Thu, Jan 25, 2018 - Page 12 News List

Phone, 28nm chips drag UMC profit

PICKUP?The chipmaker is hoping for a rebound in 28nm chip demand this quarter, as it continues efforts to secure new design opportunities to rebuild sales momentum

By Lisa Wang  /  Staff reporter

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.

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