Chartered Semiconductor Manu-facturing Ltd, the third-largest maker of customized chips, said it will lose more money in the second quarter than it estimated on fewer orders from phone companies.
In its third such lowering of growth forecasts in the past six months, the Singapore-based company said sales will fall about 48 percent from the first quarter's US$206.7 million, more than the 25 percent decline it estimated in April. Chartered, which is 60.8 percent owned by the government, expects to lose between US$0.76 and US$0.78 an American depository receipt, down from its forecast for a loss of US$0.50 to US$0.52.
The sales and profit declines reflect cooling demand from phone equipment makers such as Ericsson AB and Conexant Systems Inc and may force Chartered to cut spending on new equipment and find other ways of slashing costs, investors said. The company is already utilizing only about a third of its production capacity.
"When customers see a huge slowdown in terms of demand, the first people they cut are the outsourcing companies like Chartered," said Marc Tan, who helps manage about S$200 million (US$110.6 million) at OUB Optimix Funds Man-agement in Singapore and owns Chartered shares.
Chartered said it expects customers to increase purchases in the third and fourth quarters. Its ADRs rose US$1.65 to US$32.75 yesterday, before the announcement. Each Chartered ADR is made up of 10 common shares. Its shares were unchanged at S$5.80 in Singapore. While they've fallen about 55 percent in the past 52 weeks, the shares have gained 22 percent in the year to date.
Chartered lost US$30.9 million, or US$0.22 for every ADR, in the first quarter ended March 31, compared with a profit of US$37.8 million, or US$0.29, in the year-earlier quarter. That was its first loss in six quarters.
* Chartered's wafer shipments in the first quarter fell 21 percent to 166,400 from a year ago.
* The decline is a 32 percent drop from the fourth quarter.
* The chipmaker said it won't reduce capital spending targets of US$1 billion this year, although it lowered that target from US$1.2 billion in April.
The company said spending on chips may increase in the second half of the year, helped by interest rate cuts by the US Federal Reserve.
Investors said the outlook for a recovery is still not clear.
Demand for chips won't increase until the end of the year, said Julian Mayo, who helps manage US$600 million in global assets global, including US$200 million in Asia, as managing director at Regent Financial Services Ltd in Hong Kong.
"I don't think there will be a pickup any time soon," Mayo said. "The Fed rate cut won't have an enormous impact. There is an excess in capacity in products like mobile phones and computers at a time when demand is relatively weak."
Chartered's five biggest customers by sales -- Ericsson, Conexant, Broadcom Corp, Agilent Technologies Inc and STMicroelectronics NV -- have either revised their sales or profit estimates this year or fired workers. Communications companies made up half Chartered's business last year.
The company said orders from communications customers would probably drop as a percentage of total sales next quarter.
Chartered said it expects the average usage of its factory equipment to be in the low 30 percent range, compared with last month's forecast for the second quarter of less than 50 percent and the first quarter's utilization rate of 61 percent.
Chartered's wafer shipments in the first quarter fell 21 percent to 166,400 from a year ago. That's also a 32 percent drop from the fourth quarter. Wafers are sheets of silicon cut into chips, which are used to power cellular phones and other electronic devices.
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