United Microelectronics Corp. Q1 2010 Earnings Call Transcript

United Microelectronics Corp. Q1 2010 Earnings Call Transcript
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United Microelectronics Corp. (UMC)

Q1 2010 Earnings Call

April 28, 2010 8:00 am ET

Executives

Qidong Liu - CFO

Shih-Wei Sun - CEO

Analysts

Randy Abrams

J.J. Park

Donald Liu - Goldman Sachs

Sarmah Pranab - Daiwa Securities

Steven Pelayo - HSBC

Jagadish Iyer - Arete Research

Mehdi Hosseini - FBR

Emily Liu - Arete Research

Presentation

Operator

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Welcome, everyone, to UMC’s 2010 Q1 earnings conference call. All lines have been placed on mute to prevent any background noise. After this presentation, there will be a question-and-answer session. Please follow the instructions given at that time, if you would like to ask a question.

For your information, this conference 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, www.umc.com under the ‘investor relations/investor events’ section.

I would now like to turn the call over to Mr. Qidong Liu, CFO of UMC. Mr. Liu, you may begin.

Qidong Liu

Thank you, and welcome to UMC’s conference call for the first quarter of 2010. With me today is our CEO, Dr. Shih-Wei Sun.

During this conference call, we may take forward-looking statements based on management’s current expectation 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 beyond company’s control. For these risks, please refer to UMC’s filings with the SEC in the U.S. and the ROC security authority.

For the first quarter of 2010, wafer shipment volume achieved a record high of 1.033 million 8-inch equivalent wafers, and capacity utilization rate rose to 88%. Revenue decreased 3.7% quarter-over-quarter to NT$26.72 billion, from NT$27.75 billion in Q4 2009, the increased 147% year-over-year from NT$10.84 billion in first quarter of 2009.

Gross margin was 24.6%. Operating margin was 12.7%. And net income was NT$3.48 billion, and earnings per ordinary share were NT$0.28 and earnings per ADS was $0.44. Above is the short summary for the results in Q1 2010. More details are available in the quarterly report, which has been posted on our website.

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

Shih-Wei Sun

Thank you, Qidong. Thank you all for joining us today. As always, we appreciate your interest in UMC. I will start with a brief summary of UMC’s 2010 first quarter operating results and share with you our general operating outlook. After that, I will provide you with the guidance for the second quarter of 2010. We will then have a Q&A session to answer your questions.

For Q1, we continue to experience robust demand, with average selling price falling slightly compared to the previous quarter only because we focused more on supporting our customers’ short-term product mix to strengthen our long-term partnerships.

At the same time, UMC continued to work with customers to migrate products and technologies in alignment with the high-end process capacity that is slated to become more readily available from the second quarter onwards.

As UMC continues to optimize sales, capacity mix, and the business composition, we anticipate revenues and profits to continue on an upward trajectory, with the share of revenue contributed by 65-nanometer and below technologies to grow significantly.

UMC optimistically anticipates continue the growth momentum; meanwhile, we will closely monitor the strength of that momentum within the overall economic context, especially in the second half of the year, to ensure that we respond prudently.

With regard to technology, UMC’s internally developed high performance 40-nanometer logic process has demonstrated steadily higher yields for customers’ products, and our 45 nanometer low-power process has also smoothly ramped up to mass production.

Many of our high-performance and low-power 40-nanometer customers have achieved their product verification with us, and we will continue to support more customers’ design tape-outs.

Our development of 28-nanometer gate-last high-k/metal-gate technology has been progressing well, with plans to achieve IP pilot capabilities by the end of 2010. Since early this year, we also began to work with customers on planning and initial development of advanced 20-nanometer technology.

As technologies advance, UMC will continue to invest CapEx in augmenting high-end and specialty technology capabilities each quarter to serve our customers. Our 65/55 nanometer capacity at Fab 12i in Singapore will increase substantially beginning in second quarter.

At Fab12A in the Tainan Science Park, we plan to pull in the timeframe of Phase 3 readiness, so that cleanroom related facilities and equipment installation will be completed by Q3, with production lines running in Q4. We have a fully devoted our efforts to satisfying our customers’ needs and creating win-win scenarios while pursuing long-term return on equity growth.

We will be celebrating our 30

th

anniversary soon and UMC has always committed itself to investing in Taiwan, as its base in establishing a global presence. In preparation for future expansion, we began the Tainan Science Park project to not only invest aggressively in broadening our capacity offerings, but also to establish a new training center devoted to attracting and training the industry’s top talents, further demonstrating our company’s commitment to sustainable growth.

Now, let me provide you with the guidance for the second quarter of 2010. We expect wafer shipments to grow in the high single-digit percentage range. Wafer ASP will increase but approximately offset by currency appreciation. Capacity utilization rate will be in the high 90s range.

In terms of profitability, our gross margin will be in the high 20s range. The gross momentum will be from all three segments, led by strong consumer sector.

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