- Yet to see strong recovery signs in PC, smartphone, and consumer applications due to a slower pace of inventory digestion.
- Automotive application remains on a growth trajectory but may have peaked in Q1 2023.
- 28nm continues as one of the key bright spots within the expected utilization rate back to 90% higher by the end of 2023.
United Microelectronics (UMC) reported $1.78 billion in revenue for Q1 2023, down 14.5% YoY and 20.1% QoQ, constrained by sluggishwafer demandand the continuing customer inventory digestion. Despite the utilization rate dropping to 70%, the average selling price (ASP) was still stable. The gross profit margin remained firm at 35.5% due to cost reduction and product mix optimization. The management indicated that demand recovery has not been strong inPCs,smartphonesand consumer applications, and customer inventory digestion has been slower than expected.
Automotive stood out but might not be sustainable in coming quarters
Theautomotive businesswas one of the key drivers that posted growth in Q1 2023, contributing to 17% of total revenue in the quarter. Revenue from integrated device manufacturer (IDM) customers also increased to 23% in Q1 2023 from 19% in Q4 2022 helped by growth in the automotive business. However, management pointed out that revenue fromautomotive applicationsmay have peaked in Q1 2023 because it has been strong for three consecutive quarters since H2 2022. Nevertheless, the automotive segment is still a long-term growth driver for UMC.
Remains positive in 28nm outlook
The utilization rate of28nmnode in Q1 2023 was relatively higher compared to other nodes despite inventory correction in thecommunicationsegment. The management guided 28nm’s utilization rate to gradually improve and exceed 90% level by the end of 2023, supported by the demand forOLEDdisplay driver ICs, digital TVs andWi-Fi 6/6E. UMC 28nm delivers better power consumption and performance versus competitors, which strengthens the company’s value proposition to customers. The management believes the technology leadership will reflect on its 28nm market share.
2023capital spending guidance unchanged
联电重申了其资本支出指导3美元billion for 2023. As for allocation, 90% will be used for 12-inch wafers and 10% for 8-inch wafers. Most of the capital spending will be on 12A P6 for the 28nm capacity. The capacity will reach 12kwpm by the end of 2023 with customer commitments on track, echoing the management’s positive demand outlook for OLED display driver ICs, digital TVs and Wi-Fi 6/6E. The remaining capital will be spent on 12i P3 in Singapore.
2023 outlook
UMC has forecastedwafer shipmentand ASP to be flat QoQ in Q2 2023 with utilization rate guided at low 70% and gross margin at mid-30%. The management pointed out that customer inventory digestion insemiconductorswill continue to linger in Q2 2023 with limited visibility into H2 2023. However, the management is still positive on the 28nm demand outlook and the structural long-term growth trend in automotive applications driven byelectrificationand digitalization. The company will continue to work on cost control and product mix optimization to improve profitability during the semiconductor down cycle.