New 300-mm fab positions Chartered for future growth

Analysts said the chip maker could bank on its strong network of alliances and stronger anticipated demand in the consumer technology sector to drive growth in the months ahead, though some uncertainties about its performance in the long term remain.

Chartered reported a loss of $67.1 million for the second quarter, a slight improvement from the $84.5 million loss posted for the first quarter, but a far cry from the $15.3 million profit recorded in the second quarter of 2004.

Revenues for the quarter were $194.0 million, up 7 percent sequentially but down 24.2 percent from the same period a year ago.

Dharmo Soejanto, an electronics industry analyst with Kim Eng Securities here, said Chartered's second quarter results were "a bit better than expected" and predicted revenue would rise about 40 percent in the third quarter.

Gartner principal semiconductor analyst Tan Kay Yang said the earnings report contained "no surprises."

He added that the launch of commercial shipments from its 300-mm Fab 7 facility in June, one month ahead of schedule, was an indication Chartered was "doing very well."

Though startup costs for its Fab 7 facility, which began commercial shipments in June, have proved a drain on Chartered's finances, both analysts said it would contribute significantly to the company's future expansion, as would its partnerships with market leaders like IBM and Samsung.

"Chartered's collaboration with IBM, mainly in Fab 7, puts it on the leading edge in terms of nano-manufacturing, and it's forming an even more powerful consortium going ahead," Tan said, referring to the announcement in June that IBM, Chartered, and Samsung would jointly develop design kits for 65-nm base and low-power processes.

"This means Chartered has more exposure, but also a wider customer base," Tan added.

Chartered "needs to have Fab 7 to stay in the game with competitors like [United Microelectronics Corp.] and [Taiwan Semiconductor Manufacturing Co.]," Soejanto said. "I don't see Fab 7 as a liability, but as a necessity."

"Having IBM [as a partner] technology-wise is better than going it alone," he added. "And IBM also takes up most of Chartered's capacity."

Industry analysts agreed it was hard to predict when Chartered would return to profitability, but said there was reason to be optimistic about its immediate future.

"We see 3G really driving the market along with consumer game consoles, which will benefit all the major players," Tan said. "The market is picking up and things are improving not only for 8-inch but also 12-inch [wafers]."

Soejanto said that he saw Chartered's losses "narrowing" later this year, but said weak demand could yet derail its growth.

"Visibility beyond the third quarter is fairly limited. We're looking at a lot of uncertainty, of which consumer demand is the biggest," he said.