United Microelectronics Corp (UMC, 聯電), the world’s second-biggest contract chipmaker, yesterday reported record-high quarterly losses amid falling demand and huge non-operating losses.
UMC's net losses widened to NT$23.51 billion (US$692.6 million) in the fourth quarter, compared with losses of NT$1.41 billion in the third quarter after booking NT$21.78 billion in non-operating losses. The Hsinchu-based chipmaker earned NT$1.36 billion in the fourth quarter of 2007.
UMC also reported its first operating loss — NT$1.17 billion — in almost three years. The last time it reported operating losses — of NT$560 million — was in the third quarter of 2005.
UMC chief executive Sun Shih-wei (孫世偉) said the company could post a third straight quarterly loss in the first quarter as customers appeared reluctant to aggressively replenish inventory given uncertainty over a potential economic recovery.
However, with customer inventory continuing to fall, the company said it had seen some orders rush in, which could be a sign of the market bottoming out in the first quarter.
“UMC’s internal indicators have shown signs that the demand may have bottomed out, and we are closely watching for signs of recovery,” Sun said in a statement.
“The first quarter is probably the bottom ... [and] February could be the weakest,” Sun said.
With demand remaining sluggish, shipments may plunge by between 40 percent and 42 percent during the January-to-March quarter from 567,000 8-inch equivalent wafers shipped last quarter, and the average selling price could slide by between 3 percent and 5 percent during the period, Sun said.
Factory utilization may fall further to around 30 percent this quarter from 48 percent last quarter and 86 percent a year ago, which would drive the chipmaker’s gross margin into negative territory, UMC chief financial executive Liu Chitung (劉啟東) said.
Gross margin dropped to 10.2 percent last quarter from 17.6 percent in the third quarter, the company’s statement said.
“The first-quarter guidance fell short of my expectations, and UMC may report bigger losses than I thought,” said Kenneth Lee (李克揚), a semiconductor analyst with Primasia Securities Co. Lee had said UMC could lose NT$1.41 billion this quarter.
In terms of revenues, UMC may see a quarterly decrease of about 45 percent this quarter, rather than the 30 percent Lee estimated.
But UMC gave a better outlook than its bigger rival Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which projected a quarter-on-quarter revenue decline of between 45 percent and 50 percent, Lee said.
UMC intends to cut capital spending for this year to less than US$400 million largely on advanced technologies, compared with the US$349 million spent last year.
TSMC said that new equipment spending this year could be 20 percent lower than the US$1.88 billion it spent last year.
“As more and more companies are sending positive messages, we expect those that are willing to invest in next-generation technologies during the downturn will be early beneficiaries of a recovery, or even of the next boom,” Lee said. “UMC could be one of them.”
Separately, TSMC said yesterday its board had approved a proposal to distribute cash dividends of NT$3 per share and a stock dividend of 0.5 percent, the the company said in an e-mailed statement.
The proposal will be discussed at the firm’s annual shareholders’ meeting on June 10, it said.