http://www.eetimes.com/document.asp?doc_id=1328805

Alan Patterson

1/27/2016 06:31 PM EST
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TAIPEI —United Microelectronics Corp. (UMC), the world’s third-largest foundry, has raised its expected capital expenditure for 2016 to about $2.2 billion on expectations that the chip industry will emerge from a downturn around the second quarter of this year.

The company will increase its capex from $1.8 billion last year as it predicted that demand for chips made with its most advanced 0.28nm process technology will steadily increase with each quarter this year. UMC and its larger competitor Taiwan Semiconductor Manufacturing Co. (TSMC) have the lion’s share of the 0.28nm business while foundry rivals are still ramping up the process.

UMC said 28nm demand, fueled by communication chip customers, accounted for 10 percent of its revenue in 2015, compared with about 3 percent in 2014.

“We have introduced refined 28nm process variations,” UMC CEO Po Wen Yen, said during a conference call with analysts following the company’s announcement of fourth-quarter results for 2015. “UMC will continue to strengthen our 28nm technology roadmap with enhanced processes that raise chip performance while lowering power consumption.”

Capex ‘Optimistic’
Credit Suisse analyst Randy Abrams said UMC appears to be taking a “more optimistic view on capex.”

UMC and TSMC, the world’s largest foundry, are upping the ante for capex this year. TSMC earlier this month said it will increase its capital expenditure in 2016 to an amount ranging from $9 billion to $10 billion as it aims for a bigger share of finer geometry chips. TSMC slashed its capex several times last year to a final total of $8.1 billion.

UMC said it is seeing stronger demand for automotive chips in its eight-inch and 12-inch fabs as customers migrate from consumer chips to more stringent grade 1 and grade 0 semiconductors. Grade 0 semiconductors operate in a -40°C to +150°C ambient operating temperature range, while grade 1 chips can work in a -40°C to +125°C ambient operating temperature range.

“Our exposure in the automotive supply chain will help to generate a new revenue stream for UMC,” CEO Yen said.

Utilization slump
The company’s utilization rate in the fourth quarter of 2015 was 83 percent, down from 93 percent in the same period of 2014. UMC said its utilization will remain in the low 80 percent-digit range during the first quarter this year as customers are still responding to an inventory correction.

The company reiterated expectations for a recovery in the second quarter this year, when demand for its 28nm chips will account for 15 to 20 percent of its overall sales revenue. UMC forecast that 28nm demand, led by consumer and communication products, will increase with each quarter this year.

UMC is showing renewed optimism after its effort to capture a larger slice of the 28nm pie stalled during the second half of last year when the chip business slumped and TSMC vowed to protect its 28nm market share.

—Alan Patterson covers the semiconductor industry for EE Times. He is based in Taiwan.