UMC April sales up by third, boding well for Q2

TAIPEI, May 9 (Reuters) UMC, the world's second-largest contract chip maker, said on Tuesday its April sales rose by a third from a year ago, riding an industry upturn spurred by demand for new consumer electronics.

Analysts said United Microelectronics Corp. was on track to meet its forecast of a 5-6 percent increase in second-quarter shipments after a strong start in April.

''Sales momentum should pick up gradually each month this quarter so we have confidence in its guidance,'' said Grand Cathay Securities analyst Jeff Chang. ''But a strong recovery won't be seen until after the third quarter.'' Major Taiwan technology exporters, including UMC, typically ramp up production in the third quarter to meet growing demand for computers and consumer products before the year-end holiday.

UMC's April sales were T.46 billion (US9 million), up from T.37 billion a year earlier and marking the sixth straight annual gain. But they were virtually flat with March.

For the first four months, total sales rose 23 percent to T.85 billion from a year before, UMC said in a statement, without elaborating.

Sector leader Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) is set to announce April sales on Wednesday.

UMC has said it expected second-quarter shipments to rise by 5-6 percent from the first quarter, with average selling prices rising 2 percent, while its operating profit fell 72 percent in the first quarter from a year ago.

UMC also expected its gross profit margins at ''high-teen'' percent, versus 13.3 percent in the first quarter, which analysts said could boost the firm's profits amid growing popularity of new generation mobile phones, game consoles and flat-screen TVs.

UMC announced the sales result after the market closed in Taipei.

Its ordinary shares fell 1.11 percent to T.35 and TSMC shares were off 2.02 percent at T.00. The main TAIEX share index slid 1.14 percent.

But UMC shares spiked to their highest close in nearly nine months on Monday. So far this year, UMC has risen 20 percent and TSMC was up 9 percent.

Though demand for personal computers slowed, UMC has seen handset demand start to accelerate, about one to two months earlier than typical seasonal trends.

Both TSMC and UMC count Texas Instruments Inc. (TI) as one of their major clients. TI is the world's largest supplier of mobile phone chips.

Reflecting the firm's confidence, UMC has said its sales would grow by double-digit percent in the third quarter from the second quarter.

Output of chips in advanced 90 and 130 nanometre circuits would account for over 50 percent of UMC's total sales by the end of 2006, up from a third in the first quarter, UMC said.

REUTERS MP PM1646