Q1 2025 United Microelectronics Corp Earnings Call

April 23, 2025

because President Wong and absent due to urgent personal matter. In a moment, RCFO will present first quarter financial results followed by our key message to address UMC's focus and second quarter of 2025 guidance.

After our CFO's remarks there will be a Q&A session. UMC's quarterly financial reports are available at our website www.umc.com under the investors financial

During this conference, we may make forward-looking statements based on measurements, current expectations and release.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materials, including the risks that may be beyond the company's control.

David Wong: For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC securities authorities. During this conference, you may view our financial presentation material, which is being broadcasted live through the Internet. I would now like to introduce UMC's CFO, Mr. Chitung Liu, to discuss UMC's Q1 2025 financial results.

For more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings for the SEC and the ROC securities authorities.

During this conference you may view our financial presentation material which is being broadcasted live through the internet.

David: I would now like to introduce UMC CFO , Mr. Chidon Liu, to discuss UMC's first quarter of 2025 financial results. Thank you very much.

Chitung Liu: Thank you, David Wong. I'd like to go through the Q1 2025 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page 4, the Q1 2025 consolidated revenue was TWD 57.86 billion, with gross margin at around 26.7%. Net income attributable to the stockholder of the parent was TWD 7.78 billion, and the earnings per ordinary share was 0.62 TWD. Wafer shipment was flat sequentially compared to the previous quarter. However, it was up 12% year-over-year for the same period of 2024. On page 5, on the sequential comparison, wafer revenue declined 4.2% sequentially to TWD 57.85 billion, mainly due to this one-time price adjustment in the beginning of calendar year.

David: I'd like to go through the first quarter of 2025's investor conference for the intercial material, which can be downloaded or viewed in real time from our website.

Chi-Tung Liu: Starting on page 4, the first quarter of 2025, consolidated revenue was 57.86 billion NT, with growth margin at around 26.7%.

Chi-Tung Liu: Net income attributable to the stockholder of the parent was $7.78 billion and the earnings the ordinary share was $0.6220.

Chi-Tung Liu: With a shipment was flagged sequentially compared to the previous quarter, however it was at a 100% year-over-year for the same period of 2024.

on page 5

on the sequential comparison.

Chi-Tung Liu: With a revenue decline 4.2% sequentially to 57.85 billion NT, many due to this one time price adjustment in the beginning of calendar year.

Chitung Liu: Gross margin was impacted by the lower ASP as well as the earthquake during the Chinese New Year's holidays. It went down to 26.7% or 15.4 billion NT dollars. We expect to see margin recovery in the coming quarters. Operating expenses is under control, represent about 10.6% of the total revenue of 6.1 billion NT. That give us the overall operating income around 9.7 billion NT or 15.9 percentage points. In terms of non-operating income, due to the weakness in the stock market, and we have some losses coming from mark-to-market investment valuation, which is around 439 million NT loss.

Chi-Tung Liu: First module was impact by the low ASB as well as the earthquake during the Chinese period. Um, how are we going to do that?

It went down to 26.7% or $15.4 billion NT.

Chi-Tung Liu: And we expect to see margin recovery in the coming quarter.

Operating expenses is under control.

Chi-Tung Liu: Represent about 10.6% of the total revenue of 6.1 billion NT.

That gives us the overall operating income.

around 9.7 billion NT or 15.9 percentage points.

Chi-Tung Liu: In terms of non-operating income due to the weakness in the small market and we have some losses coming from market to market investment.

graduation, which is around 439 million NT laws.

Chitung Liu: Total net income attributable to the shareholders of the parent in Q1 2025 was TWD 7.777 million, or EPS of 0.62 TWD in Q1 2025. For the year-over-year comparison, revenue increased by 5.9%. This is mainly due to the wafer shipment increase, as I mentioned earlier, around 12% year-over-year wafer shipment increase, offset by the ASP decline. For the net income comparison, we see a 25% year-over-year decline, and therefore, EPS also was lower in the same magnitude. On next page, cash position still remain over TWD 100 billion. It's about TWD 106 billion at the end of 31 March 2025.

Chi-Tung Liu: Total net income attributable to the shareholders of the parents in Q1 2025 was 7.777.

million NT.

Or EPS of 0.6 to $20 in q1 25

for the year-over-year comparison.

Revenue will be increased by 5.9%

Chi-Tung Liu: This is many due to the wave of human inquiries as I mentioned earlier around 10% year over year wave of human inquiries.

Upside by the AACP time.

And...

For the

Net income comparison.

Chi-Tung Liu: We see 25% year-over-year decline, and therefore, the EPA is also lower in the same magnitude.

I'm at page

Chi-Tung Liu: Cash position still remain over 100 billion NT. It's about 106 billion.

and develop at the end of March 31st.

Chitung Liu: Our total equity now reach 390 billion NT dollars at the end of Q1 2025. On page 6, this routine beginning of the year one-off price adjustment which actually contribute to most of the revenue decline in Q1 2025. Roughly the ASP declined by about 4 to 5% in Q1. For revenue breakdown, we see a good growth coming out of our Asian-based customers. It's now reached around 66% of our total revenue. North America customers, on the other hand, represent about 22% of the pie. IDM show a mild growth on page 10 to 18% of the total revenue breakdown in Q1 2025. Consumer segment is the strongest in Q1, mainly driven by Wi-Fi, DTV, set-top box, and DDI.

Chi-Tung Liu: Our total equity now reached 390 billion and $20 had the end of Q1 2025.

On page 6, there's a...

Chi-Tung Liu: Routine, beginning of the year, one of the types of adjustments with Rapida actually contributed to most of the revenue decline in Q1 of 2025. So roughly the ASB decline by about 4-5% in Q1.

Chi-Tung Liu: For revenue breakdown, we see good growth coming out of our Asian-based customers.

It's now reaching around 66% of our total revenue.

Chi-Tung Liu: North America customers on the other hand represent about 22% of the park.

Chi-Tung Liu: IDM show a mile growth on page 10 to 18% of the total revenue breakdown in Q1.25

Chi-Tung Liu: Consumer treatment is the strongest in Q1, mainly driven by Wi-Fi, DPPV, HEDABOX and DDI.

Chitung Liu: Communications, computers didn't really change that much. We're happy to see our 40-nanometer and below revenue now is over 50% of our total revenue. Now reach 53% in Q1, when 22- and 20-nanometer revenue account for 37% of the total revenue breakdown. In Q1, there was some disruption from earthquake, but mainly there's also annual maintenance schedule. Capacity in Q1 was lower. For Q2, we see back to normal capacity as well, some mild increase coming out of Singapore fab due to the ramp is starting. On page 14, our 2025 CapEx remain unchanged at $1.8 billion. This is the summary of UMC financial results for Q1 2025. Next, I would like to share our key messages.

and communication computers didn't really change that much.

Chi-Tung Liu: And we're happy to see our 14 Nm and below revenues now is over 50% of our total revenues.

Chi-Tung Liu: Now reach 53% in Q1 when 22 and 20 year old now meet the revenue come for 37% of the total revenue breakdown.

Chi-Tung Liu: In Q1, there was some disruption from earthquake, but mainly there's also a new maintenance stage, so capacity.

Chi-Tung Liu: In Cuba, what's lower? And for quarter two, we see the back to normal capacity as well, some minor increase, coming out of Singapore fast.

Page 14.

Our 2025 KPACs remain unchanged at 1.8 billion US dollars.

Thank you. Bye bye. Bye bye.

Speaker Change: This about is the summary of UMC financial results for Q1 2025.

Next, I would like to share our key messages.

Chitung Liu: Apologize for still putting Jason's picture here because it's rather short notice and it's also, more importantly, it's a very good picture. Our results in Q1 were in line with our previous guidance, with slight-ish wafer shipments and one-time pricing adjustments at the beginning of the year to reflect market conditions. Q1 highlight includes 22- and 28-nanometer revenue hitting a record high, representing 37% of total sales. That was driven by a 46% quarter-over-quarter increase in 22-nanometer revenue from products such as OLED, display driver IC, ISPs, as well as digital TV, Wi-Fi, and audio codec chips. We expect customers to tape out additional 22-nanometer products in the coming quarters as customers increasingly migrate to our 22-nanometer logic and specialty platforms for next-generation applications.

Speaker Change: So I apologize for still putting Jason's picture here because it's rather show-noted and it's also more important than it's a very good picture.

Speaker Change: So our results in the first quarter were in line with our previous guidance.

with five-dish wafer shipment.

