 Chartered Semiconductor has warned that due to weaker than expected demand for end product devices in the second quarter, its customers are being cautious on committing to any increases in production runs. The foundry now expects business to be flat for the third quarter.
"We believe customers are cautious about their inventory positions, and some are reacting to softer-than-usual seasonality in some of the end markets," stated George Thomas, senior vice president and CFO of Chartered in a financial statement. "As a result of this, our outlook for the third quarter 2006 is now weaker than what we had anticipated earlier. However, this weakness is offset to a significant extent by the new businesses such as the AMD microprocessor ramp in the third quarter." Indeed the ramp of 90nm SOI based microprocessor's for AMD is the first significant ramp rate increase for Chartered's 300mm Fab 7 facility since the second half of 2005.
The foundry is projecting 3Q06 wafer starts per month to increase to 13,259wspm up from a relatively flat 10,607wspm for the 2Q06 period. The increase is 2,652wspm, which indicates the order level AMD has placed with Chartered. More worryingly, Thomas noted that the foundry was seeing particular weakness in the consumer video gaming market, referring it is assumed to the demand for Microsoft's Xbox 360 microprocessors. "Based on our current outlook, we expect Chartered revenues for third quarter 2006 to be essentially flat and revenues including our share of SMP to be slightly down, compared to the second quarter," commented Thomas. "In comparison to the second quarter, we see significant weakness in the consumer sector, primarily due to decline in revenues from video game devices. The communications sector is expected to be weaker to a lesser extent, offset by strength in the computer sector. We expect a utilization rate of approximately 75 percent for the third quarter, after comprehending a sequential increase in capacity of approximately five percent. Revenues from 0.13-micron and below technologies, including 90nm, are expected to represent around 51 percent of our total business base revenues. 90nm revenues alone are expected to grow approximately 25 percent sequentially and contribute approximately 28 percent of our total business base revenues."
However, Chartered still expects to migrate Microsoft's Xbox 360 microprocessor to the 65nm node in 1Q07 as planned.
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