Q4 2024 United Microelectronics Corp Earnings Call

January 21, 2025

Jason Wong: I'm joined by Mr. Jason Wong President.

President of UMC.

Mr.

You see that fall off.

In a moment.

Operator: We will hear our CFO present the fourth quarter. followed by our Quarters.

Over here.

Okay.

Fourth quarter financial results.

By our President's key message to address Umc's focus.

First quarter 2025.

Well, that's all president and CFO.

Operator: Once our President and CFO complete their remarks, they will make forward-looking statements based on management's current expectations and beliefs. subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risk...

Remarks, there will be a Q&A session.

Umc's quarterly financial reports are available at our website.

You won't see that call.

Investors financial section.

Michael Lin: During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control.

During this conference we may make forward looking statements based on management's current expectations and beliefs.

These forward looking statements are subject to a number of risks.

That could cause actual results to differ materially.

Including the risks that may be beyond the company's control.

Michael Lin: For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentations material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's Q4 2024 financial results.

Operator: for a more detailed description of in violence with the SEC and the ROC security authorities.

For a more detailed discussion of these risks.

Certainties.

So two hours.

And subsequent filings with the SEC.

Securities authorities.

And then just compass.

The financial presentation material, which is being broadcast live through the internet.

Operator: broadcast live through the Internet.

Operator: Now, I would like to introduce UMC. Catch UNC's fourth quarter, 2020.

Wow.

I would like to introduce Umc's CFO research, you're doing due to discuss fourth quarter financial.

<unk> financial results. Thank you Michael I like to go through the full Q2 for the Investor Conference presentation material, which can be downloaded.

Chi-Tung Liu: Thank you, Michael. I'd like to go through the Q4 2024 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page 4, the Q4 2024 consolidated revenue was TWD 60.4 billion, with gross margin at 30.4%. Net income attributable to the stockholder of the parent was TWD 8.5 billion, and earnings per ordinary share were TWD 0.68. Utilization rate in the Q4 was 70%, slightly down from the previous quarter of 71%. On the quarterly income statement, operating revenue was basically flat, around TWD 60.4 billion. Gross margin rate maintained at 30.4% or TWD 18.3 billion.

Chitung Liu: Thank you, Michael. I'd like to go through the Q4 2024 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page 4, the Q4 2024 consolidated revenue was TWD 60.4 billion, with gross margin at 30.4%. Net income attributable to the stockholder of the parent was TWD 8.5 billion, and earnings per ordinary share were TWD 0.68.

Mr. Jason Wong: Thank you, Michael.

Mr. Chidung Liu: I'd like to go through the 4Q24 Investor Conference presentation material, which can be downloaded of you in real time from our website. Starting on page four, the fourth quarter of 2025. The solid day revenue was $60.4 billion. net income attributable to the stockholder of the parent. and earnings per ordinary share for $0.68 NTD. slightly down from the previous quarter of Operating revenue was basically flat. for or $18.3 billion.

So starting on page four.

First quarter of 2024.

Consolidated revenue was 54 billion.

Gross margin at 34%.

Net income attributable to the stockholder of the parent was eight five.

Yeah.

Sure.

Chitung Liu: Utilization rate in the Q4 was 70%, slightly down from the previous quarter of 71%. On the quarterly income statement, operating revenue was basically flat, around TWD 60.4 billion. Gross margin rate maintained at 30.4% or TWD 18.3 billion.

Hey.

Got it.

You can read into Q4 was 70%.

Down from the previous quarter.

Perfect.

On the quantity.

The income statement.

Operating revenue was basically flat.

Around 50 points.

Yes.

And our gross margin rate at 34%.

Or 18 point.

Okay.

Chi-Tung Liu: Due to mark-to-market loss of the investment portfolio for both UMC and UMC Capital, we registered a TWD 1.4 billion loss of non-operating income in Q4 2024. The result is the net income attributable to the shareholder of the parent reached TWD 8.49 billion or $0.68 EPS per share. For the cumulative whole year 2024 performance, on a year-over-year comparison, revenue increased 4.4% Y-O-Y to TWD 232.3 billion. Gross margin rate was around 32.6% or TWD 75.6 billion. Operating expenses is under control, around 10.9%, similar to the 10.7% in 2023.

Chitung Liu: Due to mark-to-market loss of the investment portfolio for both UMC and UMC Capital, we registered a TWD 1.4 billion loss of non-operating income in Q4 2024. The result is the net income attributable to the shareholder of the parent reached TWD 8.49 billion or $0.68 EPS per share.

<unk>.

Mr. Chidung Liu: Due to mark-to-market loss of the investment portfolio for both UMC and UMC Capital, We registered a $1.4 billion loss of non-operating income in Q4 2020. The result is the net income attributable to the shareholder of the parent. reached 8.49 billion NT, or 0.001 billion NT. dollar for the cumulative whole year 2024 performance. Revenue increased 4.4% YOY to $232.3 billion. Gross Margin Rate was around 32.6%, or $75.6 billion NT. Operating expenses is under control around 10.9 the net income for 2024. PPS per ADS is 0.5%. On the balance sheet, our cash on hand is over $100 billion.

You have to mark to market loss of the investment.

Guy Smith: Guy Smith portfolio for policy on.

Seed capital.

Guy Smith: We register and one 4 billion loss of non operating income in Q4.

Guy Smith: Net income attributable to the shareholder of the parent.

Guy Smith: 8.4 nights do you have a N P O.

Guy Smith: Dollar.

Chitung Liu: For the cumulative whole year 2024 performance, on a year-over-year comparison, revenue increased 4.4% Y-O-Y to TWD 232.3 billion. Gross margin rate was around 32.6% or TWD 75.6 billion. Operating expenses is under control, around 10.9%, similar to the 10.7% in 2023.

Guy Smith: Sure.

Guy Smith: Well the accumulative.

Guy Smith: Year 2020 full performance.

Guy Smith: Year over year comparison.

Guy Smith: Revenue increased four 4% Y O y to 272.3.

Guy Smith: Gross margin rate was around 32, 6% or $75 $6.

Guy Smith: Yeah.

Guy Smith: Operating expenses.

Guy Smith: Under control around 10, 9%.

Guy Smith: Similar to the a 10, 7% in 2023.

Chi-Tung Liu: The net income for 2024 was 47.2 billion NT or 3.8 NT dollars per share. EPS per ADS is 0.58. On the balance sheet, our cash on hand is over 100 billion NT. Total equity for the company at the end of 2024 reached 378 billion NT dollars. ASP last quarter at Q4 was flat quarter-over-quarter. Let's go down to page nine for revenue breakdown. For Q4 2024, the Asia sales represent about 61%, which declined 4 percentage points from the previous quarter, when Europe increased from 5% to 11% in Q4 2024.

Chitung Liu: The net income for 2024 was 47.2 billion NT or 3.8 NT dollars per share. EPS per ADS is 0.58. On the balance sheet, our cash on hand is over 100 billion NT. Total equity for the company at the end of 2024 reached 378 billion NT dollars. ASP last quarter at Q4 was flat quarter-over-quarter. Let's go down to page nine for revenue breakdown. For Q4 2024, the Asia sales represent about 61%, which declined 4 percentage points from the previous quarter, when Europe increased from 5% to 11% in Q4 2024.

Guy Smith: Net income for 2024.

Guy Smith: Well, it's 47 point tool.

Guy Smith: A N T.

Guy Smith: Great point.

Guy Smith:

Guy Smith: $90 shares buy shares.

Guy Smith: Yes.

Guy Smith: At this 0.58.

Guy Smith: Yeah.

Guy Smith: On the balance sheet, our cash on hand is over one.

Guy Smith: 100.

Mr. Chidung Liu: And total equity for the company at the end of 2024 reached $378 billion. ASB last quarter at Q4 was flat around around flat, two-quarter over quarter.

Guy Smith: And our total equity for the company.

Guy Smith: Rich.

Guy Smith: And he daughters.

Guy Smith: S T last quarter Q.

Guy Smith: Q4 was flat a wrong around.

Guy Smith: So at a two quarter over quarter.

Guy Smith: And.

Guy Smith: Let's go down to a page nine full revenue breakdown.

Mr. Chidung Liu: Let's go down to page 9 for revenue breakdown. to Q4 2024. Asia's sales represent about 61% Europe increased from 5% to 11%. For the whole year, the Asia part of the revenue increased from 57% in 2009. Europe declined about 3% to 8%. U.S., North America didn't really change that much. For quarterly IDM revenue, remain flattish from $50,000 to $100,000. For the full year, it declined from 22%. In terms of application breakdown communication also declined about 3% to 39% and others including automotive due to customers. all the modulation and wafer sheet. Our full year. application breakdown.

Guy Smith: Our Q4 2024.

Guy Smith: Yeah.

Guy Smith: And you should see us representing about 51%, which declined four percentage points from the previous quarter.

Guy Smith: Europe increased four 5%.

Guy Smith: Per cent in Q4 of 2024.

Chi-Tung Liu: For the whole year, the Asia part of the revenue increased from 57% in 2023 to 63% in 2024. Europe declined about three percentage points to 8% from 11% in the previous year. US, North America, didn't really change that much, from 27% to 25%. For quarterly IDM revenue, remained flattish from 15% to 16%. For the full year, it declined from 22% in 2023 to 16% in 2024. In terms of application breakdown, we see consumer segment decline about 2% to 29%, and communication also declined about 3% to 39%.

Chitung Liu: For the whole year, the Asia part of the revenue increased from 57% in 2023 to 63% in 2024. Europe declined about three percentage points to 8% from 11% in the previous year. US, North America, didn't really change that much, from 27% to 25%. For quarterly IDM revenue, remained flattish from 15% to 16%. For the full year, it declined from 22% in 2023 to 16% in 2024. In terms of application breakdown, we see consumer segment decline about 2% to 29%, and communication also declined about 3% to 39%.

Guy Smith: But the whole year.

Guy Smith: Asia part of the revenue increase from 57% in 2023% to 53% in 2020 for Europe declined about 3%.

Guy Smith: Eight percentage points.

Guy Smith: The previous year.

Guy Smith: In the U S North America.

Guy Smith: And really change that much from 27% from 75%.

Guy Smith: For quarterly revenue remain flattish, some 15% or 15%.

Guy Smith: For the full year.

Guy Smith: Some tiny 2%.

Guy Smith: These 3% to 15% in 2020.

Guy Smith: In terms of self application breakdown.

Guy Smith: We see.

Guy Smith: Sundar Seckman declining about 2%.

Okay.

Guy Smith: Communication also declined about 3%.

Chi-Tung Liu: Others, including automotive and industrial, in this single quarter, due to customers' order modulation and wafer ship difference increased from 14% to 19%. On page 14, our full year top application breakdown communication is around 42%, and consumer is about 28%. On page 15, our technology breakdown, our 22- and 28-nanometer shipment continue to increase. Right now represent about 34% of the total revenue. Our 14-nanometer also see some increase from 13% in the previous quarter to 16% this quarter. For the whole year, 28nm, 22nm represent about 34% of our total revenue, when 14nm remain constant, around 14%. Capacity continued to increase, mainly from our 12A 10nm T6 operation.

Guy Smith: Perfect.

Chitung Liu: Others, including automotive and industrial, in this single quarter, due to customers' order modulation and wafer ship difference increased from 14% to 19%. On page 14, our full year top application breakdown communication is around 42%, and consumer is about 28%. On page 15, our technology breakdown, our 22- and 28-nanometer shipment continue to increase.

Guy Smith: Others.

Guy Smith: Automotive and industrial in this single quarter.

Due to customers.

Guy Smith: Oh that modulation and with all wafer should difference increased from 14% to 19%.

Guy Smith: On page 14.

Guy Smith: For a.

Guy Smith: Full year.

Guy Smith: Application breakdown.

Guy Smith: Is around 42%.

Guy Smith: Consumer was about 28%.

Guy Smith: On page 15, our technology breakdown.

Mr. Chidung Liu: Page 15, Technology Breakdown, are 22 and 28. Naomi. And right now represent about 34% of the total revenue. some increase from 13% in the previous quarter. For the whole year, 2028-2022 represents about 34% of our total revenue. mainly from our 12A, 10N, P6 operators.

Guy Smith: Our 22 in 10 years.

Guy Smith: Nanometer shipments continue to increase and right.

Chitung Liu: Right now represent about 34% of the total revenue. Our 14-nanometer also see some increase from 13% in the previous quarter to 16% this quarter. For the whole year, 28nm, 22nm represent about 34% of our total revenue, when 14nm remain constant, around 14%. Capacity continued to increase, mainly from our 12A 10nm T6 operation.

Guy Smith: Right now representing about 74% of the total.

Guy Smith: Total revenue.

14 nanometer also see.

Guy Smith: Some increased 13% in the previous quarter to 16% this quarter.

Guy Smith: For the whole year.

Guy Smith: Finally, a tiny two representing about 34% and all of our total revenue.

Speaker Change: I'm 40 nanometer I remain constant at around 14%.

Capacity continues to increase.

Speaker Change: Many of our top 10, a M P fix the operation.

Chi-Tung Liu: It will somehow decline a little bit because of the Chinese New Year's holiday schedule and also annual maintenance schedule in the Q1 of 2025. CapEx budget for 2025 currently stand around $1.8 billion, and the actual CapEx number for 2024 was a bit over $2.8 billion. The above is a summary of UMC results for Q4 2024. 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.

Chitung Liu: It will somehow decline a little bit because of the Chinese New Year's holiday schedule and also annual maintenance schedule in the Q1 of 2025. CapEx budget for 2025 currently stand around $1.8 billion, and the actual CapEx number for 2024 was a bit over $2.8 billion. The above is a summary of UMC results for Q4 2024. 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.

Speaker Change: You will somehow decline.

Speaker Change: A little bit because of the Chinese new year holiday schedules and also in your maintenance schedule.

Speaker Change: Q1 of 2025.

Speaker Change: Capex budget for 2025 countries around one 8 billion and the actual capex number for 2020 for quite a bit over $2 8 billion.

Mr. Chidung Liu: APEC's budget for 2025 currently stands at around $1.8 billion. The actual capex number for 2024 was a bit over 2.8.

Speaker Change: All of us.

Mr. Chidung Liu: The above is a summary of UMC results for Q4 2021. More details are available in the report, which has been posted on our website.

Yeah, Buffy so summary of UMC result for Q4 2000 and plentiful.

Speaker Change: More details are available in the report, which has been posted to our website I will now turn the call over to personnel have you ever seen as well.