Speaker Change: A one-time pricing adjustment at the beginning of the year to reflect market conditions.

Speaker Change: First call the highlights include 2220 Army's revenue heating and record highs.

Representing 37 of the Total Fair.

I was driven by a 46%

Quarter-over-quarter increase in 22 nanometer revenue from father such as Olai display driver I.C.

Speaker Change: ISP, as well as digital TV, Wi-Fi, and audio conductors.

Speaker Change: We expect customers to take out additional 22 Nm father in the coming quarters.

Speaker Change: As customers increasingly migrate to our 22 nanometer logic and specialty platform for next generation application.

Chitung Liu: Earlier this month, we also officially inaugurated our new Singapore phase 3 fab, which provides additional 22-nanometer capacity to support future growth. Pilot runs are underway and is on schedule to ramp up to volume production in early 2026. The expansion in Singapore also further broadens our geographic diversification, enabling customers to strengthen their supply chain resilience. Meanwhile, in February, our board of directors proposed a cash dividend of 2.85 TWD per share, which is subject to approval from shareholders in the upcoming AGM on 28 May. Looking ahead to Q2, we are expecting a moderate rebound in demand across all segments according to near-term alignment with our customers. Beyond that, of course, we have to be cautious about wafer demand projections as policies and markets are still adjusting to the recent tariff announcement.

Speaker Change: Earlier this month, we also officially inaugurated our new Singapore Phase 3 effect, which provides additional 22 Nm in capacity to support future growth.

Speaker Change: Hello rounds are underway and it's on schedule to rent up to volume production in early 2020-26.

Speaker Change: The expansion in Singapore also further broadens our geographic diversification, enabling customers to strengthen their supply chain resilience.

Speaker Change: Meanwhile, in February , our board of directors proposed a cash dividend of 2.85 NT per share which is subject to approval for shareholders from shareholders in the upcoming AGM on May 28th.

Speaker Change: Looking ahead to the second quarter we are expecting a moderate rebound in demand across all segments according to near-term alignment with our customers.

Speaker Change: Beyond that, of course, we have to be cautious about way-for-demand projections of policy and market, but still adjusting to the recent terrorist announcement.

Chitung Liu: To navigate this challenging environment, we are working closely with customers to monitor trends in end market demand. We also strengthen our competitive advantage by focusing on execution of key technology products, such as the 12 nanometer collaboration with US partners and ensuring our customers have access to geographically diverse manufacturing options. In addition, we are implementing cost reduction plans and accelerating AI and intelligent manufacturing systems to enhance operational efficiency. Through these key focuses, we are confident that UMC can maintain our financial and business resilience. Now, let's move on to the Q2 2025 guidance. Wafer shipment will increase by 5 to 7% sequentially. ASP in US dollar terms will remain flat. Gross margin will be back to approximately 30%, and capacity utilization rate will also recover to around mid-70% range.

Speaker Change: To navigate this challenging environment, we are working closely with customers to monitor trends in a market demand.

Speaker Change: We also strengthen our competitive advantage by focusing on execution of key technology products such as the 12-nm collaboration with U.S.

Ensuring our customer have access to geographically diverse manufacturing options

Speaker Change: In addition, we are implementing COS reduction plan and accelerating AI and intelligent manufacturing systems to enhance operational efficiency.

Speaker Change: Through this key focus, we are confident that UMC can maintain our financial and business really.

Speaker Change: Now, let's move on to the second quarter of 2025 guidance.

With a treatment, we are increased by 5-7% sequentially.

ASP in U.S. dollar terms will remain flat.

What margin will be back to approximately 30 percent?

Speaker Change: And capacitive dilution rate will also be recovered to the around mid 70% range.

Chitung Liu: As I mentioned earlier, the CAPEX, cash-based CAPEX will remain unchanged at about $1.8 billion. That concludes our remarks. Thank you all for your attention. Now we are ready for questions.

Speaker Change: As I mentioned earlier, the K-PAC, K-PAC will remain unchanged at about 1.8 billion US dollars.

Speaker Change: That concludes our remarks. Thank you all. Thank you all for your attention. And now we are ready for questions.

Operator: Thank you, Chitung Liu. Ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star 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 key number 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: Thank you Chidong and ladies and gentlemen we will now begin the question and answer session.

Speaker Change: 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 start 2 to cancel the question.

Speaker Change: Now please press start key number one on your keypad if you would like to ask the question thank you

Speaker Change: And our first question will be coming from Sonya Lean UBS. Go ahead, please.

Sunny Lin: Thank you very much for taking my questions. So my first question, I want to start from the tariff impact. For the short term, how are tariff affecting the customer order behaviors for Q2 and second half? How is that impacting your business planning? It does seem like you are having a good recovery for Q2 sales. How much of that is driven by the pulling orders due to tariff?

Sunny Lane: Thank you very much for taking my questions. So my first question won't just start from the TERF impact And so for the short term on how are TERF affecting the customer order behaviors for Q2 and second half?

Speaker Change: And how are that impacting your business planning and it doesn't like you are having a good recovery of acute cells. How much of that is driven by the point orders due to

Chitung Liu: Okay. UMC collaborates closely with customers for technology and product qualification across multiple fabs, reducing exposures to site-specific risks and ensuring supply chain resilience. We adopt a forward-looking approach to mitigate business risk, including a geographically diversified manufacturing footprint. By 2027, we will have manufacturing base for our most advanced available technology in the US. UMC also has a healthy financial structure to navigate through macro uncertainties. Although the escalating trade tensions and global tariff policies have increased uncertainties in the semi industry, we have not seen market demand change in the very near term, i.e., Q2 2025. Of course, visibility in the second half is becoming very limited. In longer term, customer may decouple their internal manufacturing options and explore external wafer sourcing options.

Okay, so um...

Speaker Change: UMC collaborates closely with customers for technology and product qualification across multiple facts.

Reducing soldiers to side specific rigs and ensuring supply shared and to be treated.

Speaker Change: We adopt a former looking approach to mitigate business rig, including a geographically diversified manufacturing footprint, and by 2027, we will have manufacturing base for lots of vent available technology in the U.S.

Speaker Change: UMC also has a healthy financial structure to navigate through macro uncertainties.

And, um...

Speaker Change: Although the escalating trade tension and global terror policy have increased uncertainties.

Speaker Change: in a semi-industry and we have nothing multi-demand change

In a very near term, I co-order to 2025, yes.

Speaker Change: Of course, visibility in the second half is becoming very limited.

A longer term customer made a couple of their internal manufacturing options.

and its flower is sent away for posting options.

Chitung Liu: UMC's strategic positioning, focusing on technology differentiation, global manufacturing diversification, product mix optimization, and manufacturing excellence. I think, in short, there's very little change we observe for Q2. However, if you include our Q1 results plus our Q2 guidance, we think we are slightly ahead of our expectation at the beginning of the year. That will give us some buffer for the uncertainty, the increasing uncertainty in the second half.

UMC Strategic Position UMC Corp

Speaker Change: focusing on technology, differentiation, global manufacturing, diversification, pandemic, optimization, and manufacturing for your hard-to-find.

I think in short, it's very little change.

We are up there for the taking quarter. However...

Speaker Change: If you include our Q1 result plus our CO2 guidance, we think we are flatly ahead.

Speaker Change: is partition at the beginning of the year and that will give a tongue buffer for the uncertainty, the increasing uncertainty in the second half.

Sunny Lin: Got it. Thank you very much, Chih-Tong. Basically, you are saying the growth in Q2 is not so much driven by pulling, just a little bit. In that case, should we be less concerned about meaningful drop-off going to second half because they are not much being pulled in?

Speaker Change: I gotta say thank you very much. You don't so basically USA the girls in Q2. It's not so much driven by point just a little bit. And so in that case.

Speaker Change: Should we be less concerned about meaningful drop of going to second half because they are not much being pulling?

Chitung Liu: There's not that much pulling, you are correct, for Q2. There's some customer who are sidelined, and they want to take some precautionary actions. But there are some customer doing the opposite. Net-net impact for Q2 is very limited. But again, we cannot really see through second half. What we are seeing right now doesn't really suggest there will be a shortfall in the coming quarters.

Speaker Change: That's not that much pudding you are correct for quarter two. There's some customer for a side-light that they want to take some precautionary.

Speaker Change: actions but there are some customers doing the opposite so net net impact for Corp 2 is very limited.

So...

