United Microelectronics Corp (UMC, 聯電), the world’s second-largest contract chipmaker, said yesterday it planned to ramp up its capital spending to between US$1.2 billion and US$1.5 billion this year, up from US$551 million last year, to meet strong consumer demand for capacity and advanced technologies.
UMC chief executive officer Sun Shih-wei (孫世偉) said this year’s capital spending was mainly aimed at establishing capacity using 40/45-nanometer process technologies and introducing facilities for developing 28-nanometer technologies at its Fab12A in South Taiwan Science Park (南部科學工業園區) in Tainan.
The company will also expand capacity using 65/55-nanometer process technologies at its Fab12i in Singapore, he said.
PHOTO: MAURICE TSAI, BLOOMBERG
UMC’s increased capital spending this year reflects the company’s improved financial results over the past year. The Hsinchu-based company yesterday reported a net income of NT$4.39 billion (US$136.93 million), or NT$0.35 per share, for last quarter, compared with a record loss of NT$23.51 billion during the same period a year earlier.
“Our company not only managed to go through a year of drastic economic fluctuations, but also took the lead in recovering rapidly from the financial tsunami,” Sun told investors. “Last year’s revenue saw the smallest contraction, 4.2 percent, among other competitors.”
Revenue totaled NT$88.62 billion last year, down from NT$92.53 billion in 2008. However, fourth-quarter revenue rose 1.2 percent to NT$27.75 billion from the previous quarter, the company said yesterday in a statement.
Asked if the substantial increase in capital spending might mean the semiconductor industry could face excess capacity in the next two years, Sun said that UMC would not enter into “an arms race” with its competitors, adding that the amount of capital spending for this year was at a low risk because it only accounted for 25 percent of the company’s revenues in the last three to four years.
“It [the amount of capex] is still in a reasonable range,” Sun said. “About 94 percent of capital expenditures would be used on 12-inch fabs and 6 percent on 8-inch ones.”
UMC’s 12-inch wafer fabs have been fully loaded and have experienced supply constraint. Although 8-inch fabs have yet to be fully utilized, their capacity utilization rate has continued to rise, he said.
“The entire capacity utilization rate is expected to reach between 86 percent and 89 percent in the first quarter of this year,” Sun said.
The capacity utilization rate was 86 percent in the fourth quarter.
Gross margin will likely be between 20 percent and 30 percent, compared with 25.9 percent in the fourth quarter.
Shares of UMC rose to NT$16.65 on the Taiwan Stock Exchange yesterday after the company’s board approved a plan on Tuesday to buy back NT$300 million of its own shares on the open market until April 2.
UMC chief financial officer Liu Chi-tung (劉啟東) said that the repurchased shares would either transfer to employees or be cancelled to help improve shareholder equity returns.
“If there’s still enough cash, UMC will continue to buy back shares on the open market in an aggressive manner,” he said.
Looking ahead, UMC said its wafer shipments would match fourth-quarter levels, when it delivered around 990,000 8-inch-equivalent wafers to its customers.
Average selling prices are likely to fall by less than 3 percent in the first quarter from the previous quarter, while the appreciation of the New Taiwan dollar is likely to cut revenue by between 1 and 2 percent, UMC said.
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