Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- UMC's first quarter 2025 revenue increased by 5.9% year-over-year, driven by a 12% increase in wafer shipments.
- The company inaugurated a new Singapore Phase 3 fab, which will provide additional 22-nanometer capacity, supporting future growth.
- UMC's 22/28-nanometer revenue hit a record high, representing 37% of total sales, with a significant increase in 22-nanometer revenue.
- UMC maintained a strong cash position with over TWD100 billion, providing financial stability.
- The company is implementing cost reduction plans and accelerating AI and intelligent manufacturing systems to enhance operational efficiency.
Negative Points
- UMC experienced a 4.2% sequential decline in wafer revenue due to a one-time price adjustment and an earthquake during the Chinese New Year holidays.
- Net income declined by 25% year-over-year, impacting earnings per share.
- The company faced losses from mark-to-market investments due to stock market weakness, amounting to TWD439 million.
- Visibility for the second half of 2025 is limited due to geopolitical tensions and potential tariff impacts, creating uncertainty in demand projections.
- UMC's automotive segment experienced a decline due to softness in microcontrollers, DDI, and power management, with inventory levels remaining relatively high.
Q & A Highlights
Q: How are tariffs affecting customer order behaviors for Q2 and the second half, and how is that impacting UMC's business planning?
A: Chi-Tung Liu, CFO, explained that UMC collaborates closely with customers to mitigate risks through a geographically diversified manufacturing footprint. While trade tensions and tariffs increase uncertainties, UMC has not observed significant changes in market demand for Q2 2025. However, visibility for the second half remains limited. The growth in Q2 is not significantly driven by pooling orders due to tariffs.
Q: What is UMC's pricing strategy in light of potential tariff impacts on the supply chain?
A: Chi-Tung Liu stated that UMC does not compete purely on pricing but focuses on technology differentiation and manufacturing excellence. UMC aims to work transparently with customers to address any cost increases due to tariffs, ensuring long-term strategic partnerships.
Q: Can you provide an update on the 28-nanometer and 22-nanometer utilization rates and their impact on revenue?
A: Chi-Tung Liu noted that the 22/28-nanometer segment is performing well, representing 37% of total revenue, with 22-nanometer alone contributing more than mid-teens. This segment is a key growth driver for UMC in 2025.
Q: What is the status of UMC's partnership with Intel on 12-nanometer technology, and is there potential for earlier production?
A: An unidentified company representative confirmed that the joint development is on track, with early PDK expected by 2026. UMC is aligning with key customers to expedite ramp-up, with production planned in Arizona.
Q: How is UMC's cooperation with US-based IDMs progressing, and are there opportunities for collaboration beyond Intel?
A: Chi-Tung Liu mentioned that UMC has ongoing collaborations with several US-based IDMs and is open to exploring strategic options to enhance shareholder value. However, there are no current merger activities.
Q: Can we assume Q1 is the trough for gross margin, and what are the expectations for margin trends going forward?
A: Chi-Tung Liu highlighted that while Q1 included a one-time pricing adjustment, visibility for the second half is limited. UMC is focused on improving product mix and operational efficiency to enhance profitability.
Q: Has UMC seen potential upside from North American or IDM customers due to tariff issues?
A: Chi-Tung Liu noted increased customer appreciation for UMC's diverse manufacturing base, which offers flexibility in production locations. However, quantifying the impact is challenging at this stage.
Q: What are the demand trends across key end markets, particularly automotive and industrial segments?
A: David Wong, Investor Relations Manager, stated that while consumer segments grew, automotive demand declined due to high inventory levels. UMC remains cautious about the automotive market's recovery.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