Mr. Jason Wong: I will now turn the call over to President of UMC, Mr. Jason Wong. Our fourth quarter results may guide us, with wave assurement and utilization by exceeding expectations. We are expecting a steady improvement in demand across communication, consumer, and computer settlements. Our 2228nm portfolio remains the largest contributor, with revenue increasing 15% in 2024. Notably, offers significant power-saving and performance advantage over the 20 ANL meter solutions. are accelerating and we expect to see higher revenue contributions from 2025 onwards. Looking into 2025, the semiconductor market is hoisted for another year of growth, driven by strong demand for AI servers as well as increasing semiconductor content in smartphones, PCs, and other electronic devices.

Jason Wang: Well, thank you, Chi-Tung Liu. Good evening, everyone. I would like to share UMC's Q4 results. Our Q4 results met guidance, with wafer shipment and utilization slightly exceeding expectations. For full-year 2024, revenue grew 4.4% year-on-year, reflecting a steady improvement in demand across communication, consumer, and computer segment. Our 22-nanometer, 28-nanometer portfolio remains the largest contributor, with revenue increasing 15% in 2024. Notably, customers are showing strong interest in migrating to our 22-nanometer specialty platform for next-generation networking and display driver applications, which offers significant power-saving and performance advantage over the 28-nanometer solutions. Tape-outs for 22 nm products are accelerating, and we expect to see higher revenue contribution from 2025.

Speaker Change: Well thank you.

Speaker Change: Yeah.

Speaker Change: Fourth quarter results.

Speaker Change: Our fourth quarter results.

Speaker Change: Wafer shipment.

Speaker Change: Site exceeding expectation.

Speaker Change: For full year 'twenty 'twenty four revenue grew four 4% year on year.

Speaker Change: Reflecting a steady.

Speaker Change: Men across communication consumer and computer equipment.

Speaker Change: R 22, 28 nanometer portfolio remain the largest contributor.

Speaker Change: Revenue, increasing 15% in 2024.

Jason Wang: Notably, customers are showing strong interest in migrating to our 22-nanometer specialty platform for next-generation networking and display driver applications, which offers significant power-saving and performance advantage over the 28-nanometer solutions. Tape-outs for 22 nm products are accelerating, and we expect to see higher revenue contribution from 2025.

Speaker Change: Customers are showing strong interest.

Speaker Change: Adding to our 22.

Speaker Change: Specialty platform.

Speaker Change: Next generation networking.

Speaker Change: Applications.

Speaker Change: Which offer significant power savings.

Speaker Change: And advantage.

Speaker Change: <unk>.

Speaker Change: Sure.

Speaker Change: Tape outs for 22 nanometer products.

Speaker Change: And we expect to see higher revenue contribution.

Speaker Change: Plenty of 25.

Jason Wang: Looking into 2025, the semiconductor market is poised for another year of growth, driven by strong demand for AI servers as well as increasing semiconductor content in smartphones, PCs, and other electronic devices. To capture opportunities in the fast-moving market, UMC continues to invest in technology innovation, developing industry-leading specialty solutions to ride the next wave of system upgrades and stay ahead of the competition. Building on our technology foundation, UMC is also actively expanding our advanced packaging offering to help unleash the potential of AI in the coming years. In conjunction with technology development, our key capacity expansion projects are progressing as planned. Our new Singapore Phase 3 fab will enhance customer supply chain resilience, while the 12-nanometer cooperation with our US partner will offer customers a migration path beyond 22 nanometers. Now, let's move on to Q1 2025 guidance.

Speaker Change: Looking into 2025.

Speaker Change: Semiconductor market.

Speaker Change: Okay.

Speaker Change: By strong demand for.

Speaker Change: That's increasing.

Speaker Change: Semiconductor content in smartphones.

Speaker Change: And I'll take it.

Speaker Change: Right.

Mr. Jason Wong: To capture opportunities in a fast-moving market, UMC continues to invest in technology innovation, developing industry-leading specialty solutions to ride the next wave of system upgrades and stay ahead of the competition. Building on our technology foundation, UMC is also actively expanding our advanced packaging offering to help unleash the potential of AI in the coming years. In conjunction with technology development, our key capacity expansion projects are progressing as planned.

Speaker Change: To capture opportunities in a fast moving market.

Speaker Change: <unk> continued to invest in technology and innovation.

Speaker Change: In India.

Speaker Change: Youre right. The next wave of system upgrades.

Jason Wang: Building on our technology foundation, UMC is also actively expanding our advanced packaging offering to help unleash the potential of AI in the coming years. In conjunction with technology development, our key capacity expansion projects are progressing as planned. Our new Singapore Phase 3 fab will enhance customer supply chain resilience, while the 12-nanometer cooperation with our US partner will offer customers a migration path beyond 22 nanometers. Now, let's move on to Q1 2025 guidance.

Speaker Change: The competition.

Speaker Change: Building on our Technology Foundation.

Speaker Change: So.

Speaker Change: Packaging offering to help unleash the potential.

Speaker Change: You know in coming years.

Speaker Change: In conjunction with technology.

Speaker Change: Our capacity expansion projects.

Speaker Change: That's the plan.

Mr. Jason Wong: Our new Singapore Phase III Fab will enhance customer supply chain resilience, Now let's move on to First Order 2025 Guidance. margin will be higher.

Speaker Change: Our Singapore.

Speaker Change: Pat.

Speaker Change: Yeah.

Speaker Change: Wow.

Speaker Change: Cooperation.

Speaker Change: Are you at on that.

Speaker Change: Customer migration path.

Speaker Change: 22 now.

Speaker Change: No that's a move on to first quarter 2020.

Jason Wang: Our wafer shipments will remain flat. ASP in US dollars will decrease by mid-single-digit percentage. Gross margin will be higher than 25% with 21 January earthquake impact. Capacity utilization rate will be approximately 70%. Our 2025 cash-based CapEx will be budgeted at $1.8 billion. That concludes my comments. Thank you. Thank you all for your attention. Now we are ready for questions.

Speaker Change: Our wafer shipments will remain flat.

ASP in U S.

Speaker Change: Dollar.

Speaker Change: Bye.

Speaker Change: Okay.

Speaker Change: Gross margin will be higher than 25%.

Speaker Change: January 20th earthquake.

Speaker Change: In the past.

Speaker Change: <unk> will be approximately 70%.

Speaker Change: Our 2020 cash based capex will be budgeted.

Speaker Change: Yeah.

Mr. Jason Wong: That concludes my comment.

Speaker Change: That concludes my comments. Thank you. Thank you all for your attention.

Speaker Change: Four questions.

Operator: Yes, thank you, President Wang. Ladies and gentlemen, we will now begin our question and answer session. If you have a question for any of today's speakers, please press star one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. Now, please press star one on your keypad if you would like to ask the question. Thank you. Our first question will be coming from Sunny Lin, UBS. Go ahead, please.

Speaker Change: Yes, thank you, but there's no one and ladies and gentlemen, we would now begin now question and answer session.

Operator: Yes, thank you, President Wong. And ladies and gentlemen, we will now begin our question and answer session. If you have a question for any of today's speakers, please press star 1 on your telephone keypad and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star 2 to cancel the question. Now please press star 1 on your keypad if you would like to ask a question.

Speaker Change: You have a question for any of todays speakers. Please press star one on your telephone keypad, if you will into the queue.

Speaker Change: After you are announced please ask your question.

Operator: If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. Now, please press star one on your keypad if you would like to ask the question. Thank you. Our first question will be coming from Sunny Lin, UBS. Go ahead, please.

Speaker Change: If you find that your question has been answered before they should turn to speak.

Speaker Change: Spreads start to to cancel the question.

Speaker Change: Now please press star one on your keypad, if he would like to ask the question. Thank you.

Speaker Change: And our first question will be coming from suddenly Ilene UBS go ahead. Please.

Sonny Lin: And our first question will be coming from Sonny Lin, UBS. Go ahead, please. Good afternoon, Jason and Qidong. Thank you for taking my questions. So my first question is on gross margin. And so on these above 25% gross margin guidance for Q1, could you help us understand what are some of the major factors? Because if we look at the Q1 2024, your broader ASP was also down by about a single digit, but you were able to keep up your gross margin. And so I wonder what's the meaningful decline for Q1 this year? And then maybe the second part for gross margin is how should we think about the full year?

Sunny Lin: Good afternoon, Jason Wang and Chi-Tung Liu. Thank you for taking my questions. My first question is on gross margin. On this above 25% gross margin guidance for Q1, could you help us understand what are some of the major factors? Because if we look at the Q1 2024, your blended ASP was also down by about mid-single digit, but you were able to keep up your gross margin. I wonder, what's the meaningful decline for Q1 this year? Maybe the second part for gross margin is how should we think about the full year?

Speaker Change: Good afternoon, Jason Tito. Thank you for taking my questions. So my first question is on gross margin.

Speaker Change: So these are above 25%.

Speaker Change: Gross margin guidance for Q1 could you help us understand what are some of the major factors.

Speaker Change: Because if we look at the Q1 'twenty 'twenty four you blend it used to be what those were down by about mid single digit, but you were able to keep up your gross margin and so I wonder why see a meaningful decline off of Q1 this year.

Speaker Change: And then.

Speaker Change: I guess, maybe the second powerful gross margin is how shall we think about the four yet.

Sunny Lin: Will this above 25%, should we consider that as a fair assumption for full year, or would you expect some recovery in coming few quarters? Maybe let me stop here, and I have a few follow-ups.

Sonny Lin: Will this above 25%, should we consider that as a fair assumption for full year or would you expect some recovery in coming few quarters? Maybe let me stop here and I have a few follow-ups. Thank you.

Speaker Change: Well at least about a 25%.

Speaker Change: Shall we call figure that that's a fair assumption for full year or would you expect a recovery in coming few quarters, maybe let me stop here and I have a few follow ups.

Chi-Tung Liu: Thank you. First of all, the earthquake earlier this morning does have impact on our Q1 margins, maybe about low single digit. However, or large part of the loss will be compensated through insurance in the later stage. Secondly, the Q1 margin is impacted by both ASP decline, which is one-off, and also the increased depreciation expenses. We don't expect anything structural in terms of profitability change. The one-off pricing adjustment and depreciation, plus the earthquake this morning lead to this higher than 25% gross margin guidance. We will continue to deploy aggressive cost management to offset the headwind costs, focusing on multi-source sourcing strategies, streamlining process flow, supply chain pricing management, and power reduction measures on facility and tools.

Chitung Liu: Thank you. First of all, the earthquake earlier this morning does have impact on our Q1 margins, maybe about low single digit. However, or large part of the loss will be compensated through insurance in the later stage. Secondly, the Q1 margin is impacted by both ASP decline, which is one-off, and also the increased depreciation expenses. We don't expect anything structural in terms of profitability change.

Speaker Change: Thank you first of all.

Mr. Chidung Liu: The earthquake earlier this morning does have impact on our Q1 margins, maybe about low single digits. And however, the part of the, or large part of the loss will be compensated. Secondly, Q1 margin is impacted by both ASP decline, which is one out. and uh... Also, the increased depreciation expense.

Speaker Change: Oh, that's great earlier this morning.

Speaker Change: The impact on them.

Speaker Change: Q1 margins, maybe about low single digit.

Speaker Change: However.

Speaker Change: Uh huh.

Speaker Change: Part of that a large part of the loss will be compensated.

The reinsurance in the later stage.

Speaker Change: And secondly.

Speaker Change: The Q1 margin is impacted by both H P C class, which is one off.

Speaker Change: And.

Speaker Change: Also the increased depreciation expenses.

Mr. Chidung Liu: So, we don't expect anything structural in terms of profitability. The one-off pricing adjusts.

Speaker Change: So we don't expect anything structural in terms of all follow up profitability.

Speaker Change: Change.

Chitung Liu: The one-off pricing adjustment and depreciation, plus the earthquake this morning lead to this higher than 25% gross margin guidance. We will continue to deploy aggressive cost management to offset the headwind costs, focusing on multi-source sourcing strategies, streamlining process flow, supply chain pricing management, and power reduction measures on facility and tools.

Speaker Change: Oh pricing adjustment and depreciation but.

Mr. Chidung Liu: But the earthquake this morning lead to this higher than 25% cost margin crisis. We will continue to deploy aggressive cost management to offset the headwind cost, focusing on multi-sourcing strategies, streamlining process flow, supply chain pricing management. Power Reduction Measures and Facilities.

Speaker Change: Oh. This morning me towards these are higher than 25% gross margin.

Speaker Change: We will continue to deploy our aggressive cost management to offset the highway and costs.

Speaker Change: A multi sourcing strategy streaming line streamlining process flow.

Speaker Change: Supply chain pricing matters friends and power reduction measures.

Chi-Tung Liu: Of course, we will continue to invest for the future, including the automation transformation. As for the rest of the year, we will give the guidance on a quarterly basis.

Chitung Liu: Of course, we will continue to invest for the future, including the automation transformation. As for the rest of the year, we will give the guidance on a quarterly basis.

Speaker Change: Canadian tourists of course, we will continue to invest for the future.

Mr. Chidung Liu: Of course, we will continue to invest for the future, including the automation transformation.

Speaker Change: The automation and transformation.

Mr. Chidung Liu: So as for the rest of the year, we will give the guidance quarterly basis.

Speaker Change: So as for the rest of the year, we will keep the guidance on a quarterly basis.

Sunny Lin: Got it. Thank you very much, Chi-Tung. If I could follow up on the depreciation increase, what's your current guidance for the growth for depreciation for 2025? How much depreciation or increase going to Q1? Should we assume most of the depreciation increase to happen in first half because you have completed your 28-nanometer expansion in Taiwan, and therefore, the depreciation increase will start to moderate going to second half?

Speaker Change: Got it. Thank you very much she would also if I could follow up on the depreciation piece and so what's your current guidance for the cost of depreciation for 2025, and how much depreciation will increase going to Q1.

Sonny Lin: Got it. Thank you very much, Qidong. So if I could follow up on the depreciation increase. And so what's your current guidance for the growth for depreciation for 2025? And how much depreciation will increase going to Q1? Should we assume most of the depreciation increase to happen in first half? Because you have completed your 28 nanometer expansion in Taiwan. And therefore, the depreciation increase will start to moderate going to second half. The depreciation increase in 2024, as we guided, was low 20 percent. As a matter of fact, it's very close to 20 percent. As for 2025, the guidance will be high 20 percent for the whole year.

Speaker Change: So most of the depreciation increase too.

Speaker Change: Hap I E first half because you have completed your 28 nanometer expansion in Taiwan.

