United Microelectronics Corp (UMC, 聯電), the world’s No. 2 contract chipmaker, yesterday said the planned industrial electricity rate hike averaging 35 percent would erode its gross margin by less than 1 percentage point.
UMC’s comments came after Taiwan’s contract chipmakers and LCD panel makers were widely expected to suffer the most from the price increase, because of heavy power consumption in their manufacturing processes and most of their advanced plants being located in Taiwan due to the government’s restrictions on moving such plants abroad.
The price hike would increase local electronics manufacturers’ electricity cost ratio from 1.93 percent to 2.38 percent, according to the Ministry of Economic Affairs’ forecast.
The ministry’s did not provide a projection for the chip manufacturing sector, which is one of two major pillars of Taiwan’s manufacturing sector.
“The impact will vary in scale in according to the company’s operations in different stages,” UMC chief financial officer Liu Chi-tung (劉啟東) said by telephone, when asked if he considered the 1 percent erosion a significant impact.
The slumping global economy helped push UMC’s gross margin down to the weakest level in more than two years at 18.6 percent during the final quarter of last year.
The figure is expected to shrink to 16 percent in the first quarter of this year, not counting the effect of rising electricity bills, Credit Suisse said.
“Contract chipmakers and LCD panel makers will be worst hit by the new electricity price increase because most of their factories are here,” independent analyst Henry Chen (陳志恆) said yesterday in Taipei.
The LCD panel manufacturing sector, another pillar of the manufacturing sector, expects to see electricity costs rise 0.45 percentage points, from 1.92 percent at the moment to 2.37 percent.
“The increase in the electricity rates will definitely increase our costs as long as electricity consumption is a component of our cost structure, but I will not say it is a major one. Instead, raw material costs account for the biggest part,” Freda Lee (李秀芬), a spokesperson of the nation’s No. 2 LCD panel maker, AU Optronics Corp (友達光電), said by telephone.
Lee declined to quantify the impact on the company’s overall production costs.
In February, AU Optronics unveiled a new project to cut power consumption by 25 percent in 2015 from 2010.
Based on the ministry’s projection, cement providers and textile companies would see their electricity costs rise the most, by 1.41 percentage points and 0.81 percentage points respectively, but this does not factor in that most local cement companies have relocated their factories to China.
“Based on my knowledge, local factories make up a very small portion, or less than 20 percent, of their total capacities,” Chen said.
On Thursday, the ministry unveiled its plan to raise electricity rates to help turn around state-run Taiwan Power Co (Taipower, 台電), which is expected to lose NT$15.2 billion this year even after the proposed price hikes, down from a previous estimate of NT$117.6 billion amid rocketing costs of importing coal and other fuels.
The new rates will take effect in the middle of next month.
Share prices of AU Optronics and its bigger rival Chimei Innolux Corp (奇美電子) rallied 4.11 percent and 2.17 percent to NT$15.2 and NT$14.1 respectively yesterday, as panel prices are expected to improve this month and be flat next month and in June, helping the companies reduce losses, as Credit Suisse predicted.
Share prices of the nation’s two biggest contract chipmakers — Taiwan Semiconductor Manufacturing Co (台積電) and UMC — surged 2.78 percent and 2.48 percent to NT$84.9 and NT$14.45 on the Taiwan Stock Exchange in trading yesterday.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last