Q1 2022 United Microelectronics Corp Earnings Call
Welcome everyone to Umc's 2022 first quarter earnings conference call.
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Please follow the instructions given at that time, if you would like to ask the question.
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Please visit our website www UMC com under the Investor Relations investors events section.
And now I would like to introduce Mr. Michael Lin head of Investor Relations at UMC. Mr. Leanne. Please begin.
Thank you and welcome to Umc's.
Conference call for the first quarter of 2022.
I'm joined by Mr. Jason Wang.
Rather than off year and see that.
You don't do the CFO of UMC.
In a moment.
Yeah, our CFO present, the first quarter financial results, followed by our President's key message to address Umc's focus.
Second quarter 'twenty to 'twenty two guidance.
Once our president and CFO accompany their remarks.
There will be a Q&A session Umc's quarterly financial reports are available at our website.
You won't see a dot com under the investors financial section.
This conference we may make forward looking statements based on management's current expectations and beliefs.
Forward looking statements.
Subject to a number of risks.
And uncertainties that could cause actual results to differ materially.
The risk.
The company's control.
For a more detailed description of these risks and uncertainties.
For two hours in a sequence filings with SEC and the policies security authorities.
During this conference you May view, our financial presentation material, which is being broadcast live through the internet.
Now I would like to introduce Umc's CFO research you're doing due to discuss this.
Quarter 'twenty, you're talking to.
<unk> financial results. Thank you Michael.
Like to go through the Q1, 'twenty, two investor conference presentation material, which can be downloaded over here.
Real time from our website.
Starting on page for the first quarter of 2022 consolidated revenue was $63.42 billion. We saw gross margin at 43, 4%.
Net income attributable to the stockholder of the parent was 19 point 19 period.
The earnings per ordinary share or $1, six one and $3.
In terms of capacity utilization rate.
100%.
For the last question.
$12 five.
Correct.
In Q1.
2022.
All income statement.
Although the sequential comparison basis.
And you wind up by seven 3% mainly driven.
Driven by our better areas.
Well you're right.
Three 4% compared to 79, 1% in the previous quarter.
Operating income as a result.
75, 2%.
For operating income margin.
A number of 22 3 billion.
Okay.
And that income is about 20% compared to 15 billion.
Previous quarter.
About 25% quarter over quarter growth.
The EPS is the 1617 key shifts.
In terms of year over year comparison, our revenue grew up 575% year over year and operating margins by nearly.
Two times two times $2 3 billion.
He is also almost doubled compared to the same period I'll talk here.
In terms of our balance sheet is nothing new customers remain strong.
Hundred 70 til therapy.
Total equity is about 300 billion.
And $2.
As I mentioned, the Q1 cat, one or so or one off that is.
Stronger than what you put in your own device.
In terms of revenue breakdown.
We see little change on a sequential basis.
U S representing 32% in half of our total revenue.
Sure.
Before per se.
Our idea in Cyprus, a ratio did not change much.
It's about 13% of our revenue and.
Everything 87%.
In terms of.
The segment breakdown.
Some of your car insurance.
Our largest segment of 45% of revenue.
The others, which including auto industrial is about 12%.
Computer and consumer 76% respectively.
Revenue from different geometry.
Hum.
14 nanometer and below revenue.
Around 38% almost identical to the previous quarter.
And we're continuing to see.
Capacity increase for <unk>.
Two of 2000 and talking to you too we are seeing a 10000 wafer per month for fishing or capacity.
Plenty of Hanmi cars coming in for the holiday timeframe.
Sure I'll frame, so that will lead to about.
45% of capacity increase in the second quarter of 2022.
After our announcement for the Singapore Phase III expansion.
Our revenue our Capex budget.
236 theatres in U S dollars.
2000, and timing to a majority of.
90% of cost.
Shopping we liked it.
The property is the summary.
Umc's result for Q1 2000 plenty to.
More details are available in the report which has been posted on our website.
I will now turn the call over to personal have you ever seen it.
If I'm wrong.
Well. Thank you that you don't.
Everyone here I would like to share Umc's first quarter highlights.
Started 2022 was a solid first quarter.
Our strong wafer demand kept all SAP operating at full capacity and higher average blended pricing with our overall revenue.
While we have observed a general end market featuring a cyclical.
With the COVID-19 pandemic.
These businesses continue to be well supported by structural trend.
Increasing silicon content devices and driving new applications.