Speaker Change: And therefore, the depreciation increase will start to.

Speaker Change: Moderate going to second half.

Chi-Tung Liu: The depreciation increase in 2024, as we guided, was low 20%. As a matter of fact, it's very close to 20%. As for 2025, the guidance will be high 20% for the whole year. We don't really have a full quarterly breakdown yet for the depreciation expenses because it varies according to the tool installation, etc. The peak of the depreciation we will see. Wait until maybe 2027 to see peak out. It's still another year or two to go in terms of depreciation increase.

Chitung Liu: The depreciation increase in 2024, as we guided, was low 20%. As a matter of fact, it's very close to 20%. As for 2025, the guidance will be high 20% for the whole year. We don't really have a full quarterly breakdown yet for the depreciation expenses because it varies according to the tool installation, etc. The peak of the depreciation we will see. Wait until maybe 2027 to see peak out. It's still another year or two to go in terms of depreciation increase.

Speaker Change:

Speaker Change: Depreciation are increasing 2024.

Guy Smith: How sweet Guy did it was a low 20% as a matter of fact, it's very close to 20%.

Guy Smith: As for 2025 guidance, whether it be high as 20% for the whole year.

Mr. Chidung Liu: And we don't really have a full quarterly breakdown yet for the depreciation expenses because it varies according to the tour installation, et cetera. At the peak of the depreciation, we will see – wait until maybe 2027 to see pick-up. So it's still another year or two to go in terms of depreciation.

Speaker Change: Yeah, we don't really have a full quarter the breakdown yet for the.

Speaker Change: Depreciation expenses because of your batteries according to the.

Speaker Change: Tour installation et cetera, but the peak of the.

Speaker Change: Depreciation.

Speaker Change: We will see wait until maybe 2007 to see Pickoff.

Speaker Change: So he's still another year or two it took out in terms of depreciation increase.

Sunny Lin: Got it. Thank you very much. My second question is on your cash dividend. How should we think about your policy? Obviously, I think last year business was through the trough. On the other hand, your cash flow should start to improve substantially, given a lower CapEx. I understand the cash dividend will still need to go through the approval from the board. Any color from your strategy will be very helpful.

Speaker Change: Got it thank you very much.

Sonny Lin: Got it, thank you very much.

Sonny Lin: My second question is on your cash dividend. So how should we think about your policy? Obviously, I think last year business was through the trough, but on the other hand, your cash flow should start to improve substantially given a lower capex. I understand the cash dividend would still need to go through the approval from the board, but any color from your strategy will be very helpful.

Speaker Change: My second question is on your cash dividend.

So how should we think about your policy.

Speaker Change: Obviously I think last year this is wes.

Speaker Change: Yes.

Speaker Change: But on the other hand, you a cashless should start to improve substantially lower he packs.

Speaker Change: Dan the.

Speaker Change: The cash dividend will still need to go through the approval from the board.

Speaker Change: But any color from your strategy will be very helpful.

Chi-Tung Liu: Yeah. We understand, UMC need to maintain a somewhat, better than average, dividend yield in order to attract our investors. We will strike a delicate balance between business growth and shareholder return. Most importantly, we want to ensure shareholder receive a stable and consistent cash dividend.

Chitung Liu: Yeah. We understand, UMC need to maintain a somewhat, better than average, dividend yield in order to attract our investors. We will strike a delicate balance between business growth and shareholder return. Most importantly, we want to ensure shareholder receive a stable and consistent cash dividend.

Mr. Chidung Liu: Now, we understand, uh... UMC needs to maintain a somewhat better than average dividend yield in order to attract our investors. and we will track a dedicated, a dedicated balance. business growth and shareholder return. Most importantly, we want to ensure shareholders receive a stable and consistent cash flow. Well, so last three years, you pay $3 or above cash dividend. And so when you mention sustainable, should we consider that from an absolute amount point of view? It's both. It's blended. So you should blend the absolute dollar concept along with dividend yield and also the payout rate. Got it, no problem.

Speaker Change: Yeah, we understand no.

Speaker Change: You haven't seen you need to maintain somewhat.

Speaker Change: Better than average dividend.

Speaker Change: Dividend yield.

Speaker Change: In order to attract our investors and we will attract a decade after decade.

Speaker Change: Okay got it.

Speaker Change: Between business growth and shareholder return most importantly, we want to assure shareholders that receive a stable.

Speaker Change: This thing catch stupid.

Operator: Well, last 3 years you pay $3 or above cash dividend. When you mention like sustainable, should we consider that as a from an absolute amount point of view?

Sunny Lin: Well, last 3 years you pay $3 or above cash dividend. When you mention like sustainable, should we consider that as a from an absolute amount point of view?

Speaker Change: Well so loss so yes, you pay.

Speaker Change: C dollars well above our cash dividend and so when you mentioned like sustainable Ah shall we coffee that asset from a absolute amount part of you.

Chi-Tung Liu: It's both. It's a blended. You should blend the absolute dollar concept along with the dividend yield and also the payout ratio.

Chitung Liu: It's both. It's a blended. You should blend the absolute dollar concept along with the dividend yield and also the payout ratio.

Speaker Change: It's both.

Speaker Change: So you should.

Speaker Change: The absolute dollar concept, along with a 2% yield.

Speaker Change: And also at the payout ratio.

Operator: Got it. No problem. My last question is for Jason. I want to get your view on the overall semi cycle, more specifically, into 2025. How do you think about UMC's addressable foundry market growth for this year? Are you seeing any green shoots from consumer restocking or supply chain recovery? Thank you.

Sunny Lin: Got it. No problem. My last question is for Jason. I want to get your view on the overall semi cycle, more specifically, into 2025. How do you think about UMC's addressable foundry market growth for this year? Are you seeing any green shoots from consumer restocking or supply chain recovery? Thank you.

Speaker Change: Got it no problem, but my last question for Jason.

Mr. Jason Wong: My last question for Jason, and so once you get your view on the overall semi-cycle, more specifically into 2025, and how do you think about UMC's addressable foundry market growth for this year? Are you seeing any green shoots from consumer restocking or supply chain preview? Thank you. It's our view that the semiconductor industry is expecting to see a 10% growth in 2025, mainly driven by the found a moderate growth in consumer electronics and increased semiconductor content from the AI smartphone and AI PC notebook replacements. So the dominance of growth still remains to be an AI survey area.

Speaker Change: And so once you get your view on the overall semi cycle, what's the most likely into 2025 and how do you think about Umc's foundry market golf are for this year are you see any green shoots a phone consumer restocking or supply chain people. Thank you.

Jason Wang: Sure. Of course. Yeah. For the semi outlook, I mean, it's our view that semiconductor industry, we're expecting to see a 10% growth in 2025, mainly driven by the high demand for AI servers, as well as some of the moderate growth in consumer electronics and increase in semiconductor content from the AI smartphone and AI PC notebook replacement. The predominant dominance of growth still remains to be the AI server area. For the foundry, we expect the 2025 foundry market will grow in mid- to high-teens percentage. Again, that includes the AI momentum.

Speaker Change: Sure.

Speaker Change: What are your outlook I mean.

Speaker Change: Sure.

Speaker Change: Semiconductor industry.

Speaker Change: Backing to see a 10% growth in 'twenty five.

Speaker Change: We live by the high demand.

Speaker Change: This will sound a moderate growth.

Speaker Change: Okay.

Speaker Change: In that context.

Speaker Change: The AI smartphone.

Jason Wang: The predominant dominance of growth still remains to be the AI server area. For the foundry, we expect the 2025 foundry market will grow in mid- to high-teens percentage. Again, that includes the AI momentum.

Speaker Change: Replacement.

Speaker Change:

Speaker Change: Predominantly yes.

Speaker Change: Gross.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: Uh huh.

Mr. Jason Wong: For the boundary, we expect the 2025 boundary market will grow in need-to-hide-things percentage. Again, that includes the AI momentum. For the UMC addressable market, we have expect to grow moderately, while we see the increase in some kind of content as well. This factor will be the main driver for the low single-digit growth in the maternal market. So I think in UMC addressable, we're projected at low single-digit growth for 2025.

Speaker Change: We expect the 2025 foundry market.

Speaker Change: Me too high teens percentage.

Speaker Change: Yes.

Speaker Change: Right.

Jason Wang: For the UMC addressable market, we have observed that inventory for consumer electronics has been digested to a healthy level, and the demand of this product is expected to grow moderately, while we see the increasing semiconductor content as well. This factors will be the main driver for about low single digit growth in the mature node market. I think in UMC addressable, we're projected at low single digit growth for 2025. For UMC, it's our goal that we will outgrow our addressable market while maintaining our structural profitability.

Speaker Change: Yeah.

Speaker Change: 44.

Speaker Change: The whole market.

We have observed.

Speaker Change: Okay.

Speaker Change: It has to be.

Speaker Change: Digest it to a healthy level.

Speaker Change: This product is expected to grow moderately.

Speaker Change: We see it increasing.

Speaker Change: Content as well.

Speaker Change: Those will be the main driver.

Speaker Change: About low single digit growth in the mature nodes.

Speaker Change: Market.

Speaker Change: So umc's addressable forget it.

Speaker Change: Single digit growth for 2025.

Speaker Change: And so you won't see it all.

Mr. Jason Wong: And for UMC, it's our goal.

Speaker Change: Our addressable market.

Speaker Change: Our structural profitability.

Sunny Lin: Thank you, Jason. Maybe one more follow up. Customers have started to see some upside from the supply chain preview ahead of the potential tariffs in first half of this year and provide this guidance of low single digit growth for 2025. Have you considered some upside from that regard?

Speaker Change: Thank you Jason.

Sonny Lin: Thank you, Jason. Customers have started to see some upside from the supply chain preview ahead of the potential tariffs in the first half of this year, and provide this guidance of low single-digit growth for 2025. Have you considered some upside from that regard?

Speaker Change: Hey, what's up.

Speaker Change: Our customers have started to see some upside from their supply chain people huddle deep potential tired of.

Speaker Change: Uh huh.

Speaker Change: Provide these guidance of low single digit growth for 2025 Hyatt have you can see some upside a false I regard.

Jason Wang: Can you repeat that again? I didn't. I kind of break off from the beginning. Yeah, sorry.

Speaker Change: Oh can you repeat that again I didn't I kind of break.

Sonny Lin: Uh, can you repeat that again? I didn't, I kind of break, uh, break off. No problem. Sorry about that.

Speaker Change: A breakout on that.

Sunny Lin: No problem. Sorry about that. Just one quick follow-up. When you mentioned this low single digit growth for your addressable market for 2025, I wonder, have you considered some upside from the potential supply chain pull-ahead of tariffs? Because in recent few months, we have started to hear from fabless indicating that some rush orders are coming through from China ahead of the tariff.

Speaker Change: No problem, sorry about that so just one quick follow up when you mentioned low single digit growth for your addressable market for 2025, I Wonder Uh huh.

Sonny Lin: So just one quick follow up. So when you mentioned this low single digit growth for your adjusted market for 2025, I wonder, have you considered some upside from the potential supply chain preview ahead of tariffs? Because in recent few months, we have started to hear from fabless indicating that some rush orders are coming through from China ahead of the tariffs. Well, for the Q1... Q & A It is somewhat better than the traditional seasonality. current projection, you know, it's not. But because of the lack of visibility, unless the Q2 can be sustainable, otherwise we still project it will be a low single digit.

Speaker Change: Have you can see theres, some upside off on the potential supply jumped ahead of tariffs.

Speaker Change: In recent months, we have started to hear from our Fabless are indicating that some rush orders not coming through a phone China ahead of the tariffs.

Jason Wang: Yes, I got it. Okay. Well, for the Q1 guidance that we just provided, it is somewhat better than the traditional seasonality. We guided shipment will be somewhere in flat. The short-term visibility remains limited, partly because the non-fundamental factors such as the US tariff. We certainly hope that Q2 will grow sequentially. The current projection, you know, it's not 100% including those, but because the lack of visibility, you know, unless the Q2 can be sustainable, otherwise, we still project that will be a low single digit. In other words, that low single digit is not including the tariff, but we do see a better than the traditional seasonality Q1 projection. Yeah.

Speaker Change: Yeah, I got it okay.

Speaker Change: Oh.

For the Q1.

Speaker Change: For the Q1 guidance that we just provided.

Speaker Change: Is somewhat better than usual.

Speaker Change: Alex.

Speaker Change: We got a shipment will be somewhat flat.

Speaker Change: In the short term visibility.

Speaker Change: Limited it partly because it down from them.

Speaker Change: Uh huh.

Speaker Change: U S tariff.

Speaker Change: We certainly hope that Q2 will.

Jason Wang: The current projection, you know, it's not 100% including those, but because the lack of visibility, you know, unless the Q2 can be sustainable, otherwise, we still project that will be a low single digit. In other words, that low single digit is not including the tariff, but we do see a better than the traditional seasonality Q1 projection. Yeah.

Speaker Change: Shelby.

Speaker Change: Current projections.

Speaker Change: It's not 100%.

Speaker Change: But because of the lack of.

Speaker Change: Yeah.

Who can be sustainable otherwise.

Speaker Change: Okay.

Mr. Jason Wong: In other words, that low single digit is not including the terrorist, but we did see a better Got it.

Speaker Change: In other words.

Speaker Change: It's not.

Speaker Change: Yes.

Speaker Change: But better than that.

Speaker Change: Yeah.

Sunny Lin: Got it. Very helpful. Thank you very much.

Speaker Change: Got it very helpful. Thank you very much.

Sonny Lin: Very helpful. Thank you very much.

Operator: Thank you. Next one, Gokul Hariharan, JPMorgan. Go ahead, please.

Speaker Change: Thank you.

Goku Honey: Next one, Goku Honey Hotline, J.P. Morgan. Go ahead. Hi, thanks for taking my question. First question on pricing, Jason, what are we assuming? Are we basically taking a one-time price reduction across the spectrum, about 5% or something like that?

Speaker Change: Next one Goku Honey hotline Jpmorgan go ahead. Please.

Gokul Hariharan: Yeah. Hi, good evening, and thanks for taking my question. First question on pricing, Jason. What are we assuming? Are we basically taking a one-time price reduction across the spectrum, about 5% or something like that? Also, I wanted to understand, do you feel that you can hold off on any further price declines through the course of the year given there seems to be both price pressure from your larger competitor in Taiwan, as well as price pressure from a lot of the new capacity on 20 nanometer in China as well.

Speaker Change: Yeah, Hi.

Speaker Change: Thanks for taking my question first question on pricing and what are we assuming that how do we how do we basically picking a one time price reduction across the across the spectrum are about 5% or something like that.

