United Microelectronics (UMC) 28 Apr 212021 Q1 Earnings call transcript

Company Profile

Participants

Michael Lin	Head, Investor Relations
Chi-Tung Liu	Chief Financial Officer
Jason Wang	President
Randy Abrams	Credit Suisse
Bruce Lu	Goldman Sachs
Gokul Hariharan	JPMorgan
Roland Shu	Citigroup
Szeho Ng	China Renaissance
Charlie Chan	Morgan Stanley
Sunny Lin	UBS

Call transcript

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Operator

Welcome, everyone, to UMC's 2021 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at that time, if you would like to ask a question.

For your information, this conference call is now being broadcasted live over the Internet. available hour be is the will finished. replay within after an conference Webcast website, Investor under section. visit www.umc.com, Please our the Relations, Events Investors, And to like now I introduce Mr. would at Lin, Michael Investor Relations of Head UMC. Mr. And please Lin, begin.

Michael Lin

financial President's to you, and our XXXX. address there focus hear complete Financial by at In of a section. to followed of key of by results, guidance. UMC; the Thank Mr. website, available UMC's joined first are CFO Q&A remarks, welcome our and UMC's Investors call message section. present Liu, first XXXX UMC's www.umc.com, I'm quarter Once their the for reports Wang, the Jason quarterly will will UMC. Chi-Tung moment, our a the conference the second the Mr. and be our we quarter the financial President quarter President CFO CFO and the under

statements and the subject control. the number cause this may make on uncertainties that including to management's conference, actual are the beyond be statements that based forward-looking could results expectations forward-looking differ current to risks These and materially, may we risk of During company's a beliefs.

securities risks, US filing in UMC's For and refer with SEC the the please these to ROC authorities. the

CFO, I quarter to XXXX Now, Mr. financial introduce like would discuss to UMC's results. Liu, Chi-Tung UMC's first

Chi-Tung Liu

Page material, I like presentation downloaded Michael. can which first Starting X. conference to would investor be on you, our quarter Thank go through XXXX the from website.

a and previous XXXX XX.X%. improvement parent the of utilization the In the please was were quarter to stockholder with quarter. rate at to page billion, from The the TWD XX% earnings first was first quarter, TWD the shares the The attributable X.XX. margin per X. go XX.X XX.XX And in was capacity consolidated further income revenue XXX%, TWD ordinary billion, net gross of

somewhat is also TWD the QX as X% it sequentially. increase stronger X%-plus. ASP dollars. Gross growth, quarter which sequential as wafer margin contributed NT of well XX.X% X%-plus continued TWD or billion. about profit XX.X% XX.X represents XX.X was operating quarter-over-quarter increased first offseted income of margin to billion both by shipment, For XX.X%, comparison, revenue in by And which from was to grow And rate

was -- income ADS reported is X.XX per -- the So around US$X.XXX. net TWD as per for about

comparison XX.X% gross So dollar margin on XXXX. X. NT -- XX.X% improved the X.X% of exchange stronger improved operating to year-over-year to to compared grow quarter period rate. by point margin margin Gross page gross -- on first X% Revenue by the much nearly -- same And XX.X% year. despite from percentage XX.X% last of point stronger in

X.XX So pretty significant QX show TWD from -- TWD a quarter. past EPS X.XX in On page to growth to X. will XXXX this

XXXX. TWD about in to Our ASP XXX as around more equity and Like billion, ASP of the TWD mentioned growth first you cash well is earning is shipment QX than the our wafer close earlier, see there's And X, total can on both -- growth from growth. blended Page as revenue X% billion. for uptick I quarter XXX contributing

terms revenue our of Page on In breakdown X.

XX% quarter first it growth minor of Asia grow. XXXX. Japan also about now, continued And of and show revenue. right to Europe the in total And represent our

segment. Page XX, For some distribution still And major unchanged, Page around X, XX%. balanced among IDM, on three more we see

On will new at And XX%. CapEx project mainly price as details Page our XX/XX-nanometer total And XXA our to breakdown about represents technology, both now for XX% we QX XX, another XX, growth, XXXX. XX% due capacity represents our later. XXX in annual Page go the XX-inch and see budget, represent of coming XX, quarter Communication some two, about XX-nanometer X% Xiamen. will well QX for in which for up and we quarter-over-quarter into from XXXX, capacity we Page a Consumer expansion mainly So XX% on about revised in as is Tainan, capacity

new is updated the CapEx For for XXXX now billion. US$X.X

So turn XXXX. website. are call details of Jason which the to posted in I the been on report, is our results UMC More will has of Mr. the available above for a QX President UMC, summary now over Wang.

Jason Wang

evening, Good Chi-Tung. you, Thank everyone.

