United Microelectronics Corp (UMC, 聯電), the world’s third-largest foundry services provider, yesterday said that factory utilization this quarter would fall to 70 percent, the lowest in 10 years, due to a prolonged inventory correction cycle driven by sagging end-product demand from PCs and smartphones.
The Hsinchu-based chipmaker expects 28-nanometer technology to be the bright spot, with much higher utilization than the corporate average. The 28-nanometer technology and the 22-nanometer technology were its largest revenue contributors last quarter with a 28 percent share.
Overall factory utilization last quarter dropped to 90 percent from 100 percent in the previous quarters.
Photo: Ann Wang, Reuters
With the downtrend in equipment loading extending into the current quarter, UMC expects gross margin to fall to about 35 percent this quarter, compared with 42.9 percent last quarter.
Wafer shipments are to plummet 17 to 19 percent sequentially this quarter, the chipmaker said.
Average selling prices would be flat this quarter and remain firm through this year, thanks to long-term supply agreements with customers, it said.
Only a few customers breached the agreements and faced penalties, it added.
“Given a soft global economic outlook for 2023, we expect the current challenging environment to persist through the first quarter, as customers’ inventory turnover days are still higher than normal, while order visibility remains low,” company president Jason Wang (王石) told investors during a virtual conference.
“We expect the inventory situation to gradually improve with better visibility in the second half of 2023,” Wang said. “We hope the first quarter will be the trough.”
UMC plans to spend US$3 billion on new facilities and manufacturing equipment to expand 12-inch wafer production at its 12A P3 fab in Tainan and P6 fab in Singapore.
Some capacity at the fabs have been booked by customers.
New capacity from the Tainan fab would come online in the third quarter and the P6 fab would begin volume production in the first half of 2025, UMC said.
This year’s capital budget is slightly higher than last year’s US$2.7 billion, but the chipmaker said that it would adjust spending in response to market changes.
This year “will be a down year for semiconductors and foundries, due to deterioration in the global economy and weakening consumer demand,” Wang said.
The global semiconductor industry would see revenue drop by a low-single digit percentage, while the foundry sector would see a 5 percent decline annually, he said.
The decline would be even more drastic for UMC’s addressable market with about 12 percent, or 13 percent on an annual basis, Wang said.
Commenting on the effects of geopolitical tensions, UMC said it would benefit from concerns over supply disruptions.
Some customers are in discussions with UMC to fulfill their capacity sourcing plans, Wang said.
UMC saw net profit contract 29.4 percent to NT$19.07 billion (US$630 million) in the fourth quarter of last year, compared with NT$26.99 billion in the third quarter. On an annual basis, net profit rose 19.6 percent from NT$15.95 billion.
For the whole of last year, net profit soared 56.3 percent year-on-year to NT$87.19 billion, from NT$55.78 billion in 2021. Earnings per share jumped to NT$7.09 from NT$4.57.
Overall revenue increased 30.8 percent to NT$278.71 billion last year, with sales of auto chips posting the fastest growth rate at 82 percent.
Revenue contribution from auto chips rose to 9 percent of overall revenue last year, the company said.
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