Specialty technologies, such as <unk>.
Mark I memory power management, RF, Soi and OLED display driver unnecessary for application across the <unk>.
<unk> Iot and automotive.
And our strategy to focus on reading the specialty technology has been successful.
Which now contribute more than half of our wafer revenue.
An increased number of customers are recognizing the value of our customers, especially with your process.
Long term partnership.
Looking ahead.
We expect the positive demand outlook remain unchanged despite stock market volatility.
Caused by the pandemic and geopolitical issues.
The expansion of that 12 AEP has come online in this current quarter.
Which will help us access not only to be meant that we haven't been able to fulfill.
We are also actively adding capacity our overseas basis to support our customers' long term growth.
Our Singapore side, we recently announced a new fast to address.
Growing 22 28 nanometer demand.
<unk> already secured multiyear supply agreements.
2024.
Meanwhile, our Japan subsidiary.
Tracy and denzel.
Bleeder to cooperate on the production of a power semiconductor at USG.
Tracy 300 meters.
Does that mean.
Order to serve the growing demand.
The market.
Operation demonstrates our strong commitment.
Two supporting our customer and met constraints, you know automotive value chain.
Part of the industry Megatrends.
Raising the adoption of electric vehicles.
As a growth catalyst for our automotive business.
We are excited to be selected as a foundry partner for many global leading customers as we aim to expand our market share.
Fast growing automotive segment.
Next I will also 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.
I would like to take this opportunity to reiterate that umc's growth strategy is aligned with industry Megatrends.
As a leading specialty technology providers are customized and highly differentiated solutions across the eight inch and 12 inch will minimize umc's exposure to market fluctuations.
The specialty technology will enhance customer stickiness.
Knowing our long term visibility.
In addition, the lta's demonstrate our customers' long term Cleveland endorsement and cooperating with you let's see.
Giving us the confidence to expand our capacity and grow cohesively with our customers.
Revenge resilience during the industry downturn.
As for 28 nanometers.
We always align with the customer on 22, 28 nanometer new capacity expansion.
With the <unk> ramp in 2023.
The demand supply balance will it depends on the timing of the two and recruitment delivery.
In light of his recent equipment delay supply.
Supply chain disruption.
Impact on Furloughing 28 nanometer capacity coming on stream still remain to be seen.
We believe 22 28 nanometer will be a long lasting node driven by applications such as the Wifi six six.
Now looking at OLED driver IC.
We are well positioned diversified our product portfolio to capture this market opportunity.
Now, let's move on to the second quarter of 2022 guidance.
Our wafer shipment increased by 4% to 5%.
ASP in U S dollars will increase by 3% to 4%.
Gross profit margin will be approximately 45%.
Capacity utilization rate will be at 100%.
Our 2022 cash base Capex will be.
U S $3 $6 billion.
That concludes my comments. Thank you all for your attention now we are ready for questions.
Yes, Thank you President <unk>, ladies and gentlemen, we will now begin our question and answer session.
A question for any of todays speakers. Please press one on your telephone keypad and you were into the queue.
After you are now please ask your question. If you find that your question has been answered it before it is mature to speak please approach zero two to cancel the question. Thank you.
Police presence you'll want to ask a question. Thank you.
And our first question is coming from radiate rooms Credit Suisse. Go ahead. Please yes, thank you and Tom I wanted to ask the first question.
Just about the environment wanted to see first from the China Covid Lockdowns.
If you've seen any market impact kind of orders either from the factory shutdowns or consumption impact.
And I'm curious within your application mix, if you've seen Kent.
Cancellation or slowing in certain applications and then shipped to other applications.
If you are still in a position of.
Fulfill demand or you see.
Some applications still what demand you need to get capacity to meet.
Okay, well I mean, the China lockdown certain have some effect to the market demand.
The old World the year strong demand for Aldo industrial server and networking Stephan.
<unk> offset softness in the smartphone and mobile and the PC.
Some of the market.
India under the China about them.
For for the overall 2022.
It still remains a challenge for us to meet the aggregate these men.
Our customers.
Near term there whether it is the demand or inventory fluctuation among the selective customers.
Has not been the fact that UMC demand supply imbalance situations.
Okay, and I wanted to add.
I ask on the Capex increase it sounds like tied to Singapore.
A few years out.
Are you having to prepay two secure tools quite early and.
Given the bottlenecks if you could give an update on.