Here, working wafer In like utilization our in I capacity led the UMC. our across quarter to the demand the to and overall a would side, equivalents. with shipments suppliers X-inch million, customers, semiconductor we to to X.XX shortage, first alleviate partners of wafer supply QX, chain. Amid the robust update operating result tightness manufacturing bringing full component are

grew our the contribution from billion, higher XX-nanometer technology. our to XX.X% which TWDXX.XX quarter-over-quarter For gross profit quarter, partly reflected

driven first digital the shipments, quarter, increase in connectivity wafer set-top with chips demand into wafer by smartphones. XX-nanometer an associated we During continued TV, designed box strong see and to

pickup wafer foresee of XX-nanometer As a revenue product will to significant to overall increase pipeline, quarter-over-quarter, XXXX. started XX/XX-nanometer enhance XX-nanometer consumer and we We have products that foundry representing ship fulfill XX% business. XX-nanometer Furthermore, our recognition in revenue UMC out result, demand, quarter leading share. first grew XX% of a mix wafer our optimize in to product tape a product XX-nanometer

leading ROI our dollars. XXXX, with the in wafer the The XXA into provided production us second customers in while which have Tainan to demand Recent our quarter will an Fab Park project global reinforce market earmarked partnership our Taiwan the will continue total which market of long-term second alleviate to to the will supply, win-win within expand Directors Board UMC billion. investment expansion lift shipments approved Therefore, strategy trying and quarter, capacity ASP boundary, in an at TWDXXX at through customers. for and the dynamics CapEx with supply an PX chain. scheduled innovative blended the investment for of Looking capacity Science outpace PX is in plan, opportunity US have model constraint several

the the PX, multiyear's the Fab a product market loading level. UMC Science driver for Park PX new foundry our previously In a TWDXXX loading billion the UMC's at relevance look will years. road. approximately strengthen worldwide bulk XXA company's of position production, the further healthy capacity a multiple and over protection PX by towards The reach to adjacent is in down of alignment areas, announced program IT is the will to mechanism number involved We one XXXX between customers addition in allocated ensure PX as so to OLED market leveraging CapEx investment the next three that includes forward billion, is UMC opportunities UMC US$X.X industry may that supported Tainan and sites, which equipment we XX-nanometer capture such maintained total

guidance. the to let's XXXX Now, move on quarter second

shipments U.S. will dollar X% by X%. to in by X%. Our ASP increase will increase wafer

be However, challenge benefits XXX%. headwind Gross XX%. be shipments increase utilization will on surging in Capacity may dollar the NT growth. margin potentially will ASP profit offset to QX

attention. Our you XXXX my your be all concludes for That comments. at will cash-based US$ CapEx billion, budget Thank earlier. mentioned X.X Chi-Tung as

Now we are for ready questions.

Operator

Yes. Thank Wang. you, Mr.

we Randy ladies and please, our Credit now And Now Abrams, coming Suisse. first Thank is our Go begin question-and-answer gentlemen, ahead, will from session. question Instructions] [Operator you. Randy.

Randy Abrams

Thank Yes. Okay. you. and results the margin Congratulations on improvement.

much with Fab capacity Phase continue framework the view wanted the spend around Could billion raise? of if with or to for the there's spending you ask NT$XXX the discuss amount And question, of First for there's the in also, capacity X continue if Phase other CapEx couple capacity XXA X how the And on for China the if this expansion. may a planned you is a total also current year CapEx, next years? plan? for facilities, to level expect any I

Chi-Tung Liu

the And nearly NT$XXX the for to this part CapEx PX alone, the billion. that three around next starting So total of it's also through so, is of XXXX. spending in over from likely year, is out bulk one-third and years, XXXX Randy, -- the likely in latter spread

will will wafer early key as year. the over per at capacity go original are contribution the And maybe part CapEx bulk That's of seeing as next we billion, ongoing. that years. of the So be to budget XX,XXX the earlier, already month And three US$X.X the next XX-nanometer for PX. our the of that

level we month. to the But the As the are capacity time was XX,XXX, close right now. of for And already -- closing XX,XXX it extension, you -- per last it's wafer to year. as target XX,XXX, about, by through focus the about Xiamen, to wafer now recall, the reaching target same also

maybe more? you to to want So add Jason,

Jason Wang

I XX,XXX wafer point about will other is PX, total capacity, we'll data of after the the for be the the think PX, the XXA. be top site, the Tainan adding for facility, the XX,XXX. on by And

So we XXX,XXX. about are approaching

Randy Abrams

Okay.

just, PX? So at XX,XXX

Jason Wang

Right.

