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UMC says Q2 shipments may grow 11-13%

TAIPEI -- United Microelectronics Corp. (UMC, 聯華電子), one of Taiwan's leading contract chip makers, has expressed optimism toward the second quarter of this year and expects that its wafer shipments for the second quarter will rise 11-13 percent from a quarter earlier.

In an investor conference held Wednesday, UMC said its upbeat assessment came on the back of solid demand for certain chips, such as wireless communications ICs and drive ICs.

Q2 Utilization Looks to 89%

UMC Chief Executive Officer (CEO) Yen Po-wen (顏博文) said the chip maker's production capacity utilization for the April-June period could range between 87 percent and 89 percent, an improvement from the first quarter's 81 percent.

Yen added that UMC's second-quarter gross margin could rise to between 24 percent and 26 percent from 18.6 percent recorded a quarter earlier.

"For the second quarter of 2014, UMC will benefit from continued growth in customer demand, especially from the communication segment," Yen said in a statement. "We expect increased growth in wafer shipments and higher capacity utilization rates to drive better profitability."

Market analysts have anticipated that the global semiconductor business will stage a strong rebound in the second quarter after inventory adjustments seen in the previous two quarters.

However, UMC, like its rival Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電), defied the conventional wisdom, reporting a significant sequential growth in net profit for the January-March period in reflection of rising demand for chips used in computers and related products.

In the first quarter, UMC posted NT$1.18 billion (US$39.07 million) in net profit, up 57.5 percent from the fourth quarter of last year.

Q2 EPS Stays Little Changed

Its earnings per share (EPS) for the three-month period stood at NT$0.015, up from NT$0.010 seen a quarter earlier.

UMC's consolidated sales for the first quarter rose 3.2 percent from a quarter earlier to NT$31.69 billion.

In the first quarter, chips made on the 65-nanometer (nm) process or more advanced processes accounted for 51 percent of UMC's total sales, with chips on the 40nm process making up 20 percent of the total revenue, the chip maker said.

UMC launched production of chips on the sophisticated 28nm process at the end of last year, which made up roughly a low-single digit percentage of its total sales in the first quarter. But Yen said the 28nm process is expected to represent more than 5 percent of the total revenue in the fourth quarter.

Meanwhile, a UMC board meeting approved a proposal to assign NT$10.75 billion in budget for future production expansion, while the board meeting also issued a greenlight for the company to sell up to NT$10 billion in unsecured corporate bonds to repay part of its debts.

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