Q4 2021 United Microelectronics Corp Earnings Call

For your information. This conference call is now being brokers do life over the Internet web cast replay will be available within two hours. 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. Michael Lin head of Investor Relations at UMC. Mr. <unk>. Please begin.

Thank you and welcome to the Umc's conference call for the fourth quarter of 'twenty or 'twenty one.

I'm joined by Mr. Jason Wong depressed and occupancy.

Just that you don't do the CFO of UMC.

In a moment.

Here, our CFO present, the fourth quarter financial results, followed by all persons key message to address Usc's focus in the first quarter 'twenty to 'twenty two guidance.

Once our president and the CFO complete their remarks, there will be a Q&A.

Fiction.

Umc's quarterly financial reports are available.

Besides that trip with us that you won't see that com under the investors financial Joseph section.

During this conference.

May make forward looking statements based on 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 these risks please refer to umc's filing with the SEC in the U S.

Policy Securities authorities.

Now I would like to introduce Umc's CFO .

You don't do to discuss <unk> fourth quarter 2021 financial results. Thank.

Thank you Michael I would like to go through the full Q2 one.

Investor Conference presentation material, which can be downloaded from our website.

Starting on page three the fourth quarter of 2021.

<unk> was 59 one.

$1 billion, we saw gross margin at 39, 1%.

Net income attributable to the stockholder of the parent was $15 95 billion.

<unk> ordinary shares 1.3 empty.

Yeah.

Capacity utilization rate remained at 100% plus.

Please turn to page four.

Q4 comps.

Comprehensive income statement.

Operating revenue grew sequentially five 7% to $59 1 billion.

Gross margin, we reported 79, 1%.

12, 5% to 23 one period.

We controlled operating.

Expenses.

And the percentage of our revenue.

Decline a little bit to 11, 5%.

682 period.

Non operating income of 558, our net income attributable to shareholders of the parent was <unk> 15.949 billion or an EPS of one three.

In Q4.

For the whole year on the page five.

2000, <unk> revenue grew by 25% year over year.

In $90 tons to 213 billion of N T.

In U S dollar terms their grocery was higher around 2027% given the stronger NT dollar appreciation.

U S dollars.

Gross profit margin was 33, 8% or 72 billion in a year of 2021.

And the overall.

Nonoperating income.

Over $10 billion brought by 70% year over year.

Year over here.

Mainly due to the stronger stock market performance in most of the financial assets that we hold.

February according to a desktop margin performance.

Income tax expenses also grew significantly to $6 7 billion, mainly due to a lower base in 2020 and also profitability in 2021.

So for the full year the EPS.

Full 0.57.

<unk> by 91, 1%.

Net income terms.

So on page six.

Cash continue to pay up to $132 6 billion.

At the end of 2021, and total equity also growth to $281 two.

2 billion by the end of 2021.

Page seven the ASP trends continue to inch up.

<unk>.

Q4 of last year, we saw EPS.

<unk> grew up by more than 3%.

In terms of our revenue breakdown for page eight our.

Asia still remain our largest potion of earning revenue contribution.

56%.

In Q4, and North America at 21%.

For the full year on page.

H nine.

The ratio of didn't change much compared to the.

The quarterly numbers.

So page 10.

Fourth quarter identical that IBM contribute around 14% of total revenue and for the full year, we see a 3%.

Percentage point increase.

For IDM revenue to 15% in 2021 versus 10% in.

In 2020.

So on page 12 communication also remain around 46% of the pie.

And for the full year.

On page 13, we see.

Computer segment growth by three percentage points to 17%.

Consumer also growth three percentage point to 27% compared to the year of 2020.

And for Q4, 'twenty, one by technology breakdown on page 14.

For 22 28 nanometer.

Account for about 20%.

<unk> total revenue.

Yeah.

38% of the revenue coming from 40 narrow them below in Q4.

And for the full year on page 15.

We see.

Pretty meaningful increase.

<unk> revenue from 14%.

This year to 90% in 2021, which also helps all blended.

Okay.

Yes.

On page 16.

<unk> continued to see some mile capacity expansion, although Q1, there will be some.

Our maintenance and your maintenance so most of the increase.

It's Scott.

Among different Fabs, which shows in this table on page 16.

For page 17, so far.

Currently our 2022.

Capex budget around 2 billion.

Full year 2021, the actual spending.

One 8 billion U S dollars.

And.

Yes, both we said summary of Umc's result for Q4 2021.

More details are available in the report which has been posted on our website.

I'll now turn the call over to President of UMC, Mr. Jason Wang.

Thank you Qi Dong, who evening everyone.

I'd like to update a fourth quarter operating result of UMC.

The fourth quarter.

Demand continues to drive for loading across our Fabs.

While overall wafer shipments grew one 7% quarter over quarter to $2 5 million eight inch equivalent.

For the full year revenue in 2021 rose by more than 20% year over year.

Operating income reached a record high.

Even by a surge in our 28 nanometer business.

The 75% year over year revenue increased from 28 nanometer technologies strengthened our overall weaker ESP and reflect the robust ship demand related to fight it.

And automotive makers.

You also substantially contributed to the improvement in the Companys financial structure.

Our healthy 28 nanometer product pipeline will further diversify our product portfolio and customer base.

UMC to capture additional market share.

Looking ahead into Q1 2022.

Anticipate that the men across all mills Umc's addressable market, we will continue to outpace supply.

Our growth in the long term is supported by industry sneaker trend.

Which you will be kept at fold by structural changes occurring in the industry.

We will continue to deepen cooperation with customers with our differentiated specialty technologies manufacturing excellence and capacity expansion closely linked to the demands of our partners.

<unk>, we will keep pushing for cost reduction and particular fleet managing our capex.

To deliver sustainable and healthy returns for our shareholders.

Next I would like to take a few minutes to share our view on the industry outlook, and where we see umc's position in the industry going forward.

UMC has enjoyed a banner year in 2021.

Over the past three years, the company has performed and achieve our business goals. Thanks to the positive market dynamics and strong partnerships, we have developed with our customers.

We believe the current semiconductor market maker train's empty the continuous penetration of <unk> phones.

<unk> adoption and the fast proliferation of Iot devices will continue to drive higher demand for silicon content.

That in turn will lead to a growing demand for foundry capacity and technology.

Not only at the bleeding edge nodes, but also for UMC focused market.

<unk> future.

We have been working closely with our customers aligning our technology solution to capture those mega trends driven opportunities.

We are well prepared.

Whatever competition across many platforms.

The demand supply imbalance, we have experienced over the past two years.

Salary leave us a new capacity will come online.

Yet you have made clear the need for a structure and dramatic transformation foundry value chain towards closer cooperation immature mutually risk mitigation.

Many of our customers recognize the importance of the course.

So cooperations and have responded by participating in our accelerated capacity expansion partnerships and reach a multi use long term supply agreement with us.

L P eight.

<unk> long term capacity assurance to our partners.

Loading protection to UNC in return.

<unk>. We are also working with an assistant companies and automakers to enhance the visibility and transparency in the supply chain with the N of addressing uneven supply in the industry and the long term the supply challenges.

L D A's are more than a protection mechanism for UMC.

They are endorsement from our customers and points to UNC strengthened position among our peers.

In the past few years, we have also significantly enhanced the company's structural profitability hitting us the necessary resilience to weather through the market fluctuations.

We envision UMC will continue the growth momentum.

<unk> over the past two years based on our comprehensive technology offering foundry position and customer relationships. Our goal is to make UMC.

At $10 billion company by 2024, with Aro equal to 20%.

Last but not least I would like to highlight our focus on ESG.

While ESG is at a forefront of many corporate agenda today.

Corporate social responsibilities have been umc's top priority over a decade.

Over the years.

Sustainability has become deeply embedded in our culture.

And become part of our corporate DNA in June last year.

<unk> committed to reach net zero emission by 2015, the first semiconductor foundry to do so in the 'twenty to 'twenty One Beach ASI, we were ranked first in.

That's a sector an important recognition for our ongoing commitment to the environment, our communities and our shareholders.

We sincerely invite you to visit our website, where you can download our annual corporate sustainability report.

Now, let's move on to the first quarter of 2022 guidance.

Our wafer shipments will remain flat.

ASP in U S dollar will increase by 5%.

Gross profit margin will be approximately 40%.

Capacity utilization rate will be at 100%.

Our 2022 cash base Capex will be budgeted at a U S $3 billion.

That concludes my comments. Thank you all for your attention and now we are ready for questions.

Yes, Thank you president <unk> and ladies and gentlemen, we will now begin our question and answer session.

A question for any of todays speakers. Please present zero one on your telephone keypad will enter the queue.

After you are announced please ask your question.

If you find that your question has been answered before.

To speak please press star zero to cancel the question. Thank you.

Now please spreads as you'll want to ask a question. Thank you.

Our first question is coming from Randy Abrams Credit Suisse. Go ahead. Please okay, yes, thank you and congratulations on a good result.

I wanted to test the first couple of questions on the Capex.

The $3 billion budget when it clarify is most of the spending tied to the phase six project or do you have any other additional projects.

And should we view this spending.

With that phase six is a high base.

Or is it your view we may have follow on expansion.

To maintain this higher level of spending.

Okay, well I mean, the $3 billion capex.

Part of that was a 500 million capex budget that roll over from our 2021.

And the other is includes our maximization of the $12 six and 12 ex Q1 that we have announced at 12 <unk> P. One of capacity, what England five K per month.

And the pieces will increase another five cases per month.

The.

The.

For the peak.

