United Microelectronics Corp (UMC, 聯電), the world's second-largest contract chipmaker, yesterday painted a rosy outlook for its third-quarter shipments, despite its continuously lackluster profitability.
"We expect a full-scale market recovery starting in the third quarter after the inventory consumption was completed in the second quarter," UMC's chief executive Jackson Hu (
Hu said UMC has seen signs of growing demand for its chips. The handset segment is expected to show the strongest demand, followed by consumer-electronics products such as DVD devices and personal computers, he said.
The firm has therefore predicted that its third-quarter wafer shipments will rise by around 15 percent from the second quarter, with capacity utilization rate increasing to 75 percent.
Unlike its bigger rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which on Tuesday forecasted a further decline in pricing, UMC said it expected its average selling price (ASP) in the July-to-September period to rebound by 1 percent to 3 percent.
Nevertheless, UMC's sluggish operating margin will remain flat or even drop by 3 percent in the third quarter from the previous quarter, mainly due to depreciation of its two fabs producing 12-inch wafers, UMC said.
"The slow profitability is a real issue," said Roland Shu (
UMC should devise some creative measures to boost its operating profitability, Shu said, suggesting the chipmaker enhance its fabs' operation efficiency by making them more flexible so the plants with looser production loading can support overloaded ones, which is what TSMC has been doing.
UMC posted better-than-expected second-quarter earnings of NT$299 million (US$9.38 million), or NT$0.02 per share yesterday, a plunge of 80.3 percent from the previous quarter, on net sales of NT$19.44 billion, down by 4.2 percent quarter-on-quarter and 33.4 percent year-on-year. It earned a total net income of NT$1.82 billion, or NT$0.11 per share, in the first half of this year, compared to TSMC's first-half net income of NT$5.18 billion, or NT$1.69 per share.
UMC shipped 6.3 million wafers in the second quarter, up 12 percent from the first quarter, with an utilization rate increasing to 65 percent from 63 percent but ASP sliding by 9 percent.
To strengthen its competitiveness, UMC has focused on developing advanced 90-nanometer technology and now has 60 products to supply 21 customers, vice chairman Peter Chang (張崇德) said.
"90-nanometer technology is very important technology to UMC... and we think we have been doing fairly well compared to our competitors," he said.
UMC expects products made with 90-nanometer technology to account for 15 percent of its sales in the second quarter, up from 9 percent in the first, and to hit 20 percent in the fourth quarter.
In comparison, TSMC expects the 90-nanometer technology to contribute nearly 10 percent of revenue in the third quarter, up from 2 percent in the second, and to exceed 10 percent in the fourth.
Shares of UMC dropped 3.2 percent to close at NT$22.50 on the Taiwan Stock Exchange, before the company released its quarterly earnings yesterday.
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