Apr 23, 2025 / 09:00AM GMT
Operator
Welcome, everyone, to UMC's 2025 First Quarter Earnings Conference Call. (Operator Instructions) For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within an hour after the conference is finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section.
Now I would like to introduce Mr. David Wong, Investor Relations Manager of UMC. Mr. Wong, please begin.
David Wong - United Microelectronics Corp - Investor Relations Manager
Welcome to UMC's conference call for the first quarter of 2025. I'm joined by Mr. Chi-Tung Liu, CFO of UMC; and Mr. Michael Lin, Senior Director of Finance, because President Wang is absent due to urgent personal matter. In a moment, our CFO will present our first quarter financial results, followed by our key message to address UMC's focus and second quarter 2025 guidance.
After our CFO's remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC securities authorities.
During this conference, you may view our financial presentation material, which is being broadcasted live through the Internet. I would now like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's first quarter 2025 financial results.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Thank you, David. I'd like to go through the first quarter 2025 investor conference presentation material, which can be downloaded or view in real time from our website. Starting on Page 4, the first quarter of 2025 consolidated revenue was TWD57.86 billion with gross margin at around 26.7%. Net income attributable to the stockholder of the parent was TWD7.78 billion, and earnings per ordinary share were TWD0.62. Wafer shipment was flat sequentially compared to the previous quarter.
However, it was up 12% year over year for the same period of 2024. On Page 5, on the sequential comparison, wafer revenue declined 4.2% sequentially to TWD57.85 billion, mainly due to this one-time price adjustment in the beginning of calendar year. Gross margin was impacted by the lower ASP as well as the earthquake during the Chinese New Year holidays, it went down to 26.7% or TWD15.4 billion. And we expect to see margin recovery in the coming quarters. Operating expenses is under control, represent about 10.6% of the total revenue or TWD6.1 billion.
That gives us the overall operating income around TWD9.7 billion or 16.9 percentage points. In terms of nonoperating income, due to the weakness in the stock market, we have some losses coming from mark-to-market investments valuation, which is around TWD439 million loss. Total net income attributable to the shareholders of the parent in Q1 2025 was TWD7.777 million or EPS of TWD0.62 in Q1 '25. For the year-over-year comparison, revenue increased by 5.9%. This is mainly due to the wafer shipment increase, as I mentioned earlier, around 12% year-over-year wafer shipment increase, but offset by the ASP decline.
And for the net income comparison, we see a 25% year-over-year decline. And therefore, EPS also was lower in the same magnitude. On next page, cash position still remains over TWD100 billion. It's about TWD106 billion at the end of March 31. Our total equity now reached TWD390 billion at the end of Q1 2025.
On Page 6, there's a routine beginning of the year one-off price adjustments, which actually contribute to most of the revenue decline in Q1 of 2025. So roughly, the ASP declined by about 4% to 5% in Q1. For revenue breakdown, we see a good growth coming out of our Asian-based customers. It's now reaching around 66% of our total revenue. North America customers, on the other hand, represent about 22% of the pie.
IDM show a mild growth, on Page 10, to 18% of the total revenue breakdown in Q1 '25. And Consumer segment is the strongest in Q1, mainly driven by WiFi, DTV, set-top box and [DDI]. And communication computers didn't really change that much. And we're happy to see our 40-nanometer and below revenue now over 50% of our total revenue now reached 53% in Q1 when 22 and 20-nanometer revenue account for 37% of the total revenue breakdown. In Q1, there was some disruption from earthquake but mainly this is also annual maintenance schedule.
So capacity in Q1 was lower. And for quarter 2, we see the back to normal capacity as well as some mild increase coming out of our Singapore fab due to the ramp is starting. On Page 14, our 2025 CapEx remain unchanged at USD1.8 billion. So this above is the summary of UMC financial results for Q1 2025. Next, I would like to share our key messages.
I apologize for still putting Jason's picture here because it's rather short notice, and it's also more importantly, it's a very good picture. Our results in the first quarter were in line with our previous guidance with flattish wafer shipments and onetime pricing adjustments at the beginning of the year to reflect market conditions. First quarter highlights include 22/28-nanometer revenue hitting a record high, representing 37% of the total sales. That was driven by 46% quarter-over-quarter increase in 22-nanometer revenue from products such as OLED display driver IC, ISP as well as digital TV, WiFi and audio codec chips. We expect customers to tape-out additional 22-nanometer product in the coming quarters.
