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UMC Reports Second Quarter 2022 Results

Daniel Nenni

Admin
Staff member
Q2 GM climbs to 46.5% as 1H 2022 operating income reaches NT$50.5bn
S
econd Quarter 2022 Overview:

  • Revenue: NT$72.06 billion (US$2.43 billion)
  • Gross margin: 46.5%; Operating margin: 39.1%
  • Revenue from 22/28nm: 22%
  • Capacity utilization rate: 100%+
  • Net income attributable to shareholders of the parent: NT$21.33 billion (US$718 million)
  • Earnings per share: NT$1.74; earnings per ADS: US$0.293
July 27, 2022 04:36 AM Eastern Daylight Time
TAIPEI, Taiwan--(BUSINESS WIRE)--United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) (“UMC” or “The Company”), a leading global semiconductor foundry, today announced its consolidated operating results for the second quarter of 2022.

“Second Quarter of 2022 Outlook and Guidance.”
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Second quarter consolidated revenue was NT$72.06 billion, increasing 13.6% QoQ from NT$63.42 billion in 1Q22. Compared to a year ago, 2Q22 revenue grew 41.5% YoY from NT$50.91 billion in 2Q21. Consolidated gross margin for 2Q22 reached 46.5%. Net income attributable to the shareholders of the parent was NT$21.33 billion, with earnings per ordinary share of NT$1.74.

Jason Wang, UMC co-president, said, “In the second quarter, we delivered results in line with guidance, thanks to continuous strong demand for UMC’s differentiated processes across our end markets. Overall wafer shipments rose 4.3% from the previous quarter, while higher average selling price and a favorable foreign exchange rate lifted second-quarter gross margin to 46.5%. Revenue from our 22/28nm portfolio increased 29% sequentially, driven by the additional capacity at Fab 12A P5 that came online during the second quarter. We are confident in the long-term growth prospects of our 22/28nm business, which now represents 22% of UMC’s overall wafer revenue, and has demonstrated solid traction for OLED display drivers, image processors, WiFi, and automotive applications. As structural trends drive semiconductor content increase in end devices from smartphones to automobiles, it is our conviction that 28nm is a long-lasting node that will be important for many existing and emerging applications for years to come.”

Co-president Wang said, “Going into the third quarter, we expect our business to remain firm. While cooling demand for smartphones, PCs, and consumer electronics may pose some short-term fluctuations, we are actively working with customers to adjust their product mix. Coming off a super cycle over the past two years, the semiconductor industry is now in a period of inventory correction. We believe UMC’s comprehensive portfolio of differentiated, leading specialty technologies and strong partnerships with leading customers will help us navigate the cyclical macro environment.”

Co-president Wang added, “Moving onto our progress in sustainability, we are pleased to become the first semiconductor foundry globally to have emissions reduction targets validated by the Science Based Targets initiative (SBTi), the leading body that independently assesses emissions targets of companies and ensure they align with the latest climate science. This reflects UMC’s commitment to accountability and confirms our roadmap to achieve our net-zero pledge. According to our roadmap, we will systematically lower direct emissions from our operations, indirect emissions from our electricity usage, as well as emissions from our value chain in order to minimize the environmental footprint of our operations and products.”

Second quarter operating revenues increased by 13.6% sequentially to NT$72.06 billion which was lifted to higher wafer shipments, increase in wafer pricing as well as favorable foreign exchange rate. Revenue contribution from 40nm and below technologies represented 40% of wafer revenue. Gross profit grew 21.7% QoQ to NT$33.47 billion, or 46.5% of revenue. Operating expenses grew 3.0% to NT$6.71 billion. Net other operating income remained relatively flat at NT$1.40 billion. Net non-operating loss amounted to NT$2.59 billion primarily from non-cash based items recognized as marked-to-market assets. Net income attributable to shareholders of the parent amounted to NT$21.33 billion.

Earnings per ordinary share for the quarter was NT$1.74. Earnings per ADS was US$0.293. The basic weighted average number of outstanding shares in 2Q22 was 12,283,479,334, compared with 12,283,479,334 shares in 1Q22 and 12,206,292,756 shares in 2Q21. The diluted weighted average number of outstanding shares was 12,553,373,552 in 2Q22, compared with 12,534,728,721 shares in 1Q22 and 12,382,592,798 shares in 2Q21. The fully diluted shares counted on June 30, 2022 were approximately 12,553,374,000.

Detailed Financials Section
Operating revenues increased to NT$72.06 billion. COGS increased to NT$38.58 billion, which included 1.9% sequential decrease in depreciation, mainly reflecting higher wafer shipments. Gross profit grew 21.7% QoQ to NT$33.47 billion. Operating expenses slightly increased 3.0% QoQ to NT$6.71 billion, as G&A grew 15.8% to NT$2.58 billion while R&D was up 5.8% QoQ to NT$3.21 billion, representing 4.5% of revenue. Net other operating income was NT$1.40 billion. In 2Q22, operating income grew 26.1% QoQ to NT$28.16 billion.

