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UMC trims capex after poor Q2, upbeat on Q3

Posted: 29 Jul 2005 ?? ?Print Version ?Bookmark and Share

Keywords:foundry chip?

Taiwan's foundry chip maker United Microelectronics Corp. has reported poor financial results for the second quarter, in contrast to its rival Taiwan Semiconductor Manufacturing Co. Ltd. (see July 26 story), but gave an upbeat forecast for the third quarter.

UMC's revenue decreased 4.2 percent quarter-over-quarter to NT$19.44 billion (about $608 million) from NT$20.29 billion (about $635 million) in 1Q05, and decreased 33.4 percent year-over-year from NT$29.18 billion (about $913 million) in 2Q04. Net income in 2Q05 was NT$299 million (about $9.3 million), a sequential decrease of 80.3 percent from 1Q05 and a 97.6 percent decrease over 2Q04.

UMC also reported that manufacturing capacity utilization crept up from 61 percent in the first quarter to 63 percent in the second quarter but the company trimmed its capital expenditure plan from between $1.0 billion and $1.5 billion to $1.0 billion with $332 million having been spent to date in 2005.

However low as the company's net income and manufacturing capacity utilization were, they came in better than expected. In April UMC had predicted that it would dip into loss and that manufacturing capacity utilization would dip to 60 percent.

"The second quarter of 2005 was a difficult quarter, but we are quite confident that we have exited the trough of the downturn," said UMC CEO, Jackson Hu, in a statement. "As a result of our effective response to the inventory correction that started in the fourth quarter of 2004, our shipment volume increased 11.7 percent sequentially to 630 thousand 8-inch equivalent wafers. Despite the mild setback of a 4.2 percent decline in revenue and a gross margin of 1.1% in 2Q05, we saw a number of positive developments in several different areas. Towards the end of the first quarter of 2005, we started to see an upturn in the consumer market, and more recently, the communication and computer segments seem to have regained momentum. This across-the-board jump in demand leads us to believe that we will soon be entering a new stage of growth."

For the third quarter UMC said it expects wafer shipments to increase by mid-teen percentage points while wafer average selling prices increase by low single digit percentage points. This would result manufacturing capacity utilization rate advancing to 75 percent, the company said.

The percentage of manufacturing revenues at 0.18-micron and below is set to reach 60 percent, while 90-nm is expected to be responsible for 15 percent of manufacturing revenues. The communication segment is expected to be the strongest followed by the consumer and computer segments, UMC said.

Jackson said UMC would continue expand 300-mm capacity in Taiwan and Singapore. "We believe that with our proven SoC Solution Foundry strategy, UMC is well-positioned to capitalize on the many new and exciting opportunities facing the semiconductor industry," Jackson concluded.

- Peter Clarke

EE Times

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