• Revenue: TWD60.5 billion for Q3 2024, a 6.5% sequential increase.
• Gross Margin: 33.8% in Q3 2024, down from 35.2% in the previous quarter.
• Net Income: TWD14.5 billion attributable to stockholders in Q3 2024.
• Earnings Per Share (EPS): TWD1.16 per ordinary share in Q3 2024.
• Capacity Utilization Rate: 71% in Q3 2024, up from 58% in the previous quarter.
• Cumulative Revenue for First Three Quarters: TWD171.9 billion, a 2.6% increase.
• Net Income for First Three Quarters: TWD38.64 billion.
• Cash Dividend Payout: TWD103.4 billion at the end of Q3 2024.
• 22/28 Nanometer Revenue: Reached a record high of 35% in Q3 2024.
• Annual CapEx Budget: Revised to USD3 billion for 2024.
• Wafer Shipment Growth: Increased 7.8% sequentially in Q3 2024.
• Specialty Portfolio Revenue: Accounted for 53.1% of total sales in Q3 2024.

• Warning! GuruFocus has detected 4 Warning Sign with UMC.

Release Date: October 30, 2024

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 6.5% sequential increase in operating revenue for Q3 2024, reaching TWD60.5 billion.
• The company's capacity utilization rate improved significantly from 58% in the previous quarter to 71% in Q3 2024.
• UMC's 22/28 nanometer revenue reached a record high, accounting for 35% of total revenue in Q3 2024.
• The company maintained a strong cash dividend payout, with TWD103.4 billion at the end of the third quarter.
• UMC's diversified manufacturing footprint and ongoing collaboration with Intel are expected to enhance its value proposition and strengthen its position in the foundry industry.

Negative Points

• UMC's gross margin decreased from 35.2% in the previous quarter to 33.8% in Q3 2024.
• The company anticipates a decline in gross margin to around 30% in Q4 2024 due to lower capacity utilization and NT dollar appreciation.
• UMC revised its annual CapEx budget down from USD3.3 billion to USD3 billion, reflecting delays in its Singapore capacity ramp.
• The company faces ongoing challenges from rising depreciation costs and utility rate hikes, impacting its financial performance.
• UMC is experiencing an oversupply situation in the foundry industry, which may affect pricing and market dynamics moving forward.

Q & A Highlights

Q: What is driving the better-than-expected revenue for Q4, and what is the outlook for 2025? A: Jason Wang, President: The computing segment is performing slightly better than expected, offsetting mild declines in communication and consumer segments. For 2025, despite signs of global economic recovery and improving inventory levels, customer forecasts remain conservative. We expect an increase in wafer shipments.

Q: Are you seeing stabilization in pricing, or is there another round of competition expected? A: Jason Wang, President: For Q4 2024, pricing will remain flat. Our pricing resilience has been demonstrated during demand-supply imbalances. For 2025, we foresee a similar pattern to 2024, with a one-off pricing adjustment to align with market dynamics and gain market share.

Q: Why is the gross margin expected to fall to 30% in Q4 despite flat revenue and ASP? A: Chi-Tung Liu, CFO: The lower guidance is due to a lower capacity utilization rate, NT dollar headwinds, and higher depreciation from capacity expansion. However, EBITDA margin remains similar quarter over quarter.

Q: What is the outlook for inventory levels and utilization rates in the next six months? A: Jason Wang, President: Inventory levels in communication, consumer, and computing have normalized, while automotive and industrial segments will normalize by Q2 2025. We expect utilization rates to rebound to healthy levels, potentially above 80%, as inventory levels stabilize.

Q: Is there a strategic plan for 8-inch capacity given the current market conditions? A: Jason Wang, President: We do not plan to reduce 8-inch capacity. We believe demand will remain steady, and we see opportunities to gain market share with differentiated technology solutions. We expect gradual improvement in 8-inch loading.

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