TAIPEI: United Microelectronics Corp, the world's second-largest custom-chip maker, has doubled its shipments and has posted its first profit in four quarters on the strength of increased demand for consumer electronics on the Chinese mainland.

Second-quarter net income was NT$1.55 billion ($47 million), or 12 NT cents a share, compared with NT$2.4 billion, or 18 NT cents, a year earlier, the Hsinchu, Taiwan-based company said yesterday. The chipmaker was expected to report profit of NT$1.11 billion, according to the median of eight analyst estimates compiled by Bloomberg.

United Micro joins Semiconductor Manufacturing International Corp, the mainland's biggest chipmaker, and Singapore's Chartered Semiconductor Manufacturing Ltd in reporting improved results as the industry rebounds from its worst-ever slump. Mainland sales gained after the government gave subsidies to encourage spending on electronics and revive economic growth.

"The second-quarter result beat expectations, and we believe UMC will continue to deliver quarter-on-quarter increases in revenue into the third quarter," said Bevan Yeh, who counts United Micro shares among the equivalent of $1.2 billion he helps manage at Prudential Financial Securities Investment Trust Enterprise in Taipei.

United Micro fell 1.1 percent to close at NT$13.85 in Taipei trading, compared with a 0.8 percent decline in the benchmark TAIEX index. The company's shares have advanced 86 percent this year, after tumbling 61 percent last year. The chipmaker expects a "modest increase" in profit this quarter from the second, Chief Executive Officer Sun Shih-wei said at a press conference in Taipei. Sales will also rise from the April-to-June period, United Micro said.

The company's factory usage in the second quarter rose to 79 percent from 30 percent in the previous three months as chip shipments more than doubled, United Micro said in a statement.

Companies including Intel Corp, the world's biggest chipmaker, and Texas Instruments Inc order from United Micro and its bigger rival Taiwan Semiconductor Manufacturing Co to avoid the expense of building chip factories, which cost as much as $3 billion each. Taiwan Semiconductor, which controls more than half of the custom-chip manufacturing market, is scheduled to report second-quarter results today.

"We believe UMC is likely to surprise investors by delivering positive year-on-year growth in revenue in the third quarter," Warren Lau, a Hong Kong-based analyst at Macquarie Group Ltd who rates the stock to "outperform", wrote in a research report this week.

In November, the Chinese mainland implemented a 4 trillion yuan ($585 billion) stimulus package, 20 billion yuan of which is being used for subsidies for home-appliance purchases in rural areas this year.

The country's economy expanded 7.9 percent in the second quarter, making it the first of the major economies to rebound from the global recession.

"The mainland's stimulus program is boosting orders for electronics products that use semiconductors made by UMC," said Kenneth Lee, a technology analyst at Fubon Securities Co in Taipei, before earnings were announced. "United Microelectronics is benefiting from the robust business of local chip-design companies."

Global chip sales are headed for their first back-to-back annual contractions, according to technology-research firm Gartner Inc.

Bloomberg News

(HK Edition 07/30/2009 page2)