United Microelectronics Corp (UMC, 聯電) yesterday reported stronger-than-expected quarterly net profits in the third quarter. The world’s No. 2 contract chipmaker said it expects a decline in revenues to decelerate this quarter amid growing demand for advanced chips that are used in smartphones and tablets.
During the three-month period that ended on Sept. 30, UMC’s net profits plummeted 78 percent to NT$1.95 billion (US$65 million) from NT$8.72 billion a year ago, beating an average forecast of NT$1.53 billion among analysts surveyed by Bloomberg.
The third-quarter figure was the worst in eight quarters, since the firm posted net profits of NT$1.55 billion in the second quarter of 2009.
UMC warned that overall factory utilization would drop from 74 percent last quarter to close to the company’s break-even level of between 65 percent and 69 percent this quarter as excessive inventory and sagging end product demand cuts orders.
That would lead to a 10 percent decrease in shipments this quarter from 1.03 million 8-inch wafers in the third quarter, UMC chief executive Sun Shih-wei (孫世偉) told investors yesterday.
However, average selling prices would increase 5 percent this quarter on the back of strong demand for chips made on advanced 40-nanometer and 65-nanometer technologies, including chips used in e-readers and 3G smartphones, Sun said.
That implies that UMC’s revenues will contract about 5 percent from last quarter’s NT$25.19 billion, said Michael Chou (周立中), an analyst with Deutsche Securities in Taipei, in line with his earlier forecast.
In the July-to-September period, UMC’s revenues, of which communication chips accounted for 53 percent, fell 10.51 percent quarter-on-quarter.
Sun said the company is maintaining a bleak outlook for the semiconductor market as the eurozone debt crisis, inflation in China, and limited inventory distribution and digestion in the supply chain are all contributing to uncertainty.
In August, Sun said the current downturn would last for several quarters, blaming a weak macroeconomic environment.
Yesterday, Sun reiterated that market demand would remain weak, “as reflected by our customers’ conservative ordering patterns.”
The company would still manage to post low-single-percentage margin in the current quarter by cutting costs and boosting operational efficiency, he said.
UMC’s margin may shrink to 1.7 percent in the final quarter, from 6.1 percent in the third quarter, Chou said, but he doubted whether UMC would escape posting a loss as the chipmaker’s solar subsidiaries are still suffering losses because of overcapacity.
On the technology front, UMC said it is increasing its investment in next-generation 28-nanometer process technology. UMC has 10 customers engaged for the new technology, which is sscheduled to enter commercial production in the middle of next year, he said.
UMC has also secured 20 customers for its 40-nanometer technology, Sun said. He expects a belated breakthrough in December when 40-nanometer technology chips are expected to make up a bigger share of the company’s revenues, about 10 percent, rather than all of the fourth quarter’s revenues as Chou had estimated.
UMC said capital spending would remain unchanged at US$1.8 billion for this year, primarily on advanced technologies.
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