United Microelectronics Q1 2025 Earnings Report

United Microelectronics EPS Results

• Actual EPS: $0.09
• Consensus EPS: $0.10
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.13

United Microelectronics Revenue Results

• Actual Revenue: $1.78 billion
• Expected Revenue: $57.63 billion
• Beat/Miss: Missed by -$55.85 billion
• YoY Revenue Growth: +1.90%

United Microelectronics Announcement Details

• Quarter: Q1 2025
• Date: 4/23/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, April 23, 2025
• Conference Call Time: 5:00AM ET

United Microelectronics (NYSE:UMC) operates as a semiconductor wafer foundry in Taiwan, China, Hong Kong, Japan, Korea, the United States, Europe, and internationally. The company provides circuit design, mask tooling, wafer fabrication, and assembly and testing services. It serves fabless design companies and integrated device manufacturers. United Microelectronics Corporation was incorporated in 1980 and is headquartered in Hsinchu City, Taiwan.

United Microelectronics Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1, wafer shipments were flat sequentially and up 12% YoY, with consolidated revenue of NT$57.85 billion, a 26.7% gross margin, net income of NT$7.78 billion and EPS of NT$0.62, though net income declined 25% YoY.
• For Q2, the company guides 5–7% wafer shipment growth sequentially, USD ASPs flat, gross margin rising to ~30% and capacity utilization recovering to the mid-70% range.
• 22 nm and 28 nm nodes reached a record 37% of Q1 revenue—driven by OLED display drivers, ISPs, DTV, Wi-Fi and audio codecs—with 22 nm revenues up 46% QoQ and 53% of total revenue coming from 40 nm and below.
• The new Singapore Phase III fab was inaugurated to add 22 nm capacity, supporting volume production in early 2026 and strengthening geographic diversification for supply-chain resilience.
• Management cautioned that second-half demand visibility is limited due to geopolitical and tariff risks, and is working closely with customers on risk mitigation, technology differentiation and cost-reduction plans.

Presentation

[Operator]

Welcome everyone to UMC's twenty twenty five First Quarter Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at that time if you would like to ask the question. For your information, this conference call is now being broadcasted live over the Internet.

[Operator]

Webcast replay will be available within an hour after the conference has 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, IR Manager at United Microelectronics]

Welcome to UMC's conference call for the first quarter of twenty twenty five. I'm joined by Mr. Qi Dong Liu, CFO of UMC and Mr. Michael Lin, Senior Director of Finance. Because President Wong is absent due to urgent personal matter.

[David Wong, IR Manager at United Microelectronics]

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 twenty twenty five guidance. After our CFO's remarks, there will be a Q and A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors, Financials 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.

[David Wong, IR Manager at United Microelectronics]

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 Dong Liu, to discuss UMC's first quarter twenty twenty five financial results.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Thank you, David. I'd like to go through the first quarter twenty twenty five investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page four. The first quarter of twenty twenty five, consolidated revenue was billion dollars with gross margin at around 26.7%. Net income attributable to the stockholder of the parent was NT7.78 billion dollars and earnings per ordinary share were NT0.62 dollars Wafer shipment was flat sequentially compared to the previous quarter.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

However, it was up 12% year over year for the same period of 2024. On Page five, on the sequential comparison, wafer revenue declined 4.2% sequentially to 57,850,000,000.00, 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 holiday. It went down to 26.7% or billion dollars and we expect to see margin recovery in the coming quarter. Operating expenses is under control, represent about 10.6% of the total revenue of billion dollars That gives us the overall operating income around NT9.7 billion dollars or 15.9 percentage points.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

In terms of non operating income, due to the weakness in the stock market, we have some losses coming from mark to market investment valuation, which is around $439,000,000 loss. Total net income attributable to the shareholders of the parent in Q1 twenty twenty five was million dollars or EPS of NT0.62 dollars in Q1 twenty twenty five. 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 it's offset by the ASP decline.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 remain over 100,000,000,000, it's about 106,000,000,000 at the March '31. Our total equity now reached billion dollars at the end of Q1 twenty twenty five. On Page six, this routine beginning of the year one off price adjustment, which represents actually contribute to most of the revenue decline in Q1 of twenty twenty five.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 reached around 56% 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 twenty twenty five.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

And consumer segment is the strongest in Q1, mainly driven by WiFi, DTV, set up of 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 nanometer and 28 nanometer revenue account for 37% of the total revenue breakdown. In Q1, there was some disruption from earthquake, but mainly there's also annual maintenance schedule. So capacity in Q1 was lower.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