Speaker Change: But again, we can now really see through second half and how we are seeing right now doesn't really suggest

Sunny Lin: Got it. Thank you. My follow-up question on tariffs is in terms of the potential disruptions about the supply chain on the pricing side. If tariffs are pushed through, either for finished goods, direct semi chips, or both, based on your current discussions with clients, would you expect some impact on UMC's pricing and margin as well as maybe potentially everyone in the supply chain will need to share the cost to some extent?

in the coming quarters.

Speaker Change: Got it. Thank you. My follow-up question on tariffs is in terms of the potential disruptions about the supply chain on the pricing side. And so if tariffs are put through either for finish goods or the SMEs, chips or both.

Speaker Change: Based on your current discussions with clients, would you expect some impact on UMC pricing and margin as well? As may be potentially everyone in the supply chain will need to share the cost to some extent.

Chitung Liu: I think we don't have a generalized answer. Let me start with our UMC pricing policy or strategy. We don't compete purely on pricing. Our strategy is built around technology differentiation and manufacturing excellence via regionally diversified manufacturing bases. All that attribute work to insulate UMC and our customer away from low entry barrier markets. Despite the pricing pressures, UMC remain committed to deliver differentiated technology and ensuring our customers to gain market share through the long-term strategic partnership. Our value proposition is really to work with our customers in a transparent method. Any disruption or the cost increase through tariff, we believe we will co-work with our customers to come up with a solution.

[inaudible]

Speaker Change: I think we don't have a general attention, so let me start with UMC pricing.

Speaker Change: our policy of strategy. We don't compete with you. Our strategy is to build around technology differentiation and manufacturing excellence via regionally diverse farming and manufacturing basis.

Speaker Change: All that attributes work to insulate UMC and our customer away from low entry barrier market.

And this slide, the...

Speaker Change: Parting pressure UMC remain committed to deliver differential technology and ensuring our customers to gain market share through the long-term and try to teach a partner to shoot.

Speaker Change: So our value proposition is ready to work with our customers.

being a transparent method.

Speaker Change: Increase through tariff. We believe we will co-work with customers.

to come up with a solution.

Sunny Lin: Got it. I have a question on 28 nanometer. Roughly, what's the utilization rates in Q1 and Q2? How should we think about the mix of 22 nanometer within the whole 28 and 22 nanometer sales, let's say, going to second half of 2025?

Speaker Change: Got it. Uh, then I have a question on 28 nanometer. Uh, and so roughly, uh, what's the utilization rate in Q1 and Q2? Uh, and how should we think about the mix of 22 nanometer, uh, within the whole 28 and 22 nanometer cells? Let's say going to second half of 2025.

Chitung Liu: First of all, our guidance for Q2 is mid-70 for the company as a whole. 12-inch is higher than corporate average, and 8-inch is below corporate average. Among 12-inch, I would say 22, 28 is the better sector, is not the best sector. Right now, 22 and 28 represent 37% of our total revenue. And 22 alone, I would say is more than mid-teens and continue to increase. And that will be a key growth driver for UMC's 2025 growth. I hope that answers your question.

Uh, first of all, our guidance will begin quarter.

is the meat 70 for the company of the whole.

Speaker Change: And of course, 12 inch is higher than copper average and A-inch is below copper average.

Speaker Change: The number 12, I would say 2228, is the better sector, is not the best sector.

Speaker Change: Right now 22 and 28 represent 37% of our total revenue.

And 22 a long I would say it's more than

Speaker Change: meeting and continue to increase and that will be a key cross driver for UMC's 2025, uh, growth.

So I hope that answers your question.

Sunny Lin: That's very helpful. Mid-teen percentage, that's in terms of total sales, correct?

Speaker Change: That's very helpful, so meet 10% of that in terms of total sales, correct?

Chitung Liu: That's correct.

Sunny Lin: Thank you very much. Maybe my last question. On this partnership with Intel on 12 nanometer, what's the latest update that you could provide us? Will it be possible that we see an earlier production in 2026? I guess, lately, given the maybe rising reshoring interest in the US, are you seeing much stronger demand for these collaborations?

That's correct.

Speaker Change: Thank you very much. Then maybe my last question.

Speaker Change: And so on this partnership with Intel on 12 nanometer, what's the latest update that you could provide us?

Speaker Change: Uh and we'd be passable that we see an earlier production in 2026 and I get lately given the Maybe rising reshoring interest in the US are you see much stronger demand for this collaboration?

Chitung Liu: Maybe Michael can answer the question.

Michael Lin: Sure. The joint development is on track. We are progressing well according to the project milestones. At this moment, we are verifying the silicon performance for the pilot line, and we expect the early PDK will be ready for the first wave of customer by 2026 as planned. In fact, we have been aligning with key customers on the device spec to speed up the ramp-up as quickly as possible. Right now, we are porting the process technology in Arizona Fab, and so far the progress is on track.

Speaker Change: So maybe Michael can answer the question. Sure. Now join the following what is on track.

Speaker Change: We are progressing well according to the project milestones. At this moment, we are verifying the silicon performance for the pallet line, and we expect the early PDK will be ready for the first wave of customer.

Speaker Change: by 2026 as printed. In fact, we have been aligning with key customers on the device spec to speed up their renders as quickly as possible. Right now we are in the process technology.

Arizona fat and so far the progress is on track.

Sunny Lin: Got it. Basically, sales contribution, you guys still from 2027?

Speaker Change: got it and so uh basically uh self-contribution uh you guys feel from 2027

Chitung Liu: Yes.

Sunny Lin: Got it. Thank you very much.

Yep.

Chitung Liu: Thank you.

got it. Thank you very much.

Operator: Thank you. Next one, Laura Chen, Citi. Go ahead, please.

Thank you.

Next one, lower chain city, go help please.

Laura Chen: Hi. Thank you very much for taking my questions. I also want to know more about like your US cooperation. Is it only Intel's, other than Intel's? Do you have any opportunity to work with other IDMs in the United States?

Speaker Change: Hi, thank you very much for taking my questions. I also want to know more about like your US cooperation. If only Intel's other than Intel's, would you have any opportunities to work with other IDNs in the United States?

Chitung Liu: We have plenty of US-based IDM customers as consistently among our top customers. I think I don't need to mention their names, but you definitely know who they are. From time to time, we have JDPs, we have capacity support, and that will continue to be our strategic collaboration going forward. We do have other IDM customers in the US working closely with UMC. Of course, the current stage, the most important project is this 12-nanometer US footprint collaboration with this US partners.

We have plenty of U.S. based IBM customers.

has consistently among our top customers.

Speaker Change: And I think I don't need to mention the name, but you definitely know who they are. So on time to time we have GDP, we have...

capacity support. And um...

That will continue to be our um...

Speaker Change: strategic collaboration coming forward. So we do have other IDM customers in the U.S. working closely with UMC.

Speaker Change: But, of course, the current stage, the most important project is this 12 Nm U.S. footprint collaboration with this U.S. partner.

Laura Chen: Understood. Because previously I also have the news, I understand that management already kind of denied, but I'm just wondering, like, other than our current clients in the US IDMs, is there any chance we can also work with GlobalFoundries on some sort of, like, a joint venture or a cooperation, any type of the cooperation?

Speaker Change: understood because previously I also have a news. I understand I mentioned already kind of a denied but I'm just wondering like other than our current clients in the US IDN, is there any chance we can also work with Global Foundry on some sort of like a joint venture or a cooperation, any type of the cooperation?

Chitung Liu: I don't want to comment on market rumors. I think

Speaker Change: I don't want to come in on market rumors. I think for issues like this, these so sensitive and important, I have to come from the official announcement from any company involved.

Laura Chen: Okay.

Chitung Liu: On an issue like this, it's so sensitive and important. It has to come from the official announcement from any company involved. I think from again UMC's perspective, we consistently looking for strategic options to enhance shareholders' value. Anything can help to increase our competitiveness as well as the shareholders' value, we will certainly look into that. Currently there's no ongoing so-called merger activity right now. Again, we have to say that, there's no merger ongoing right now. It doesn't have to be merger. There are many other collaborations we can still pursue to enhance shareholders' value and returns. That is our mandate, and we are continuing to explore all different kind of options.

Speaker Change: But I think from again, from UMC perspective, we consistently looking for...

Speaker Change: Currently there's no ongoing so-called the merger activity right now. So again, we have to say that

There's no merger ongoing right now, but uh...

Speaker Change: It doesn't have to be much. There are many other collaboration we can still pursue to enhance shareholder value and returns. That is our mandate and we are continue to explore all different kinds of options.