Timing of when Youre, bringing up some of the capacity like the additional phase in China next year.
Still ramping up and how much is ramping up middle of next year.
Well first.
For this year the <unk> has come on line this quarter.
We mentioned earlier for the next phases are kind of $19 6 million.
The challenge in the supply chain, including component labor shortage.
We have been comfortably industry by equipment.
We're currently working diligently with the supplier to identify something critical twos, and two shuffled apparel and minimize the delay.
Furthermore, we actually were children internally, our two installation and qualification schedule. So the bottom line is the goal is through those efforts, we will ensure our LTA convenient for the customer in 2023 remains unchanged.
Okay.
Could just clarify again the capex raise.
What was the factor already too.
How would that increase for the new fab.
And you mentioned securing LCA does that imply you're still expect even with delay.
Some of that capacity should ramp second half next year.
Well I mean.
We managed the <unk> ramp.
But we will experiencing some delay.
We are aligning that with our base capacity and show the customers commitment to be so.
They also have dynamic, but we have to continue working with both supplier and the customer.
We're increasing our capex budget cash based Capex for 2022 is mainly for the shell construction.
Sure.
So you can think of.
Okay.
And Keystone guys for the overall Capex framework is.
Is there a rough way to think about next year and the.
Depreciation where you've had a nice tailwind based on the new cash payment schedule. How do you see depreciation this year roughly for next year.
This year, we mentioned the overall depreciation expenses should be down by less than 5%.
Yeah, similar to that of last year.
However for next year depreciation expenses, so likely through right.
Uh huh.
Meaningful way.
These cost numbers.
This years.
Overall pulse Petrie M.
M T six.
Crazy or not only absolute profit also the EBITDA margins.
There won't be some short term.
Counting depreciation impact in 2023.
We'll quickly.
Back to our normal range.
Okay and one final question.
I think last quarter, you mentioned 18 billion for the baseline capacity I just wanted to inquire.
Enquire a little more.
The you mentioned in the prepared remarks downturn resilience.
If there where I start correction, just how much flexibility, Mike if you've given on shipments for them to push out if they don't have to demand.
Then how fixed is.
The pricing in the downturn like have you have you kind of secured for baseline.
Fixed pricing or if you could clarify a little more.
The way to think about the LTA in a downturn scenario.
Sure.
Well I mean in general the background of the LTA is to serve the long term.
<unk> benefits of both customer and UMC. So while we both party focus on the pockets of market to pursue business growth.
UMC alone with our customers share the contractual obligations set forth in the agreement.
Given those obligations both parties have consider the scenarios and factor in all of the financial risks outlined in the LTE along with the market fluctuation. So the continuous have closed on both parties in the LTE it would not be DVA, regardless of the market dynamics.
Okay won't be deviated and it sounds like you would do it.
You do expect quantity and pricing then theres some commitments on those in this obligation absolutely. There is a commitment on both volume and pricing yes, okay. Great. Okay. Thank you. That's my question. Thank.
Thank you.
Thank you.
And next we'll have Brett Simpson Arete research for questions go ahead. Please.
Yeah. Thanks, very much I wanted to just follow up on Randy's question. There about LTA is I think you mentioned $18 billion last quarter.
Did UMC sign any new LTA is this quarter and if so.
Where does the cumulative LTA amount today and what's the prospect for signing new LTA stood out this year or is the vast majority of these deals kind of in the rearview mirror now thank you.
Well I'll tell you, it's a mechanism to give us the longer term visibility.
And so yes. The LTA is a mechanism will continue deploy throughout this year and.
In fact, we actually there has been voted by LTE is still under discussion currently.
We do see this lta's of Us I've mentioned.
Long term full compelling benefits for both customer and ourselves. So we will continue to deploy that.
And good Ltvs rise in the quarter 18 grounds would go up.
Well.
He has gone out a little bit and they still kind of the ongoing one.
We expect that number will continue going up.
And in fact.
The.
Denzel announcement, we just did.
Actually that is part of the LTE as well.
Okay. That's helpful and maybe just as the second question I guess, we've seen a sharp increase in your gross margins over the last couple of years and I understand the LTA is give you protection around the cycle.
Market market changes in market conditions, but can you share with us.
Youre thinking about how gross margins trend through the cycle for UMC.
Yes.
If we look at the sort of puts and takes of all of this.
Cycle, where would you expect gross margins to sort of.
Settle in long term for UMC, given all the dynamics we've seen of late.
