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UMC cuts 28nm ramp up due to weak demand

Posted: 31 Jul 2015 ?? ?Print Version ?Bookmark and Share

Keywords:UMC? wafer? inventory? TSMC? LCD driver?

United Microelectronics Corp. (UMC) has revealed that its ramp of 28nm process technology will decrease as the outlook for demand is expected to remain weak until 1H16 while the chip industry irons out the kinks in its inventory.

The portion of total revenue for the Hsinchu, Taiwan chipmaker from its most advanced 28nm node will probably drop to about 10 per cent during H2 after peaking at 11 per cent in Q2. UMC has been aiming since the middle of last year to gain a foothold in 28nm that larger rival Taiwan Semiconductor Manufacturing Co. (TSMC) has dominated for nearly five years.

"Weakness in overall demand, partly due to the uncertainties in economic outlook, will prolong the inventory adjustment through 2H15," UMC CEO Po Wen Yen said. "28nm will take a few quarters to regain momentum."

UMC said that 28nm will rebound to about 15 per cent of total revenue by 2Q16. By Q3 of next year, the company said it expects to reach 30,000 eight-inch wafer equivalents per month in 28nm, bringing the new technology node in line with overall corporate profitability.

"The fact that you're pushing out that 30K until the middle of next year really concerns me," said HSBC analyst Stephen Pelayo. Other analysts echoed those worries, focusing most of their questions on UMC's 28nm expectations.

Three months ago, the company said that it had more than 20 customers engaged in 28nm development and expected to make more than five products for "several" customers by the end of this year.

TSMC said it will not cede market share in more mature technologies. The company vowed to protect its market share at the 28nm technology node, which in Q2 accounted for 27 per cent of company revenue, the largest chunk of total sales for the company during that period.

More expectations

UMC said that for the time being, it will maintain its planned capital expenditure budget for 2015 at $1.8 billion, up from the $1.4 billion capex for last year.

In 3Q15, UMC said its wafer shipments are likely to decrease by about five per cent from the equivalent of 1.54 million eight-inch wafers it sold in Q2. The company said its Q3 ASP in US dollars will probably drop by about three per cent from Q2. Capacity utilisation in Q3 will slide to the high 80 per cent range from 94 per cent in Q2.

The company's ASP is expected to fall because of demand weakness in more mature geometries such as 65nm, which includes products such as LCD drivers.

Looking ahead to more advanced geometries, UMC plans to start commercial production of 14nm FinFET products in 1H17. The company has been planning to skip 20nm and target 14nm FinFET as its next technology node to catch up with foundry rivals Samsung and TSMC. Samsung started making 14nm FinFET chips earlier this year while TSMC plans to begin commercial production of 16nm FinFET products in mid-2015.

- Alan Patterson
??EE Times

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