UMC, SMIC Q4 results reflect seasonal softness, DRAM price drops
By Ann Steffora Mutschler, Senior Editor -- 1/30/2008
Reflecting typical seasonal demand softness, Taipei, Taiwan-based semiconductor foundry United Microelectronics Corp (UMC) reported late Tuesday its revenue for Q4 2007 fell 11% sequentially to $851 million (27.6 billion New Taiwanese dollars), and increased 5.8% year-over-year from $810.8 million (26.1 billion NT) in Q4 2006.
UMC attributed the sequential revenue decrease to a 9.4% decline in wafer shipment, while a weak US dollar also contributed to the decrease in revenues in local currency terms.
Gross profit was $175.5 million (5.6 billion NT), or 20.5% of revenue, compared to $255.3 million (8.2 billion NT), or 26.5% of Q3 2007 revenue. Operating profit for the quarter was $41.3 million (1.3 billion NT), or 4.8% of revenue, compared to $131.7 million (4.2 billion NT), or 13.6% of Q3 2007 revenue.
Q4 net income decreased to $42 million (1.36 billion NT), compared to compared to $286.6 million (9.23 billion NT) in Q3 2007 as revenue from 90 nm and smaller process nodes was 26%.
UMC chairman and CEO, Dr. Jackson Hu, said in a statement, “With regard to the first quarter, most of our customers' inventories are at normal levels, and for the most part they are cautiously optimistic about future growth with many estimating single digit growth. Of course, we continue to closely monitor end demand due to the ongoing sup-prime mortgage crisis in the United States.”
Looking to Q1, UMC expects the seasonality to continue with shipments dropping between 14 and 15% from Q4, but also expects ASPs to rise by approximately 1% due to an increase in 65 nm shipments.
Overall capacity utilization is expected to be approximately 70%, with contribution from 90 and 65 nm products accounting for more than 35% of total revenue.
In terms of applications, UMC said it is seeing the largest seasonal corrections in the communications segment, followed by consumer products with PC related products experiencing the smallest correction.
In 2008, UMC said it is planning for capital expenditures of between $500 and $700 million with the major focus of this year's spending to improve product mix for its 8- and 12-inch production lines by increasing the percentage of advanced technologies and improving ASPs. “Effective use of our capacity will give us the potential to well support customers' demand upside in 2008,” Hu explained.
He also noted that UMC’s 45 nm development program is moving along smoothly with several customer prototypes ready. “We expect to see a small amount of 45 nm production in the second half of the year. Our 32 nm development program is also on schedule,” he said.
In addition to joint development programs with its IDM and fabless customers, UMC also works with industry research organizations, including ATDF, IMEC, and IME. Going forward, the company said it would not rule out further technology development alliances, such as its current activities with Elpida.
For the full year 2007, UMC’s revenue increased 2.6% over 2006 to $3.3 billion (106.8 billion NT), from $3.2 billion (104.1 billion NT) in 2006, with gross profit margin of 21.1%, compared to 19.9% in 2006, and operating profit margin of 6.4%, compared to 5.9% in 2006 and net income that decreased to $526.7 million (17 billion NT), from $1 billion (32.6 billion NT) in 2006. 2007 EPS was $0.034 (1.09 NT), compared to 2006 EPS of $0.056 (1.81 NT).
The percentage of revenue from 65 nm sales was 2% in 2007; the percentage of revenue from 90 nm and below sales increased to 23%, from 18% in 2006
Foundry challenger Semiconductor Manufacturing International Corp (SMIC) also reported its Q4 and full year 2007 results, with revenue that rose by 5.8% year-over-year in 2007 to $1.5 billion despite unprecedented difficult conditions in the DRAM market.
For the full year 2007, SMIC’s gross profit up was up by 20% to $152.7 million from 2006 due to solid growth in the non-DRAM business and gross margin was 9.9% in 2007 compared to 8.7% in 2006. The Shanghai, China-based foundry shrunk its net loss to $40 million in 2007, compared to a net loss of $44.1 million in 2006.
In Q4, SMIC’s revenue rose modestly to 3% year-over-year to $395.3 million and up by 1% from $391.4 million in Q3 2007.
Q4 gross margin was 8.9% in compared to 10.8% in Q3 2007 primarily due to the continual price decline in the DRAM market, SMIC noted. Q4 net loss was $21.2 million, compared to a net loss of $25.6 million in Q3 2007, mainly from the DRAM business.
Dr. Richard Chang, CEO of SMIC, commented, “SMIC has continued to grow its revenue in the fourth quarter of 2007 on a year-on-year and a quarter-on-quarter basis. Operationally, our capacity at the end of the fourth quarter of 2007 has increased to 185,250 8-inch-equivalent wafers per month, with a high utilization rate of 94%. For 2007, our wafer shipments and sales increased by 14.6% and 5.8%, respectively, over 2006.”
As part of its plan to mitigate the continuing DRAM pricing erosion, Chang said SMIC has reduced its DRAM foundry services in Q4 and reduced DRAM shipments by approximately 22% since Q1 2007, excluding a single large shipment in Q4 2007 to clear inventory of discontinued DRAM product lines.
“Confronted with a more difficult DRAM market in 4Q07 than in the previous quarter, we still managed to reduce our net loss in the fourth quarter. We expect DRAM revenue as a portion of total revenue to decrease to below 20% in the first quarter of 2008, with further reduction throughout the remainder of the year,” he continued.
SMIC noted that it experienced growth in its non-DRAM business as revenue from non-DRAM business increased by 13.5% to $1.1 billion in 2007, compared to $988 million in 2006. Gross profit from non-DRAM business saw a 104% year-on-year increase in 2007. As more logic customers migrated to more advanced technology process nodes, SMIC said its logic sales from 0.13-micron and 90 nm technology nodes also increased by 42% over 2006.
In other SMIC news, the company announced today that it will invest $1.58 billion in a Shenzhen, China-based R&D center to contain 8- and 12-inch production lines. This follows a similar action in Shanghai and comes on the heels of a separate deal that saw SMIC license 45-nm bulk CMOS process from IBM for 300-mm wafer foundry services.
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