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4/23/2025
Welcome everyone to UMC's 2025 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 the time if you would like to ask the 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. Now, I would like to introduce Mr. David Wong, Investor Relations Manager of UMC. Mr. Wong, please begin.
Welcome to UMC's conference call for the first quarter of 2025. I'm joined by Mr. Shidong Liu, CFO of UMC, and Mr. Michael Lin, Senior Director of Finance, because President Wong is absent due to urgent personal matter. In a moment, our CFO will present first quarter financial results, followed by our key message to address UMC's focus in 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 CFO, Mr. Chi-Dong Liu, to discuss UMC's first quarter 2025 financial results.
Thank you, David. I'd like to go through the first quarter of 2025 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page 4, the first quarter of 2025, consolidated revenue was $57.86 billion NT, with gross margin at around 26.7%. Net income attributable to the stockholder of the parent was 7.78 billion NT, and the earnings per ordinary share was 0.62 NT dollars. Wafer shipment was slagged sequentially compared to the previous quarter. 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 57.85 billion NT, mainly due to this one time price adjustment in the beginning of calendar year. Growth margin was impacted by the lower ASB as well as the earthquake during the Chinese New Year holidays. It went down to 26.7% or 15.4 billion NT 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 6.1 billion NT. That gives us the overall operating income around 9.7 billion NT, or 16.9 percentage points. 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 million NT loss. Total net income attributable to the shareholders of the parent in Q1 2025 was $7.777. million NT or EPS of 0.62 NT dollars in Q1 2025. For the year-over-year comparison, revenue increased by 5.9 percent. This is mainly due to the wafer shipment increase, as I mentioned earlier, around 12 percent. But it's offset by the ASP decline. And for the net income comparison, we see a 25 percent year-over-year decline. And therefore, EPS also was lower. In the same magnitude. On this page, cash position still remain over 100 billion NT. It's about 106 billion NT dollars at the end of March 31st. Our total equity now reached 390 billion NT dollars at the end of Q1 2025. On page 6, this routine, beginning of the year, one-off price adjustment, which actually contributed 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. is now reached 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 2025. And consumer segment is the strongest in Q1 mainly driven by Wi-Fi, DTV, and DDI. And communication and computers didn't really change that much. And we're happy to see our 40 nanometer and below revenue now is over 50% of our total revenue, now reached 53% in Q1, when 22 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. And for Q2, we see the back-to-normal capacity as well, some mild increase coming out of our Singapore FAFSA. due to the ramp is starting. On page 14, our 2025 KPACs remain unchanged at 1.8 billion US dollars. So this above is the summary of UMBC financial results for Q1 2025. Next, I would like to share our key messages. 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 flat-ish wafer shipment and one-time pricing adjustment at the beginning of the year, to reflect market conditions. First quarter highlight includes 22, 28 nanometer revenue hitting a record high, representing 37 of the total sales. It 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, Wi-Fi, and audio codec chips. We expect customers to take out additional 22nm products in the coming quarters, as customers increasingly migrate to our 22nm logic and specialty platforms for next-generation applications. Earlier this month, we also officially inaugurated our new Singapore Phase 3 effect, which provide additional 22 nanometer capacity to support future growth. Tyler rounds 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 2.85 NT per share, which is subject to approval 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 market 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. We also strengthen our competitive advantage by focusing on execution of key technology products, such as the 12 nanometer collaboration with U.S. 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. Welfare treatment will increase by 5% to 7% sequentially. ASP in U.S. dollar terms will remain flat. Growth margin will be back to approximately 30%. And capacity utilization rate will also recover to the around mid-70s range. As I mentioned earlier, the cash-based CAPEX will remain unchanged at about $1.8 billion. That concludes our remarks. Thank you all for your attention. And now we are ready for questions.
Thank you, Chi Dong. And ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star 1 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, please press star 2 to cancel the question. Now please press start key number one on your keypad if you would like to ask the question. Thank you. And our first question will be coming from Sunny Lin, UBS. Go ahead, please.
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 are having a good recovery for Q2 sales. How much of that is driven by the pulling orders due to tariff?
