UMC May See Capacity Utilization Rate Hit 6-year Low in Q4

Taipei, Oct. 31, 2008 (CENS)--With its fourth-quarter wafer shipment expected to decline by 25% from the third quarter, United Microelectronics Corp. (UMC), a major wafer foundry firm in Taiwan, may see its capacity utilization rate hit a 6-year low of only 55% in the quarter, according to Sun Shih-wei, CEO of the firm.

After witnessing its capacity utilization rate sharply drop to 36% in the third quarter of 2001 due mainly to "Dot-com Bobble" worldwide, UMC had rallied back and effectively maintained the rate at between 70% and 90% from 2003 through the first half of this year.

Running at a capacity of only 79% in the third quarter, UMC reported its third-quarter revenue of NT$24.748 billion, down 1.9% from the second quarter; and posted gross profit rate of 17.6%, regressing from 23%. Although scoring operating income of NT$947 million, the firm, after writing off investment losses, still suffered a net loss of NT$1.413 billion, or NT$0.11 per share, in the quarter.

Facing the recent global financial turmoil, UMC remains conservative about the market prospect for the fourth quarter of this year, projecting its wafer shipment to wane and capacity utilization rate to hit the lowest level of 55% seen since the first quarter of 2002. Institutional investors also estimate UMC's fourth-quarter loss to range from NT$1.4 billion to NT$1.5 billion, with gross profit rate to sharply slide to only 10%.

In response to the gloomy future, UMC has recently announced a plan to slash its capital spending by 20-30% to NT$400-500 million for entire this year. The figure may probably trend downward continuously next year.

Sun noted that clients' moves to suspend orders for wafers to control inventory levels spell worries about the impact of global economic recession on the industry in the future. To counter, UMC has managed to adjust its operation strategies and continued its development of advanced production processes, so as to ensure cooperation with major customers and current market shares, according to Sun.

He added that UMC will hopefully remain profitable in core business, and, with cash of NT$25.194 billion available currently, will overcome the hard time in the industry worldwide.