United Microelectronics Corporation (NEW)

Welcome everyone to UNC's 2025 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 the time if you would like to ask a question. And for your information this conference call is now being broadcasted live over the internet. Webcast replay will be available within two hours after the conference is finished. Please visit our website .unc.com under the investor relations, investors events section. Now I would like to introduce Mr. Michael Lin, head of investor relations at UNC. Mr. Lin, please begin.

Thank you and welcome to UNC's conference call for the second quarter of 2025. I am joined by Mr. Jason Wang, president of UNC, and Mr. Chih-Tung Liu, the CFO of UNC. In a moment we will hear our CFO present the second quarter financial result, followed by our president's key message to address UNC's focus on third quarter 2025 guidance. Once our president and CFO complete their remarks, there will be a Q&A session. UNC's quarterly financial reports are available at our website .unc.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 more detailed description of these risks and uncertainties, please refer to our recent and subsequent violence with the FCC and the RLC security authorities. During this conference you may view our financial presentation material which is being broadcast right through the Internet. Now I would like to introduce UNC CFO, Mr. Chih-Tung Liu, to discuss UNC's second quarter 2025 financial results.

Thank you, Michael. I'd like to go through the 2Q25 investor conference presentation material which can be downloaded or viewed in real-time from our website. Starting on page 4, second quarter of 2025, consolidate revenue was $58.8 billion NT dollars, with their growth margin at around 28.7%. The net income attributable to the stockholder of preparing was $8.9 billion NT, and earnings per ordinary share was $0.71 NT dollars. Welfare treatment in quarter 2 increased to $957,000, up about .3% quarter over quarter. However, the effective NT dollar exchange rate also appreciated a similar magnitude from 32.89 in Q1 to 30.81 in Q2. And utilization rate increased from 59% in Q1 to 76% in Q2. Revenue as a result increased about .6% sequentially to $58.75 billion NT dollars. Growth margin, as we mentioned earlier, reached .7% or $15.8 billion NT. This is already affecting around 3% of the forex impact, 3% point, in quarter 2. Net income reached $8.8 billion NT, or .1% net income percentage rate. EPS is $0.71 NT dollars in second quarter compared to 0.62 in the previous quarter. On page 6, for first half comparison, net income increased by .7% to $115 billion NT. Growth margin reached .7% compared to .1% in the same period of 2024. Net income attributable to the shareholder of the parent for first half of 2025 was $15.67 billion NT or $1.34 in EPS terms. Cash remained over $100 billion, which is about $111 billion NT at the end of first half of 2025. Total equity for the company is now around $337.04 billion NT. HCI just a little bit in the second quarter, mainly due to the better bottom net. On page 9, for revenue breakdown, there is literally no change on a sequential comparison basis. Euro increased by 20% and Asia reached about 67%. IBM edged up slightly to 19% compared to 18% in the previous quarter. In terms of application breakdown, the changes are also very minor. Consumer went down to 33% by 1% and communication increased by 1% to 41%. Advanced technology revenue continues to increase and now revenue below 40 nm represents more than half of the total revenue, which reached 55% in quarter 2, when 22 and 100 nm represent 40% of the company total revenue. On page 13, the capacity breakdown, we will continue to see some minor capacity increase. For the third quarter, the capacity increase will come from mainly 12x in China. After the first six months, our Paypal budget for year 2025 remains unchanged at an estimate of $1.8 billion. The above is the summary of UMC results for second quarter 2025. 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.

