United Microelectronics Corp (UMC, 聯電), the world’s No. 3 contract chipmaker, yesterday reported its weakest net profit in seven quarters due to sluggish demand for mobile phone chips and its advanced 28-nanometer (nm) chips.
Net profit last quarter plunged 30.5 percent to NT$1.77 billion (US$60.41 million), compared with NT$2.55 billion in the same period of 2016, the company’s financial statement showed.
That also represented a quarterly contraction of 50 percent from NT$3.47 billion, due to a significant decline in investment gains, the statement said.
UMC expects revenue to be little changed this quarter from last quarter’s NT$36.63 billion as robust overall demand should offset continuing weakness in 28-nanometer chips.
“During the [fourth] quarter, our capacity utilization from legacy 8” and 12” technologies continued to reflect robust demand, despite a decrease in 28nm HKMG contribution,” UMC copresident Jason Wang (王石) told a teleconference.
“Looking into the first quarter of 2018, we anticipate our foundry business to remain relatively flat,” Wang said.
The company said that operating income would only break even this quarter from NT$1.9 billion last quarter due to a lower gross margin.
The downward spiral in gross margin is to extend to between 13 and 14 percent this quarter from 17.2 percent last quarter, Wang said, adding that capacity utilization rate this quarter would remain at about 90 percent after falling from 96 percent in the third quarter last year.
“We have high hopes for a rebound for our 28nm technology in the second half,” Wang said, adding that the company is continuing efforts to secure new design opportunities and rebuild its 28-nanometer business momentum.
UMC’s wafer shipments are forecast to grow 2 to 4 percent quarterly, but average selling prices are to fall 2 percent in US dollar terms, he said.
The company plans to trim capital expenditure by about 24 percent to US$1.1 billion this year from last year’s US$1.44 billion, after shifting its strategy to seek justifiable returns on investment rather than pure revenue growth, he said.
UMC expects revenue this year to grow at a slower pace than the high-single-digit-percentage growth estimated for the overall foundry industry, Wang said.
Revenue last year rose 1 percent to NT$149.29 billion from NT$147.87 billion a year earlier, with contribution from 28-nanometer chips dropping to 16 percent from 17 percent, while revenue from 14-nanometer chips made up 1 percent, mostly from increasing demand for cryptocurrency mining and artificial intelligence, company data showed.
Net profit last year climbed 15.8 percent year-on-year to NT$9.63 billion from NT$8.32 billion, with earnings per share rising to NT$0.79 from NT$0.6.
STAYING AHEAD: Fitch said that TSMC remains technologically ahead of others, but Samsung is building a new chip fab, while China is investing in its domestic industry As escalating US-China tensions and COVID-19-related production disruptions force US technology supply chains to transform, Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) US$12 billion chip fabrication plant in Arizona would be key to spurring greater US production of core semiconductor components, Fitch Ratings said. “We view the US-TSMC alliance as a first step in building a more autonomous US technology supply chain, given high barriers to entry, specifically related to the significant capital and design capability required for leading-edge semiconductor manufacturing,” Fitch said in a statement on Tuesday. “By working with TSMC, US chipmakers will not face the financial burden of incremental investment
DIVERSIFICATION: Although COVID-19 would push more companies to produce in emerging markets, DBS said that it was unlikely that firms would totally leave China Geopolitical tensions and supply disruptions are expected to accelerate the migration of manufacturing out of China, as concerns about the risk of production concentrated in one country increase, S&P Global Ratings said. Although its economic expansion might be weaker than previous levels due to the accelerated relocation of manufacturing, China’s economic growth would still be stronger than that of most other economies, the ratings agency said. “While absolute growth rates will moderate, we believe China’s economic performance will continue to be a key sovereign credit support,” S&P Global Ratings credit analyst Tan Kim Eng (陳錦榮) said in a statement on Thursday. “Its growth
Taiwan’s corporate landscape has changed significantly over the past 20 years, with Hon Hai Precision Industry Co (鴻海精密) replacing Formosa Plastics Corp (台塑) as the revenue leader, while Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) has emerged as the most profitable firm, a survey of Taiwan’s 50 largest companies published on Tuesday last week showed. The Chinese-language CommonWealth Magazine survey ranked Taiwan’s 50 largest companies based on their revenue last year, and compared them with the results of a similar survey it conducted in 2000. Only 33 companies on the original list remained in this year’s rankings, the survey found, following two
GEOPOLITICAL RISKS: Beijing announced plans to strengthen ‘enforcement’ in Hong Kong, sparking losses across Asia led by the Hang Seng’s 5.6 percent plunge Local shares on Friday ended sharply lower amid renewed tensions between the US and China over Chinese telecommunications equipment giant Huawei Technologies Co Ltd (華為) and China’s plan to introduce a national security law in Hong Kong. The TAIEX on Friday finished down 197.16, or 1.79 percent, at 10,811.15 on turnover of NT$177.183 billion (US$5.9 billion), almost flat from a close of 10,814.92 on May 15. The market was down across all major sectors, in particular electronics shares, which finished down 1.99 percent from Thursday’s close. Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest wafer foundry and a chip supplier