The world's second largest foundry United Microelectronics Corp (UMC) has reported its Q2 results.

It attributed better capacity utilisation and activities on cost control as the key reasons for an increase in revenue, gross profit and operating income during Q2. Net income in Q2 was $78.3 million (2.4 billion NT), an increase of 1,064% compared to $6.7 million (206 million) in Q1.

The figures included a sequential revenue increase of 5.1% to $833 million (25.24 billion NT); gross profit margin was 23%; operating margin of 9.3%. UMC's Q2 net income increased to $79 million (2.4 billion NT). And EPS was $0.032 (19 cents NT)

Gross profit was $189.3 million (5.8 billion NT), or 23% of revenue, compared to $116.9 million (3.58 billion NT), or 14.9% of Q1 revenue. Operating income increased 1,132% sequentially to $76.4 million (2.34 billion NT), or 9.3% of Q2 revenue.

"As the newly appointed CEO of UMC, I am happy to report that in Q2 2008 UMC saw improvements in revenue, gross margin, and operating margin compared to Q1," said UMC CEO, Dr. Shih-Wei Sun, in a statement.

"These results were in line with our previously released guidance. Customer demand for advanced 90nm and 65nm technologies remained steady, with combined revenue from these process nodes totaling 36%. Looking forward to Q3, we see that the environment is more challenging than we previously expected. In general, customers have adopted a cautious attitude due to the rising uncertainty in the global economy. We will continue to monitor the situation closely and adjust our operations accordingly," Sun continued.

"Going forward as CEO, my top priority is to ensure that UMC's foundry solutions deliver the greatest benefits to our global customer base. This will enable us to increase our market share among our key foundry customers and maximize profitability. UMC will also continue to focus on operational efficiency and cost control activities through an emphasis on teamwork and execution. At the same time, we will continue to invest in the development of advanced technologies that are critical to our future growth and profitability. UMC is well positioned to weather the headwinds that face the overall economy due to our strengths in R&D and manufacturing, as well as our sound financial structure and our excellent team that has a wealth of experience dealing with the cyclical nature of the semiconductor industry."

The percentage of UMC's Q2 revenue from 90nm business increased to 31%, compared to 30% in Q1, mainly due to stronger demand for wireless communication chips. The percentage of revenue from 90nm and below was 36% in Q2.

Interestingly, the percentage of UMC's revenue from fabless customers increased to 71% in Q2 from 70% in Q1, and capacity utilization was up to 85% in Q2 from 73% in Q1.

UMC maintained its original CAPEX plans for 2008 of $500 to $700 million. Capital expenditure for UMC during Q2 was $82 million. Accumulated CAPEX in the first half was $269 million.

Looking ahead to Q3, UMC expects Q3 wafer shipments to be flat from Q2, with wafer ASPs in US$ to decrease by approximately 0 to 2% points. The company expects an impact from currency fluctuation to be 0 to -2% on revenue.

Capacity utilization should remain at approximately 80%; gross profit margin to be in high teen % points; the consumer segment expected to be the strongest followed by the communication and computer segments

Ann Steffora Mutschler, Senior Editor - Electronic News