Thank you, Xindong. Good evening, everyone. Here I would like to share UMC's second quarter results. In the second quarter, the utilization rate increased to 76% as the wafer shipment grew .2% quarter over quarter, primarily driven by communications in image signal processors, NAND controllers, Wi-Fi and LTE controllers. While we experienced an increase in the overall utilization and the growth of our 22 and 28 nm portfolio, the unfavorable foreign exchange movement of the NT dollar kept our growth margin to .7% by nearly 3 percentage points. Revenue from our 22 and 28 nm portfolio continued to grow sequentially, now accounting for 40% of total sales, a record high in both percentage and absolute dollar terms. Our industry-leading 22 and 28 nm solutions continue to win adoption by customers, and we expect to see further market share gains in wireless communications over the coming quarters. We have always believed that with the right differentiation, 22 and 28 nm is a strong and long-lasting goal with a robust product pipeline. In addition, the new Phase III facility at our Singapore FAC 12i sets to start production in 2026, while enabling UMC to better serve customers seeking diversified manufacturing for enhanced supply chain resilience. Looking ahead to the third quarter, we expect a mild increase in wave measurement. However, adverse foreign exchange movement will lead to a decline in NT dollar revenue. We are closely monitoring the near-term uncertainties and risks of the market-intensified US tariff policies. To mitigate macro and geopolitical haptings, including foreign exchange risks, QMT will continue to actively manage our foreign exchange exposure and maintain financial flexibility to enhance our financial structure and business resilience. Now let's move on to the third quarter 2020 buy guidance. Our wave measurement will increase by no single digit percentage. However, NT dollar denominated revenue is fully exposed to fluctuation in the foreign exchange rate. For instance, a 5% appreciation in the NT dollar will result in a corresponding 5% reduction in the QNT dollar revenue. AFT in the US dollar will remember, Q3 growth margin will be approximately Q2 growth margin subject to the foreign exchange effect. Therefore, our Q3 growth margin will be approximately equal to that of Q2 under the assumption the foreign exchange rate is at the current level. Capacity utilization rate will be in the mean 70% range. Our 2025 cash-based HAPAC budget will remain unchanged at the US 1.8 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions.

Yes, thank you President Wong. 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 key and number 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, please press star key and number two to cancel the question. Thank you. Now please press star one on your keypad if you would like to ask a question. Thank you. Now first we will have Brett Ling, Bank of America, for questions. Go ahead please.

Hi, thank you for taking my questions. I have two questions. The first one will be on the ASP Trend. What is the initial outlook and view on the ASP Trend into 2026 given the higher expense and cost? Obviously we are happy to learn the ASP in the near term. Any initial view for 2026? Thank you.

Well, I mean typically we don't guide anything beyond that, beyond 25. So as you said, we can talk about the near term of the ASP outlook, but you will be interested in looking into the longer term ASP projection. So let's share about the ASP strategy. Our goal is to continue to finish our technology offering and dynamics and to maintain and improve our ASP resilience. We want to further widen the gap in technology offerings while increase the revenue contribution by those respective nodes. Following our road off of the 22 and 28-nm technologies, we will continue to provide specialty technology in 40 and 35-nm nodes, where the percentage of our revenue contribution competing with the pricing boundaries will continue to decline. For the near term, our Q2 ASP saw a low single digit increase driven by a higher 22 and 28-nm dynamics. In Q3, we expect the dynamics to remain unchanged, therefore the ASP will remain firm

for this year. Got it. Thank you very much. And my second question will be, well, we have seen in the presentation 40-nm and below mixed, listing the slides as below for a while, but still listed in there. So, do we expect the number to increase, and will that be from 12-nm or potentially also 6-nm?

Well, okay. Well, 12-nm is still a bit far for us. For that particular program, the cooperation with Intel is progressing well and we remain on track according to the project milestones. At present, both teams are working on verifying certain performance for the pipeline, and we expect that the early PDK will be ready for the first-place customer in June 2026. So, we expect customers' product table is better to begin in 2027, so we'll probably see some revenue in that timeframe. So, I think that's the tool. And we continue marching in that direction. Beyond that, if we don't have any concrete plan for anything beyond this round-out here today, our development effort will continue to focus on that and of course broaden our specialty technology portfolio on both ends. And so, that is definitely on our roadmap, but once we have more concrete updates, we'll be sure with you. Currently, the most important task is to be able to highly competitive solution with mass production at 12-nm through our cooperation with our partners. And for anything beyond that, we will explore the future opportunity through the partnership arrangement, which we believe will be mutually beneficial.

Sure. That sounds great. Thank you very much.

Thank you. Next one, Charlie Turn, Morgan Stanley. Go ahead, please. Hi, Jason. Shidong.

Good afternoon. And my first question is about the tariff impact of your customers' behavior. Do you see the pulling in and what does it impact to your second half, sustainability or outlook? Thank you.

Sure. Good afternoon, too. We do observe the sound demand uptrend in the Q2 and of course Q3 is highly driven by the inventory build-up in anticipation of a potential US tariff. And so, for UNC's first half 25 results, it was in line with our guidance of the Q2. The Q2, the weight of the shimmy increased to 6.2 to 3% quarter over quarter, while the Q3, it may increase on a higher base, we expect the shimmy will still grow mildly sequentially. And so, there are some observations about that. The key to the 2025 market dynamics, such as adjustment to the US policies and ongoing geopolitical and macro uncertainty, the usual seasonal patterns may be different. We, along with our customers, will closely monitor those and market signals.