Mr. Jason Wong: Also, I wanted to understand, do you feel that you can hold off on any further price declines through the course of the year, given there seems to be both price pressure from your larger competitor in Taiwan as well as price pressure from a lot of the new capacity on 20nm in China? And again, our pricing strategy remains. to follow the market price. all growing table momentum in 22 can mitigate the potential 28 competitions.

Speaker Change: Also I wanted to understand do you feel that you can hold off on any further price declines through the course of the yard given.

Speaker Change: That seems to be you bought price pressure from your larger competitor in Taiwan as well as price pressure from a lot of B, a new capacity on 20 nanometer in China as well.

Jason Wang: Of course. I mean, we are experiencing that for the past years. Again, our pricing strategy remains unchanged, and we will. However, we do respect to follow the market price like we said in the past. At the beginning of the year, we always plan there will be a one-off pricing adjustment. The pricing outlook will resemble a similar pattern like 2024, which will be about a flattish year after the one-off adjustment. To mitigate the market pressure, the pricing pressure, we'll continue to strengthen our product portfolio. We do expect 22, 28 nanometer revenue contribution will continue to increase and will represent high 30% range for us. The growing tablet momentum in 22 can mitigate the potential 28 competitions.

Speaker Change: Of course, I mean, we.

Speaker Change: We are experiencing that for the past.

Speaker Change: Yes.

Speaker Change: Again, our pricing strategy.

Speaker Change: Remains unchanged.

Speaker Change: But however, we do respect.

Speaker Change: Although the market price.

Speaker Change: In the past.

Speaker Change: And at the beginning of the year, we always plan there will be a one off pricing adjustment.

Speaker Change: And.

Speaker Change: The pricing outlook.

Speaker Change: Similar pattern like 'twenty, 'twenty, four which will be about.

Speaker Change: Flattish year.

Speaker Change: After the one off adjustment.

Jason Wang: To mitigate the market pressure, the pricing pressure, we'll continue to strengthen our product portfolio. We do expect 22, 28 nanometer revenue contribution will continue to increase and will represent high 30% range for us. The growing tablet momentum in 22 can mitigate the potential 28 competitions.

Speaker Change: And the two.

Speaker Change: The market pressure the pricing pressure will continue this trend.

Speaker Change: Our product portfolio and we do expect the 'twenty two 'twenty.

Speaker Change: The revenue contribution.

Speaker Change: Continue to increase and will represent.

Speaker Change: Hi.

Speaker Change: N.

Table two.

Speaker Change: 22, okay.

Speaker Change: A potential 28 competition.

Jason Wang: You know, it's our view that in 2025, we'll continue working to differentiate from the industry peers in the mature foundry market. We know the competition is there. Geopolitically, the outlook taking place in the semiconductor industry is, again, you know, unprecedented, and we have experienced it in the last year, in 2024 as well. Some of the initiatives already happening to enhance the supply chain resilience because of the oversupply situation in the industry. Now, for UMC, we are one of the few foundry suppliers who can support global fab operations. We have envisioned a need for diversified manufacturing strategy many years ago, while at the same time, we believe the fundamental competitiveness is to strengthen our technology differentiation.

Speaker Change: Uh huh.

Mr. Jason Wong: It's our view that... will continue working on differentiating from the industry peers in the mature foundry market. We know the competition there, the geopolitically, the outlook. Some of the initiatives are already happening against the supply chain resilience because of the oversupply. For UMC, we are one of the few boundary suppliers who can support global fab operations.

Speaker Change: It's our view that in 2025, we will continue to differentiate on the industry peers.

Speaker Change: Foundry market, we know the competition there.

Speaker Change: Jill geopolitically, the Aldo taking place.

The industry is.

Speaker Change: Again, I'm President and we have experienced in the last year in 2024 as well.

Jason Wang: Some of the initiatives already happening to enhance the supply chain resilience because of the oversupply situation in the industry. Now, for UMC, we are one of the few foundry suppliers who can support global fab operations. We have envisioned a need for diversified manufacturing strategy many years ago, while at the same time, we believe the fundamental competitiveness is to strengthen our technology differentiation.

Speaker Change: Some of the initiatives already happening and that.

Speaker Change: Two against the supply chain.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Because of the oversupply situation in the industry now.

Speaker Change: We all wonder if a few foundry supply.

Speaker Change: We'll get into that.

Speaker Change: Operations.

Mr. Jason Wong: We have envisioned a need for diversified manufacturing strategies many years ago, while at the same time we believe the fundamental compatibility of the needs of the world. Our pricing strategy is unchanged compared to the previous year, and we are gaining shares in our addressable market, and UMC's diversified manufacturing... and competitive technology.

Speaker Change: We have a need for diversified.

Speaker Change: Strategy many years ago, while at the same time, we believe the fundamentals.

Speaker Change: Competitiveness is to strengthen our technology differentiation.

Jason Wang: In conclusion, our pricing strategy is unchanged compared to the previous year, and we are gaining shares in our addressable market. UMC's diversified manufacturing footprint and competitive technology offering will still set us apart from our peers. That's our view.

Speaker Change: Sure.

Speaker Change: This strategy is unchanged compared to the previous year, and we are gaining shares in power electronics home market.

Speaker Change: Pardon me if I could.

Speaker Change: Footprint and competitive technology offering.

Speaker Change: To set us apart from our peers.

Speaker Change: That's all right.

Gokul Hariharan: Got it. Thanks, Jason. Just one more question on pricing. I remember that a lot of LTA contracts were negotiated back in 2021, came into force in 2022. Many of them were three- to four-year kind of contracts. I presume a lot of them are coming up for renewal this year and probably next year. How does that influence pricing? I'm sure clients are gonna be asking for lower price given the current situation compared to back in 2021, 2022. Just wanted to understand, like, not just for this year, but like going forward a couple of years, do we think that the price curve is generally going to be downward sloping given this pressure?

Speaker Change: Got it. Thanks. Thanks, Susan So just one more question pricing I remember that a lot of L. D contracts that are negotiated back in 'twenty. One came into force in 2022, many of them that the Peter you had kind of contractual Ah I presume a lot of them are coming up for renewal this year and probably next year.

Goku Honey: Got it. Thanks, thanks Jason.

Goku Honey: So just one more question, pricing. I remember that a lot of LTA contracts were negotiated back in 21, came into force in 2022. Many of them were three year, three to four year kind of contracts. So I presume a lot of them are coming up for renewal this year and probably next year. How does that influence pricing? I'm sure clients are going to be asking for lower price given the current situation compared to back in 2021, 2022.

Gokul Hariharan: How does that influence pricing? I'm sure clients are gonna be asking for lower price given the current situation compared to back in 2021, 2022. Just wanted to understand, like, not just for this year, but like going forward a couple of years, do we think that the price curve is generally going to be downward sloping given this pressure?

Speaker Change: Yeah.

How does that influence pricing I'm sure clients I'm going to be asking for lower price given the current situation compared to back back in 2021 2022 so I just wanted to understand like not just for this year, but like going forward a couple of years.

Mr. Jason Wong: So just want to understand, not just for this year, but going forward a couple of years, do we think that the price curve is generally going to be downward sloping given this pressure? while our partners and customers remain committed, engaging with UMC on an ongoing basis, and for the future growth. So fundamentally, that system never changes. Now the market dynamic does put some pressure on those LTAs. So like I said, we all respect the market price dynamics, and we're closely working with our customers to navigate through this process, in order for them to protect and continue to be competitive in their marketplace.

Speaker Change: Do we think that the price club isn't really going to be downward sloping given this pressure.

Jason Wang: I think pricing is one of it. The LTA, I mean, the concept of LTA is really more of the mutual commitment from both customer and our and UMC, that we have to commit and honor our commitment, you know, agreement in inputting capacity and while our partners and customers, you know, remain committed, you know, engaging with UMC on ongoing basis and for the future growth. You know, fundamentally, this has never changed. Now, the market dynamic is putting some pressure on those LTA. We, you know, like I said, we respect the market price dynamics, and we're closely working with our customer to navigate through this process, you know, in order for them to protect and continue to be competitive in their marketplace.

Speaker Change: I think pricing is one of them.

Speaker Change: L T E I mean.

Speaker Change: The concept.

Speaker Change: It's really more of the mutual commitment from both customer and.

Speaker Change: And UMC.

Speaker Change: We have to.

Speaker Change: Anna you all agree.

Speaker Change: And even putting capacity and our partners and customers.

Amit: Amit as you know.

Amit: I'm going basis.

Amit: And for the future growth So you know.

Jason Wang: You know, fundamentally, this has never changed. Now, the market dynamic is putting some pressure on those LTA. We, you know, like I said, we respect the market price dynamics, and we're closely working with our customer to navigate through this process, you know, in order for them to protect and continue to be competitive in their marketplace.

Amit: Fundamentally that's just has never changed.

Amit: The market dynamics have been putting some pressure on those L. P. Eight.

Amit: So we like that.

Seth.

Amit: The market price dynamics.

Amit: And with our customers to navigate through this.

Amit: Process and.

Amit: Yeah.

Amit: And then to protect and continue to compete a.

Amit: Competitive.

Jason Wang: There is, you know, ongoing discussion with our LTA owners and with the goal that we will continue working together going forward and help them to be competitive in the marketplace.

Amit: Lucky place so.

Mr. Jason Wong: So there is an ongoing discussion with our LTA owners, and with the goal that we will continue working together going forward, and helping.

Jason Wang: There is, you know, ongoing discussion with our LTA owners and with the goal that we will continue working together going forward and help them to be competitive in the marketplace.

Amit: There is.

Amit: I'm going discussion with our.

Amit: Illness.

Amit: And with that.

Amit: We will continue working together going forward and help them to be competitive in the market.

Amit: Yes.

Gokul Hariharan: Gokul? Gokul, do you mute yourself? Yeah. Hi. Sorry. Sorry about that. Maybe one last question. Could you talk a little bit about the capacity ramp for the Singapore fab? Are you taking a little bit of a slower course of action? How much capacity do you expect to come online for the Singapore fab this year and potentially next year? This CapEx kind of moderation down to $1.8 billion from $3 billion, is that where we should expect it over the next couple of years, or is it just a one-year thing?

Jason Wang: Gokul? Gokul, do you mute yourself?

Amit: Okay.

Amit: Uh huh.

Speaker Change: But cook, who do you mute yourself, yeah, hi, sorry.

Goku Honey: Gokul, do you mute yourself? Yeah, hi. Sorry. Sorry about that.

Gokul Hariharan: Yeah. Hi. Sorry. Sorry about that. Maybe one last question. Could you talk a little bit about the capacity ramp for the Singapore fab? Are you taking a little bit of a slower course of action? How much capacity do you expect to come online for the Singapore fab this year and potentially next year? This CapEx kind of moderation down to $1.8 billion from $3 billion, is that where we should expect it over the next couple of years, or is it just a one-year thing?

Amit: Sorry about that so.

Goku Honey: So, maybe one last question. Could you talk a little bit about the capacity ramp for the Singapore Fab? Are you taking a little bit of a slower course of action? How much capacity do you expect to come online for the Singapore Fab this year and potentially next year?

Speaker Change: Maybe one last question could you talk a little bit about the capacity ramp for.

Speaker Change: The thinkable fab are you, taking a little bit of a slower.

Speaker Change: Of course of action how much capacity do you expect to come online for the Singapore Fab this year and potentially next year and this gap.

Mr. Chidung Liu: And this CapEx kind of moderation down to 1.8 billion from 3 billion, is that where we should expect it over the next couple of years or is it just a one-year thing? I mean, for the capacity expansion in 2025, our Singapore, the E3 production went is still on track and for the January 26th and start from January 26th. So that milestone remains unchanged. The volume has somewhat adjusted, and so, you know, we found...

Speaker Change: Capex kind of moderation down to one 8 billion from 3 billion is that bad but you should expect it over the next couple of years or is it just a one year thing.

Jason Wang: Sure. I mean, for the capacity expansion in 2025, our Singapore the P3 production win is still on track, and for the 26 January 2026 and start from 26 January 2026. That milestone remains unchanged. However, the volume has somewhat adjusted. You know, given the current market dynamics and the customer alignment, we are adjusting that ramp profile, but the timing did not change. The 2024 CapEx mainly spending in the P3 building facility, and that is the major portion which already complete and deployed. For the CapEx, you know, projection going forward, we do not expect there will be any uptick from the current level.

Speaker Change: Sure I mean.

The capacity expansion in 2020 five.

Speaker Change: Our Singapore.

Speaker Change: The.

Speaker Change: Q3 production is.

Speaker Change: It's on track and 40 of January 26.

Speaker Change: Stock on January 26, so that milestone remains unchanged. However.

Jason Wang: However, the volume has somewhat adjusted. You know, given the current market dynamics and the customer alignment, we are adjusting that ramp profile, but the timing did not change. The 2024 CapEx mainly spending in the P3 building facility, and that is the major portion which already complete and deployed. For the CapEx, you know, projection going forward, we do not expect there will be any uptick from the current level.

Speaker Change: The volume has some wage adjustments.

Speaker Change: So following the <unk>.

Speaker Change: Current market dynamics.

Speaker Change: And the customer alignment.

Speaker Change: Adjusting that rent profile by the tiny do not change.

Speaker Change: The 'twenty 'twenty, four capex, mainly spending India.

Goku Honey: 224 CapEx, mainly spending in the P3 building facility and that Okay, understood. And lastly, gross margin, given Chitong's guidance on depreciation, kind of high 20s kind of growth, revenue growth, you're expecting reflect mid-single digit. Is it fair to expect that gross margin stays in this mid-20s level through this year? Is that a fair kind of characterization of margins?

Speaker Change: Building facility and that is a major portion of it.

Speaker Change: We have deployed so.

Speaker Change: For the Capex projection going forward.

Speaker Change: We do not expect.

Any uptick from the current level.

Gokul Hariharan: Okay, understood. Lastly, gross margin. Given Chi-Tung Liu's guidance on depreciation, kind of high twenties kind of growth, revenue growth you're expecting looks like mid-single digit. Is it fair to expect that gross margin stays in this mid-twenties level through this year? Is that a fair kind of characterization of margins?

Speaker Change: Okay understood and lastly, gross margin.

Speaker Change: Just on the guidance on depreciation kind of high twenty's kind of growth.

Speaker Change: Revenue growth you were expecting looks like mid single digit.

Speaker Change: Is it fair to expect that gross margin stays in this mid twenties level through this year or is that a is that a fair kind of characterization of margins.

