UMC Slashes Capex

　　United Microelectronics Corp. (UMC) said it will pare its capital expenditures for this year to $1.1 billion as the company expects no significant increase in sales this year.

　　Taiwan’s second-largest foundry will cut its capex by about a quarter from the $1.4 billion it spent in 2017. The company during most of 2017 was targeting a capex of $1.7 billion after spending $2 billion in 2016.

　　The spending cuts come as the company’s sales of 28nm products flounder amid strong competition. UMC’s most advanced 14nm process technology, which the company launched in the second quarter last year, accounted for 2 percent of its overall sales during the fourth quarter of 2017.

　　"Our 2018 revenue is not going to grow significantly," said UMC Co-President Jason Wang at an event to announce the company’s fourth-quarter 2017 results. The company is going through a restructuring transition that may take as many as two years, he said.

　　UMC expects the overall foundry segment to grow in the high-single digits this year, a forecast that’s in line with that of its larger competitor, Taiwan Semiconductor Manufacturing Co. (TSMC).

　　TSMC believes it will continue to lead chip industry growth in 2018 with the company’s annual revenue gaining by as much as 15 percent from 2017. The overall growth rate for the foundry segment this year will be about 10 percent while the semiconductor industry will grow by as much as 8 percent, according to TSMC.

　　UMC will increase expenditures on its 200mm fabs to about a third of capex, compared with about 9 percent last year. The boosted investment in the company’s 200mm facilities is aimed at upgrading existing capacity and strengthening average sales prices.

　　Demand for chips made on eight-inch wafers has been “very robust,” according to Wang, particularly for mobile products, RF switches, microcontrollers and display drivers.

　　Wang also said UMC will ramp up 14nm production, without providing a timeframe.

　　UMC said it aims to “recover” in the 28nm business by expanding sales of its HPC and HPC+ versions later this year. The company said its 28nm high-k/metal gate stack (28HPCU) process can be used for products such as application processors, cellular baseband, FPGAs and networking ICs. The company says its new 28HPCU+ can provide a 15 percent boost in performance for wearable, IoT and automotive applications.

　　Still, analysts were less positive about UMC’s outlook for a recovery in 28nm given increasing competition in that node and the likelihood that more foundry customers will migrate to 22nm during this year.

　　"We remain negative on the 28 nm supply/demand dynamics and worry about the competitive pressure from TSMC and Semiconductor Manufacturing International Corp. (SMIC)," said Mark Li, an analyst with Bernstein in Hong Kong. "The number of new 28nm tapeouts is expected to double this year, but UMC also noted they will be from smaller customers and the individual volumes will be small."

　　UMC plans to launch its 22nm process later this year, following TSMC, which has already put its own 22nm technology on the market.

　　Focus on Returns

　　UMC management repeatedly said during the quarterly results announcement that the new focus for the company is return on investment, a guideline that has made the company "cautious about R&D spending." The company has improved its cash flow and said it may acquire existing older capacity or evaluate mergers and acquisitions.

　　UMC and TSMC during this month noted an increase in prices for blank wafers. UMC it said it may pass on those increases to customers while TSMC said it would find ways of internally offsetting the higher wafer prices.