Taiwan-based United Microelectronics Corporation (NYSE:UMC), a prominent global semiconductor foundry, saw its stock price fall on Wednesday after reporting fiscal second-quarter results that largely disappointed market expectations.
For the quarter, the company reported revenue of $2.01 billion (58.76 billion New Taiwanese dollars), marking a modest 3.4% increase year-on-year. However, this figure missed the analyst consensus estimate of $2.05 billion.
On a sequential basis, revenue saw a slight uptick of 1.6%. Earnings per American Depositary Share (ADS) came in at 12 cents, also missing the analyst consensus of 14 cents.
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Despite the overall miss, the company showcased progress in its advanced process nodes. Revenue derived from 22nm and 28nm technologies accounted for a record 40% of wafer revenue, a significant increase from 33% reported a year ago.
The contribution from 40nm technology experienced a marginal sequential decline, even as its share of total sales modestly increased to 15% from 12% in the prior year. Capacity utilization showed improvement, rising to 76% from 68% year-over-year.
However, the gross margin contracted to 28.7% from 35.2% in the same period last year. Capital expenditures for the quarter totaled $273 million.
United Microelectronics Co-President Jason Wang provided a detailed overview of the quarter’s performance and strategic initiatives. He noted that the company’s utilization rate improved to 76% in the second quarter, driven by a 6.2% quarter-over-quarter increase in wafer shipments.
This growth was primarily fueled by robust demand in the communications sector for imaging signal processors, NAND controllers, WiFi, and LCD controllers.
Wang acknowledged that while overall utilization increased and the 22/28nm portfolio expanded, an unfavorable New Taiwanese dollar exchange rate impacted profitability, reducing the gross margin by nearly three percentage points to 28.7%.
He emphasized the continued sequential growth of revenue from the 22/28nm portfolio, which reached a record 40% of total sales in both percentage and absolute dollar terms.
Wang asserted that “the company’s industry-leading 22/28nm solutions gained further customer adoption,” and the company anticipates gaining market share in wireless communications in the upcoming quarters.
Reaffirming confidence in the long-term strength and differentiation of the 22/28nm node, he highlighted that the new Phase 3 facility at Singapore’s Fab 12i, slated for production in 2026, will play a crucial role in supporting customers seeking diversified manufacturing options for enhanced supply chain resilience.
Looking ahead to the third quarter, Wang cautioned that while the company anticipates a modest increase in wafer shipments, adverse foreign exchange trends are expected to reduce revenue when denominated in New Taiwanese dollars. The company remains vigilant in monitoring short-term uncertainties, including potential shifts in U.S. tariff policies.
Outlook
For the third quarter, United Microelectronics projects wafer shipments to increase by a low-single-digit percentage, with the average selling price (ASP) expected to remain flat. The company anticipates a quarterly gross margin of approximately 28.7% and capacity utilization in the mid-70% range. United Microelectronics reiterated its capital expenditure target of $1.8 billion for 2025.
Price Action: UMC stock is trading lower by 4.21% to $6.82 premarket at last check Wednesday.
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