As customers increasingly migrate to our 22-nanometer logic and specialty platform for next-generation applications. Earlier this month, we also officially inaugurated our new Singapore Phase 3 fab, which provide additional 22-nanometer capacity to support future growth. Pilot runs are underway and is on schedule to ramp up to volume production in early 2026.
The expansion in Singapore also further broadens our geographic diversification, enabling customers to strengthen their supply chain resilience. Meanwhile, in February, our Board of Directors proposed a cash dividend of TWD2.85 per share, which is subject to approval for shareholders -- from shareholders in the upcoming AGM on May 28.
Looking ahead to the second quarter, we are expecting a moderate rebound in demand across all segments according to near-term alignment with our customers. Beyond that, of course, we have to be cautious about wafer demand projections, as policies and markets are still adjusting to the recent tariff announcements. To navigate this challenging environment, we are working closely with customers to monitor trends in end market demand.
We also strengthened our competitive advantage by focusing on execution of key technology products such as the 12-nanometer collaboration with US partners, and ensuring our customers have access to geographically diverse manufacturing options.
In addition, we are implementing cost reduction plans and accelerating AI and intelligent manufacturing systems to enhance operational efficiency. Through these key focuses, we are confident that UMC can maintain our financial and business resilience. Now let's move on to the second quarter of 2025 guidance. Wafer shipments will increase by 5% to 7% sequentially. ASP the in USD terms will remain flat.
Gross margin will be back to approximately 30% and capacity utilization rate will also recover to the -- around mid-70% range. As I mentioned earlier, the cash-based CapEx will remain unchanged at about USD1.8 billion. That concludes our remarks. Thank you all for your attention. And now we are ready for questions.
Questions and Answers:
OperatorThank you, Chi-Tung. And ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)
Sunny Lin, UBS.
Sunny Lin - UBS - Analyst
Thank you very much for taking my questions. So my first question, I want to start from the tariff impact. And so for the short term, how are tariffs affecting the customer order behaviors for Q2 and second half? And how is that impacting your business planning? And it does seem like you're having a good recovery for Q2 sales, how much of that is driven by the pooling orders due to tariff?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Okay. So UMC collaborate closely with customers for technology and product qualification across multiple fabs, reducing exposures to site-specific risk and ensuring supply chain resilience. We adopt a forward-looking approach to mitigate business risks, including a geographically diversified manufacturing footprint. And by 2027, we will have manufacturing base for our most advanced available technology in the U.S. UMC also has a healthy financial structure to navigate through macro uncertainties.
And although the escalating trade tensions and global tariff policies has increased uncertainties in the semi industry and we have not seen market demand change in the very near term, i.e., quarter 2 2025 yet. Of course, visibility in the second half is becoming very limited. And longer term, customers may decouple their internal manufacturing options and explore external wafer sourcing options. And UMC's strategic positioning, focusing on technology differentiation, global manufacturing diversification, product mix optimization and manufacturing excellence. So I think, in short, there's very little change we observe for the second quarter.
However, if you include our Q1 results plus our quarter 2 guidance, we think we are slightly ahead of our expectation at the beginning of the year. That will give us some buffer for the uncertainty -- the increasing uncertainty in the second half.
Sunny Lin - UBS - Analyst
Got it. So basically, you are saying the growth in Q2 is not so much driven by pooling just a little bit. And so in that case, should we be less concerned about a meaningful drop-off going to second half because they are not much being pooling?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
There's not that much pooling, you are correct, for quarter 2. There's some customers were sidelined and they want to take some precautionary actions, but there are some customers doing the opposite. So net-net impact for quarter 2 is very limited. So -- but again, we cannot really see through second half. And what we are seeing right now doesn't really suggest there will be a shortfall in the coming quarters.