Laura Chen: Yeah, certainly. My second question is about margin. Obviously, into Q2, even though there's a lot of macro uncertainty, we see that the utilization improvement and also the gross margin back to 30%. Can we kind of assume that Q1 is a trough for the gross margin since we have the one-time pricing adjustment back in Q1, as the overall demand seems back to normal? I just wondering what's your view on the overall gross margin trends going forward?

Yeah, certainly.

Speaker Change: My second question is about a margin of VLC into Q2, even though there's a lot of macro uncertainty, we see that the utilization rate improvement and also the growth margin back to 30, it's 30%. So can we kind of assume that Q1?

Speaker Change: is a 12 for the growth margin. Since we have the one time pricing adjustment back in Q1, um, the, uh, overall demand seems to back to no more. So, uh, I'm just wondering what or our view on the overall growth margin trends going forward.

Chitung Liu: Unfortunately, we mentioned the second half, the visibility becomes very limited with a lot of increasing uncertainties. It makes us very difficult to predict the numbers for the second half. We can only give the guidance a quarter at a time. Our profitability largely depends on product mix, pricing, utilization rates, and FOREX movement, and COGS. We have taken several initiatives to enhance our profitability that include business engagement, technology differentiation, driving the efficiency in operations, and improving our CapEx efficiency to manage the depreciation impact. Current gross margin level reflects Q1 2025 one-time pricing adjustment, as well as the depreciation increase mainly coming from P6 in Thailand, as well as the upcoming P3 in Singapore.

Unfortunately, we mentioned the second half, the visibility becomes...

We are very limited with a lot of increasing our certainties.

So it makes us very difficult to predict.

Speaker Change: The numbers for the second half we can only give the guidance.

Speaker Change: It's a quarter at a time, but our possibility is largely depending on what I mean, I think, utilization rate and for-act movement and COGS.

Speaker Change: We have taken several initiatives to enhance our possibilities that include business engagement.

Technology differentiation.

Speaker Change: Driving the efficiency in operation and improving our care packed efficiency to manage the depreciation impact.

So current growth margin level reflects Q1 2025.

Speaker Change: One-time pricing adjustment, as well as the depreciation increase, many coming from P16 Thailand, as well as the upcoming P3 in Singapore.

Chitung Liu: We are actively looking to improve our product mix, such as more specialty content and higher 22, 28 wafer shipments, and drive the efficiencies in operations when our EBITDA margin can still remain intact.

and we are actively looking to improve our partner needs.

Speaker Change: Such a small specialty content and higher 22.28 wafer treatment.

and drive the efficiencies in operation.

When our eBDR margin can still remain intact.

Laura Chen: Okay, that's very fair. Thank you very much.

Okay, that's very fair. Thank you very much.

Chitung Liu: Thank you.

Operator: Next one, Brad Lin, BofA Securities. Go ahead, please.

Speaker Change: Next one, Brett Ling, Bank of America Security. Go ahead, please.

Brad Lin: Thank you for taking my question. Congrats on the very solid Q1 result and also the bright Q2 guidance. I have two questions. The first question would be in terms of the customer type, has UMC seen potential upside from maybe North America or IDM due to the current tariff issue? Thank you.

Brett Lynn: Thank you for taking my question and congrats on the well-solid one-kill result and also the bright second quarter guidance side. I have two questions. The first question will be in terms of the customer type. Has UMC seen potential outside from maybe North America or IDM due to the current tariff issue?

Chitung Liu: I think we do see increasing customer appreciation to UMC's regionally diverse manufacturing base. For various reasons, customer may need to have certain type of product manufacturing in some specific manufacturing sites. UMC with operations in Singapore, Taiwan, Japan, and China, and upcoming US capacities, I think our customer appreciate even more recently with the option we can offer. I think that's the feeling and also the sense we get from the recent conversation with many of our major customers.

Thank you.

Brett Lynn: So I think we do see customer increasing customer appreciation to UMC's regionally diverse manufacturing base. So for various reasons

Brett Lynn: Customer may need to have certain types of product manufacturing in some specific manufacturing sites and UMC with operations.

Singapore, Taiwan, Japan, and China, and upcoming US capacities.

I think our customers appreciate even more recently.

with the option we can offer.

Brett Lynn: Since we get from the recent conversation with many of our major customers.

Brad Lin: Thank you very much. That's very clear. A follow-up question on that is what time do we expect to see so-called meaningful contribution from this kind of impact?

Speaker Change: Thank you very much. That's very clear, but the follow-up question on that is, is that what time do we expect to see so-called meaningful contribution from this kind of impact?

Chitung Liu: So far it's very difficult to quantify. For our Singapore fab, probably the best example that the P3 is going to volume production in early 2026, and I think it's becoming a very sought-after locations for its less impacted geopolitical tension. Certainly, if any demand exceeds the capacity we can offer, we will certainly see a better performance out of our Singapore site. Same argument can apply to any other site we have. I cannot give you a quantified answer for now. Just the customer appreciation certainly will endorse our customer relationship and the so-called stickiness for the longer term.

[inaudible]

So far, it's very difficult to punch it by.

But, um...

Speaker Change: So, our Singapore Fed suffered a special example that the 3P3 is going to volume production in early 2026.

And I think it's becoming a very um...

pursuit after location.

Let's impact it geopolitical tension. So...

Certainly, if there is any...

The man is feet.

The capacity we can offer.

Speaker Change: We will certainly see a better performance out of our Singapore side.

Speaker Change: Same argument can apply to any other side we have

Speaker Change: So, I can now give you a qualified instance for now and just the customer appreciation certainly will endorse our customer relationship and the support of thickness for the longer term.

Brad Lin: Got it. Thank you very much. Hopefully that we can also gain more so-called LTA with that as well. If any, please do let us know. My second question would be, well, end market demand. Could you also provide insight into the demand trends across the key end markets such as, especially for automotive and also industrial, as well as the consumer electronics? Have there been any notable shift in the customer behavior or order patterns recently compared to our last earnings call? Thank you.

Speaker Change: may be behavior or other patterns recently compared to our last earnest call. Thank you.

Michael Lin: Yeah. For Q1, you know, consumer segment grew as our CFO alluded to, driven by Wi-Fi, DTV, set-top box, and driver IC. All the other segments such as communication remained relatively flat, and we saw computing kind of decline due to a softer demand in I/O. Automotive for Q1 also declined due to softness in microcontrollers, DDI, as well as power management. As you know, for Q2, all major segments for computing, communications, consumer will grow. For computing segments, we expect that growth will be driven by flash controller IC. For communication, it will be increased from ISP, networking, flash controller, as well as Wi-Fi. For consumer, it will grow due to continuous growth from DTV and set-top box.

Speaker Change: For Q1, you know, consumer segment group has our CFO alluded to, driven by Wi-Fi

Speaker Change: But all the other segments such as communication remain relatively flat and we saw all computing kind of decline due to a softer demand in Iowa.

Speaker Change: Automotive for Q1 also declined due to softness in microcontrollers DDI as well as power management.

Speaker Change: But as you know, for Q2, all major segments for computing, communications, consumer.

Speaker Change: We'll grow for computing segments. We expect that growth will be driven by a flash controller IC.

Speaker Change: for communication, or be increased from ISP networking, flash controller as well as Wi-Fi.

Speaker Change: for consumer, it will grow due to continuous growth from DTV and set up box.

Michael Lin: Last, but for automotive, we expect that segment to be flattish, looking for Q2.

Speaker Change: And last but for automotive we expect that segment to be flatish looking for

Brad Lin: Should we expect any meaningful recovery from this auto industrial, which seems to be relatively softer for a while?

Speaker Change: Should we expect any meaningful recovery from this auto industry which seems to be relatively softer for a while?

Chitung Liu: The automotive right now, the inventory seems kind of, you know, relatively high, obviously, compared to other key segments of our business. For now, we remain on more conservative tone for the auto market.

Michael Lin: The automotive right now, the inventory seems kind of, you know, relatively high, obviously, compared to other key segments of our business. For now, we remain on more conservative tone for the auto market.

Speaker Change: So the automotive right now the inventory seems kind of you know relatively high obviously compared to other key segments of our business.

Speaker Change: So for now we remain a more conservative tone for the auto market.

Brad Lin: Got it. Thank you very much.

call it thank you very much

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

[inaudible]

Thank you.

Next one, Charlie Chan, Morgan Stanley . Go have a place.

Charlie Chan: Thanks for taking my question. You know, my first question will be also on gross margin. It seems like Q1, you're doing a little bit better than the guidance of mid-20%. In Q2, kind of hit 30% amid some pricing pressure. Can you share with us some more color about which parts are doing better pricing or cost, or just a kind of FX impact so you can deliver better gross margin? Thank you.