Chi-Tung Liu: It's difficult to guide the full year, especially on quarterly patterns for the gross margin right now. I think all we can say is that we try very hard, at least from a EBITDA margin point of view, to have an intact structural EBITDA margin. Of course, the depreciation numbers will go up continuously over the next two years. Our goal is really to have an intact structural profitability. Hopefully, we will see more 22 nanometer shipments along with recovery, capacity utilization rate to offset the increased cost side of the equation.

Chitung Liu: It's difficult to guide the full year, especially on quarterly patterns for the gross margin right now. I think all we can say is that we try very hard, at least from a EBITDA margin point of view, to have an intact structural EBITDA margin. Of course, the depreciation numbers will go up continuously over the next two years. Our goal is really to have an intact structural profitability. Hopefully, we will see more 22 nanometer shipments along with recovery, capacity utilization rate to offset the increased cost side of the equation.

Mr. Chidung Liu: Difficult to guide the full year, especially... on quarterly patents for the gross margin right now. I think all we can say is we try very hard, at least from a CB.margin point of view. to have an intact structure EBITDA margin. Of course, the depreciation numbers will go up. over the next two years. But our goal is really to have an intact structure probability, and hopefully we will see more 22 nanometer ship. along with recovering capacity utilization rate to offset the increase. cost side of the equation.

It's difficult to guide the full year, especially.

Speaker Change: Quarterly patterns for the gross margin right now because you know all we can say we try very hard.

Speaker Change: Our EBITDA margin point of view.

Speaker Change: We have a in tax structure EBITA margin of course, the depreciation numbers will go up continuously over the next two years, but theyre. All goal is really to have a intact.

Speaker Change: Structural possibility and hopefully we will see more 22 nanometer shipment along ways recovery capacity utilization rate.

Speaker Change: Offset the.

Speaker Change: The increase of cost side of the house.

Yes.

Gokul Hariharan: Okay, thank you.

Speaker Change: Okay. Thank you.

Operator: Thank you. Next one, Brad Lin, Bank of America. Go ahead, please.

Speaker Change: Thank you.

Operator: Next one, Bratlin Bank of America, go ahead. Hi, good afternoon. Thanks, Benjamin, for taking my questions. I have two questions. One is on the Silicon Interposer business outlook. Would you please share the latest updates and expansion plans for UMC's Silicon Interposer business? And also, beyond AI application, do you also foresee non-AI application adopting this kind of the, well, so-called cold-watch technologies as well?

Brett Lane: Next one Brett Lane Bank of America go ahead. Please.

Brad Lin: Hi, good afternoon. Thanks, Jason Wang, for taking my questions. I have two questions. One is on the silicon interposer business outlook. Would you please share the latest updates and expansion plans for UMC's silicon interposer business? Also, beyond AI application, do you also foresee non-AI application adopting this kind of the, well, so-called, CoWoS technologies as well? Thank you.

Speaker Change: Hi, Good afternoon, Thanks management for taking my questions I have two questions. One is on the us really calling into post their business outlook would you. Please share the latest updates any spansion planes for UMC is asleep come into parts of the business and also beyond AI application do you also foresee AI.

Vacation adopting these kind off the well so cold cold wash technologies as well thank you.

Jason Wang: Sure. For the silicon interposer existing capacity, there's no plan to expand. Some of the product already migrating to the next generation. We do have a product pipeline that coming into this, but there is a chasm between that. For the application being associated with the interposer as well as advanced packaging, we continue to see quite a bit of momentum on that. I can probably give you a bit of a detail, you know, on that front. Our customer are seeing increased requirements for the communication bandwidth and energy efficiency point of view, particularly in the AI application.

Mr. Chidung Liu: Thank you. of the, some of the products. have a pipeline coming into this, but there is a question between that. For the application being associated with the interposer as well as advanced packaging, we continue to see quite a bit of momentum on that. And so I can probably give you a bit of a detail on that front is our customers are seeing increased requirements for the communication bandwidth and energy efficiency point of view, particularly in the AI application. So we foresee there will be increased needs of integrated memory, logic, and even sensors, you know, chiplet for the better AI.

Speaker Change: Sure.

Speaker Change: No plans.

Speaker Change: Yeah.

Speaker Change: The some of the product.

Speaker Change: Eating.

Speaker Change: Two the next generation.

Speaker Change: We do have a pipeline that coming into this but there is a chasm between that.

Jason Wang: For the application being associated with the interposer as well as advanced packaging, we continue to see quite a bit of momentum on that. I can probably give you a bit of a detail, you know, on that front. Our customer are seeing increased requirements for the communication bandwidth and energy efficiency point of view, particularly in the AI application.

Speaker Change: No.

Speaker Change:

Speaker Change: So 40 of 40 applications being associated with the AR.

Speaker Change: The polls are wells that are the best packaging.

Speaker Change: You didn't see a quite a bit of momentum.

Speaker Change: And so.

Speaker Change: I can probably give you a bit of a detail.

Speaker Change: That is all customer inquiries requirement.

Speaker Change: Florida communication families in energy.

Speaker Change: GNC point of view, particularly in the AI applications. So we foresee there will be increasing.

Jason Wang: We foresee there will be increasing needs of integrated memory, logic, and even sensors, you know, chiplets for the better AI performance. We are broadening our packaging technology offering beyond this interposer, the 2.5D interposer, and which will allow us to develop a new system architect with multiple partners enlarging our addressable market. I mean, that's, you know, where we stand on the current interposer, which is top, you know, is, and no expansion on that. Meanwhile we expanding or broadening our advanced packaging offering for the future engagement.

Speaker Change: Memory logic, and even sensors chipset for the fed has the AI performance. So we are broadening our packaging technology offering the young.

Mr. Chidung Liu: We are broadening our packaging technology offering beyond the 2.5D interposer, which will allow us to develop a new system architect with multiple partners, enlarging our address flow market.

Speaker Change: Two points.

Speaker Change: And which will allow us to keep all of the new system hockey type with multiple partners.

Speaker Change: Lodging all addressable market so I.

Jason Wang: I mean, that's, you know, where we stand on the current interposer, which is top, you know, is, and no expansion on that. Meanwhile we expanding or broadening our advanced packaging offering for the future engagement.

Speaker Change: I mean, that's where we are.

Speaker Change: Staying on the currently.

Speaker Change: Paul.

Speaker Change: No expansion on that but Meanwhile, we are extending our packaging.

Mr. Chidung Liu: But meanwhile, we're expanding our Thank you very much. That's pretty clear. It sounds like despite limited expansion, we should see more value addition and high utilization rate for this business slide. Am I correct? Yes, we do expect there will be a pipeline coming in with numerous different products. Got it.

Speaker Change: Packaging offering.

Speaker Change: For the future.

Brad Lin: Thank you very much. That's pretty clear. It sounds like despite limited expansion, we should see more value addition and high utilization rate for this business line. Am I correct?

Speaker Change: Thank you very much that that's pretty clear you sounds like despite limited expansion, we should see more value addition, and high utilization rates for this basis lie am I correct. Yeah. We do expect there will be a pipeline coming in.

Jason Wang: Yeah. We do expect there will be a pipeline coming in, with numerous different product and applications.

Speaker Change: Numerous different products and applications.

Brad Lin: Got it. Thank you very much. My second question would be on the, well, geopolitical impacts on the, customer orders. Have you observed any significant share gains from the overseas clients due to the, well, rising geopolitical dynamics? When does the management expect this to drive the, well, revenue growth meaningfully? And also, conversely, do you anticipate any downside risk from so-called, China for China trend here? Thank you.

Speaker Change: Got it. Thank you very much. So my second question would be on the well geopolitical impacts on the customer.

Operator: Thank you very much.

Operator: So my second question would be on the geopolitical impacts on the customer orders. So have you observed any significant share gains from the overseas clients due to the, well, rising geopolitical dynamics? When does the management expect this to drive the, well, revenue growth meaningfully? And also, conversely, do you anticipate any downside risk from so-called China for China trend here?

Speaker Change: Customer over theirs, so have had.

Speaker Change: Have you observed any significant share gains from the overseas clients due to the well rising geopolitical dynamics, Oh and desktop management do you expect this to drive the revenue growth that meaningfully and Oh. So Conversely, do you anticipate any downside risk from so called.

Speaker Change: China for China Tryin' here. Thank you.

Mr. Chidung Liu: Thank you. I mean, we don't see any downside, and in fact, we see multiple different directions. You know, there is product moving into certain regions, and some product is moving out certain regions. So, there are more... provides supply resilience to fulfill various customers' foundry sourcing strategies or requirements. We actually do see we position ourselves well, and we welcome... currently they are.

Jason Wang: Sure. I mean, we don't see any downside. In fact, we see multiple different directions. You know, there is product moving into certain regions, and some products is moving out certain regions. There are multiple dynamic directions on those adjustments on our customer's sourcing strategy. With UMC's diversified manufacturing site that provides supply resilience to fulfill various customers foundry sourcing strategies or requirements, we actually do see we position ourself well, and we welcome any opportunity from our customer. As of currently, there are many ongoing projects that which will materialize after 2025.

Speaker Change: Sure I mean, we don't see any downside and in fact, we see.

Speaker Change: Multiple different direction.

Speaker Change: There is product moving into southern region and selling product.

Speaker Change: Also the regions. So they are more dynamic and direction.

Speaker Change: Adjustment.

Customer sourcing strategy and with the diversified manufacturing site that provides.

Jason Wang: With UMC's diversified manufacturing site that provides supply resilience to fulfill various customers foundry sourcing strategies or requirements, we actually do see we position ourself well, and we welcome any opportunity from our customer. As of currently, there are many ongoing projects that which will materialize after 2025.

It is twofold.

Speaker Change: There is a customer.

Speaker Change: Strategies all requirements.

Speaker Change: We we position ourselves well and we will kind of any opportunity from a customer.

Speaker Change: Okay.

Speaker Change: Currently there are many ongoing projects.

Speaker Change: She will materialize after 2025.

Brad Lin: Thank you very much, Jason.

Speaker Change: Oh, thank you very much different.

Operator: Thank you very much, Jessen.

Jason Wang: Sure.

Operator: Thank you. Next question, Charlie Chan, Morgan Stanley. Go ahead, please.

Speaker Change: Thank you.

Charlie Chan: Next question, Charlie Chan, Morgan Stanley. Go ahead, please. Hello Jason, Qidong.

Speaker Change: Next question Charlie Chan Morgan Stanley go ahead. Please.

Charlie Chan: Hello, Jason Wang, Chi-Tung Liu. First of all, Happy New Year. The earthquake is a little bit unfortunate, and hope your financial damage will be fully recovered later this year. First of all, I wasn't very clear about your comments about Q2 seasonality. Jason Wang, if I may double confirm that, you said, Q2, you are expecting,

Speaker Change: Hello, Jason.

Charlie Chan: First of all, happy new year and the earthquake is a little bit unfortunate and hope your financial damage will be fully recovered later this year. So first of all, I wasn't very clear about your comments about second quarter. Jason, if I may, can I double confirm that you said 2Q you are expecting FAB utilization to go a little bit higher and above seasonal. Can you clarify your comments about second quarter growth? Thank you.

Speaker Change: First of all happy new year.

Speaker Change: Yes, Craig.

Speaker Change: Unfortunately, then of your.

Speaker Change: Financial damage will be fully recovered.

Speaker Change: Later this year.

Speaker Change: So first of all Oh, I wasn't very clear about your.

Speaker Change: Comments about the second quarter.

David: David If I may can I doubled.

Speaker Change: Double confirm that you said.

Speaker Change: <unk> you are expanding.

Charlie Chan: Fab utilization to go a little bit higher and above the seasonal. Can you clarify your comments about Q2 growth? Thank you.

Speaker Change: The fab utilization to be higher and above the seasonal can you clarify your comments about second quarter growth. Thank you.

Jason Wang: Well, first, you know, thank you and a Happy New Year to you too. You know, in the, we definitely will navigate through this earthquake situation hopefully quickly, and we can recover and help our customer with their delivery, urgent delivery and with the shipment. Now, coming back to the Q2, it's too early to provide a Q2 guidance. We typically, you know, will provide quarterly guidance, outlook projection. What I said earlier is it was that our Q1 2025 is better than seasonality. It's better than we originally expected. The short-term visibility remains limited, partly because the non-fundamental factors like this, you know, for the US tariff, you know, in relation to the US tariff. We certainly hope, that's why I say that, we certainly hope that Q2 will grow sequentially.

Mr. Jason Wong: Well, first, thank you and happy quickly and we can recover and help. Now, coming back to the Q2... It's too early to provide. like quarterly guidance. Well, I said early... or Q1 2025 if that's the short term visibility remains unlimited. certainly hope. Why is that? We certainly hope that Q2 will grow sequentially. We are confident with our current 22-millimeter product pipeline, which will our 2025 second half growth. So we expect to grow our revenue in 2025. starting in seconds.

Speaker Change: Well first you know thank.

Speaker Change: Thank you and happy new year to you too.

Speaker Change: We definitely will navigate through this earthquake situation hopefully quickly and we can recover and help our customer.

Speaker Change: It was their delivery urgent delivery in wafer shipments.

Speaker Change: Now coming back to the Q2.

Speaker Change: <unk>.

Speaker Change: Too early to provide our Q2 guidance and.

Speaker Change: Well provide quarterly guidance, all the projections well I said earlier.

Jason Wang: What I said earlier is it was that our Q1 2025 is better than seasonality. It's better than we originally expected. The short-term visibility remains limited, partly because the non-fundamental factors like this, you know, for the US tariff, you know, in relation to the US tariff. We certainly hope, that's why I say that, we certainly hope that Q2 will grow sequentially.

Speaker Change: Our Q1 2025.

Speaker Change: Yeah.

Speaker Change: Is better than we originally expected.

Speaker Change: The short term visibility remains limited partly because the fundamental factors like this you know 40 are the U S tariffs.

Speaker Change: You can relate to the U S tariffs.

We certainly hope.

Speaker Change: Why is it that we certainly hope that Q2 will grow sequentially, but at this point the facility.

Jason Wang: At this point, the visibility remain low. We just have to wait and see. Once we have clarity, we'll provide more guidance. Meanwhile, we are confident with our current 22-nanometer product pipeline, which will enter production this year and to fuel our 2025 second half growth. We expect to grow our revenue in 2025, mainly with expectation that we will have, you know, the product launch on 22 starting in second half of 2025.

No.

Speaker Change: Just have to wait and see once we have clarity, we'll provide more guidance. Meanwhile.