Six capacity after the five K per month will reach $32 five K per month for RP six pushes the Hyatt.

Previous announced it.

Yes.

After we added <unk> <unk> per month capacity at each site.

We believe we can add to continue serving the strong customer demand.

We'll continue to enhance our economic scale.

Each site and maximize production efficiency, so that's pretty much what that $3 billion.

And overall based on that.

Overall, 2022 capacity will increase about 6% yield a year.

Okay and for the timing to clarify for the 32 five K.

When is the timing when that would be available for like wafer shipments.

Yes.

If I gave a month will be commenced.

Comments in Q2 2024.

Of 24, Okay. So thats later okay.

The 10 billion call it with you.

With these projects you have the capacity or.

Do you have like if you could go through do you have additional space between the China, Singapore, Taiwan to do additional kind of faith or do you need to.

To expand further go to Greenfield.

Well, that's actually a pretty good question.

And so this way or.

<unk> expansion strategy will come to you first of all our global expansion strategy will come to you followed our stringent ROI.

Criteria, we have been volatile.

And.

But at the same time, it would take us into a consideration of future market and customer demand.

And we.

We see we have a very diversified regional production site.

And so we do have the flexibility to assess the future expansion site.

To meet the customer requirement.

The question about.

The 12.

<unk> is the China fab the economy, we have a fab buildings constructed at both Japan.

And the Sherman to 12 Act. However, both specify will still require additional capex to build clean room before installed tubing equipment.

And in addition to that.

UMC has a lot to evaluate different expansion options as well.

Beyond the current <unk>, Taiwan, and we will discuss our expansion plan accordingly, but we will evaluate all options right now.

And one last maybe for cheating on the depreciation for if you could give a view this year.

Initial feedback based on this plan direction for next year.

So I think the key really we want to keep these offenders trial revenue.

Our control so we will continue to do that.

<unk> 72, depreciation actually will decline year over year.

Approximately 5% of that.

And followed by a flat to a small increase in 2023.

It depends.

Okay.

Capex this year and also net shipping costs are currently.

From a delivery time has been prolonged.

Okay.

Liberty.

The 21st.

2007, five K has that pushed out at all or is that second half 2023.

Four.

You mentioned that <unk> would be in 2024, but running with the big capacity would be available.

The both the <unk> six.

Let me get back to a <unk> as well.

The board of the <unk> production ramp schedules do Amtrak.

<unk> the 10-K per month capacity will come online by Q2 2022.

His upcoming quarters.

<unk>.

The 46.

Six we have encountered some equipment delivery delayed at.

At the same time, we are working with the suppliers right now along with internal engineering efforts.

Will it be shortened the two installation schedule. So long so right now we still keep it schedule on track and the <unk>.

Ingalls to ensure capacity comes in that commitment to RP six customers.

Okay and I think.

Is that is the Q2 2023, Okay Q2, Okay, yes right.

And then just one last question and I'll get back to the queue.

With some of the.

Cost rising on labor, how should we take the view on Opex now.

More increase or you mentioned something about continuing on the cost reduction effort.

How would that trend and also some of the.

The subsidy if that would maintain a similar level.

For Opex.

Yes.

<unk> seen the trend for labor cost increased.

This is a really.

A function of improved profitability.

So I'll call. It still remained the same we hope.

Well grow as a person.

<unk> revenue you will continue to be under control, even trend down a little bit.

Okay, even trend down meeting in absolute dollars.

No no I mean percentage of revenue as a percent of revenue. Okay. I understand okay. Thanks, a lot for the incremental color I appreciate it.

Thank you.

Next question Z holding China Renaissance go ahead. Please.

Hi, Good day gentlemen, two questions from my side. The first one just want to tap your brain on.

On the Finfet market does the company have any trying to go back through that market call I'll be happy to check it twice during 2008.

Well I mean.

We never abandoned the Fort.

<unk> think that.

These are all.

Plants always keeping the 14th.

The R&D.

Activities and we have delivered in 2014 and technology and we are engaging with us.

A number of our customer for the Finfet 14 Finfet.

We do not have any plan beyond 2014.

We do see that.

That will be very high challenging for us to start addressing that.

Think that beyond the 2014.

So we will stop at 14 at this point.

I see great.

The other question given.

Given the fact that yes.

Huge progress on gross margin expansion this quarter be a guidance or something around 40% gross margin would.

Would be the steady state gross margin for the company going forward.

Yes.

Well first I mean, I will start out with this.

We do see.

The increase of the.

The Capex and buy the same time, we will manage and control the depreciation through disciplined capex approach to maintain the gross margin based on our financials.

Portability and focus and focus on our EBITDA margin expansion.

Into the future.

<unk>.

The principle that we follow this.

If I may add on to that all comprehensive technology portfolio.

All of our leading customer base coupled with the.

Well balance ancient helping diversify offering.

We think we actually currently having a higher than most of our competitors in terms of EBITDA margin.

And UMC become margin, we think there's still room for further enhancement.

Due to mix improvement by specialty technology.

Expansion of 28 nanometer scale.

And also some cost reduction effort.

Also productivity improvement potential.

Potential A&P increase.

But the accounting margin, especially gross margin may vary along with the moving depreciation expenses.

Derived from the investment for the future.

So.

We will manage our gross margin through disciplined capex imbalance.

Our financial flexibility and our gross margin, which.

Translate to absolute dollar dividend payout.

We will be in line or higher than Umc's long term foundry growth.

Yes.

I see okay. Thanks, Patrick.

And last question from my side.

Net operating income.

Steel.

Quantity around the around 1 billion plus or minus.

For this year.

No no I mean, this is a very difficult.

Again, this is highly correlated to share price performance.

I don't know if I need to upgrade.

Operating income not the nonoperating net.

So thats relate mostly related to the subsidy.

That's on our shop now.

Operation It still won't be.

80, 590% there for 2022.

Okay, and how long would that last.

Go into <unk> and beyond.

Uh huh.

Mostly.

Six years scheme.

I think they will.

Into 2023 and me.

In 2024.

Okay, Alright, Okay fair enough. Okay. Thank you very much and congratulations.

Thank you.

And next question Bruce Lu Goldman Sachs go ahead. Please.

Alright, Thank you for taking my question.

My question is what's your expected foundry growth rate for 2022.

TSMC is guiding for 15% to 20% per year.

$10 billion revenue guidance suggested like 10% compound growth for the next two or three years. If TSMC is guiding below 15, 20%, which means that either you are losing market share.

In 2022 and were or are you expecting that flattish growth in the coming two years. So if.

Is there something I missed.

No I mean.

We have a long term goal is to bring the company over $10 billion and by 2024 and but for the 2022.

Despite a lower contribution wafer demand associated with the Wolfgang Homeland home learning.

We still expect structural demand such as the <unk> and Iot will remain strong. So we estimate the foundry industry growth in 2022 will be around 20% in the same time. The UNC is projected to grow in line or higher than the foundry industry.

For 2022.

Okay. Then you can easily achieve a target by 2023.

[laughter] 10 buildings now really a numerical target it's really.

So we want to become a $10 billion plus company.

Of course.

For me.

Yes.

I think it's the easier targets.

In 2003, so thats why im.

It's a big deal.

Okay. So the next question is still regarding Toby go ahead I'm sorry go ahead.

Okay, sorry about that.

Next question is more about the profitability first quarter AAC extended by 5%.

Blended basis.

Which is supposed to be like wafer to wafer price and better product mix.

And your distribution.

Depreciation in 2022 expanded only by 5% so theoretically you should see more.

Gross margin impact because of this.

So why the gross margin only increased by 1%.

Approximately 40% and also fall.

The 2022.

We discussed.

There's some structural change in labor costs.

Also associated with our improved profitability and falling raw material costs.

Also there will be some kind of structural change.

For Ya.

Just like the structural change in.

In the foundry industry so.

For 2022, we anticipate.

Some raw material increase along the rest of it yet.

So you mean, the nugget the Brazilian call it increased a lot.

Which offset the impact of setup.

From the higher wafer prices is that right.

Yes, I mean, yes, basically we projected labor and raw material costs are increasing.

And we believe this is not just the inflation right because of the demand outpaces supply and we see this happening throughout the supply chain.

But the labor cost.

Cost increase is more structural.

Do you expect to.

Further increase your wafer price to offset the impact because the raw material costs continue to go off a bit.

Throughout the year.

Well I mean.

Our <unk> strategy.

He's not exploiting short term optimistic profit right.

So issue reflect our value and market price, which was delivered to our customer.

The same time, we want to strengthen our relationship with the customer in a long term basis and mutually growing with our customer and two to four that our AC will reflect the market value.

And we will cooperate with our customer and coping with the rising input costs.

Inflation, even need it so we will continue monitoring that.

But structurally the raw material cost.

Increasing then because your value provided to our customer remain unchanged you should you should get past the incremental cost to your customers.

At the same time, we want to make sure that the customer can achieve their mute their growth as well.

<unk>.

We closely working with them that yes.

Understood. Thank you I'll go back to the queue.

Thank you.

Thank you.

Our next question Rolling She Citigroup go ahead. Please.

Hi, good afternoon.

My first question is for your 500 million Capex push it all fell Lafayette to B C.

There was that due to the extended.

So how about.

Mr 3 billion Capex plan, obviously, well you worry about Lisa.

Equipment lead time to continue in pets.

Equipment delivery.

And also continue in pet.

Capex spending this year.

Oh, the $3 billion.

It's already incorporated every.

Possible scenario, we have for today.

It is current condition.

Okay, but your Capex is.

