Chip maker UMC posts drop in Q2 earnings as sales fall

31 Jul 2008

Taiwan's UMC said its second-quarter net profit fell by half as chip sales slowed as a US-led economic downturn hits spending on PCs, mobile phones and TVs.

A Reuters report also said analysts expect UMC, together with its bigger rival TSMC, to see more pain ahead as customers ranging from Texas Instruments to Nvidia are expected to cut orders as the consumer slowdown leads to bigger stockpiles of chips.

TI issued a grim outlook last week on weakness in its wireless chip unit.

UMC, which makes 60% of its chips for communications devices such as mobile phones, said wafer shipments would be flat in the third quarter, while the average selling price would be flat to 2% lower, the Reuters report also said.

Mediatek, Taiwan's top chip designer and one of UMC's clients, reported its second-quarter profit dropped by a third.

UMC booked an April-June net profit of NT$2.397 billion ($78.6 million), below last year's NT$4.91 billion ($160 million), but higher than a consensus forecast of NT$2.07 billion ($67.8 million) by Reuters Estimates.

Reflecting slower demand in the third quarter, UMC's capacity utilisation rate is seen dropping by 5 percentage points to about 80% from the previous three months.

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