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To: DJBEINO who wrote (9148)	1/30/2001 7:44:17 AM
From: DJBEINO	Respond to of 9582

CSMF.SI closed @5.250 +0.100 +1.94% 11,268,000 +++++++++++ Chartered to cut capacity this year By Jennifer Tan SINGAPORE, Jan 30 (Reuters) - Chartered Semiconductor Manufacturing (NasdaqNM:CHRT - news), a leading supplier of chips to the telecommunications industry, said on Tuesday it plans to cut back capacity this year to counter weaker growth in the sector. Chief executive Barry Waite told analysts in a conference call the world's third largest independent foundry would slash production by 11 percent in 2001 and cut capital expenditure to US$1.2 billion versus an earlier projection of US$1.5 billion. Waite, speaking after Chartered unveiled its fourth quarter results, said the company remained committed to its focus on the telecoms market -- which accounted for more than half of sales -- despite signs of slowing sectoral demand. ``This short-term correction would not change our long-term direction and focus on the communications market,'' he said. Despite the capacity cutbacks, production in 2001 would rise 25 percent from a year ago and investment levels would still increase from the previous period, Waite said. Kim Eng Securities analyst Dharmo Soejanto said: ``Chartered's operating environment has deteriorated more rapidly than expected and the company would face a tough first half.'' Chartered, whose shares are also listed on Nasdaq, posted solid fourth-quarter earnings on the higher end of expectations at US$77.4 million, up from $22.1 million in same 1999 period. Some analysts reckoned Chartered shares were expensive given its weak outlook. Fair value has been pegged at between S$5.25 and S$7.50. At 0724 GMT, Chartered's shares were unchanged at S$5.15, off an earlier high of S$5.30. The stock has underperformed the benchmark Straits Times Index (^STI - news) by more than 60 percent in the last six months. DELAYED PRODUCTION Responding to a weaker industry growth outlook, Chartered has pushed back the production schedule for its latest wafer fabrication (fab) plant from this year to mid-2002. ``The silver lining in this current outlook is that it has given us the opportunity to revise our equipment strategy for our newest fab, Fab 7,'' Waite said. He said the company could turn its focus away from 200-mm wafer technology and convert Fab 7 into ``a totally 300-mm facility''. Analysts said this move would provide an opportunity to focus on developing higher-end technology and narrow the gap with its Taiwanese competitors. ``It's a slow market and bad for business in the short term, but this creates a window of opportunity for the company to upgrade,'' said Patrick Yau, analyst at ABN AMRO Securities Asia. TELECOMS STILL KEY Chartered said its focus remained on telecoms despite growing gloom in the sector after Swedish cellphone maker Ericsson stunned the market last week by outsourcing its entire mobile handset production. Sales to networking and wireless technology customers accounted for about 51 percent of Chartered's revenues in 2000. ``There are still very healthy numbers (in the telecoms sector) compared to the outlook for PCs (personal computers),'' Waite said, adding that estimates for handset growth were more than 30 percent in 2001 and infrastructure at 20 percent plus. Warren Lau, an analyst at HSBC Securities, also felt the communications market held growth potential. ``We still believe Chartered's exposure to communications is better than that of PCs, as the PC industry is facing structural changes and penetration rates are saturated,'' he said. Chartered officials, who remained confident of a recovery in the latter half of the year, acknowledged pricing pressures were building up. Chief financial officer Chia Song Hwee expected an average 10-15 percent fall in technology prices in the sector this year. biz.yahoo.com