United Microelectronics Corp (UMC, 聯電), the second-largest contract chipmaker, reported lower than expected second quarter earnings yesterday, and said third quarter shipments will drop by 5 percent.
The company reported net profits of NT$4.4 billion (US$129 million) or NT$0.35 per share on sales of NT$18.6 billion (US$549 million) for the second quarter ended June 30, compared to a loss of NT$1.9 billion (US$56 million) during the same time last year. A survey of analysts conducted by Bloomberg News prior to the announcement had forecast a profit of NT$5.9 billion (US$178 million).
"The market may see the foundry industry in a bad light after this," said Harvey Chang (
UMC's disappointing earnings and guidance come just a week after rival chipmaker Taiwan Semiconductor Manufacturing Co (TSMC,
Chang had expected an even worse report from UMC based on TSMC's investor conference last week. TSMC said a challenging second quarter will be followed by a significantly lower third quarter as the chip industry recovery takes a three to six month "pause."
UMC officials were comparatively upbeat. The company predicted that average selling prices will rise in the third quarter on the strength of mobile phone and other communications product sales.
"We are still positive on the third quarter and expect a several percent increase [in sales over the second quarter]," said Liu Fu-tai (
When asked how sales for the year would pan out, UMC Vice Chairman John Hsuan (
Analysts, however, said the chip industry contributed less to the company's second-quarter performance than the sale of assets that included stock.
UMC earned NT$2.6 billion (US$77 million) on sales of shares in MediaTek Inc (
UMC also earned NT$1.3 billion from the sale of its stake in a joint venture with Hitachi.
On the TAIEX, Shares of UMC rose 4.7 percent yesterday to NT$33.3 ahead of the earnings announcement. TSMC shares closed up 3 percent at NT$52 after falling to the 7 percent limit for two consecutive days.
UMC plans to cut spending on new plants and equipment by US$300 million this year, down to US$1.3 billion. The company also worked out a scheme to better share R&D expenses on high-technology manufacturing processes by adding Infineon Technologies AG, a Germany-based memory chipmaker to an existing joint engineering project with US-based Advanced Micro Devices Inc (AMD) to develop 65nm and 45nm manufacturing processes.
UMC has already signed joint venture projects with both Infineon and AMD to build advanced, 12-inch chip manufacturing plants in Singapore. The crux of these agreements will remain the same, UMC officials said, with only the R&D portion changing.
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