UMC also announced it was doubling capital spending plans for 2002 to $1.6 billion from an original budget of $800 million set at the start of this year. The new target is an increase of 45% from $1.1 billion in 2001. UMC's wafer fab capacity utilization moved up to 50% from 48% in Q4 of 2001, and the foundry company predicted that it would reach 70% in the current second quarter period.

The Taiwan foundry company reported a net income of NT$216 million ($6.2 million) for the first quarter vs. a net loss of NT$3.75 billion ($108 million) in the fourth quarter of 2001. In the first quarter last year, UMC had a net income of NT$6.47 million ($186 million) on net sales of NT$23.59 billion ($678 million). UMC's first net income in three quarters was helped by NT$2.67 billion ($79 million) in non-operating income, including gains from the sale of 2.86 million shares in MediaTek Inc., a fabless chip company spun out of UMC in 1997.

The foundry's operating loss for the first quarter was reduced to NT$2.45 billion from a loss of NT$5.18 billion in Q4.

"The unprecedented magnitude of the downturn experienced by the semiconductor industry in 2001 gave us--unfortunately--ample time to reorganize and carefully re-evaluate both internal and external policies," said John Hsuan, vice chairman and CEO of UMC.

"To date, we have made substantial adjustments to our marketing, sales and R&D departments, as well as in quality control and fab operations," he said. "Among other initiatives, we combined our R&D department and Fab 8D into one single central R&D operation. We expect that, as a result of this initiative, we will benefit from an accelerated pace of research advances, thus better facilitating the production of new designs for our customers."

UMC also has canceled the sale of its eight-inch (200-mm) wafer production equipment in Fab 8 B because of a strong pickup in demand for older 0.35- and 0.25-micron processing technology, Hsuan said. The company had announced its plans to sell of that equipment in January, but demand increased for applications using the processes of Fab 8 B, including devices for optical storage, DVD players, LCD drivers and other consumer products, said the chief executive.

The Taiwan foundry company said it now expects revenues in the second quarter to show strong sequential growth from Q1 with capacity utilization rising to 70% from 50% in the first three months of this year. UMC's capacity utilization was at a low point of 36% in Q3 of 2001 during the severe semiconductor downturn.

UMC said it plans to have installed capacity for 654,000 eight-inch equivalent wafers in the second quarter, up from 616,000. UMC's capacity target is 747,000 eight-inch equivalent wafers in the final quarter of this year vs. 750,000 in Q4 of 2001.

The company predicted that its operating margin will return to the positive territory in the second quarter, and it is looking for an increase in average selling prices for processed wafers in the high single digit percnage range due to an improved mix in technologies.