Charlie Chun: Uh, uh, uh, uh, uh, taking my question. So see that my, my first question, I will be also on, uh, [inaudible]

Charlie Chun: It seems like one queue you're doing a little bit better than the kind of the least 20.

Charlie Chun: And took you kind of hit the 30%. I mean that some price in pleasure. Can you share with other some?

Charlie Chun: More color about which parts are doing better, no better price in a cost or just a kind of effects impact so you can see where better gross margin. Thank you.

Chitung Liu: Well, thank you for saying that better. Personally, I don't think it's better. We will never feel enough to pursue a better gross margin. I think it's a very important index internally for all the management team. We continue to proactively deploy cost reduction efforts, including multi-source, streamline our operations, manage supply chain pricing, and drive automation transformations. These measures kinda help us to offset, or at least partially about those cost headwinds, including green energy, including yearly, annually, salary adjustment. There are a couple of headwinds we need to offset through our-

Charlie Chun: a better growth margin. I think it's a very important index internally for all the management teams. So we continue to proactively deploy cost reduction efforts.

including multi-source, streamline or operation, manage supply chain pricing.

and drive automation transformation.

Charlie Chun: So this measures kind of help us to update our elite partially.

about the Corp headwind including...

green energy, um, including...

Uh, it's here, yearly, annually, uh...

Celery Adjustment

So there's a couple of headwinds we need to

Charlie Chan: Mm-hmm.

Chitung Liu: Cost reduction efforts. In the beginning of the call, we mentioned that Q1, Q2 is slightly ahead of our expectations.

I'll step through our post-reduction efforts.

Charlie Chun: In the beginning of the call, we mentioned that UMQ to a straight-ear head of our expectations.

Charlie Chan: Mm-hmm.

Chitung Liu: At the compared to the guidance we gave for the beginning of the year. That can only give us the buffer. Hopefully, it's enough for the increasing uncertainty for the second half. Pursuing a better gross margin is the endless mandate for management team. We hope we can do better.

Charlie Chun: At the, uh, compared to the guidance we gave for the beginning of the year, but that kind of only give us a buffer hopefully is enough for the increasing uncertainty for the second half.

So...

Charlie Chun: Following a better course margin is the analyst's mandate for the management team. We hope we can do better.

Charlie Chan: Sure. Yeah. Thanks for the comment, and hope you can keep it up. Second question is about your kind of the partnership with Intel in the US. So just out of curiosity, do you receive some requests that some of your customers want you to accelerate that US operation with Intel? Because it seems like your foundry peer, right, seems to receive a similar request, and even some customers are willing to pay higher wafer price for their chips to be produced in the US. I know you have your planned schedule for the 12 nanometer in the US, but I'm just curious whether you are receiving similar requests that hope you can speed up.

Speaker Change: Yeah, thank you for the comment and hope you can keep it up. Um, and second question is about your.

Speaker Change: There's a partnership with Intel in the U.S. So just all the curiosity, do you receive some requests?

Speaker Change: That some of your concerns won't you to assert that U.S. operation with Intel because it seems like

Um...

Speaker Change: You're found to appear right since to receive a similar request and event them customers are willing to pay higher with a price to be produced for their shifts to be produced in the US. I know I know you have you have a planned schedule for the.

Speaker Change: 12 nanometer in the U.S. But I'm just curious whether you are receiving a similar request that the hope you can speed up.

Chitung Liu: The answer is yes. I think most of the customers like to see the 12 nanometer solution as early as possible, and they also have a very aggressive product launch time, and they hope our 12 nanometer solution can catch up with their product roadmap. Yes, the pressure is there. We understand that, and we received inquiries from our, we'll call the early adopter customers. That's why we are under the pressure, try to expedite the whole process. It's already a very aggressive process, I mean, timeline.

Speaker Change: The answer is yes. In most of the customers like to see the 12-nm solution as early as possible and they also have a very aggressive further long time and they hope our 12-nm solution.

Speaker Change: can catch up with their father, Roma. So yes, the pressure is there. We understand that and we received their encouragement from our father.

Speaker Change: or call the early adapt systems. That's why we are under the pressure.

try to expedite the whole process.

Speaker Change: But it's already a very aggressive process, I mean timeline. So it's also the first time we cooperate, collaborate with our partners.

Charlie Chan: Mm-hmm.

Chitung Liu: It's also the first time we cooperate, collaborate, with our partners. There's also many tasks and need to be solved before we can even try to catch up with our aggressive timeline.

And this is also many tasks and need to be...

Thanks. Bye-bye.

Speaker Change: Before we can even try to catch up with our aggressive timeline. So again this is a there's a pressure and wish to do so but in reality

Charlie Chan: Mm-hmm.

Chitung Liu: Again, there's a pressure and wish to do so, but in reality, so far we are on track with our planned schedule.

So far we are on track with our planned schedule.

Charlie Chan: Gotcha. Yeah. Thanks for that answer. Besides the hope for you to accelerate the plan, do you also see some desire for you to even kind of reach out to more advanced nodes? Because I know you need to plan ahead, right? Maybe 3 to 4 years if you want to further migrate to below 12nm. I ask these questions because your industry peer already officially denied their future partnership with the US fab, which is Intel. I'm not sure if that'll give you more room or your customers wish you to migrate to the more advanced nodes that would adopt EUV.

Speaker Change: So yeah, I think sense for that answer. So besides the the hope for for you to consider it.

Speaker Change: The plan to also see some desire for you to even kind of reach out to more advanced notes.

Speaker Change: Because I know, uh, you need to plan ahead, right? Maybe 24 years if you want to, uh, for the microtube below 12 nanometer.

I ask these questions because at your.

in the sphere already officially denied.

uh their future partnership with the US F. uh

Speaker Change: Which is Intel. So I'm not sure if if that gives you more more room or your concerns you wish you to migrate to the more advanced notes that would adopt EUV.

Chitung Liu: If you are using the market story as a background for this question, I have to be extremely careful, right?

Speaker Change: So if you are using the market story of the background for his question, I have to be careful, right? So in that case, the answer is no. So we are only focusing on the current notes, which is self-near meters.

Charlie Chan: Mm-hmm.

Chitung Liu: In that case, the answer is no.

Charlie Chan: Mm-hmm.

Chitung Liu: Only focusing on the current node, which is 12 nanometers.

Charlie Chan: Okay.

Chitung Liu: That's the both companies decided. There's a contract between two companies to execute.

Speaker Change: and both companies decided and there's a contract between two companies to execute this trap now into collaboration.

Charlie Chan: Mm-hmm.

Chitung Liu: this 12 nanometer collaboration. For UMC-

Charlie Chan: I see.

Chitung Liu: Alone, of course, I can speak for UMC.

Speaker Change: And for UMD along of course I can speak for UMD. We appreciate this collaboration with our US partner.

Charlie Chan: Mm-hmm.

Chitung Liu: We appreciate this collaboration with our US partner. We offer our foundry knowhow and the bulk of the technology structure.

and we offer our phone to know how and the uh...

Speaker Change: The bulk of the technology structure, the U.S. often offers the outside capacity.

Charlie Chan: Mm-hmm.

Chitung Liu: U.S. partners offer the on-site capacity with very limited depreciation. We think it's a very innovative mutual benefit collaboration. Certainly-

Speaker Change: with very limited situations. So we think it's a very innovative, mutual benefit collaboration and certainly we don't want to be limited to the current and not only.

Charlie Chan: Mm-hmm.

Chitung Liu: We don't want to be limited to the current node only. However,

Charlie Chan: Mm. Yeah.

Chitung Liu: This contract only covers 12 nanometer for now.

However, this time I only cover 12 nanometers for now.

Charlie Chan: Okay. That's a great answer as well. The last one, I think, very kind of technical short-term question. I'm sorry, but, did you maintain your full year guidance? And if that is the case, what's the implied half-on-half seasonality? How much uncertainty are you backing for second half?

Okay, that's a great great answer as well. So the last one, I think very.

Speaker Change: kind of technical short-term question. So I'm sorry but did you maintain your full-your guidance? And in this case was the implied haven't happened. How much

Concert either you back in for for second half.

Chitung Liu: Our view for the whole 2025 hasn't really changed. Our view on 2025 foundry market is it's set to grow in the mid- to high-teens %.

Our view for the whole 2025 hasn't really changed.

