United Microelectronics Corp., the world's second-largest custom-chip maker, reported a bigger first-quarter profit decline than some analysts estimated as customers cut orders to clear excess inventory.
Net income fell 88 percent to NT$1.5 billion (US$45 million), or NT$0.08 a share, from NT$12.29 billion, or NT$0.69, a year earlier, the Hsinchu, Taiwan-based company said yesterday. The average estimate of 12 analysts in a survey compiled by Bloomberg was for profit of NT$2.37 billion.
The chipmaker joins market leader Taiwan Semiconductor Manufacturing Co. and Singapore's Chartered Semiconductor Manufacturing Ltd. in reporting a decline in first-quarter profit after customers including Texas Instruments Inc. cut orders to clear inventory of chips used in mobile phones. Dallas-based Texas Instruments said orders will recover this quarter.
"When the industry is under pressure, UMC feels the pressure more," said Albert King, who manages US$10 million in assets as chief investment officer at Prophet Capital Inc. in Taipei. "When the industry rebounds, they rebound more."
United Microelectronics' sales, reported earlier, declined 5.6 percent to NT$23 billion. Shares of United Microelectronics gained 0.3 percent to NT$19.1 at the close of trade in Taipei today, compared with a 0.9 percent decline in the benchmark Taiex index.
Operating profit, which measures sales minus the cost of goods sold and administrative expenses, declined 78 percent to NT$18.5 million from NT$85 million a year earlier, according to Bloomberg calculations, based on figures filed to the exchange by the company.
The chipmaker's first-quarter operating margin fell to 0.08 percent, from 0.34 percent a year earlier, the lowest in seven quarters. Profit margin, which measures profit as a percentage of sales, declined to 6.3 percent from 50 percent a year earlier.
United Microelectronics last year posted non-operating profit of NT$14.1 billion in the first quarter from the sale of shares in chip design company Mediatek Inc., a gain which was not repeated in the first-quarter of this year.
Taiwan Semiconductor last week said first-quarter profit fell 42 percent to NT$18.8 billion. Chartered Semiconductor, the world's third-largest custom-chip maker, on April 27 said net income dropped 76 percent to US$5.34 million.
Texas Instruments, the world's largest mobile-phone chipmaker, last week said profit fell for the first time in two years as customers such as Motorola Inc. cut orders to clear inventories of chips. The company forecast sales will rise in the second quarter to between US$3.32 billion and US$3.6 billion, compared with US$3.4 billion analysts estimated.
United Microelectronics will hold an investors' conference on May 2 to discuss the results and outlook.