Thu, Feb 07, 2013 - Page 13 News List

UMC expects flat sales on low yields

By Helen Ku  /  Staff reporter

United Microelectronics Corp (UMC, 聯電), the world’s second-largest contract chipmaker, yesterday said wafer shipments this quarter would increase because of contributions from its Chinese subsidiary, but overall sales and margins would be flat because of lower utilization rates.

The company’s deployment of 28-nanometer (nm) process technology is still lagging behind world No. 1 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), and sales contribution from this segment is forecast to show only single-digit sales growth in the fourth quarter of this year at the earliest, UMC chief executive officer Yen Po-wen (顏博文) told an investors’ conference in Taipei.

UMC’s shipments of 28nm chips last quarter beat the company’s expectation of 5 percent of its total shipments, but Yen said it is unlikely to see a significant improvement until the second half of the year when technology upgrades and production yields increase.

For this quarter, UMC expects wafer shipments to grow by 6 percent, with contributions from Chinese subsidiary He Jian Technology (Suzhou) Co (和艦科技), he said.

However, the average selling price is forecast to drop 6 percent as the company’s overall utilization rate is estimated to fall to 75 percent, he added.

Last quarter UMC shipped a total of 1.07 million wafers, and capacity utilization hit 80 percent.

For this year, UMC plans to trim capital expenditure by 25 percent to about US$1.5 billion from US$2 billion last year, with 94 percent of the investment to be spent on 12-inch fabs and 6 percent on 8-inch plants, Yen said.

Net non-operating income is forecast to reach US$100 million this quarter, while its new business ventures, including solar cell manufacturer Topcell Solar International Co (聯景光電) and Chinese LED chip manufacturer United LED Shan Dong Corp (冠銓山東光電), are expected to generate sales of NT$2 billion this quarter, he added.

UMC chief financial officer Liu Chi-tung (劉啟東) told investors that UMC is “defensive” in expanding its new businesses, seeking to upgrade technologies and improve yields first to win customers’ trust.

“We are confident that our sideline businesses can achieve growth gradually. We will try to cut down costs step by step to increase profitability. Our new businesses, after all, are still at the beginning stage,” Liu said.

Due to lower shipments, equipment depreciation and New Taiwan dollar appreciation, UMC saw sales drop 8.5 percent to NT$26.09 billion last quarter from NT$28.53 billion in the third quarter, with gross margin of 16.8 percent and operating margin of 3.7 percent.

Last quarter’s net income was NT$1.17 million, down 51.5 percent from NT$2.42 million in the previous quarter. On an annual basis, the figure represents a 19.39 percent increase from NT$980 million.

Total net income last year fell 25.4 percent to NT$7.92 billion from NT$10.61 billion in 2011, despite full-year sales edging up 0.1 percent to NT$106 billion from NT$105.88 billion.

Earnings per share last year were NT$0.63, down 25 percent from NT$0.84 in the previous year.

UMC shares closed down 0.44 percent at NT$11.35 yesterday before the company’s investors’ conference began, underperforming the broader market, which gained 0.25 percent.

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