United Microelectronics Corp (UMC, 聯電), the world’s No. 3 contract chipmaker, yesterday posted its strongest quarterly net profit in 10 quarters, boosted by massive asset gains, primarily from the acquisition of Chinese chipmaker Hei Jian Technology (Suzhou) Co (和艦科技).
Net income grew nearly eight times to NT$6.59 billion (US$220 million) in the quarter ending March 31, compared with NT$739 million in the final quarter of last year, marking the best quarter since the third quarter of 2010.
Beating its own forecast, UMC posted NT$294 million in operating profits for last quarter, reversing an operating loss of NT$850 million in the prior quarter, rather than merely breaking even, as the chipmaker forecast three months ago.
“Our foundry profits were better than we expected so as to offset losses from our solar business,” UMC chief financial officer Liu Chi-tung (劉啟東) said. “We originally expected a slight loss.”
Non-operating profits soared to NT$7.25 billion, from NT$1.38 billion, with about NT$6 billion from a one-time gain, resulting from buying an 85 percent stake in Hei Jian at a price lower than the Chinese chipmaker’s book value, Liu said.
UMC also gave a stronger-than-expected outlook for this quarter, saying demand would recover from a slump on excessive inventory.
Wafer shipments are expected to climb by between 12 percent and 14 percent this quarter from last quarter’s 1.13 million wafers, while chip prices will remain flat, UMC chief executive officer Yen Po-wen (顏博文) told investors.
“Following several months of inventory correction in the semiconductor market, demand has stabilized,” Yen said. “With increasing demand led by the communications sector, primarily mobile devices, we anticipate second-quarter foundry operating results will improve significantly.”
His forecast translates into between 12 percent and 14 percent quarterly growth in revenue, from NT$26.37 billion, without factoring in foreign exchange rate changes.
Utilization will climb slightly to between 81 percent and 83 percent, from 78 percent.
UMC’s sequential growth surpassed the low-single-digit percent increase forecast by Credit Suisse analyst Randy Abrams and a market consensus of 9 percent growth forecast by other analysts, according to a Credit Suisse report.
Gross margin for UMC’s foundry business is expected to slide to low single digit percent growth this quarter from last quarter’s 4.1 percent, as increased investment in advanced 28-nanometer technology offsets growth from high-margin 40-nanometer chips, Yen said.
UMC forecast that revenue contribution from 40-nanometer chips would be 20 percent this quarter from 18 percent a quarter ago.
The chipmaker said losses at its new solar business would amount to NT$800 million this quarter, compared with a loss of NT$790 million last quarter. Revenue from this business is forecast to rise slightly to NT$1.5 billion from NT$1.44 billion.
As for the company’s technology roadmap, Yen said UMC would adjust its strategy by focusing on major nodes, such as 14-nanometer or 16-nanometer technology, while skipping 20-nanometer technology, which Yen said he considered a transition technology.
The company is expected to start high-volume production of 14-nanometer or 16-nanometer chips in 2015, he said.
Separately, UMC said its board of directors approved the distribution of a cash dividend of NT$0.4 per share, representing a 63 percent payout ratio compared with UMC’s earnings of NT$0.63 per share last year. The distribution represents a 3.31 percent cash dividend, compared with the company’s closing price of NT$12.1 yesterday.