• Consolidated Revenue: TWD60.4 billion for Q4 2024.
• Gross Margin: 30.4% for Q4 2024.
• Net Income: TWD8.5 billion attributable to stockholders for Q4 2024.
• Earnings Per Share (EPS): TWD0.68 per ordinary share for Q4 2024.
• Utilization Rate: 70% in Q4 2024.
• Annual Revenue Growth: 4.4% year-over-year increase to TWD232.3 billion for 2024.
• Annual Gross Margin: 32.6% for 2024.
• Operating Expenses: 10.9% of revenue for 2024.
• Annual Net Income: TWD47.2 billion for 2024.
• Cash on Hand: Over TWD100 billion at the end of 2024.
• CapEx for 2025: Budgeted at USD1.8 billion.
• Revenue Contribution from 22/28-nanometer: 34% of total revenue for 2024.
• Q1 2025 Guidance - Gross Margin: Expected to be higher than 25%.
• Q1 2025 Guidance - Capacity Utilization Rate: Approximately 70%.

• Warning! GuruFocus has detected 8 Warning Signs with NSE:INDOSTAR.

Release Date: January 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• United Microelectronics Corp (NYSE:UMC) reported a 4.4% year-over-year revenue growth for 2024, indicating strong demand across communication, consumer, and computer segments.
• The company's 22/28-nanometer portfolio saw a 15% revenue increase in 2024, highlighting its significance as a major revenue contributor.
• UMC is actively expanding its advanced packaging offerings to capitalize on AI opportunities, which is expected to drive future growth.
• The company maintains a strong cash position with over TWD100 billion on hand, providing financial stability and flexibility for future investments.
• UMC's diversified manufacturing footprint is seen as a competitive advantage, offering supply chain resilience and supporting global operations.

Negative Points

• UMC's utilization rate decreased slightly to 70% in Q4 2024, reflecting potential challenges in maintaining operational efficiency.
• The company experienced a TWD1.4 billion loss in non-operating income due to mark-to-market losses in its investment portfolio.
• Gross margin guidance for Q1 2025 is expected to be above 25%, impacted by a one-off ASP decline and increased depreciation expenses.
• The semiconductor market faces ongoing pricing pressures, particularly in the 28-nanometer segment, due to increased competition from China.
• UMC's revenue from Europe declined from 11% in the previous year to 8% in 2024, indicating regional market challenges.

Q & A Highlights

Q: Could you explain the factors behind the gross margin guidance of above 25% for Q1 2025, considering the mid-single-digit ASP decline? A: Chi-Tung Liu, CFO: The Q1 margin is impacted by a one-off ASP decline and increased depreciation expenses. Additionally, the recent earthquake affected margins by a low single digit, but this will be compensated through insurance. We will continue aggressive cost management to offset these impacts.

Q: What is the expected growth for depreciation in 2025, and how will it affect the first half of the year? A: Chi-Tung Liu, CFO: Depreciation is expected to grow by high 20% in 2025. The peak of depreciation will not occur until 2027, so we anticipate a gradual increase over the next couple of years.

Q: How does UMC plan to manage cash dividends given the improved cash flow from lower CapEx? A: Chi-Tung Liu, CFO: UMC aims to maintain a better-than-average dividend yield and ensure stable and consistent cash dividends. We will balance business growth with shareholder returns.

Q: What is UMC's outlook for the semiconductor market in 2025, and how does it plan to capture growth opportunities? A: Jason Wang, President: We expect the semiconductor industry to grow by 10% in 2025, driven by AI servers and increased semiconductor content in electronics. UMC plans to outgrow its addressable market by investing in technology innovation and expanding its advanced packaging offerings.

Q: How is UMC addressing pricing pressures in the market, especially with the upcoming renewal of LTA contracts? A: Jason Wang, President: Our pricing strategy remains unchanged, with a one-off adjustment at the beginning of the year. We expect a flattish pricing outlook after this adjustment. We are working closely with customers to navigate market dynamics and maintain competitiveness.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.