Speaker Change: We are confident with our current 22 nanometer product pipeline, which will enter production this year.

Speaker Change: Here.

Speaker Change: And to fill our 2025 second half growth. So we expect to grow our revenue in 2020 by anyone's expectations.

Speaker Change: The other larger in 'twenty.

Speaker Change: 22, starting second half of 'twenty.

Charlie Chan: Okay. Got it. Thanks. Yeah, so by the way, you were very correct about last year's industry growth. I think you said single digit growth, right? It turned out to be like a 6% growth for overall foundry sector. Yeah, I also quite agree with you that inventory levels are quite healthy and semi content increase in PC, smartphone probably will make this year a little bit better than last year. Yeah. Switching gear to those advanced packaging business, right? I think last quarter talked about interposer, but recently there is news talking about you probably will do a wafer on wafer, right? Which is a kind of 3D packaging for a US customer too.

Speaker Change: Okay.

Charlie Chan: Okay, got it, thanks. Yeah, so by the way, you were very correct about last year's industry growth. So I think you said low single, sorry, single digit growth, right, and turned out to be like a six percent growth for overall foundry sector. So yeah, I also quite agree with you that Inventory labels are quite healthy and semi-content increase in PC, smartphone probably will make this year a little bit better than last year.

Speaker Change: Got it thanks.

Speaker Change: Yes, so by the way are.

Speaker Change: You are very.

Speaker Change: Colorado about last year's industry.

Speaker Change: Industry growth.

I think you said low single.

Speaker Change: Sorry single digit growth I turned out to be.

Speaker Change: Like a 6% growth or overall foundry sector. So yeah I also quite agree with you that our.

Speaker Change: Inventory levels are quite healthy.

Speaker Change: In Sydney.

Speaker Change: Semi content.

Speaker Change: Increasing P C. Some of them probably will make it easier.

Speaker Change: Better than last year.

Speaker Change: Yeah, so switching gears to the event.

Charlie Chan: Yeah, so switching gear to those advanced packaging business, right? So I think last call talked about interposer, but recently there's a news talking about you probably will do wafer-on-wafer, right? Which is a kind of a 3D packaging for a U.S. customer. Want to talk more about this development and how do you compare your wafer-on-wafer or hybrid bonds technology to your industry peers like TSMC or SPL? I think SPL is more on the chip level 3D packaging, right?

Speaker Change: Packaging business. So I think our last call I took up all into postpaid.

Speaker Change: Are you, saying there is a news that took in about you.

Speaker Change: You probably will do.

Speaker Change: Wafer on wafer right, which is kind of bad so.

Speaker Change: <unk> Pak packaging for our U S Kosmos due.

Charlie Chan: Want to talk more about this development and how do you compare your wafer on wafer or hybrid bonds technology to your industry peers, like TSMC or SPIL? I think SPIL is more on the chip level 3D packaging, right? You know, just a kind of a comparison between your 3D IP technology versus either TSMC or SPIL, that'll be great. Thank you.

Speaker Change: Wanted to talk more about.

Speaker Change: These people all months and how are how do you compare your wafer on wafer or hybrid bonds a takeout.

Speaker Change: Thank God you're to your in those peers like a TSMC or a scale I think scale is more on the chip.

Speaker Change: Chip level.

Speaker Change: C D packaging I bet.

Mr. Chidung Liu: But just a kind of comparison between your 3D IT technology versus either TSMC or SPL, that would be great. Thank you.

Speaker Change: Just a kind of a comparison between your C D.

Speaker Change: IC takeouts versus either TSMC.

Speaker Change: Thank you Cynthia.

Speaker Change: It'd be great. Thank you.

Jason Wang: Sure. Well, first of all, you know, talk about the projection. I do want to have some clarification on the inventory projection on our side.

Speaker Change: Sure.

Speaker Change: Well first I'll talk about the are you talking about projection I do want to have some clarification on the inventory projection Oh.

Mr. Chidung Liu: First of all, you talk about projection. I do want to have some clarification on the inventory projection on our. That's indicating a stable demand in the end market. In terms of application, the DOI and inventory for consumer electronics are approachable. However, the DOI remains relative. We believe it will still take more time to digest. Yeah, I think so, yeah. First of all, we typically do not. Like I said... We are broadening our wafer-on-wafer bonding, hyperbonding is one of the capabilities and technology that we provide. And in addition to that, there's also the interposer with DTC, discrete DTC, and so on.

Charlie Chan: Mm-hmm.

Jason Wang: We did see the DOI decrease as expected in Q3 2024.

Speaker Change: Mhm.

Speaker Change: <unk> decreased as expected in the third quarter of 2024.

Charlie Chan: Mm-hmm.

Jason Wang: reported in the past. That is, that's indicating a stable demand in the end market. In terms of application, the DOI and inventory for consumer electronics are approaching the healthy level. However

Speaker Change: Well, we haven't been in the past that.

Speaker Change: Indicating a stable.

Speaker Change: In the end market.

Speaker Change: In terms of application.

Speaker Change: I feel I inventory full consumer choice are approaching the healthy level now.

Charlie Chan: Mm.

Jason Wang: The DOI remains.

Charlie Chan: Mm.

Jason Wang: relatively high in the automotive and industrial sectors, which means that

Speaker Change: Hi.

Speaker Change: The industrial sector.

Charlie Chan: Okay.

Jason Wang: We believe it will still take more time to digest.

Charlie Chan: Okay.

Jason Wang: We believe it will still take more time to digest.

Speaker Change: We believe it will still take more time to digest.

Charlie Chan: Got you.

Got you.

Jason Wang: And the, uh-

Charlie Chan: Yeah. Thanks for that. Yeah.

And I think so.

Speaker Change: Yes.

Jason Wang: Yeah.

Charlie Chan: Mm-hmm.

Jason Wang: Yeah. Coming back to the advanced packaging. First of all.

Speaker Change: So coming back to the the packaging first of all.

Charlie Chan: Mm-hmm.

Jason Wang: We typically do not comment on any market speculation and specific customers. Like I said, we are broadening our packaging technology offering beyond the 2.5D interposer, which we have shipped in the past. Hybrid bonding is one of the capability and technology that we provide. In addition to that.

Speaker Change: Typically do not comment on any market speculation and specific customers.

Speaker Change: Like I said.

Speaker Change: We are broadening our packaging technology offering beyond.

Speaker Change: What you have shipped in the past.

Speaker Change: The wafer to wafer foundry.

Speaker Change: One of the capability of technology that we provide.

Charlie Chan: Mm.

Jason Wang: There's also the interposer with DTC, discrete DTC.

Speaker Change: Okay.

Speaker Change: So.

Speaker Change: Yeah.

Speaker Change: DTC.

Charlie Chan: Mm-hmm.

Jason Wang: and so on. There are multiple technology offering and more like in a toolbox for us.

Speaker Change: And so long and so they are.

Mr. Chidung Liu: And so there are multiple technology offerings, more like in a toolbox for us. Well, the market direction is they are product going to require a higher bandwidth and more efficient in many of the different applications. And then we can engage in without. Our current I see.

Speaker Change: Technology offering.

Speaker Change: When I get in the toolbox.

Charlie Chan: Mm-hmm.

Jason Wang: We do see the, well, the market direction is that our product going to require a higher bandwidth and more efficiency in many of the different applications. We can-

Speaker Change: And.

Speaker Change: Well the market direction is.

Speaker Change: Product.

Speaker Change: Requires a higher bandwidth and more efficient in many of the different application.

Charlie Chan: Mm.

Jason Wang: Engaging with our customer with those technology capability and tailor to their solution needs. I think our current stage is try to equip ourselves to be capable of doing so. We will be able to broaden our solution and serve our customer to enlarge our addressable market.

Speaker Change: Engaging with our customers.

Speaker Change: Technology capability.

Speaker Change: Yeah.

Speaker Change: Tailored to.

Speaker Change: Their solution needs so.

I think our current stage he's tried to equip ourselves to be capable of doing. So then we would be able to broaden our solutions and serve our customer to enlarge our addressable market.

Charlie Chan: I see. How about those optical related application? I mean, PIC, right? Photonic IC. I remember to stack PIC and EIC, you also need hybrid bond, right? I'm not sure if UMC is also considering the kind of CPO supply chain. I don't think there's a kind of only NVIDIA Rubin, right? I think other customers like Broadcom, Marvell, they are also pushing these CPO. Does UMC have any kind of plan to get into this market?

Speaker Change: I see.

Charlie Chan: How about those optical related applications? I mean, PIC, right? Photonic IC. I remember to stack PIC and EIC, you also need So I'm not sure if UNC is also considering the kind of CPO supply chain. I don't think there's a kind of only NVIDIA or Ruby, right? I think other customers like Broadcom, Marvell, they are also pushing this CPO.

Speaker Change: Oh, She told me I teed up vacation I mean.

Speaker Change: P IC right photonic IC.

Speaker Change: And remember to stake a b C and D. ICU you also need to.

Speaker Change: Hi, Barry bought right, so I'm not sure you've.

Speaker Change: Are you in season so.

Speaker Change: Uh huh.

Speaker Change: C P O.

Speaker Change: Our supply chain.

I think I don't think there is a kind of a oney M. B a roofing I think.

Speaker Change: Other customers like Broadcom Avago.

Speaker Change: They are also pushing these C P O. So.

Mr. Chidung Liu: So does UNC have any kind of plan to get into this market? Oh, certainly. I mean, we're not going to miss out on any potential growth opportunity. When, you know, when we talk about the increase of communication bandwidth and energy efficiency, it applies to many different applications. Any others will probably require So yes, we do see there will be a various application that requires such technologies. And so again, we believe by broadening offering will help us to enlarge our traditional market without missing out. Thank you.

Speaker Change: No.

Speaker Change: He has any.

Speaker Change: Kind of a plan to get into this market.

Jason Wang: Oh, certainly. I mean, we're not gonna miss out any potential growth opportunity. When, you know, when we talk about the increase of communication bandwidth and efficiency, energy efficiency, you know, it applies to many different applications, not limited to the current GPU and the processors, and there are many others. The many others will probably require integrating memory logic, you know, like the GPU, but in a different, you know, bandwidth and also the different capability. Yes, we do see there will be various application that require such technologies. Again, we believe, you know, by broadening our technology offering will help us to enlarge our addressable market without missing out.

Speaker Change: Well certainly I mean, we were not going to miss out any potential growth opportunity.

Speaker Change:

Speaker Change: You know when we talk about the.

Speaker Change: The increase of communication bandwidth efficiency energy efficiency.

Speaker Change: It applies to many different applications.

Speaker Change: Ltd.

Speaker Change: Alright.

Speaker Change: The GPU.

Speaker Change: Processors and there are many others.

Jason Wang: The many others will probably require integrating memory logic, you know, like the GPU, but in a different, you know, bandwidth and also the different capability. Yes, we do see there will be various application that require such technologies. Again, we believe, you know, by broadening our technology offering will help us to enlarge our addressable market without missing out.

Speaker Change: So these many others will probably require integrating.

Speaker Change: Memory logic.

Speaker Change: Do you view, but in a different.

Speaker Change: Families and.

Speaker Change: So yes, we do see there will be various apps.

Speaker Change: Application that requires such technologies.

Speaker Change: So again.

Speaker Change: We belief by broadening our technology offering will help us to enlarge Alex vessel market.

Charlie Chan: Thank you. Last one from me is really your key partner, Intel. So there was an organization change. I'm not sure if you are comfortable to comment or share what does that mean to your partnership with Intel. Any positive or negative given the recent senior management CEO change of Intel?

Speaker Change:

Speaker Change: Thank you.

Charlie Chan: Yeah, and last one from me is really your key partner, Intel. So there was an organization change.

Speaker Change: And that last.

Speaker Change: That's one from for me is really.

Speaker Change: Coupon or Intel.

Speaker Change: Uh huh.

Speaker Change: Well go back they shouldn't change.

Mr. Chidung Liu: So I'm not sure if you are comfortable to comment or share what does that mean to your partnership with Intel, any positive or negative given the recent senior manager and CEO change of Intel? I mean, what I can share with you is this, this strategic cooperation is definitely Our partner and us are both very committed to bring this most competitive 12-millimeter solution to the Western footprint, and we are seeing a very strong customer interest. We have At the moment, we are verifying the circuit performance already for the pilot line, and we expect...

Speaker Change: Sure you by your comment about too.

Speaker Change: Sure.

Speaker Change: What does that mean to your partnership.

Speaker Change: With Intel.

Speaker Change: Any possible negative given the reset.

Speaker Change: Recent senior manager and CEO change out of Intel.

Jason Wang: Well, I mean, what I can share with you is this strategic cooperation is definitely a win-win for both companies. Our partner and us are both very committed to bring this most competitive 12-nanometer solution to the western footprint. We are seeing a very strong customer interest. You know, we have been working closely and diligently to accelerate the delivery schedule since day one. At the moment, we are verifying the silicon performance already for the pilot line, and we expect the early PDK will be ready for the first wave of customers by 2026 as planned. Therefore, we believe this cooperation will be beneficial for the industry, our customers, and for both companies. I do not foresee any changes in this cooperation. You know, in this cooperation.

Speaker Change: Well I mean.

Well I can share with you is this district teachers cooperation.

It's definitely a rising for both companies.

Speaker Change: And our party.

Speaker Change: Every company to bring the.

Speaker Change: Most competitive.

Speaker Change: To the western footprint.

Speaker Change: We are seeing a very strong customer interest.

Speaker Change: Hi.

Speaker Change: <unk> been working closely until.

Speaker Change: Two a salary.

Speaker Change: Reschedule since day one.

Jason Wang: At the moment, we are verifying the silicon performance already for the pilot line, and we expect the early PDK will be ready for the first wave of customers by 2026 as planned. Therefore, we believe this cooperation will be beneficial for the industry, our customers, and for both companies. I do not foresee any changes in this cooperation. You know, in this cooperation.

Speaker Change: At the moment.

Speaker Change: This performance already for the pilot line and we expect the early PDK will be ready for the first wave of customer by 26 was explained it.

Mr. Chidung Liu: Therefore, we believe this is a problem. companies.

Speaker Change: Therefore, we believe this cooperation will be beneficial for the industry, our customers and for both companies. So I do not.

Mr. Chidung Liu: So I do not. Now, our key focus is on Wi-Fi connectivity, high-speed interface, SOC products, in addition to broadband. process is exploring potential Technology solutions to further complement Our portfolio with diverse product application Thank you.

Speaker Change: Well see any changes.

Speaker Change: This cooperation.

