Shares of United Microelectronics Corp (UMC, 聯電) rose yesterday, almost hitting a two-month high, after the world's second-biggest contract chipmaker said it planned to reduce capital by 30 percent to boost return on equity (ROE).
UMC denied speculation, however, that the move would pave the way for a buy-out deal from overseas private equity fund investors.
"We have not approached any private equity fund [for a buyout deal]," company spokesman Chitung Liu (
On Tuesday night, the Hsinchu-based chipmaker said in a filing to the Taiwan Stock Exchange that its board approved a proposal to pay back NT$57.4 billion (US$1.75 billion), or NT$3 per share, to its shareholders by canceling 5.74 billion in outstanding shares, or 30 percent of its overall 19.13 billion issued equity.
Investors welcomed the capital reduction proposal and raised UMC shares 6.89 percent to NT$20.95 in Taipei yesterday. That was compared to an increase of 1.06 percent on the benchmark TAIEX.
The company's American Depositary Receipts (ADR) had earlier surged 11 percent to US$3.67 in New York on Tuesday.
According to stock exchange regulations in Taiwan, UMC shares will be suspended for 15 days around August or September as part of the capital-reduction process, while its ADRs will be suspended in New York around the same time for a shorter period.
The capital reduction plan is expected to obtain the go-ahead during an extraordinary shareholders' meeting scheduled for June 11. UMC's capital reduction is the biggest of its kind in Taiwan over the past six months.
"UMC hopes to boost the return on equity for shareholders by improving its capital structure," the chipmaker said in the statement.
UMC stressed that the capital reduction would not affect its future capacity expansion plans. Instead, the chipmaker said, the company would generate sufficient cash flow from its operations to fund a new 12-inch wafer fabrication plant in Tainan, as well as for developing advanced technologies.
UMC has NT$83 billion in cash and the equivalent as of the third quarter of last year. The company said earlier that it planned to spend US$5 billion in building the plant over the next few years.
"The capital reduction will definitely have a positive impact on UMC, which has reflected on its stock price," said Rick Hsu (徐稦成), a semiconductor analyst with Nomura Securities Co in Taipei.
Hsu might join other investment research houses such as Merrill Lynch and raise his investment rating on UMC from "neutral."
``This announcement should support the stock despite probable negative guidance that we expect from the company,'' Merrill Lynch analyst Dan Heyler wrote in a report yesterday.
Heyler upgraded the shares to ``buy'' from ``sell'' with a 12-month price target of NT$25.
The company's overcapitalized balance sheet is nothing new, "however the action is coming sooner than the market anticipated," Heyler wrote.
Eric Chen (陳慧明), an analyst with BNP Paribas Securities, raised his projection for UMC's return on equity by 20 percent to 10.9 percent this year in the wake of the 30 percent cut in capital.
The share price of UMC is also expected to rise to NT$23.7 due to the capital reduction plan, which would represent about a 13 percent upside from yesterday's closing price.
Chen was cautious about upgrading UMC's investment rating, however. He said he still favored rivals Taiwan Semiconductor Manufacturing Co (TSMC,
additional reporting by Bloomberg
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day