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» United Microelectronics Corporation Q2 2010 Earnings Call Transcript
Above, there is a short summary for the results on 2Q 2011. 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 Thanks, Chi-Tung. Good morning, good afternoon and good evening, ladies and gentlemen. In Q2 2011, wafer shipments reached 1.15 million 8-inch equivalent wafers, in line with UMC's guidance. As we enter the third quarter of 2011, certain macroeconomic factors such as European and U.S. sovereign debt issues and the emerging market inflation have led to unfavorable global economic conditions. These macro uncertainties have led customers to adopt a conservative outlook. Furthermore, customers have adjusted their order patterns in order to consume elevated inventory levels due to overstocking after Japan's March earthquake. This ongoing situation has negatively impacted the worldwide semiconductor industry and will offset the high demand season traditionally seen during the second half of the year. Consequently, we anticipate UMC's business performance may reflect this weakened demand condition beyond Q3. During this period, we will further enhance our operations through active customer diversification, efficient business execution and aggressive cost control measures. We will also focus on the opportunities ahead. UMC's CapEx, which remains at US$1.8 billion for 2011, will support our advanced production ramp. UMC's R&D efforts will continue in earnest to prepare for customers' future technology requirements. We will also leverage our foundry technologies to take advantage of the fast-growing mobile communication and the computing markets with high-performance, low-power consumption requirements. UMC's volume production 40nm process is expected to reach 10% of revenue by the end of 2011. We are also smoothly developing our 28nm process and design IP platform, with the first of several 28nm customer products entering pilot production in Q3 2011. For 65nm, UMC will benefit from the second wave of new customers targeting specialty technologies including analog, high-voltage, CMOS image sensor and embedded non-volatile memory products.
We believe through the leadership of our cohesive, high-caliber management team, healthy capital structure and clearly defined business strategy, UMC will emerge from the downturn stronger and better positioned to capitalize on the business opportunities in 2012 and beyond.Now, let me provide you with the guidance for the third quarter of 2011. Revenue will show a low-teen percentage range, about 10% to 12% decline, mostly driven by lower volume. Operating margin would be in the low single digit percentage range. Capacity utilization would be in the low 70% range. The consumer and the computer segments will outpace the communications sector. This concludes my comments. We're now ready for questions. Operator, please open the lines up. Thanks. Question-and-Answer Session Operator (Operator Instructions) Your first question comes from Kevin Chen from Credit Suisse. Randy Abrams - Credit Suisse Hi, this is Randy Abrams from Credit Suisse. The first question follows on a bit from this afternoon. On your fast-follower strategy, you've traditionally over the past couple of years invested a bit slower on R&D and CapEx to focus on profitability. Are you starting to tilt back as you look at 28nm to be more aggressive now in R&D and CapEx to start to narrow the gap again, so be less of that fast-follower and start to try to narrow the gap again with TSMC? Shih-Wei Sun First of all, we are not really fast-follower if you're talking about logic technology. I think that's really the Intel. They are defining the process architecture for logic technology generation-after-generation, starting from strain engineering, silicon-germanium, high-k metal gate, et cetera. So for UMC, (inaudible) we are trying to provide our customer-driven solution in a timely fashion, also fit into our overall structure. We still try to raise our R&D spending. In the past few quarter, it's 8% or below. So we're still doing that. Read the rest of this transcript for free on seekingalpha.com