Taiwan's chipmakers are lowering prices as world demand slows, an executive of the nation's No. 2 make-to-order semiconductor company said yesterday.
``We are offering product discounts on a case-by-case basis,'' said Peter Chang (
As UMC's customer and those of its rivals such as Taiwan Semiconductor Manufacturing Co (TSMC,
"I expect that discounts will stimulate demand," said Daniel Heyler, an analyst with Merrill Lynch in Taipei. "The price discounts are for extra quantity beyond what customers expect to buy."
Prices of high-end products will fall first, UMC's Chang said. Analysts are lowering their expectations for the company.
"We've cut our sales forecast for UMC in the first-quarter from the fourth quarter 2000 by 17 percent to NT$16.4 billion" because customer inventory correction is affecting orders, Heyler said. "We could still see pricing pressure on their products and official cuts in capital expenditure."
TSMC said that its factory utilization rate will probably fall below 100 percent during the first quarter this year.
TSMC spokesman Tzeng Zing-hao (
UMC's factories will be running at 85 percent of capacity during this quarter as customers eliminate inventory backlogs, Chang said.
"Their optimistic forecasts were wrong," he said.
The discounts follow more than a year of rising prices for the products TSMC and UMC make for such customers as Intel Corp and Motorola Inc. In its most recent earnings report, UMC said that the average selling price for its silicon wafers rose to about US$1,475 in the third quarter from US$1,275 in the first quarter last year. Silicon wafers are the material from which chips are cut and packaged.
Meanwhile, ABN Amro Asia has assigned a "buy" investment rating for both stocks of TSMC and UMC, citing improved utilization rates in the two wafer foundries.
The Holland-based securities house said the utilization rate at TSMC in the second quarter of the year will be higher than that in the first quarter because the chipmaker is likely to win a contract for supplying digital signal processors to Texas Instruments.
The processors are the major components for mobile phones and the ground stations for the wireless telecommunications devices. The global market for digital signal processors is expected to hit US$8 billion this year, compared to US$6.4 billion recorded in 2000, Deutsche bank said.
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