Thu, Oct 31, 2013 - Page 13 News List

UMC warns on margins in Q4

By Lisa Wang  /  Staff reporter

United Microelectronics Corp (UMC, 聯電), the world’s fourth-largest contract chipmaker, yesterday reported a 72 percent jump in net profit for last quarter, but warned that weak seasonal demand and inventory correction would undermine margins this quarter.

Net profit reached NT$3.48 billion (US$118.5 million) last quarter, compared with NT$1.81 billion in the second quarter and NT$1.49 billion in the corresponding period last year, the chipmaker’s financial statement showed.

The quarterly income far exceeded Credit Suisse’s estimate of NT$2.83 billion.

UMC also said the results were better than it expected.

“For the fourth quarter, we have seen a decline in wafer demand. Primary factors that led to a weakened outlook stemmed from a seasonal correction, supply chain inventory control and macroeconomic uncertainties,” UMC chief executive office Yen Po-wen (嚴博文) told a teleconference.

Because of sagging demand, chip shipments are expected to decline by between 8 percent and 10 percent in the current quarter, from last quarter’s record-high of 1.33 million wafers, he said.

The average selling price is also predicted to fall about 2 percent sequentially this quarter due to lower prices for 12-inch wafers, he said.

The company’s utilization rate is also forecast to decline to about 75 percent this quarter, from 87 percent in the previous quarter, he said.

Operating margin would just break even, compared with 7.2 percent in the third quarter, he added.

However, the company expects to post an operating loss this quarter after including a forecast loss of NT$550 million for its new solar business, UMC chief financial officer Liu Chi-tung (劉啟東) told investors.

Operating income more than doubled to NT$2.4 billion last quarter, from NT$1.15 billion in the second quarter, the company’s financial statement showed.

On the progress of the company’s 28-nanometer (nm) technology, UMC said 28nm chips would account for a low single-digit percentage of its revenue at the end of this year.

Yen said UMC has more than 20 customers for its 28nm chips, with more than 30 tap-outs.

“The market remains cautious on UMC migrating to 28nm and beyond,” Daiwa Capital Markets analyst Eric Chen (陳慧明) said in a research note released after the teleconference.

UMC’s business growth outlook will be limited by its unclear 28nm business and stiff price competition for 40nm chips, Chen said.

Chen has a “hold” rating on UMC.

UMC’s revenue growth mainly came from 40nm and 65nm chips, which accounted for 34 percent of the chipmaker’s sales last quarter.

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