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Chartered Semiconductor shows signs of recovery

Chartered Semiconductor Manu-facturing Ltd, the world's fourth-largest supplier of made-to-order chips, may add to growing evidence of a recovery in semiconductor demand when it briefs investors tomorrow, analysts said.

The Singapore-based company's shares have risen more than a quarter in the past month, outpacing gains by bigger rivals, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), up 12 percent, and United Microelectronics Corp (UMC, 聯電), which has gained 9 percent.

Chartered Semiconductor, which has posted nine consecutive quarterly losses, has been winning orders as its rivals fill up capacity at their most advanced plants, forcing some customers to look elsewhere, analysts said. Demand for chips used in cell phones and computers is climbing as telecom companies start high-speed mobile services and after Intel Corp introduced a new wireless product for notebook computers earlier this year.

"They probably will raise at least their near-term forecast" for sales, said Russell Tan, an analyst with NRA Capital, who rates the shares "hold."

Chartered Semiconductor's shares, which fell 83 percent last year, rose S$0.035to S$0.0915 as of 10:33am, after hitting a low of S$0.63 on March 31. They touched a high of S$16.03 in March 2000.

Taiwan Semiconductor shares rose NT$3 to NT$56.50. United Microelectronics shares rose NT$1.50 to NT$23.30.

The company, which in March predicted that it would have a second-quarter loss of US$97 million to US$107 million on sales of US$114 million to US$120 million, will provide its mid-quarterupdate this morning in Singapore.

Chartered Semiconductor is gaining from the spillover at Taiwan Semiconductor and may be winning new customers at its less-advanced factories, analysts said.

Taiwan Semiconductor, the world's biggest supplier of made-to-order chips, said last week it expects sales this year to rise by 20 percent, aided by demand for its most sophisticated production equipment.

It forecast in April that its second-quarter factory use would rise to 80 percent from 67 percent in the first three months.

Demand for chips is coming from makers of cellphones with color screens and from makers of devices that let computer users surf the Internet wirelessly, said Lim Chuan-yang, an analyst with Standard & Poor's.

Some analysts have questioned whether the recovery cam be

sustained.

Chip companies also gained steam in the middle of last year before demand fell below analysts' forecasts at the end of the year.

As a result, chip sales overall barely rose last year.

"There is some concern among investors about whether we'll see a similar pattern this year," said Pranab Kumar Sarmah, an analyst with Daiwa Institute of Research.

Chartered Semiconductor, which is about 60 percent owned by a Singapore government agency, has put off adding the latest chip-making systems to conserve cash as it looks to improve activity at its older factories, where business has been sluggish.

The company has used less than half of its chip-making equipment since the first quarter of 2001.

Its second and third-oldest factories, known as Fab 2 and Fab 3, can produce a combined 63,000 chip wafers a month, according to the company's regulatory filings.

Last year, their total output was 243,000 wafers, or an average of 20,250 a month.
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