Technology / Semiconductor / Internet Research

Nicolas Baratte

Equity Bottom-Up

United Microelectronics Corp / Equity Bottom-Up

<ul>
<li>2Q25 was good QoQ: utilization up 7 pct-points, wafer shipments up 6%, US$ ASP up 8%, US$ revenue up 15% QoQ. But NT$ appreciated 13%, cancelling out the operating recovery.</li>
<li>3Q25 guidance: slow US$-revenue growth, NT$-revenue decline. FX leads to both 2Q and 3Q below Consensus by mid-teens%. Big miss despite improving operations: utilization higher, mix better, ASP higher.</li>
<li>The stock is cheap. Outlook is positive in terms of mix improvement, specialty process. But many unknowns (US tariffs, macro overall, NT$) will cloud the outlook for another 2-3 quarters. </li>
</ul>


2Q25 was good QoQ: utilization up 7 pct-points, wafer shipments up 6%, US$ ASP up 8%, US$ revenue up 15% QoQ. But NT$ appreciated 13%, cancelling out the operating recovery.
3Q25 guidance: slow US$-revenue growth, NT$-revenue decline. FX leads to both 2Q and 3Q below Consensus by mid-teens%. Big miss despite improving operations: utilization higher, mix better, ASP higher.
The stock is cheap. Outlook is positive in terms of mix improvement, specialty process. But many unknowns (US tariffs, macro overall, NT$) will cloud the outlook for another 2-3 quarters. 


UMC 2Q25: The Recovery Is Cancelled Out by NT$ Appreciation

Taiwan Tech Focused Senior Analyst

Patrick Liao

United Microelectron Sp Adr / Equity Bottom-Up

<ul>
<li>3Q25 Guidance: Wafer shipments growing by a low single-digit %; Revenue: Fully exposed to NT dollar exchange rate fluctuations; ASP (in USD): remain stable; Gross margin: Approximately flat to Q2</li>
<li>Focus on increasing loading, improving mix, new tech deployment, and controlling depreciation (&lt;10% YoY after 2025) to gradually return to mid-30s GM.</li>
<li>UMC leverages specialty content (now &gt;50% of revenue) to differentiate from peers.</li>
</ul>


3Q25 Guidance: Wafer shipments growing by a low single-digit %; Revenue: Fully exposed to NT dollar exchange rate fluctuations; ASP (in USD): remain stable; Gross margin: Approximately flat to Q2
Focus on increasing loading, improving mix, new tech deployment, and controlling depreciation (&lt;10% YoY after 2025) to gradually return to mid-30s GM.
UMC leverages specialty content (now &gt;50% of revenue) to differentiate from peers.


UMC (2303.TT; UMC.US): 3Q25 Outlook Improves Slightly over 2Q25, Based on Estimated FX Assumptions.

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

<ul>
<li>UMC’s renewed push into 6nm, paired with Intel’s strategic overhaul under new CEO Lip-Bu Tan, raises the likelihood of an Intel equity stake in UMC.</li>
<li>We maintain our Structural Long view on UMC and reiterate our original thesis: a deeper partnership via a stake from Intel would be transformative.</li>
<li>At 12.5x trailing PER with a net cash position, UMC remains attractively valued as a strategic asset -- especially if can essentially have its own 'Group' advanced fabs with Intel.</li>
</ul>


UMC’s renewed push into 6nm, paired with Intel’s strategic overhaul under new CEO Lip-Bu Tan, raises the likelihood of an Intel equity stake in UMC.
We maintain our Structural Long view on UMC and reiterate our original thesis: a deeper partnership via a stake from Intel would be transformative.
At 12.5x trailing PER with a net cash position, UMC remains attractively valued as a strategic asset -- especially if can essentially have its own 'Group' advanced fabs with Intel.


Our Thesis: Intel Should Take a Stake in UMC -- New Signals Reinforce the Case

<ul>
<li>
<a href="https://www.smartkarma.com/entities/united-microelectron-sp-adr" target="_blank" data-smartkarma-citation="entities:11540:1" rel="noopener">United Microelectron Sp Adr (UMC US)</a> is likely to exceed its 2Q25 guidance by 5–10%, while the outlook for 3Q25 appears somewhat gloomy, with a flat quarter-over-quarter (QoQ) performance likely.</li>
<li>
<a href="https://www.smartkarma.com/entities/qualcomm-inc" target="_blank" data-smartkarma-citation="entities:969:1" rel="noopener">Qualcomm Inc (QCOM US)</a> and <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA Corp (NVDA US)</a> are allocating a few thousand 12” wafers at UMC, but it appears to be the end of the product cycle.  </li>
<li>
<a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, for example, has been relatively aggressive in wafer procurement in 2Q25, which could lead to a pullback in 3Q25.  </li>
</ul>



United Microelectron Sp Adr (UMC US) is likely to exceed its 2Q25 guidance by 5–10%, while the outlook for 3Q25 appears somewhat gloomy, with a flat quarter-over-quarter (QoQ) performance likely.

Qualcomm Inc (QCOM US) and NVIDIA Corp (NVDA US) are allocating a few thousand 12” wafers at UMC, but it appears to be the end of the product cycle.  