Cash base means.

You need to see equipment delivered to your fab and then you pay.

Two equipment vendors.

The Capex right.

That's right yes.

Yes.

Factoring all of this.

We have seen so far.

Good morning.

The.

Towards the Lake.

Yeah. So my question is how confident you are you can receive off lease equipment.

Already ordered the equipment benches things now with Lisa.

Sure.

Supply issues.

Lead times have been very low so do you see any risk for you to fail to get most of this equipment. This year.

Well given the latest update from our supplier.

This will be considered high confidence.

But however, they.

We continue things down to delivery interruption in the supply chain. So if there is a further delay.

We have to have a way to mitigate that to keeping our original commitment to our customer.

Uh huh.

Right now I mean for the $3 billion question I think that that is already kind of see the order delivery schedule that we have updated our suppliers understood. Thanks and my second question is.

So you are blended ASP in full queue. So you have about maybe 4%.

Ill quote unquote.

ASP increase in <unk>, but I look at your product mix.

You only have very.

How about 1% higher revenue contribution from 20 nanometer so I.

Basically I assume.

Our blended ASP increase in <unk> was mainly come from is a like to like wafer ASP increase.

So how about for the first quarter.

Europe .

Two up above 5% so I'll.

How about.

The percentage of foundries.

Ms improvement goal.

Like to like implement thanks.

For the Q1, ASP, 5% uptick.

Peter reflect mostly in the pricing adjustments.

You saw pricing adjustment so the product mix will be.

Pretty much the same.

As our full Q right that's right yes.

Okay then.

Then for you for this 2022.

Theta too.

Just the price maker booth.

Ask.

Yeah.

I touched that the ASP.

Asps will reflect our market value and our relevance in the supply chain.

And our projection right now.

It will be.

2022, ASP dynamic will be similar to the two.

2021.

Based on our current view in the demand and supply in our 2021 blended ASP.

The increase of by about mid teens percentage.

Mhm. Okay. So you said 2022, you spent the blended ASP to increase similar as 2017.

Yes, Okay. Thank you sure.

Yes.

Thank you.

The next question Frank Lee HSBC go ahead. Please.

Okay. Thank you just wanted to ask about I guess, the this idea of the semi content growth I think you've alluded to that previously in this call as well in the past.

Analyst meetings I just wanted to I guess, if you guys could give us a bit more color in terms of content.

Content growth potentially by node are we seeing semi content growth picked up across all nodes in terms of what you see are there any of those in particular, where you see even more semi content growth as we expected.

Wow.

We don't really have by now.

Numbers, but we are confident.

The UMC addressable market, which is forcing them to know.

The mature node.

Many of the analysts.

Still will show a very good growth.

May not be as high as <unk>.

Bleeding H.

Now to UMC.

UMC to enjoying a mega trend so.

The simple answer is really across the board across most of the no.

For UMC focus umc's addressable market.

Okay. So I guess.

If we're looking for semi content across the board would you expect the level of semi content growth that we've seen over the last year to continue to be at the same pace or do you think it will start to.

Just slow down a bit I mean, just generally expectations and how you see the semi content continuing in the next one or two years.

Well I mean, the market intelligence leads us to believe that.

The industry.

The Mega channel actually continue to drive positive growth.

And it will spread our old notes, we just not ready to add at this point.

To discuss by node basis, but okay.

Although we have seen the growth will continue and.

Because we see it.

Number area have a significant silicon content increase.

Founded the <unk>.

Real estate increases the second real estate increases because of more function.

A functionality us was automotive.

On the component is actually increase by unit costs. So.

There are many different areas and spread out of different notes.

And I think the Mega trend is going to drive this industry continues to grow.

Quite some time.

Okay. Thank you and then sorry, just my last question is just you.

You touched a bit about the.

The auto.

Market as well.

Yes currently auto it doesn't look like it's more than 10% of your revenue but.

The way, we should look at autos should we think about it as a much bigger impact relative to what the revenue occupiers of the future capacity going forward.

Wondering incentive I guess, the new capacity going forward, how should we think about the auto space as part as the overall influence on the industry capacity.

Well on the absolute dollar standpoint.

Relatively small compared to the mobile space the smartphone space.

But they are important because they have a different characteristic for example for instance.

Also components.

Long lifecycle.

So they have a longer longevity.

And so.

So we ultimately into consideration.

If it was under consideration are also a revenue.

Portion will actually continue to increase.

Okay alright, thank you.

And next we will have senior lien UBS for questions go ahead. Please.

Hi, Thank you for taking my questions. Congrats on the very strong performance.

My first question is.

For next couple of years clearly dish.

Constructive demand drivers for.

For trailing edge.

Several foundries are expanding and China is also accelerating the investment.

So I wanted to get your thought on how overall supply demand dynamics could trend next couple of years.

Hopefully earlier, we're kind of touch about the demand so it's.

Our market intelligence.

A lead.

Demand will continue to be strong because those mega trends reason.

The supply side.

Based on the announced capacity expansion plan.

We do see the oversupply situation at 28 nanometer.

Beyond 2023.

Not before 2023, but we still also believe.

The.

Oversupply situation will be mile and short lived.

Given that 28 nanometer will be a sweet spot for many applications.

And expect that demand will continue to migrate to 28 nanometers and 28.

28 nanometer demand will continue to grow.

And with our strong 28 nanometer product pipeline.

Our lineup with our technology and market based on the market Mega trends.

Endorsed by the leading customer with a multi year LTA commitments between the LTA College in single source.

Approximately 80% coverage of capacity. So we are confident that our 80% I mean, our 28 nanometer capacity expansions will protect us.

And now we have a pretty good expectation.

Actually a high expectation on 28th growth.

But that gives you a bit of a demand and supply.

Yeah.

Got it. Thank you very much that's very helpful.

So the 80% coverage is that for 28, specifically or for your overall capacity.

Well I mentioned is actually up for the.

28 nanometers.

Right.

No.

Would you be able to share with us if we look at your total capacity.

Ross eight and 12 inch how many of the capacity is now covered by Otas.

They have a very similar.

So you won't see the LTA and the single source business.

Actually endorsed by our customer's commitment competency on technology.

It's all designed into UMC platform, that's when we discuss the LTA in single source and many of them.

<unk> sourced product.

With our differentiated technology.

Yeah.

The total revenue contribution to now is around $18 billion U S dollars.

Continue to pile up many of the products are related to industry Mega trend.

Our specialty technology, Knowhow, and we expect those product will have a longer lifespan.

Alright, thank you.

My second question is on your gross margin.

So after price adjustment is there still a margin difference between eight inch in 12 inch.

And do you have a gross margin target for next couple of years, asking you mentioned the target for <unk>.

20%. So I'm wondering if you also have a goal for gross margin as well. Thank you.

Oh above 20% plus hour you should give you a sense about our.

Gross margin target of course, we cannot really give you.

The numbers.

Again, our real focus is EBITDA margin bridge.

We all continue to show further improvement.

Gross margin can vary along with it.

Depreciation curve and this year will be down slightly next year would be up slightly.

After that maybe increase a little bit more.

<unk> face also increase after three years of compound growth so.

We don't have a go for internal purposes, but.

Keith really to that.

All shareholders to receive.

The dividend in line in terms of our grocery after dividend to be in line or better than all of it.

Gross.

Got it that's very helpful. Thank you very much.

Thank you.

Next question Charlie Chan Morgan Stanley go ahead. Please.

Sure. Thanks.

Gentlemen, and again congratulations for you.

Great results and.

We're going to kind of sell you some kind of industry assumption in your chest. That's here with us. So you also called that the foundry industry is going to grow.

20% year on year.

Can you break out the human grocers, just the ASP increase do you think the.

Is it similar to your company.

Meaning the ASC increase account for maybe 15% of growth.

Shipment increased six 5%.

Yeah.

Well I mean the.

Our previous <unk>.

Our previous outlook based on our market data is we believe the foundry growth will be about 12% this year.

And now we.

Our revised two about 20% and naturally due to the higher utilization some of the capacity expansion and also the A&P increase.

Around the industry. So there are combination of view.

And that make us to believe that 20% will be the current projection.

Okay understood.

And if I may can I ask your based on your.

Kind of.

Calculation, what do you see foundry that supply capacity supply increase over the.

Uh huh.

Year two than anyone so according to our calculation it should be more than 10% last year and should be close to 10% in 2022, just wanted to compare notes.

Assumption.

Well I mean.

The.

Obviously, we have.

South data internally.

The intelligence, but.

The data may based on a different base.

<unk>.

Current numbers, so is I don't want to mislead you.

Yeah.

Associated with the deal.

The base level and deepen and result so.

Yeah.

You're probably talking about between the.

6%.

10% range.

Okay, and then about your communication is.

More than half of your revenue right, so can't break down into.

Smartphone versus non smartphone in data communications segment.

You mean within the communications segment.

How much you said smartphone.

Oh for the photo Wilder.

We project, it's going to be about 85%.

For the.

The the wired wireless is probably going to be about 15%.

Oh, Okay, I see yeah, so I think.

Wanted to ask two.

Allude to these.

Uh huh.

Hi Tech supply chain inventory debate.

So I guess first of all just a very very near term since you have exposure to.

Smartphone as well.

Do you see any kind of a slow down or.

Inventory increased sense of your customers or.

Channel for any of the segments.

Some of them, but also.

Consumer tax piece of it.

Thank you.

We kind of touched a little bit earlier.

We do see some of the wafer demand associated with the.

The Wolfcamp a land home learning.

