Downturn hits Taiwan’s foundry chip makers

Sales for the month of November slowed for the world’s two largest contract chip makers as the global economic downturn bites the semiconductor industry.

Taiwan Semiconductor Manufacturing (TSMC) on Wednesday reported its worst monthly sales result in over three years.

November consolidated sales at the world’s largest contract chip maker fell to NT$20.6 billion (US$615.2 million), down 34 percent compared to the same month last year and 30 percent lower than October.

The company’s main rival in the foundry chip business, United Microelectronics (UMC), reported net sales in November fell to NT$6.02 billion, down 33 percent compared to the same month last year and lower than October’s NT$7.91 billion.

UMC also lowered its fourth quarter earnings guidance, blaming weak chip demand on global economic woes.

The chip maker lowered its fourth quarter revenue target to between NT$18.2 billion and NT$18.7 billion from a mid-point of NT$19.5 billion previously. The company also reduced its gross profit margin target to between 7 percent and 9 percent. TSMC lowered its fourth quarter financial guidance last week.

Meanwhile in Germany,Qimonda AG hopes to soon strike a deal to research chip technology with the state of Saxony, where its main chip factories are located, a company representative said.

Qimonda, one of the world’s largest DRAM makers, faces serious financial test in the coming three months without such a deal. Last month, the company announced it will run out of cash in the first quarter of next year unless it can find new investors, a strategic partner, or the DRAM industry takes a turn for the better.

But a rebound in the DRAM industry remains unlikely. A year-long industry downturn has turned into a nightmare for DRAM makers as global economic woes impact shipments of PCs, where most DRAM goes. Prices for DRAM chips are already sitting at record lows and despite attempts to cut production, won’t improve much over the next few months, according to market researcher Gartner.

But government intervention could save Qimonda. Although the company declined to comment until a deal with the state government is finalized, a representative said alternatives exist in case talks collapse.

“The government has various instruments to support Qimonda,” said Ralph Heinrich, a representative for the company.

Qimonda operates an advanced chip factory and a research and development center in Dresden, which is located in Saxony. The company employs around 3,200 people there, but has already announced plans for layoffs and the closure of a chip packaging and testing facility.

A number of DRAM makers are seeking help from their governments these days. The Taiwan government has opened a task force to determine how best to aid its DRAM makers, while reports indicate that South Korea may be seeking credit for Hynix Semiconductor.

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