Samsung Electronics (005930 KS), for example, has been relatively aggressive in wafer procurement in 2Q25, which could lead to a pullback in 3Q25.  


UMC (2303.TT; UMC.US): Gloomy Outlook for 3Q25.

TSMC (Taiwan Semiconductor Manufacturing) / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing)

<ul>
<li>The Semiconductor industry associations report re-accelerating Semi sales, and increase 2024-25 forecasts. This is due to higher AI / Accelerators, HBM Memory but the rest of the market remains sluggish</li>
<li>TSMC remains on its high growth plateau at 34% YoY, driven by AI and 3nm. UMC remains on a sluggish recovery at 7% YoY.</li>
<li>AMD, Nvidia, SK Hynix, TSMC: stocks are not expensive on PE relative to earnings growth. Non-Consensus: we think AMD and SK Hynix are worth a serious look.</li>
</ul>


The Semiconductor industry associations report re-accelerating Semi sales, and increase 2024-25 forecasts. This is due to higher AI / Accelerators, HBM Memory but the rest of the market remains sluggish
TSMC remains on its high growth plateau at 34% YoY, driven by AI and 3nm. UMC remains on a sluggish recovery at 7% YoY.
AMD, Nvidia, SK Hynix, TSMC: stocks are not expensive on PE relative to earnings growth. Non-Consensus: we think AMD and SK Hynix are worth a serious look.


Semiconductor Sales Reaccelerating, AI Accelerators Accelerating:  AMD, AVGO, NVDA, SK Hynix, TSMC

Taiwan

United Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs) and related electronic products.  The Company's main products are consumer electronic ICs, memory ICs, personal computer peripheral ICs, and communication ICs.

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United Microelectronics Corp (2303 TT)

UMC 2Q25: The Recovery Is Cancelled Out by NT$ Appreciation

2Q25 showed strong performance but NT$ appreciation offset gains. 3Q25 guidance predicts slow US$-revenue growth, NT$ decline, despite operational...

Nicolas Baratte

UMC (2303.TT; UMC.US): 3Q25 Outlook Improves Slightly over 2Q25, Based on Estimated FX Assumptions.

UMC expects slight growth in wafer shipments, stable ASP, and flat gross margin in Q3. Focus on increasing loading and new tech deployment to...

Patrick Liao

Our Thesis: Intel Should Take a Stake in UMC -- New Signals Reinforce the Case

UMC's partnership with Intel, including a possible equity stake, could be transformative and strategically valuable for both companies. Latest...

Vincent Fernando, CFA

UMC (2303.TT; UMC.US): Gloomy Outlook for 3Q25.

UMC may beat 2Q25 guidance, but 3Q25 outlook appears flat; QCOM and NVDA allocating wafers at UMC, signaling end of product cycle; Samsung...

Patrick Liao

Semiconductor Sales Reaccelerating, AI Accelerators Accelerating: AMD, AVGO, NVDA, SK Hynix, TSMC

Semiconductor sales are re-accelerating due to AI Accelerators and related HBM memory. AMD and SK Hynix stocks are out of favor and worth...

Nicolas Baratte

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UMC 2Q25: The Recovery Is Cancelled Out by NT$ Appreciation

​2Q25 showed strong performance but NT$ appreciation offset gains. 3Q25 guidance predicts slow US$-revenue growth, NT$ decline, despite operational...

Nicolas Baratte

UMC (2303.TT; UMC.US): 3Q25 Outlook Improves Slightly over 2Q25, Based on Estimated FX Assumptions.

​UMC expects slight growth in wafer shipments, stable ASP, and flat gross margin in Q3. Focus on increasing loading and new tech deployment to...

Patrick Liao

Our Thesis: Intel Should Take a Stake in UMC -- New Signals Reinforce the Case

​UMC's partnership with Intel, including a possible equity stake, could be transformative and strategically valuable for both companies. Latest...

Vincent Fernando, CFA

UMC (2303.TT; UMC.US): Gloomy Outlook for 3Q25.

UMC may beat 2Q25 guidance, but 3Q25 outlook appears flat; QCOM and NVDA allocating wafers at UMC, signaling end of product cycle; Samsung...

Patrick Liao

Semiconductor Sales Reaccelerating, AI Accelerators Accelerating: AMD, AVGO, NVDA, SK Hynix, TSMC

​Semiconductor sales are re-accelerating due to AI Accelerators and related HBM memory. AMD and SK Hynix stocks are out of favor and worth...

Nicolas Baratte

2Q25 showed strong performance but NT$ appreciation offset gains. 3Q25 guidance predicts slow US$-revenue growth, NT$ decline, despite operational...

UMC expects slight growth in wafer shipments, stable ASP, and flat gross margin in Q3. Focus on increasing loading and new tech deployment to...

UMC's partnership with Intel, including a possible equity stake, could be transformative and strategically valuable for both companies. Latest...

Semiconductor sales are re-accelerating due to AI Accelerators and related HBM memory. AMD and SK Hynix stocks are out of favor and worth...