United Microelectronics Corp (UMC, 聯電), the world’s second-largest contract chipmaker, yesterday posted its weakest quarterly net profit in two years and the chipmaker expected excessive inventory levels and slack end-demand for handsets and TVs to drive down revenues by as much as 13 percent this quarter.
Factory utilization is expected to drop to just above 70 percent in the current quarter, approaching the chipmaker’s break-even point, UMC said.
Operating margin will also plunge to a low single-digit percentage this quarter, from 11.8 percent in the second quarter, when factory usage fell to 87 percent in a downward spiral that started last summer, the company said.
The quarterly decline in revenue would be the biggest in the past 10 years during the normally busy third quarter, chief executive Sun Shih-wei (孫世偉) told investors.
The decrease was deeper than Credit Suisse’s forecast of a 10 percent drop and an increase of 2 percent that was forecast by most analysts.
“As we enter the third quarter, certain macroeconomic factors, such as the European and US sovereign debt issues and emerging market inflation, have led to unfavorable global economic conditions,” Sun said.
“These macroeconomic uncertainties have led customers to adopt a conservative outlook. Furthermore, customers have adjusted their order patterns so that hey can consume elevated inventory levels because of overstocking following the earthquake and tsunami in Japan in March,” he added.
However, UMC kept this year’s capital spending unchanged at US$1.8 billion as the company hopes to catch up with its main rivals by ramping up production of advanced 28-nanometer and 40-nanometer technologies. The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), announced last week that it was cutting its capital expenditure by 5 percent this year to US$7.4 billion because of slumping demand.
During the April-to-June period, UMC’s net income shrank 28.8 percent to NT$3.19 billion (US$110 million), the lowest level since the second quarter of 2009, from NT$4.48 billion in the first quarter. The results were a 39 percent decline from the NT$5.27 billion posted a year ago.
Sun said end demand in the communications sector would be the weakest this quarter, when compared with computers and consumer electronics. Chips used in communications are the biggest source of revenue at UMC, making up 53 percent of last quarter’s revenues.
“UMC is also facing some customer specific shortfalls,” Credit Suisse analyst Randy Abrams said in a research note yesterday.
The chipmaker’s major handset chip customers, including Infineon Technologies AG, Texas Instruments Inc, Xilix Inc and MediaTek Inc (聯發科), are having difficulties for a variety of reasons, such as loss of market share and product revamps, and some of them are gradually shifting production to TSMC, Abrams said.
UMC yesterday gave a more cautious third-quarter outlook than its peers, such as TSMC, Abrams said.
TSMC said last week that the latest slowdown would be a brief one and that it expected revenues to contract by between 6 percent and 8 percent this quarter from last quarter.
Abrams blamed lower exposure to smartphones and tablet devices for UMC’s larger decline in revenue.
“The ongoing situation [weak market demand] could last for several months, or even several quarters,” Sun said.
UMC and TSMC shares tumbled 1.17 percent and 1.82 percent to NT$12.65 and NT$70.1 respectively yesterday, compared with the benchmark TAIEX’s 1.49 percent loss.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
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
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
FUTURE PLANS: Although the electric vehicle market is getting more competitive, Hon Hai would stick to its goal of seizing a 5 percent share globally, Young Liu said Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler and supplier of artificial intelligence (AI) servers powered by Nvidia Corp’s chips, yesterday said it has introduced a rotating chief executive structure as part of the company’s efforts to cultivate future leaders and to enhance corporate governance. The 50-year-old contract electronics maker reported sizable revenue of NT$6.16 trillion (US$189.67 billion) last year. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), has been under the control of one man almost since its inception. A rotating CEO system is a rarity among Taiwanese businesses. Hon Hai has given leaders of the company’s six