Speaker Change: Our view on the 2025 boundary market is despite to grow in the mid-to-high-team advantage. Like we mentioned earlier, the previous Corp. UMC's attention on rockets should grow around, I mean, low-finger digits.

Charlie Chan: Mm-hmm.

Chitung Liu: Like we mentioned earlier, the previous quarter.

Charlie Chan: Mm-hmm.

Chitung Liu: UMC's addressable market should grow around, I mean, low single digits, for our addressable market, which we intend, and we have declared we're going to outgrow that.

Speaker Change: for our transfer market which we intend and we will have declared we're going to outboard that.

Charlie Chan: Mm-hmm.

Chitung Liu: Of course, I mentioned that the Q1 plus the guidance for Q2 put a-

Of course.

Speaker Change: I just said that I mentioned that the first quarter plus the guidance for quarter two put a little bit ahead of our expectation.

Charlie Chan: Mm-hmm.

Chitung Liu: A little bit ahead of our expectations, but the uncertainties in second half may offset that, which we don't know clearly yet. That's the current view for the whole 2025.

But the uncertainty in the second half may upset them.

Which we don't know clearly yet.

So, that's the current view for the whole 2025.

Charlie Chan: We probably use like, you know, single digit, maybe mid-single digit as a full year guide and try to calculate or imply the second half. Is that the right way to think about your narrative on second half?

So you probably use like uh.

Single digit may be missing a digit as a fooier.

Speaker Change: Guide and try to calculate the implied second half is that the road way to think about your

Speaker Change: You nearest your phone on second half. Yeah, let's think to the qualitative statement that we try very hard to outperform our transfer market.

Chitung Liu: Yeah. Let's stick to the qualitative statement that we trying very hard to outperform our addressable market.

Charlie Chan: Okay. Thank you. Yeah, I'll read back to the queue. Thank you.

Speaker Change: Okay, okay. Thank you. Yeah, I'll be back to the queue. Thank you

Operator: Thank you. Next one, Gokul Hariharan, J.P. Morgan. Go ahead, please.

Thank you.

Next one, Goku Harihalan, JP Morgan. Go ahead, please.

Gokul Hariharan: Yeah. Hi. Hi, Chitung, David Wong, and Michael Lin. My first question is on margin. I think you kind of got back to 30% in Q2. How should we think about the cadence for margins? Because it looks like your implied expectation in the second half is going to be largely flattish, looks like. If that's the case, how should we think about margins? And could you also refresh what is your expected depreciation growth? I think last time you said high 20% for this year. Is that still the case given Q1? I think the increase was not that big sequentially.

Goku Harihalan: Yeah, hi hi Chitong David and Michael. My first question is on margin. I think you've kind of got back to 30% in Q2.

Speaker Change: How do we think about the cadence for margins because it looks like you're implied expectation a second half is going to be largely flourish looks like so if that's the case. How do we think about margins and could you also refresh.

Speaker Change: What is your expected depreciation growth? I think last time you said high 20% for this year is that still the case given Q1 I think the increase was not that big

Chitung Liu: Depreciation increase still high 20% for 2025. Each quarter is sequentially going up, so we are facing higher depreciation expenses for every quarter. That's the pressure. For margin guidance, I think I have to highlight that about 2 percentage points in Q1 was impact from the earthquake. That's one off.

Speaker Change: The depreciation increase is still high 20% for 2025 and each quarter is sequentially going up. So we are facing higher depreciation expenses.

for every quarter.

So that's the pressure.

Speaker Change: For margin guidance, I think I have to highlight that about two percentage points in Q1 was impact from the earthquake.

Gokul Hariharan: Yeah.

Chitung Liu: If you add back that 2%, the increase is more mild for the second half. Again, we are very sensitive to loadings for the second half in terms of where we are for the margin. We know the factors such as pricing, the depreciation, but we don't know the factor for FOREX and the loadings. Of course, we continue to try to enrich our product mix by having more 22 nanometers. All these factors blended together create the formula for our gross margin, especially in the second half.

Speaker Change: That's one now. So if you head back that 2% the increase is more more mild for the second half.

Speaker Change: And again, we are very sensitive to loading for the second half in terms of where we are for the margin. We know the factors such as

Thank you.

Speaker Change: uh the depreciation but we don't know the factor for 4X and loading so of course we continue to try to enrich our product mix by having more 22 Nm.

So all these facts are blending together, uh, create.

The formula for course margin.

especially in the second half.

Gokul Hariharan: Understood. Is 22, 28 combined now higher margin, compared to the corporate average, already, or is it still not there yet?

Speaker Change: understood so is 2228 combined now higher margin uh compared to the corporate average uh already or is it still not there yet.

Chitung Liu: If you exclude the new depreciation out of Thailand P6 and Singapore P3, of course it is. If you include that, I'm not so sure. May not be the case.

Speaker Change: If you exclude the new depreciation out of Thailand P6 and Singapore P3, of course, it is, but if you include that, I'm not so sure, may not be the case.

Gokul Hariharan: Understood.

Chitung Liu: The depreciation is there anyway with or without the extra 22, 28 contribution. Of course, the more, the merrier.

Speaker Change: So the depreciation is there anyway. We saw without the extra 22-20th contribution. So of course the more the merrier.

Gokul Hariharan: That's fair. Thanks, Chitung. Just on the Singapore P3, are you having any thought about accelerating the capacity plan, given you mentioned you're getting a lot more demand coming through for, or interest coming through for, the Singapore fab? Because I think previously you kind of slowed it down a little bit compared to previous plan given the demand outlook. Is that something that we could anticipate some change?

Speaker Change: That's fair. Thanks. You don't. So, um, just on the Singapore, uh, P3, um, are you having any thought about accelerating the capacity plan given? Uh, you mentioned you're getting a lot more demand coming through for or interest coming through for Singapore Fab.

Speaker Change: Because I think a previous you you kind of slowed it down a little bit compared to previous plan given the demand outlook, you said something that we could anticipate some change.

Chitung Liu: I think that's definitely dynamic. Okay. The future capacity ramp for 12-inch Singapore will be dependent on the alignment with our customer needs. Of course, we have begin to see a pickup in tape out. That may or may not translate into a pickup in customer demand, but tape out definitely already see the pickup. It could happen, but current plan still the production ramp, it the net production will be in early 2026.

See, that's definitely, uh...

Dynamic. Okay, so the future capacity rent for drop by Singapore.

will be dependent on the alignment with our customer needs.

Speaker Change: And of course we have begin to see a pickup in Tata.

So that

May or may not translate into a pick-up.

in customer demand, but PayPal definitely already see the pick up.

Speaker Change: So it could happen, but the current plan still, the production rent, the net production will be in early 2026.

Gokul Hariharan: Understood. Lastly on the Intel collaboration, I think once you start the 12 nanometer revenue contribution, could you talk a little bit about what kind of customers you are seeing adopting this? Secondly, once you start the revenue contribution, what is the impact to your margins or EBITDA given the unique kind of arrangement that you have with Intel?

Undisturbed

Speaker Change: And lastly on the Intel collaboration, I think once you start the 12 nanometer revenue contribution.

Speaker Change: Can you talk a little bit about what kind of customers you're seeing adopting this and secondly?

Speaker Change: Once you start the revenue contribution, what what does the impact to your margins or a bit given the unique kind of arrangement that you have within them?

Chitung Liu: Okay. Michael can answer the first question, I can answer the second question.

Speaker Change: Okay, my co-opier answer the first question I can answer the second question.

Michael Lin: Okay. As for now, our key focus are on Wi-Fi connectivity and high speed interface SoC products. In addition to this, 12-nm large process, we also exploring potential FinFET specialty technology solutions to further complement our portfolio with diverse product applications.

Okay. Bye.

Speaker Change: As for now, our chief focus on Wi-Fi connectivity and high-speed interface SOC product.

Speaker Change: So in addition to this 12 nanometer large part, we also explore potential things, things that specialty can also solutions to further complement our portfolio with diverse product applications.

Chitung Liu: As for the margin, certainly we hope it's an enhancement to our corporate average. It largely depends on the capacity utilization rate. By structure there's limited depreciation cost item in the COGS. The overall US manufacturing probably will quote higher manufacturing costs than the manufacturing in Taiwan. There's two factors we'll need to see how to offset each other. There's still many variables. We have to wait until closer to 2027.

As for the margins.

Certainly, we hope it's a good enhancement.

to our corporate average.

It's largely dependent on the capacity utilization rate.

and by structure there's limited depreciation called item.

in the field here, but the overall U.S. manufacturing have probably worked both.

