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To: DJBEINO who wrote (9555)	12/4/2001 11:48:25 PM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

UMC Says 4th-Qtr Loss Will Be Lower Than Forecast as Sales Rise By Alan Patterson Hsinchu, Taiwan, Dec. 5 (Bloomberg) -- United Microelectronics Corp., the second-largest maker of chips for other companies, said its fourth-quarter loss may be lower than its earlier forecast as sales of chips used in personal computers and consumer electronics are improving. ``The fourth quarter will probably be slightly better than we thought,'' Fu Tai Liou, a vice president at UMC, said in an interview. ``Our capacity use has risen from 40 percent.'' Sales at UMC, which supplies to ATI Technologies Inc., the second-largest designer of PC graphics chips, are increasing at a rate faster than the 10 percent earlier predicted. Customers are placing more orders for chips made with the company's most advanced technology, Liou said. ``We expect capacity utilization to improve,'' said Omar Negyal, who helps manage about $1.5 billion in stocks at Foreign & Colonial Management Ltd., including shares in UMC. ``Improvement should be sustainable through the next three quarters, though we won't see utilization rising to the 100 percent levels of 2000.'' UMC in October said it expects to post a loss of NT$3.2 billion ($93 million) for the full year. That implied UMC will have a fourth-quarter loss of about NT$3.8 billion, having earned a profit of NT$596 million in the first nine months. Liou declined to give a specific number for the fourth quarter. Liou denied reports the company has won orders from Nvidia Corp., the largest PC graphics chip designer, whose semiconductors power Microsoft Corp.'s new Xbox game console. UMC and rival Chartered Semiconductor Manufacturing Ltd. of Singapore turned to losses this year as analysts predict global chip sales will shrink by a third to about $117 billion in the worst year in the industry's history. UMC's larger rival, Taiwan Semiconductor Manufacturing Co., which has stayed profitable, raised its forecast for fourth-quarter net income this week. A loss in the fourth quarter would be the third in a row for UMC. The company made a record profit of $485 million in the same period last year after getting more orders than it could meet. Liou declined to say when the company will return to a profit. Idle Capacity UMC said its capacity use increased from 40 percent in the third quarter, in line with its expectations. UMC said it expects to write off all the company's remaining inventory of computer memory chips that were made to help fill idle capacity. Prices of memory chips are still below the cost of production, Liou said. Demand is improving for chips made with 0.18 micron technology, Liou said. Chipmakers aim to increase the number of semiconductors made from a single silicon wafer by shrinking chip sizes, thereby helping cut cost. ``Increased demand will be for new technology,'' Liou said. Capacity use in UMC's older chip plants remains low, he said. UMC and TSMC are two of fewer than 10 companies worldwide investing in the production of 300-millimeter silicon wafers. These sheets will more than double the chips made from 200- millimeter disks currently. The dinner-plate-sized wafers will cut production costs by about 30 percent, analysts said. TSMC Vice President Genda Hu said this week at an industry conference in Taiwan the company expects to save 30 percent of costs from 300 millimeter wafers by the middle of 2004. Capital Expenditure UMC said its capital spending next year will be lower than the $1.1 billion budgeted for 2001. ``We still don't know at which point we should invest in more capacity,'' Liou said. ``We'll watch demand requirements.'' Orders from communications chip customers, which UMC aimed to serve on the expectation they would contribute the most to sales in the future, have shown almost no sign of improvement, Liou said.