I see. Thank you. I think lots of discussion about the future of the advanced aging technology. So, Jason, can you share with us about your business development here and also, I think you have some interposer capacity, right? How are we going to utilize those capacity going forward and maybe some color about the potential applications?

Sure. Well, I mean, we're not missing. We don't want to miss out on the packaging opportunities. We are preparing our advanced packaging solutions for what we see is for the growing energy consumption of the cloud AI, as well as the potential growth in the agile AI market. So first, to address the power efficiency requirement for the high computing processor, UMC is developing the 2.5D interposer with the DDC and the DTC, which is going to be the roadmap coming up. And right now, we are, the current interposer is moving on to the next generation and we're waiting for the introducers and expect to ramp up to that. Second, the UMC is leveraging the scalable 3D -to-wafer stacking and TFT to enhance the competitiveness of our specialty technology. We are currently in mass production for the extremely small phone battery for the 5G and 6G RFID. And based on the success of the 5G and the 6G RFID with the -to-wafer stacking, we are also developing -to-memory stacking and -to-large stacking service for the high bandwidth computational requirements.

Okay, thank you. My next question again is always want to consult your friends about the semiconductor cycle, but I believe this is the third consecutive year we don't see the second half retirees. What do you think is happening on this semiconductor industry? Why we don't see sustainability or so-called specificity, right? Because I remember in the past you have like upcycle and shortage, overcapacity and then corruption, but we don't see that anymore.

I mean, certainly the visibility is actually lower nowadays. You are absolutely right. When we started here in 2025, we actually expected 2025 growth outlook will be slightly faster than our threshold market. And we think our threshold market is going to grow slightly at a low single digit. And we think at this moment we still expect our 2025 growth outlook will remain unchanged. So that's safe. But beyond 2025 or 2026, we have to closely working with our customers and sharing their visibility and as well the monitoring the DOI situation. Today, I think the DOI is getting to the healthy level. We think that DOI is approaching to the healthy level about a quarter to quarter ago. And right now, the computer, consumer, communication segment is still healthy, remain healthy, and while the automotive and industrial still remain high. So I think while monitoring the macroeconomics of the DOI, and then we can only hope that soon later we will see the upside. But right now the visibility is pretty low today.

Okay, okay. Yeah, so maybe try again about the first question about the pricing. Because obviously it has actually impacted all the time, the last intensive growth margin. Would that be a factor you can put on the table to negotiate with your customers for next year's pricing? I

mean we continue working with our customers in terms of pricing conversation, you know, closely. But those are more of a tactical conversation. I think fundamentally, I got a report earlier, I think our key focus is trying to differentiate our technology offering. And so that we can continue to enhance our product mix to improve the ASP resilience. And I think that's where we're marching. And we have a very clear roadmap today that on many fronts of our technology development. So our goal is to further widen the gap in technology offering and increase the revenue contribution from those respective nodes in technology offering. And which we think that we can make sure that our ASP can remain resilient.

Great. That's very helpful.

Thank you. Next one, Goku Harihara, JP Morgan. Go ahead please.

Hi, Jason and Jigong. Thanks for taking my questions. First of all, for the Singapore FAP 20 nanometer and 22 nanometer expansion, could you talk a little bit about what is the current pace of the ramp up and the kind of customers that you're ramping up there? Obviously some of the pricing negotiations that you had back in 22 and 23 obviously had some price escalators. Could you talk a little bit about whether those price escalators still exist given the environment has definitely changed somewhat? So that's on the really dynamic part.

Well, for the S.I. Singapore facility, given the current market dynamics and customer alignment, we project the 12x3 production ramp will start in January 2026. And it will ramp up with a higher volume starting in the second half of 2026. And that's the current ramp plan. Many of this ramp schedule and alignment is based on the customer's communication. And right now, given the application ramp up is going to be mainly in the communication with our 22 nanometer high-voltage devices, and we still believe our 22 and 28 nanometer high-voltage solutions aren't differentiated from the market. And so the AFCs still remain fairly healthy at this point.

Got it. Secondly, on gross margins, so we are roughly in the mid-70s utilization and we're kind of in the mid to high 20s gross margin. I think depreciation definitely started to grow again and looks like it's going to grow into the next couple of years as you bring in 12i. So could you talk a little bit about what is the realistic pathway for us to get back to that mid-30s gross margins or low to mid-30s gross margins that we talked about? Currently it's not completely controlled, but maybe talk about some of the other factors. Is that kind of like a realistic goal that you're pursuing? And back to some of the previous questions, can pricing be a realistic tool to kind of get there or is it more challenging to use price as a tool together?

