As manufacturing pressures continue in a long, drawn-out fight for survival, the top two foundries have reported downward trends on weak end demands.

UMC reported on its Q4 2008 this week, and the results were not encouraging. Revenues decreased 25.1% sequentially to $566 million (18.54 billion New Taiwan Dollars). UMC’s gross margin was 10.2% and net loss was $771 million (23.51 billion NT) for the December quarter.

Shih-Wei Sun, the company’s CEO, noted that the global economic recession in the December quarter impacted UMC and was characterized by a “sharp drop” in customer demand. “For the quarter, wafer shipments dropped to 567 thousand 8-inch equivalent wafers,” he said in a statement. “Customers still remain conservative about end-market demand and are strictly controlling their purchase orders and inventory levels. However, UMC’s internal indicators have shown signs that the demand drop may have bottomed out, and we are closely watching for signs of recovery.”

Sun pointed out hopeful signs, such as customer adoption of UMC’s 40-/45-nm technologies with products currently in pilot production using low-power, high-performance logic processes. The proven high-k/metal-gate technologies with yields in 45-nm SRAM test products are milestones for UMC.

Meanwhile, top foundry TSMC this week announced sales for the month of January at $367 million (12.44 billion NT), a decrease of 5.5% from December 2008 sales and a decrease of 59% from January 2008 sales.

Are the pressures on manufacturing and the high cost of running a fab too costly or is this just the results of a faltering economy? “The broad trend has been a weakening industry since Q4 of last year, but semiconductor manufacturing is currently experiencing depressed utilization rates because end demand is weak,” Tristan Gerra, an analyst with research and investment banking company Robert W Baird & Co  said on a call with the press. When the end demand returns, semiconductor manufacturing is expected to pick up.

“There will be some pick up at the end of Q2 or Q3 because inventories will be used up and inventory replenishment is needed, though we expect industry utilization rates will remain depressed beyond this time in a longer trend,” said Gerra.

By: DocMemory
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