Sunny Lin - UBS - Analyst
Got it. Thank you. My follow-up question on tariff is in terms of the potential disruptions about the supply chain on the pricing side. And so if tariffs are pushed through either for finished goods or direct semi chips or both, based on your current discussions with clients, would you expect some impact on UMC's pricing and margin as well as maybe potentially everyone in the supply chain, we need to share the cost to some extent?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
I think we don't have a generalized answer. So let me start with our UMC pricing policy or strategy. We don't compete purely on pricing. Our strategy is built around technology differentiation and manufacturing excellence via regionally diversified manufacturing basis. All that attribute work to insulate UMC and our customers away from low-entry barrier market.
And despite the pricing pressures, UMC remain committed to deliver differentiated technology and ensuring our customers to gain market share through the long-term strategic partnership. And so our value proposition is really to work with our customers in a transparent method. Any disruption of the cost increase through tariffs, we believe we will co-work with our customers to come up with a solution.
Sunny Lin - UBS - Analyst
Got it. And then I have a question on 28-nanometer. And so roughly, what's the utilization rates in Q1 and Q2? And how should we think about the mix of 22-nanometer within the whole 28- and 22-nanometer sales, let's say, going to second half of 2025?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
First of all, our guidance for second quarter is mid-70% for the company as a whole. Of course, 12 inch is higher than corporate average and 8 inch is below corporate average. Among 12, I would say, 22/28 is the better sector, if not the best sector. And right now, 22 and 28 represent 37% of our total revenue and 22 alone, I would say, is more than mid-teens and continue to increase. And that will be a key growth driver for UMC's 2025 growth.
Sunny Lin - UBS - Analyst
That's very helpful. So mid-teen percentage that's in terms of total sales, correct?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Correct.
Sunny Lin - UBS - Analyst
Thank you very much. And then maybe my last question. And so this partnership with Intel on 12-nanometer, what's the latest update that you could provide us? And would it be possible that we see an earlier production in 2026? And I guess, lately, given the maybe rising reshoring interest in the US, are you seeing much stronger demand for these collaborations?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Maybe [Michael] can answer the question.
Unidentified Company Representative -
Sure. The joint development work is on track. We are progressing well according to the project milestones. At this moment, we are verifying the silicon performance for the pilot line, and we expect the early PDK will be ready for the first wave of customer by 2026 as planned. In fact, we have been aligning with key customers on the device spec to speed up the ramp-up as quickly as possible.
Right now, we are putting the process technology in Arizona fab. And so far, the progress is on track.
Sunny Lin - UBS - Analyst
Got it. And so basically, sales contribution, you guide still from 2027?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Yes.
Sunny Lin - UBS - Analyst
Got it. Thank you very much.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Thank you.
Operator
Laura Chen, Citi.
Laura Chen - Citi - Analyst
Hi, thank you very much for taking my questions. I also want to know more about like your US cooperation. If only Intel's -- other than Intel, would you any -- have any opportunity to work with other IDMs in the United States?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
We have plenty of US-based IDM customers as consistently among our top customers. And I think I don't need to mention the names, but you definitely know who they are. So from time to time, we have JDPs, we have capacity support. And that will continue to be our strategic collaboration going forward. So we do have other IDM customers in the US.
working closely with UMC. But of course, the current stage, the most important project is this 12-nanometer US footprint collaboration with the US partners.
Laura Chen - Citi - Analyst
Understood. Because previously, I also have a news, I understand that management already kind of denied, but I'm just wondering like other than our current clients in US IDMs, is there any chance we can also work with Global Foundries on some sort of like joint venture or collaboration, any type of the cooperation?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
I don't want to comment on market rumors. I think for issue like this is so sensitive and important has to come from the official announcement from any company involved. But I think from -- again, from UMC's perspective, we're consistently looking for strategic options to enhance shareholders' value. Anything can help to increase our competitiveness as well as the shareholders' value, we will certainly look into that. And currently, there's no ongoing so-called merger activity right now.
So again, we have to say that there's no merger ongoing right now. But it doesn't have to be merger. There are many other collaboration we can still pursue to enhance shareholders' value and returns. And that is our mandate, and we are continuing to explore all different kind of options.
