Shareholders yesterday gave United Microelectronics Corp (UMC, 聯電) the final go-ahead on a potential 2.5 billion yuan (US$365 million) initial public offering (IPO) of its Chinese unit, Hejian Technology (Suzhou) Co Ltd (和艦科技), to finance capacity expansion in China’s thriving semiconductor market.
The chipmaker is engaged in an uphill battle to quench strong demand for 8-inch wafers. UMC has hiked its contract manufacturing prices for 8-inch chips due to higher component costs and tight supply.
Hejian, which operates an 8-inch fab in Suzhou in China’s Jiangsu Province, is to increase manufacturing capacity to about 75,000 wafers a month by the second quarter of next year, compared with 65,000 wafers currently, UMC said.
“Hejian is running its fab at full utilization,” UMC chief financial officer Liu Chi-tung (劉啟東) told reporters on the sidelines of an extraordinary shareholders’ meeting in Hsinchu yesterday. “We will submit the [Hejian IPO] application [to the Chinese authorities] as soon as possible.”
Hejian is to join other Chinese and overseas firms lining up to debut A-shares on the Shanghai stock market.
Hejian plans to issue 400 million new shares, reducing UMC’s shareholding to a controlling 87 percent following its debut, from 98 percent, said UMC, the world’s No. 3 contract chipmaker.
UMC holds about a 9 percent share of the world’s foundry market, according to market researcher IC Insights.
Hejian is to fulfill orders from Chinese customers, while UMC would focus on serving customers from Taiwan and North America, which made up more than 70 percent of UMC’s revenue of NT$38.85 billion (US$1.26 billion) last quarter, Liu said.
Hejian and UMC’s two other Chinese subsidiaries — United Semiconductor (Xiamen) Co (聯芯) and UnitedDS Semiconductor (Shandong) Co (聯璟半導體) — contributed 15 percent of their parent company’s revenue in the April-to-June quarter, up from 11 percent in the first quarter of the year, Liu said.
United Semiconductor (Xiamen), which operates a 12-inch fab in Xiamen in China’s Fujian Province, is struggling to achieve profitability due to a smaller customer base, UMC said.
The Xiamen fab primarily produces 28-nanometer chips and 40-nanometer chips, while UnitedDS Semiconductor is a chip designer, UMC said.
Liu cautioned customers against building large inventories as the US-China trade war develops.
UMC has factored in the effect of the dispute in the company’s business outlook for the current quarter, he said.
UMC last month forecast that wafer shipments would remain flat this quarter.
However, gross margin would sink to 15 percent, from 17.2 percent last quarter, as inventory corrections and lower smartphone demand in China would reduce demand for 40-nanometer and 28-nanometer chips, UMC said.
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