United Microelectronics Corp. Q3 FY2025 earnings call

• In the third quarter, demand growth across most market segments drove a 3.4% increase in wafer shipments and improved utilization rate to 78%, with pickup in sales of smartphones and notebooks driving replenishment orders.
• The 22-nanometer technology platform continues to provide differentiation, with 22-nanometer revenue accounting for over 10% of total sales in 2025 and over 50 product tape-outs projected, expecting contribution to increase in 2026.
• UMC recently announced readiness of its 55-nanometer BCD platform, complementing mobile, consumer applications and automotive/industrial use with rigorous automotive standards.
• For the fourth quarter, wafer shipment is anticipated to be comparable with third quarter's volumes, wrapping up 2025 with shipment growth in the low teens. UMC's technology portfolio is well positioned to serve growing demand of power efficiency optimization, high-bandwidth data transfer and improved connectivity.

In the third quarter of 2025, consolidated revenue was TWD 59.13 billion, with a gross margin of 29.8%. Net income attributable to the stockholder of the parent was TWD 14.98 billion and earnings per ordinary share were TWD 1.2. Capacity utilization rate climbed to 78% with wafer shipment just marked 1 million 12-inch equivalent wafers. North America represented about 25% of the total revenue in the third quarter, 5% higher compared to the previous quarter. Asia declined by nearly 4 percentage points to 63% in the third quarter of 2025. Total 22 and 28 revenue reached about 35%. For 40-nanometer and 65-nanometer revenue, they were somewhat unchanged, in about 17% and 18%, respectively. The monthly capacity of UMC's 12x Xiamen fab is nearly 32,000 wafers per month, and annual CapEx is heading to the budget number of $1.8 billion with 90% in 12-inch and 10% in 8-inch.

• Fourth quarter wafer shipment will remain flat.
• ASP in U.S. dollar will remain firm.
• Gross margin will be approximately in the high 20% range.
• Capacity utilization rate will be in the mid-70% range.
• 2025 cash-based CapEx budget will remain unchanged at USD 1.8 billion.

• Geopolitical uncertainties such as potential impact of tariffs.
• Risks related to rare earth supply restrictions which could potentially impact business.

Q: Regarding the near-term outlook, how does the business by end market trend into the current quarter in fourth quarter and first half next year, and about growth momentum into 2026?

A: While going into Q4, shipment outlook remains flat. For 2026, despite seasonality, believe 2025 business growth momentum will continue with wafer shipment expected to increase year-over-year. Growth drivers include 22-nanometer, 28-nanometer, and 8-inch segments with various applications.

Q: On gross margin trend, why does gross margin not go higher than the third quarter despite flat shipment and more favorable FX?

A: Gross margin depends on utilization rate, ASP, product mix, depreciation and foreign exchange. Even though FX is better than forecast, it's still unfavorable as it ate up about 3% of total revenue, and Q4 '25 gross margin will remain in the high 20 percentage range.

Q: On cost structure, how to think about other manufacturing costs trend?

A: Part of employee compensation is bonus based on profit sharing. Higher bonus in third quarter increased compensation expenses, and the trend will fluctuate along with rolling profit recognition.

Q: On geopolitical uncertainty, specifically semi tariff and rare earth supply, any impact on business?

A: Cautious about semi tariff uncertainties, monitoring progress. On rare earth supply, haven't seen impact yet but continue to monitor. UMC has geo-diversified manufacturing sites and strategic initiatives to address geopolitical concerns.

Q: On pricing, latest progress on engagement with clients and blended ASP outlook?

A: Pricing strategy is to work closely with customers, but it's too early to guide on magnitude. LTA is a mechanism for mutual commitment, and future commitment remains intact but impact of LTA expiring on blended ASP is too early to determine specifics.

Q: On Singapore expansion, latest update on capacity ramp in 2026?

A: 12 IP3 production ramp will start in January 2026 and ramp up with higher volume starting in second half of 2026.

Q: On dividend policy, any consideration to revisit to absolute cash dividend?

A: It's not impossible, but the company always tries to strike a good balance between high percentage payout ratio and absolute dividends.