And for quarter two, we see the back to normal capacity as well as some minor increase coming out of our Singapore fabs due to the ramp is starting. On Page 14, our twenty twenty five CapEx remain unchanged at US1.8 billion dollars So this above is the summary of UMC financial results for Q1 twenty twenty five. Next, I would like to share our key message. So 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. So our results in the first quarter were in line with our previous guidance with flattish wafer shipment and onetime pricing adjustment at the beginning of the year to reflect market conditions.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

First quarter highlights include 22 nanometer, 28 nanometer revenue, keeping a record high, representing 37 of the total sales. That was driven by a 46% quarter over quarter increase in 22 nanometer revenue from products such as OLED display driver IC, ISPs as well as digital TV, WiFi and audio codec chips. We expect customer to take out additional 22 nanometer products 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 III fab, which provide additional 22 nanometer capacity to support future growth. Tailor rounds are underway and is on schedule to ramp up to volume production in early twenty twenty six.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 dollars 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 policy and markets are still adjusting to the recent tariff announcement. To navigate this challenging environment, we are working closely with customers to monitor trends in end market demand.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

We also strengthened our competitive advantage by focusing on execution of key technology products such as the 12 nanometer collaboration with U. S. Partners and ensuring our customer have access to geographically diverse manufacturing options. In addition, we are implementing cost reduction plans and accelerating AI and intelligent manufacturing system to enhance operational efficiency. Through these key focuses, we are confident that UMC can maintain our financial and business resilience.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Now let's move on to the second quarter of twenty twenty five guidance. Wafer shipment will increase by 5% to 7% sequentially. ASP in U. S. Dollar terms will remain flat.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Gross margin will be back to approximately 30%. And capacity utilization rate will also recover to the around mid-seventy percent range. And as I mentioned earlier, the CapEx cash based CapEx will remain unchanged at about USD 1,800,000,000.0. That concludes our remarks. Thank you for thank you all for your attention. And now we are ready for questions.

[Operator]

Thank you,

[Operator]

If you a question for any of today's speakers, please press star one on your telephone keypad and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, And our first question will be coming from Sunny Lin, UBS. Go ahead please.

[Sunny Lin, Analyst at UBS Group]

Thank you very much for taking my questions. So my first question, 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 doesn't like you are having a good recovery for Q2 sales.

[Sunny Lin, Analyst at UBS Group]

How much of that is driven by the pulling orders due to tariff?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Okay. So UMC collaborate closely with customers for technology and product qualification across multiple fabs, reducing forgers to site specific risks and ensuring supply chain resilience. We adopt a forward looking approach to mitigate business risk, including a geographically diversified manufacturing footprint. And by 2027, we will have manufacturing base for our most advanced available technology in The U. S.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

UMC also has a healthy financial structure to navigate through macro uncertainties. And although the escalating trade tensions and global tariff policies have increased uncertainty in the semi industry, and we have not seen market demand change in the very near term, I. E, quarter two twenty twenty five yet. Of course, visibility in the second half is becoming very limited. And longer term, customer may decouple their internal manufacturing options and explore external wafer sourcing options.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

UMC's strategic positioning, focusing on technology differentiation, global manufacturing diversification, product mix optimization and manufacturing i7. So I think in short, there's very little change we observed for the second quarter. However, if you include our Q1 results plus our quarter two guidance, we think we are slightly ahead our expectation at the beginning of the year. And that will give us some buffer for the uncertainty, the increasing uncertainty in the second half.

[Sunny Lin, Analyst at UBS Group]

Got it. Thank you very much, Jidong. So basically, you are seeing the growth in Q2 is not so much driven by pulling just a little bit. And so in that case, should we be less concerned about meaningful drop off going to second half because they are not much being pulling?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

There's not that much put in, you are correct, for quarter two. There's some customer who are finalizing and they want to take some precautionary actions. But there are some customers doing the opposite. So net net impact for quarter two is very limited. So but again, we cannot really see through second half.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

And all we are seeing right now doesn't really suggest there will be a shortfall in the coming quarters.

