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UMC Net Income Misses Estimates, Forecasts Sales to Fall

Oct. 31 (Bloomberg) -- United Microelectronics Corp., the world’s second-largest contract maker of chips, posted profit which missed analyst estimates and forecast shipments, sales and margins will fall this quarter as customers clear inventory.

Third-quarter net income climbed 24 percent to NT$2.42 billion ($83 million), from NT$1.95 billion a year earlier, the Hsinchu, Taiwan-based company said in a statement today. The average of 15 analysts’ estimates compiled by Bloomberg was for profit of NT$3.62 billion.

UMC faces lower revenue as clients such as Texas Instruments Inc. seek to cut stockpiles amid continued economic weakness. The global economic slowdown and the introduction of new devices from Apple Inc. and computers based on Microsoft Corp.’s Windows 8 platform are creating uncertainty over the strength of demand.

“We are in an inventory correction now for two quarters,” Chief Executive Officer Sun Shih-wei said at an investors’ conference today. “Also, there’s so many products being introduced now” in the fourth quarter, which makes it difficult to predict final orders.

Unconsolidated sales climbed 13 percent from a year earlier to NT$28.5 billion.

Revenue will decline 6 percent to 8 percent from the prior period, leading to a drop in the gross margin, Chief Financial Officer Liu Chitung told investors. Taiwan’s appreciating currency will cut revenue by about one percent, Liu said.

In Line

That implies revenue of NT$26.2 billion to NT$26.8 billion, according to Bloomberg News calculations, in line with the NT$26.5 billion average of 17 analysts’ estimates compiled by Bloomberg.

UMC fell 1.4 percent to NT$10.85 at the close of trading in Taipei, before the announcement. The benchmark Taiex index declined 0.2 percent.

Texas Instruments, a designer of chips used in home appliances and consumer electronics, on Oct. 22 forecast fourth-quarter profit that fell short of most analysts’ estimates, as chip resellers cut inventory on concern that economic growth will remain weak. Customers are “uncertain as to their end demand,” Texas Instruments’ Chief Financial Officer Kevin March told Bloomberg News.

Shipments to Decline

UMC’s shipments in the fourth quarter will drop 7 percent to 9 percent from the prior three-month period, while average price per wafer will rise about 2 percent, UMC said in a statement today. Factory usage will drop to a mid-to-high 70 percentage range, compared with 84 percent in the third-quarter, it said.

Gross margin will be a high-teen percentage figure, compared with 24 percent in the prior period and missing the 21 percent average of 13 analysts’ estimates for the fourth quarter.

Taiwan Semiconductor Manufacturing Co., the world’s largest custom chip maker, on Oct. 25 forecast sales and profit margins this quarter that exceeded analysts’ estimates as a downturn in demand may be milder than previously expected.

UMC maintained its 2012 capital expenditure plan of $2 billion, less than a quarter of the $8.3 billion TSMC said it will spend.

To contact the reporter on this story: Tim Culpan in Taipei at

To contact the editor responsible for this story: Michael Tighe at

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