I really.
Maybe she.
And comment that Bob if I can give you a bit of a background.
The way we look at this gross margin in the long term.
Is the way that was throughout the past few years, we have transformed the company is resilient and well positioned to weather through the market fluctuation. So few things one is the capex strategy.
Our stringent ROI criteria in fact with the customers to LTE.
The second is we have continued to close cooperate with a leading customer to happen optimize our client portfolio.
And third.
We continue to grow our specialty technology business could become higher differentiation, Jason and customize the process solution, which now will provide a longer longer visibility and stickiness.
Therefore, the company will have more room to grow EBITDA margin product mix refinement.
And the last is the company's healthier financial now the structure that includes a much improved our breakeven point.
I think will contribute to allow UMC to weather through the semiconductor cyclicality. So that means the margin will stay at a healthy level and thats.
On a higher level, how we manage this margin going forward yes.
Thanks very much.
Yes.
Thank you.
Next question is from Bruce of Goldman Sachs Go ahead. Please.
Well. Thank you for taking my question.
Look Greg I wanted to ask.
The second quarter I mean, the gross margin fighting for 45%.
Which is up from about 40% last year, comparing the guidance the guidance I mean, you bought.
Cool.
If I understood you have major.
But the only difference between core.
In the third quarter is the peak.
<unk>, which is multi pardon me an island.
Okay.
You had 28 pardon me.
The property is already higher than the corporate average.
Uh huh.
No I think <unk> nanometer.
Margins.
In line, we thought 12 inch operation.
And that's our accounting statement point of view of course.
You'd be down market.
You may have.
Our margin in 10 months.
I have to emphasize that our Q1 tie.
40%.
Somewhat of a lift.
Five of these.
Recurring theme.
Quarter to what we already effecting.
We guarantee scenario.
Hey, there.
Hotaling quota as well, mainly coming from rising raw material costs.
And the.
Increased labor costs.
<unk> pretty much either.
Got it.
Okay.
Uh huh.
In the second quarter, so 45%.
Roughly gross margin.
We can see right now for second quarter.
Thank you the next question.
The investment content, it's mostly.
Hey, Steven.
Can you provide us how much of your business right now.
Putting much and I think also a paypal or like customized cockpit.
The revenue comes to begin from those.
This is luis.
Yes.
More difficult to move away.
When you see that down cycle.
Alright so.
Well let.
So this way for the.
Our overall product mix.
<unk> technology kind of feed to a single source uncompromised.
Product that probably representing more than 50% of our current revenue levels.
And that is continuing to increase.
In the current quarter with all over 50%.
And the <unk>.
The LTA arrangement.
The 28 nanometer, particularly copper is.
About 80%.
Okay.
And the like.
In addition to those.
Yes Sandy.
We announced specialty technology.
Our single source that also has.
A good percentage of that in there.
So net net I would say we have about 65% complete a single source.
In specialty technologies, so that will probably give you some ideas.
In addition to that we also have some over that time, we stay LTE coverage.
Do we have a pocket for two years.
I think the number will continue to increase.
Our specialty technology and customer engagement momentum remained strong and robust.
That number will come to the right and.
While we continue that progress we can we can again update on ongoing basis.
Alright. Thanks.
I wanted to squeeze one question for the R&D expenses, which is below 5%.
5% of revenue first quarter is that the new norm for the UMC I think we are.
We discuss this like two or three years ago, but now it's getting to the the level of 5%.
A new norm for UMC.
UMC moving forward.
Given the current near term projection.
We will stay in a similar level.
Revenue continue to grow.
And Meanwhile, we continue.
All of them.
Different various of technology in the specialty area.
But I think it was still within that ballpark, yes.
Okay. Thank you I'll go back to the case.
Thank you.
It's one Charlie Chan Morgan Stanley go ahead. Please.
Thank you Hi, Jason Hi, It's you don't.
Good afternoon.
My first question is about the.
Your LTA or Concho, Wisconsin, but because right now.
See that sum up consumer or PC.
Smartphone customer inventory keep it going higher so would you allow.
Customers to trade.
Stream or cut that.
Forecast, even they have some country with you.
Well I mean.
Customer forecasts changes.
Contractual obligations.
We sort of touched on earlier the convenient.
Fourth.
In the LTA will not deviate regardless of market dynamics.
Yes that is my concern that because of you know customer too.
Give that obligation in there.