The softness in the on the smartphone side, we also see.

Uh huh.

Some softness but.

The overall.

Michael I'm, probably a flattish.

Laurie insight, but we do expect the.

Smartphone penetration is do continue.

Automotive continues.

Lots of activity on the Iot space too so.

Easily offset the softness so I think at this point.

We believe that demand will remain will remain robust.

If you're talking about the near term.

For us this year there are few challenges.

Just only comps case lumpy to the equivalent we talked about earlier and also information.

So for this year will be focused on working closely with both upstream and downstream partners to ensure that supply the loading and the managing of coffee issue.

I am.

Concern about the demand for the year, but I'm more focused on.

The overall.

Yeah.

The other the other factors.

Yeah Okay.

Okay.

But one very quick follow up would be back to the queue.

Regarding the kind of take the pace inventory assumption, you're <unk> assumed debt.

The supplies you need to keep that very very high inventory, probably given the logistic issue right.

But.

Oh It comes in you said for consumer Tech.

The inventory value could that discount.

Alrighty.

Kind of chip chip components.

Kind of a full year assumption do you.

Coffee the timing of inventory correction or do you think.

This year.

We wouldn't see kind of inventory rebalancing for the Texas Tech supply chain.

I mean.

For the for the.

Inventory levels are.

Our data shows it was stood at a moderate level.

The inventory level.

Inventory pile for logistics reason or equal.

The high expectation outlook.

The outside inventory preparation reasons.

Yes.

We couldnt judge that but.

On a high level, they still within the moderate level and so on.

As loans that.

Our majority of our focus is on the Mega trends I think.

They still on the uptrend load so.

That you have.

Do you feel comfortable about it right now however.

Great.

No the foundry is it.

Cyclical industry, India Indeed.

So I think for U N C. I think we will position to weather through the cyclicality of the business.

As we for the past few years, we can prepare for this we are ahead of our competition even that we have a comprehensive technology portfolio aligned to the mega trend like that.

Mentioned earlier, we are engaged with.

Leading customer coupled with a well balanced eight inch and 12 inch diversified offering.

In addition, we see customers endorsement.

So the increase of the LTA for the future capacity expansion in our arrangement.

All the effort we have spent.

Past few years, we believe the company has become more resilient in the event.

Nickel uncertainty if that happened but.

We haven't really seen any sign that were happening in 2022.

Alright.

I see.

It's more important to us as a company we need to get prepared for it.

Yes, yes.

Fair enough.

Jason. Thank you very much I think that's a very very helpful. Thank you. Thank you.

Yes.

And next question Goku, how do you how long Jpmorgan go ahead. Please.

Hi, Thanks for taking my questions I have a couple of questions on pricing.

Sure.

The new engagement I think litigations with customers recently.

I'm wondering if the feedback youre getting from public companies.

For the pipe.

Especially after the very big one off like.

That has been seen from your larger competitor, that's probably putting with all the pharma companies.

Across the board.

Do you feel that there is more room for gravel in terms of price increases.

From here on the Q1 that we haven't even seen.

Meaningful but beyond that how.

How much scope of <unk>.

When do we see.

Well.

Again, we don't take the pricing the ASP short term office is optimistic.

Two.

So.

We are closely working with our customer to ensure we have a mutual growth.

And to capture the market opportunities, so I would say.

Right now.

They understand.

Our pricing adjustment for Q1 and will do.

Going to be closely working with them.

For UMC.

The 2022.

Projecting out for the year, we project, it's going to be similar to our 2021 number.

It's already include all of the product makes us well.

The pricing adjustment that we have aligned with our customers so far I think.

I think we do have the customers' understanding and alignment on those.

But if the market does continue.

The changes.

And we will work with our customer closely.

Got it.

So.

I think it's probably the the biggest level of price increases that we've seen in any of the past totally buy up cycle.

Roughly I think if I, if I take mid mid teens.

I think we blended basis in 'twenty, two and probably 30% higher than 2021.

Let's say that it's a downturn sometime in the future.

How do you think about pricing do you think the pricing I think all the dental at this level or do you feel that that is going to be some level of combination needed, especially given the big magnitude of price increases you have seen in the up cycle.

Well I mean, that's very good I mean, that's also.

The logic behind that we don't go out there just raising price or raising price.

The past couple of years, we tried to realign.

Our A&P to the market price and also reflect our market value and so I think we have done that in the past and now that we basically mark.

At the market price level and that this ASP reflects our market relevance and so I think the customer has that understanding going forward.

Market dynamics.

We definitely have to cope with.

With that in mind, but.

In General I think there's real estate beauty.

Our market price will be.

Okay.

One more question on demand and what customers have been doing I think you said you mentioned there is some weakness that you're seeing in some parts of it.

Smartphone net sandbox of work from home Wifi et cetera.

A new customer.

Actively reducing our debt, but do you are you are they are still pending to keep hiring mentoring given the supply chain.

And demand, obviously anything we can see that as kind of weakening but that you've kind of seen that translate jurado capella.

Tending to keep more inventory.

Well right now we continue experiencing a customer's escalations.

So on daily basis.

I actually have like.

I mentioned earlier, we do see some dealer inventory increase on some components.

Uneven supply situation and the escalation situations is that remains.

It didn't change much.

And we have been.

We communicated with all of the customer.

Whereas alto or the.

Communication or consumer.

Our customer and we have been very transparent and provide a very high visibility for them to understand it and so.

If there is a challenge that will continue.

Eight the shortage situation.

But we're still under that booked.

We haven't we have not.

See a sign or signal that we havent gone into inventory or the inventory situations.

Got it. Thank you very much thank you Sir.

Next question Randy Abrams Credit Suisse. Go ahead. Please yes. Thanks for the follow up I wanted to ask just a follow up on the LTA. Then if you could discuss the inventory correction. The protection is at quantity base towards they can defer the quantity.

Is the element also any degree of pricing or prepayment involved like if you could if you could just update the structure of these LTA if you've set up.

Oh well.

<unk>.

Well the way I would say is there's a well.

Well protected for both customer and us.

We have a we have provided the capacity assurance while we.

Well the LTA provides a loading protection and UMC in return.

The such a loading protection includes Dr.

The volume and the <unk>.

ASP.

So.

Yeah and deposited.

But.

It won't be able to go into detail with.

Ah, yes, because we do have a confidential cost with our customers.

Okay.

And then the other question I wanted to ask on 28, if you could go through how you see that is that the way we think about it is still about 20% year on year in the next couple of years because now you have the overall company growing at that pace. If you could give an update how you see 28 growing and back to your view.

Say oversupply two years from now in that node is the planned by that time, we go back to upgrading to finfet will be upgrade or or is it your.

Your views slowdown in capacity, just knowing we might get to that oversupply situation. So beyond these current phases.

Making the claim to start slowing down factoring what other players are doing.

Sure so for the <unk>.

Two of the 28 nanometer capacity will grow additional 20% year over year.

Okay and.

Beyond beyond 2022.

Uh huh.

We still have a very high confidence that it will be a sweet spot for many application. So I think that the demand will continue.

The growth will continue.

Based on our alignment with the customer endorsement based on LTA I've seen those 28.

<unk> well protected.

As a potential risk mitigation for the 2008 to migrate into 2014 that option is always there.

There is a high commonality percentage of the two that actually would be able to come back to 2014.

And so I think that auction will always be there.

And just the last follow up on the application has there been broadening you've talked in the past things like the OLED driver Wi Fi six ISP.

When.

When you mentioned the additional surge of a business.

Are there any new promising applications for the sweet spot.

Well we'd start.

The exploration of the.

Volatile memory.

Ill get into a discussion and.

ISP will also be in 28 nanometers, which is where the sensor controller and dose is all going to be a very strong applications yeah.

Okay, Alright, great. Thank you very much.

Sure.

Ladies and gentlemen, we're taking the last question, which is from Bruce Lu of Goldman Sachs Go ahead. Please.

Well. Thank you for taking my follow up two questions are critical in this year 2021, and that was one 8 billion, which is slide 500 meeting shortfalls from the previous guidance.

You mentioned that maybe some of the tool it's pushed out to 2022, so which means that you had $3 billion. Capex. Initially include those of financial media push out is that the right understanding.

Yes.

Yes.

So what do you mean.

Originally we were expecting 3 billion dollar caveat by effectively $2 5 billion is that the right on the <unk> side.

That's based upon the current payment schedule still.

This number is not really if you compare it to a larger competitive stature.

That's really a smaller numbers to maneuver so.

I mean this.

Remember, it's dynamically adjust according to our payment schedule in this $3 billion, it's based upon our visibility right now.

I see understood. The second thing is that.

When everyone is expecting life span.

Spending 28 nanometer capacity.

The industry wide.

Which means that for other legacy 12 inch like 40 nanometers, which is no one is expanding those.

<unk>, which we also see some of the big shortage of that do you have any plan to.

Increased 40 nanometers or either no truck capacity.

If there is we will definitely report accordingly.

We definitely see Dallas will.

C.

The shortage across the old notes and so EBIT.

If there is any plan on that well definitely report that.

Thank you.

Thank you and ladies and gentlemen, we thank you for your questions that concludes today's Q&A session I will turn things over to UMC head of IR for closing remarks.

Thank you for attending this conference today.

I appreciate your questions.

As always if you have any additional follow up questions. Please feel free to contact UMC at.

And you're going to see a dot com have a good day and happy Chinese new year.

Thank you, ladies and gentlemen that concludes our conference for <unk> 'twenty. One. Thank you for your participation in Umc's conference there will be a webcast replay within two hours. Please visit www dot UMC com onto the investors events section you may now disconnect Goodbye.

