United Microelectronics Corporation (NEW)

Welcome everyone to UMC's 2026 First Order Earnings Conference Call. All lights 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. Request replay will be available within two hours after this 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.

Thank you, and welcome to UMC's conference call for the first quarter of 2026. I'm joined by Mr. Chi Dong-Biu, CFO of UMC, and Mr. Michael Lin, Senior Director of Finance. In a moment, we will hear our CFO present the first quarter financial results, followed by our key message to address UMC's focus in second quarter 2026 guidance. Once our CFO completes the remarks, there will be a Q&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. 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. Qi Dong Liu, to discuss UMC's first quarter 2026 financial results.

Thank you, David. I'd like to go through the first quarter 2026 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page 4, the first quarter of 2026, consolidated revenue was $61.04 billion NT, with gross margin at 29.2%. Net income attributable to the stockholders of the parents was $16.17 billion NT, and the earnings per ordinary share were $1.29 NT, which showed pretty good growth compared to both last quarter as well as the same quarter of last year. On page five, first starting from the sequential comparison, revenue was basically flat or down 1.2% sequentially to 61.4 billion NT. Growth margin at 29.2% slightly declined from the previous quarter of 30.7%. Net income attributable to shareholders of the parent loan has increased 60% sequentially to $15.17 billion, partially due to the strength of the stock market performance, and the non-operating income grew 60% to $5.3 billion in the first quarter of 2026. EPS as a result reached 1.29. EPS per 8 years is 0.204 in the first quarter of 26. On page 6, year-over-year comparison, revenue grew by 5.5% year-over-year, mainly due to shipment increase. And gross margin also showed 2.5 percentage point improvement to 29.2% to 17.8 billion NT in the first quarter of 26. And EPS also showed nearly more than 100% growth in the net income compared to 7.7 billion in the first quarter of last year. On page 7, Our balance sheet highlights total equity reach of $406 billion NT and cash on hand still over $100 billion NT at the end of the first quarter of 26. On page 8, our AST declined slightly in the first quarter of 26, mainly due to a better than expected change way for shipments. which bring down the blended ASD. On page nine, revenue breakdown by different geography. The changes are very minor. We see some decline in Europe region from 11% in the previous quarter to 9% in this quarter. And the other region stay relatively similar. compared to the Q4-25. On page 10, IDM showed a bigger decline from 20% in the previous quarter to now 14% of the total revenue. On page 11, communication also declined 3% quarter over quarter to 39% when consumer increased by 4% to 32%. in first two funding cells. For technology breakdown, our revenue below 40 nanometers will remain over 50% of the total shipment, and 28, 22 is around 34%, slightly declined from the previous quarter. On page 13, there's some annual maintenance schedule or maintenance. in the first quarter of 26 resulting slight decline in available capacity in the first quarter of 26. And we will see the total available capacity to go back to the previous level in the second quarter of 26. On page 14 is our overall budget annual K-tax. which for the time being still stay around 1.5 billion U.S. dollars. And the above is the summary of UMC's results for first quarter of 2026. Next, I would like to go to share our key messages. So in the first quarter, our welfare treatment increased 2.7% sequentially on a relatively strong growth in the consumer segment. lifting overall utilization rate to 79%, which is a continual improvement. Expect decline in blended ASP during the quarter, which I explained earlier. This is partially reflected higher A-inch wafer shipment. And gross margin held firm at 29.2%. And demand for our 22 nanometer logic and specialty process continue to gain momentum, with 22 nanometer revenue now reached another record high and accounting for about 14% of total first quarter revenue. At the end of this year, over 50 customers will have complete payouts on our 22 nanometer platform for a very diverse range of applications, including display driver ICs, network chips, and microcontrollers. We continue to invest in the next generation technology beyond 22 nanometer. Our 12 nanometer collaboration with our partner will provide customers with technology continuity as well as a U.S.-based manufacturing option. EMC also recently announced important development in the emerging business, including a strategic partnership to deploy lithium-ion-based TFLN photonics for AI infrastructures. Going to second quarter, we expect strong wafer shipment growth across both 8-inch and 12-inch portfolios, supported by a strong rebound in the communication segment, as well as healthy demand across computer consumer industrial markets. When the current memory supply shortage and ongoing conflict in the Middle East are creating certain headwinds and market volatilities, UMC continues to foresee resilient market demand. UMC will continue to monitor industry and macroeconomic development closely when prudently managing our business to cope with market dynamics amidst evolving semiconductor landscape change. Now, let's move on to second quarter 2026 guidance. Our wafer shipment will increase by high single digits, and HP in US dollar terms will increase by low single digits. First margin will be approximately 30%, and capacity dilution rate will be in the low 80% range. Our 2026 cash-based KPAS, as I mentioned earlier, so far will maintain around $1.5 billion budget. So that concludes my comments, and thank you all for your attention. Now we are ready for questions.