Net non-operating expense in 2Q22 was NT$2.59 billion, primarily reflecting NT$3.68 billion in net investment loss, offset by a NT$1.36 billion in exchange gain.

In 2Q22, cash inflow from operating activities was NT$35.09 billion. Cash outflow from investing activities amounted to NT$11.72 billion, which included NT$11.63 billion in capital expenditure, resulting in free cash flow of NT$23.46 billion. Cash outflow from financing reached NT$13.42 billion, primarily from NT$11.62 billion repayment in bank loans and NT$2.48 billion in redemption of bonds. Net cash inflow in 2Q22 totaled NT$11.55 billion. Over the next 12 months, the company expects to repay NT$ 4.18 billion in bank loans.

Cash and cash equivalents increased to NT$183.72 billion. Days of inventory increased by 1 day to 62 days.

Current liabilities increased to NT$131.81 billion, mainly from NT$97.04 billion in other. Long-term credit/bonds decreased to NT$45.70 billion. Total liabilities increased to NT$216.51 billion, leading to a debt to equity ratio of 76%.

Analysis of Revenue
Revenue from Asia-Pacific increased to 65% while business from North America remained at 22% of sales. Business from Europe was 8% while contribution from Japan decreased to 5%.

Revenue contribution from 22/28nm grew to 22% of the wafer revenue, while 40nm contribution stayed at 18% of sales.

Revenue from fabless customers accounted for 86% of revenue.

Revenue from the communication segment represented 45%, while business from computer applications decreased to 16%. Business from consumer applications was 27% as other segments remained at 12% of revenue.

Shipment and Utilization Rate
Wafer shipments grew 4.3% QoQ to 2,622K in the second quarter, while quarterly capacity grew to 2,528K. Overall utilization rate in 2Q22 remained above 100%.

Capacity
Overall capacity in the second quarter increased to 2,528K 8-inch equivalent wafers. Capacity will grow in the third quarter of 2022 to 2,539K 8-inch equivalent wafers, driven by the capacity expansion taking place at 12X and 8N.

CAPEX
CAPEX spending in 2Q22 totaled US$395 million. 2022 cash-based CAPEX budget will be US$3.6 billion.

Third Quarter 2022 Outlook & Guidance

Quarter-over-Quarter Guidance:

Wafer Shipments: To remain flat
ASP in USD: To remain flat
Gross Profit Margin: To be in the mid-40% range
Capacity Utilization: 100%
2022 CAPEX: US$3.6 billion

Recent Developments / Announcements

UMC ranked top 5% in corporate governance evaluation for 8th consecutive year
UMC shareholders approve NT$3 cash dividend at annual shareholders’ meeting
UMC’s climate goals validated by Science Based Targets initiatives

Please visit UMC’s website for further details regarding the above announcements

About UMC
UMC (NYSE: UMC, TWSE: 2303) is a leading global semiconductor foundry. The company provides high quality IC production with a focus on both logic and specialty technologies to serve every major sector of the electronics industry. UMC’s comprehensive technology and manufacturing solutions include logic/RF, embedded high voltage, embedded flash, RFSOI/BCD and IATF-16949 automotive manufacturing certification for all its manufacturing facilities. UMC operates 12 fabs that are strategically located throughout Asia with a maximum capacity of approximately 850,000 8-inch equivalent wafers per month. The company employs approximately 20,000 people worldwide, with offices in Taiwan, China, United States, Europe, Japan, Korea and Singapore. For more information, please visit: http://www.umc.com.
 

Daniel Nenni

Admin
Staff member
Like GF, what is next for UMC? How long can they milk the mature nodes?

Maybe Intel will pick up some more fabs?
 

hist78

Well-known member
Like GF, what is next for UMC? How long can they milk the mature nodes?

Maybe Intel will pick up some more fabs?

At this moment, Intel probably will refrain itself from buying more mature node fabs, especially those larger ones. Because it can drag down intel's profit margin further.
 

Daniel Nenni

Admin
Staff member

28nm was an interesting node. If you remember TSMC was the only fab to yield at 28nm when Samsung, Chartered, UMC and GF chose a different implementation. 28nm was the first HKMG process for TSMC and they won the node overwhelmingly. TSMC yielded and the others didn't.

So yes TSMC has a lot of of 28nm but so does everyone else. Anandtech did the press tour at the TSMC symposium. I talked to the ecosystem. TSMC is pushing FinFETs.
 

jms_embedded

Active member
TSMC's strategy is to push customers to FinFETs and it's working. And when demand for mature nodes lightens TSMC can drop the hammer on proices. It's the perfect crime.
Not sure I believe you on the second sentence (either half of it) but we'll see. (Or rather, the general public / investors probably won't see, but customers will, because TSMC reports a revenue breakdown by node size, but they don't report node-size-breakdowns of other proprietary financial stats like utilization/capacity/profit margin/income/etc.)

Why would it be a crime? This is a capitalistic society, and from what I can tell TSMC seems to have made its reputation by charging fair but profitable prices, remaining a stable provider, and cultivating long-term relationships with clients no matter how large/small.
 
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