Yeah.

Okay.

[music].

[music].

Welcome everyone to Umc's 2021 fourth 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 he would like to ask a question.

For your information. This conference call is now being brokers do life over the Internet web cast replay will be available within two hours. 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. Michael Lin head of Investor Relations at UMC. Mr. Lee Please begin.

Thank you and welcome to the Umc's conference call for the fourth quarter of 2021 .

I'm joined by Mr. Jason Wall depressed occupancy I missed that you don't do the CFO of UMC.

In a moment, we will hear our CFO present, the fourth quarter financial results followed by all persons key message to address Usc's focus in the first quarter 'twenty to 'twenty two guidance.

Once all our president and CFO complete their remarks, there will be a Q&A session.

Umc's quarterly financial reports are available at all.

Triple dog without USA dot com under the investors financial Joseph section.

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.

Certainties that could cause actual results to differ materially, including the risks that may be beyond the company's control.

All these risks please refer to umc's filing with the SEC in the U S and the <unk>.

Policy security authorities.

Now I would like to introduce Umc's CFO is that true.

Don't do to discuss Umc's fourth quarter, 2021 financial results.

Thank you Michael I would like to go through the full Q2, one investor conference presentation material, which can be downloaded from our website <unk> com.

Page three the fourth quarter of 2021.

Thought that RFP was 59 one.

$1 billion with a gross margin at 39, 1%.

Net income attributable to the stockholder of the parent was $15 95 billion and earnings per ordinary shares were one $3 million.

Capacity utilization rate remained at 100% plus.

Please turn to page four.

Q4.

Comprehensive income statement.

Operating revenue grew sequentially five 7% to $59 1 billion.

<unk> reported a 79, 1%.

Improved 12, 5% to $23 1 billion.

We controlled operating expenses.

And the percentage of revenue declined a little bit to 11, 5%.

682 billion.

Non operating income of 558, our net income attributable to shareholders of the parent was 50, 15, 94 9 billion or an EPS of one three.

In Q4.

The whole year on the page five.

For 2021 and revenue grow by 25% year over year.

In NT dollar terms to 213 billion N T.

In U S dollar terms their grocery was higher.

1027%, given the stronger NT dollar appreciation against U S dollars.

Gross profit margin was 33, 8% or $72 billion in a year of 2021.

And the overall net nonoperating income.

Over 10 billion brought by 70% year over year over year.

Mainly due to the stronger stock market performance in most of the financial assets that we hold.

Valuate it according to the stock market performance.

Income tax expenses also grow significantly to $6 7 billion, mainly due to a lower base in 2020 and also profitability in 2021.

So for the full year the EPS is false.

Fall five seven.

Grow by 91, 1%.

Net income times.

So on page six.

<unk> continued to pay up to $132 6 billion.

By the end of 2021, and total equity also growth to $281.

2 billion by the end of 2021.

Page seven the ASP trend continued to inch up.

The.

Q4 of last year, we saw EPS.

<unk> grew up by more than 3%.

In terms of revenue breakdown for page eight our.

Asia is still remain our largest potion of earning revenue contribution.

56%.

In Q4, and North America at 21%.

And for the full year on page <unk>.

90.

The ratio didn't change much compared to the.

Our quarterly numbers.

So page 10.

Both caused by vertical that IBM contribute around 14% of total revenue and for the full year, we see a 3%.

Percentage point increase.

For IDM revenue to 15% in 2021 versus 10% in.

In 2020.

So on page 12 communication also remain around 46% of the pie.

And for the full year.

On page 13, we see.

Computer segment grow by three percentage points to 17%.

Consumer also growth three percentage points to 27% compared to the year of 2020.

And for Q4, 'twenty, one by technology breakdown on page 14.

For 22 28 nanometer.

Account for about 20%.

Of our total revenue.

Yeah.

38% of the revenue coming from 40 narrow them below in Q4.

For the full year on page 15.

We see.

Pretty meaningful increase in <unk> revenue from 14% in the previous year to <unk>, 90% in 2021, which also help all blended.

ASP.

Page 16 continue.

Continue to see some.

Mile capacity expansion, although Q1, there will be some.

Our maintenance and momentum is so most of the increase.

This is Scott.

Among different Fabs, which shows in this table on page 16.

For page 17, so far are currently our 2022 capex budget around $2 billion.

Full year 2021, the actual spending was about $1 8 billion U S dollars.

And.

The above is a summary of Umc's result for Q4 2021.

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 Wang.

Thank you Qi Dong, who evening, everyone here I would like to update a fourth quarter operating resolve Unc.

In the fourth quarter strong demand continues to drive full loading across our fabs while.

Overall wafer shipments grew one 7% quarter over quarter to $2 five 5 million eight inch equivalent.

For the full year revenue in 2021 rose by more than 20% year over year.

Operating income reached a record high.

Driven by a surge in our 28 nanometer business.

The 75% year over year revenue increased from 28 nanometer technologies strengthened our overall wafer ASP.

And reflect the robust ship demand related to <unk>.

And automotive makers.

We also substantially contributed to the improvement in the Companys financial structure.

Our healthy 28 nanometer product pipeline will further diversify our product portfolio and customer base.

Table UMC to capture additional market share.

Looking ahead into Q1 2022.

We anticipate that would be men across a whole milk umc's addressable market, we will continue to outpace supply.

Our growth in the long term is supported by industry sneaker trend.

Which you will be kept us holding by structural changes occurring in the industry.

We will continue to deepen cooperation with customers with our differentiated specialty technologies manufacturing excellence and capacity expansion.

The link to the demands of our partners.

At the same time, we will keep pushing for cost reduction and meticulously manage our capex in order to deliver sustainable and healthy returns for our shareholders.

Next I would like to take a few minutes to share our view on the industry outlook, and where we see umc's position in the industry going forward.

UMC has enjoyed a banner year in 2021.

The past three years, the company has performed and achieve our business goals. Thanks to the positive market dynamics and strong partnership we have developed with our customers.

We believe the current semiconductor market Mega trends, namely the continued penetration of <unk> phones, the celebration of the <unk> adoption and the basketball innovation of Iot devices.

We'll continue to drive higher demand for silicon content.

That in turn will lead to a growing demand for bumping capacity and technology.

Not only at the bleeding edge, but also for UMC focused the market in the foreseeable future.

We have been working closely with our customers aligning our technology solution to capture those mega trends driven opportunities.

We are well prepared.

The competition across many platforms.

The demand supply imbalance, we have experienced over the past two years made some relieve us of new capacity will come online.

Yet you have made clear the need for a structure and dramatic transformation foundry value chain towards closer cooperation and mature mutually risk mitigation.

Many of our customers recognize the importance of the course.

So cooperation and have responded by participating in our accelerated capacity expansion partnerships and reach a multi use long term supply agreement with us.

LTA.

<unk> long term capacity assurance to our partners.

Loading protection to UNC in return.

<unk>, we are also working with and system companies and automakers to enhance the visibility and transparency in the supply chain with the end, although dressing uneven supply in the industry in the long term the supply challenges.

L D A's are more than a protection mechanism for UMC.

They are endorsement from our customers and points to umc's strengthened their position among our peers.

In the past few years, we have also significantly enhanced the company's structural profitability hitting us the necessary resilience to weather through the market fluctuation.

We envision UMC will continue the growth momentum.

<unk> over the past two years based on our comprehensive.

This technology offering foundry position and customer relationships. Our goal is to make UMC U S $10 billion company by 2024 with Aro equal to 20%.

Last but not least I would like to highlight our focus on ESG.

While ESG is at the forefront of many Colgate agenda today.

Corporate social responsibilities have been umc's top priority over a decade.

Over the years.

Sustainability has become deeply embedded in our culture and.

And become part of our corporate DNA in June last year.

On the <unk> topic team committed to reach net zero emission by 2050, the first semiconductor foundry to do so in the 2020, what BJ. Aside we were ranked first in the semiconductor sector, an important recognition for our ongoing commitment to the environment, our communities and our shareholders.

We sincerely invite you to visit our website, where you can download our annual corporate sustainability report.

Now, let's move on to the first quarter of 2022 guidance.

Our wafer shipment will remain flat.

ASP in U S dollar will increase by 5%.

Gross profit margin will be approximately 40%.

Capacity utilization rate will be at 100%.

Our 2022 cash base Capex will be budgeted at a U S $3 billion.

That concludes my comments. Thank you all for your attention and now we are ready for questions.

Yes, Thank you President <unk> and ladies and gentlemen, we will now begin now question and answer session.

If you have a question for any of todays speakers. Please press <unk> one on your telephone keypad will enter the queue. After you are announced please ask your question.

If you find that your question has been answered before so turn to speak Please press star zero to cancel the question. Thank you.

Now please spreads as you'll want to ask a question. Thank you.

Our first question is coming from Randy Abrams Credit Suisse. Go ahead. Please okay, yes, thank you and congratulations on a good result.

When they test the first couple of questions on the Capex.

For the $3 billion budget when it clarify is most of the spending tied to the phase six project or do you have any other additional projects.

And should we view this spending.

With that phase six is a high base.

Or is it your view, we may have a follow on expansion.

To maintain this higher level of spending.

Okay, well I mean, the $3 billion capex.

Part of that was a 500 million in capex budget that rolled off on our 2021.

And the other is includes our maximization of the 12, six and 12 months ex Q1 that we have announced that they will tell the XP one of capacity increase of five per month.