Randy Abrams

XX,XXX. clarify, And Okay. to it's

PX PX, at XX,XXX have is XX,XXX. you So

to that XXX,XXX. it brings So

And second schedule. expansion and gets the Okay. mechanism the it this back new to question,

could XX%? relative the downtrend could that and was how you business growth. two If on, kind expand depreciation you does on impact they're nice to getting where the in But And if and that profile more How originally the depreciation current pricing that with margins get would margins, you as the grow the an your updated But new capacity. talk changed? view years. give next how of now you'll the that

Jason Wang

I to actual pricing, I going the specific can -- about Well, the mean, without update.

did The not disciplined our change. first is ROI-driven strategy

strategy. XXXX, multiple you margin our would said, like topline years So program this with growth, of program Starting not affect accretion. in that this support will

we financially, is believe, this So justifiable.

because a after off years our XXXX, PX depreciation this near-term Even be this a will will As rolled controlled remains XXXX. press depreciation quarter earlier percentage run strengthened downward in with market have the revenue in trend we expansion stated position depreciation the mainly post our effort few release, gross will together and this managed, CapEx our meantime, to margin capture improvement, the second of total PX And well opportunity. at as light financial unchanged. UMC

think also changes. of the part So our structure I customers market recognize

to beneficial this Yes. foresee meaningful they them. also So them, to but is arrangement

Randy Abrams

the XXXX updated a there's the with market on an think, X% pricing quarter, plus lot view if blended next a initial some there's to capacity pricing with out already contracting give X% And rounds X%. of and could I year you're second may If but a the see minimum view, also start there last in how in question. tightness, at is one there's movement pricing? year? And talk an view Okay. the of further into on was, if kind ASP of The up you up

Jason Wang

the will And with for ASP market will pricing And the growth the also We dynamics, more year of in our market XX% could now. the position, price be year-over-year -- approach digit and the forecast will is overall current continue the reflect our therefore, the lift full And ASP single high aligning market to improvement. mix aligned mainly the XX%. customers. From but recent it product our position. value market of include

about growth on point So we approaching see we XX% -- XXXX, at ASP. entire see we'll the this year-over-year be

Randy Abrams

Okay. And are or constraints? as you half? scheduled, like yet? Or early normally is there that But is XXXX second any talk given starting -- on in the

Jason Wang

we hopefully, alignment of only -- wrap We earlier. pricing, early also before said -- up the I capacity not as can year. support discussions, ongoing are There just mid the

And ongoing is so at still point. this that

Randy Abrams

Great. Thanks a lot.

Operator

from question Go Bruce Sachs. And the next please. ahead coming Goldman is Lu,

Bruce Lu

contract Can details. just booking thank we and But because problem many you and capacity. and so of fab? don't the bit Or a capacity, the TSMC, is about contracts What customers business we can for Chairman many, taking your the us many the Hi, day. long-term need the -- Because are capacity, give lot oversupply in don't -- any of the XX, that a my seen additional capacity more have is who we building model I we of is talking XX-nanometers you can color added honor industry questions. fully mechanism newly for end the How loaded? new ensure investor dominated in at XX-nanometer when global kind double the have? innovative in the from little about

get desired So how can we can we our return? ensure that

Jason Wang

good And can long a That's answer very actually short question. a and be it answer.

lead see start this a imbalance, if decision. the supply-demand mature as knows, node. background I dynamics recent to off market a me particularly maybe can in bit of everyone giving The a Let of

market advanced capacity Some of on technology. we of In our the expansion in seen about too. peers mentioned past also have most the focused years, that, few

changed components recognize challenging of the the time service in our X-inch position did However, period structurally X-inch that to are company as over think, a and a not have that. critical play foundry semi XX our the this vital And, market nodes, significantly chain. mature due and role condition. I Therefore, XX-inch supply provider. capacity we Within and roles those address customers many the believe mature there event a

our these have and at so we And providing opportunity to work closely. situation this the to time, this us stopped customer mature shortage supply node. solve together And an in

call just the the arrangement this So product And by different alignment. this behavior this because track is this is than we years of it expert. toward multi agreement innovative supported win-win of putting model -- with a customer, collaboration

the a ensure customers. is multiple in loading also maintain a And between alignment, the UMC capacity and healthier So to under there's years to loading agreement the mechanism protection this level.

this words, PX commitment from well-protected with other in and is the obligation both So program sides.

talk you the to about XX% about or of cyclical other accounts cyclicality. vulnerable rest risk, PX, will the the to without the when offering XX% our this industry's Now more PX operations. only of be With capacity

think set well-protected. the itself is PX program I So up

sizable with the Our focus is the offering. technology have And at is our -- goal at predictable the competitiveness capacity -- we the yield base capacity more our the our enhancement base to end to service and relentless our stability, on of continue the manufacturing day, in this of and and capacity. protect our excellence our

the industry's the are with cyclicality. fundamental those cope solution to So

bottom-line, program from some market on And still downs, -- Yes. and but on And but probably downs, material won't concern, seeing will fundamentals. well-structured, and it effort, happen beyond happen. our to is the will to that, best to inventory stay situation I PX years. time. based current itself academic those conventional well-protected. demand-supply one And I -- correction focus the but imbalance market The the with ups -- year we the two we're more so And our or ups methodology, within think the have our go back for the

about sort view that's, of, So we how this.

