Thu, Jul 17, 2003 - Page 10 News List

UMC shifts strategy again in attempt to maintain its focus

BLOOMBERG

United Microelectronics Corp's (UMC, 聯電) decision to sell assets, drop plans for alliances and spend more on plants may help it catch up with made-to-order semiconductor rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電). Some investors, though, say they are tired of the company's strategy flip-flops.

UMC, the world second-largest supplier of made-to-order chips, yesterday said spending on expansion this year may exceed the US$500 million it originally budgeted as it tries to benefit from a recovery in the chip industry. Jackson Hu (胡國強), named new chief executive, will oversee the expansion.

Shares of UMC rose US$0.50, or 2 percent, to NT$25.80 per share on the TAIEX yesterday.

Second-quarter profit at UMC probably fell, while its larger rival increased earnings, adding to pressure to change strategy, analysts said.

UMC "is a company that has had various changes of strategy to lift profit," said Richard Sneller, who helps manage the equivalent of US$30 billion globally for Baillie Gifford & Co. "TSMC has followed a clearly designed strategy. Jackson is going to have his hands full."

UMC didn't give details of its increased spending Tuesday. It has previously said it will spend about US$1.5 billion this year and next on factories that make larger silicon wafers, which more than double the number of chips that can be made from an 8-inch disc and promise to cut production cost by as much as a third.

"This gives me the impression the company will be more focused," said Ronald Chan, who helps manage US$2.5 billion in Asia for Baring Asset Management.

UMC said it was changing its strategy, just six months after it was announced, to avoid conflict of interest with customers.

On Jan. 26, UMC Chairman Robert Tsao (曹興誠) said he aimed to "create a network of partnerships among companies that make electronic products" to counter an industry slump caused by too many suppliers. The era of high margins for chip foundries was "gone forever," Tsao said.

The same month, the company increased its stake in rival Silicon Integrated Systems Corp (矽統) to 15.8 percent. Silicon Integrated more than a year ago stopped placing orders with UMC after building its own plant.

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