Chartered, Flextronics post losses despite higher sales

Chartered, Flextronics post losses despite higher sales
By Mike Clendenin and Tony Santiago, EE Times
October 23, 2003 (12:45 p.m. EST)
URL: http://www.eetimes.com/story/OEG20031023S0028

SINGAPORE — Chartered Semiconductor Manufacturing said it sees a strong fourth quarter for IT products, especially computing and consumer devices, which will drive its sequential revenue growth by 22 percent to 26 percent.The bad news is that Chartered continued its string of losses in the third quarter, totaling $75.9 million, and it expects a loss in the fourth quarter of about $50 million, despite its optimistic demand projections.

Beyond the current quarter, Chartered said its visibility remains limited. The company's chief executive, Chia Song Hwee, also noted in a conference call that it was hard to differentiate between seasonal demand and an overall net gain in semiconductor market demand. “Our customers are not able to dissect that information as well,” he said, “but in general they are optimistic for 2004.”

Chartered's revenue growth is being boosted by its transition to 0.18-micron and belowproducts, which should contribute a l ittle more than 40 percent of its revenue in the fourth quarter.

Chartered's revenue totaled $137 million in the third quarter, up 6 percent from a year ago and 8 percent from the second quarter. Utilization was 59 percent, about 10 percent below Chartered's estimated breakeven point.

The company is projecting a 66 percent utilization rate in the fourth quarter and revenues of $171 million. Average selling price per wafer will either dip 1 percent or increase 3 percent, the company said.

Including its share of joint ventures, the company is projecting revenues of $221 million. With these joint ventures, Chartered believes it needs a revenue range of $250 million to $270 million to break even.

Ricky Tham, electronics analysts from Axiom Consulting in Hong Kong, said Chartered would likely concentrate on the communications wireless and computer chip markets since both are expected to pick up over the next quarter.

“There seems to be greater prospects in the communications and computer se gment of the chip market where Chartered seems to have made capacity improvements in the rollout of its advanced 0.13-micron chips,” he said. Chartered concurred that demand for its 0.13-micron chips increased over 45 percent quarter-on-quarter over the last three months.

Market analysts said Chartered's rosy predictions were possible given the overall increase in its production capacity. Chartered predicts production capacity utilization of at least 64-68 percent in the fourth quarter compared with 59 percent in the third quarter.

Flextronics losses

Singapore-based contract electronics manufacturer Flextronics International Ltd. reported a $100.1 million loss in its third quarter. The loss compared to earnings of $34.7 million last year. Sales improved to over 13 percent to $3.5 billion.

Tham, the analyst, said Flextronics closed several factories that manufactured circuit boards while incurring $45 million in after-tax expenses. “It also incurred an additional $95 million in expe nses for retiring $492 million in bonds ahead of schedule. By doing so it hoped to reduce its annual interest expense by $43 million,” he added.