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September 24, 2017

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UMC to buck Q1 slow trend: Daiwa

TAIPEI -- Daiwa Securities said Wednesday that United Microelectronics Corp. (UMC) could brave the headwinds of the first quarter, a traditional slow season for the integrated circuit industry, to report sequential sales growth.

In a research note, the securities firm said that demand for drive ICs remains solid, so that UMC could see its consolidated sales for the January-March period rise 1 percent from a quarter earlier, helping the chip maker offset the impact from the slow-season effect during the three-month period.

In addition to the solid demand for drive ICs, Daiwa Securities said UMC is expected to start to ship chips made on its 28 nanometer process to Taiwan-based IC designer MediaTek Inc. for tablet computer use in the first quarter, which will boost the chip maker's sales.

The brokerage forecast represented a contrast to sales guidance given by rival Taiwan Semiconductor Manufacturing Co. (TSMC) last week, which said TSMC's first-quarter consolidated sales could fall 5-7 percent from the fourth quarter due to inventory adjustments.

Daiwa Securities said monthly production of UMC's chips made on the 28nm process could reach about 10,000 units in the first quarter and is expected to double in the fourth quarter. UMC began production of chips made on the 28nm process in the fourth quarter but the production made up only a small fraction of its total sales.

The expectations of a 1 percent sequential increase in UMC consolidated sales also showed an improvement from the company's revenue in the fourth quarter, when the figure fell 8.04 percent from the third quarter to NT$30.72 billion (US$1.02 billion).

The fourth-quarter sales were in line with the company's previous estimations, taking inventory adjustments into account.

In the IC business, the slow-season effect continues into the first quarter from the fourth quarter, and sales could stage a rebound in the second quarter.

UMC is scheduled to hold an investor conference Friday to release its fourth-quarter results and give sales guidance for the first quarter. In the first nine months of last year, UMC posted NT$0.95 in earnings per share (EPS), up from NT$0.43 recorded in the same period of the previous year. The market expects the chip maker to report about NT$0.2 in EPS for the fourth quarter.

Shares of UMC fell 0.39 percent to close at NT$12.75 on the Taiwan Stock Exchange Wednesday.

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