Okay, so UMC collaborates closely with customers for technology and product qualification across multiple facts, reducing exposures 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. UMC also has a healthy financial structure to navigate through macro uncertainties. And although the escalating trade tensions and global tariff policies have increased uncertainties in the semi-industry, and we have not seen market demand change in a very near term, i.e., quarter to 2025 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. And UMC's strategic position focusing on technology differentiation, global manufacturing diversification, product mix optimization, and manufacturing excellence. 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 increase in uncertainty in the second half.
Got it. Thank you very much, Jidong. So basically, you are saying 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 there's not much being pulled in?
There's not that much pulling, you are correct, for quarter two. 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 two is very limited. So, but again, we can now really see through second half. And all we are seeing right now doesn't really suggest there will be a shortfall in the coming quarters.
Got it. Thank you. My follow-up question on tariffs is in terms of the potential disruptions about the supply chain on the pricing side. And so if tariffs are put 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.
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. And beside the fighting pressures, UMC remain committed to deliver differential technology and ensuring our customer 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 or the cost increase through tariffs, we believe we will co-work with our customers to come up with a solution.
Got it. Then I have a question on 28 nanometer. roughly uh 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 cells let's say going to second half of 2025 first of all our guidance for second quarter is mid 70 for the company as a whole and 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, is not the best sector. And right now, 22 and 28 represent 37 percent of our total revenue. And 2022 alone, I would say, is more than meeting and continue to increase. And that will be a key growth driver for UMC's 2025 growth. So I hope that answers your question.
That's very helpful. So meeting percentage, that's in terms of total sales, correct?
That's correct.
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 US, are you seeing much stronger demand for these collaborations?
Maybe Michael can answer the question.
Sure. The 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 customers by 2026 as planned. In fact, we have been aligning with key customers on the device spec to speed up the rainbow as quickly as possible. Right now, we are putting the process technology in Arizona Fed, and so far, the progress is on track.
Got it. And so, basically, sales contribution, you guys still from 2027? Yes. Got it. Thank you very much. Thank you.
Thank you. Next one, Laura Chen, Citi. Go ahead, please.
Hi, thank you very much for taking my questions. I also want to know more about your U.S. cooperation. If only Intel, other than Intel, would you have any opportunity to work with other IDMs in the United States?
We have plenty of U.S.-based IDM customers consistently among our top customers. And I think I don't need to mention their names, but you definitely know who they are. So from time to time we have JDPs. We have capacity support. that will continue to be our strategic collaboration going forward. So we do have other IDM 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 these U.S. partners.
Understood. Because previously I also have the news, I understand that management already kind of denied, but I'm just wondering, like, other than our current clients in the U.S., IDMs, is there any chance we can also work with Global Foundry on some sort of, like, a joint venture or a cooperation, any type of the cooperation?
I think... I don't want to comment on market rumors. I think for an issue like this, it's so sensitive and important. It has to come from the official announcement from any company involved. But I think, 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's 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. It doesn't have to be merchant. There are many other collaborations we can still pursue to enhance shareholders' value and returns. That is our mandate, and we are continuing to explore all different kinds of options.
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 iteration rate improvement and also the growth margin back to 30%. So can we kind of assume that Q1 is the trial for the growth margin since we have the one-time pricing adjustment back in Q1 as the overall price? demand seems back to no more. So I'm just wondering what's our view on the overall growth margin trends going forward?
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 possibilities largely depend 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 CAPAC efficiency to manage the depreciation impact. So 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 shipment and drive the efficiency in operation when our EBITDA margin can still remain intact.
Okay, that's very fair. Thank you very much.
Thank you.
Next one, Brett Ling, Bank of America Securities. Go ahead, please.
Thank you for taking my question. I congratulate on the well solid 1Q result 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.
I think we do see 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 US capacities, I think our customers appreciate it 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.
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?
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 location for its less impacted geopolitical tension. So certainly, if there is any demand, we see 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 thickness for the longer term.
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, in market demand, so could you also provide insights into the demand trends across the key 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 other patterns recently compared to our last earnest call? Thank you.
For Q1, consumer segment grew, as our CFO alluded to, driven by Wi-Fi, DTV, Setup Box, and Driver IC. All the other segments such as communication remain relatively flat, and we saw computing kind of decline due to a softer demand in I.O. 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, it will be increased from ISP, networking, flash controller, as well as Wi-Fi. For consumer, it will grow 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.
Should we expect any meaningful recovery from this auto industry, which seems to be relatively softer for a while?
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 remain in a more conservative tone for the auto market.