[Sunny Lin, Analyst at UBS Group]

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 trips 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 will need to share the cost to some extent?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 customer away from low entry barrier market.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

And despite the pricing pressure, 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, Analyst at UBS Group]

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 twenty eight and twenty two nanometer cells, let's say, going to second half of twenty twenty five?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

First of all, our guidance for second quarter is mid-seventy for the company as a whole. Of course, 12 inches is higher than corporate average and eight inches is below corporate average. So non-twelve, I would say twenty two-twenty eight is the better sector, is 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

And that will be a key growth driver for UMC's twenty twenty five growth. So I hope that answers your question.

[Sunny Lin, Analyst at UBS Group]

That's very helpful. So mid teen percentage, that's in terms of total sales, correct?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

That's correct.

[Sunny Lin, Analyst at UBS Group]

Thank you very much. And then maybe my last question. And so on this partnership with Intel on 12 nanometer, what's the latest update that you could provide us? And will it be possible that we see an earlier production in 2026? And I guess, lately, given the maybe rising reshoring interest in The U.

[Sunny Lin, Analyst at UBS Group]

S, are you seeing much stronger demand for these collaborations?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Maybe Michael can answer the question. Sure.

[Michael Lin, Investor Relations & UMC Acting Spokesperson at United Microelectronics]

Joint development 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.

[Michael Lin, Investor Relations & UMC Acting Spokesperson at United Microelectronics]

Right now, we are porting the process technology in Arizona fab and so far the progress is on track.

[Sunny Lin, Analyst at UBS Group]

Got it. And so basically, sales contribution, you guys still from 2027?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Yes.

[Sunny Lin, Analyst at UBS Group]

Got it. Thank you very much.

[Operator]

Thank you. Thank you. Next one, Laura Chen, Citi. Go ahead please.

[Laura Chen, Research Analyst at Citigroup Global Markets Inc.]

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's, would you any have any opportunities to work with other IDNs in The United States?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

We have plenty of U. S.-based IDM customers 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So we do have other IBM customers in The U. S. Working closely with UMC. But of course, the current stage, the most important project is this 12 nanometer U. S. Footprint collaboration with this U. S. Partner.

[Laura Chen, Research Analyst at Citigroup Global Markets Inc.]

Understood. Because previously, I also have the news. I understand that management already kind of denied. But I'm just wondering, other than our current clients in The U. S.

[Laura Chen, Research Analyst at Citigroup Global Markets Inc.]

IDMs, is there any chance we can also work with GlobalFoundry on some sort of like a joint venture or a cooperation, any type of the cooperation?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 shareholder value. Anything can help to increase our competitiveness as well as the shareholder value, we will certainly look into that. And currently, there's no ongoing so called demerger activity right now.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So again, we have to say that there's no merger ongoing right now. But it doesn't have to be merged. There are many other collaborations we can still pursue to enhance shareholders' value and returns. That is our mandate. We are continuing to explore all different kind of options.

[Laura Chen, Research Analyst at Citigroup Global Markets Inc.]

Yes, certainly. My second question is about the margin. Obviously, into Q2, even though there's a lot of macro uncertainty, 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 onetime pricing adjustment back in Q1 as the overall demand seems to back to no more. So I'm just wondering what's our view on the overall gross margin trends going forward?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Unfortunately, we mentioned the second half, the visibility becomes very limited with a lot of increasing uncertainty. 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 possibility is largely dependent on product mix, pricing, utilization rate and ForEx movement and COGS. We have taken several initiatives to enhance our possibilities that include business engagement, technology differentiation, driving the efficiency in operations and improving our CapEx efficiency to manage the depreciation impact.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So current gross margin level reflects Q1 twenty twenty five onetime 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, 20 eight wafer shipment and drive the efficiencies in operation when our EBITDA margin can still remain intact.

[Laura Chen, Research Analyst at Citigroup Global Markets Inc.]

Okay. That's very fair. Thank you very much.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Thank you.

[Operator]

Next one, Brett Lin, Bank of America Securities. Go ahead please.

[Brad Lin, Director at Bank of America Merrill Lynch]

Thank you for taking my question. Congrats on the well solid 1Q results and also the bright second quarter guidance. I have two questions. The first question will 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, SVP & CFO at United Microelectronics]

So I think we do see customer increasing customer appreciation to UMC's regionally diverse manufacturing base. So for various reasons, customer 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 U. S. Capacities, I think our customer appreciate even more recently with the option we can offer.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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, Director at Bank of America Merrill Lynch]

Thank you very much. That's very clear. But a follow-up question on that is that what time do we expect to see so called meaningful contribution from this kind of impact?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So far, it's very difficult to quantify. But for our Singapore fab, probably the best example that the PP3 is going to volume production in early twenty twenty six. And I think it's becoming a very pursuit after location 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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, Director at Bank of America Merrill Lynch]

Got it. Thank you very much. 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.