Laura Chen - Citi - Analyst
Yes, certainly. My second question is about the margin. Obviously, into Q2, even though there's a lot of macro uncertainty, we see that the utilization rate improvement and also the gross margin back to 30%. So can we kind of assume that Q1 is the trough for the gross margin since we have the one-time pricing adjustment back in Q1, the overall demand seems to back to normal. So I'm just wondering what's our view on the overall gross margin trends going forward?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Unfortunately, we mentioned the second half, the visibility becomes very limited with a lot of increasing uncertainties. So it makes us very difficult to predict the numbers for the second half. We can only give the guidance a quarter at a time.
But our profitability is largely depend on product mix, pricing, utilization rate and ForEx movement and COGS. We have taken several initiatives to enhance our profitability that include business engagement, technology differentiation, driving the efficiency in operations and improving our CapEx efficiency to manage the depreciation impact.
The current gross margin level reflects Q1 2025 one-time pricing adjustment as well as the depreciation increase, mainly coming from P6 in Thailand as well as the upcoming P3 in Singapore. And we are actively looking to improve our product mix, such as more specialty content and higher 22, 28 wafer shipments and drive the efficiencies in operations when our EBITDA margin can still remain intact.
Laura Chen - Citi - Analyst
Okay, that's very fair. Thank you very much.
Operator
Brad Lin, Bank, America Securities.
Brad Lin - Bank of America Securities - Analyst
Thank you for taking my question. Congrats on the solid 1Q result and also the bright second quarter guidance. I have two questions. The first question would be in terms of the customer type. Has UMC seen potential upside from maybe North America or IDM due to the current tariff issue? Thank you.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
I think we do see customer -- increasing customer appreciation to UMC's regionally diverse manufacturing base. So for various reasons, customers may need to have certain type of product manufacturing in some specific manufacturing sites. And UMC with operations in Singapore, Taiwan, Japan and China and upcoming US capacities, I think our customers appreciate even more recently with the option we can offer. So I think that's the feeling and also the sense we get from the recent conversation with many of our major customers.
Brad Lin - Bank of America Securities - Analyst
That's very clear. But a follow-up question on that is that at what time do we expect to see so-called meaningful contribution from this kind of impact?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
So far, it's very difficult to quantify. But for our Singapore fab, probably the best example that the P3 is going to volume production in early 2026. And I think it's becoming a very pursuit after locations for its less impacted geopolitical tension. So certainly, if there is any demand exceeds the capacity we can offer, we will certainly see a better performance out of our Singapore site. And same argument can apply to any other site we have.
So I cannot give you a quantified answer for now. Just the customer appreciation certainly will endorse our customer relationship and the so-called stickiness for the longer term.
Brad Lin - Bank of America Securities - Analyst
Got it. Hopefully that we can also gain more so-called LTA with that as well. If any, please do let us know. So my second question would be, well, end market demand. So could you also provide insight into the demand trends across the key end markets such as especially for automotive and also industrial as well as the consumer electronics?
Have there been any notable shift in the customer behavior or order patterns recently compared to our last earnings call? Thank you.
David Wong - United Microelectronics Corp - Investor Relations Manager
Yes. For Q1, Consumer segment grew as our CFO alluded to, driven by WiFi, DTV set-top box and driver IC. But all the other segments such as Communication remained relatively flat, and we saw Computing kind of decline due to a softer demand in IO. Automotive for Q1 also declined due to softness in microcontrollers, DDI as well as power management. But as you know, for Q2, all major segments for Computing, Communications, Consumer will grow.
For Computing segments, we expect that growth will be driven by flash controller IC. For Communication will be increased from ISP, networking, flash controller as well as WiFi. For Consumer, it will grow due to continuous growth from DTV and set-top box. And last, but for Automotive, we expect that segment to be flattish, looking for Q2.
Brad Lin - Bank of America Securities - Analyst
Should we expect any meaningful recovery from this auto industry, which seems to be, well, relatively softer for a while?
David Wong - United Microelectronics Corp - Investor Relations Manager
So the Automotive right now, the inventory seems kind of relatively high, obviously, compared to other key segments of our business. So for now, we stay -- we remain a more conservative tone for the auto market.
Brad Lin - Bank of America Securities - Analyst
Got it. Thank you very much.
David Wong - United Microelectronics Corp - Investor Relations Manager
Thank you.
Operator
Charlie Chan, Morgan Stanley.
