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United Microelectronics Corporation (UMC)

Q2 2012 Earnings Call

July 25, 2012, 8:00 a.m. ET


Bowen Huang - Head of IR

Shih-Wei Sun – CEO

Chitung Liu – CFO


Mehdi Hosseini – Susquehanna International

Szeho Ng – BNP

(Richard Cload – Pioneer)

Steven Pelayo - HSBC

Donald Lu - Goldman Sachs

Satya Kumar – Credit Suisse

Randy Abrams - Credit Suisse

Donald Lu - Goldman Sachs



Welcome everyone to UMC's 2012 quarter two earnings conference call. (Operator Instructions)

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For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within an hour after the conference is finished. Please visit our website at under the investor relations investor events section.

I would now like to introduce Mr. Bowen Huang, head of Investor Relations at UMC. Mr. Huang, you may begin.

Bowen Huang

Thank you, and welcome to UMC's conference call for the second quarter of 2012. With me today is the CEO of UMC, Dr. Shih-Wei Sun and the CFO, Mr. Chitung Liu.

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 risks that may be beyond the company's control. For this risk, please refer to UMC's filing with SEC in the U.S. that allows these securities authorities.

I would now like to introduce you UMC's CFO, Mr. Chitung Liu to explain UMC's second quarter 2012 basis results.

Chitung Liu

Thank you, Bowen. So the second quarter of 2012, revenue was NT $27.62 billion. That's 15.2% quarter over quarter increase from NT $27.77 billion in Q1, 2012. And 1.9% year-over-year decrease from NT $28.15 billion in Q2, 2011.

Gross margin was 24.4%. Operating margin was 11.5%. Net income was NT $2.99 billion, and earnings per owner share were NT $.24.

The above summary of UMC results for Q2, 2012, most details are available in the report, which has been posted on our website.

I will now turn the call over to Dr. Sun.

Shih-Wei Sun

Thanks, Chitung. Good morning, good afternoon, and good evening, Ladies and Gentleman.

In Q2, 2012, UMC's results exceeded our expectations. Wafer shipments grew 18.6% quarter-over-quarter to reach $1.14 million, eight inch equivalent wafers bringing overall capacity utilization to 84%. Strength from the communication in the consumer sectors mainly contributed to the increase in shipments.

For the upcoming quarter, we expect mild revenue growth with 40 nanometer percentage contributions increasing significantly as the volume production begins for several new products.

40 nanometers, 28 nanometers, 20 nanometers FinFet that 3D transistor technologies and the groundbreaking for our FAB 12A Phase 5 and the Phase 6 in Tainan, Taiwan will solidify UMC's leading edge technology and the capacity foundation to further advance UMC into the next round of growth.

Obtaining IBM's 20 nanometer process design kit and the FinFet technology will expedite the development of our internal technologies enabling customers to realize the next generation of low power consumption chips for mobile communication and the computing applications.

With a complete portfolio of 28 nanometer and the 20 nanometer process technologies, Fab 12A Phase 5 and the Phase 6 readiness is timed to provide sufficient advanced capacity to propel UMC and its customers into a new growth phase. These efforts to secure forefront technology and adequate capacity demonstrates UMC's leadership under our customer driven foundry solutions approach. And have been overwhelming well received from our customers and partners.

UMC's advanced technology business is entering another growth cycle. Though our upcoming efforts to enhance mass production technology, capacity expansion, and the customer service, we anticipate leading edge revenue contribution to increase substantially during the second half of this year. However, we are cautious due to the potential for chip demand volatility in the near future as end demand uncertainties elevates in light of a growing European sovereign debt issues, supply chain inventory, and the customers adopting a conservative stance. We are watching the situation closely so we may respond accordingly to any status change, while at the same time, developing leading edge in the specialty technologies thus strengthening UMC's solid foundation to ensure stable and long term growth.

Now let me provide you with the guidance for the third quarter of 2012. Wafer shipments were increased marginally. Wafer ASP in U.S. dollars were increased marginally as well.

Gross margins will be in the mid 20% range. Capacity utilization will remain flat from previous quarter. The computer and the consumer segments were out pace communication segment.

That concludes my comments. We are now ready for questions. Operator, please open the lines up. Thanks.

Question-and-Answer Session


(Operator instructions). Your first question comes from the line of Mehdi Hosseini of Susquehanna International.

Mehdi Hosseini – Susquehanna International

Yes, thank you. Mehdi Hosseini, Susquehanna International. Can you please provide me an update with your process technology migration? When would you start trial production for High K-Metal gate and when would that tend to volume ramp up? And I have a follow on.

Shih-Wei Sun

Okay. For 28-nanometer, UMC offers two process options. One is a Poly-SiON and one is a High K-Metal gate. High – if you’re asking High K-Metal gate, we are having our first real High K-Metal gate product this summer. So we are in the pilot production phase in the second half of this year.

And UMC is one of the few foundries offering the K-[inaudible] High K-Metal gate technology.

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