Income Falls Like a Brick at UMC
Online staff -- Electronic News, 7/27/2005
Still licking its wounds from the industry-wide inventory correction that started in Q4 2004, semiconductor heavyweight United Microelectronics Corp. (UMC) weighed in Wednesday with Q2 results, reporting a whopping 80 percent sequential drop in net income, falling from $48.4 million to $9 million, on revenues of $615 million, which were down 4.2 percent sequentially.
In terms of dollars, UMC got boxed out of the ring by arch rival Taiwan Semiconductor Manufacturing Co. (TSMC), which reported Tuesday a 9.2 percent sequential increase in net income, which rose to $575 million on revenues $1.85 billion – up 5.1 percent compared with Q1.
Similar to TSMC, however, UMC reported a decrease in average selling price (ASP), down 9 percent sequentially, but boasted an increase in wafer shipments, up nearly 12 percent sequentially to 630,000 8-inch equivalent wafers. UMC attributes the decline in ASP primarily to much higher shipments from lagging-edge technology nodes.
Meanwhile, the rebound in wafer shipments is cause to believe that the worst is behind UMC, the company said.
"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. Despite the mild setback of a 4.2 percent decline in revenue and a gross margin of 1.1 percent in 2Q05, we saw a number of positive developments in several different areas. Toward 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."
UMC saw an increase in 90nm revenue during the quarter, which increased from 7 percent to 9 percent of overall revenue, as a result strengthening its SoC solution programs. The company expects 90nm revenue to increase to 15 percent in Q3.
"During the second quarter, we further strengthened our SoC solution programs so that our customers may more effectively address the new cost and time-to-market challenges encountered at nanometer technologies,” Hu said in the same statement. “For 90nm, where comprehensive integrated SoC solutions are particularly necessary to ensure early product success, we have incorporated the industry's latest design for manufacturing solutions to supplement our world-class technology, manufacturing, design, and back-end support. This complete SoC package will significantly bolster the competitiveness of UMC's customers in today's rapidly advancing semiconductor industry."
UMC expects wafer shipments to increase by mid-teen percentage points in Q3, while ASP is expected increase by low-single-digit percentage points. The company forecasts operating profit margins to be between 0 percent and negative 3 percent.
[Harry: The fact that TSM took share away to great their income reinforces the muted demand overall for technology. It also points to low growth/no growth in cap ex for semi equipment companies as capacity utilization is still not high enough to justify significant investments.
The uptick in telecom demand reinforces earnings reports from ADTN, TLAB and ADCT and the cap ex guidance from some of the carriers.
ESST earnings miss would sugges that demand for consumer electronics is weak in light of new kick apps. Besides the iPod, everyone has their cheap DVD player. Big screen LCD TV are stil not cheap enough to be under everyones christmas tree and the next series of gaming platforms is still 18 months off.] |