Charlie Chan - Morgan Stanley - Analyst
Thanks for taking my question. Chi-Tung, my first question will be also on gross margin. So it seems like 1Q, you're doing a little bit better than the guidance of mid-20% and 2Q kind of hit the 30% amid some pricing pressure. Can you share with us some more color about which parts are doing better, better pricing or cost or just a kind of FX impact, so you can deliver better gross margin? Thank you.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Well, thank you for saying that's better. Personally, I don't think better. We never feel enough to pursue a better gross margin. I think it's a very important index internally for all the management team. So we continue to proactively deploy cost reduction efforts, including multi-source, streamline our operations, manage supply chain pricing and drive automation transformation.
So these measures kind of help us to offset or at least partially about those cost headwinds, including green energy, including yearly -- annually salary adjustment. So there are a couple of headwinds we need to offset through our cost reduction efforts. And in the beginning of the call, we mentioned that Q1, Q2 is slightly ahead of our expectations at the -- compared to the guidance we gave for the beginning of the year. But that kind of only give us the buffer. Hopefully, it's enough for the increasing uncertainty for the second half.
So pursuing a better gross margin is the [analyst] mandate for management team. We hope we can do better.
Charlie Chan - Morgan Stanley - Analyst
Sure. I hope you can keep it up. And second question is about your kind of a partnership with Intel in the US? So just out of curiosity, do you receive some request that some of your customers want you to accelerate that US operation with Intel?
Because it seems like your foundry peer, right, seems to receive a similar request and even some customers are willing to pay higher wafer price for their chips to be produced in the US. I know you have the planned schedule for the 12-nanometer in the US, but I'm just curious whether you are receiving similar requests that hope you can speed up?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
The answer is yes. I think most of the customers like to see the 12-nanometer solution as early as possible. And they also have a very aggressive product launch time, and they hope our 12-nanometer solution can catch up with their product road map. So yes, the pressure is there. We understand that, and we received inquiries from our call the early adopt customers.
And that's why we are under the pressure, try to expedite the whole process. But it's already a very aggressive process, I mean, time line. So it's also the first time we collaborate with our partners. And there's also many tests and need to be solved before we can even try to catch up with our aggressive time line. So again, this is -- there's a pressure and wish to do so.
But in reality, so far, we are on track with our planned schedule.
Charlie Chan - Morgan Stanley - Analyst
Got you. So besides the hope for you to accelerate the plan, do you also see some desire for you to even kind of reach out to more advanced nodes? Because I know you need to plan ahead, right, maybe 3 to 4 years if you want to further migrate to below 12-nanometer. I ask this question because that your industry peer already officially denied their future partnership with the US fab, which is Intel.
So I'm not sure if that gives you more room or your confidence you wish you to migrate to more advanced nodes that would adopt EUV.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
So if you are using the market story as a background for this question, I have to be careful, right? So in that case, the answer is no. So we are only focusing on the current node, which is 12-nanometers. And that both companies decided and there's a contract between 2 companies to execute this 12-nanometer collaboration. And for UMC alone, of course, I can speak for UMC, we appreciate this collaboration with our US.
partner, and we offer our foundry know-how and the bulk of the technology structure and US partner offer the on-site capacity with very limited depreciation. So we think it's a very innovative mutual benefit collaboration. And certainly, we don't want to be limited to the current node only. However, this contract only cover 12-nanometer for now.
Charlie Chan - Morgan Stanley - Analyst
Okay. That's a great answer as well. The last one, I think very kind of tactical short-term question. So I'm sorry, but did you maintain your full year guidance? And if that is the case, what's the implied half-on-half seasonality?
How much conservative can you bake in for second half?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Our view for the whole 2025 hasn't really changed. Our view on 2025 foundry market is expected to grow in the mid- to high-teens percentage, like we mentioned earlier, the previous quarter. UMC's addressable market should grow around, I mean, low single-digits for our addressable market, which we intend, and we have declared we're going to outgrow that. Of course, I just mentioned that the first quarter plus the guidance for quarter 2 put us a little bit ahead of our expectation, but the uncertainties in second half may offset that, which we don't know clearly yet. So that's the current view for the whole 2025.
