United Microelectronics Corp (UMC, 聯電), the world’s No. 3 contract chipmaker, yesterday said that it is cautious about its business outlook for the next two quarters, after its net profit last quarter more than halved from the previous quarter to NT$1.72 billion (US$55.58 million) due mainly to sluggish demand for low and mid-range smartphones.
Net profit in the third quarter plunged 53 percent from NT$3.66 billion in the previous quarter and fell 50.43 percent from NT$3.47 billion a year earlier, the company said in a statement.
Business is expected to deteriorate this quarter, as sagging demand for cryptocurrencies is expected to sap demand for the its advanced 14-nanometer chips, while its 28-nanometer technology is facing an overcapacity problem, the company said.
“We are seeing a softening of wafer demand from customers [in the fourth quarter], partly due to continued softness in entry and mid-level smartphones,” UMC co-president Jason Wang (王石) told an investors’ teleconference.
“Cryptorcurrencies is where the weakness lies. So, our 14-nanometer technology will be very volatile,” Wang said.
Fourteen-nanometer chips contributed 5 percent to the chipmaker’s total revenue of NT$39.39 billion last quarter, while 28-nanometers chips accounted for 13 percent.
Furthermore, the escalating US-China trade war, rising global crude oil prices and weakness in emerging-market currencies might further add to macroeconomic uncertainties, Wang said.
“At this point, we do see the market uncertainty stretching beyond the fourth quarter. We are cautious about the outlook in the first quarter” of next year, he said.
To cope with fluctuating demand and growing market uncertainty, the UMC would continue “to moderate its expansion of advanced technologies,” Wang said.
At the beginning of this year, UMC said that it would not allocate any resources to develop 7-nanometer technology, dropping from the race for technological leadership.
It said it aimed to boost return on investment, adding that 7 nanometer was not an addressable market.
Wafer shipments and average selling prices are both expected to decline 4 to 5 percent this quarter from last quarter, Wang said.
Gross margin would decline to a low-teens percentage this quarter from 17.6 percent last quarter, he said.
Factory utilization this quarter is expected to fall to about 80 percent from 94 percent in the third quarter, he said.
Revenue contribution from the communications segment last quarter fell to 43 percent from 47 percent in the prior quarter while contribution from the computer segment rose 19 percent from 16 percent, the statement showed.
UMC kept its capital spending for this year unchanged at US$1.1 billion, but added that it expects to see a reduction next year.
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