United Microelectronics Corporation (NEW)

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.