Taiwan-based chipmaker United Microelectronics (UMC) has reduced capital expenditure to $3 billion for 2022, compared with a previous plan for $3.6 billion due to weakening demand.
UMC’s clients include U.S. company Qualcomm and Germany’s Infineon.

“Moving into the fourth quarter, we expect to face headwinds amid demand weakness, impacted by factors including the inflationary environment and the Ukraine war,” UMC co-president Jason Wang said in an earnings call.

The company has observed a prolonged downturn in smartphone and personal computer demand in a trend that will linger into the first half of next year.

However, UMC said its expansion in Singapore and Tainan in Taiwan are progressing as planned to meet long-term supply commitments.

The company reported a 34.9 percent jump in third-quarter revenue to T$75.39 billion.

UMC said third quarter consolidated revenue was NT$75.39 billion, increasing 4.6 percent QoQ from NT$72.06 billion in 2Q22. Compared to a year ago, 3Q22 revenue grew 34.9 percent YoY from NT$55.91 billion in 3Q21. Consolidated gross margin for 3Q22 reached 47.3 percent.

UMC said Q3 revenue from Asia-Pacific declined to 62 percent while business from North America was 23 percent of sales. Business from Europe was 9 percent while contribution from Japan increased to 6 percent. Revenue contribution from 22/28nm grew to 25 percent of the wafer revenue, while 40nm contribution was 17 percent of sales.

UMC said revenue from fabless customers accounted for 83 percent of revenue. Revenue from the communication segment represented 45 percent, while business from computer applications decreased to 14 percent. Business from consumer applications was 27 percent as other segments increased to 14 percent of revenue.

“Our results benefited from product mix optimization and a favorable exchange rate, while fab capacity remained fully utilized. Despite softening demand in consumer end markets, strengths in certain wireless communications areas drove further expansion in our 22/28nm business, which accounted for 25 percent of overall third-quarter revenue and lifted wafer average selling price,” Jason Wang, co-president of UMC, said.

Overall capacity in the third quarter increased to 2,539K 8-inch equivalent wafers. Capacity will grow in the fourth quarter of 2022 to 2,543K 8-inch equivalent wafers, reflecting the capacity expansion taking place at 8N. Capex spending in 3Q22 totaled US$764 million.

South Korea’s SK Hynix also warned on Wednesday of an unprecedented deterioration in memory chip demand, saying it would cut investment after quarterly profit tumbled by 60 percent.

Taiwanese rival TSMC, the world’s largest contract chipmaker, this month reported an 80 percent surge in third-quarter profit, its strongest growth in two years. TSMC cut its annual investment budget by at least 10 percent for 2022.

UMC expects limited impact from US export controls because the rules mainly target more advanced chips than the company produces.