And the T. Six will increase another eight per month.

The.

<unk>.

For the peak.

Six capacity after the <unk> per month will reach $32 five K per month for RP, six which is the highest.

Previous announced.

Yes.

After we added <unk> <unk> per month capacity at each site.

We believe we can add to continue serving our strong customer demands and we will.

Continue to enhance our economic scale, each site and maximize production efficiency. So that's pretty much what that $3 billion.

In <unk> and overall based on that.

Overall, 2022 capacity will increase about 6% yield a year.

Okay and for the timing to clarify for the 32 five K.

When is the timing when that would be available for like wafer shipments.

Yes.

If I could add months will commence.

Comments in Q2 2024.

Of 24, Okay. So that's later okay.

The 10 billion goal.

<unk>.

With these projects you have the capacity or.

Do you have like if you could go through do you have additional space between the China, Singapore, Taiwan to do additional kind of faith or do you need to.

To expand further go to Greenfield.

Well, that's actually a pretty good question.

And so this way our global expansion strategy will come to you first of all our global expansion strategy will come to you followed our stringent ROI.

Criteria, we have been volatile.

And.

But at the same time, it would take us into a consideration of future market outlook and customer demand.

And we.

UMC, we have a very diversified regional production side like you to know and so we do have the flexibility to assess the future expansion site and to meet those customer requirement.

The question about.

The 12 bags, the China fab. The currently we have a fab buildings constructed at both Japan and the Sherman to 12 X. However, those first five will still require additional capex to build clean room before installed tubing equipment.

In addition to that I assume you are.

He has a largely to evaluate different extension option as well.

Beyond the current <unk>, Taiwan, and we will discuss our expansion plan accordingly, but we will evaluate our options right now.

And one last maybe for cheating on the depreciation for if you could give a view this year and initial feedback based on this plan direction for next year.

So I think the key is really we want to keep these tenders trial revenue.

Under control.

So we will continue to do that in 'twenty, two 'twenty 72, depreciation actually will decline year over year.

5% of that.

And followed by a flat to a small increase in 2023.

Which is it depends.

Okay.

Capex this year and also next year because our currently.

From a delivery time has been prolonged.

Okay.

Delivering the 21st.

2007, five K has that pushed out at all or is that second half 2023.

Four.

You mentioned that <unk> would be in 2024, but running with the big capacity would be available.

The both the <unk> six.

Let me go back to the <unk> as well.

The board of <unk>.

<unk> production ramp schedules do Amtrak.

<unk> the 10-K per month capacity will come online by Q2 2022.

His upcoming quarters in Q2.

The <unk> the <unk>.

Six we have encountered some equivalent delivery delayed Edison.

At the same time, we are working with the suppliers right now along with internal engineering efforts.

Will it be shortened the tool installation schedule. So long so right now we still keep it schedule on track and the <unk>.

Ingalls to ensure capacity commitment commitment to RFP six customers.

Okay.

Is that is the Q2 2023, Okay Q2, Okay, yes right.

And then just one last question and I'll get back to the queue.

With some of the.

Cost rising on labor, how should we take the view on Opex now.

More increase or you mentioned something about continuing on the cost reduction effort.

How would that trend and also some of the.

The subsidy if that would maintain a similar level.

So for all packs.

Yes.

Seeing the trend before labor costs increased.

This is a really a function of improved profitability.

So our goal is still remembered thin we hope.

Oh, well grow as a percent.

Our revenue you will continue to be under control, even trend down a little bit.

Okay, even trend down meaningfully in absolute dollars.

No no I mean percentage of revenue as a percent of revenue. Okay. I understand okay. Thanks, a lot for the incremental color I appreciate it.

Thank you.

Next question Z holding China Renaissance go ahead. Please.

Alright, gentlemen, two questions from my side. The first one just want to tap your brain on the feed that market does the company have.

To go back through that market.

Peter just in 'twenty.

Between 2008.

Well I mean.

We never abandoned the 14 finfet.

These are our plans always keeping the 14 finfet under R&D.

Activities and we have delivered a 14 technology and we are engaging with us.

A number of our customer for the Finfet 14 thing that we do not have any plan goes beyond 2014.

We do see that.

That will be very high challenging for us to a salad dressing.

I think that beyond 2014.

So we will stop at 14 at this point.

I see great and the other question.

Given the fact that yes.

Huge progress on gross margin expansion this quarter I've got we've got something around 40% gross margin.

Would be the steady state gross margin for the company going forward.

Yes.

Well first I mean, I will start out with this.

We do see.

The increase of the.

The Capex and buy the same time, we will manage and control the depreciation through disciplined capex approach to maintain the gross margin based on our financials that affordability and focus and focus on our EBITDA margin expansion, while investing for the future.

No.

The principle that we follow this.

If I may add on to that all comprehensive technology portfolio.

All of our leading customer base coupled with the.

Oh, well balance ancient helping diversify offerings.

We think we actually currently having a higher than most of our competitors in terms of EBITDA margin.

And <unk> margin, we think there's still room for further enhancement.

Who makes improvement by specialty technology.

Expansion of 28 nanometer scale.

And also thumb.

Cost reduction effort.

Also productivity improvement potential.

Potential A&P increase.

But the accounting margin, especially gross margin may vary along with the moving depreciation expenses.

Derived from the investment for the future.

So.

We will manage our gross margin through disciplined capex imbalance.

Our financial flexibility and our gross margin.

Translate to absolute dollar dividend payout.

We will be in line or higher than Umc's long term foundry growth.

Okay.

I see okay. Thanks, Pat you don't maybe last question from my side.

Other operating income.

Steel.

Quantity around the around 130 <unk>.

For this year.

No no I mean, this is a very difficult.

Again, this is highly correlated to share price performance.

I need to upgrade.

I did not operate not the nonoperating net okay.

That's the relate mostly related to the subsidy.

So our Shanghai operation It still will be.

80, 590% there for 2022.

Okay, and how long would that last year would that go into <unk> and beyond.

Its mostly young a six year scheme.

I think they will.

Us into 2023.

In 2024.

Okay, Alright, Okay fair enough. Okay. Thank you very much and congratulations.

Thank you.

And next question Bruce Lu Goldman Sachs go ahead. Please.

Alright, Thank you for taking my question.

My question is what's your expected foundry gross rate for 2022.

TSMC is guiding for 15% to 20%, but Europe .

$10 billion revenue guidance suggested like 10% compound growth for the next two years, if TSMC is guiding bullets 15, 20%, which means that either you are losing market share.

In 2020 tool on where or are you expecting that flattish growth in the coming two years, So if theres something I missed.

No I mean.

We have a long term goal is to bring the company over $10 billion and by 2024 and but for 2022.

Despite a lower contribution wafer demand associated with the Wolfgang slowly at home learning.

We still expect structural demand such as the <unk> and Iot will remain strong. So we estimate the foundry industry growth in 2022 will be around 20% in the same time. The UNC is projected to grow in line or higher than the pumping industry.

For 2022.

Okay. Then you can easily achieve a target by 2023.

[laughter] temporarily not Arabia numerical target it's really.

So Jonathan could become a $10 billion plus company.

Of course.

For me.

Yes.

I think it's easier targets.

Do you have any in 2003, so that's why I was confused.

Okay. So the next question is regarding Toby go ahead I'm sorry go ahead.

Can you talk about that.

Next question is more about the profitability.

First quarter AAC extended by 5%.

Blended basis.

Which is supposed to be like wafer.

The wafer price and better product mix.

New distribution.

Depreciation in 2022 expanded only by 5% so theoretically you should see more.

Gross margin impact because of this.

So why the gross margin only increased by 1%.

Approximately 40% and also fall.

The 2022.

We discussed.

There's some structural change in our labor cost.

Also associated with our improved profitability and falling raw material costs.

Also there will be some kind of structural change.

View.

But just.

Just like the structural change that pipe in the foundry industry so far.

For 2022, what we anticipate.

Some.

Raw material increase along the rest of the year.

So you mean, the non depreciation cost increase lock.

Sure.

<unk> offset the impacts offset the benefit from the higher wafer prices is that right.

Yes, I mean, basically we projected labor and raw material costs are increasing.

And we believe this is not only just the inflation because of the demand outpaces supply and we see this happening throughout the supply chain.

But the labor cost.

Cost increase is more structural.

I see.

Do you expect to.

Further increase your wafer price to offset the impact because those raw material costs continue to go off a bit.

Throughout the year.

Well I mean.

Our <unk> strategy.

If not exploiting short term opportunistic profit right.

So he should reflect our value and market price, which is delivered to our customer.

The same time, we want to strengthen our relationship with the customer in a long term basis and mutually growing with our customer.

For that hour AC will reflect the market value and we will cooperate with our customer in coping with the rising input costs.

Inflation, even need it so.

We will continue monitoring that.

But structurally.

Raw material costs.

Increasing then because your value provided to a customer remain unchanged you should you should be able to pass the incremental cost to your customers.

At the same time, we want to make sure that the customer can achieve their mute their growth as well so.

We are closely working with them that yes.

Understood. Thank you I'll go back to the queue.

Thank you.

Thank you.

The next question Rolling She Citigroup go ahead. Please.

Hi, good afternoon.

My first question is for your 500 million Capex push all fall Lafayette TBC.

That was that due to the extended.

So how about.

Mr 3 billion Capex plan, Alicia well you worry about Lisa.

Equipment lead time to continue in pets.

Equipment delivery.

And also continue in pet.

Capex spending this year.

Oh, the $3 billion.

It's already incorporated every.

