United Microelectronics Corporation (NEW)

Welcome everyone to UMC's 2020 second 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 a question. For your information, this conference call is now being broadcast 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. And now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. And Mr. Lin, please begin.

Thank you and welcome to the UMC Conference Call for the second quarter of 2020. I am joined by Mr. Jason Wong, the President of UMC, and Mr. Chi-Dong Liu, the CFO of UMC. In a moment, we will hear our CFO present the second quarter financial result, followed by our President's key message to address UMC's focus and the third quarter 2020 guidance. Once our President and the CFO complete their remarks, there will be a Q&A section. 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 the 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 this risk, please refer to UMC's filing with the SEC in the U.S. and the ROC security authorities. Now, I would like to introduce UMC CFO, Mr. Chi-Dong Liu, to discuss UMC's second quarter 2020 financial results.

Thank you, Michael. I would like to go through the 2Q20 investor conference presentation material, which can be downloaded from our website. Starting on page 3, the second quarter of 2Q20 consolidated revenue was $44.39 billion NTD. with gross margin at 23.1%. The net income attributable to the stockholder of the parent was $6.68 billion NT, and earnings per ordinary shares were $0.55 NT. Utilization rate in the second quarter improved to 98% from 93% in the previous quarter. On the next page, page four, quarter-over-quarter comparison, revenue grew 5% to $44.3 billion due to the combination of ASP increase as well as the wafer shipment increase. Gross margin, as a result, climbed to 23.1% or 10.25 billion NT, up 26% sequentially. All the operating expenses are under control, and therefore we see OPEX decline slightly by 0.8% quarter over quarter. As a result, operating income jumped 71% quarter over quarter to 5.8 billion NT, with the reverse of our non-operating items from the revaluation of our investment, our net income attributable to the stockholder of the parent in quarter two reached 6.68 billion NT or 15.1% net income margin. EPS was 0.55 in quarter two compared to 0.19 in first quarter of 2020. On page five, the first six months comparison, revenue increased 26% to 86.6 billion NP, partially due to the combination of USJC, which contribute around 10% of the revenue top line. And gross margin was 21.2%, or 18.38 billion NT. And net income attributable to the stockholder of the parent was 8.888 million NT in the first six months of 2020. And EPS is 0.74 for the first two quarters of the year. On the next page, page 6, our cash has reached almost $100 billion NT dollars. And for the total equity in the first half of 2020 was $209 billion NT. On page 7, KSP increased by a low single-digit percentage, mainly due to the surge in our 28 revenue shipments. On page 8, the revenue breakdown, Asia stayed around 55% and Japan also remained around 9%. For page 9, IBM and Fabulous remained unchanged at 12% and 88% respectively. On page 10, communication declined 3 percentage points to 51% and made up by computer and others segments. And on page 11, as I mentioned, ASP increased by low single-digit percentage point, mainly due to the surge in our 28 nanometer shipment, which now reached 13 percent of the total revenue in the second quarter, compared to 9 percent in the previous quarter. And capacity still remained minor increase quarter over quarter, and CAPEX remained at 1 billion US dollars for the whole 2020. So the above is a summary of UMC's results for second quarter of 2020. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wong.