UMC revenue rise points to widespread semiconductor demand

Analysts see tablets as a big driver for chip demand, but UMC is more cautious

United Microelectronics (UMC), the world's second-largest contract chip maker, saw revenue for 2010 increase 35.9 percent over 2009. Robust demand for a range of consumer electronics including smartphones drove the growth.

Taiwan-based UMC said production of semiconductors brought in total net operating revenue of more than NT$120 billion (US$4.13 billion), reflecting business from makers of telecommunication equipment such as mobile phones. Computers and consumer electronics accounted for most of the rest.

"Tablets and smartphones, or related peripherals such as Wi-Fi, or related human interfaces such as display drivers, also touchpads, they're all doing pretty well," company CEO Sun Shih-wei told an investor conference.

A recovery in global demand for technology products last year, after a recession in 2009, has raised the income of Taiwan's other big manufacturers as well.

Tablets have already raised demand for semiconductors, with more to come, analysts believe. The rollout of Intel's second-generation Core microprocessors and competition from AMD's Fusion also require new motherboard chips.

"We're entering what seems to be another fresh tech up-cycle, and that's a reversal of trends from the past few years," said Wai Ho Leong, regional economist with Barclays Capital in Singapore. "It's going to be a launch year this year."

But chips for computers made up only 12 percent of UMC's overall sales last year, the company said, and it's too early to say where tablets are headed. "Tablets are still ramping up," Sun said. "They're still at an early stage. There are a lot of uncertainties."

UMC has ambitions this year to do more with its relatively advanced 40-nanometer foundry process for high-end chip designs, company officials said. Twenty products from 15 clients using chips from its 40 nanometer process are already being made on a large scale, they said.

The company expects to use 90 percent of its capacity in 2011. The current quarter's capacity should exceed the previous three, at about 1.26 million eight-inch wafer equivalents, UMC said.

UMC operates eight foundries in Taiwan and one in Singapore, plus a joint venture LED plant with supplier Epistar in China.

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