United Microelectronics Corporation (NYSE:UMC) Q1 2023 Earnings Call Transcript
United Microelectronics Corporation (NYSE:UMC) Q1 2023 Earnings Call Transcript April 26, 2023
United Microelectronics Corporation beats earnings expectations. Reported EPS is $0.22, expectations were $0.16.
Operator: Welcome, everyone, to UMC's 2023 First Quarter Earnings Conference Call. . And for your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference is finished. And please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. And now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.
Michael Lin: Thank you, and welcome to UMC's conference call for the first quarter of 2023. I'm joined by Mr. Jason Wang, the President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the first quarter financial results followed by our patents key message to address UMC's focus and second quarter 2023 guidance. Once our President and CFO complete their remarks, there will be a Q&A section. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section. During this conference, we may make forward-looking statements. based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risk that may be beyond the company's control.
For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's first quarter 2023 financial results.
Chi-Tung Liu: Thank you, Michael. I would like to go through the first quarter 2023 investor conference presentation material, which can be downloaded or view in real time from our website. Starting on Page 4, the first quarter of 2023. Consolidated revenue was TWD 54.2 billion, with gross margin at 35.5%. The net income attributed to the stockholder of the parent was TWD 16.2 billion, and earnings per ordinary shares were 1.31. Wafer shipments in this quarter come at 126,000 equivalent wafers which was a decline of 17.5% quarter-over-quarter, which also fall in the better end of our previous guidance of 17% to 19% decline for the first quarter. Utilization in first quarter is as we guided around 70%. For Page 5, the sequential comparison, revenue declined 20.1% and to TWD 54.2 billion.
Other than the 17.5% wafer shipment decline, there's also a negative impact of 3% plus impact from the ForEx due to NT dollar appreciation. Gross margin rate was 35.5%, which is a 34% decline to TWD 19.2 billion. Operating expenses was lower than the level of Q4 last year at TWD 5.78 billion. This is a typical first quarter seasonal factor. So we do expect this number to increase in the second quarter of 2023. Nonoperating income total reached TWD 4.64 billion, which is quite a significant improvement from the fourth quarter of last year. mainly due to the recovery in the stock market for our portfolio. And net income is TWD 15.38 billion and net income attributable to the shareholders of the parent is with a net income margin of 29.9%. EPS is 1.31 for the first quarter of 2023.
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On a year-over-year comparison on Page 6, revenue declined 14.5% and net income declined by 18.3%. So the first quarter of 2022 was 1.61 in EPS, and this quarter is as mentioned, 1.31 for the first quarter of 2023. So on Page 7, cash remained nearly unchanged around TWD 171 billion. Due to the continuous CapEx, we can -- we have seen our total assets increased to TWD 549.6 billion. On Page 8, our blended ASP for wafer equivalent has inched up in Q1 '23. For Page 9, our geographic breakdown. For revenue, Asia showed a bigger decline from 54% in the previous quarter to 50% in the first quarter and every other region has increased sequentially. And for Page 10, IDM has shown a stronger growth in the first quarter. Now the percentage of revenue reached 23% when tablets represent about 77% of our total revenue.
In terms of segment breakdown on Page 11, this quite meaningful mainly driven by when computer and consumer and also communication are all showing some decline in percentage of revenue. On Page 12, our revenue for 14-nanometer technology and below represent around 41% of our total revenue, although 28 and 22 nanometers still on 26%, so about 2% decline from 17% to 15%. Q1 2023 was the lowest point in terms of available capacity, mainly due to the annual maintenance schedule for selected sites. Quarter 2, you will go back to the normal. And also on top of that, will be P6, our Tainan fab expansion will start to kick in, and we can see the capacity increase for fab 12A. So overall, we will see a low single-digit increase in our available capacity from quarter 2 2023.
On Page 14, our annual budget for CapEx remain unchanged. -- around $3 billion. And it's going to be a little bit front-end loaded in the first half and 90% will be related to 12-inch expansion and 10% is more related to 8-inch capacity. So the above is a summary of UMC results for first quarter of 2023. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang.
Jason Wang: Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's first quarter results. In the first quarter of 2023, our business was impacted by sluggish wafer demand as the customer continue to digest elevated inventory levels. In line with the guidance previously provided, wafer shipments fell 17.5% quarter-over-quarter and utilization rate dropped to 70%, while average selling prices stayed firm during the quarter. Better in a less favorable foreign exchange rate, revenue in the first quarter fell 20.1% quarter-over-quarter. Despite lower utilization, gross margin remained firm at 35.5% and reflecting improved structural profitability and optimize the product mix. Although demand weakened across major end markets, our automotive and industrial segment posted growth during the quarter.
Automotive sales, in particular, accounted for 17% of overall first quarter revenue. While this partially reflects decline in other segments, we expect automotive to remain a significant revenue contributor and growth -- key growth driver for UMC going forward as the IC content in car continue to increase driven by electrification and alternatives driving. Entering the second quarter of 2023, we expect customers' inventory correction to linger given the softness in overall end market demand. As a result, our wafer shipment will be flat this quarter. Meanwhile, the company continues to implement strict cost control measures to ensure our profitability remains intact through near-term cyclicality. Going forward, we believe our strategy of focusing on the development of a differentiated solution across numerous larger and specialty technology platforms such as , RFSOI, BCD will help us secure future business and expand our presence in the IC industry.
While positioning for the future business growth, UMC is also committed to maintain a high dividend payout ratio. In Q1, the Board of Directors proposed to distribute a cash dividend of approximately TWD 3.60 per share, subject to shareholders' approval. Now let's move on to the second quarter 2023 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar will remain flat. Gross profit margin will be in the mid-30% range. Capacity utilization rate will be in the low 70% range. Our 2023 cash-based CapEx will be budgeted at . That concludes my comments. Thank you all for your attention. Now we are ready for questions.
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