United Microelectronics Corp (UMC, 聯電), the world's second-largest supplier of made-to-order chips, has used lower prices to take market share for 90-nanometer technology from bigger rival Taiwan Semiconductor Manufac-turing Co (TSMC, 台積電), Citigroup Inc analyst Andrew Lu said.
TSMC, the world's largest maker of customized chips, has lost orders from Freescale Semiconductor Inc, Qualcomm Inc and ATI Technologies Inc, said Lu, head of semiconductor research in Asia, in an interview yesterday.
"To enter the business, United Microelectronics has to use low prices to compete," Lu said.
Lu said TSMC should cut capital spending to between US$2 billion and US$2.5 billion next year from the expected amount of between US$2.6 billion and US$2.7 billion this year.
Higher shipments of chips made with so-called 90-nanometer technology boosted gross margins more than the company expected, UMC said Aug. 2.
Thinner connections between parts allow the company to make smaller chips for cellphones and increase the yield per silicon wafer. A nanometer is one billionth of a meter.
UMCs' share of sales from 90-nanometer technology rose to 16 percent in the second quarter compared with 13 percent in the first quarter, and will rise to more than 20 percent in the third quarter, the company said on Aug. 2.