Tower narrows Q4 loss, UMC continues modest sales slide

The Israeli foundry is executing cost reduction measures to decrease 2008 operating expenses by more than $20 million.

By Ann Steffora Mutschler, Senior Editor -- Electronic News, 2/6/2008

The world's second largest semiconductor manufacturing foundry United Microelectronics Corp (UMC) continued its modest sequential sales slide when it reported revenue for January of $256.8 million (8.2 billion New Taiwanese dollars), down 3% from $264.5 million (8.5 billion NT) in December 2007. On a year-over-year basis, revenues dipped less than 1% from $257.4 million (8.2 billion NTD) in January 2007.

Foundry challenger Tower Semiconductor Ltd continued to gain ground as today it reported record annual revenue of $230.9 million, up 23% from $187.4 million in 2006 with record Q4 revenue of $61.6 million, up 11% from $55.5 million in Q4 2006 and up 9% sequentially from $56.6 million in Q3 2007.

Q4 GAAP net loss was $25.3 million, or 20 cents per share, an improvement of $11 million as compared to $36.3 million, or 38 cents per share, for Q4 2006. For the full year 2007, GAAP net loss improved by $33.7 million against a revenue increase of $43.4 million, which represents 78 percent incremental net margin.

The foundry also pointed out that it achieved annual positive cash flow from operations for the first time since Fab2 was established and recorded positive cash flow from operations for the 5th consecutive quarter and positive EBITDA for the 9th consecutive quarter

At the same time, Tower said it is executing cost reduction initiatives and efficiency measures, to result in a decrease of more than $20 million in 2008 operating expenses, but was not more specific.

“Our record revenue performance during Q4 not only surpassed the $60 million milestone for the first time, but also exceeded the semiconductor industry's average growth rate in regards to both quarterly and annual sales,” noted Russell Ellwanger, Tower CEO, in a statement.

In Q4 2007, Ellwanger pointed out that Tower achieved another record in revenue and wafer shipments. “In the midst of an uncertain global economy, our customer demand has remained strong,” he said.

As such, Tower expects Q1 to be in line with normal seasonality and anticipates revenue will range between $57 and $62 million, representing a 3 to 11% increase from the $55.6 million in Q1 2007. Furthermore, Tower expects continued growth in 2008 as its installs, qualifies and releases for production its current 0.13-micron capacity ramp.