Chartered Semiconductor Manu-facturing Ltd said it had its biggest quarterly loss after going public two years ago and expects business to worsen in the next three months on fewer orders amid slower economic growth.
The No. 3 maker of chips to other companies' specifications recorded a third-quarter loss of US$118.3 million, or US$0.86 for each American depositary share, compared with net income of US$71.6 million, or US$0.51 a share, a year ago. The July to September loss was narrower than the US$135.1 million expected by five analysts and the shares rose as much as 4.8 percent.
"The results are better than expected," said Dave Lam, who helps manage about S$200 million (US$114 million) in investments at OUB Optimix Funds Management Ltd in Singapore. However, "visibility remains poor and the outlook remains weak -- it's too soon to say we're beyond the valley."
Chartered has been hurt as customers such as Ericsson AB and Motorola Inc. faced weaker demand for their products, leading to fewer orders for chips. The loss means that the Singapore chipmaker is falling behind its Taiwanese rivals Taiwan Semiconductor Manufacturing Co (
The two competitors are expected to take away business from Chartered as customers focus on a smaller number of suppliers, analysts said, adding that their chipmaking technology is more advanced than Chartered's.
"For quite a while, the market already ranks Chartered after Taiwan Semiconductor and United Microelectronics, so I don't think there would be any difference in the coming months," Ian Lui, regional chief investment officer at Allianz Asset Management which manages US$500 million in Asia.
* Chartered's third-quarter sales fell 74 percent to US$79.2 million.
* Wafer shipments in the three months fell 74 percent to 64,400 from a year ago.
* The company's spending on investments this year will be cut to US$550 million, less than half of the US$1.2 billion slated at the start of the year.
Chartered is also struggling as makers of mobile phones, facing declining sales, work to get rid of chips held in inventory. Nokia Oyj last week lowered its forecast for 2001 industry sales of handsets to 390 million phones from about 405 million.
To cope with the slower growth and reduce costs, Chartered is idling some equipment, cutting salaries and forcing some employees to take time off.
"They did better on their cost savings than expected," said Gregory Yap, head of research at OCBC Investment Research Pte in Singapore. "But the longer-term strategic concerns remain because they are cutting their capital expenditure and that may affect their competitive standing."
Chartered's third-quarter sales fell 74 percent to US$79.2 million. Wafer shipments in the three months fell 74 percent to 64,400 from a year ago. They declined about a quarter from the second quarter with weaker demand. Wafers are cut into chips, which are used to power electronics devices from modems, personal computers to cellular phones.
About 22 percent of Chartered's production equipment was used in the quarter, as against 31 percent in the previous three months. The company expects about the same utilization rate for the October to December period.
For the current quarter, Chartered predicted a loss of US$0.95 to US$0.97 per American depositary share, with sales little changed to down 5 percent from the third quarter.
"With the tragic events in recent weeks, it has become more challenging to predict what the next quarters hold for the semiconductor industry," Barry Waite, Chartered's chief executive, said on a conference call for analysts. However, he added that indications from his biggest customers show "we do appear to reaching a point of stabilization."
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