Bruce Lu

actually that bigger So create a problem.

capacity XX, per XX,XXX XX,XXX is like to wafers covering For example, month. right, your like

well-protected but the protected. onward, in XX,XXX is XXXX remaining So XX,XXX not the is additional

sides, XX,XXX customer per but capacity. previous -- PX month they if capacity original the will on fulfill right? orders -- they can is So both having the that Is in like PX, wafers the their cut the P

Jason Wang

not protect this the be or people a trade have Yes. competitiveness I that on compete have talking we saying mean situation. to standpoint, to or PX, we going order on is in to geopolitical the with And or a competitiveness from forth. even -- about -- in same whether space, so is or what so or so I'm PX based our issue imbalance and deal

with selective our for will -- which it doing the -- we're segment We simple putting we competence core we result word few market have to in on addressable market focus and is another and and within Our from past put been a our years. as And the a focus customer And we we strengthen well. start we then retentive our as within addressable our segment. area market a believe result, portfolio. technology market that that actually segment, aligning start the seeing gain on

we to executing and to So -- that the protect baseline. have continue

select so And staying have And I we in feel march a we the think comfortable. that into been feel we area. focused direction we

executed, relevant. been have become We more and we've

yourself will the you compete executing situation. to Yes. -- and the market point And just this prepare at the that. in risk never just happen And market that to to we situation, that continue don't think continues. we have So but we have cyclical to have this say confidence in

Bruce Lu

see. I

Okay. the for PX One clarification investment.

return it secure? how margin can not that the ensure diluted? PX that dilutive like -- this return-driven cannot target return. unchanged. justify current me, we But target not will mentioned that the can this the is be it's for ensure can for incremental wafer how price XX incremental the is we ROE revenue? Or ROE can Or for How how be You that or

Jason Wang

on predetermined of that, Because growth, accretion. current support support the the and PX the top-line multi-years program only our they for margin the program, pricing has a not also based program

Bruce Lu

I see. see. I

your increasing different be So price capacity? will this compared XX-nanometer PX wafer to

Jason Wang

yes. It different, is

Bruce Lu

that. disclose premium? But we can price the understand I somehow

Jason Wang

No, we can't.

Bruce Lu

queue. you. to Thank the Right. back go I’ll

Jason Wang

you. Thank Sure.

Operator

And Go ahead from JPMorgan. next please. Gokul Hariharan, is coming question the

Gokul Hariharan

question. for Thanks my taking

you some kind numbers Could a level customer, to hard about we like stop to capacity arrangement. why boundary, ROI co-investment clear that is, any terms what any or to Just any we new of could communicate boundary ROI Did of will you will that bit the it customers talk of, in not do understand that we co-investment? this a invest? like the enrollment little of investors? talk accept why part. where the us for don't Also, in co-investment so is thinking for about UMC consider and when put have? And be around Firstly, potential terms from what accept you wanted on

Jason Wang

addition -- predetermined of PX of market to a So mechanism there's program. the I the mentioned as to first market earlier to is Well, well there protection, because as their situation pricing earlier okay? what all, of the the just And in highlighted commitment protect PX. this dynamics. committing background deposit And a by guarantee structural I arrangement capacity to as also in loading of the current a

this they us jointly. and recognized the participated willing is this so group customer changes, of possible So structural with

I this a So is program key say of customers. will and some the us joint between

we're -- both growth. on UMC's and time shortage have issues financially is solving -- of thing lines to And this, agree a affecting the this the the top-line that so ensuring of -- UMC's Board data. see UMC's line not based and arrangement, spent And driven do I ROI the and ROI many right the we that bottom we elaborate disciplined Directors the discussing it and financial lot without And also our we team's to that targets. strategy. numbers, margin bottom with can review accretion, tell review, more affecting I the and but can't meets the about our of under you our meets specific our provide

post production depreciation earlier, program, trend with downward the and unchanged, ramping. -- the remains PX So even asset the also start again, I near-term mentioned XXXX

for this well-structured program feel a we is So us.

Gokul Hariharan

Understood. it. Got

year being ASP up Just one did shipment maybe about change I terms about outlook? there to previous. question. any of in blended this XX% Is compared talk you other think

year, to now? X% at capacity mid-single growth expecting we're better looking we still little roughly like or it outlook for more, X% digits. Shipment is growth think growth bit this a Or a capacity this year? are I little bit

Jason Wang

year, Yeah. growth is for yes. the That capacity the same

Gokul Hariharan

I’ll the back queue. to very Understood. go Thank you much.

Jason Wang

right. you. Thank All

Operator

And ahead, next Citigroup. please. the Roland one Shu, Go is from

Roland Shu

Hi.

