TAIPEI — United Microelectronics Corp. (UMC), Taiwan’s second largest foundry, said the ramp of its most advanced node, 28nm, will probably slip during the early portion of 2017 under strong competition.
UMC, which competes with larger rival Taiwan Semiconductor Manufacturing Co. (TSMC) and smaller foundries in China in 28nm said that its first wave of customers at that geometry have migrated to more advanced nodes at the same time as an expected second wave of customers have been slower to adopt chips made with the process technology.
While UMC reached its 2016 target for 28nm to account for 17 percent of the company’s overall sales, that percentage is likely to slide downward during the first quarter. The company last year said that 28nm would reach as much as 20 percent of overall sales during 2016.
“The revenue contribution will be in the mid-teens percentage” during the first quarter, UMC CEO Po-Wen Yen said yesterday on a conference call with analysts to announce the company’s fourth-quarter 2016 results. The company expects 28nm to bounce back to more than 20 percent of overall sales by the second-half of 2017.
UMC is squeezed by strong price competition from companies such as TSMC and Shanghai-based Semiconductor Manufacturing International Corp. (SMIC).
UMC wants to expand production of 28nm products at its new fab in Xiamen, China that’s a joint venture with the local government. To do so, however, UMC will need to demonstrate to the Taiwan government that it has started production of 14nm products domestically. Fearing the loss of a competitive advantage to China, the Taiwan government requires domestic chipmakers to keep their leading technology at home.
The 14nm hurdle may be a stumbling block for UMC. The company said it will probably achieve what it called a small volume, about 2,000 wafers per month this year, at the 14nm node.
The first quarter is typically a slow season for the electronics industry. UMC said its capacity utilization will dip to about 90 percent from 94 percent during the fourth quarter last year.
UMC said it will also trim its capital expenditure for this year to $2 billion after budgeting $2.2 billion last year. The company said it expects sales growth for 2017 to be in line with semiconductor industry growth.
UMC said that it will earmark about half of this year’s capex for the ramp of its Xiamen joint venture fab. UMC plans to make an additional capital injection of about $450 million in the JV during the first quarter this year, taking UMC’s stake in the joint venture to more than 50 percent.
TSMC, the world’s biggest foundry, is also trimming its capex to about $10 billion this year. In 2016, the company’s capex came in at NT$328 billion ($10.4 billion). TSMC has been among the top-three spenders in the chip industry, which include Samsung and Intel.
TSMC, a bellwether for the electronics industry, predicted that during this year, the global semiconductor market will grow by 4 percent while the foundry business expands by about 7 percent and TSMC’s business increases within a range of 5 to 10 percent.
—Alan Patterson covers the semiconductor industry for EE Times. He is based in Taiwan.