United Microelectronics Corp (UMC, 聯電) yesterday posted its weakest quarterly net profit in five quarters, as chip demand for most applications slackened amid a longer-than-expected inventory correction.
Net profit declined 18.3 percent annually to NT$16.18 billion (US$526.6 million) in the first quarter of this year from NT$19.81 billion in the same quarter last year and 15.1 percent from NT$19.07 billion in the previous quarter, the world’s third-largest foundry service provider said.
Earnings per share dropped to NT$1.31 from NT$1.61 a year earlier and NT$1.54 a quarter earlier.
Photo: Lam Yik Fei, Bloomberg
Gross margin dropped to 35.5 percent from 42.9 percent in the previous quarter and 43.4 percent a year earlier, marking the lowest level in seven quarters.
“In the first quarter of 2023, our business was impacted by sluggish wafer demand as customers continued to digest elevated inventory levels,” UMC copresident Jason Wang (王石) told investors at an online conference yesterday.
The business outlook remains bleak, as the Hsinchu-based chipmaker said this year would be a “very challenging year.”
“The market will be much weaker than we anticipated. Recovery is much slower than we expected,” Wang said.
UMC said the foundry sector would see revenue declining by a high-single-digit percentage from a year earlier — worse than forecast three month earlier, when it expected a mid-single-digit percentage decline.
The global semiconductor industry would see a mid-single-digit percentage decline in revenue this year, rather than its previous prediction of a low-single-digit percentage drop, UMC said.
“Given the weaker-than-expected end-market environment, we see the pace of inventory digestion move slower than expected. We have not seen any signs of strong recovery for the second half yet,” although the company’s revenue hit the bottom last quarter, Wang said.
For this quarter, UMC expects wafer shipments to be flat from last quarter.
Demand outlook for all segments, including PCs, and communication and consumer electronics, would also be flat sequentially, it said.
Wang said that replenishing demand for automotive chips peaked last quarter, after two quarters of robust growth.
Automotive chips, which accounted for 17 percent of the company’s revenue last quarter, would be a major growth driver in the long term, UMC said.
Gross margin is expected to stabilize at about 35 percent this quarter, with average selling prices remaining flat from last quarter, the chipmaker said.
Overall factory utilization would be slightly above 70 percent, little changed from last quarter, it said.
The utilization of 28-nanometer technology would gradually rise to above 90 percent in the second half of this year, Wang said.
UMC said it uses 28-nanometer technology to make OLED driver ICs, TV chips and Wi-Fi 6 chips, adding that the technology contributed 26 percent to its revenue last quarter.
UMC said it would keep its capital budget at US$3 billion this year, but is ready for potential downward adjustments in accordance with market demand.
The chipmaker said that its new factory in Tainan, dubbed P6, would increase production next quarter.
The fab would produce chips under long-term supply agreements with customers, UMC said.
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