First contribution quarter from was XX-nanometer question you first out Jason. growth revenue. your gross to Jason, profit said the higher prepared remark, partly reflects in

So question margin seeing gross is, margin XX-nanometer Are above about the quarter? average corporate how in average the corporate we to already? a gross XX-nanometer first compared

Jason Wang

line contributions. a out both by and us in XX So give sides. now becomes our node They both the margin -- to don't the are any We node, okay? top breakdown meaningful from on

Chi-Tung Liu

If I compared past itself over few may, quarters. the the XX is actually to

is much than few better the past of gross XX-nanometer current actually margin the So quarters.

Roland Shu

how I Then margin? this overall Yes. X-inch XX-inch your like? was also gross Okay. XX-inch X-inch about said look that gross margin the corporate price about adjustment, and previously, think average. Then gross XX-inch you and the how below margin after

Jason Wang

Price adjustment mix absolute value. as product comes reflection increase well as our market It is of price a really increase. from both

really it numbers carry an be point about that accounting much XX-inch. X-inch, change doesn't X-inch if XX-inch. it But the as of much about the less that you less represents EBITDA may necessarily view, From can of are we're then not that So than depreciation. higher too between always dynamic understand And talking and margin, -- much the case.

So overall, point XX-nanometer of a with profit XX-inch, we from improved that margin were progression happy especially the view. has

Roland Shu

you're of you ship Yes. about talked also customers' Understood. product XX-nanometer starting And demand. because to that

XX-nanometer a than to better for and carry XX- a change? or the So profitability margin XX-nanometer? XX-nanometer? Does gross that how margin higher carry this ASP this much a about Is migration,

Jason Wang

gross typically, by without blended mean, breaking number margin I detail. the provide we down

as I'd the node. add, our wafer on X-inch also contribution, like each improvement. to cost XX-inch well continued as just pinpoint result reduction pricing But the not mix, So a the margin effort shipment it's the is justification productivity product gross and hard to

and just node a associated of fab. more And -- is one or blended on this result -- not or everything. with particular So it's

in we we're happy start challenging the upcoming XX% the quarters. So -- the that

I we that, think done, on given continue what are have we'll confident improve we to too.

Roland Shu

question for me. Last Okay.

due I wafer raw this the you think your couple So And demand? to to of a months have are wafer of view comfortable supply. enough increasing suppliers? you ago, secure changed wafer from able you recently were your total

Jason Wang

managing that on had the been our while We a closely diligently assurance. working we issue and aligned have and that with Yes. supply supplier back, in

any No. So right now. we problem haven't seen

Roland Shu

Okay.

So you the have secure wafer. of

for So the a see change? about price how Do wafer you change wafer recently? meaningful price

Jason Wang

with can't what's with But chain. pricing this across pricing the going with structure. -- the supply the current see you alignment okay We the our I to at stage, current And Yeah. tell happen based supplier, tomorrow. dynamics on we're

Roland Shu

the see up you or... do going So pricing

Jason Wang

that point, I have don't this but not. change visibility going at will that I don't or tomorrow up know

Roland Shu

Okay.

Okay. Understood.

Okay. Thank you. Yeah.

Jason Wang

Sure.

Operator

Szeho from ahead please. Ng, And Go the next one Renaissance. is China

Szeho Ng

have gentlemen. Hi, two good questions. afternoon I

products XX-nano, Because start to The XX-nano regarding strategy. sure XX-nano first assessing if XX-nano possibility? UMC one would expansion I'm some not into go the plans have the the of the

Jason Wang

into before be but arrangement Yeah. with no that. migrate timeframe possible will the Yeah. and The program, XX, and option in PX the -- XXXX, to plan sometime there's

Szeho Ng

Got expansion you. the regarding loading that some have see. protection of the I And comment a mechanism. sort we customer with collaborative the

would clause last So I just protection in long wonder that how general?

Jason Wang

It lasts entirety of the program.

Szeho Ng

All Okay. right.

Thank very Okay. Great. right. All you much.

Operator

Charlie And Morgan Stanley. question from please. ahead next Go Chan, the comes

Charlie Chan

Thanks. congratulations Good strong afternoon a gentlemen, and results. very for

projects. So is also my the regarding PX first question

some saw any equipment you to flow, I customers? point? there want So from Can clarify consignment clarify. Is the so just news

Jason Wang

There's No. the is providing The Customer consignment capacity will guarantee answer commitment to from by their customer. deposit. no no.

Charlie Chan

Okay.

from So balance is almost sheet? all your

Jason Wang

is. it Yes,

Charlie Chan

Okay.

some CapEx? kind need fund raising debt the future ratio or to increase with you to So do that, the sponsor of do

Chi-Tung Liu

Yeah.

