UMC sees possible microprocessor deals

United Microelectronics Corp. (UMC) sees the possibility of new microprocessor deals as major chip makers farm out more orders to contract chip makers, the head of the company said Wednesday.

It's an outsourcing trend the chip industry has seen before. Advanced Micro Devices, for example, announced a plan to build a joint chip factory with UMC in Singapore in early 2002, dubbed AU. But the plan was scuttled after AMD joined a technology alliance led by IBM.

A new deal by AMD to join with a contract chip maker would likely prolong its battle with microprocessor market leader Intel, which would benefit users with continued low prices for the latest chips. The two companies have fought a fierce price war for over a year, driving down the cost of microprocessors, the most expensive chip in a PC.

A number of major chip makers will likely farm out chip production in the future instead of building new factories or investing in new chip production research, according to Jackson Hu, chairman of UMC, at the company's first-quarter investor's conference in Taipei.

The company does not yet have new orders for microprocessors, said Liu Chi-tung, UMC's chief financial officer.

AMD currently farms out some microprocessor orders to IBM and Singapore's Chartered Semiconductor Manufacturing, in addition to producing chips at its own factories. But tough competition with Intel and a tighter cash situation has led to speculation that AMD might turn again to a contract chip maker for a chip factory partnership instead of going it alone.

On Wednesday, the Chinese-language Commercial Times newspaper reported that AMD had outsourced the production of a few graphics chip products to UMC. The newspaper did not say where it got the information.

UMC, the world's second largest contract chip maker, reported its worst quarterly revenue since mid-2005 on Wednesday, as chip shipments fell and the company was forced to reduce prices.

UMC's sales slumped to NT$23.03 billion (US$695.9 million as of March 31, the last day of the period reported) in the quarter, down 5.6 percent year-over-year. Net profit fell 88.1 percent to NT$1.46 billion. The revenue figure was UMC's worst since the second quarter of 2005, when it reported revenue of NT$19.44 billion.