Chip shipments double at UMC in Taiwan and SMIC in China

UMC returned to profitability after three losing quarters, while SMIC posted its ninth straight quarterly loss

Chip shipments more than doubled in the second quarter compared to the first at contract chip makers United Microelectronics (UMC) of Taiwan and its smaller rival Semiconductor Manufacturing International (SMIC) of China, another sign the global chip industry continues to rebound.

Several factors have boosted the chip sector over the past few months, including strong demand from China due to economic stimulus plans already in place there. Those plans are meant to expand 3G (third generation) mobile communications networks and subsidize consumer spending in rural areas for gadgets such as LCD TVs and home appliances. Demand for mobile devices globally has also helped, particularly for smartphones, laptops and netbook computers.

UMC, the world's second-largest contract chip maker, posted its first net profit after three losing quarters on Wednesday. But at NT$1.55 billion (US$47.40 million) its net profit was still down 36 percent from NT$2.40 billion in the second quarter last year.

The company's shipments of silicon wafers, the raw materials upon which chips are etched, rose to 898,000 in the second quarter from 384,000 in the first quarter as recession fears eased and customer demand picked up, the company said. Thousands of chips can be made on a single wafer.

Revenue was NT$22.63 billion (US$691.8 million), up from the recession-gripped first quarter's NT$10.84 billion, but down 10 percent compared to the second quarter last year.

Rebounding demand prompted UMC to raise its 2009 equipment and factory spending plan to US$500 million from US$400 million previously. Chartered Semiconductor in Singapore, the third-biggest contract chip maker, last week raised its capital spending plan this year to US$500 million, from US$375 million previously.

UMC expects profitability to rise modestly in the third quarter as back-to-school demand for electronics products kicks in. UMC's revenue will also rise quarter on quarter in the third quarter, said CEO Sun Shih-wei, at the company's quarterly investors conference in Taipei.

Contract chip makers produce semiconductors on behalf of clients such as graphics chip designer Nvidia and communications chip giant Qualcomm.

SMIC, China's largest chip maker, reported its ninth straight losing quarter on Wednesday, despite dramatic increases in revenue and chip shipments.

SMIC's net loss in the second quarter widened to US$97.9 million from US$47.2 million during the same quarter last year. The loss narrowed compared to the first quarter, when the company made a net loss of US$119.08 million. Second-quarter revenue fell 22 percent year-on-year to US$267.4 million, but the figure was up 83 percent from US$146.5 million in the first quarter.

"In the second quarter, we witnessed a strong business recovery on all fronts," SMIC said in a statement.

Shipments of silicon wafers at SMIC more than doubled to 341,000 in the second quarter compared to 168,000 in the first quarter.

Demand for chips continues to rise, the company said. SMIC expects its revenue to increase as much as 18 percent in the third quarter compared to the second.

"As our customer orders remain strong, we see current momentum for recovery to continue in the third quarter," SMIC said, adding that it will remain vigilant on cost controls as it strives for profitability.

The last time SMIC reported a net profit was in the first quarter of 2007, when it made US$8.76 million.

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Dan Nystedt

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