UMC posts best Q3 in years on stronger chip sales

United Microelectronics (UMC), the world's second-largest contract chip maker, reported its best quarterly net profit in two years on Wednesday due to strong chip sales.

The company's positive momentum in the second quarter carried over into the third quarter, it said. It is optimistic about the fourth quarter, as it expects average selling prices to rise due to an improved product mix.

The global chip industry has continued to rebound after bottoming in the first quarter of this year as the global recession gripped financial markets.

Stronger chip shipments sent UMC's sales for the third quarter up 11 percent year on year to NT$27.41 billion (US$843.9 million) as it turned to a net profit of NT$6.1 billion from a loss of NT$1.4 billion in the same quarter last year. The last time UMC posted a better net profit was in the third quarter of 2007, when it reported net profit NT$9.23 billion.

The chip maker warned that the appreciation of the Taiwan dollar and some seasonal factors may hurt its shipments in the fourth quarter. Chip sales normally peak in the third quarter because gadget makers need to install them inside devices ahead of the gift buying season for end-of-the-year holidays.

UMC expects its chip shipments to remain flat or drop as much as 3 percent in the fourth quarter compared to the third, but average selling prices could rise as much as 3 percent. Demand for chips in consumer electronics is expected to grow, while the computer segment might show some weakness, UMC said.

The company will spend US$500 million on new factory equipment this year, and plans to substantially increase capital spending on cutting edge chip production gear next year.

UMC also on Wednesday announced it plans to buy all stock in UMC Japan

Challenges in Japan's chip industry could cause a surge in outsourcing to contract chip makers such as UMC, the company said, but UMC Japan is losing money and could continue to lose money and be unable to capture new business without help from the parent company in Taiwan.

UMC will offer nearly NT$2.44 billion for outstanding shares of UMC Japan.

Copyright © 2009 IDG Communications, Inc.

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