Charlie Chan - Morgan Stanley - Analyst
So we probably use like single digit, maybe mid-single digit at the full year guide and try to calculate the implied second half. Is that the right way to think about your narrative on the second half?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Yes. Let's stick to the qualitative statement that we're trying very hard to outperform our addressable market.
Charlie Chan - Morgan Stanley - Analyst
Okay. Okay. Thank you. Yes, I'll be back to the queue.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Thank you.
Operator
Gokul Hariharan, JPMorgan.
Gokul Hariharan - JPMorgan - Analyst
Yes, hi Chi-Tung, David and Michael. My first question is on margins. I think you've kind of got back to 30% in Q2. How should we think about the cadence for margins? Because it looks like your implied expectation in the second half is going to be largely flattish looks like. So if that's the case, how should we think about margins?
And could you also refresh what is your expected depreciation growth? I think last time, you said high 20% for this year. Is that still the case given Q1, I think the increase was not that big sequentially?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Depreciation increase is still high 20% for 2025, each quarter sequentially going up. So we are facing higher depreciation expenses for every quarter. So that's the pressure. And for margin guidance, I think I have to highlight that about 2 percentage points in Q1 was impact from the earthquake. That's one-off.
So if you add back that 2%, the increase is more mild for the second half. And again, we are very sensitive to loading for the second half in terms of where we are for the margin. We know the factors such as pricing, the depreciation, but we don't know the factor for ForEx and loading. So of course, we continue to try to enrich our product mix by having more 22-nanometers. So all these factors blending together create the formula for our gross margin, especially in the second half.
Gokul Hariharan - JPMorgan - Analyst
Understood. So is 22/28 combined now higher margins compared to the corporate average already or is it still not there yet?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
If you exclude the new depreciation out of Thailand P6 and Singapore P3, of course, it is. But if you include that, I'm not so sure, may not be the case. But the depreciation is there anyway with or without the extra 22/28 contribution. So of course, the more the merrier.
Gokul Hariharan - JPMorgan - Analyst
That's fair. So just on the Singapore P3, are you having any thought about accelerating the capacity plan given you mentioned you're getting a lot more demand coming through for -- or interest coming through for Singapore fab? Because I think previously, you kind of slowed it down a little bit compared to previous plan given the demand outlook. Is that something that we could anticipate some change?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
I think that's definitely dynamic, okay? So the future capacity ramp for 12i Singapore will be depend on the alignment with our customer needs. And of course, we have begin to see a pickup in [tape-out] so that may or may not translate into a pickup in customer demand. But [tape-out] definitely already see the pickup. So it could happen, but the current plan still the production ramp, the mass production will be in early 2026.
Gokul Hariharan - JPMorgan - Analyst
Understood. And lastly, on the Intel collaboration. I think once you start the 12-nanometer revenue contribution, could you talk a little bit about what kind of customers you're seeing adopting this? And secondly, once you start the revenue contribution, what is the impact to your margins or EBITDA given the unique kind of arrangement that you have with Intel?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Okay. Michael can answer the first question. I can answer the second question.
Unidentified Company Representative -
Okay. As for now, our key focus on WiFi connectivity and high-speed interface SoC products. So in addition to this 12-nanometer large process, we're also exploring potential FinFET specialty technology solutions to further complement our portfolio with diverse product applications.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
As for the margin, certainly, we hope it's an enhancement to our corporate average, but it largely depends on the capacity utilization rate. And by structure, there's limited depreciation cost item in the COGS. But the overall US manufacturing probably will both higher manufacturing costs than the manufacturing in Taiwan. So these two factors will need to see how to offset each other.
So there's still many variables we have to wait until closer to 2027.
Gokul Hariharan - JPMorgan - Analyst
Got it. And the capacity allocated into this arrangement, is that largely a static capacity that Intel has already allocated? Because obviously, they have a lot of capacity on 14-nanometer given that was a full node for Intel, right? So they probably have quite a bit of capacity even after some of the conversion. So is that a static allocation?
Or is it something that is dynamic depending upon how demand goes?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
I will say it's more dynamic. However, it definitely need a certain economy of scale to start with and depends on how customer adoption for this technology and this collaboration. Certainly, we believe there could be upside if the market adoption is more than expectation.