Our billion exchangeable announced we project, bond another bit well, is which likely current cash-on-hand by for as disposing than about our to $XXX a non-core just and will million assets. USD$XXX more raise us this little

of PX maintain light even we high of standpoint project. view, ratio financial in a from think I dividend current So new our payout can this

So much on pretty structure. our is no there financial impact

Charlie Chan

-- you business. the back so PX Since to don't Okay.

cetera. driver connectivity, You there box, TV, including of several wireless mentioned that are type demand, setup OLED IC, et

-- or of comes demand if PX How major from PX? project? even prototype current this of is which for the a a kind customer long-term which driver kind demand, from that or for So the

Jason Wang

And time, roadmap our outlook the leading segments, And and of their first those has mean, global will existing it's customers also along aligned. At I of the all market name are in demand outpace names. with well customers Well, companies. in view, industry can't their addressable same And them technology really customers. projection. our our semiconductor all, been semi products I the

a in So high-growth it's area.

we believe so growth. well is And capacity PX the the to -- to well-positioned secure we're program this as future

Charlie Chan

Okay.

seems came interpretation? that or few across Is single from right future not like it -- the demand products. So fitting a the for customers, as

Jason Wang

Yeah. with It's multiple yes. customer products, multiple a

Charlie Chan

use Okay. Thanks. And your large if the project my Those within X-inch is then you is see year semi going source. products speciality fab. do used other question of to do may later, products? X-inch maybe XX-inch major the those inch to to semi or think migrate IC, a I'm XX-inch? you you sure about as of two But And that for a -- sensors. is trend trend that XX-inch. efficient panel years more not happening the foundry a kind But driver power this of example, think those, forward, like migrate for IC, that

Jason Wang

you mean, I performance to, due like advantage. to said, the X-inch cost or every is motive the application, reason XX-inch from migrating Well,

on within So is -- product because -- -- demand is a you to continue including We to XX-inch with application, observe different and And don't pipeline because the of customer overflow there any the we a mentioned. don't see align X-inch we the overflow, that. X-inch high. continued what

even the the within continue bi-application on and they it haven't and basis will we seen into XX-inch, really reason, continue because different that. so reason, And that performance a XX-inch. cost because And the we nodes. continue migrating seeing migrating to product a But

Charlie Chan

Okay.

much. very Thanks Okay.

shouldn't X-inch see is supply a a structural does shortage? of because maybe? mean there Is I alternative use alternative, that I that So right to right, that foundry that XX-inch. mean kind think,

Jason Wang

think shortage I demand structural the strong. being issue. continue X-inch very advantage has The is

is building we on as come growth. very fast the greenfield as market to due the not as see that X-inch so online -- However, facility a difficult, challenges at demand

the remain So years, still at the I we structural think of will and challenged, -- couple under X-inch constraints. we're foreseeable least, for Yes.

Charlie Chan

maybe last back And to Yes. Chi-Tung. question, Okay.

the into But guidance, your years? you just you trend year can a it margin, will right? seems into on the would help margin management's what sheet, know next PX you So to can your give don't dilute comments understand, suggest me like to to next Because further now the XXX% year's continue presently go the Is running right? Thank margin you because that you feel the you. going down? Can will equipments margin seems So price to margin give answer hike utilization up? already, you depreciation help I of just us confidence the are gross older capacity then next us higher -- I be though from gross your based or benefit benefits from understand? at that to So balance own help is now, understand gross that. few utilization right? to the to even that

Chi-Tung Liu

Yes.

First we up go of margin sequentially that. will didn't We didn't the gross all, say say XXXX. in

collective reflecting say is a effort We reduction, Okay? of and gross that cost margin adjustment. ASP the market also mix product

gross And and our as exempt our all guidance we target. we operation continue improve give gross overall margin. quarter-by-quarter. a price XX% to But the ROI with it's and PX, can going hopefully, of with for about will to doing represent that. we of are XX% And So to margin prefixed

to our that project beginning, to be this mention to adding driving it's So assumption don't expect gross PX it's basic -- to our we plug If into our that's ROE base, from margin. dilute actually will because performance. the profitable force we going the overall current going very And be

Charlie Chan

Yes.

trend, some last you depreciation gave remember I quarter, us right? So

Chi-Tung Liu

XXXX, Depreciation the well control, well decline expenses. for reversed. will beyond in XXXX less numbers are XXXX, than looking full the number under still as the year depreciation And start be we and when X% trend mid annual in trend to still PX the not be wise, Yes. in, of and for will kick somewhat as XXXX, the

Charlie Chan

Okay.

Sorry.

that. missed I Sorry,

how to auto output I'm and not to is your do shortage is semi go the will will and when sure one there very from you are also, auto up disclose the sense global last auto your keen guess the much side, the investors get ease? I really I exposure, one about contribution? when you think So, semi that production. why revenue semi start mean

Jason Wang

just have category we new now customers expansion. our to the down itself, it closely, mean pie. well along productivity shortage The under auto across and with I and right the break really segment capacity work as improvements as board, the haven't with It's our is the we in the others.