[Brad Lin, Director at Bank of America Merrill Lynch]

So could you also provide insight into the demand trend 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 the patterns recently compared to our last earnings call? Thank you.

[David Wong, IR Manager at United Microelectronics]

Yes. For Q1, consumer segment grew, as our CFO alluded to, driven by WiFi, DTV, set up box and driver IC. But all the other segments, systems 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.

[David Wong, IR Manager at United Microelectronics]

For computing segments, we expect that growth will be driven by flash controller IC. For communication, it will be increased from ISP, networking, flash controller as well as Wi Fi. For consumer, overall growth due to continuous growth from DTV and set up box. And last, but for automotive, we expect that segment to be flattish looking for Q2.

[Brad Lin, Director at Bank of America Merrill Lynch]

Should we expect any meaningful recovery from this auto industry, which seems to be relatively softer for a while?

[David Wong, IR Manager at United Microelectronics]

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, Director at Bank of America Merrill Lynch]

Got it. Thank you very much.

[Operator]

Thank you. Next one, Charlie Chan, Morgan Stanley. Go ahead please.

[Charlie Chan, Analyst at Morgan Stanley]

Thanks for taking my question. So 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-twenty and 2Q kind of hit 30%, I mean, there's some pricing pressure. Can you share with us some more color about which parts are doing better, no matter pricing or cost or just a kind of FX impact, so you can deliver better gross margin? Thank you.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Well, thank you for saying that 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 operation, manage supply chain pricing and drive automation transformation.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So this measure kind of help us to offset or at least partially about those cost headwinds, bringing 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So pursuing a better gross margin is the end of the mandate for management team. We hope we can do better.

[Charlie Chan, Analyst at Morgan Stanley]

Sure. Yeah. Thanks for the comment, and I hope you can keep it up. And second question is about your kind of 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 to be for their ships to be produced in The U.

[Charlie Chan, Analyst at Morgan Stanley]

S. I know you have planned a schedule for the 12 nanometer in The U. S. But I'm just curious whether you are receiving a similar request that hope you can speed up?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 roadmap. So yes, the pressure is there.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

We understand that and we received inquiries from our, so called the early adopt customers. That's why we are under the pressure, try to expedite the whole process. But it's already a very aggressive process, I mean, timeline. So it's also the first time we cooperate, 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So again, this is a pressure and wish to do so. But in reality, so far, we are on track with our planned schedule.

[Charlie Chan, Analyst at Morgan Stanley]

Got you. So yeah. Thanks. Thanks for for that answer. So besides the the hope for for you to accelerate the the the the plan, do you also see some desire for you to even kind of reach out to more advanced nodes?

[Charlie Chan, Analyst at Morgan Stanley]

Because I know you need to plan ahead. Right? Maybe three to four years if you want to further migrate to below 12 nanometer. I ask these questions because that your industry already officially denied their future partnership with the USF, which is Intel. So I'm not sure if that gives you more room or your concerns you wish you to migrate to the more advanced nodes that would adopt EUV.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So if you are using the market story as a background for this question, I have to be extremely careful, right? In that case, the answer is no. So we are only focusing on the current node, which is 12 nanometer. And that's the both companies decided and there's a contract between two companies to execute this 12 nanometer collaboration. For UMC alone, of course, I can speak for UMC, we appreciate this collaboration with our U.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

S. Partner. And we offer our foundry know how and the bulk of the technology structure. U. S.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Partner offer the on-site capacity with very limited depreciation. So we see it's a very innovative mutual benefit collaboration. And certainly, we don't want to be limited to the current node only. However, this only cover 12 nanometer for now.

[Charlie Chan, Analyst at Morgan Stanley]

Okay. That's great answer as well. So the last one, I think a very kind of technical short term question. So I'm sorry, but did you maintain your full year guidance? And is that okay, what the implied half and half seasonality? How much conservative you're baking for second half?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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. Yes, this addressable market should grow around, I mean, low single digit for our addressable market, which we intend and we have declared we're going to outgrow that. Of course, I just said that I mentioned that the first quarter plus the guidance for quarter two 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, Analyst at Morgan Stanley]

So we probably use like single digit, maybe mid single digit as a full year guide and try to calculate the implied second half. Is that the right way to think about narrative on second half?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Yes, let's stick to the qualitative statement that we're trying very hard to outperform our addressable market.

