Taiwan chip firm reports profit fall

United Microelectronics Corp (UMC), one of the world's largest chip makers, reported a drop in profits during the second quarter. The company has downplayed speculation that it could soon begin to take advantage of government policies that are expected to loosen restrictions on investment in China by high tech firms.

UMC reported quarterly revenue of $822m, a 0.6 per cent increase from the same period one year earlier. Net income fell 51.2 per cent year-on-year to $78m. Both revenue and profits increased significantly compared to the first quarter, however.

"Looking forward to Q3, we see that the environment is more challenging than we previously expected. In general, customers have adopted a cautious attitude due to the rising uncertainty in the global economy," warned UMC's chief executive officer, Shih-Wei Sun.

Taiwan's government is looking at easing restrictions on high-tech investment in neighbouring China, potentially allowing chip makers to site advanced 12-inch wafer fabs there. This would bring the chip makers closer to many of the manufacturing sites that use the chips they make. However, UMC executives have told local media that they do not currently plan such a move as the company is still focused on expanding the 12-inch wafer output of its existing fabs in Taiwan.

"UMC will... continue to focus on operational efficiency and cost control activities through an emphasis on teamwork and execution. We will continue to invest in the development of advanced technologies that are critical to our future growth and profitability," said Sun.

Since the results were announced. UMC's share price has continued a general downwards trend that has persisted through most of 2008, during which the shares have lost approximately 30 per cent of their value.