Chartered Semiconductor Man-ufacturing Ltd's (
Chartered shares fell US$0.08, or 1.7 percent, to S$4.60. The company said sales may drop as much as 20 percent to US$80.5 million from the previous three months because of a slump in shipments.
The decline is more than Chartered's July forecast for revenue to dip 15 percent.
Even as the Singapore-based Chartered said the chip industry slump may bottom out some time during the second half of the year, analysts worry that any demand related to holiday season sales in the fourth quarter may evaporate by the start of 2002.
"The news is confirming investors' worry when they dumped the stock a few months ago -- we definitely have overcapacity at this point in time," said Ian Lui, chief investment officer at Allianz Asset Management Ltd, which manages US$500 million in Asia, and holds Chartered shares.
"Most companies say the fourth quarter will be better than the third quarter but they're still unsure about the direction after that."
Chartered also said its use of factory equipment or capacity utilization will fall to the `low-20s' from the `mid-20s' level that it predicted last month. That means about four-fifths of Chartered's equipment is lying idle because of weaker demand.
"Wafer shipments may dip slightly," Chia Song Hwee, Chartered's chief financial officer said in a statement.
"With this in mind, we have widened the band on our revenue target."
The low usage of factory equipment may set Chartered back in closing its gap with rivals Taiwan Semiconductor Manufacturing Co (台灣積體電路公司) and United Microelectronics Corp (聯電), analysts said, estimating the two Taiwan chipmakers' use of capacity at about 30 percent.
In July, Chartered said it will slash expenses and spending on equipment to US$700 million this year from an earlier target of US$1.2 billion.
The company also delayed the opening of a US$3.5 billion plant in northern Singapore to 2003 from next year, after postponing the opening this year.
"Semiconductor and electronics manufacturers in Asia are still going to suffer -- we haven't seen any kind of a bottom yet," said Lawrence Wu, who helps to manage US$300 million in investments at OSK Asia Asset Management Ltd.
"Sales aren't that great and I don't think demand will pick up substantially."
The new factory was to make the more advanced 12-inch wafers, which the two competitors are also pursuing.
Wafers are cut into chips to power electronics equipment from cellular phones to personal computers. The standard eight-inch wafers yield fewer chips.
Chartered reaffirmed its third-quarter loss of US$0.94 to US$0.96 cents for each American depositary receipt, the company said in a press release. It's the first time this year the chipmaker hasn't cut its profit estimates.
"Manufacturers are going to be a lot more cautious about the level of orders they place for components," said Jatin Doktor, an analyst at G.K. Goh Research Pte in Singapore.
"For Chartered, the outlook for a pick up may not be as rosy as what people are anticipating."
The company's reiteration of the loss was in line with analysts' expectations.
Chartered will probably post a loss of US$134.8 million, or US$0.97-5 for each ADR in the third quarter, according to the average estimate of four analysts surveyed by Bloomberg News on the matter.
A Chartered ADR is made up of 10 common shares.
"At the current level, the third quarter should be the bottom and there may also be some pick up in the fourth quarter," said Pranab Kumar Sarmah, an analyst at Daiwa Institute of Research Singapore Pte, who rates the stock a "hold."
Chartered's able to maintain its gross profit margin target as the company cuts costs, such as idling some equipment, Chia said.
In the past six months, Chartered's shares have declined 67 percent, compared to the 63 percent drop in the Bloomberg Asia Pacific Semiconductors Index.
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