Inventory keeps going higher but it probably needs that dosing that we cannot really.
Sell through to market given the market situation.
Hum.
Hmm.
That's not entirely correct.
Okay, Ive, a customer taking a precision to reduce the loading.
They fulfill their contractual financial obligations.
Is there another alternative.
Yes.
If there is any kind of.
Patents.
Force customer to keep the.
Keep up producing.
Well there are certainly some contractual obligations financially.
And.
It is our belief.
Most parties have consider the scenario, while we enter into that agreement.
Okay.
Okay. Thanks.
That's why I kind of agree with that.
Some have taken those are still pretty robust.
So I put the motive and.
<unk>.
But as you mentioned.
But.
I think you're going to see the real revenue exposure to those.
<unk> taken this gives it quite low I don't think that.
We could exceed that 20% of revenues.
Agree with that.
I didn't I didn't catch the last statement again I'm sorry.
So it does.
Those are <unk>.
Moshe two automotive news.
Working class.
To date, our revenue exposure shouldn't be more than 20%.
In.
Bye.
My understanding.
You said right.
No, it's actually higher than 100%.
Okay, So how how high it would be.
I mean this.
Well we.
I will say, we were probably one third of it that is already within the hour.
Automotive industrial and.
And there is a.
The other area, even with India.
The PC networking.
The way that we category that the part of that is attribute answer and that will can push out that much stronger.
The man.
So if.
If you go into.
Itchy sub category, including seasonal book and then you have two secondary by different applications again.
So they are some of the stronger settlement under some category. This is another week or so.
So exposure wasn't exactly on a very high service level.
Okay. So yes, so that's it.
Very helpful I think.
Oh, those are trying to get a sense.
First of all your current tap you have patient over the next quarter of.
February that vision with everybody the facts.
The cashier mitek inventory correction and.
UMC has sufficient.
Well for our industrial automotive and networking.
To offset that weakness.
I think that was pretty helpful. But lastly.
So maybe I can give you another.
Example for instance.
On the smartphone space remain.
<unk> to the <unk> phone.
OLED space on the high voltage.
The <unk> because we don't do much of a TBD in the smartphone area.
We do quite a bit of a.
<unk> please.
I see.
Importantly, with our high voltage Theres a mix of other applications that we've been there so yeah.
So the mix is quite different.
Yes, and Thats it.
Is there any concern that.
Given you had the otas like a two way right you have to deliver customers need to stick with the odor.
<unk> right.
If there is any kind of.
Schedule delay.
Would you need to pay.
A penalty to your customer.
Again.
There is a mutual contractual obligations right and so we both calculated that and we have a coffee the oldest scenario and faster into that so at this point.
Umc's perspective.
Our goal is to ensure.
Our commitment to meet.
Hi.
Yes.
I see I see so you wanted to.
Put the Kosmos demand as the first priority and Ah.
Okay, I get that and what's <unk>.
The biggest shortage I mean, the bottleneck for entire production line.
Got that.
Quite a bit of detail there.
That's it.
Loans to list.
There's going to be to fill it.
Okay.
Okay. Okay.
Good luck. Thank you thanks, Jason Thank you.
Thank you.
Yes, Christian Goku, how do you how long Jpmorgan go ahead. Please.
Hi, good afternoon, and thanks for taking the question first of all on <unk>.
Do you can you don't could you remind us how much of your 12 inch capacity in eight inch capacity is now covered by LTE.
I guess.
55.
<unk> six <unk> and <unk> will probably be 100% covered but for the existing capacity could be have a reminder, on how much is covered by M. D.
We don't break down by competition.
Obviously, all the annuity peer with capacity.
That should come on stream.
And pieces and tying in Ireland and.
Singapore are all covered by multi year LTA.
Although new classes.
<unk> hundred per se.
And you've done so far.
<unk> is a couple of Ta and.
I think the.
Overall our ratio.
Jeff had mentioned.
The overall business covered by Ikea is close to.
747 out of 40% area.
Understood.
So let me ask I think you mentioned that you saw some demand weakness in some of the cyclical Lady guys.
Related to pandemic shutdown lockdown et cetera could you talk a little bit about what are the customer constant conversations you are having in these areas.
Is your backlog or do you think as a result.
Is there still a lot of non supported demand for these segments that you still can fulfill is that not supported demand coming down just wanted to understand what are the dynamics that are happening between you and the customers given some of this demand weakness.
