Thu, Jul 25, 2019 - Page 12 News List

UMC profit up 45% on high demand

CAUTION:Customers are managing inventories more carefully amid a weakened global economic environment, which might contribute to lower visibility, the company said

By Lisa Wang  /  Staff Reporter

Contract chipmaker United Microelectronics Co (UMC, 聯電) yesterday said its net profit last quarter rose 45 percent quarterly, due mainly to improving chip demand for mid-to-low-end smartphones.

The Hsinchu-based chipmaker expects the growth momentum to carry into this quarter, driven by inventory replenishment demand from “some selected customers in the communications segment.”

That would help wafer shipments grow 2 to 4 percent quarterly and help raise wafer prices by 1 percent in US dollar terms, UMC said.

However, gross margin would be little changed from 15.7 percent last quarter, as the factory utilization rate would remain at the higher end of 80 percent, the chipmaker said.

Overall, UMC remained conservative about its business outlook.

“Customers are continuing to manage their inventory carefully amid a weakened global economic environment, which might contribute to lower visibility in the business forecast during the second half,” UMC copresident Jason Wang (王石) told an investors’ teleconference.

“Communications will be the strongest segment in the third quarter, particularly in the mid-to-low-end smartphone area,” Wang said.

The communications segment was the largest revenue generator for UMC last quarter, contributing 52 percent, with revenue of NT$36.06 billion (US$1.16 billion).

Regarding global 5G development, Wang said that the company holds a similar view as some of its semiconductor peers.

“Global 5G development is accelerating,” Wang said. “We expect 5G to arrive earlier than originally expected.”

Messages from UMC’s customers have shown that they are speeding up chip production plans and working to widen product coverage, which Wang said is a good sign for the company.

“Hopefully, we can penetrate into this growing [market],” he said.

For UMC, the addressable 5G market is diverse, from advanced 28-nanometer and 22-nanometer technology to mature technology used to make power management chips and driver ICs for ultra-high-definition 8K panels, Wang said.

UMC’s net profit in the second quarter jumped to NT$1.74 billion, compared with NT$1.2 billion in the first quarter.

However, on an annual basis, net profit more than halved from NT$3.66 billion.

Earnings per share rose to NT$0.15 from NT$0.1 in the first quarter, but were still lower than NT$0.3 a year earlier.

UMC attributed the quarterly growth to increasing chip demand for low-to-mid-range smartphones, switches and routers, which helped boost its factory utilization to 88 percent.

UMC’s conservative view about the foundry business was not a surprise.

Gartner Inc in its latest report forecast that revenue in the global foundry sector would decline 1.74 percent to US$61.78 billion this year.

The foundry sector would not return to growth until next year, which would lead to a compound annual growth rate of 4.5 percent to US$78.3 billion in revenue during from last year to 2023, Gartner said yesterday.

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