United Microelectronics Corp’s (UMC, 聯電) planned investment in a semiconductor joint venture with Fujitsu Semiconductor Ltd might generate limited contribution, JPMorgan analysts led by Gokul Hariharan said in a research note.
The analysts’ comments followed the nation’s second-largest contract chipmaker’s announcement on Thursday that it and Fujitsu Semiconductor had reached an agreement for UMC to become a minority shareholder of a newly formed subsidiary of the Japanese chipmaker that is to include its 12-inch wafer manufacturing facility located in Kuwana City, in the Mie Prefecture of western Japan.
In a joint statement, UMC said it plans to invest ¥5 billion (US$48.18 million) as an initial investment, allowing it a 9.3 percent stake in the new venture and help increase the company’s presence in Japan. Under the terms of the agreement, UMC is to license its 40-nanometer (nm) low-power process technology to Fujitsu Semiconductor, the statement said.
“We believe UMC can rationalize owning a stake in Fujistu’s 12-inch Mei foundry company with a focus on developing new process R&D and carry out legacy chip manufacture in Japan without undertaking actual expansion,” JPMorgan analysts said. “At the mentioned 9.3 percent stake, we believe contribution to UMC from this venture would be minimal.”
UMC said the Fujitsu Semiconductor’s 12-inch wafer factory in Mie has a monthly capacity of 28,000 wafers for use in image sensors and automobile electronics. However, JPMorgan’s on-site checks suggest that the fab’s current capacity stands at 20,000 wafers per month, with technology focusing on 90nm and 65nm.
UMC chief executive Yen Po-wen (嚴博文) said in a statement that after adding Fujitsu’s 12-inch fab in Mie, the company would have three 12-inch operations in Taiwan, Singapore and Japan, claiming a unique position in the region.
“UMC will also be able to leverage this strategic partnership to gain new foundry business within the Japanese market,” Yen said.
JPMorgan said UMC would likely further increase its stake in this venture or potentially acquire the Mie fab in the future, considering Fujitsu’s ongoing restructuring in its semiconductor division.
“UMC’s past experiences in running fabs in Japan have not been encouraging,” the brokerage said.
JPMorgan remains downbeat about the company’s earnings outlook into next year, particularly as the company is facing heavy losses in its solar subsidiary, reiterating its “underweight” rating on UMC shares with a price target of NT$11.5. UMC shares closed unchanged at NT$13.65 yesterday in Taipei trading.
Additional reporting by Lisa Wang
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