Well in general.
We remained challenged due to us to meet the aggregated demand.
From a customer so we still severity.
On the under supplied.
Our customer.
But mainly if you break it down by.
At different segments, the PC notebooks in the smartphone area has shown some have shown some softness.
While the automotive.
Industrial server and networking still escalating.
What is the is the shortage.
No.
I said.
At this point.
Phil I'll.
I'll feel that demand remain.
As per the high level to us okay for us.
And the company.
With the conversation with some of the customer is we are.
Diligently meeting day or modulating, some soft area, Oh, 40 that eating the higher inventory or.
The solid demand if we can modulate those capacity to support those.
No.
Severe shortage.
So that is ongoing process.
Effort all of that.
Okay understood.
My second last question is on.
Yeah.
<unk> price increase I think you're talking about roughly 3% to 4% increase in me for ESP on U S dollar basis.
That primarily coming from your increased 20 nanometer mix or are you still seeing me for price increases to customers given b.
Unfulfilled demand.
It has both.
As a result of our both pricing increase as well.
The product mix.
Okay. Okay. Thank you very much and one last question. If this had been so would you be on IBD. Congratulations on that could you talk a little bit about what kind of capacity.
Japan would you be allocating for that is there any details in terms of the plans for this.
Sure.
Under the program.
UMC week through USB C will provide.
<unk> manufacturing service to them so.
The program is one of the dental care.
Capex for the twos and use JC will peers, the capex will clean room facilities.
And the production ramp for potential will start in 'twenty 'twenty three targets capacity ramp reached 10-K per month by 2025.
Understood. Okay. Thank you very much thanks sure. Thank you.
Thank you.
Next questions Sunny lean of UBS go ahead. Please.
Hi, Jason Thank.
Thank you for taking my questions.
On the steady performance.
My first question is also to follow up on LTE.
Does your engagement.
Sort of limit.
Possibility to push out the capacity expansion.
If customers continue to pursue the demand.
Uh huh.
There are contractual obligations, including the timing Paul.
Managing the equipment delay so.
That's helpful.
To fulfill our contractual obligation.
Not to impact all companies.
Now to your customers so the planning.
Got it.
And so maybe.
A question high level question.
On the January earnings call share your thought on the supply demand outlook for overall tardiness laundry for next couple of years.
Now.
After a quarter that the changes on the demand and also on the supply side. So I wonder if you could share with us your latest thoughts on the supply demand outlook.
Well I mean.
For 2022.
I think we we remember.
Our view on 2022.
Remains solid.
<unk>.
In Q1, I think we gave we revised up the <unk>.
Industry growth will be about 20% plus.
That view has not changed.
Changed it.
And UMC is target to grow in line or higher than that foundry foundry foundry industry I think that also.
Sure.
For 2023.
If we.
Looking to the outlook, we remain cautiously optimistic.
On the marketing it.
Yeah.
The overall makeup that you wouldn't see us focus on I think that that will continue growth.
But the.
But given the current market situation, we know without more cautiously optimistic on that.
Over the past few years, Saudi proactive market positioning.
And closely working with our.
The overall global leading customers with our ROIC driven capex and.
I think all of this effort will help us to enhance them.
Our position financially.
And we will continue.
The company profit, even even with this market market dynamic.
So we at this point are we at for the 20th century, we are partially optimistic pilot.
Understood that's fair.
Helpful.
So any expectation on the industry wide supply demand going to 2023 and 2021.
Well I mean, we touched that area as well.
Getting the challenge in the supply chain, including oldest shortage weighed upon component or labors.
They will be solid equipment would be like and I've seen some of the announced capex capacity may not come online on time.
But the so I think the.
Right now instead, commenting on the overall market in the 2023 in terms of supply and demand we feel comfortable about our situation.
And given what I just mentioned earlier, what we have changed is a few years, along with our talking to market the market Mega trends along with the customer.
Alignment.
And we feel comfortable about our 2023.
The supply dynamics.
Got it alright, thank you very much.
My another question is on pricing I think on January <unk>.
Generally.
Got it therefore 2022 pricing to go up by a mid teen percentage.
<unk> basis.
But if based on second quarter guidance that may imply limited upside into second half would that be a fair assumption.
Well, we guided that.
And based on the margin.
Expansion in both Q1 and Q2.
Promising approaching our annual target right now.
Got it so no.