[Charlie Chan, Analyst at Morgan Stanley]

Okay. Okay. Thank you. Yes, I'll be back to the queue. Thank you.

[Operator]

Thank you. Next one, Gokul Hariharan, JPMorgan. Go ahead please.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

Yes. Hi, Chitong, 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?

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

Because it looks like your implied expectation that 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, SVP & CFO at United Microelectronics]

Depreciation increase still high 20% for 2025. Each quarter is 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 two percentage points in Q1 was impact from the earthquake.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So all these factors blended together create the formula for our gross margin, especially in the second half.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

Understood. So is 22, 20 eight combined now higher margin compared to the corporate average already? Or is it still not there yet?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 extra twenty two, twenty eight contribution. So of course, the more the merrier.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

That's fair. Thank you, Tom. 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 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, SVP & CFO at United Microelectronics]

That's definitely dynamic, okay. So the future capacity ramp for TL5 Singapore will be dependent on the alignment with our customer needs. And of course, we have begun to see a pickup in tape out. So that may or may not translate into a pickup in customer demand. But PayPal definitely already see the pickup.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

So it could happen, but current plan still the production ramp, the next production will be in early twenty twenty six.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

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 are seeing adopting this? And secondly, once you start 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, SVP & CFO at United Microelectronics]

Okay. Michael can answer the first question, I can answer the second question. Okay.

[Michael Lin, Investor Relations & UMC Acting Spokesperson at United Microelectronics]

As for now, our key focus are on Wi Fi connectivity and high speed interface SoC products. So in addition to this 12 nanometer large process, we also exploring potential FinFET specialty technology solutions to further complement our portfolio with diverse product applications.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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 COGS. But overall U. S.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Manufacturing probably will both higher manufacturing costs than the manufacturing in Taiwan. So these two factors will need to see how to help offset each other. So there's still many variables. We have to wait until closer to 2027.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

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.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

So is that a static allocation or is it something that is dynamic depending upon how demand goes?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

I will say it's more dynamic. However, it definitely needs certain economy of scale to start with and depends on how customer adoption for this technology and this collaboration certainly will be there could be upside if the market adoption is more than expectation.

[Gokul Hariharan, Managing Director at JP Morgan Chase & Co]

Got it. Thank you very much.

[Operator]

Thank you. Next one, Felix Pan, KGI. Go ahead, please.

[Felix Pan, Executive Vice President at KGI Securities]

Hi, good afternoon. There are two questions from me. First of all, still on the semiconductor tariffs 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 if like UMC also holding this kind of a view if that's the tariff on semiconductor place? That's my second that's my first question.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

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, Executive Vice President at KGI Securities]

Okay. So can I so if that means if you don't rule out the possibility that foundry also have to bear the cost at some degree, is that in place, is that right?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

It's not what I said, no. What I said was we will cooperate with our customers in a very transparent environment and collaboratively to deal with this parent issue.

[Felix Pan, Executive Vice President at KGI Securities]

Okay, understood. Okay, 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 cycle if the essentially the down cycle is coming assuming that how you see the inventory level across the different application from your perspective?

[David Wong, IR Manager at United Microelectronics]

Okay. So as far as the inventory goes, the current days of inventory remain similar to first quarter twenty twenty five. 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 it will take more time to digest. So obviously, we will continue to carefully monitor the ongoing impact of the tariff policies.

[David Wong, IR Manager at United Microelectronics]

And it has obviously created a very challenging environment in the semiconductor supply chain.

[Felix Pan, Executive Vice President at KGI Securities]

Okay. Can I just have a quick follow on that? I understood different from other cycle, currently besides the auto, every auto application at healthy label. But because of the ninety days the ninety day post for the terafrosting, so you see the inventory like how likely to elevate in second quarters? Do you think this the play like that and how serious for the inventory pop up?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Actually, mentioned that there's not much local 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, Executive Vice President at KGI Securities]

Okay. Thank you.

[Operator]

Thank you. Next one, Jason Zhang, CLSA. Go ahead please.

[Jason Zhang, Quant, Eqs Exo & Flow Options at CLSA Limited]

Thank you for taking my questions. My first question is in terms of the advanced packaging. Think, preferably, 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 such as that UMC is cooperating with U.

