05.02.2001
UMC expects sharp drop in 2Q01 orders, to pick up slightly in 2H01

• UMC's (2303 'Lian Dian') 1Q01 results came in slightly above expectations with net income at NT$6.47b, down 61.3% QoQ, and leading to EPS of NT$0.57. Revenue declined 25.9% QoQ, and the utilization rate in 1Q01 was 70%.

• Broken down by device application, the computer sector saw the highest (43.9%) sequential revenue decline, while the communication and consumer sectors were less severely affected, with sequential declines of 11.2% and 16%, respectively.

• In 2Q01, UMC expects revenue to fall off another 30% with utilization at 45-50%. The downturn reflects a slight drop in PC related orders and a much greater fall in communication related orders. UMC says inventory correction in the communication sector may be complete by the end of 4Q01. The PC sector may see a slight seasonal pick up in 2H01, and thus we expect 2H01 recovery to be only moderate.

• UMC's view on the industry outlook is more conservative than TSMC's (2330 'Tai Ji Dian'), and we would tend to side with UMC on industry prospects. Nevertheless, we should point out that TSMC has a few customers, including NVida (US) and VIA (2388 'Wei Sheng'), who are able to run a different growth pattern from that of the industry as a whole. Hence, TSMC may be able to outperform the industry in 2H01.

LindaLiu@Primasia.com +886-[0]2-2547-8867