Taiwan chipmaker UMC says some happy to use China capacity others shun

United Microelectronics Corp. (UMC) said Wednesday that some customers are pleased to use capacity freed up by a shift away from made-in-China chips amid Sino-U.S. tensions.

Western corporations are reconsidering their supply chains and reliance on China as a manufacturing base, with Washington tightening constraints on Beijing’s semiconductor ambitions and technical and military achievements.

UMC (2303.TW) co-President Jason Wang said on an earnings call that U.S. and European chip designers were starting to “evaluate their supply chain resilience” as they moved orders away from Chinese facilities.

Wang said UMC, which makes chips in Taiwan, China, Singapore, and Japan, might gain.

“We are seeing some customers moving products to other locations outside of China, but at the same time we also see some customers asking to take advantage of the China gap that creates,” he said, without naming the companies.

Due to rising prices, interest rates, and a dismal global economic outlook, individuals and businesses have cut down on tech spending.

UMC (2303.TW), whose clients include Qualcomm Inc. (QCOM.O) and Infineon (IFXGn.DE), reported a 14.5% year-on-year reduction in first-quarter revenue to T$54.2 billion ($1.77 billion), down 20.1% from the previous quarter. Wafer shipments fell 17.5%.

Wang predicted a difficult 2023. “The recovery will be much slower than we anticipated.”

However, the business maintained its capital spending projection of $3 billion, up from $2.7 billion last year, citing robust demand for automotive chips driven by electric vehicles and autonomous driving.

Last week, bigger Taiwanese rival TSMC (2330.TW), the world’s largest contract chipmaker, reported a surprise 2% growth in first-quarter profit but anticipated a 16% drop in sales for the second quarter due to an inventory glut and a worsening global economy.