Chartered cuts growth forecast

Singapore - Chartered expects gross profits to plummet by S$15 million, hurt by increased costs, but maintains that its second quarter guidance would remain.

In its mid-quarter update, Chartered Semiconductor Manufacturing said it expects its business outlook to remain essentially unchanged from the quarterly forecast released in April.

"Two additional 65nm (chip) customers that were expected to enter production this quarter have successfully done so and we continue to expect the momentum at that node to continue into the latter half of the year as more products enter into production," said George Thomas, senior vice president & CFO of Chartered.

However, it warned of eroded profit margins in the vicinity of S$15 million as costs increase. "Approximately S$9 million of the cost increase is attributable to a less favourable build-up of work-in-progress inventory, and approximately S$3 million to higher depreciation in Fab 3E as a result of the valuation exercise that is in progress and approximately S$2 million to a weaker US dollar," he added.

Despite the lower gross profit the company is reiterating its net income guidance due to a tax credit that is expected to offset that decline.

In its first quarter results, the company forecasted a 17% increase in revenues in the second quarter compared to the first, and a net income of approximately $6 million for the second quarter.

The company also announced a "strategic investment" in Taiwan-based system-on-chip design company SOCLE Technology. Financial terms of the investment were not disclosed.