So about right now, others account XX%.

for within So, it's market, numbers. our automotive

Charlie Chan

Okay.

you Okay, much time. Thank Thank your very understood. for you.

Jason Wang

Sure.

Operator

one Sunny ahead next please. from the And Go Lin, UBS. is

Sunny Lin

your you first and results. my question for for on My taking Hi. expansion. is great Thank your congratulations questions, also PX

second think a just saying I press that completed, the the start has will production been put from you fab quarter only but net out release of show XXXX.

that the are Or constraint possibility actually So, equipment production the because the industry. any seeing earlier supply I wonder is that's now than expected? in we could mass that of start if there

Jason Wang

Well, our time there's for we we'll working see this I point, suppliers. equipment. And the mean lead are overall at with a

the ensure So second still But for already on we production PX we're what targeting. with XXXX. That's supplier we're would that, to our confirming quarter project that happen.

current So the plan. that's

Sunny Lin

years color a could new Maybe in production of versus XX to I terms we for capacity follow-up with is of share and therefore, cost wonder Since most increase. if your the your to the expansion. compare cost the it. down. you us current several your ago, If capacity, built start Got capacity depreciation come any

Jason Wang

I increase. all, of there's don't first a Well, cost think

actually economic is cost coming certain So, scale, the you to once reach down. overall

Sunny Lin

Right.

Jason Wang

in And in So, of factory And the -- building now we if figure That answer fact, has think we're CapEx actually to into actually as lower, we a given XX. a was what okay? flexibility terms this that building six years and higher. It's XX-nanometer budget it's the question, generalize converting -- the don't we the consider a in XX, don't compared we capacity yes. that a PX ago. presented, as is well our we that program earlier it's

converting that into has certain the entire XX-nanometers. So, program flexibility the

And this, can we have so, ago. But sure when six -- so the built than flexibility, what we this general, that want to current to lower what And this okay? we we we years is make plan six regenerate cost ago. figure in XX years

Sunny Lin

very My several that's edge. question CapEx supply-demand Got And it. now trailing I on the the imbalance. helpful. for Thank overall second foundries the to driving That's is think you. accelerate

industry? whole overexpansion sense Thank to term or want you. get lead if could for volatility more just the So, the your medium this to in

Jason Wang

be supply will touched once the the the a -- we newly to capacity available, there's geopolitical happen the chance our lead-time, likely within the okay? lead-time, But -- probably have good excess consider capacity this in become continue to think for mean Given tensions, good that, In Based we kind unchanged imbalance I they not even as structural lead-time the will consideration, I won't we we one material capacity, shortage uncertainty the two don't years. have It's issue study, tightness delivery two on research years, okay? to beside least the okay? the next probably the and until confidence nonetheless, anticipate okay? this one pretty of and earlier also okay? -- remain well. of But we addressed, addition XXXX, the any will to at think

Sunny Lin

All right. very Thank much. you

Operator

question next Stefan please. ahead Capital. Ellis The comes from Go Chang [ph],

Unidentified Analyst

Hi for And question. you taking my thank two here. have I questions

foundry see those sourcing. at dual clients already use they is do wondering, the -- some dual wondering, for still the look for first that one is product see technology, or semi the question. just only we semi product because production would my of product clients use This I'm if have you the now, First XX-nanometer I'm are using we just for clients sourcing? usually

Jason Wang

do capable customer think is design will probably in enable they they double the to. is they supply Well, multiple and to have customer a to result are need the perspective. to is I okay? mean, assurance perspective their customer's the ensure ensure their there strategy single-source don't this, supply If need different efforts, from perceive came, One believes multiple design sourcing this and a If several a resources, they their so -- enable supply, sourcing. I to on

is And customers' customized. perspective -- chain. the the -- perspective on specific, a that's they're and the consideration very design one the on So, the supply different on product and

very they multiple have to So, source. are hard

the because yes. So, product, the of characteristics

an a So, comment serve node, specifically. is UMC a so into I But the advanced when design talking as node, about sense, you about very costly. advanced you're we I can't tell give you the leading don't edge can on because really general node very

to investment. be if So, will -- enable a a very that you be significant want source, multiple will it

the So, factor is here. investment of important one

Unidentified Analyst

you question of Understood. all was, Actually, comment just tied sort your if Yes. made the XX-nanometer? to Yes.

