January 7, 2011 / 6:59 AM / 8 years ago

UPDATE 1-UMC posts weaker sales; fresh demand seen

* New gadgets seen boosting fresh chip demand in 2011

* Stock flat before results vs TAIEX’s 1.13 pct fall (Recasts; adds analyst comments and details)

TAIPEI, Jan 7 (Reuters) - Taiwan’s UMC (2303.TW), the world’s No.2 contract chipmaker, saw its third month-on-month fall in sales on Friday after a Christmas buying spree came to an end, while a stronger Taiwan dollar hurt the firm’s margins.

However, analysts say UMC and sector leader TSMC (2330.TW) are set to ride a consumer boom this year and boost output for an array of new electronics products including smartphones and tablet computers that require more powerful chips.

United Microelectronics Corp (UMC) (UMC.N) needs to beef up efforts to churn out more microchips using advanced process technology to catch up with TSMC (TSM.N) and stay competitive.

“The Taiwan dollar certainly has some impact on its sales but I would say things still look alright for foundries, at least for the first half of this year,” said Bevan Yeh, a fund manager at Prudential Financial Securities Investment Trust.

The Taiwan dollar TWD=TP hit a 13-year high recently, though analysts say big exporters who have taken hedging measures should see limited currency impact.

“Clients will place new orders for new products, so chip demand will grow but we still prefer the industry’s leader,” said Yeh, who owns TSMC shares in his portfolios.

UMC, which counts Taiwan’s Mediatek Inc (2454.TW) and U.S.-based Xilinx Inc (XLNX.O) among its major clients, had sales of T$10.178 billion ($347 million) in December, the company said in a statement.

That was 9.5 percent higher than the same month a year ago but down 2.5 percent from November, it said, without giving other details.

TSMC and UMC are set to post fourth-quarter earnings and give guidance for the first quarter of 2011 near the end of January. TSMC’s December sales are due out on Monday.

UMC’s sales came after the Taipei stock market closed on Friday. UMC shares were flat as investors have largely priced in its sales figures, which matched analysts’ expectations.

TSMC rose 2.1 percent, against the main TAIEX's .TWII 1.13 percent drop. TSMC shares hit their highest level in about a decade in late December, while UMC shares reached a near eight-month high in late December.

For the whole 2010, UMC’s sales totalled T$120.43 billion, up 36 percent from 2009, the company said.

For a table on the company's website, see here (US$1=T$29.3) (Reporting by Baker Li; Editing by Jonathan Standing)

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