Got it. Thank you very much.
Thank you. Next one, Charlie Chan, Morgan Stanley.
Go ahead, please. Thank you for taking my question. 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 the 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, no matter pricing or cost, or just a kind of impact so you can deliver a better gross margin?
Thank you. Well, thank you for saying that's better. Personally, I don't think it's better. We never feel enough to pursue a better growth 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-soft, 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. In the beginning of the call, we mentioned that Q1, Q2 is slightly ahead of our expectations compared to the guidance we gave for the beginning of the year. But that kind of only gave us the buffer. Hopefully, it's enough for the increasing uncertainty for the second half. So pursuing a better gross margin is the analyst's mandate for management team. We hope we can do better.
Sure, yeah. Thanks for the comment, and I hope you can keep it up. And second question is about your partnership with Intel in the US. So just out of curiosity, do you receive some requests that some of your customers want you to accelerate that U.S. operation with Intel because it seems like you're a foundry peer, right? Seems to receive a similar request and even some customers are willing to pay higher with a price for their chips to be produced in the U.S. I know you have a planned schedule for the 12 nanometer in the U.S., but I'm just curious whether you are receiving similar requests that hope you can speed up?
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. We understand that and we received inquiries from our or call the early adopters. That's why we are under the pressure to expedite the whole process. But it's already a very aggressive process. I mean, timeline. So it's also the first time we collaborate with our partners. And there's also many tasks that need to be solved before we can even try to catch up with our aggressive timeline. So, again, this is a pressure and wish to do so, but in reality, so far, we are on track with our planned schedule.
Gotcha. So, yeah, thanks for that answer. So besides the hope for you to accelerate the 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 three to four years if you want to further migrate to below 12 nanometer. I ask these questions because your industry already officially denied their future partnership with the USFAP. which is Intel. So I'm not sure if that gives you more room or your customers wish you to migrate to the more advanced nodes that would adopt EUV.
So if you are using the market story as a background for this question, I have to be extremely careful, right? So in that case, the answer is no. So We are only focusing on the current node, which is 12 nanometers. And both companies decided, and there's a contract between two companies to execute this 12 nanometer collaboration. And for UMC alone, of course I can speak for UMC, we appreciate this collaboration with our U.S. partners. And we offer our country know-how. and the bulk of the technology structure. U.S. partner offer the onsite 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 note only. However, this only cover 12 nanometer for now.
Okay, that's a great answer as well. 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 if that's the case, what does it imply, half and half sustainability? How much conservative are you begging for second half?
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 team 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 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.
So we probably use like... single-digit, maybe meet single-digit as a four-year guide and try to calculate or imply the second half. Is that the right way to think about your narrative on second half?
Yeah, let's stick to the qualitative statement that we're trying very hard to outperform our stressful market.
Okay, okay. Thank you. Yeah, I'll be back to the queue. Thank you.
Thank you. Next one, Goku Harihalan, JP Morgan. Go ahead, please.
Yeah, hi. Hi, Chitong, David, and Michael. My first question is on margin. I think you 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 flourished, 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.
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. That's one out. So if you add back that 2%, the increase is more mild for the second half. And again, we are very sensitive to flooding. 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 the loading. So, of course, we continue to try to enrich our product mix by having more 22 nanometers. So, all these factors blended together create the formula for course margin, especially in the second half.
Understood. So is 2228 combined now higher margin compared to the corporate average already, or is it still not there yet?
If you exclude the new depreciation out of Tainan P6 and Singapore P3, of course it is. But if you include that, I'm not so sure. It may not be the case. But the depreciation is there anyway, without the extra 22, 28 contributions. So of course, the more the merrier.
That's fair. Thanks, Yitong. 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 or interest coming through for the 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?
I think that's definitely dynamics. Okay, so the future capacity rent for 12i Singapore will be dependent on the alignment with our customer needs. And of course, we are beginning to see a pickup in tapers. So that may or may not translate into a pickup in customer demand. But tapers definitely already see the pickup. So it could happen, but the current plan still the production rent, the net production will be early 2026.
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 what is the impact to your margins or EBITDA given the unique kind of arrangement that you have with Intel?
Okay, Michael, to answer the first question, I can answer the second question.
Okay. 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 thin-fat specialty canals solutions to further complement our portfolio with diverse product applications.