Jason Wang: As of now, our key focus are on Wi-Fi connectivity, high-speed interface SoC products. In addition to cooperating on the 12 nanometer logic process, we're also exploring potential advanced specialty technology solution to further

Speaker Change: And that's sort of it.

Speaker Change: Now our key focus on Wi.

Speaker Change: Wi Fi connectivity high speed interface I suppose he brought up.

Speaker Change: In addition to operating.

Speaker Change: Well now be the larger process. We're also exploring potential seems like specialty technology solution to further.

Charlie Chan: Mm.

Jason Wang: Complement our portfolio with diverse product application. We first of all are still very excited about the engagement, and we are very committed, and we see a very good progress at this point.

Speaker Change: Complement our portfolio.

Diversified applications. So we first.

Speaker Change: First of all we're still very excited about the engagement.

Speaker Change: And we see a very good progress.

Speaker Change: At this point.

Charlie Chan: Got you. Thank you. Thanks, Jason. This is super helpful. Thank you.

Jason Tito: Got you. Thank you thanks, Jason just super helpful. Thank you.

Charlie Chan: Thanks Jason. This is super helpful.

Operator: Thank you.

Speaker Change: Yes.

Jason Wang: Thank you.

Operator: Thank you. Next one, Bruce Lu, Goldman Sachs. Go ahead, please.

Speaker Change: Thank you your next one Bruce Lu Goldman Sachs go ahead. Please.

Bruce Liu: Next one, Bruce Liu, Goldman Sachs. Go ahead, please. Hi, Jason. The first question is a quick one. The Europe business went up quite a lot in the post-quarter, but application-wise, you know, we see that others' applications went up a lot in the post-quarter. Can you tell us...

Bruce Lu: Hi, Jason. The first question is a quick one. The Europe business went up quite a lot in Q4, but application-wise, you know, we see that other applications went up a lot in Q4. Can you tell us a little bit more detail, you know, do you have any market share gains there or any project wins or, you know, what is the application which drive the Europe growth in Q4?

Speaker Change: The first question is a quick one.

The Europe business window quite a lot in fourth quarter.

Speaker Change: Location wise as you know, we see that others application went up a lot in fourth quarter can.

Speaker Change: Can you tell us.

Mr. Chidung Liu: a little bit more detail you know do you have any market share against there or any project project wind or you know what is the application which drive the europe growth in force Well, she don't actually have a comment about this earlier. The pickup. automotive business really reflecting is the customer's modulation for their inventory management. So we see this one-off uptrend and then we'll align that. I also touched on the inventory situation. Oh, I see. Okay.

Speaker Change: So a little bit more detail do you have any market share gains there or any push it towards that window.

Speaker Change: The application, which drive their Europe grows in fourth quarter.

Jason Wang: Chi-Tung Liu and Bruce Lu actually commented about this earlier. The pickup in the Q4 automotive business really reflecting is the customers' modulation for their inventory management. We see this one-off uptrend and then will, you know, align back to the end market demands, which I also touched on the inventory situation. The automotive industry sectors inventory remains high, and it will still take more time to digest.

Speaker Change: Well, that's you don't want them frozen.

Speaker Change: Just a comment.

And I thought the severity of the pick up the Q4.

Speaker Change: Automotive.

<unk> as a customer modulation for their inventory management.

Speaker Change: So we see it as well.

Speaker Change: One of our powertrain and then it will.

Speaker Change: For like back to the end market demand, which I also touched on the inventory situation optimal towards small.

Speaker Change: Even though it remains high.

Speaker Change: It will still take more time to digest.

Bruce Lu: Oh, I see. Okay.

Speaker Change: So let's see.

Jason Wang: It's more of inventory adjust.

Speaker Change: Is it more of a inventory okay.

Bruce Lu: Okay. Next one is for your ASP, which drew down mid-single digit in Q1. Is there a product mix issue or mostly for the one-off? I mean, is it pretty much mid-single digit across different nodes or, you know, any specific node has higher price erosion than other nodes? For example, like 28 or 8 versus.

Speaker Change: Okay.

Mr. Chidung Liu: Okay, the next one is for your ASP, which is download musical digit in first quarter. Is there a product mix issue or mostly for the one-off, I mean, or is it? Pretty much Mr. Goldrich across different notes or, you know, any specific note has higher price erosion than other notes. For example, like 28 or H versus 12B. Right. I mean, you're absolutely right. It's the plan. while we have. Can I assume your 20A is differentiated and not worse, lower than missing rotational motion? I can't really comment on every single note, but I can tell you, not only at 22 and some other.

Speaker Change: Our next witness for your E S. P O.

Speaker Change: Which tumblr musical theater in first quarter.

Speaker Change: Is there.

Speaker Change: Product mix issue or most people the one offs I mean or.

Speaker Change: Is it.

Speaker Change: Pretty much mid single digit across different node or.

Any specific didn't know has higher price.

Speaker Change: We shouldn't then other nodes.

Speaker Change: For example, like 28 or <unk> versus <unk>.

Jason Wang: Right. I mean, you're absolutely right. It's the blended base. The one-off, you know, mid-single digit is at the blended base. There are some nodes that are actually more associated with commodity-like solutions. They have deeper erosion. And while we have a differentiated technology, have a lower erosion, and then combining with the product mix for the quarter, and then we try to manage that at a one-off, at a mid-level, mid-single digit adjustment.

Speaker Change: Right I mean, you're you're absolutely right is the is the blended base.

Speaker Change: The one off.

Speaker Change: Single digit.

Speaker Change: There are some.

Speaker Change: No.

Speaker Change: No that actually my social was commodity like a solution they have deeper erosion and while we have a differentiated technology.

Speaker Change: Erosion, and then combining with the product mix for the quarter.

Speaker Change: We tried to manage that.

Speaker Change: At a one off.

Speaker Change: Levels meet musical digitally.

Speaker Change: Yeah.

Bruce Lu: Can I assume your 28 is a differentiated node with lower than mid-single digit erosion?

Speaker Change: Because I would assume your 'twenty as a differentiator.

Speaker Change: Lower than mid single digit erosion.

Jason Wang: I can't really comment on every single node, but I can tell you, not only at 28, 22, and some other specialty technology as well, has a better, above the, you know, lower than the average blended basis and some are higher, yes.

Speaker Change: Yeah.

Speaker Change: I can't really comment on every single no, but I can tell you that not only at 28 22.

Speaker Change: Some other specialty technology as well has the better our policy is.

Speaker Change: Lower than the average blended basis.

Speaker Change: Hi.

Bruce Lu: Which means that ASP erosion is lower than the corporate average of mid-single-digit for 28 and 22?

Speaker Change: Loaded, which means that it used to be which is lower than the corporate average or mid single digits for the 28 and hunting.

Mr. Chidung Liu: Lower than, which means the ASP-WASH is lower than the COBRA. 420 and until. Yeah so. The blender is 5%, I mean some are smaller than 5%, some are higher than 5%.

Bruce Lu: Which means that ASP erosion is lower than the corporate average of mid-single-digit for 28 and 22?

Jason Wang: That means if a blender is a 5%, I mean, some are smaller than 5%, but some are higher than 5%.

Speaker Change: Yes, so that is is the.

Speaker Change: If a plant is a 5% that you saw more of it.

Speaker Change: Some are higher than <unk>.

Bruce Lu: I see.

Jason Wang: Right.

Speaker Change: Right.

Bruce Lu: Okay. One last one is, do you consider, you know, as you mentioned, you are the only one who can manufacture the wafer in different geographical location, and TSMC could make it clear that they charge premium in non-Taiwan capacity. Do you consider to charge premium for your Singapore or Japan fabs with higher pricing?

Speaker Change: Okay. One last one is that you can see the you know as you.

Mr. Chidung Liu: Okay, one last one is that do you consider, you know, as you mentioned, you are the only one who can manufacture the wafer in different geographical location and TSMC could make it clear that they charge premium. in non-Taiwan capacity. Do you consider to charge premium for your Singapore or Japan bags. with higher pricing. I mean, the pricing is an important topic, right? I mean, we continue aligning with our customer, with the end goal that we... You will respect and follow it. Now, the uh... wouldn't you know. All markets close. We want to position ourselves. as well, striking a balance.

Speaker Change: You mentioned you are the only one who could manufacture the way put in different geographical location.

Speaker Change: He couldn't make it clear that they charge premium.

Speaker Change: In <unk>.

Speaker Change: Taiwan capacity do.

Speaker Change: So you can see there.

Speaker Change: To charge premium for your Singapore, Japan Fabs.

Speaker Change: With higher pricing.

Jason Wang: I mean, the pricing is an important topic, right? I mean, we continue aligning with our customer with the end goal that we need to help them to compete in their marketplace. So we will respect and follow that market pricing. And, you know-

Speaker Change: The pricing is an important topic right I mean, we continue aligning with our customer with the angles that we need to help them to compete in their marketplace.

Speaker Change: So we will respect and follow that market pricing.

Bruce Lu: Mm-hmm.

Speaker Change: And.

Jason Wang: From a strategy point of view that we're unchanged, but from competitiveness point of view, we will continue aligning with our customers' needs to maintain that. Now, it's important to know that we look at this market in a way that we believe our market is growing in the low single digits, and we wanna position ourselves still gaining shares in our addressable market while striking a balance between the growth and profitability, which we have shown consistently in our financial performance and with a resilient track record in the past. It's our belief that with a healthy financial structure, we have the flexibility to continue to invest in the technology development, in broadening our offerings, and for our future growth.

Speaker Change: From a strategy point of view that change.

Speaker Change: Some competitiveness point of view, we will continue to align it with our customer.

Speaker Change: No.

Speaker Change: Yeah.

Speaker Change: It's important to know that.

Speaker Change: Look at this market in a way that we believe are market growing in the low single digits and we wanted to position ourselves still gaining shares in our addressable market, while striking a balance between the growth and profitability.

Mr. Chidung Liu: which we have shown consistently in our financial performance and with a resilient track record. And it's our belief that with a healthy... have the flexibility to continue to invest in the technology development in broadening our So we want to stay competitive, but meanwhile, we're Okay, thank you.

Speaker Change: We have shown in the system.

Speaker Change: Financial performance and with that.

Speaker Change: We said in the past and it's our belief that we say a healthy financial structure, we have the flexibility to invest in the technology development and broadening our offering and for our future growth. So we want to stay competitive, but Meanwhile, we want to manage that balance.

Jason Wang: It's our belief that with a healthy financial structure, we have the flexibility to continue to invest in the technology development, in broadening our offerings, and for our future growth.

Jason Wang: We want to stay competitive, but meanwhile, we wanna manage that balance. Yeah.

Speaker Change: Yeah.

Bruce Lu: Okay. Thank you.

Speaker Change: Okay. Thank you.

Operator: Thank you. Next one, Jason Tsang, CLSA. Go ahead, please.

Speaker Change: Thank you.

Operator: Thank you. Thank you for taking my questions. My first question is in terms of your target usage rate.

Speaker Change: Next one Jason Jones C. L. I say go ahead. Please.

Jason Tsang: Thank you for taking my questions. My first question is in terms of your targets utilization rate. As your competitor in China are now, I think their utilization rate already reached to a very high level. I just want to know which kind of levels of your utilization rate is more reasonable for UMC for this year or in coming year. Thank you.

Speaker Change: Thank you for taking my questions.

Speaker Change: My first question is in terms of your Turkish.

Speaker Change: Right.

Operator: As your competitor in China, I think their retaliation rate already reached to a very high level. So, I just want to know which kind of levels of the use action rate is more reasonable for UNC for this year or in coming years. We always strive for increased utilization rate. Right now, the current projection is about 70% level of utilization. Got it.

Speaker Change: That's your comparator in China.

Speaker Change: No I think they're generally.

Speaker Change: Or do you reach to a very high level.

Speaker Change: So I should want to know.

Speaker Change: Which kind of levels.

Speaker Change: So you can raise it is more reasonable for UMC for it this year, we're in coming years. Thank.

Speaker Change: Thank you.

Jason Wang: Well, we always strive for increase utilization rate and but not on an unreasonable expense to get that. Right now the current projection is about 70% level of utilization corporate average. Some of them now actually have a higher utilization, some has lower. For instance, our 8-inch loading is still under the recovery mode, and which will continue to strengthen our offering and hopefully we can recover that in the longer term. Right now they are below the corporate average. Our, you know, 28 and 22 is, you know, is actually above the corporate average. We continue to see a strong momentum in the tape-out.

Speaker Change: Well, we always strive for increased.

Speaker Change: Right and but not on a reasonable expense to get that right.

Speaker Change: Right now the.

Speaker Change: Current projections is about 70%.

Speaker Change: Utilization Copa average.

Speaker Change: No actually I had a higher yield.

Speaker Change: Uh huh.

Jason Wang: For instance, our 8-inch loading is still under the recovery mode, and which will continue to strengthen our offering and hopefully we can recover that in the longer term. Right now they are below the corporate average. Our, you know, 28 and 22 is, you know, is actually above the corporate average. We continue to see a strong momentum in the tape-out.

Speaker Change: For instance, our eight inch loadings.

Speaker Change: And what you.

Speaker Change: We will continue to strengthen.

Speaker Change: Our offering and hopefully we can be covered that in the longer term, but right now they are below that.

Speaker Change: The average.

Speaker Change: Our 28.

Speaker Change: And 'twenty two.

Speaker Change: Our Boston above the.

Speaker Change: Corporate average and we continue to see strong momentum.

Jason Wang: I think in general, we, like I answered Bruce Lu, you know, I try to strike a balance between that. 70% right now is not, I would not say high, but I think will be a right number for us to maintaining that balance at this point. Of course, we'll continue striking for better utilization rates. Yeah.

Speaker Change: So.

Speaker Change: I think in general we like it.

Speaker Change: And so Bruce I tried to strike a balance between that.

Speaker Change: And 70% right now.

Speaker Change: No.

Speaker Change: I would not say high but I think it will be a right number for us to maintaining that.

Speaker Change: At this point, but of course, we will continue striking for better utilization.

Jason Tsang: My second question is in terms of your competition. I think your Chinese competitor now already has a very high utilization rate. Have you seen lower competitions from those Chinese players in this year?

Speaker Change: Got it. So my second question is in terms of your competition. So I think your Chinese competitors now already has already has a very high attachment rate. So have you seen lower competitions from Chinese players in this years.

Operator: So, my second question is in terms of your competition. So, I think your Chinese competitors now already have a very high euthanasia rate. So, have you seen lower competitions from those Chinese players in this year?