Possible scenario, we have for today.

It is current condition.

Okay, but your capex.

Is that catch base means.

You need to see office equipment delivered to your Fab and then you pay.

Two equipment vendors you recognize the capex right.

Yes.

It's factored in.

Oh. This is an area we have seen so far.

Our doctor.

Towards the Lake.

Yeah. So my question is how confident you are you can't receive off lease equipment.

Already ordered the equipment vendors.

Now with Lisa.

Sure.

Supply issues the equipment lead times have been very low so do you see any risk for you to fail to get most of this equipment. This year.

Well given the latest updates on our supplier and this will be considered.

High confidence.

But however, they will.

We continue seeing sounder delivery interruption in the supply chain. So if there is a further delayed and we have to have a way to mitigate that to television our original commitment to our customer.

Right now I mean for the $3 billion question I think.

That is already kind of see the order delivery schedule that we have updated our suppliers understood. Thanks and my second question is.

Therefore, you are blended ASP in full queue. So you have about maybe 4%.

Non quota all blended ASP increase in <unk>, but I look at your product mix.

You only have a very.

How about 1% higher revenue contribution from 20 nanometer so I.

Basically I assume you are blended ASP increase in <unk> was mainly come from is a like to like wafer ASP increase.

So how about for the first quarter.

Our HD two.

Two up above 5%, so I'll hop.

I'll hop out.

Founded mist.

Ms improvement goal.

Like to like implement thanks.

For the Q1, ASP, 5% uptick.

To reflect mostly in the pricing adjustment.

You saw pricing adjustment so pardon me it will be.

Pretty much the same as our full Q right that's right yes.

Okay then.

Then for you for this year 2022.

Theta too.

Just the price like a booth.

Earlier.

I touched that the ASP.

Asps will reflect our market value and our relevance in the supply chain.

And our projection right now.

It will be.

2022, A&P dynamic will be similar to the.

2021.

Based on our current view in the demand and supply in our 2021 blended ASP.

The increase it by about mid teens percentage.

Mhm. Okay. So you said 2022, you spent the blended ASP to increase similar as 2017.

Right.

Right, yes, okay. Thank you.

Sure.

Thank you.

And next question Frank Lee HSBC go ahead. Please.

Okay. Thank you just wanted to ask about I guess, the this idea of the semi content growth I think you've alluded to that previously in this call as well in the past analyst meetings I just wanted to I guess, if you guys can give us a bit more color in terms of the semi content growth potentially by node or are we seeing.

Content growth picked up across all nodes in terms of what you see or are there any of those in particular, where you see even more semi content growth as expected.

Well.

We don't really have thought by now.

Numbers, but we are confident.

The UMC addressable market, which is forcing them to know.

Maturing out by many of the analysts.

Still show very good growth.

It may not be as high.

Breathing breathing H, but good enough.

So UMC to enjoying a mega trend so.

The simple answer is really across the board across most of the no.

For UMC focus umc's addressable market.

Okay. So I guess.

We're looking for semi content across the board would you expect the level of semi content growth that we've seen over the last year to continue to be at the same pace or do you think it will start.

Just slow down a bit I mean, just generally expectations how are you.

Semi content continuing in the next one or two years.

Well I mean, the market intelligence leads us to believe that the.

The industry.

The Mega channel actually continue to drive positive growth.

And it will spread our old notes, we're just not ready to add at this point too.

As discussed by node basis.

Okay.

Although we've seen the growth will continue.

And.

And because we see.

Number area have a significant silicon content increase.

Founded.

Real estate increases the second real estate increases because of more functions.

Increased functionality US was automotive you see some of the components actually increase by unit costs.

So.

How many different areas and spread out of different notes.

And I think the Mega trend is going to drive this industry continues to grow for quite some time.

Okay. Thank you and then sorry, just my last question is this.

You touched a bit about the.

The auto.

Market as well.

Yes currently auto it doesn't look like it's more than 10% of your revenue, but the.

The way, we should look at autos should we think about it as a much bigger impact relative to what the revenue occupiers of the future capacity going forward.

Wondering how sensitive I guess, the new capacity going forward, how should we think about the auto space as part as the overall influence on the industry capacity.

Well on the absolute dollar standpoint the.

Relatively small compared to the mobile space the smartphone space.

But they are important because they have a different characteristic for example for instance.

Also components.

Lifecycle.

So they have a longer longevity.

And so the.

So we also into consideration and so forth.

If it was under consideration are out of our revenue.

Portion will actually continue to increase.

Okay alright, thank you.

And next we'll have senior lien UBS for questions go ahead. Please.

Hi, Thank you for taking my questions. Congrats on the very strong performance.

My first question.

For the next couple of years are currently.

Constructive demand drivers for trailing edge.

Several foundries are expanding and China is also accelerating the investments.

I wanted to get your thought on how overall supply demand dynamics could trend next couple of years.

Hopefully earlier, what kind of a touch above the demand. So it's our market intelligence needs to believe the demand will continue to be strong because that those mega trends reason on the supply side.

Based on the announced capacity expansion plan.

We do see the oversupply situation at 28 nanometer could happen beyond 2023.

Not before 2023.

But we still also believe yeah.

The oversupply situation will be mile and short lived.

Given that 28 nanometer will be a sweet spot for many applications.

And expect that demand will continue to migrate to 28 nanometers and 28.

28 nanometer demand will continue to grow.

And with our strong 28 nanometer product pipeline.

We have aligned it with our technology and market based on the market Mega trends.

Endorsed by the leading customer with a multi year LTA commitments between the LTE coverage in single source.

We have approximately 80% coverage capacity. So we are confident that our 80% I mean, our 28 nanometer capacity expansions will protect us at the same time.

We have a pretty good expectation.

<unk> high expectations plenty ace growth.

But that gives you a bit of a demand supply at all.

Yeah.

Got it. Thank you very much that's very helpful.

The 80% coverage is that for 28, specifically or for your overall capacity.

Well I mentioned is actually up for the 20.

28 nanometers.

Right so.

Would you be able to share with us if we look at your total capacity across eight and 12 inch how many of the capacity is now covered by LTA.

They have a very similar.

You won't see the LTA and the single source business.

Actually endorsed by our customer's commitment and competency on technology.

<unk> designed into UMC platform, that's when we discuss the LTA in single source and many of them.

Single source products.

With our differentiated technology.

The.

The total revenue contribution to now is around $18 billion U S dollars and they continue to pay up many other product related to industry Mega trend.

By our specialty technology, Knowhow, and we expect those product, we'll have a longer lifespan.

Alright, thank you.

My second question is on your gross margin.

So after price adjustment is there still a margin difference between eight inch and 12 inch and.

And do you have a gross margin target for next couple of years I think you mentioned the target for <unk>.

20%. So wondering if you also have a goal for gross margin as well. Thank you.

So above 20% plus hour you should give you a sense about our.

Gross margin target of course, we cannot really give you.

The numbers.

Again, our real focus is EBITDA margin bridge.

We all continue to show further improvement.

Gross margin came Berry along with.

Depreciation curve and this year will be down slightly next year would be up slightly but.

After that maybe increase a little bit more about our base also increase after three years of compound growth. So.

Uh huh.

We don't have a go for internal purposes, but.

Keith really to that.

Shareholder there to receive.

The dividend in line in terms of our grocery off the dividend to be in line or better than all.

<unk> gross.

Got it that's very helpful. Thank you very much.

Thank you.

Next question Charlie Chan Morgan Stanley go ahead. Please.

Sure. Thanks.

Gentlemen, and again congratulations for your <unk>.

Good results and.

I really want to kind of sell you some kind of industry.

I'm showing you here with us. So you also called that the foundry industry is going to grow Tony.

<unk> percent year on year can you breakdown the human grocers, just the ASP increase do you think the.

Is it similar to your <unk> trend that many in the ASC increase account for maybe 15% of growth and shipment increased six 5%.

Well I mean.

Our previous.

Our previous outlook based on our market data is we believe the foundry growth will be about 12% this year.

And now we.

Our revised two about 20% and naturally due to the higher utilization some of the capacity expansion and also the A&P increase.

Around the industry. So there are combination of yield.

And that make us to believe that 20% will be the current projection.

Okay understood.

If I may can I ask your based on your.

Kind of a <unk>.

Calculation, what do you see foundry that supply capacity, so probably increase over the.

The past year, I mean to the 91.

Oh this year according to our calculation it should be more than 10% last year and should be close to 10% in <unk> just wanted to compare notes with euro assumption.

Well I mean.

The.

Obviously, we have.

Sounds data internally.

The intelligence, but that.

Data on <unk> based on a different base so different.

Different numbers, so I don't want to mislead you.

The associated with it.

Different base level, and deepen and result.

Hum.

You're probably talking about between the.

6% to 10% range.

Okay. Okay.

Then about your communication.

More than half of your revenue right, so can't break down into.

Smartphone versus non smartphone in data communications segment.

You mean within the communications segment.

How much you said smartphone.

Oh for the photo allowed us.

We project, it's going to be about 85%.

<unk>.

For the year.

The the wires why it is probably going to be about 15%.

Yes, so I think.

I wanted to ask two.

Allude to these kind of.

TEG supply chain inventory dbase.

So I guess first of all just a very very near term since you have exposure to.

Smartphone as well.

Do you see any kind of a slow down or.

Inventory increase that so your customers or channel for any of the segments.

Some of them, but also.

Other consumer attack PCL et cetera. Thank you.

We kind of touched a little bit earlier.

We do see some of it.

Wafer demand associated with the <unk>.

