United Microelectronics Corporation (NYSE:UMC) Q3 2023 Earnings Call Transcript

United Microelectronics Corporation (NYSE:UMC) Q3 2023 Earnings Call Transcript October 25, 2023

Operator: Welcome, everyone, to UMC's 2023 Third Quarter Earnings Conference Call. [Operator Instructions]. For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within an hour after the conference is finished. Please visit our website, www.umc.com, under the Investor Relations, Investors Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.

Michael Lin: Thank you, and welcome to UMC's conference call for the third quarter of 2023. I am joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the third quarter financial results followed by our President's key message to address UMC's focus and fourth quarter 2023 guidance. Once our President and CFO complete their remarks, there will be a Q&A section. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. 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 risk that may be beyond the company's control.

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 presentation 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 third quarter 2023 financial results.

Chi-Tung Liu: Thank you, Michael. I would like to go through the third quarter 2023 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page four, the third quarter of 2023, consolidated revenue was NT$57.1 billion, with gross margin at 35.9%. Net income attributable to the shareholder of the parent was NT$16 billion, and the earnings per ordinary shares were NT$1.29, which is slightly better than the previous quarter of NT$1.27 and our shipment in the third quarter declined sequentially about 2%. And the capacity utilization rate in the third quarter was 67%. Page five is the income statement for the third quarter. The revenue grew 1.4% sequentially to NT$57 billion, due to a better mix and also, better blended ASP as well as helped by the favorable exchange rate.

Gross margin remains somewhat similar to the previous quarter at the 35.9% or NT$20.4 billion. Operating income reached about NT$15.96 billion, which is equivalent to NT$1.29 EPS in the third quarter of 2023. On page six, is the first nine months' performance because of the downturn of the cycle, we witnessed around 20.5% year-over-year decline in our top line, which was NT$167.5 billion. Gross margin rate dropped from 45.8% in the previous year to the first three quarter of the year of 2023 of 35.8%. And EPS for the first three quarter of the year reached NT$3.87 per share. On page seven, the cash on hand still around NT$140 billion with the total asset is more than NT$547 billion. On page eight of blended ASP as I mentioned earlier, due to the better mix and also the difference in between 12-inch and 8-inch with a capacity utilization rate.

A semiconductor chip with intricate circuitry, highlighting the company's tech capabilities. Editorial photo for a financial news article. 8k. --ar 16:9

Our ASP -- blended ASP in the third quarter continue to age up in the third quarter of 2023. For revenue breakdown on page nine, Asia remain the biggest segment of the pie around 58%, which grow about 2 percentage points from the previous quarter. And Europe and North America remain unchanged when Japan declined by about 2 percentage points in terms of revenue breakdown. IDM versus fabulous on page 10, remain unchanged quarter-over-quarter. On page 11, we see a small increase in communication, which is 46% in the third quarter. And consumer drop from 26% in the second quarter to the 23% in the third quarter of 2023. On page 12, along with our increased capacity coming out of P6 in 22 nanometers and 28 nanometers, our revenue also grow accordingly.

Now reach 32% in the third quarter of 2023 for total revenue for 49 nanometers and below in the third quarter reached 45%, which are compared to 41% in the previous quarter. For capacity breakdown on a quarterly basis on page 13, P6 continue to have a new capacity common stream, we see about more than 1% capacity increase in the third quarter. And the following quarter in Q4, we expect to see more than 2% sequential capacity growth, also, mainly due to the capacity increase in our Thailand P6 facility. On the last page of my presentation is on fund CapEx, which currently running on track is budget to be remain unchanged around $3 billion for year 2023. So, the above is a summary of UMC results for third quarter 2023. 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.

Jason Wang: Thank you, Chi-Tung. Good evening everyone. Here, I would like to share UMC third quarter results. During the third quarter, despite a 2.3% decrease in wave shipment, quarterly revenue and gross margins remains firm quarter over quarter, primary attributed to the demand strength in computing and communication segments, continuous product mix enhancement as well as favorable currency movement. From end market perspective, strength in computing application was propelled by LCD controllers, WiFi, Codec, and Touch IC controllers. While shipments in communication segments increased due to demand for RF front end IC and networking chips. Looking back at 2023, although, Foundry industry experiences a significant decline in market demand.

UMC maintains solid structural profitability supported by furnace in blended ASP due to continuous product mix optimization efforts and increase contribution from specialty technologies. As UMC continues to introduce new specialty technology to solidify our differentiation, we will strengthen the competitiveness of our customers and enhance their respective market positions. For the fourth quarter, with the recent threshold from PC and Smartphones, we expect demand has gradually stabilized it. However, customers still employ a cautious and conservative approach in maintaining a lean inventory level, while automotive business condition appear challenging. For 2024, we anticipate production rent of our 12A, P6 bed will further enhance revenue contribution from 22 nanometers and 28 nanometers, continuing the robust distance traction for UMC.

In addition, through our technology leadership, we will remember our offering on 22 nanometer derivative products, which will further our specialty technology product pipeline. Now let's move on the fourth quarter 2023 guidance. Our waiver shipment will decline by approximately 5%. ASP in US dollar will remain flat. Gross margin will be in the low 30% range. Capacity utilization rate will be in the low 60% range. Our 2023 cash base CapEx will be budgeted at US $3 billion. That concludes my comments. Thank you all for your attention. And now we are ready for questions.

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