United Microelectronics Corp (UMC, 聯電), the world’s third-largest wafer foundry service provider, yesterday said that the appreciation of the New Taiwan dollar, which has surged at its fastest pace in four decades against the US dollar, poses a significant threat to its revenue and profitability in the second half of this year.
As order visibly remains vague for the second half of the year, foreign exchange rate volatility is a more real and visible factor that would affect the chipmaker’s financial performance than capricious tariff policies, UMC chief financial officer Liu Chi-tung (劉啟東) told reporters on the sidelines of its annual shareholders’ meeting in Hsinchu.
“We are more worried about the impact of foreign exchange rates in the second half of the year,” Liu said.
Photo courtesy of United Microelectronics Corp
The NT dollar has hovered at about NT$29 to NT$30 against the greenback recently, having strengthened 8.9 percent since the beginning of this year.
Against this backdrop, the chipmaker has to absorb the impact of the currency’s appreciation, as its revenue is in US dollars, it said.
For every 1 percent the NT dollar gains against the US dollar, UMC’s gross margin would reduce by 0.4 percentage points, Liu said.
“The negative impact will be direct and evident on our second-half [results],” he said.
UMC sees its revenue growth driver this year from customers’ increasing adoption of 22-nanometer technology — the most advanced technology available from the firm — from 28-nanometer technology, Liu said.
The technology is critical for UMC to gain an upper hand against Chinese competitors, which are expanding the capacity of mature technologies at lower cost, he said.
Furthermore, UMC is offering specialized and customized services to customers to differentiate itself from its competitors, he added.
Asked about the company’s overseas expansion strategy, Liu said UMC is prioritizing developing 12-nanometer technology jointly with Intel Corp, with greater interest from several customers, Liu said.
Volume production is arranged for 2027 at Intel’s fab in the US, he said.
That provides an extra manufacturing site selection for customers amid escalating geopolitical tensions, Liu said.
The 12-nanometer project has enormous market potential and is cost-efficient, as no extreme ultraviolet lithography machines would be required in the manufacturing process, he said.
UMC has also received interest from Middle Eastern companies to build new chip manufacturing facilities based on mature technologies in the region, Liu said.
Capacity expansion would not be UMC’s priority, Liu said, adding that the firm would only invest on the grounds of customer base enlargement or market share expansion.
Shareholders yesterday approved the company’s proposal to distribute a cash dividend of NT$2.85 per share, a payout ratio of 75 percent based on last year’s earnings per share of NT$3.8.
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