United Microelectronics Corp (UMC, 聯電), the second-largest maker of chips for other companies, said its fourth-quarter loss may be lower than its earlier forecast as sales of chips used in personal computers and consumer electronics are improving.
"The fourth quarter will probably be slightly better than we thought," Liou Fu Tai, a vice president at UMC, said in an interview. "Our capacity use has risen from 40 percent."
Sales at UMC, which supplies to ATI Technologies Inc, the second-largest designer of PC graphics chips, are increasing at a rate faster than the 10 percent earlier predicted. Customers such as MediaTek Inc (聯發科技), Taiwan's second-largest chip designer, are placing more orders for semiconductors made with UMC's most advanced technology, which helps them cut costs, Liou said.
"We expect capacity utilization to improve," said Omar Negyal, who helps manage about US$1.5 billion in stocks at Foreign & Colonial Management Ltd, including shares in UMC. "Improvement should be sustainable through the next three quarters, though we won't see utilization rising to the 100 percent levels of 2000."
UMC in October said it expects to post a loss of NT$3.2 billion (US$93 million) for the full year. That implied UMC will have a fourth-quarter loss of about NT$3.8 billion, having earned a profit of NT$596 million in the first nine months. Liou declined to give a specific number for the fourth quarter.
Liou denied reports the company has won orders from Nvidia Corp, the largest PC graphics chip designer, whose semiconductors power Microsoft Corp's new Xbox game console.
UMC shares soared NT$3, or the 7 percent limit, to NT$46.5 on the Taiwan stock exchange. Shares in Taiwan Semiconductor Manufacturing Co (TSMC,
UMC and rival Chartered Semiconductor Manufacturing Ltd (特許) of Singapore turned to losses this year as analysts predict global chip sales will shrink by a third to about US$117 billion in the worst year in the industry's history. UMC's larger rival, TSMC, which has stayed profitable, raised its forecast for fourth-quarter net income this week.
A loss in the fourth quarter would be the third in a row for UMC. The company made a record profit of US$485 million in the same period last year after getting more orders than it could meet.
Liou declined to say when the company will return to a profit.
UMC said its capacity use increased from 40 percent in the third quarter, in line with its expectations. UMC said it expects to write off all the company's remaining inventory of computer memory chips that were made to help fill idle capacity. Prices of memory chips are still below the cost of production, Liou said.
Demand is improving for chips made with 0.18 micron technology, Liou said. Chipmakers aim to increase the number of semiconductors made from a single silicon wafer by shrinking chip sizes, thereby helping cut cost.
"Increased demand will be for new technology," Liou said.
Capacity use in UMC's older chip plants remains low, he said.
MediaTek, a unit of UMC, today raised its full-year profit expectations by a third because demand for its DVD chips is improving and production costs are declining, the company said.
UMC and TSMC are two of fewer than 10 companies worldwide investing in the production of 300mm silicon wafers.
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