Jason Wang

most I think the they'd of If you able the look -- enable capacity, multiple the be XX at product, source. to

to There long on a the customer it. as differentiation side. be as be there -- wants do will think -- some the will I technology

leading on in the have a ahead position And for For those, technology UMC, market few we solutions. some of the think market. still I we're

will stickiness on better customer probably that. we enjoy So,

Unidentified Analyst

Understood. Thank you.

like the quickly, we understood the two, mature But tighter it XXX-millimeter? need in XXX a always if are XXX do XXX-millimeter very between do the mature or you millimeters millimeters, comparison in see or node, node, [indiscernible]. really Another -- shortage that just question is they is you for to bigger so although

Jason Wang

severely we is ensure, be is on booking From this possibility secure -- our the that as what an question, they're also XXX-millimeter it's okay. the a XXX-millimeter. constrained But Well, to customer interesting able supply. as the there's well see, a to both on they'd double view,

severe difficult. at the So But industry-wise, overbooking is we the are point, how node. the I I under mature board very this judging you, we're shortage can on across think tell

Unidentified Analyst

Thank you. Yes.

follow-up So very comment. quick just your last a on

about, So continue another years. a the two will overbooking. mentioned tightness But also you possible probably one you mentioned you to for due see previously, probably to

make possibility, the the assume can to try comments you tightness already regarding we you you had So possible exclude the -- when to already overbooking? consider supply

Jason Wang

mean, XXX. I Absolutely. this a is planning

pipeline going all our to So market, we're research actually we end chain and analysis in actually of that. supply the -- consider back to study, we terms on way have that. entire And the to the based

XG adoption driving So I a the EV smartphones, the learn-from-home, as in automotive, well from demand, few trends think this as work-from-home that space. the mega space there's

you and are lack past CapEx those so So And if space. demands years, -- mature in look okay? there's node the at of the real,

structurally, they're enough. not just So

probably believe, even foundry the we we capacity structural why believe space, the that's so with in And any -- this still announced remains. with or shortage PX the today will even

Unidentified Analyst

Very Thank clear. you. you. results. Thank Very Yes. good

Jason Wang

you. Thank

Operator

we're one And last the the Go question. please. Sachs. we're time, last so running out gentlemen, and taking Ladies ahead, of Goldman is from Lu, Bruce

Bruce Lu

Okay. again. my question you taking Thank for

have a question Now I ASP. about

as first base more product For only blended pretty by which a is like the X.X% driven improved XX-nanometer and mix improvement. by -- much ASP quarter,

I XX-nanometer growing supposed ASP is by that The is, So which ASP. capacity, for again, or mainly growing the second assuming XX. much X%, by where the only, the is pretty to is quarter driven talking is X%. higher for market guidance is like for also have addition a But by which mean much X% also I'm capacity much bigger is capacity second X%, new quarter, that shipment about? hike the but price

So improvement? like-to-like as ASP, any base a do see we

Chi-Tung Liu

Well, there's answer to correct.

ASP X%, one was The first not quarter something. growth than actually point more

than price comes as of So so I increase, some mentioned less X.X%. from about -- that

And some product from that mix of improvement. comes

more So overall, was X%. growth one than quarter ASP

Bruce Lu

assumption I it's quarter? first see. What Because ForEx like… the is in using

Chi-Tung Liu

was -- X XX.X. ForEx

So negative impact there from ForEx. X% a nearly was

Bruce Lu

I see. Understand that. Understand.

So the driven is is what ASP improvement? ASP for product the the what -- second assumption for quarter, expansion by the the mix

Chi-Tung Liu

key I similar. would each. which XX-XX Still both factors, say contribute nearly are

So but we in ASP. this normally force don't similar X% quarter for driving a two to give you the detailed for expect numbers, should see growth

Bruce Lu

see. I

wafer That seems be math want simple good than my for have very It just I seems a XX from that too for XX-nanometer me you higher return. to price has the that true wafer The to like the math. price. similar price. current Last XX%-plus question, quick did Okay. a market be to PX to

I'm So, is is that there math sounds missing? Or anything correct?

Chi-Tung Liu

portfolio. the predetermined but a I a can't there pricing is actually customers. very arrangement with really comment on It's diversified percentage, customer

So mean the I okay? line work, bottom the I mechanism it is well, the math mean works. --

Bruce Lu

math so work? my -- The math

Chi-Tung Liu

comment it's that. can't yes, -- of the I percentage about So

Jason Wang

Basically of calculation. one total wrong in effect the ROI

of also reduction et factor in and the just cetera, cetera. the scale effort all mentioned. and Chi-Tung factors et also The benefit cost economy the We of -- the

it's again, So a collective factor.

Bruce Lu

I see. Understand. Thank you.

Jason Wang

you. Thank

Operator

questions. for session. thank IR Thank your I'll to today's UMC we turn Head remarks. over it of gentlemen, and Q&A ladies And closing you concludes all That you. for you. Thank

Michael Lin

you Yes. appreciate conference this questions. We for attending today. your Thank

always, to please additional day. ir@umc.com. contact UMC good you As follow-up at if any Have questions, have feel free a

Operator

Please that you www.umc.com There a Events quarter for your Thank And webcast gentlemen, ladies in participation hour. the conference UMC's will concludes within you. Investors' be our conference. first visit under an for replay section. and Thank XXXX.

You disconnect. may now Goodbye.

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