SMIC, UMC cut capexs

The foundries hold back on 2009 capacity expansion on cloudy visibility of end customer demands.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 10/29/2008

Amid losses and poor visibility, both SMIC (Semiconductor Manufacturing International Corp) and UMC announced capex reductions while reporting on Q3 numbers today.

SMIC said its capital expenditures for Q3 were $242 million and estimated total capital expenditures for 2008 will be around $790 million. The foundry said that its capital expenditure is incurred primarily for the expansion of 8-inch fab capacity, the conversion of its Beijing fab from DRAM to logic production, and R&D activities.

For more on SMIC, see "Looking between the lines in SMIC's Q3 financials."

"We plan to hold back any capacity expansion in 2009 until we have more visibility of end customer demands," SMIC said in its statement this morning. On that, the company said that its planned capex for 2009 is around $200 million, or $590 million less than it expects to spend this year.

The company made its estimates as it reported a Q3 net loss of $30.3 million, an improvement compared to its loss of $45.6 million in Q2 but an increase when compared to the $25.6 million loss it recorded for Q3 2007.
 
Likewise, revenue of $375.9 million increased sequentially, up 9.6% on Q2, but showed a year-over-year decrease, down 3.9% from the Q3 2007.
 
SMIC reported fab-capacity utilization reached 90.5% in Q3, compared to 92.2% in Q2 and 94.1% in Q3 2007. Q3 shipments of 8-inch equivalent wafers were up 7.3% sequentially to 431,660 units, and were down 5.8% from Q3 2007.

Meanwhile, Taiwan-based UMC reported this morning that it has revised its capex plans for 2008 down to $400 to 500 million. By the end of Q3, UMC's year-to-date capex totaled $308 million. UMC's original capex estimate for 2008 was $500 million to $700 million and was down from the $900 million it spent in 2007.

UMC made its capex statement today as it also reported Q3 fab utilization at 79% and estimated Q4 fab utilization will slide to 55%. UMC shipped 883,000 8-inch equivalent wafers in Q3, up from the 875,000 8-inch equivalents it shipped in the previous quarter but down from the 1,017 8-inch equivalents it shipped in Q3 2007.

The number two foundry further reported its first loss in seven years, with Q3 loss coming in at about $44 million. That compares to a profit of about $72.2 million in Q2 and a profit of about $276 million in the year-ago quarter.

UMC's Q3 revenue of $744 million decreased 1.9% quarter over quarter and was down 20.2% year over year.

"Looking ahead to Q4, we see that the environment is more challenging than we previously anticipated," Shih-Wei Sun, CEO of UMC, said in a statement. "Customers have adopted a cautious attitude with regard to their wafer demand forecasts due to uncertainty related to the current global economic situation."