UMC Reports Lower December Sales, Announces Fab Construction

United Microelectronics reports sales in December fell 7.17% y-o-y to NT$8.37 billion ($260m), but for the calendar year, sales grew 14.68% to NT$104.1 billion ($3.2b). UMC also announced construction is underway on its second Taiwan 300mm fab with max capacity of 50,000 wafers. Reuters quotes a Taiwan-based portfolio manager who comments, "The bottom should be in Q1 and then its sales will start rising from April or May." Shares of UMC and rival TSMC have traded higher since bottoming last summer in anticipation of a recovery ahead of the Windows Vista launch and on overall demand for consumer electronics. Merrill Lynch however, warned last week of high inventory levels that could keep pressure on foundries into Q2. Regarding UMC's capacity expansion at a price tag of $5b, CEO Jackson Hu comments, "UMC remains strongly committed to continuing its growth and development in Taiwan. The close proximity of the R&D center to the fabs will allow for the seamless integration of advanced process technologies from the R&D phase to manufacturing ..."

• Sources: UMC press release and monthly sales release, Reuters, WSJ
• Related commentary: UMC Increasing Capacity Despite Chip Glut, Caris' Downgrades, Merrill: United Microelectronics An 'Unappealing Buyout Candidate', Texas Instruments, Foundries Beginning to Understand its Excess Inventory Issues
• Potentially impacted stocks and ETFs: United Microelectronics (UMC). Competitors: Taiwan Semiconductor Manufacturing (TSM), Semiconductor Manufacturing International (SMI), Chartered Semiconductor Manufacturing (CHRT). ETFs: iShares MSCI Emerg Mkts Index (EEM), iShares MSCI Taiwan Index (EWT)

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