Chip clients evaluating supply chain resilience: Taiwan chipmaker UMC

A shift from made-in-China chips amid Sino-US tensions has opened up capacity that some customers are happy to use, Taiwanese chipmaker United Microelectronics Corp (UMC) said on Wednesday.

Many Western companies are reviewing their supply chains and reliance on China as a manufacturing base, with Washington stepping up curbs in particular aimed at hobbling Beijing's chip ambitions and slowing its technological and military advances.

Asked on an earnings call about US and European chip designers shifting orders away from Chinese factories, UMC co-president Jason Wang said their customers were starting to "evaluate their supply chain resilience".


UMC could benefit from that, given the company makes chips in Taiwan, China, Singapore and Japan, Wang added.

"We are seeing some customers move their products to other locations outside of China, but at the same time we also see some customers asking to take advantage of the China gap that creates," he said, without naming the companies.

Global tech demand has slumped in recent months as soaring inflation, rising interest rates and a gloomy world economic outlook have led consumers and businesses to tighten spending.

UMC, whose clients include US company Qualcomm Inc and Germany's Infineon, reported a 14.5% year-on-year fall in first-quarter revenue to T$54.2 billion ($1.77 billion), down 20.1% from the previous quarter with wafer shipments dropping 17.5% quarter-on-quarter.

"2023 will be a challenging year," Wang said. "The recovery will be much slower than we anticipated."

However, the company kept its guidance for capital spending this year of $3 billion, compared with $2.7 billion for last year, and said it saw strong demand from automotive chips driven by electric vehicles and autonomous driving.

Bigger Taiwanese rival TSMC, the world's largest contract chipmaker, last week reported a surprise 2% rise in first-quarter profit but forecast a 16% plunge in sales for the second quarter amid an inventory glut and as a weakening global economy has clouded the demand outlook.