| |
Phil,
What possible good can it do any shareholder to participate in these "Let's establish completely unrealistic earnings estimates or whisper numbers so the stock can tank when the unrealistic guess isn't exceeded." type of games?
What's your estimate for MTSN's quarter?
The estimate was a nickle. Let it stand.
JMHO, or JMNSHO, whichever,
Ian.
++++++++++++++++++++++++++++++++
some more stuff on a couple of MTSN's customers...
================
January 13, 2000
Tech Center
Tech Heavyweight UMC
Wants to Put On Pounds
By RUSSELL FLANNERY
TAIPEI, Taiwan -- United Microelectronics Corp. has been portrayed as the loser in one of high-tech Asia's most costly takeover battles, which ended last Friday when island industry leader Taiwan Semiconductor Manufacturing Co. bought Worldwide Semiconductor Manufacturing Corp. for at least US$5 billion in stock.
But don't expect UMC to stand still. Taiwan's No. 2 semiconductor maker is poised for a year of fat growth and profits as more customers line up for its specialized outsourcing services.
Even without the Worldwide acquisition, UMC has expansion plans of its own -- including a 45% increase in capacity this year, and a 40-60 joint venture with Hitachi Ltd. that will operate a cutting-edge semiconductor plant in Japan starting in 2001. It also is poised to reap efficiency gains from one of Taiwan's biggest restructurings -- its US$4 billion merger of four affiliates that took effect on Jan. 3. Over the longer term, UMC is closing in on a technology gap with Taiwan Semiconductor, analysts say.
UMC's strategy is "showing up in the stock and the bottom line," says Don Floyd, regional semiconductor analyst at Credit Lyonnais Securities. He predicts UMC's earnings per share will grow nearly fourfold this year to 5.62 New Taiwan dollars (18.2 U.S. cents), from NT$1.60 last year, and that net profit will surge to NT$49.1 billion from NT$10.4 billion. UMC shares, meanwhile, are up 22% in the past month; they rose NT$3 each, or 2.7%, to NT$114 on Wednesday.
Expansion plans by both TSMC and UMC are part of a push by Taiwan companies in the global semiconductor industry. Production on the island will account for about 10% of total world output this year, compared with next to nil a decade ago. A measure of the island's rising clout world-wide: TSMC and UMC combined will account for about 16% of the global semiconductor industry's capital spending in 2000, valued by Dataquest Inc. at US$36 billion this year. They're also No. 1 and No. 2, respectively, in the fast-growing contract manufacturing, or foundry, niche, where global revenues are projected to grow to US$29 billion in 2003 from US$5 billion in 1998, according to Donaldson, Lufkin & Jenrette.
To be sure, TSMC improved its position vis-a-vis UMC with the Worldwide acquisition because it gained plant space needed to meet booming industry demand. "Capacity has become the No. 1 priority because of rapid growth in the industry," says Dan Hyler, regional semiconductor analyst at Merrill Lynch Taiwan. The value to a local buyer of Worldwide, which is located in the chip-making hub in Hsinchu, is especially high compared with acquiring a facility abroad, he says.
UMC, meanwhile, is spending about US$2.6 billion on capital expansion this year. That compares with more than US$3 billion by TSMC, but still among the world's top 10, according to Credit Lyonnais. That money will go toward, among other things, two new plants in Taiwan.
At least as important, the company is getting more out of several facilities it set up as joint ventures in the mid-1990s -- including one with U.S.-based S3 Inc. -- with the aim of expanding its contract manufacturing business. The joint-venture approach helped bring new blood into the organization and lock in customers that boosted UMC's share of the foundry market to about 35% today from just 3% a few years ago, the company says.
But even UMC spokesman Alex Hinnawi concedes that the joint ventures were "no longer the best way to maximize operating efficiency and profitability." Two problems: The units competed with each other for customers, and it took too long for technology developed by UMC to circulate among its joint-venture affiliates. "There was a lot back and forth, and it was time-consuming," says UMC's chief technology officer, Fu Tai Liou, referring to all the paperwork generated at the time. Price competition among UMC's affiliates was "costly" to the group, he adds.
The merger of UMC with its four affiliates will "help them eliminate competition that had existed among their own units, and help customer service," says Eric Wang, technology industry analyst at ABN Amro. The new structure also makes UMC's financial operations more transparent, improving the company's attractiveness to international equity investors, foreign stock analysts say.
Finally, UMC is upgrading its technology. That means working with customers to etch chips at advanced 0.18-micron line-width -- which can mean lower costs, starting trial production with narrower 0.15-micron technology and delivering samples of copper processes that may replace conventional aluminum. "It looks like UMC is shipping more 0.18 and copper than TSMC," says Credit Lyonnais's Mr. Floyd. "They're hustling."
UMC's overall expansion and technology improvements are part of a virtuous cycle that is bringing in more prestigious customers. "Five years ago, Hitachi wouldn't have touched UMC with a 10-foot pole," says Matt Cleary, vice president of Asia technology research at Credit Suisse Asset Management.
It's unlikely that UMC is finished with mergers and joint ventures aimed at expanding capacity, despite the loss of the Worldwide deal, analysts say. Future moves will likely be outside of Taiwan because "there isn't much more on this island they can buy," says Mr. Cleary. UMC bought 56% of Nippon Steel Semiconductor Corp. in 1998, and announced a technology agreement with Kawasaki LSI last March.
"Japan will be a big market for foundry manufacturing, and UMC has been planting more seeds there than anybody," says Calvin Chang, a semiconductor analyst at Jardine Fleming Taiwan.
For its part, UMC doesn't have much to say about other mergers; nor is it looking back about the one many say would have suited it well. "We have an aggressive expansion plan of our own," says Mr. Hinnawi, UMC's spokesman.
|
|
