HONG KONG: Sales in Taiwan's United Microelectronics Corp (UMC), the world's second-largest contract chip maker, fell 57 percent in February, year-on-year, as the global economic recession halts demand for technology products.

UMC sold NT$3.14-billion ($90-million) worth of products last month, compared with NT$7.29 billion in the same period last year, the company said on its website yesterday.

UMC announced the sales results after the Taipei stock market closed; shares in the company rose 6.4 percent, defying the benchmark TAIEX's 0.55 percent decline.

Analysts expected the chipmaker would have monthly sales losses after it posted a NT$23.5 billion ($694 billion) loss in profit in the last quarter of 2008. It also booked NT$21.8 billion from investment losses.

"If the biggest player in the industry is going to post a loss, the second-biggest won't be too good either," said Robyn Hsu, an analyst at Capital Investment Trust Corp.

The Hsinchu, Taiwan-based UMC saw sales of NT$6.29 billion in the first two months of 2009, which was a 59.4 percent drop from the same time last year.

UMC's bigger and more profitable rival, Taiwan Semiconductor Manufacturing Co (TSMC), said in January it expected first-quarter sales to drop up to 50 percent.

However, Deutsche Bank predicted TSMC's first-quarter sales would decline 35 to 38 percent on a weaker Taiwan dollar and possible increasing orders after the inventory-adjustment phase.

"We believe the semiconductor industry should see a bottom this quarter, and the number of orders will pick up as the inventory adjustment phase reaches an end. We expect fundamentals to improve from the second quarter led by the wireless segment," Deutsche Bank wrote in a research note.

By comparison, UMC said its first-quarter shipments of silicon wafers, used to make chips, will fall up to 42 percent from the previous three months, while the average selling price will decline 3 to 5 percent.

UBS said it was too early to predict when the sales in chip-making companies will hit bottom.

Taiwan, producer of more than 20 percent of the world's computer-memory chips, last week announced it would merge its struggling chip makers and bring in technology and investments from Japan's Elpida or US-based Micron to overhaul a sector suffering from its worst-ever slump.

Named Taiwan Memory Co, the newly formed company hopes to produce more chips and cut manufacturing costs with advanced technology brought in by foreign partners, said John Hsuan, the firm's recently appointed head, who was a former executive at UMC.

(HK Edition 03/10/2009 page16)