Foundries top Q3 forecasts on improved utilization

SAN FRANCISCO—Continuing a positive trend that is rippling through the broader semiconductor industry, silicon foundries United Microelectronics Corp. (UMC) and Semiconductor Manufacturing International Corp. (SMIC) posted better-than-expected third-quarter sales Wednesday (Oct. 28). Both companies also reported improved capacity utilization levels approaching 90 percent for the quarter.

UMC (Hsinchu, Taiwan) reported third-quarter sales of NT$27.4 billion ($853 million), up 21 percent compared to the second quarter and up 11 percent compared to the third quarter of 2008. UMC announced a net income for the quarter of NT$6.09 billion ($187 million), up from a net income of $NT$1.5 billion ($48 million) in the previous quarter and a net loss of NT$1.4 billion ($43 million) in the year-ago quarter.

Consensus analyst expectations for the third quarter had called for UMC to post revenue of about $809 million, according to Yahoo Finance.

Third-quarter gross profit was NT$7.66 billion ($233 million), or 27.9 percent of revenue, compared to 23.8 percent in the second quarter, UMC said.

"Revenue for Q3 was the highest it's been for the past seven quarters, while gross profit margin increased to the highest level in five years," said Shih-Wei Sun, CEO of UMC, in a statement. "UMC is optimistic about the fourth quarter and expects ASP to rise as our product mix continues to improve."

But Sun said factors such as seasonal adjustment and appreciation of the Taiwan doller may slightly impact its fourth-quarter revenue. The comapny expects continued profitability its foundry business and will be overall profitable for the year, he said.

Capacity utilization improved to 89 percent in the third quarter, up from 79 percent in both the previous and year-ago quarters, UMC said. The company's capacity utilization had dipped as low as 30 percent in the first quarter of this year.

UMC announced several capacity expansion measures, including the expansion of its Fab12i in Singapore by more than 30 percent (65/55-nm and 45/40-nm capacity). The company said it plans to substantially increase 2010 capital expenditures for 45/40-nm production capacity and for continued 28-nm R&D equipment procurement at its Fab12A.