Fri, Jun 21, 2013 - Page 13 News List

UMC mulls investment opportunities

TARGET ACQUIRED?The firm said it aims to secure stakes in other companies to boost capacity, but did not name any of its targets, leaving analysts guessing

By Kevin Chen  /  Staff reporter

United Microelectronics Corp (UMC, 聯電) is looking for investment opportunities in regional wafer plants, which analysts said reflects the company’s urge to increase its production capacity.

The move also indicates that the world’s No. 3 contract chipmaker has seen signs of growing demand for power management integrated circuits (PMICs), analysts said.

On Wednesday, UMC announced in a filing to the Taiwan Stock Exchange that its board of directors had approved a plan to seek investment opportunities in Asia, as the company hopes to accelerate its foundry business growth.

The company plans to spend as much as US$300 million to seek “appropriate investment targets and cooperation partners” around Asia, the filing said.

However, the Hsinchu-based company did not specify what potential targets it has on its radar, nor whether its preferred plants specialize in 8-inch or 12-inch wafer production.

“The motivation behind this investment plan is that the company sees strong demand for driver and mobile-related PMICs in 2014,” said Carlos Peng (彭國維), an analyst at Fubon Securities Investment Services Co (富邦投顧).

The need for a new generation of PMICs is likely to increase in the second half of this year, and stay strong through next year because of the growth momentum of tablet PCs, Peng said in a note yesterday.

Global semiconductor companies have been working to develop the next generation of high-performance power management chips specifically tailored for the growing popularity of portable devices, such as tablet PCs, Ultrabooks and smartphones.

They are also facing strong demand for the mid to high-end foundry process — from 0.18 micron to 90 nanometer process — on power management chip production, supported by a growing migration from feature phones to low-cost smartphones by consumers in emerging markets, including China and India.

The smartphone migration “will increase the average wafer size of the small panel driver IC in the new handset and spur demand for the 8-inch foundry business,” Peng said.

However, “UMC’s 8-inch capacity [will be] fully utilized in the second half of this year due to strong driver, power management, micro-electromechanical system and computing IC inventory build-up,” he said.

In its stock exchange filing, UMC said it was hoping to secure shareholdings, capacity or manufacturing equipment in targeted companies through equity investment or direct purchase.

Local media yesterday reported that China’s Semiconductor Manufacturing International Corp (中芯國際) and the US-based GlobalFoundries Inc could be UMC’s potential targets.

However, Yuanta Investment Consulting Co’s (元大投顧) analyst Felix Hsu (徐凰原) did not agree, saying the two companies’s financial conditions are stable, meaning they have no need for external financial investment.

In his note to clients, Hsu said UMC’s target could be Silterra Bhd’s 8-inch wafer plants in Malaysia.

However, he added that the company might see limited benefit from its overseas plants in the near term due to management issues.

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