United Microelectronics Corp (
Net income dropped to NT$2.6 billion (US$75.6 million) in the three months ended June 30 from NT$4.4 billion a year ago, when profit was inflated by NT$3.44 billion of one-time gains, analysts said.
UMC is scheduled to report second-quarter earnings today after the stock market closes.
The chipmaker this month appointed a new chief executive, Jackson Hu (胡國強), and ended a strategy of seeking alliances with electronics companies to focus on chipmaking.
The company may be depending less on investments in units to boost profit because the chip business, where it has lagged behind Taiwan Semiconductor Manufacturing Co (台積電), is recovering.
"The company has flip-flopped strategies three times in the last few years," said Devan Kaloo, who helps manage the equivalent of US$2.4 billion in Asia excluding Japan for Aberdeen Asset Management.
Shares of UMC have risen 23 percent this year, against a 47 percent gain for TSMC, which last week reported a better-than-expected 26 percent increase in second-quarter profit to NT$11.7 billion.
Sales at United Microelectronics rose 16 percent to NT$21.7 billion in the second quarter, outpacing a 13 percent increase at TSMC.
While UMC gained from an improvement in demand that has benefited most global chipmakers this year, its profitability may have lagged that of TSMC, which was able to raise prices for chips made with its newest production technology.
"UMC hasn't been able to jack up its prices," said Michael Ding, who counts shares in both chipmakers among the equivalent of US$4.2 billion he helps manage for International Investment Trust Co (國際投信).
UMC has more Asian customers than its rival and these haven't been able to raise their own prices. The firm's Asian customers include companies in which it holds stakes, including chip designers Silicon Integrated Systems Corp (
"United Microelectronics has to diversify away from its Taiwanese customer list," said James Johnstone, an analyst with Gartmore Investment Management.
The company needs to divest itself of stakes in chip companies to win new customers, he added.
Hu, appointed on July 15, has said the company will stop forming partnerships with other electronics companies, reversing a strategy announced only six months ago.
Hu's appointment signals a renewed focus on the company's main business as a "chip foundry," a manufacturer of semiconductors for other companies that either don't have their own factories or can't afford to invest in new capacity.
UMC's profit is likely to be lower than the same quarter last year, when the company booked one-time gains including NT$3.25 billion from selling shares in AU Optronics Corp (友達光電), the nation's biggest maker of flat-panel displays.
UMC is among the first companies in the world to invest in new factories that make larger, 12-inch silicon wafers from which chips are cut. The company is building a 12-inch factory in Singapore with Germany's Infineon Technologies AG at a cost of about US$3.6 billion.
The partners said they expected to start production in the second quarter of this year.
INVESTOR RESILIENCE? An analyst said that despite near-term pressures, foreign investors tend to view NT dollar strength as a positive signal for valuation multiples Morgan Stanley has flagged a potential 10 percent revenue decline for Taiwan’s tech hardware sector this year, as a sharp appreciation of the New Taiwan dollar begins to dent the earnings power of major exporters. In what appears to be the first such warning from a major foreign brokerage, the US investment bank said the currency’s strength — fueled by foreign capital inflows and expectations of US interest rate cuts — is compressing profit margins for manufacturers with heavy exposure to US dollar-denominated revenues. The local currency has surged about 10 percent against the greenback over the past quarter and yesterday breached
MARKET FACTORS: Navitas Semiconductor Inc said that Powerchip is to take over from TSMC as its supplier of high-voltage gallium nitride chips Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday in a statement said that it would phase out its compound semiconductor gallium nitride (GaN) business over the next two years, citing market dynamics. The decision would not affect its financial targets announced previously, the world’s biggest contract chipmaker said. “We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period,” it said. “Our focus continues to be on delivering sustained value to our partners and the market.” TSMC’s latest move came unexpectedly, as the chipmaker had said in its annual report that it has
Rick Cassidy, the chairman of Taiwan Semiconductor Manufacturing Co's (TSMC, 台積電) US subsidiary, TSMC Arizona Corp, plans to retire, but the company has yet to name a successor. After Cassidy made his intention to retire known, TSMC Arizona held a special general meeting and approved a resolution that Cassidy would not continue as chairman and would not remain as a director, TSMC said in a statement filed with the Taiwan Stock Exchange last night. The meeting also approved a plan to appoint TSMC Arizona president Rose Castanares as a director, the company said, adding that Cassidy has been named as an advisor
SECURITY WARNING: The company possesses key 3-nanometer technology, and Taiwan should prevent it from being transferred to China, a lawmaker said The Ministry of Economic Affairs yesterday said it would conduct a “strict review” of any proposed acquisition of Taiwanese tech company Source Photonics Co (索爾思光電), following media reports that a Chinese firm was planning to buy the company in the Hsinchu Science Park (新竹科學園區). Local media reported that Suzhou Dongshan Precision Manufacturing Co (東山精密), China’s largest printed circuit board manufacturer, had announced plans to acquire Source Photonics for 5.9 billion yuan (US$823.1 million). The ministry said it has not received an application from Source Photonics and has formally notified the company that any buyout would constitute a change in its ownership structure. The
RSS