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UMC profit increases 16-fold

United Microelectronics Corp (UMC, 聯電), the world's No. 2 contract chipmaker, yesterday posted its biggest quarterly earnings in three years, driven by a voracious appetite around the world for chips used in mobile phones and consumer gadgets.

During the three months to the end of March, UMC said earnings soared to NT$6.89 billion, or NT$0.45 a share, which is about 16 times the NT$403 million it earned a year ago. The earning growth represents a 2.5-percent expansion quarter-on-quarter.

"Our first-quarter performance fully reflects the turnaround in the global semiconductor sector," UMC chief executive Jackson Hu (胡國強) said. "The results have exceeded our estimates and surprisingly bucked the industrial downtrend."

Bigger rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Tuesday beat analysts' expectations, reporting first-quarter earnings quadrupling to NT$18.79 billion, or NT$0.93 a share, from a year ago, on revenue of NT$57.51 billion.

UMC said first-quarter revenue jumped about 42 percent to NT$25.33 billion from a year earlier, an increase of 6.8 percent from the fourth quarter of last year.

As the robust demand is expected to carry into the remainder of the year, Hu expected the Hsinchu-based company's wafer shipments to rise at a quarterly rate of 10 percent in the April-June period and chip prices to rise another 5 percent.

UMC said its facilities would be fully utilized in the current quarter.

An analyst was positive about UMC's first-quarter figures and predicted the company would earn NT$2.74 per share this year.

"I believe the foundry business will enjoy explosive growth in the third quarter and UMC will be a standout," said Chris Hsieh (謝偉民), a senior technology analyst with ING Securities Inc.

Hsieh said that in the July-September period, revenue growth quarter-on-quarter will accelerate to exceed that of the second quarter. He expects the company's revenue to grow 15 percent in the second quarter.

Looking ahead, UMC's Hu optimistically predicted that the semiconductor sector is unlikely to suffer a slump next year, citing slow capacity expansion will leave little room for excessive inventory buildup, or a supply glut, which is seen crucial to throw the industry into reverse.

"It's hard to see any inventory buildup as the capacity is not there. UMC's expansion is still lower than the market demand," said Dan Heyler, a semiconductor analyst with Merrill Lynch (Asia Pacific) Ltd, echoing Hu's remarks.

According to a report by tech researcher In-Stat/MDR, the global semiconductor market is expected to grow 29 percent this year, a rebound from a three-year slump starting 2001. That would bring total revenue to US$214.7 billion before a downturn in 2006, the researcher said last week.

To meet demand, UMC said its capacity would grow at an annual pace of 20 percent thanks to increased output from its 300mm fab and from SiS Microelectronics Corp (矽統半導體), which it acquired from Taiwanese chipset maker Silicon Integrated System Corp (矽統科技) in February.
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