United Microelectronics Corp (UMC, 聯電), the world’s second-largest contract chipmaker, yesterday posted its strongest quarterly earnings in two years, helped by recovering demand for PCs and TVs and higher asset gains.
The improvement also gave UMC confidence that it would swing into profit for the whole year, the Hsinchu-based chipmaker said.
Last year, UMC reported losses of NT$22.32 billion (US$687 million).
In the quarter ending Sept. 30, UMC made NT$6.09 billion in net income, compared with losses of NT$1.41 billion a year earlier. After a year in the red, UMC also booked NT$2.18 billion in non-operating income last quarter.
The company reported net income of NT$1.55 billion for the second quarter.
“UMC’s third-quarter results beat my expectations,” said Kenneth Lee (李克揚), a semiconductor analyst with Fubon Securities Investment Services Co Ltd (富邦投顧).
“The chipmaker probably benefited from progress in gaining a bigger share in the advanced technology area,” he said.
Lee, who gave UMC a “buy” rating, has projected UMC would earn NT$3.58 billion in the July-September period.
“The positive momentum we experienced in the second quarter carried into the third quarter,” UMC chief executive Sun Shih-wei (孫世偉) said.
“UMC is optimistic about the fourth quarter,” he said.
End demand for consumer electronics may outpace communications, while PC demand may show some weakness, Sun said.
Shipments are expected to fall by as much as 3 percent this quarter from 1.02 million 8-inch equivalent wafers last quarter, Sun said.
Chip prices may rise by up to 3 percent quarter-on-quarter following a 5 percent rise last quarter, as UMC will sell more chips made on advanced technologies, he said.
Based on the guidance, UMC may post flat revenues this quarter as rising prices offset a drop in shipments, Lee said.
“That would be quite a good performance for the traditionally slack season. But the third quarter will probably be the peak for UMC in terms of net income,” Lee said.
This quarter, UMC expects gross margin to slide to around 25 percent from last quarter’s 27.9 percent, which was a five-year high.
Returning to more aggressive capacity expansion amid the recovery, UMC plans to spend as much as 25 percent of its revenue on new equipment next year, up from 12 percent last year.
UMC yesterday said it would retain planned capital spending at US$500 million for this year.
The chipmaker said it planned to buy a 49.91 percent stake in its Japanese affiliate, UMC Japan, on the open market for a maximum of NT$2.1 billion via a tender offer.
UMC owns a 50.09 percent stake in UMC Japan.
Sun said the acquisition would help UMC build a bigger presence in Japan, where chip designers who operate factories are expected to outsource more production.
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