No for the update on the full year pricing garden should we anticipate a bit of upside to second half.
Now, we can probably do that on ongoing basis on a quarterly basis.
Got it thank you very much.
Thank you.
Yes, Christian the home of China Renaissance go ahead. Please.
Hi, gentlemen, I have two questions.
First one in.
We are going to be.
Perhaps run into 'twenty, two 'twenty demand deposits I, just wonder how we are going to allocate our capacity would that be based on customer base on technology platform based on <unk> Beach in all countries as part of that being shipped.
But there are multiple considerations.
Is not a simple answer to that.
Not only from our customer alignment standpoint, you also have to think about the each site.
Economic scales. So we don't Wonder mountains product too fragmented each sites so.
We'll carefully examining the hour pool capacity profile as well as the customer demand and to align that and so it is quite dynamic.
Complicate it but.
Okay.
No.
I actually don't have a simple answer to that but I can tell you is.
It's very very sophisticated process.
Alright.
So for me I assume that basically the three fabs can basically hit the pause button in August .
As you can be fungible.
Ideally they are fungible.
But again, the highest flexibility of Fungibility that will actually increase the cost of operating it. So you have to seeking to balance some of that.
And.
Wow.
You mitigate the demand risk and you have to also attributing it to.
Financial results. So it is a balance.
Okay Fair enough Yeah second question.
Equipment.
Much of our route to market.
You can see the let's say the mature and milk photo mask and other area of concern that may limit their final wafer output.
Well I mean, yes, I mean.
The answer is yes, and it's actually a lot more than that.
So we are constantly working on productivity improvement.
Both base capacity as well as the new capacity and accelerating.
<unk> ramp up.
So they are multiple.
<unk> activities.
And Meanwhile, we are working with the two supplier to shuffle in the power here and.
And some of the different critical tools to minimize that as well so so.
It is a.
Quite a bit of interest there.
Alright, okay. Okay. If I could go back. Thank you very much. Thank you.
<unk>.
Next question.
Macquarie go ahead please.
Yes, hi.
Good afternoon, UMC could you give us an idea.
Range.
Capacity team trained by end of 2023 so.
So what I need.
I understand there is.
Equivalent delivery uncertainty I understand there is not seeing with customer capacity schedule.
But if we think about.
Can you take Q3, let's say that in both of those sound yogurt.
So teekay wafer in each.
Alright.
2013.
So when do you think reasonably the timeframe when we see those teekay in production.
Previously 46, beginning with revenue to <unk>.
Okay.
And then for <unk> could you be thank you.
Well I mean.
No, we kind of touch doubtful debt lots of effort to address that ramp up schedule for the 2023.
And the original plan is tied to having initial production in Q2 2023 and two.
Towards the end of the year, we can reach too.
Hi.
Full capacity and so that profile still under alignment with the supplier and our goal.
Based on those.
Function and the support that we have alignment with our customer is also.
Yeah under evaluate so we will continue moving to that direction. However, I think the priority at this point is to ensure our customers commitment first yeah.
Turning to capacity increases.
So the.
We are talking about.
Year over year increase.
Which increased by.
8% in property insurance for per Se.
And oney nanometer capacity.
2000, and tiny to increase about 20% year over year.
The top 510 additional fishing with 10000 wafer.
It's coming online as we speak.
It's more.
More for maintenance for this year.
Thank you. Thank you very much.
Right.
Second and last for me.
I understand that the product mix can be difficult to.
<unk>, what you're saying.
PC notebook smartphone weakness I guess it's.
Everybody thinks.
I also against that.
It really depends on customer specific client specific but when you look at your 20% revenue growth.
<unk> plus percent revenue growth.
I'm sure you have.
And those smartphone PC model that could indicate some downside to that 20% what do you think the range.
So.
Can you give us a.
To recap your question your question here.
Our current forecast what do we see all of the decrease of our PC demand.
Hey man in related to PC notebook.
I mean as you said.
You can put the confidence you have 20 plus percent revenue growth this year.
When you said.
So demand is weak because you make four five G. OLED then.
July has been unfortunate.
Actual you actually I guess, you mean, it's not that big.
In as much as the OLED <unk>.
Volumes are growing so I understand that.
Nevertheless.
All right.
I suspect there is some disconnect between.
[music].
A lot of the semiconductor expectation and very poor.
Humorous spending data on how quick on any data.
Most are seeing in terms of.