Gokul Hariharan - JPMorgan - Analyst
Got it, yes, thank you very much.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Thank you.
Operator
Felix Pan, KGI.
Felix Pan - KGI - Analyst
Hi, good afternoon. There are two questions from me. First of all, still on the semiconductor tariff potentially. I just want to double confirm, I think a couple of months ago, I think TSMC made a statement that customers should take care of the tariff things. I just wonder is that UMC also holding this kind of a view if that the tariff on semiconductor in place? That's my first question.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
So I cannot comment on our competitor. And I also mentioned earlier, UMC will adopt a very transparent cooperation alignment with our customers to cope with this potential tariff issues. So that's our thing. So how to deal with this possible potential tariff together with our customers is our key approach.
Felix Pan - KGI - Analyst
Okay. So can I -- so that means you don't rule out the possibility that foundry also have to bear the cost at some degree if that's in place? Is that right?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
It's not what I said, no. What I said is we will cooperate with our customers in a very transparent environment and collaboratively to deal with this tariff issue.
Felix Pan - KGI - Analyst
Okay. Okay. Understood. The second question, I understood that the visibility for second half is still unclear. And I think besides the demand profile, can you just share a little bit if the up cycle -- if the -- potentially the down cycle is coming, assuming that, how you see the inventory level across the different applications from your perspective?
David Wong - United Microelectronics Corp - Investor Relations Manager
Okay. So as far as the inventory goes, the current days of inventory remain similar to first quarter 2025. In terms of applications, the DOI as well as the inventory for consumer electronics remain at a healthy level. However, days of inventory for Automotive and Industrial segments remains relatively high, and we expect that will take more time to digest. So obviously, we will continue to carefully monitor the ongoing impact of the tariff policy.
And it has obviously created a very challenging environment in the semiconductor supply chain.
Felix Pan - KGI - Analyst
Okay. Can I just have a quick follow-up on that. I understood different from other cycle, currently, besides the auto, every all the application at a healthy level. But because of the 90 days -- the 90-day post for the tariff thing. So do you see the inventory like -- how likely to elevate in second quarter?
Do you think this play like that and how serious for the inventory pop up?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Mentioned that there's not much so-called net-net impact from the tariff rush order yet in the second quarter. So it should translate to a normal inventory for the coming quarter. However, again, the second half visibility is very, very limited. So anything using the current data to assume may change overnight. So it's very difficult for us to give a comment on that.
Felix Pan - KGI - Analyst
Okay. Yes, thank you.
David Wong - United Microelectronics Corp - Investor Relations Manager
Thank you.
Operator
Jason Zhang, CLSA.
Jason Zhang - CLSA - Analyst
Thank you for taking my questions. My first question is in terms of the advanced packaging. I think previously, you mentioned that UMC probably is moving -- will move into the advanced packaging market. So can you provide us more details or long-term plan in terms of this new area? And I also saw the news or rumors suggest that UMC is cooperating with US clients such as Qualcomm. So wondering if you can provide more details in terms of this new applications.
Thank you.
David Wong - United Microelectronics Corp - Investor Relations Manager
All right, thanks, Jason. Obviously, we can't really comment on specific customers. But as far as packaging-wise goes for -- we're very, very excited about our customer engagements in 3D wafer-to-wafer segments that encompasses RF front-end modules. also for sensor memory as well as logic, we've gotten the requirements, and they're actually picking up in terms of engagements.
As far as 2.5D Interposer, we have seen that the projects for -- HPC-related projects for interposers as well as a deep trench capacitor, these requirements have also continued to grow. So we expect that obviously will be a trend to come, and we will definitely prepare ourselves to accommodate these emerging trends.
Jason Zhang - CLSA - Analyst
Got it. So how is the contribution do you expect in the future if those kind of projects can start meaningful shipments or volumes in this year or in the future? Thank you.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
This is still in a very early stage. So we don't expect to see significant revenue contribution in 2025.
Jason Zhang - CLSA - Analyst
Got it. So my second question is in terms of the demand side. I think your competitor in China also suggests that there's a very solid growth momentum on demand side and their utilization rate has a meaningful improvement since second half last year. So -- and you also gave a very solid growth in Q2.
