Thu, Oct 26, 2006 - Page 12 News List

UMC's Q3 profits rise, but fail to meet expectations


United Microelectronics Corp (UMC, 聯電), the world's second-biggest contract chipmaker, posted a rise of profits in the last quarter yesterday, fueled by advanced technologies and high utilization rate.

The company's net income hit NT$8.6 billion (US$ $258 million), or NT$0.48 per share, in the third quarter, up 42 percent from NT$2.2 billion, or NT$0.11 per share, the same period last year.

Revenues rose 18 percent to NT$27.9 billion, while gross profits hit 24.5 percent, from 12.5 percent a year earlier.

"We are satisfied with our third-quarter performance," Jackson Hu (胡國強), UMC's chairman and chief executive, told an investors' conference yesterday.

Contribution to total sales from the advanced technologies -- which include 90 nanometers, 65 nanometers and below -- has surpassed the 20 percent mark for the first time to reach 21 percent, up from 16 percent the earlier quarter, the company said.

The company said it has four 65-nanometer technology products in the pilot-production stage, with 10 more to come by December. UMC has nine clients for this sector, which accounted for more than 1 percent of sales in the third quarter.

"This shows that our strategy in the past two years to improve our leading-edge technologies and expand our customer base has worked," Hu said.

According to Lu Chao-yi (呂昭億), an analyst with Concord Securities Co (康和證券), UMC's third-quarter figures were no surprise to the industry, as it relied on share investments to boost earnings.

The company's non-operating income in the last quarter rose to NT$6.4 billion from NT$2.7 billion last year, exceeding its operating profits for the seventh straight quarter.

UMC sold shares in MediaTek Inc (聯發科) this month to reduce its holdings in the chip designer to 2.87 percent. It also recently boosted its stake in memory-chip maker ProMOS Technologies Inc (茂德科技) to 8.69 percent, which Hu described as a "short term" investment.

UMC warned that momentum would be slower in the fourth quarter due to weaker demand for the 0.13-micron technology as clients undergo inventory correction.

Sales generated by the technology will drop by as much as 6 percent in the fourth quarter, Hu said.

Wafer shipments are expected to drop by 3 percent this quarter from 799,000 units in the third quarter, with their average prices declining by 6 percent, he said. Capacity utilization rate will be down to 75 percent from 82 percent and gross margins will likely be around 20 percent, he said.

Shares of UMC fell 1.4 percent to close at NT$18.10 on the Taiwan Stock Exchange yesterday before the earning results were announced.

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