Absolutely. That's our mission to continue to improve the gross margin back to the reasonable level. Given the current loading, it is frustrating, you know, fluctuating around the 70%. It's definitely putting some pressure in terms of the gross margin while the depreciation increase. And so the focus is very clear. I kind of answered Charlie earlier that we are focused on technology development, technology offering, giving them newer technology offering and the partnership engagement and with the product mixing group. And we think that we have a path going back to the reasonable level. We have, for the past, we have been maintaining our company shares in our federal market segment. Based on our current design pipelines, we're anticipating more shares in 2026 as well as going into 2027, particularly in the 2022 and 2028 meters market today. Now, while we roll out the other technology offerings, we think this will continue to improve and we're definitely marching to the, to the direction to go back to the right level, the gross margin level.

Thanks, Brian, for that. Our annual depreciation growth is going to peak out. So if you recall, in year 2023, our depreciation expense increased by more than 20% year over year and similar magnitude for 2024. And sorry, similar magnitude for this year, for 2025. But for 2026 and 2027, the increase magnitude will be a lot less, could drop down to a single digit. So hopefully we will have a better cost structure moving into year 2026 and 2027.

Thank you, Ram. Maybe one more question on the high voltage side for 2028 and 2022. Jason, do we have a pathway below 22 nanometers of high voltage, given there's been some discussion about some of the driverized related products moving below that, these two, some kind of an input node, but enabling high voltage?

It's definitely on our road map today. They are. While we do believe that 22 high voltage will be the most competitive solution today, as well as next couple years, but yes, the solution of the high voltage is on our road map. Yes.

And any guidelines in terms of anything customers will start demanding this?

That we do align with our customers and again, it's contemplating between the value proposition of the 22 versus the next node. And we are closely working on that and I send the, I don't have a specific time frame, but I kind of don't want to give it a guess right now, because giving all the data on hand, we still send the 22 nanometer high voltage, whatever length. There will probably be another year to, closer to

two years. Understood. With one last question, several of the consumer fabulous companies are guiding down Q3 quite meaningfully. Your own wafer orders are slightly moving up in Q3. Should we expect that there could be a hiccup in Q4? Every year seems to be a different seasonality, but just wanted to understand how you think about that inventory cycle for many of the Asian consumer fabulous companies, which are your key customers as

well. Sure. I mean, the inventory situation actually is quite healthy with fewer major segments already and outgoing industrializing, they still kind of high, but the rest of it is actually quite healthy. At this point, given the disability, we do not guide Q4 at this time, but our view for the full year 2025 will remain unchanged. And again, I kind of touched that earlier that we expect our addressable market will grow by the low single digit and we will still outgrow the addressable market in 2025. And the biggest challenge is now is really the disability. Given the macro uncertainties and the geopolitical concerns, I think the customer is being cautious. But it doesn't mean they don't have a demand. The question is they kind of want to play this thing in a different manner. So we work in co-proportion with them and meanwhile Q2 is growing, Q3 is slightly, sequentially, and Q4 we just have to play and see. And we will definitely report that next quarter. But meanwhile, we think the overall 2025 projection is to be unchanged.

Okay,

thank you.

Thank you. Next question from Elaine UBS. Go ahead please.

Thank you very much for taking my questions. So my first question is on 20 nanometers. So if you look at Q2, Jason was driving the revenue upside, is it driven by the 22 nanometer migration or is it through a product make-up rate? And then looking ahead, could you share a bit more on your share again in wireless communications and maybe some of the other products going into 2026?

Okay, well for the near term, the 22 and 28 revenue contribution increase is mainly coming out from the communications in Q2, computing and communications, mainly communications in Q2. Going forward, we are highly confident in the continuous growth of 22 and 28 nanometers. In 2025 and beyond, going into 2026, the strong demand outlook is supported by the continuous paypal momentum, many different applications, thanks to our customers of course. But again, it's really supported by UMC's differentiated technology and the regional manufacturing booking as well. This includes our 12i staff in Singapore, which the P3 staff expansion is on track and we want to on track to rent in 2026. We will begin to contribute in the revenue in the second half of 2026 and this will further strengthen our 22 and 28 capacity and support the growth for the growing demand. The combination of the technology proposition, manufacturing quality and well positioned capacity will ensure our 22 and 28 will remain the full growth engine for the next year, 2026.