So can we assume that there's structural improvements or recovery or growth in mature node? And/or do we see a lower competition from Chinese players because of this kind of recovery or improvement? And looking into the future, if this kind of demand can further increase. I mean, can our selling price or gross margin can be driven by this kind of meaningful growth? Yes. So I wonder if you can give us more color on this. Thank you.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Yes, I wish I could jump into that conclusion. I mean that would be great. But unfortunately, that's not what we see right now. What we are seeing is really for the first quarter and the second quarter guidance, we are a little bit ahead of year -- beginning of the year guidance. So it's doing slightly better, but not too much.
And the increasing geopolitical tensions and the potential tariffs certainly shadow the second half and visibility has become very unclear for the second half. So we cannot jump into the conclusion you mentioned. Although UMC continue to focus on the differentiated technology in order to cope with the upcoming new competitors. And our 22/28 platform is crucial for UMC strategy to move away from the commodity type of market. And we have probably the most competitive solution in 22/28 EHV, which has enabled UMC to become the leader in OLED display market.
In addition, our 22 ultra-low-power and 22 ultra-low-leakage technology, these offerings deliver 30% to 50% power savings compared to standard 28-nanometer nodes. And it's ideal for IoT device wearables and AI application. So all this plus our diversified manufacturing location, we believe we are in a unique position to find out those potential commodity capacity no matter where you're located. So we are confident about our strategic position. So hopefully, that answers your questions.
Jason Zhang - CLSA - Analyst
Understood. Thank you. I have no more question back to queue.
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Thank you.
Operator
And ladies and gentlemen, we are going to take the last question. And the last one, Ted Lin, HSBC.
Ted Lin - HSBC - Analyst
Hi, thank you for taking my question.
So my question is with the ongoing tension between U.S. and China, do you foresee any potential impact to your China fab? Like for example, like foreign -- are you expecting your foreign customers to reallocate their orders from your China facility to maybe outside of China, such as Singapore or Japan or even Taiwan? And do you foresee your customer -- localized customer to maybe reallocate -- also allocate their orders to domestic China foundry?
Chi-Tung Liu - United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
First of all, in order to mitigate the geopolitical tension, what we can do is, first, to 100% following the law. So no matter if export control for any of the local compliance requirements, UMC devotes all the resources to meet the compliance and the export control requirements. So we're following every rule out there. There's no gray area for that. And secondly, we are happy with our geographically diversified production base because you never know at what point of the time there will be requirement for customers to move around their production.
In fact, our China fab today is actually enjoying higher than corporate average loading. And we're certainly also seeing customers need to see more capacity available in our Singapore, Taiwan or Japan fab. So all we can do is really try to be as diversified as possible and make sure all these fabs can support each other in many of our major technology and offerings. That's what we can do.
Ted Lin - HSBC - Analyst
Okay, thank you. That's all I have.
Operator
And ladies and gentlemen, we thank you for your questions. That concludes today's Q&A session. And I'll turn things over to UMC IR Manager for closing remarks. David, please.
David Wong - United Microelectronics Corp - Investor Relations Manager
Thank you, everyone, for joining us today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact UMC at [email protected]. Have a good day.
Operator
Thank you. And ladies and gentlemen, that concludes our conference for first quarter '25. We thank you for your participation in UMC's conference. There will be a webcast replay within 1 hour. Please visit www.umc.com under the Investors Events section.
You may now disconnect. Thank you, and goodbye.
Call participants:
Corporate ParticipantsDavid Wong, United Microelectronics Corp - Investor Relations Manager
Chi-Tung Liu, United Microelectronics Corp - Chief Financial Officer, Senior Deputy General Manager
Conference Call Participants
Sunny Lin, UBS - Analyst
Laura Chen, Citi - Analyst
Brad Lin, Bank of America Securities - Analyst
Charlie Chan, Morgan Stanley - Analyst
Gokul Hariharan, JPMorgan - Analyst
Felix Pan, KGI - Analyst
Jason Zhang, CLSA - Analyst
Ted Lin, HSBC - Analyst
Refinitiv StreetEvents Transcript
Q1 2025 United Microelectronics Corp Earnings Call
Apr 23, 2025 / 09:00AM GMT
