UMC chair visits China to assess investment options

Officials from Taiwan's United Microelectronics Corp (UMC, 聯電) confirmed yesterday that Chairman Robert Tsao (曹興誠) is currently visiting Shanghai, Chinese-language media reported yesterday.

Yesterday's report said that Tsao's visit to Shanghai, accompanied by Deputy Chairmen John Hsuan (宣明智) and Liu Ing-dar (劉英達), would pave the way for the company's planned joint investment in China with Siliconware Precision Industries Co (矽品精密).

Lin Wen-po (林文伯 ), chairman of Siliconware, is also with Tsao on the trip, the report said, adding that the UMC managers will return to Taiwan on Tuesday.

UMC, Taiwan's second largest semiconductor maker, has set up an integrated circuit research subsidiary in Shanghai and is expected to set up a chip packaging plant with Siliconware, the report said.

Tsao, arriving in Shanghai on Monday, was expected to meet several high-ranking officials, the paper said without elaborating. Tsao has visited China several times over the past few years. The paper said Tsao would also visit several semiconductor companies in China to explore the possibility of selling older six-inch and eight-inch wafer manufacturing equipment currently being used in Taiwan.

Chinese semiconductor makers are also hoping that Taiwan Semiconductor Manufacturing Co (台積電), Taiwan's largest chipmaker, will sell them their six-inch wafer factory equipment.

The government restricts technology investment in China by local companies to plants that make equipment such as computer cases and transformers. Investment in chip plants and notebook computer assembly line is banned.

In related news, Taiwan Ratings Corp (中華信評) revised its outlook on UMC to negative from stable, the agency said yesterday.

Taiwan Ratings attributed the revision to UMC's anticipated operating loss in the second quarter and a possible further weakening in operating performance over the near to intermediate term, due to the increasingly depressed semiconductor market and continued inventory adjustment by its customers.

Despite a sequential decline in revenues and profitability, UMC still generated a free operating cash flow of over NT$6 billion and pared down its debt by NT$8.4 billion in the first quarter. The company currently has ample financial flexibility, with cash reserves of NT$51.6 billion as of the end of March, compared with NT$38.2 billion in debt.

Taiwan Ratings said the ongoing industry downturn is expected to challenge UMC's ability to sustain operating profitability and cash flow levels consistent with current ratings.