UMC changes CEO, scraps foundry strategy

UMC changes CEO, scraps foundry strategy
By Mark LaPedus and Peter Clarke, Semiconductor Business News
July 15, 2003 (11:33 a.m. EST)
URL: http://www.eetimes.com/story/OEG20030715S0017

HSINCHU, Taiwan — Amid lackluster demand for its silicon foundry services, Taiwan's United Microelectronics Corp. on Tuesday (July 15) named Jackson Hu its new chief executive, scrapped its "Virtual IDM" foundry strategy and accelerated its 300-mm fab capacity.

Hu replaces John Hsuan, who will return to his former post as UMC's vice chairman. A 25-year veteran of the chip industry, Hu joined UMC in January as the president of the New Business Development Group and head of the Design Support division.

UMC's latest strategic shift means it will continue operating as a pure foundry but will no longer pursue its "Virtual IDM" strategy. UMC had made a subtle shift from a pure-play foundry some time ago and recently bought shares in a number of companies, including Silicon Integrated Systems Corp. (SiS) and a subsidiary of Ali Corp. The moves enabled it to install board members at those companies to influence their foundry choices.

"However , in order to ensure a diversified and sufficient customer base, UMC may choose to make investments in certain IC design companies," UMC said in a statement. "At the same time, UMC will take all possible measures to avoid any conflict of interest with its existing customers."

"UMC plans to carefully review its investment portfolio, and divest itself of non-core investments. With regard to its investments in listed IC companies, UMC plans to gradually divest itself of these investments, in a manner that will not negatively impact their stock price or business relationship with UMC," the company said.

UMC did not elaborate on whether it would divest itself from SiS and Acer Labs, but the company plans to accelerate its investment in its 300-mm manufacturing facilities. Before the end of 2004, UMC said it expects to expand capacity at Taiwan's Fab 12A to 20,000 wafers per month, and capacity at UMCi affiliate to 10,000 wafers per month. UMCi is a joint 300-mm foundry venture between UMC, Infineon and th e Singapore government.

"In order to ensure continued leadership in the area of 12-inch wafer manufacturing, UMC will further strengthen its research and development for 90 nm and below process technologies, and ensure the availability of a complete catalog of relevant IP for integration in its customers' leading-edge designs," the company said.

The changes follow a period of sluggishness at UMC, the world's second largest foundry, behind Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC). On Monday, Michael McConnell, an analyst with Pacific Crest Securities Inc. (Portland, Ore.), raised his estimates for TSMC in both the second and third quarters of 2003.

In contrast, McConnell lowered his estimates for rival UMC in Q3. UMC's second quarter is expected to be in line with Wall Street's forecast. It is expected to earn $0.02 a share on sales of $618.5 million in Q2, compared to $0.02 a share on sales of $514.9 million in Q1.

UMC's sales are expected to range from flat to down 5 percent in Q3. "Wafer forecasts have remained weak in the company's consumer segment," according to a Pacific Crest report.