The Wolfcamp a land home learning.

The softness in the on the smartphone side, we also see.

Some softness but.

The overall.

Marvell and probably a flattish.

Uh huh.

Laurie insight.

We do expect.

Smartphone penetration to continue.

Automotive continue and we see lots of activity on the Iot space too. So we'll easily offset the softness so I think at this point.

We believe that demand will remember remain robust.

If you're talking about the near term.

For us this year there are few challenges.

And then just the only cost case.

Two the equivalent we talked about earlier and also information.

Yes for this year.

It will be focused on working closely with both upstream and downstream partners to ensure that supply the loading and the managing of coffee issue. So that's.

Concern about the demand for the year, but I'm more focused on.

The overall.

The other other other status.

Okay.

But one very quick follow up I would be back to the queue.

So regarding the kind of take the pace inventory assumption.

Our <unk> debt.

The supplies you need to keep that very very high inventory.

Given the logistic issue right.

But.

Oh come suddenly you said for consumer Tech.

The inventory value could discount Amanda.

To us already.

Kind of chip chip components.

Kind of a full year assumption do you.

Coffee to timing inventory correction or do you think.

This year.

We wouldn't see kind of inventory.

I don't see for the Texas Tech supply chain.

India.

For the fourth.

The inventory level.

Our data shows it was still at a moderate level.

The inventory level.

Inventory pileup, whereas for logistics reason or maybe.

The high expectation outlook.

The outstanding inventory preparation reasons.

We couldnt judge that but.

On a high level. These do we sit in a moderate level and so on.

As long as you believe are majority all focuses on the Mega trends I think.

On the uptrend load so.

That you have.

Do you feel comfortable about it right now however.

Great.

Both know the foundry is a cyclic.

Cyclical industry indeed, indeed.

I think for UMC, I think we will position to weather through the cyclicality of the business.

For the past few years, we can prepare for this we are ahead of our competition, even that we have a comprehensive technology portfolio aligned.

Aligned to the Mega trend like I mentioned earlier, we are engaged with leading customer coupled with a well balanced eight inch and 12 inch.

So by the offering.

In addition, we see customers endorsement.

So the increase of the LTA for the future capacity expansion arrangement.

All the effort we have spent.

Past few years, we believe the company has become more resilient in the event.

Uncertainty if that happened but.

We haven't really seen any sign that were happening in 2022 alright.

Alright.

I see.

It's more important to us the company, we need to get prepared for it.

Yes, yes.

Fair enough.

Jason. Thank you very much I think that's very very helpful. Thank you. Thank you. Thank you.

<unk>.

And next question Goku, how do you how long Jpmorgan go ahead. Please.

Yes, hi, thanks for taking my questions.

Couple of questions on pricing.

Sure.

The new engagement I think litigation with customers recently, what is the feedback youre getting from Fabless company.

<unk> for the pipe.

After a very big one off price hike that has been seen from your larger competitor probably hit pretty much all the public companies.

Across the board.

Do you feel that there is more room for gravel in terms of price increases.

From here on the Q1, we have seen meaningful hike, but beyond that how.

How much scope of disciplined.

Well.

Again, we don't take the pricing the ASP short term optimistic.

Two.

So.

We are closely working with our customer to ensure we have a mutual growth.

And to capture the market opportunities, so I would say.

Right now.

They understand.

Our pricing adjustment for Q1, and we're going to be closely working with them.

For UMC.

The 2022 is projecting for the year, we project is going to be similar to our 2021 number.

So thats already include all of the product makes us well.

The pricing adjustment that we have aligned with our customers so far I think.

I think we do have the customers' understanding and alignment on those.

But if the market does continue.

The changes.

We will work with our customer closely.

Got it.

No.

I think it's probably be the biggest level of price increases that we've seen in any of the past cycles.

Michael.

Roughly I think if I may.

Mid mid teen.

Brian .

Blended basis in 'twenty, two is probably 30% higher than 2021.

There is a downturn sometime in the future how.

How do you think about pricing do you think the pricing, but I think all the dental at this level.

Do you feel that that is going to be some level of compensation needed, especially given the big magnitude of price increases you have seen in the up cycle.

Well I mean, that's very good I mean, that's also.

The logic behind that we don't go out there just raising price or raising price.

The past couple of years, we've tried to realign.

Our A&P to the market price and also reflect our market value and so I think we have done that in a pad and now that we basically mark.

At the market price level and that does reflect our market relevance and so I think the customer has that understanding going forward.

<unk> dynamics.

We definitely have to cope with.

With that in mind, but.

In General I think this will save us.

Our market price will be.

Okay.

One more question on demand and what customers are doing I think you mentioned there is some weakness that youre seeing in some parts of smartphone as well as some box of work from home Wifi et cetera.

I do customers Act.

Actively reducing order that you are you are there still tending to the prior inventory given the supply chain.

And demand obviously I think you can see that as kind of weakening but are you kind of seeing that translate to hear are those as well.

Tending to keep more inventory.

Well right now we continue experiencing a customer's escalations.

So on daily basis.

I actually have like I mentioned earlier, we do see some dealer inventory increase on some components.

Uneven supply situation and the escalation situations is actually remains.

It didn't change much.

And we have been closely communicated with all of the customer.

<unk> or the <unk>.

Communication or consumer.

Customer and we have been very transparent and provide a very hybrid ability for them to understand it and so.

If there is a challenge we will continue.

The shortage situation.

But we're still under that booked.

I assume if we haven't we have not.

See a sign or signal that we havent gone into inventory all the inventory situation.

Got it. Thank you very much thank you Sir.

Next question Randy Abrams Credit Suisse. Go ahead. Please yes. Thanks for the follow up I wanted to ask just a follow up on the LTA. Then if you could discuss the in an inventory correction. The protection is hit quantity base towards they can defer the quantity.

Then.

Is the element also any degree of pricing or prepayment involved like if you could if you could just update the structure of these LTA if you've set up.

Oh well.

Well the way I would say is there's a well protected for both customer and us.

We have a we have provided the capacity assurance, while we while the LTA provides a loading protection and UMC in return.

The such a loading protection <unk>.

The volume and the ASP.

ASP.

And so.

Yeah and deposit.

But I, probably won't be able to go into detail with that.

Yes, because we do have a confidential cost with our customers.

Okay.

And then the other question I wanted to ask on 28, if you could go through how you see that is that the way we think about it is still about 20% year on year in the next couple of years because now you have the overall company growing at that pace. If you could give an update how you see 28 growing and back to your view.

Say oversupply two years from now on that node is the planned by that time, we go back to upgrading to finfet, where would be upgrade or or is it your.

Your views slowdown in capacity, just knowing we might get to that oversupply situation. So beyond these current phases Mickey.

Making the plan to start slowing down factoring what other players are doing.

Sure so for the <unk>.

Two of the 28 nanometer capacity will grow additional 20% year over year.

Okay and.

Beyond beyond 2022.

We still have a very high confidence that it will be a sweet spot for many application. So I think the demand will continue.

The growth will continue.

Based on our alignment with customer endorsement based on LTA I think those 28.

<unk> well protected.

As a potential risk mitigation for the 2008 to migrate into 2014 that option is always there.

There is a high commonality percentage of the two that actually would be able to come back to 2014.

And so I think that auction will always be there.

And just the last follow up on the application has there been broadening you've talked in the past things like the OLED driver Wi Fi six ISP.

When.

When you mentioned the additional surge of business are there any new promising applications for the sweet spot.

Well we started.

The exploration of the non volatile memory.

Ill get into a discussion and.

ISP will also be in 28 nanometers, which is central controller and dose is all going to be a very strong applications yeah.

Okay, Alright, great. Thank you very much.

Sure.

And ladies and gentlemen, we're taking the last question, which is from Bruce Lu of Goldman Sachs Go ahead. Please.

Well. Thank you for taking my follow up two questions are critical in this new 2021, and <unk> one point.

Which is like 500 million shortfall from the previous guidance, but you just mentioned that maybe some of the tool. It's pushed out to 2022, so which means that you had $3 billion. Capex initiatives include those final two medium push out is that the right understanding.

Yes.

Yes.

So what do you mean.

Originally we were expecting $3 billion by effectively $2 5 billion.

Is that the right on the centralized from my side.

That's based upon the current payment schedule still Miss numbers, not really if you compare it to a larger competitive stature.

That's really a smaller numbers to maneuver so.

I mean this.

Number is dynamically adjust according to our payment schedule in this $3 billion, it's based upon our visibility right now.

I see understood. The second thing is that.

When everyone is expecting life span.

Spending 28 nanometer capacity.

The industry wide.

Which means that for other legacy <unk> like 40 nanometers, which is like no one is expanding those.

<unk>, which we also see some of the big shortage of that do you have any plan to.

Increased 40 nanometers or either no truck capacity.

There is definitely report accordingly.

We definitely see Dallas will.

C.

The shortage across the old notes and so EBIT.

EBIT there is any plan that would definitely report that.

Understood. Thank you.

Thank you and ladies and gentlemen, we thank you for all your questions that concludes today's Q&A session I will turn things over to UMC head of IR for closing remarks.

Thank you for attending this conference today.

I appreciate your questions.

As always if you have any additional follow up questions. Please feel free to contact UMC.

And you're going to see a dot com perfect good day, and happy Chinese new year.

Thank you, ladies and gentlemen that concludes our conference for <unk> 'twenty. One. Thank you for your participation in Umc's conference there will be a webcast replay within two hours. Please visit www dot UMC com onto the investors events section you may now disconnect Goodbye.