You know coffee Lockdowns in China inflation in Europe , and the U S and so forth.
All reaching.
Especially.
The consumer inflation in some parts of the world is extremely high.
So do you have a range around this 20% revenue growth.
First of all we didn't really the first time that we were talking about I'm sorry, sorry.
Capacity.
A couple of weeks a mid teen.
So yeah I'll upset according to calculation should be about 20%.
Okay.
The President just mentioned.
We still cannot fulfill all of Africa.
Hesitate demand.
Still some areas showing very solid demand.
We're being able to fulfill any of the fluctuation from now okay.
Very clear thanks.
Thank you.
Next question friendly of HSBC go ahead. Please.
Okay, great. Thank you.
Alright, I just wanted to follow up on I guess that 20% implied 20% growth.
One of your foundry competitors already talked about.
Similar type of growth for them or are they going to exceed that.
They've kept the overall industry growth a foundry relatively unchanged.
And given their market share and given Youre also sort of maintaining your forecast for the full year to be relatively unchanged.
Does that imply.
There is more share gain that you're expecting this year relatively.
Relatively speaking.
Unless the overall industry growth is expected to increase I know you guys aren't giving explicit industry growth.
I'm trying to understand I guess the numbers that we're seeing right now.
And.
What is that is it more implied share gains that you expect this year.
Well Youre right.
While we have an implied is that our target is to grow in line or higher than the foundry industry. So that means yes.
This year again.
The lines of off target.
Okay, Alright, thank you for that.
I guess do you have anything you wanted to second question I have is as.
I think you had mentioned in the past that 28 nano.
Potentially it could be a little softer into next year.
Past.
Previous analyst meetings.
That still view that as being traded right now by management or is there any change there.
Well I think our path.
Our message was that.
We believe the 28 will be a sweet spot for many applications.
Well on the new products, which will migrate to 28. So we do believe 2018 and will continue to grow.
Our strong product pipeline.
Aligned with our technology.
The industry's mega trend.
Along with the endorsement from the global leading customer on the LTA.
We have a covenant that our 28 nanometer capacity expansion are well protected and so we.
I think we actually feel pretty comfortable with that.
Okay. So it's more of a sorry, just a follow up.
<unk> is more company specific about 2008 because of your product mix.
Terms of the agreement.
The relative comfort, yeah, as long as well as the focus of the market that we are addressing that we built.
A link to the Mega trend yes.
Okay, great. Thank you.
Sure.
Thank you.
And ladies and gentlemen, we are running out of time. So we're taking the last question.
The last question would be patchy chain of CLSA go ahead. Please hi.
Thank you for taking my question can you talk us through that Bob <unk> Denso partnership aside from the fact that they are based in Japan.
<unk> see it.
Do you have in Japan.
Key differences of producing these <unk> instead of eight inch what other benefit and challenges.
Number one and number two can you talk about the.
First quarter non op component of what is the main contributor to the non <unk> Nung up. These are my two questions. Thank you.
Sure for the first question.
Yep.
The program that we have with Denso is under the 12 inch ITV team.
It is our belief.
Getting our diligence shows they are moving into a call inkjet serving multiple.
Purpose and benefits one is performance and cost that's worth of supply.
The b.
E V O.
Alternative solution to occur and so if I can spend being in the IGT space and so we expect the older module will continue to grow.
We think this will serve that.
It will be beneficial to both potential and you wouldn't see.
And and.
The other hand is special.
Specialty technology is what's doing it is focused and we do believe that will be more specialty technology required to fulfill the automotive application and the central cooperation.
Is it more of a highlight to our ongoing efforts in providing the support to the automotive market with our specialty technology. So maybe if you don't get help with it second question in terms of non op in Q1.
900 million is for skin.
And a 500 million mark to market.
Video games.
Our investment in there.
300 million interest expenses.
The bulk of our non op non op in Q1.
Thank you very much.
Thank you.
And ladies and gentlemen, we thank you for your questions that concludes today's Q&A session and I'll turn things over to UMC head of IR for closing remarks.
Thank you for attending this conference today, we appreciate your questions as always if you have any follow.
Follow up questions. Please feel free to contact UMC.
Dot com have a good day.
Thank you and ladies and gentlemen that concludes our conference for <unk> 'twenty two with thank you for your participation in Umc's conference there will be a webcast replay within two hours.
At Www UMC com under the investors events section you may now disconnect Goodbye.
Yeah.
Okay.