Thank you very much. So on 12i, would you be able to price the wavers at the higher cost structure? And when you talk about high-volume production starting from second half of 2026, any type of capacity that we can expect?

Well, I mean we can't know exactly the capacity size, but we are quickly ranking our P3 and we look at the 22 and 28 capacity on a total basis between our old facilities. And I think the older utilization rate across the different facilities on 22 and 28 was above the October average. Even today they are above October average. And the question about the, I kind of missed your first question.

Pricing for Singapore, would you be able to price it at higher, given cost is higher as well?

No matter, I missed it. It's a positive question. Well, right now again our pricing position is based on our technology offering, our value proposition. And I think that's the baseline of the AFC. In terms of the diverse provider location, we have to work with our customers to understand the needs. So we want them to stay competitive and we want them to acknowledge the different offering of our technology. And as well the geo location benefit. So it's a project that we will talk about with our customers, but mainly on the technology differentiation as well as their competitiveness.

Got it. Thank you. That's helpful. I have a question on the Intel partnership. It seems like Intel is becoming less proactive in pursuing the founding and business with the new management. So I wonder how does that affect the business development with UMC? And let's say if Intel want to scale down and they want to maybe sell the capacity, in that case would UMC be interested in acquiring the capacity assuming the price is reasonable?

Well, first I think it's hard to comment any speculation. But I don't want to comment about the common priorities within the company, but I can only comment about our program. And our current program, like I said earlier, the cooperation with Intel is progressing very well. And the milestones remain on track. And most importantly both parties are very committed to the slow-mo operation. And so I see no change at this point. And we still have very high expectations with this program.

Got it. Thank you very much.

Thank

you. As a reminder, please press star key and number one on your keypad if you would like to ask a question. Thank you. Next we'll have Laura Chan from Citi. Go ahead please. So Laura just dropped her line and we'll take the next one. Jason Zhang, CLSA. Go ahead please.

Thank you for taking my question. And I just want to follow up the impact from the FX ratio. Can you provide your FX ratio for Q3? Thank you.

So first of all, every 1% move appreciation of $20 against US dollars. And for Q3, he will erode our growth margin about 0.4 to 0.5 percentage points. That's where the 3% point erosion comes from, back of the 6% plus $20 appreciation against US dollars. And for Q3, we don't do forecasts, but we are using current Forex rate, which is nearly 29.8 when we give out our guidance. And a reminder for Q2, the weighted average was 30.81.

Thank you. My second question is in terms of the competition. It seems like your Chinese competitors now have a better or higher user action rate currently. So do we see a better market or lower competition in the mature node? And how can UNC benefit from this lower competition? Thank you.

Well, at this point, more than half of our revenue comes from specialty technology solutions, which serve our customer demand differentiated technologies. For instance, our 2228 in Tantasia earlier is probably the most competitive solution in high-end smartphones or late display market. In addition, our 22 ultra-low leakage and low-power technology will deliver another 30 to 50% better power saving compared to standard 28. So we are positioning ourselves as a specialty technology, focused on low leakage, low power logic, embedded high voltage, DCD embedded non-polymerized memory, R&S and SOI solutions. We want to continue to provide special technology where the percentage of revenue contribution in this space will increase and the percentage of revenue competition competing with Chinese countries will continue to decline. I think that's our focus. And I think that we have made quite a bit of progress already and we think there's more room for improvement.

Got it. Got it. Thank you. I have no more questions. Thank you very much.

Thank you. Next one, Robert Chang. City, go ahead please.

Thank you very much for having me back. Just a quick follow-up, want to understand your view on the long-term growth margin outlook. We understand that there's a lot of moving parts, raising depreciation and also currencies, etc., but we do see that recently the user ratio rate is kind of improving back to high 70%. We're moving into 2.3 with the refreshment also going up. What's our view on our short-term growth margin target? If you can give us more colors on that. Thank you, Jason.

