SMI, UMC Dumped on Bullish Results; Whither TSMC?

There goes the rally in contract chip makers. Shanghai, China’s Semiconductor Manufacturing International (SMI) and Taiwan’s United Microelectronics (UMC) both this morning beat profit and sales estimates for their most recent quarters and forecast above consensus, but both saw shares punished nevertheless.

SMI shares fell 21 cents, or 7.4%, to $2.64; UMC fell 15 cents, or 4.6%, to $3.15.

After a 61% rise in UMC stock this year and a 26 rise in SMI stock, I guess folks are selling on the news.

SMI said Q3 sales fell 22%, year over year, but rose 83% compared to Q1, to $267.4 million, yielding a net loss per share of 22 cents, compared to consensus estimates for $235 million and a net loss of 33 cents per share. The company’s negative gross profit improved dramatically from Q1 to -4% from -88% due to higher production of chips, the company said.

The company forecast sales to rise 14% to 18%, or roughly $304 million to $315.5 million, ahead of the single estimate of $300 million on Thomson Financial. In other words, the quarter-over-quarter gain gets smaller from here.

UMC, meantime, said revenue in its fiscal Q3 rose 108% from the prior quarter, despite falling 10% year over year, to 22.63 billion Taiwan dollars, or roughly $689 million, compared to the average $662 million estimate, yielding profit per share of 2 cents per share, a penny better than estimates.

UMC didn’t offer a precise forecast, but the company’s comments on the conference call indicate that, just as SMI, the outperformance going forward won’t be as meaningful. Wafer shipments will rise 8% to 10% in Q4, versus 133% quarter-to-quarter last quarter. Factory utilization will rise to 85% from 30%, which is nice, but smaller than the jump from 30% in Q2 to 79% in Q3.

So the good news has been had, and folks are clearning out. On the conference call, the Q&A made clear that there’s some slight risk of chip inventories building, while a pickup in end demand is not in sight. Tomorrow, we’ll hear from the biggest of the group, Taiwan Semiconductor Manufacturing (TSM).

Anyone wanna guess where its stock will go after the report?