Taiwan chipmaker UMC warns of muted auto, industrial demand

TAIPEI (Reuters) – Taiwanese chipmaker UMC said on Wednesday it expected a rise in wafer shipments in the second quarter as inventory levels for computing, consumer and communications segments improved, but warned of muted auto and industrial demand.

WHY IT’S IMPORTANT

Investors have been on edge about chip demand after UMC’s much larger peer TSMC shocked the market last week by dialling back its expectations for the sector’s growth this year, especially in more mature technologies used in sectors like autos.

United Microelectronics Corp (UMC) focuses on more mature nodes, unlike Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest contract chipmaker, which is investing big in the most advanced 2 and 1 nanometre technology to power artificial intelligence (AI) applications.

THE DETAILS

UMC, in a first quarter earnings release, said the inventory situation for the current quarter for the computing, consumer and communications segments were improving to a healthier level, which would bring a rise in wafer shipments.

But it said demand remained muted for the automotive and industrial segments as the pace of inventory digestion had been slower than anticipated.

KEY QUOTE

“While we still expect some lingering impact from macro uncertainties and cost headwinds in the near term, we will continue to invest in technology, capacity and people to ensure UMC is ready to capture the next phase of growth driven by 5G and AI innovations,” company Co-president Jason Wang said in a statement.

BY THE NUMBERS

UMC, whose clients include U.S. company Qualcomm Inc and Germany’s Infineon, reported a 0.8% year-on-year rise in first-quarter revenue to T$54.63 billion ($1.68 billion), down 0.6 % from the previous quarter.

Wafer shipments rose 4.5% quarter-on-quarter, while capacity utilisation edged down to 65% from 66%.

The company also maintained its previous guidance for capital spending for this year at $3.3 billion.

UMC’s Taipei-listed shares have slid 4.6% so far this year, underperforming a 12.3% rise in the broader market. They closed up 3.1% on Wednesday before the earnings announcement.

($1 = 32.5650 Taiwan dollars)

(Reporting by Ben Blanchard; editing by Miral Fahmy)