Mr. Jason Wong: I mean, the, you know, I can't really comment about the competitors' behavior, but the bottom Act and striking a balance of that and we think this is not a one-time or short-term situation. We need to stay competitive in the long run. in 2025. whether they are, whether they have. less pricing pressure or continue pricing pressure, we believe we will outgrow our dreadful market. and hence our current portfolio.

Jason Wang: I mean, you know, I can't really comment about their competitors' behavior, but the bottom line is we need to stay competitive in many aspects. You know, your ASP need to be competitive, your solution need to be competitive, your manufacturing performance need to be competitive. I think, again, you know, we look at all aspects and striking a balance of that. We think this is not a one-time or short-term situation. This is we need to stay competitive in the long run. If we look at this in 2025, we project we will outgrow our addressable market, okay? Whether they have less pricing pressure or continued pricing pressure, we believe we will outgrow our addressable market.

Speaker Change: I mean the.

Speaker Change: You know I can't really comment about there.

Speaker Change: The competitive behavior, but the bottom line, we need to stay competitive.

Speaker Change: And competitively in many aspects.

Speaker Change: So you need to be competitive solutions need to be competitive.

Speaker Change: Factoring performance and to be competitive.

Jason Wang: I think, again, you know, we look at all aspects and striking a balance of that. We think this is not a one-time or short-term situation. This is we need to stay competitive in the long run. If we look at this in 2025, we project we will outgrow our addressable market, okay? Whether they have less pricing pressure or continued pricing pressure, we believe we will outgrow our addressable market.

Speaker Change: All right I see.

Again, we look at all aspects and striking a balance with that.

Speaker Change: And we think this is not a one time or short term situations as we need to stay competitive in the long run.

Speaker Change: Uh huh.

Speaker Change: If we look at this.

Speaker Change: In 2025, we'd put yet we will outgrow all addressable market, okay, and whether they are whether they have no. That's.

Speaker Change: Whether they are less pricing pressure or continued pricing pressures. We believe we will grow all addressable market.

Jason Wang: We are working on several new initiatives to drive our future growth, enhance our current portfolio, expanding our addressable market. You know, like I said, you know, from our current portfolio, we advancing our specialty technology roadmap. For example, high-voltage. We launched the industry's first 22-nanometer High V in May 2024 to sustain our leading position to the next generation handsets. Besides that, handsets, the customer already adopt our High V platform for OLED display in the next generation tablets, laptops. We'll continue to drive our roadmap into the 14 High V solution to further extend our leadership. In that front, I think we can capture the growth and not continue fighting in the same, you know, space.

Speaker Change: We are working on several new initiatives to drive even driving our future growth.

Speaker Change: And hence our current portfolio.

Speaker Change: Expanding our addressable market.

Speaker Change: And like I said.

From our current portfolio.

Speaker Change: Advancing our specialty technology roadmap.

Jason Wang: For example, high-voltage. We launched the industry's first 22-nanometer High V in May 2024 to sustain our leading position to the next generation handsets. Besides that, handsets, the customer already adopt our High V platform for OLED display in the next generation tablets, laptops. We'll continue to drive our roadmap into the 14 High V solution to further extend our leadership. In that front, I think we can capture the growth and not continue fighting in the same, you know, space.

Speaker Change: For example, the high voltage we launched the industry's first 22 nanometer E. In may 2024 to sustain our leading precision to the next generation headset besides that besides handset.

Mr. Jason Wong: He said that. Cutler has already adopted our high-definition platform for OLED display in the next-generation tablet. But we'll continue to drive our roadmap into the 14th high-resolution to further So in that front, I think we can capture. talk about our 12 nanometer core operation that provides technology no advancement and addressing high Early engaged customers already showing strong interest and they will pull in the production. We will pull in our production schedule. So I think the growth opportunity still lies in this industry because the industry is growing. And in combination with our current portfolio enhancement, the enlarged addressable market with the right...

Speaker Change: Some are highly platform for.

Speaker Change: Next generation tablet.

Speaker Change: Hi.

Speaker Change: Yeah.

Speaker Change: So we will continue to drive our roadmap into the 14th Hy Vee solution to further extend our leadership in that front I'd say, we can capture the growth and not fighting in the sense you know.

Speaker Change: 10 states.

Jason Wang: In terms of enlarging our addressable market, I, you know, we talk about our 12-nanometer cooperation that provides technology, you know, advancement and addressing high-growth market. Early engaged customers already showing strong interest, and they will pull in the production. We will pull in our production schedule. The feedback's great, you know, and our solution will be very competitive. Again, that's a differentiation from that. I talked about that we wanna provide advanced packaging solution to serve AI application with a high-growth potential, and we continue to broaden that offering and develop that. I talked about that we need to have financial strength to continue to invest in the area that we can, you know, fuel the future growth. I think there is the growth opportunity still lies in this industry because the industry is growing.

Speaker Change: In terms of a larger addressable market I know, we talked about our 12 nanometer cooperation that provides technology advancement and addressing high growth market.

Speaker Change: Do you engage your customers already shown strong interest and they will tweak.

Speaker Change: We will tweak our production schedule.

Speaker Change: And the feedback is great.

Speaker Change: And our solution will be very competitive and again, that's a differentiation.

Jason Wang: Again, that's a differentiation from that. I talked about that we wanna provide advanced packaging solution to serve AI application with a high-growth potential, and we continue to broaden that offering and develop that. I talked about that we need to have financial strength to continue to invest in the area that we can, you know, fuel the future growth. I think there is the growth opportunity still lies in this industry because the industry is growing.

Speaker Change: And I talked about that we wanted to provide advanced packaging solution.

Speaker Change: Application.

Speaker Change: High growth potential and we continue.

Speaker Change: And Dave all of that I talked about that we need to have financial strength to continue investing in it.

Speaker Change: That weekend.

Speaker Change: A few of the future growth so I think there's a.

Speaker Change: Both opportunities to life in this industry because the industry is growing.

Jason Wang: In combination with our current portfolio enhancement, the enlarged addressable market come with the right financial model that fuel our future investment. To capture those growth, I think we will differentiate on that. I certainly not try to, you know, just competing with the current utilization number, but in a way, I, you know, we try to strive to a very balanced, very healthy corporation that can continue to invest in the future and to be relevant in this industry. I maybe give you a little bit more, but I think that's sort of how we feel about this. Yeah.

Speaker Change: Combination with our current portfolio enhancement.

Speaker Change: And larger addressable market.

<unk> financial model that fuel our future investment to capture those growth.

Speaker Change: The friendship and I suddenly not tried to.

Operator: I certainly not try to, you know, just competing with the current utilization number, but in the that maybe give you a little.

Speaker Change: Just competing with the current utilization number but in the way we try to strike a very.

Speaker Change: Balanced very healthy cooperation that can continue to invest in the future and to be relevant in this industry.

Speaker Change: Maybe give you a little bit more but I think that's sort of how we feel about this.

Jason Tsang: Okay. Got it. My last question is in terms of demand side. In terms of your application portfolio, I mean, which segments did you see as a better demand? I mean, such as computers, consumer, or smartphone. Have you seen the demand recovery after Chinese government's subsidy in Q1 or in Q4?

Speaker Change: Okay, Okay got it.

Operator: Okay, got it.

Speaker Change: My last question is interesting.

Mr. Jason Wong: My last question is in terms of the demand side. So in terms of your application portfolio, I mean, which segments did you see as a better demand? I mean, such as computers, consumer, or smartphones? And have you seen the demand recovery after Chinese government's subsidy in Q1 or in Q4? First, for Q1 outlook, we expect revenue contribution in consumer segment will increase due to strength And the rest of seven is either flat or slightly declined.

Speaker Change: Inside so in terms of your application portfolio, I mean, which segment did you see that's a better man I mean.

Speaker Change: <unk>, such as computers consumer or a smartphone.

Speaker Change: And have you seen the demand recovery after Chinese government subsidy in Q1 or Q4.

Jason Wang: First, for Q1 outlook, we expect the revenue contribution in consumer segment will increase due to a strength in Wi-Fi, digital TV, set-top box, and display drivers. The rest of segment is, you know, either flat or slightly decline. You know, we talk about the Q1 outlook, despite that the consumers are stronger, but we think it could trigger by either the tariff or the subsidy, and because we do see that Q1 has better than traditional seasonality behavior. However, we're just hoping that Q2 can sustain that. At this point, due to the limited visibility, you know, we couldn't give you the Q2 guidance, but Q1 is better than the seasonality. Yeah.

Speaker Change: So first of all Q1 outlook, we expect the revenue contribution in consumer sentiment will increase due to our strength in Wi Fi digital TV set top box and display drivers are there.

Speaker Change: Seven.

Speaker Change: You know, it's either flat or slightly declining.

Speaker Change: You know we talk about the Q1 outlook.

Speaker Change: Despite that the consumer is stronger.

Speaker Change: We we we see.

Speaker Change: Figure by either the terrorists or Florida subsidy and because we do see that has a better than traditional seasonality behavior.

Jason Wang: However, we're just hoping that Q2 can sustain that. At this point, due to the limited visibility, you know, we couldn't give you the Q2 guidance, but Q1 is better than the seasonality. Yeah.

Speaker Change: However, we were just hoping that you can sustain that.

Speaker Change: At this point due to the limited visibility.

Speaker Change: We couldn't give you the Q2 guidance, but Q1 is better than that.

Speaker Change: Q1 is better than seasonality.

Jason Tsang: Okay. Thank you. I have no more question. Thank you very much.

Speaker Change: Okay. Thank you I have no more questions. Thank you very much.

Operator: OK, thank you. I have no more questions.

Operator: Thank you very much. Thank you.

Jason Wang: Thank you.

Speaker Change: Thank you.

Operator: Thank you. Ladies and gentlemen, we are taking the last question. The last one, Brad Lin, Bank of America. Go ahead, please.

Operator: And ladies and gentlemen, we are taking the last question.

Speaker Change: And ladies and gentlemen, we are taking the last question.

Mr. Chidung Liu: The last one, Breitling Bank of America. Go ahead. Thank you for taking my question. So one follow-up. So as Jason highlights, that advanced packaging is a key business growth driver for UMC to outpace the industry and also for the future growth. While I'm on the disappointed capex number itself, should we also expect a higher portion of the capex spent by UMC in the future to increase for this advanced packaging kind of service like our industry leader? Well, I mean, once the, you know, in order to Once the technology is developed and the customer alignment is in place, we will certainly deploy the capacity investment.

Brent: Last one Brent linked Bank of America go ahead. Please.

Brad Lin: Thank you for taking my question. One follow-up. As Jason highlights that advanced packaging is a key business growth driver for UMC to outpace the industry and also for the future growth, while eyeing on the disciplined CapEx number itself, should we also expect higher portion of the CapEx spent by UMC in the future to increase for this advanced packaging kind of the service like our well industry leader?

Speaker Change: Thank you for.

Speaker Change: For taking my question. So one follow up so Jason.

Speaker Change: Jason highlights that are the best packaging is a key business of course driver for UMC to outpace the industry and also for the future growth.

Speaker Change: While I'm on the disciplined Capex number yourself shoe, we owe so its back.

Speaker Change: Higher portion of that Capex spend by UMC in the future two to increase for this advanced packaging kind of their service like our while industry leader.

Jason Wang: Well, I mean, once the, you know, in our business, there's actually two major investment. One is investing in the technology development. The second is investing into the CapEx. Once the technology is, you know, developed and the customer alignment is in place, we'll certainly deploy the capacity, the capacity investment. So the CapEx will have that. Now, given our past few years of CapEx investment, given the current market dynamics, I think those advanced packaging CapEx will not affect the major trend of our CapEx projection. I think that will be still within our current trend. Yeah.

Speaker Change: Well I mean once the.

Speaker Change: Our business actually had two major investment.

Speaker Change: In the technology development.

Speaker Change: Into the Capex.

Speaker Change: Once the technologies developed in the customer lines in place with Susan deploy the.

Speaker Change: Capacity.

Speaker Change: Capacity investment so the cap has worked well.

Jason Wang: So the CapEx will have that. Now, given our past few years of CapEx investment, given the current market dynamics, I think those advanced packaging CapEx will not affect the major trend of our CapEx projection. I think that will be still within our current trend. Yeah.

Mr. Chidung Liu: So the CapEx will have that. Now, given our past...

We'll have that now.

Speaker Change: In our.

Past few years of Capex.

Speaker Change: And given the current market dynamics I've seen the dose.

Speaker Change: Those are those advanced packaging capex it would not affect the major trend of our capex projection.

Operator: Packaging Cafe. Thank you. I got it. That's very clear and then that's my only question to follow up. Thank you.

Speaker Change: It will be leasing our current current trends.

Brad Lin: Thank you. I got it. That's very clear. That's my only question to follow up. Thank you.

Speaker Change: Okay. Thank you got it that's very clear and then that's my only question to follow up thank you.

Jason Wang: Thank you.

Brad Lin: Happy New Year, by the way.

Speaker Change: How are you doing here by the way he has sent to you.

Operator: Happy New Year, by the way. Yes. Send to you. Thank you.

Jason Wang: Yes. Same to you.

Operator: Thank you. We thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks. Thank you.

Speaker Change: Thank you.

Operator: And we thank you for all your questions.

Speaker Change: And 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.

Operator: That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks.

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

Operator: Thank you for attending this conference. We appreciate your questions. As always, if you have any additional follow-up... feel free to contact UNC at ILR.

Speaker Change: Thank you for attending this conference today, we appreciate your questions and as always if you have any additional follow up questions. Please feel free to contact UMC at all.

Speaker Change: U M C dot com have felt that day and we will also take this moment to wish everyone. A happy new year happy Chinese new year happy new year to everyone. Thank you.

Operator: Have a good day. Yes, thank you.

Jason Wang: We will also take this moment to wish everyone a happy New Year, happy Chinese New Year. Happy New Year to everyone. Thank you.

Operator: Yes. Thank you. Ladies and gentlemen, that concludes our conference for Q4 2024. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com under the Investors Event section. You may now disconnect. Thank you and goodbye.

Speaker Change: Yes. Thank you ladies and gentlemen that concludes our conference for <unk> 24. Thank you for your participation in Umc's conference there will be a webcast replay within two hours. Please visit www UMC com under the investors events section you may now disconnect. Thank you.

Operator: Ladies and gentlemen, that concludes our conference for 4Q24. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com under the Investors Event tab.

Operator: You may now disconnect.

Operator: Thank you and goodbye.

Speaker Change: And goodbye.

Speaker Change: Okay.

Q4 2024 United Microelectronics Corp Earnings Call

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