As for the margin, certainly we hope it's an enhancement to our corporate average. It largely depends on the capacity utilization rate. And by structure, there's limited depreciation cost item in the COGS. But the overall U.S. manufacturing probably will hold higher manufacturing costs than the manufacturing in Taiwan. So there's two factors we'll need to see how to offset each other. So, there's still many variables. We have to wait until closer to 2095. Male Speaker 1 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 40 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?
I would say it's more dynamic. However, it definitely needs a certain economy or scale to start with and depends on how customer adaption for this technology and this collaboration. Certainly, we believe there could be upside if the market adaption is more than expectation.
Got it. Thank you very much.
Thank you.
Next one, Felix Pan, KGI. Go ahead, please.
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 months ago, I think TSMC made a statement that customers should take care of the tariff things. I just wonder if UMC is also holding this kind of view, if the tariff on semiconductor plays That's my first question.
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 these potential tariff issues. So that's our thing. So how to deal with this problem possible potential tariffs together with our customers is our key approach.
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. Is that in place? Is that right?
It's not what I said, no. What I said was or is we will cooperate with our customers in a very transparent environment and collaboratively to deal with this parent issue.
Okay, 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 potentially the down cycle is coming, assuming that, how you see the inventory level across the different application from your perspective?
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 it will take more time to digest. So obviously, we will continue to carefully monitor the ongoing impact of the tariff policies. And it has obviously created a very challenging environment in the semiconductor supply chain.
Okay. Can I just have a quick follow-up on that? I understood, different from other cycles, currently, besides the auto, all the applications have a healthy label. But because of the 90-day post for the terrorist things, so you see the inventory, how likely to, you know, elevate in second quarters. Do you think the play like that and how serious for the inventory pipe up?
As we mentioned, there's not much so-called net-net impact from the terrorist 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.
OK. Thank you. Thank you. Next one, Jason Zhang, CLSA. Go ahead, please.
Thank you for taking my questions. My first question is in terms of the advanced packaging. I 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.S. clients such as Qualcomm. So I wonder if you can provide more details in terms of this new applications. Thank you.
All right. Thanks, Jason. Obviously, we can't really comment on specific customers. But as far as packaging-wise goes, for Qualcomm, We're very, very excited about our customer engagements in 3D 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. As far as 2.5D interposer, we have seen that the projects for 3D HPC related projects for interposers as well as 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.
Got it. Thank you. So how's 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.
This is still in a very early stage, so we don't expect to see significant revenue contribution in 2025.
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 is a very solid growth momentum on demand side, and their utilization rate has meaningful improvements since second half last year. 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? Or do we see lower competitions 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... Can our selling price or gross margin can be driven by this kind of meaningful growth? Yeah, so I wonder if you can give us more color on it. Thank you.
Yeah, 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 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 continues to focus on the differential technology in order to cope with the upcoming new competitors. And our 2228 platform is crucial for UMC's strategy to move away from the commodity type of market. And we have probably the most competitive solution in 2228e Hy-Vee, which has enabled UMC to become the leader in all-day display market technology. In addition, our 22 ultra-low power and 22 ultra-low leakage technology. This offering delivers 30% to 50% power savings compared to standard 28 nanometer notes. And it's ideal for IoT device wearables and HAI applications. So all this plus our diversified manufacturing locations, we believe we are in a unique position to fend off those potential commodity capacity no matter Where are you located? So we are confident about our strategic position. So hopefully that answers your questions.
Understood. Thank you. I have no more questions. Back to you. Thank you.
Thank you. And ladies and gentlemen, we're going to take the last question. And the last one, Tatling HSBC. Go ahead, please.
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 FAP? For example, are you expecting a foreign customer 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 customers localized customer to maybe reallocate, also allocate their orders to a domestic China country?
First of all, in order to mitigate the geopolitical tension, what we can do is first to 100% following the law. So no matter it's as for 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 productions. 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 fabs can support each other in many of our major technologies and offerings. That's what we can do.
OK.
Thank you. That's all I have. Thank you. And ladies and gentlemen, we thank you for your questions. That concludes today's QA session. And I'll turn things over to UMC IR Manager for closing remarks. Debbie, please.
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 iratumc.com. Have a good day.
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 one hour. Please visit www.umc.com under the investors event section. You may now disconnect. Thank you and goodbye.