United Microelectronics Corp. (UMC) saw a new high in its 2022 sales performance, with a net profit of NT$87.198 billion (US$2.9 billion) after tax, an annual increase of 56.32%. However, due to the uncertainty hovering over the semiconductor industry, UMC did not release its financial forecast.
According to market forecasts, UMC is to bottom out in first-quarter 2023 as capacity utilization rate will drop from about 90% in fourth-quarter 2022 to about 70%, and the gross margin will also drop significantly to 34-36%. In terms of US dollars, UMC revenue in first-quarter 2023 is estimated to decline quarterly by 20%. In the second quarter, thanks to the partial end of customer inventory depletion, UMC will have the opportunity to stall further revenue decline, and strive for growth in the second half of 2023.
Owing to the weak global economy, UMC admitted that customers' inventory days will be higher than normal, order visibility will be low, and the first quarter will be full of multiple challenges. In response to the current downturn, UMC has implemented strict cost control measures and postponed some capital expenditures as much as possible. In the long run, however, UMC remains optimistic about its future growth momentum, as automotive electronic ICs will continue to be an important growth driver in 2023 and beyond.
Although UMC cannot increase foundry quotes further, it is rumored that it will provide more than 10% discount for customers who continue to place orders without significantly reducing production capacity. However, according to sources, the discount doesn't apply to all UMC customers or all process nodes. The foundry's 28nm process, for instance, is close to full utilization while quotes and long-term orders remain stable all the way to the end of 2023.
It is worth mentioning that UMC, through its differentiated product portfolio, has the opportunity to withstand demand fluctuations. In addition, amid the trend to relocate supply chain away from China, UMC is likely to benefit from order transfers.
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