[Jason Zhang, Quant, Eqs Exo & Flow Options at CLSA Limited]

S. Clients such as Qualcomm. So I wonder if you can provide more details in terms of this new applications. Thank you.

[David Wong, IR Manager at United Microelectronics]

All right. Thanks, Jason. Obviously, we can't really comment on specific customers. But as far as packaging wise goes, we're very, very excited about our customer engagements in three d wafer to wafers 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.

[David Wong, IR Manager at United Microelectronics]

As far as 2.5D interposer, we have seen that the projects for HPC related projects for interposers as well as deep trench capacitor, These requirements also continue 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, Quant, Eqs Exo & Flow Options at CLSA Limited]

Got it. Thank you. So how is the contribution do you expect in the future if those kind of projects can start a meaningful shipments or volumes in this year or in the future? Thank you.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

This is still in a very early stage. So we don't expect to see significant revenue contribution in 2025.

[Jason Zhang, Quant, Eqs Exo & Flow Options at CLSA Limited]

Got it. 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 meaningful improvements since second half last year. So and you also gave a very solid growth in Q2.

[Jason Zhang, Quant, Eqs Exo & Flow Options at CLSA Limited]

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 wondering if you can give us more color on it. Thank you.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

Yes, I wish I could jump into a 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

And the increasing geopolitical tension and the potential tariffs certainly shadow the second half and feasibility 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 2,228 platform is crucial for UMC strategy to move away from the commodity type of market. And we have probably the most competitive solution in 2220A E Hi V, which has enabled UMC to become the leader in OLED display market segment.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

In addition, our 22 ultra low power and 22 ultra low leakage technology, this offering delivers 30% to 50% power savings compared to standard 78 nanometer node. And it's ideal for high IoT device wearables and HAI application. So all this plus our diversified manufacturing location, we believe we are in a unique position to fend off those potential commodity capacity no matter is where you're located. So we are confident about our strategic position. So hopefully, that answers your question.

[Jason Zhang, Quant, Eqs Exo & Flow Options at CLSA Limited]

Understood. Thank you. I have no more questions. Back to queue. Thank you.

[Operator]

You. And ladies and gentlemen, we're going to take the last question. And the last one, Ted Lin, HSBC. Go ahead, please.

[Ted Lin, Equity Research Associate at HSBC]

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 like are you expecting like foreign your foreign customer to reallocate their orders from your China facility to maybe outside of China such as Singapore or Japan or even Taiwan?

[Ted Lin, Equity Research Associate at HSBC]

And do you foresee your customer localized customer to maybe reallocate also allocate their orders to domestic China foundry?

[Chi Tung Liu, SVP & CFO at United Microelectronics]

First of all, in order to mitigate the geopolitical tension, what we can do is first to 100% following the law. So no matter is export control or any of the local compliance requirement, UMC devote all the resources to meet the compliance and the export control requirements. So we're following every rules 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.

[Chi Tung Liu, SVP & CFO at United Microelectronics]

In fact, our China fab today is actually enjoyed higher than corporate average loading. And we 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 facts can support each other in many of our major technology offerings. That's what we can do.

[Ted Lin, Equity Research Associate at HSBC]

Okay. Thank you. That's all I have.

[Operator]

Thank you. And ladies and gentlemen, we thank you for your questions. That concludes today's Q and A session. And I'll turn things over to UMC IR manager for closing remarks. David, please.

[David Wong, IR Manager at United Microelectronics]

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@irumc.com. Have a good day.

[Operator]

Thank you. And ladies and gentlemen, that concludes our conference for first quarter twenty twenty five. We thank you for your participation in UMC's conference. There will be a webcast replay within one hour. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you and goodbye.

Participants

Executives

• David Wong, IR Manager
• Chi Tung Liu, SVP & CFO
• Michael Lin, Investor Relations & UMC Acting Spokesperson

Analysts

• Sunny Lin, Analyst at UBS Group
• Laura Chen, Research Analyst at Citigroup Global Markets Inc.
• Brad Lin, Director at Bank of America Merrill Lynch
• Charlie Chan, Analyst at Morgan Stanley
• Gokul Hariharan, Managing Director at JP Morgan Chase & Co
• Felix Pan, Executive Vice President at KGI Securities
• Jason Zhang, Quant, Eqs Exo & Flow Options at CLSA Limited
• Ted Lin, Equity Research Associate at HSBC