Chartered expects slower second half growth

Chartered expects slower second half growth
By Mike Clendenin, EE Times
July 19, 2002 (5:27 a.m. EST)
URL: http://www.eetimes.com/story/OEG20020718S0083

TAIPEI, Taiwan — With the world's top three foundries reporting results over the next two weeks, Chartered Semiconductor Manufacturing was the first to note on Friday that things picked up nicely during the first half of the year. Yet it also warned that growth would slow considerably in the second half of 2002 as its PC-oriented customers shift into conservative mode.

Chartered lost $90.7 million in the second quarter, an improvement over the $128 million it lost in the first quarter. Stronger demand for PC and communications chips helped it narrow losses, as utilization rose to 42 percent and the company earned more from its .18-micron process. The company said sales in communications, mostly from wireless customers, doubled sequentially, and computer revenues reached their highest point since the fourth quarter of 2000. Overall, Chartered expects revenues to grow by 5 percent in the third quarter, much slower than its double-digit first-half growth.

"We've gotten good growth in the last three quarters in that (computer) space so we are seeing some weakness in that area now. Wireless has been stronger than wire line and we continue to see that in the third quarter," said Chia Song Hwee, president and CEO of Chartered.

The Singapore-based company's results represented a 51 percent sequential increase. That was spurred by more customers using .18-micron processes, which rose from 10 percent of revenues in the first quarter to 24 percent in the second quarter. That portion will rise to 35 percent in the third quarter, as wireless communication demand remains more healthy than the consumer and computing sectors.

On its .13-micron process, the company said it is making steady progress in catching up with competitors in Taiwan. Currently, the foundry is working with four customers on tape-outs of five different products, based on an FSG flavor of its process. The company has so far completed about 40 different test chips and prototypes on its .13-micron process. "Low-k material development is ongoing and we expect to achieve production status in the fourth quarter," Hwee said.

Even though the company is seeing "mixed signals" in end demand, it still expects modest overall growth in the second half and a return to "robust" growth in 2003 and 2004. At this point, Hwee acknowledged that he doesn't have much visibility beyond six to eight weeks, or about one manufacturing cycle. The company has no firm orders beyond that so its guidance is based mostly on customer forecasts, which could change, for better or worse, as the fall and winter high seasons approach in America.

Chartered expects utilization to hover in the low 40s for the third quarter, which includes a 4 percent increase in capacity, and losses should narrow slightly, to between $87 million and $90 million. Chartered has lost money for six straight quarters and needs to hit about 70 percent utilization to break even.

Next week, foundry leader Taiwan Semiconductor Manufactu ring Co. reports its earnings, followed by United Microelectronics Corp. the week after. Both are expected to forecast a slowdown in growth.