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UMC Q4 income plummets on inventory adjustments

Capex to be cut in 2005

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UMC, the world's second largest chip foundry, saw its income plunge almost 88 per cent sequentially during its most recently completed quarter, the company said today.

However, the foundry reported "strong" full-year results; its figures - like those of arch-rival TSMC - reflect a vigorous business in the first half of the year, followed by weakening in the second.

For the three months to 31 December 2004, UMC's revenues fell 14.8 per cent sequentially to TWD28.23bn ($891m). It shipped 657,000 wafers in Q4 FY2004, down from 791,000 in Q3.

Operating income was down 67.5 per cent to TWD2.84bn ($90m) from TWD8.74bn ($274.8m) in Q3. Net income fell even further, down 87.8 per cent to TWD1.33bn ($41.8m) with earnings of TWD0.07 ($0.01) per share.

The company blamed the decline on "inventory adjustments by our customers" which saw the utilisation of the foundry's production capacity fall to 72 per cent during Q4, from 94 per cent in the previous quarter.

One ray of hope: demand for the company's 90nm process increased during Q4 - the process now accounts for eight per cent of UMC's revenues, from two per cent in Q3. UMC expects this percentage to rise to ten per cent in the current quarter, despite "a more challenging market environment".

The company also forecasts a post-inventory correction recovery in the second half of the year. However, it expects to spend less money on new plant this year than in 2004. Last year, it spent $1.53bn, more than planned, but capex will fall to $1-1.5bn in 2005.

For 2004 as a whole, UMC's revenues reached TWD117.31bn ($3.69bn), up 38.2 per cent on 2003. Net income jumped 127.1 per cent to TWD31.84bn ($1bn), with earnings of TWD1.89 ($0.3) per share. ®

Related stories

World chip sales down in December
SMIC coughs $175m to settle espionage allegations
World chip inventory fell 38% in Q4
TSMC Q4 decline mirrors chip market
iSuppli cuts 2005 chip sales growth target
World chip sales to fall next year - analyst
Chips are down for Taiwan foundry giants
Q3 chip production up despite downturn

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