Speaker Change: Manufacturing in Taiwan. So there's two factors we'll need to see how.

to help offset each other.

So there's still many variables

We have to wait until closer to 2020.

Gokul Hariharan: Got it. The capacity allocated into this arrangement, is that largely a static capacity that Intel has already allocated? Because obviously they have a lot of capacity on 14-nanometer, given that was a full node for Intel, right? They probably have quite a bit of capacity, even after some of the conversion. Is that a static allocation or, is it something that is dynamic depending upon how demand goes?

Speaker Change: Sorry and the the capacity allocated into this arrangement is that largely a static capacity that Intel has already allocated because obviously they have a lot of capacity on 14 and a meter given that was a full node for Intel, right. So they probably have quite a bit of capacity even after some of the conversion. So is that a static allocation or is it something that is dynamic depending upon how demand go.

Chitung Liu: I would say it's more dynamic. However, it definitely need a certain economy of scale to start with, and depends on how customer adoption for this technology and this collaboration, certainly will be big. There could be upside if the market adoption is more than expectation.

Speaker Change: I will say it's more dynamic. However, it definitely needs a certain economy of scale to start with and depends on how customer.

adoption

Speaker Change: for this technology and this collaboration. Certainly we will believe they could be outside if the market adoption is more than expectation.

Gokul Hariharan: Got it. Yeah. Thank you very much.

Chitung Liu: Thank you.

Sorry. Thank you very much.

Operator: Next one, Felix Pan, KGI. Go ahead, please.

Thank you.

Next one, Felix Pan, KGI. Go have peace.

Felix Pan: Hi. Good afternoon. There are two questions from me. First of all, still on the semiconductor tariff, potentially. I just want to double confirm. I think a couple of months ago, I think TSMC made a statement that customers should take care of the tariff things. I just wonder, like, is UMC also holding this kind of a view if the tariff on semiconductors in place? That's my first question.

Hi, good afternoon. How are you?

Speaker Change: There are two questions from me. Uh, first of all, still on the, uh, the semi conducted tariff, uh, potentially, um, I just want to double confirm. I think, um, um, a couple of months ago, I think this and see made a statement that customer should, um,

Speaker Change: care of the terrif things. I just wonder is that UMC also holding this kind of view if that's the terrif on semi-contact place. That's my first question.

Chitung Liu: I cannot comment on our competitor. I also mentioned earlier, UMC will adopt a very transparent cooperation, alignment with our customers to cope with these potential tariff issues. That's our stand. How to deal with this possible potential tariff together with our customers is our key approach.

Speaker Change: So I cannot come in our competitor and a automation earlier, UMC will adopt a very transparent cooperation alignment with our customers.

to cope with this potential carrot issue.

Speaker Change: So that's our thing. So how to deal with these possible potential tariffs together with our customers?

It's our, our, our.

Felix Pan: Okay. Does that means you don't rule out the possibility that foundry also have to bear the cost at some degree? Is that in place? Is that right?

Pee a poach.

Okay, so can I um um.

We're going to see you in the next video.

Speaker Change: So it's that means you don't rule out the possibility that foundry also have to bear the cause and some degree is that in place is that right?

Chitung Liu: It's not what I said, no.

Felix Pan: Okay.

Speaker Change: It's not Valetet, no. Valetet was, oh it is.

Chitung Liu: What I said was, or is, we will cooperate with our customers in a very transparent environment and collaboratively to deal with this tariff issue.

Speaker Change: We will cooperate with our customers in a very transparent

environment and

Collaborating to deal with this parathy issue.

Felix Pan: Okay. Understood. The second question, I understood that the visibility for second half still unclear, and I think besides the demand profile, can you just share a little bit if the upcycle, if the, you know, potentially the downcycle is coming, assuming that, how you see the inventory level across the different application from your perspective?

Speaker Change: Okay, okay, understood. Okay, uh, the second question, uh, I understood that, uh, the visibility for second half is still unclear. And, um, um, I think besides the main profile, uh, can you just share a little bit if the cycle, uh, if the, you know,

Speaker Change: and potentially the downside course coming or showing that, how you see the inventory level across the different applications from your perspectives.

Michael Lin: Okay. As far as the inventory goes, the current days of inventory remain similar to Q1 2025. In terms of applications, the DOI as well as the inventory for consumer electronics remain at a healthy level. However, days of inventory for automotive and industrial segments remains relatively high, and we expect that it will take more time to digest. Obviously we will continue to carefully monitor the ongoing impact of the tariff policies. It has obviously created a very challenging environment in the semiconductor supply chain.

Speaker Change: Okay, so as far as the inventory goes, the current days of inventory remain similar [inaudible]

Speaker Change: In terms of applications, the DOI as well as the inventory for consumer electronics remain at a healthy level.

Speaker Change: However, days of inventory for automotive and industrial segments remains relatively high and we expect that it will take more time to digest.

Speaker Change: So obviously we will continue to carefully monitor the ongoing impact of the terrorist policies.

And it has obviously created a very challenging environment in this.

in the semiconductor supply.

Felix Pan: Okay. Can I just have a quick follow on that? I understood different from other cycle currently, besides the auto, every other application at healthy label. Because of the 90 days, you know, the 90-day pause for the tariff thing. You see the inventory, like how likely to, you know, elevate in Q2? Do you think this the play like that and how serious for the inventory pop up as the case?

[inaudible]

Speaker Change: Okay, okay, I just have a quick follow on that. I understood different from other cycle currently besides the auto every older Placation at the healthy label, but because of the 90 days, you know, the 90 day post for the therapists things. So you see the inventory like how likely to, you know,

Speaker Change: elevates in second quarters. Do you think this will be like that and how serious for the inventory pop-up?

Michael Lin: As we mentioned that there's not much so-called net net impact from the tariff rush order yet in the second quarter. It should translate to a normal symmetry for the coming quarter. However, again, the second half visibility is very limited. Anything using the current data to assume may change overnight. It's very difficult for us to give a comment on that.

Chitung Liu: As we mentioned that there's not much so-called net net impact from the tariff rush order yet in the second quarter. It should translate to a normal symmetry for the coming quarter. However, again, the second half visibility is very limited. Anything using the current data to assume may change overnight. It's very difficult for us to give a comment on that.

Speaker Change: Absolutely, it's mentioned that there's not much so-called net net impact from the tariff rush order yet in the second quarter.

So...

No more inventory.

for the coming quarter. However, again, this is...

They can have feasibility.

It's very, very limited. So anything...

using the current data to assume.

Speaker Change: may change overnight so it's very difficult for us to give a comment on that.

Felix Pan: Okay. Yeah. Thank you.

Okay. Yeah. Thank you.

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

Speaker Change: Thank you. Next one, Jason Zhang, CLSA. Go ahead, please.

Jason Zhang: Thank you for taking my questions. My first questions is in terms of the advanced packaging. I think preferably you mentioned that UMC probably is moving, will move into the advanced packaging market. Can you provide us more details or long-term plan in terms of this new area? I also saw the news or rumors suggest that UMC is collaborating with US clients such as Qualcomm. Wondering if you can provide more details in terms of this new applications. Thank you.

Jason Zhang: Thank you for taking my questions. My first question is in terms of the advanced packaging. I think, preferably you mentioned that UMC probably is moving, moving to the packaging market. So, can you provide us more details or long-term plans in terms of this new area?

Jason Zhang: And I also saw the news or rumours suggest that UMC is cooperating with US clients, such as Qualcomm. So, one of you can provide more details in terms of this new applications. Thank you.

Michael Lin: All right. Thanks, Jason. Obviously, we can't really comment on specific customers, but as far as packaging-wise goes, we're very, very excited about our customer engagements in the 3D wafer-to-wafer segments that encompasses RF front-end modules. Also for sensor memory as well as logic. We've gotten the requirements, and they're actually picking up in terms of engagements. As far as 2.5D interposer, we have seen that the projects for HPC related projects for interposers as well as the deep trench capacitor. These requirements have also continued to grow. We expect that obviously will be a trend to come, and we will definitely prepare ourselves to accommodate these emerging trends.

Jason Zhang: Alright, thanks, Jason. Obviously, we can't really comment on specific customers.

Jason Zhang: But as far as uh packaging wise goes um for uh we're very very excited about our customer engagement in the 3D wafer the wafer segments uh that uh encompasses uh RF front end modules.

Jason Zhang: Um, also for sensor memory has worked logic. We've gotten, um,

the requirements and they're actually picking up in terms of uh...

