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June 29, 2017

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Semiconductor firms posed to benefit from growing demand

Due to exceedingly high orders for 8-inch and 12-inch wafers, United Microelectronics Corp. (UMC, 聯電) has raised its product prices by 5 to 15 percent to take advantage of the product thirst in the market.

 UMC's share price rose up to NT$16 before closing yesterday, showing a 4.9-percent increase on a turnover of 110,000 shares.

 UMC, Taiwan's second largest semiconductor company, is scheduled to hold an investor conference on July 30. The market expects even greater performance from the company in the third quarter. 

Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電), the world's largest contract chip-maker, recently made a forecast of 12-14 percent growth in revenues in the third quarter. Investors are upbeat that UMC will see a 10-percent or above growth in the third quarter.

 Among UMC's orders, communication related baseband processors and WiFi IC chips are in the highest demand. In order to meet consumers' increasing demand, UMC has expanded its production capacity to crank out more products. Similarly, TSMC's 20-nano manufacturing process is operating on full capacity in order to meet demand.

 According to semiconductor analysts' interpretation, there has been a growing demand for PC, as opposed to a shrinking demand in the past, and contributed to a surge in the demand. Sources say customers of both TSMC and UMC even "took the initiative" to raise prices in order to secure products.

 IC design companies asked for a 3 to 5 percent price increase to ensure a steady product supply. This is likely to benefit UMC and TSMC in terms of profit margins in the third quarter. TSMC's sales are expected to hit NT$200 billion in the third quarter for the first time. UMC on the other hand, is likely to rake in between NT$37.7 billion and NT$42.4 billion in the third quarter, growing 5 to 10 percent quarter on quarter, institutional investors forecast.

  How the semiconductor perform in the second half of the year, however, will depend on market acceptance of 4G LTE compatible phones in mainland China, some analysts pointed out.

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