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UMC expects healthy revenue growth

United Microelectronics Corp (UMC, 聯電), the world's second-biggest chipmaker on a contract basis, yesterday projected a faster-than-expected 6 percent to 8 percent growth in revenues this quarter.

Sales would be boosted by recovering demand -- primarily for chips used in communication devices -- on falling inventory, it said.

The news seemed to herald a recovery for UMC in third-quarter revenues and bottom line from an inventory-driven trough, as long as the expected demand becomes reality, UMC chairman Jackson Hu (胡國強) said during an investors' conference.

"For the second quarter, we noticed that customers' inventory levels were continuously going down," Hu said.

Starting next month, demand for communications chips -- such as those used in cellphones and chips for consumer applications including digital TVs and panel driver chips -- should pick up strongly, Hu said. Demand for computer chips for the same period has also started picking up, he said.

Communications chips made up the biggest proportion, or 56 percent, of UMC's total revenues last quarter.

Building on rebounding demand, Hu projected revenues would increase 6 percent to 8 percent this quarter from NT$23.03 billion (US$692 million) last quarter due to shipment increases and a steady average selling price.

UMC's bigger rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said last week that revenues would grow 12 percent to 15 percent in the three months between last month and next month from the previous quarter, boosted by a revival in demand, largely from communications and consumer sectors.

Hu, however, only expected UMC's profit margin to improve slightly in the second quarter from 0.1 percent in the quarter ended on March 31, citing possible erosion from currency exchange and operating expenses.

"The 6 percent to 8 percent revenue growth is much better than we thought," said Eric Chen (陳慧明), a semiconductor analyst with BNP Paribas Securities (巴黎證券).

Chen earlier projected a low single-digit revenue growth quarter-on-quarter for the period from last month to next month.

Chen said that stronger revenue growth should give a major boost to UMC's profits this quarter, instead of the small increase forecast by the company.

Net income plunged 88 percent to NT$1.46 billion -- or NT$0.08 per share -- in the first quarter, compared to NT$12.29 billion -- or NT$0.66 a share -- in the same period last year, UMC said on Monday.

UMC said industry-wide excess inventory was to blame for the sapping demand for its chips during the last quarter.

UMC shares advanced 0.52 percent to NT$19.2 yesterday as investors priced-in a solid recovery for the semiconductor company later this year.

TSMC stocks fell 1.02 percent to NT$68.

To seize upon the business opportunity, UMC raised its capital spending up to US$1.2 billion for this year, mostly on boosting its capacities at advanced 12-inch factories.

This compared to the US$1 billion set aside last year.
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