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August 3, 2006 2:30 am

UMC raises net profit but sounds a warning

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United Microelectronics on Wednesday said its quarterly earnings rose 20-fold, indicating that the world’s second-largest contract chipmaker was making progress in improving operating profitability. Net profit was T$6.052bn (US$184m) compared with T$299m a year earlier.

The good results are a filip for UMC, which has increasingly lagged behind Taiwan Semiconductor Manufacturing.

UMC’s improved profitability was mainly due to a higher proportion of advanced production technology. Jackson Hu, chief executive, said a continued trend in this direction would drive up average selling prices for UMC’s chips by 6-8 per cent in the current quarter. Overall, he gave a more cautious outlook for the current quarter than three months ago.

In April, Mr Hu had surprised investors by predicting revenue trends for the third quarter. Back then, he said sales were expected to rise by a double-digit margin, especially on strong handset demand. On Wednesday, he forecast almost flat shipments.

Mr Hu said the market had seen “very big changes” in the past three months and some segments were plagued with inventories.

While chips related to flat panel televisions had suffered in the second quarter due to disappointing demand around the Football World Cup, going forward the computer and communications segments presented more worries.

“Traditionally in the computer segment the second quarter is slow but in the third quarter things pick up. But now we see that the market is waiting for new central processing units and the new operating system,” Mr Hu said.

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