United Microelectronics ((UMC)) has held its Q2 earnings call. Read on for the main highlights of the call.
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United Microelectronics Corporation (UMC) recently held its earnings call, revealing a mixed sentiment among stakeholders. The company reported robust growth in wafer shipments and utilization rates, supported by a strong cash position and technological advancements. However, challenges such as foreign exchange impacts on gross margins and concerns over pricing strategies were also highlighted. Despite these hurdles, UMC remains optimistic, particularly with improvements in its 22- and 28-nanometer portfolios.
Increase in Wafer Shipments and Utilization Rate
UMC experienced a notable increase in wafer shipments during the second quarter, reaching 967,000 units, which marks a 6.3% rise quarter-over-quarter. The utilization rate also improved significantly from 69% in Q1 to 76% in Q2, indicating a positive trend in production efficiency.
Growth in 22- and 28-nanometer Portfolio
The company’s 22- and 28-nanometer portfolio continues to thrive, now contributing to 40% of total sales. This growth represents a record high in both percentage and absolute dollar terms, highlighting UMC’s competitive edge in advanced technology nodes.
Strong Cash Position
UMC maintains a strong cash position, with reserves exceeding TWD 100 billion and reaching approximately TWD 111 billion by the end of the first half of 2025. This financial strength provides the company with flexibility to navigate market challenges and invest in future growth.
Advanced Packaging and Technology Developments
The company is making strides in advanced packaging solutions, particularly for AI markets. UMC is developing 2.5D interposer and scalable 3D wafer-to-wafer stacking technologies, positioning itself at the forefront of technological innovation.
Foreign Exchange Impact on Gross Margin
UMC faced a significant challenge with the unfavorable foreign exchange movement of the NT dollar, which reduced the gross margin by nearly 3 percentage points, leaving it at 28.7%. This impact underscores the volatility of currency markets and their effect on financial performance.
Decline in Gross Margin Year-over-Year
The gross margin for the first half of 2025 decreased to 27.7%, down from 33.1% in the same period of 2024. This decline reflects ongoing market pressures and the impact of foreign exchange fluctuations.
Challenges in Pricing Strategy
UMC’s pricing strategy remains a concern due to current market dynamics and ample capacity availability. These factors have made pricing a recurring topic, affecting efforts to recover gross margins.
Forward-Looking Guidance
Looking ahead, UMC anticipates a low single-digit percentage increase in wafer shipments for Q3, although revenue in NT dollars may be affected by exchange rate fluctuations. The gross margin is expected to remain similar to Q2, with a mid-70% capacity utilization rate. The company’s CapEx budget for 2025 is projected to be USD 1.8 billion, with strategies in place to manage foreign exchange risks and enhance financial flexibility.
In conclusion, UMC’s earnings call presented a balanced view of the company’s current standing and future prospects. While the company faces challenges in foreign exchange and pricing strategies, its strong cash position and advancements in technology provide a solid foundation for continued growth. Stakeholders remain optimistic about UMC’s ability to navigate these challenges and capitalize on its technological advancements.