"TSMC is trading at a higher valuation because of its customer base," said Mark Baughan, an analyst with Deutsche Bank Securities in Hong Kong. TSMC will be able to increase selling prices for its wafers in the second half because companies in the computer chip business such as Intel are clients.
UMC doesn't have such large customers in the computer chip industry, which will rebound earlier than communications and consumer electronics companies that need to reduce inventories caused by overinvestment, Baughan said.
Global mobile phone sales are on track to stagnate this year at 405 million handsets, forcing the largest cell phone maker, Nokia Oyj, to cut earnings forecasts and press suppliers for lower chip prices. STMicroelectronics NV and Infineon Technologies AG, two of UMC's largest customers, supply chips to Nokia.
Tsao also lacks Chang's personal touch, analysts said.
Contacts
Chang spends about half his time abroad, meeting with customers and suppliers and speaking at industry events. As the leader of Taiwan's largest company, he appears on the cover of several local books on business management and is thronged by reporters at every public event he attends.
At one seminar in Taiwan last year, Chang exchanged views with James Morgan, the chief executive of Applied Materials, the largest producer of chip-making equipment. Morgan should be close to Chang: TSMC is Applied Material's second-largest customer after Intel.
For the past year, Tsao has kept a far lower profile. He relinquished daily control of UMC to John Hsuan (宣明智), now a deputy chairman, and president Peter Chang.
"Robert [Tsao] thinks he needs to visit clients more like Morris [Chang]," Connor Liu, an SG Securities analyst, said of Tsao's reappointment as chairman.
Bigger pie
The key battleground is for the companies to make production more efficient. Both plan to do so by making larger silicon wafers, the disks from which chips are cut.
The two are among 10 chipmakers worldwide, and the only foundries, that are opening multibillion-dollar factories to make 12-inch wafers.
By late next year when new factories reach full production, the dinner plate-sized disks will cut costs by more than doubling the chips yielded from the standard 8-inch wafers made today, said Rick Tsai (蔡力行), a TSMC vice president.
UMC, which has started making 12-inch wafers in a venture with Hitachi Ltd, may need to scale back investment in three such plants as most of its capacity is now idle.
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