Published November 1, 2008
Chartered posts Q3 net loss of US$24.4m
'Temporary salary reduction' of 5-20% for staff of Singapore foundry
By ONG BOON KIAT

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CHARTERED Semiconductor Manufacturing, which is facing slowing demand, reported a third-quarter net loss of US$24.4 million yesterday, falling from a net profit of US$114.8 million in the year-ago quarter. This translates to a net loss of one US cent per share for the three months ended Sept 30, compared with a net profit of four US cents per share previously.

FEELING THE HEATThe negative macroeconomic environment that has been prevailing for several months and the resulting difficult market conditions are finally impacting the foundry industry, says Mr Chia
The contract chip maker added that, starting November, it is implementing a 5-20 per cent 'temporary salary reduction' for its employees. This company-wide exercise will include the senior management team.
'The challenge that we face is the slowing down of demand coming into Q4 2008,' Chartered president and CEO Chia Song Hwee told BT in an interview.
The salary-trimming exercise, together with other expected payroll reductions, will help Chartered save between US$25 million and US$30 million on an annual basis, Mr Chia said.
Chartered's Q3 revenue rose 30.7 per cent to US$463.7 million, from US$354.8 million for the year-ago period.
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Click here for Chartered's news release
Taking into account its share of the minority-owned joint-venture fab SMP, Q3 revenue was US$487.2 million, up 27.6 per cent from US$381.8 million in the year-ago quarter.
The company incurred higher expenses year on year on several fronts. R&D expenses rose 13.5 per cent to US$44.2 million; general and administrative expenses rose 19.8 per cent to US$11.2 million, due primarily to higher payroll-related expenses; while sales and marketing expenses climbed 33.4 per cent to US$19.5 million.
In the company's earlier guidance, a reduction in wafer starts and higher depreciation of a plant were listed as adverse factors that would crimp margins in Q3. Yesterday, Chartered said that orders have been declining since mid-August, and that some of its customers have requested to push their deliveries forward.
'The negative macroeconomic environment that has been prevailing for several months and the resulting difficult market conditions are finally impacting the foundry industry,' Mr Chia said.
To tackle the looming challenges, the company has laid out three near-term priorities.
The first is to - through optimising product mix, improving efficiency and reducing cost - lower the company's breakeven utilisation rate, to around 75 per cent by year-end.
This means Chartered can be expected to break even operationally when it hits this mark, and earn operating income if it exceeds it. The company's utilisation rate for its Q3 period is at around 85 per cent.
The company also intends to focus on 'positioning for early phase of demand recovery' and 'preserving our cash and liquidity position'.
For Q4, the company expects to see revenue of between US$362 million and US$374 million, and a net loss of between US$52 million and US$62 million.
Chartered has had two profitable quarters to start its year - with net income of US$43.4 million and US$2.4 million for Q2 and Q1 respectively.
Chartered shares closed half a cent lower at 22.5 Singapore cents yesterday.