United Microelectronics Corp. Q1 FY2026 earnings call

• First quarter welfare treatment increased 2.7% sequentially, overall utilization rate lifted to 79%. Blended ASP expected to decline partially due to higher 8-inch wafer shipment. Gross margin held firm at 29.2%. Demand for 22 nanometer logic and specialty process continued to gain momentum, 22 nanometer revenue reached record high accounting for about 14% of first quarter revenue. Will have over 50 customers complete payouts on 22 nanometer platform by end of year. Continue to invest in next generation technology beyond 22 nanometer, 12 nanometer collaboration with partner provides technology continuity and U.S.-based manufacturing option. EMC announced strategic partnership to deploy lithium-ion-based TFLN photonics for AI infrastructures. - Second quarter expected strong wafer shipment growth across 8-inch and 12-inch portfolios, supported by strong rebound in communication segment and healthy demand across computer, consumer, industrial markets. Monitor industry and macroeconomic development closely and prudently manage business to cope with market dynamics amidst semiconductor landscape change.

Consolidated revenue in first quarter of 2026 was $61.04 billion NT. Gross margin was 29.2%. Net income attributable to stockholders of parents was $16.17 billion NT, EPS was $1.29 NT. Revenue was basically flat or down 1.2% sequentially to 61.4 billion NT. Growth margin at 29.2% slightly declined from previous quarter. Revenue grew 5.5% year-over-year. IDM declined from 20% to 14% of total revenue. Communication declined 3% quarter over quarter to 39% while consumer increased by 4% to 32%. Revenue below 40 nanometers remained over 50% of total shipment, 28, 22 around 34% slightly declined from previous quarter.

• Wafer shipment will increase by high single digits, HP in US dollar terms will increase by low single digits. First margin will be approximately 30%, capacity dilution rate will be in the low 80% range. 2026 cash-based KPAS will maintain around $1.5 billion budget. - Second quarter expects strong wafer shipment growth across 8-inch and 12-inch portfolios, supported by strong rebound in communication segment and healthy demand across computer, consumer, industrial markets. - Remain optimistic about overall 2026 business outlook, expect momentum to continue into second half, especially 22 nanometer logic and embedded IV platform to grow in high team percentage range compared to first half, also age recovery progressing to deliver good growth year over year due to low base last year.

• Market volatilities due to current memory supply shortage and ongoing conflict in the Middle East. - Peak of depreciation increase cycle, with 12 inches in Singapore ramp-up starting in meaningful terms in second half of 2026 carrying higher depreciation expenses over next several quarters. - Geopolitical tension leading to raw material cost, energy cost, and logistics cost increase.

Q: On pricing environment, any more improvement seeing with customers? Is price increase to reflect operating costs or beyond? And about Q2 low-simple digit Q1Q price increase.

A: Recently sent letter to customers about price increase in second half of 2026. Blended AP in Q2 increase mainly from mixed improvement, 22 and 28 nanometer main help for blended ASD increase. Pricing reflects evolving supply and demand environment and continuing investment.

Q: Communication segment strong, is it from AI-related networking or smartphone business rebound?

A: Communication was weaker in first quarter, will have meaningful rebound in second quarter driven by DDI, networking, FPGA, and ISP.

Q: Future plan for advanced packaging capacity expansion and real contribution in coming two years?

A: More than 10 customers on advanced packaging, expect more than 35 new tape-outs in 2026, revenue for advanced packaging next year significantly higher, in production for bridge die solution and discrete DTC, deep trench capacitor with more products to ramp up shortly.

Q: On silicon photonics, engagements and ramp of photonics-related revenues?

A: Working with industry-leading customers, preliminary data shows silicon photonic performance on par or better than peers, on track to deliver PDK 1.0 in 2027 based on iMac license, enabling integration for customers by evaluating hybrid bond, TSV, and triplet integration.

Q: On utilization breakdown between 8-inch versus 12-inch nodes and second half expectation?

A: Q2 utilization above 80%, stronger growth from 22 and 28 relatively, Japanese operation below corporate average in 65 nanometer, 80 nanometer technologies, 12-inch as a whole slightly above corporate average but gap narrowing.

Q: On pricing outlook portfolio update and EBITDA margins?

A: Pricing outlook slightly better than previous quarter, if take out increased depreciation, improved outlook should offset some cost increase, confident on EBITDA margins with cost reduction efforts.

Q: Consumer segment revenue strong, reason and trend?

A: Q1 consumer growth mainly driven by Wi-Fi and DTV data box technology, second quarter growth continue driven by MCU, LCD controller, and power-related products.

Q: Progress with Intel's engagement, impact on revenue and expense?

A: 12 nanometer project with Intel continue well, on schedule to deliver PDK and social IP to customers in 2026, anticipate product takeoff in 2027, application including DTV, Wi-Fi connectivity, and high speed interface product.

Q: Memory foundry business opportunity and 8-inch tightness?

A: Will not comment on memory foundry business speculation, 8-inch tightness difficult to differentiate demand-driven or supply-tightness-driven, first quarter company-wide utilization 79%, Ainge below corporate average in second quarter but improvement higher for Ainge though still below corporate average.

Q: Legacy node for 12-inch situation and future capacity expansion?

A: Difficult to answer hypothetical question, focus on own competitiveness and technology portfolio, advanced packaging will take some legacy part of 12-inch capacity in Singapore, current focus on 12 nanometer platform, cannot speculate future advanced node collaboration with Intel.

Q: 14 nanometers high voltage programs and driver IC technology?

A: Have proven track record for driver IC, FinFET IV solution will provide better performance, lower leakage, and more die-side savings for customers migrating into FinFET.

Q: Silicon photonics engagements, ramp of photonics-related revenues?

A: Current silicon photonics key milestone is release of PDK in 2027, current designs for PICs are pluggable solutions, looking to enable integration for customers, short-term revenue contribution for 40, 55, 65 nanometer in Q2 healthy, longer term confident on business outlook with more designs expected to lift utilization rates.

Q: Customer reaction to price hike and association with Intel's advanced packaging supply chain?

A: Appreciate customers' long-term support, customers understand price increase comes from need for efficient manufacturing and continuous investment, key is UMC helping customers increase compliance business and get more shares. Cannot comment on UMC being important partner for Intel's advanced packaging supply chain speculation, current focus on 12 nanometer platform.