United Microelectronics Corp (UMC, 聯電), the world’s No. 4 foundry service provider, on Wednesday reported that its net profit plummeted 35 percent year-on-year in the second quarter, as gross margin fell short of expectations due to the drastic appreciation of the New Taiwan dollar.
Net profit slid to NT$8.9 billion (US$297.5 million) during the June quarter, compared with NT$13.79 billion in the same quarter last year. Earnings per share dropped to NT$0.71 from NT$1.11.
Gross margin fell to 28.73 percent from 35.18 percent a year ago, missing the 30 percent target UMC set three months ago.
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UMC said that a 6 percent increase in the NT dollar against the US greenback erased 3 percentage points from its gross margin last quarter, offsetting the positive effects of higher average selling prices and factory utilization rate.
The chipmaker booked NT$1.28 billion in foreign exchange losses last quarter, reversing a gain of NT$115 million a year ago.
“That is our mission, to continue improving gross margin back to the original level,” UMC copresident Jason Wang (王石) told a virtual investors’ conference on Wednesday. “Given the current loading, fluctuating at about 70 percent, it is definitely putting some pressure in terms of gross margin. And the depreciation cost increases as well.”
Equipment loading is a key factor affecting gross margin, Wang said.
The factory utilization rate is expected to stay at about 75 percent this quarter, similar to last quarter’s level, which is “not great,” he added.
Gross margin this quarter would still be subject to changes in foreign exchange rates, Wang said.
UMC expects the NT dollar to increase to NT$29.8 against the US dollar, up 3.28 percent from second-quarter assumption of NT$30.81.
The company also estimates that every 1 percent appreciation of the NT dollar would reduce gross margin by 0.4 to 0.5 percentage points.
Average selling prices are to hold steady this quarter from last quarter, UMC said.
Wafer shipments are projected to increase slightly by 2 or 3 percent quarter-on-quarter, due to cooling demand ahead of the implementation of US tariffs, it said.
UMC expects depreciation costs for its manufacturing equipment and facilities to peak, as such costs would only increase by a single-digit percent annually next year, following several years of 20 percent expansions, company chief financial officer Liu Chi-tung (劉啟東) said.
Wang said that the company believes it would outgrow its addressable semiconductor market, which is expected to grow slightly.
UMC’s collaboration with Intel Corp to develop 12-nanometer foundry services remains on track, even after new Intel CEO Lip-Bu Tan (陳立武) took the reins in March, UMC said.
The first process design kit would be ready for customers in June next year, paving the way for the 12-nanometer chip production in 2027, it added.
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