Right now, the 70% is not great. Obviously, loading will be one of the important focus. To improve the loading, fundamentally you have to provide a comprehensive solution to customers. Like I said, we focus on technology differentiation, focus on new technology development, and then following with the customer, C-customer partners' engagement. By doing that, we think the loading will increase. So as well as the growth margin, we'll get healthier. The other one is of course the cost. For the depreciation increase, and we don't touch that earlier, those couple of years we had a significant depreciation increase. After 2025, I think the increase percentage will start getting more mild. While we improve the loading and maintaining the depreciation and the cost structure, the next thing is of course the AFC management. From the AFC management with more compelling solutions, and you have more effort to provide an infection slice and infection quality, we think the AFC will remain resilient. Not to mention, it will continue marching forward with our 12-millimeter development, and hopefully that we can continue to improve the product mix as well. So giving all those is putting a roadmap for us to improve our market relevance and position as well as our financial performance. And for the past, we have already improved our structure probability in terms of our breakeven point, and from that point we already see an effect and benefit. But going forward, there's still work to do, and combining all those, we think we have a roadmap to march into a better result.

Thank you very much. Chidong, can you also remind us what will be the depreciation cost increase for this year or maybe next year?

This year is low 20% year over year. Last year, there were very rough estimates, but as I mentioned, the magnitude of increase will decline significantly, maybe to below 10%.

Okay, thank you very much. My next question is also about our operation in China. We know we still have two fabs in China. Even though there's always very fierce competition, do we see any possibility that our IDM customers, if they want to enter the Chinese market, they can also leverage our capacity there to be depreciation as well? Can you give us more update on your current strategy in China?

Well, I mean, first of all, with our fabricated manufacturing site, we definitely will be able to serve different customer needs. And if there is a customer need for their product to be produced in our China facility, there's something that will very much welcome us. The sense in that we have a customer moving from China to other location, and we very much welcome that. And we believe with the fabricated manufacturing offering, will give us the benefit of supporting customers with their supply chain resilience needs. Right now, for the IDM customers moving into the China facility, there's certainly some signal, but I think the signal goes by multiple different ways. And so we are working closely with different customers, and hopefully we can fulfill their desired needs.

Okay, thank you very much.

Thank you. Next one, Tim Schultz, Molender, Rapper, go ahead please.

Yeah, hi there. Thank you very much for taking my questions. I had two, please. The first one is on pricing behavior, and particularly just how rivals are behaving in terms of pricing in the communications segment. Is that disciplined pricing, given the steady improvement in days of inventory, or is pricing more challenging, and then how to follow up?

When there's ample capacity available, pricing becomes a topic. So not until the capacity becomes heightened, I think the pricing will always be a topic. So I think from a behavior standpoint, it's really subject to the capacity situation. So given that the current capacity situation and region are different, and I think that conversation is due quite often.

Okay, that's very helpful. The second one, in terms of the collaboration with Intel, good to know that the PDK 2026 production 2027 is still on track. I had a two-parter there. In terms of the work you're doing with your partner, do you see any impact from the headcount reductions? Does that influence that cooperation in any way? And then the second part, talking about gross margins and the outlook in 2027, this journey to get back into the 30s. Obviously, loadings are the most critical factor, but does this cooperation with Intel play a material part in your sort of medium-term gross margin outlook? Many thanks.

From an absolute dollar terms, yes, you will. Because of the business model that we have, coming back to the question about the headcounts and the commitments of our partners, it's actually quite positive. I think the program itself is expanding from the R&D development now getting into the high-volume production preparation. So there's more involvement from different organizations. So I would say from the involvement standpoint from the different organizations, it's actually increased. I can't really comment about the headcount situation, but I can tell you we see a lot more activity from various different departments and organizations because we're moving from the R&D activity gradually moving into the so-called high-volume production preparation. So you can see, while we're expanding the activity scope, there's actually more involved with the program today.

That's

super helpful. Many thanks. Thank you. And now we're taking the last question. Alex Chang, BMP. Go ahead,

please. Thank you for taking my question. I only have one follow-up question regarding to your China business. So can you comment in terms of utilization? How is your China staff utilization versus the overall utilization? And in terms of the price pressure, have you seen the east-east recent months? What is our outlook for the price pressure in China? Thank you.

Our China 12-S facility today is actually running at full capacity. So it's above our corporate average. And since our different sites are mainly serving the manufacturing facility, the business management is all centralized. So at this point, there's no pricing differentiation between different locations.

Thank

you. Thank you. Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I'll turn it over to UMC Head of ILOG for closing comments.

Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact iocatumc.com. Have a good day.

Thank you. And ladies and gentlemen, that concludes our conference for second quarter 2025. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit us at .umc.com under the investors event section. You may now disconnect. Thank you again. Goodbye.