United Microelectronics Corp (UMC,
Demand for communications chips saw the biggest rise during the third quarter and this demand would continue until the end of the year, UMC chief executive Jackson Hu (
At the same time, UMC expects to see the amount of total production capacity it utilizes at its manufacturing facilities, or fabs, rise from 84 percent in the third quarter to over 90 percent this quarter.
"The most encouraging factor is that the utilization rate is picking up," said George Wu (
Busy production lines at Tai-wan's chipmakers are an indication that the semiconductor industry is finally coming out of a three-year slump. On Tuesday, industry leader and rival Taiwan Semiconductor Manufacturing Co (TSMC,
UMC further improved its bottom line by booking NT$1.37 billion from selling shares in chipmaker Mediatek Inc (
There is both bitter and sweet in UMC's performance.
"Our position on the results is good, but the guidance for next quarter is not so good," said Rick Hsu (
Hsu was also disappointed by the performance of UMC's most advanced technology which is used to make chips with circuits measuring 0.13 microns across on 12-inch wafers, in contrast to the current standard 8-inch wafers. UMC started production at its 12-inch fab in Tainan earlier this year, but has yet to turn a profit there.
"Our expectations were that 0.13-micron production would be a profitable business by the fourth quarter," Hsu said. "Given the operating profit margin growth, this is not possible. Everything will be delayed until the first quarter of next year."
UMC cut back on spending on new equipment from a previously forecast US$500 million to just US$350 million this year. Hu announced yesterday that UMC's Japanese subsidiary plans to build a new 12-inch fab in Japan next year to supply local demand for new advanced chips there, while the company's other fabs plan to increase 12-inch production at their existing sites.
"In Taiwan and Singapore we have room for expansion in 12-inch," Hu said.
With 0.13-micron not performing as well as expected, UMC may find it harder to close the gap with TSMC, which on Tuesday announced a fivefold improvement in its quarterly profits year-on-year.
Hu took over the reins at UMC in July and has since cut the company's list of customers in half to concentrate on bigger customers to raise profitability and ensure growth. He announced yesterday he would also increase profit-sharing among the company's employees to encourage productivity.
Primasia's Wu welcomed the move.
"I like the fact they sold non-core holdings and gave employees a bigger stake in the company. I like this kind of peer style. It means the employees have an individual investment in the company and no excuse when the stock earnings are bad," he said.
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