Jason Zhang: engagement, as far as 2.5 D Interploser.

Jason Zhang: We have seen that the projects for HPEC related projects for enterprises as well as a deep trench capacitor.

Jason Zhang: These requirements have also continued to grow so we expect that obviously will be a trend to come and we will definitely prepare ourselves to accommodate these emerging trends.

Jason Zhang: Got it. Thank you. How's the contribution do you expect in the future if those kind of project can, you know, start a meaningful shipments or volumes in this year or in the future? Thank you.

Speaker Change: Got it. Thank you. So how how's the contribution do you expect in the future if those kind of project can, you know, start the meaningful shimmings or volumes in this year or in the future. Thank you.

Michael Lin: This is still in a very early stage, so we don't expect to see significant revenue contribution in 2025.

Chitung Liu: This is still in a very early stage, so we don't expect to see significant revenue contribution in 2025.

significant revenue contribution in 2025.

Jason Zhang: Got it. My second question is in terms of the demand side. I think your competitor in China also suggest that there is a very solid growth momentum on demand side, and their utilization rate has a meaningful improvement since second half of last year. You also gave a very solid growth in Q2. Can we assume that there's structural improvements or recovery or growth in mature node and/or do we see a lower competitions from Chinese players because of this kind of recovery or improvements? Looking into the future, if this kind of demand can further increase, I mean, can our selling price or gross margin can be driven by this kind of meaningful growth?

has a minimal improvement since second half last year.

Speaker Change: So and you also gave a very solid growth in Q2 so can we assume that there's structural improvements or recovery or growth in mutual node?

Speaker Change: And, or, um, do we see lower competitions from Chinese players because of this kind of recovery or improvement?

Speaker Change: And looking into the future, if this kind of demand can further increase, I mean can

Speaker Change: Can our selling price or gross margin can be driven by this kind of meaningful growth?

Jason Zhang: Yeah, wondering if you can give us more color on it. Thank you.

Speaker Change: Yeah, so wonder if you can give us more color on this thank you

Chitung Liu: Yeah, I wish I could jump into a conclusion. I mean, that would be great, but unfortunately, that's not what we see right now. What we are seeing is really for Q1 and the Q2 guidance, we are a little bit ahead of our year beginning of the year guidance. So it's doing slightly better, but not too much. The increasing geopolitical tensions and the potential tariffs certainly shadow the second half, and visibility has become very unclear for the second half. We cannot jump into the conclusion you mentioned. Although, UMC continue to focus on the differentiated technology in order to cope with the upcoming new competitors.

Speaker Change: Yeah, I wish I could jump into that conclusion, I mean...

Speaker Change: That would be great, but unfortunately that's not what we see right now. What we are seeing is really for the first quarter and the second quarter guidance. We are a little bit ahead of our year beginning of the year guidance.

So it's doing slightly better but not too much.

and they are increasing

Speaker Change: Your political attention and the potential tariffs certainly shadowed on the second half and feasibility has become very unclear for the second half. So we cannot jump into the conclusion you mentioned.

although

Speaker Change: UMC continue to focus on the differential technology in order to cope with the upcoming new competitor.

Chitung Liu: Our 22/28 platform is crucial for UMC strategy to move away from the commodity type of market. We have probably the most competitive solutions in 22, 28 eHV, which has enabled UMC to become the leader in OLED display market segment. In addition, our 22 ultra-low power and 22 ultra-low leakage technology, this offering deliver 30 to 50% power savings compared to standard 78 nanometer nodes. It's ideal for IoT device, wearables, and edge AI applications. All this, plus our diversified manufacturing locations, we believe we are in a unique position to fend off those potential commodity capacity, no matter where you're located. We are confident about our strategic position. Hopefully that answers your questions.

Speaker Change: and our 22nd-day platform is crucial for UMC's strategy to move away from the commodity type of market.

Speaker Change: We have probably the most competitive solution in 22-28 E-H-V, which has enabled UMC to become the leader in already planned architecture.

Speaker Change: In addition, our 22 ultra low power and 22 ultra low leakage technology

Speaker Change: This offering delivers 30 to 50 percent power savings compared to standard 28-nm nodes.

And it's ideal for IOT device where both HAI applications.

Go all this!

I believe.

Speaker Change: We are in a unique position to fend off those potential

or commodity capacity, no matter if it's.

Where are you located? We are confident about our strategic position.

So hopefully that that answer your questions.

Jason Zhang: Understood. Thank you. I have no more question. Back to you.

Speaker Change: Understood. Thank you. Um, I have a normal question back. Thank you.

Chitung Liu: Thank you.

Jason Zhang: Thank you.

Jason Zhang: Thank you. Ladies and gentlemen, we're going to take the last question. The last one, Frank Lee, HSBC. Go ahead, please.

Operator: Thank you. Ladies and gentlemen, we're going to take the last question. The last one, Frank Lee, HSBC. Go ahead, please.

Speaker Change: Thank you and ladies and gentlemen we're going to take the last question and the last one that link at USB-C go ahead please.

Frank Lee: Hi. Thank you for taking my question. My question is, with the ongoing tension between US and China, do you foresee any potential impact to your China fab? Like, for example, or like, are you expecting like foreign customer to reallocate their orders from your China facility to maybe outside of China, such as Singapore, Japan, or even Taiwan? Do you foresee your localized customer to maybe reallocate, also, allocate their orders to a domestic China foundry?

Hi, um, thank you for picking my question.

Ted Ling: So my question is with the ongoing tension between US and China.

Speaker Change: Do you foresee any potential impact to your China staff? For example, are you expecting foreign customers to reallocate their orders from your China facility to maybe...

Speaker Change: I also have a China such as Singapore, Japan, or even Taiwan. And do you foresee your customer? Localized customer to maybe reallocate, also allocate their orders to a domestic.

I'm China Phong Trich.

Chitung Liu: First of all, in order to mitigate the geopolitical tension, all we can do is first, to 100% following the law. No matter it's export control or any of the local compliance requirements, UMC devotes all the resources to meet the compliance and the export control requirements. We following every rules out there. There is no gray area for that. Secondly, we are happy with our geographically diversified production base because you never know at what point of the time, there will be requirement for customers to move around their productions. In fact, our China fab today is actually enjoys higher than corporate average loadings. We certainly also seeing customers need to see more capacity available in our Singapore, Taiwan, or Japan fab.

First of all, in order to mitigate the geopolitical tension.

What we can do with first?

Speaker Change: To 100% following the law, so no matter it's as for control, or any of the local compliance requirements, UMC devotes all the resources.

Speaker Change: To meet the compliance and the actual control requirement. So we're following every rules out there. There's no gray area for that.

and secondly, uh...

We are

Happy with our Geo-Co-Efectly Fabricified Production Base.

Because you never know at 12 point of the time.

Speaker Change: There will be requirements for customers to move around their productions.

In fact our

10 a.m. today is actually

enjoyed higher than copper average loading.

And we certainly also see in customers.

more activity available in our Singapore.

Taiwan or...

Chitung Liu: All we can do is really try to be as diversified as possible and make sure all these fabs can support each other in many of our major technology and offerings. That's what we can do.

Speaker Change: Japan. So all we can do is really try to be as diversified as possible and make sure all these facts can support each other in many of our major technology and offering. That's what we can do.

Operator: Okay. Thank you. That's all I have.

Frank Lee: Okay. Thank you. That's all I have.

Okay, thank you. That's all I have.

Operator: Thank you. Ladies and gentlemen, we thank you for your questions. That concludes today's QA session, and I'll turn things over to UMC IR manager for closing remarks. David, please.

Speaker Change: Thank you and ladies and gentlemen, we thank you for your questions that concludes today's QA session and our dear things over to UMC IR Manager for closing remarks. Thank you very much.

Chitung Liu: Thank you everyone for joining us 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.

David Wong: Thank you everyone for joining us 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.

Speaker Change: Thank you everyone for joining us today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact at UMC at IR at UMC.com. Have a good day.

Operator: Thank you. Ladies and gentlemen, that concludes our conference for Q1 2025. We thank you for your participation in UMC's conference. There will be a webcast replay within one hour. Please visit www.umc.com under the Investors Events section. You may now disconnect. Thank you and goodbye.

Speaker Change: Thank you. And ladies and gentlemen, the concludes our conference for first quarter 25. We thank you for your participation in UMC's conference. That will be your webcast replay within one hour. Please visit www.umc.com under the investors event section. You may now disconnect. Thank you and goodbye.

Q1 2025 United Microelectronics Corp Earnings Call

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