UMC Q3 2022 earnings report & More+...

Like my other "Quarterly earnings" posts, a concise company background plus any other "necessary" info often accompanied the Post.

Thus, it is no exceptions for $United Microelectronics(UMC)$ .

If you already know about UMC in details, feel free to skip to Q3 2022 earnings. Of course, welcome to read the intro too.

Background

- Taiwanese company founded in 1980

- A spin-off of govt sponsored Industrial Technology Research Institute (ITRI).

- Listed on Taiwan Stock Exchange in 1985.

- Has 4 fab installations in Taiwan, Singapore, China and Japan.

- Employs approx. 19,500 people.

Confusion in Semiconductor industry

Prior to my research for this post, I have always been a little bewildered by the semicon companies in the news. 

My knowledge gap made me questioned, why is it that with so many listed semicon companies (stocks), there's still shortage of chips as reported by Wall Street analysts constantly ?

With the research, I am in a "better" position to elaborate & share.  Here goes.

Function of semiconductor chip :

Semiconductors are an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications.

Types / Categories of semiconductor firm:

There are 3 categories that a listed semicon stock could be grouped under.

a. Integrated Device Manufacturer (IDM)

A company that takes charge of all processes in producing semiconductors from planning to producing the final products. Eg. Intel, Samsung, Texas Instrument.

b. Foundry.

A semiconductor manufacturer that makes chips for other companies. Also known as "fabs". Eg. TSMC, GlobalFoundries, UMC.

c. Fabless.

A company that designs and sells the hardware and semiconductor chips but does not manufacture the silicon wafers, or chips, used in its products; instead, it outsources the fabrication to a manufacturing plant or foundry. 

Huawei belongs to this category. 

Still recall when ex-president trump bullied Huawei ? First he blacklisted Huawei. Next he blocked global chip supplies to it; with the ban taking effect from 15 Sep 2020 onwards

TSMC had to pull all resources to manufacture Huawei's designed and order of Kirin 5nm chip {that was a far superior chip than chips by Apple, Samsung, Intel etc.. 2 years backed}

When the order was completed, a cargo plane was chartered to ferry the "120 millions chip" order, out of Taiwan, the very night before the ban took effect the next morning.

With the intro done, here's the Q3 2022 earnings report.

Foundry's mkt share - UMC ranking

When it comes to Foundry's market share, UMC ranks third. It has maintained this ranking since Q1 2019 with its market share ranging between 6.8% to 7.5%.

UMC's customer base by Geography

UMC customers base could be broken down into 4 main geographical locations.

- Asia. Accounts for > 60% of UMC sales.

- North America is about a quarter 25%.

- Europe just under 10%.

- Japan slightly above 5%.

UMC's Sales by Geography breakdown clearly indicates where manufacturing (electronics) powerhouses are based out of.

The once industralized nations have fallen behind rising Asia. Containment of Asian nations have become almost a de rigueur in the media these days, no ?

UMC Sales breakdown by Apps

UMC's "Sales by Application" is an interesting insight. This is because so much have been written about semiconductor's impending slow down is due to decline in demand for computer equipment etc...

In the case of UMC, with "computer" accounting for only 14% of its sales, is it safe to conclude that slow down impact will not affect UMC too muchAgree ?

UMC Q3 2022 earings report - extract

UMC - Q3 2022 Earnings report

One of the giveaway signs that this is a "technical" company's Quarterly earnings report is the presentation layout / format. Clear, concise and cut thru the chase.  Hardly an ounce of frills whether the occasion calls for it or otherwise.  LOL.

Like its foundry-peers, UMC has put up a very credible Q3 2022 performance.   

Revenue: NT$75.39 billion (US$2.38 billion), up +4.63% QoQ.

Gross margin: 47.3%; Operating margin: 40.0%

Capacity utilization rate: 100%+. Its difficult to maintain 100% capacity usage. There is hardly idle resources lying around.

Net income attributable to shareholders of the parent: NT$27 billion (US$851 million)

Earnings per share: NT$2.19; earnings per ADS: US$0.345; up 25.91% QoQ.

Looking ahead

Based on Wall Street assessment, the Semiconductor industry has entered into its cyclical bear phase.  Furthermore, chips' supply shortage had given way to fallen demand as a result of weak economic outlook due to dampening effects of multiples interest hikes.

With a bleak outlook, semicon stocks across the board started tumbling from around mid-Aug 2022.  Surprisingly or otherwise, all that took a different beat when it was revealed on 14 Nov that Berkshire Hathaway 13F filling revealed that approximately US$4 Billion have been spent over the course of Q3 2022,  to acquire 60.1 Million TSMC shares$Taiwan Semiconductor Manufacturing(TSM)$ 

And just like that Semicon stocks seemed to have been gven a new lease of life this past week; kicking up a recovery in prices across the board. 

Will this be sustainable, only time will tell.  For now, despite market in a sideway, downwards trend - semicon stocks are holding their court.

Will you consider adding semiconductor stocks to your portfolio if you have not already done so ?  Share your thoughts & feedback in the Comments section below ok.  Thanks.

Please give a "Like" if you managed to learn something from it.  Thanks.  The rating is important to me.  Thanks again.

Matching song ?  Together In Electric Dreams by Philip Oakey and Giorgio Moroder.  Summer hit of 1984 movie (Electric Dreams).  Featured an Apple IIe computer... Dunno ? YouTube it.  Nostalgic...

@TigerStars 

@CaptainTiger 

@MillionaireTiger  

@Daily_Discussion 

@Tiger_SG 

@TigerPM 


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  • The semiconductor industry is not out of the cold, be careful.
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  • EvanHolt
    ·11-26
    UMC's gross margin is still very high.
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  • I am very pleased with UMC's current customer base.
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  • UMC seems to have great potential for growth.
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  • UMC is well worth our investment.
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  • DannDann
    ·11-24
    Great insightful post. Thanks for sharing 👍🏻👍
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  • Desumond
    ·11-24
    interesting take on this
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    • JC888
      Tks for taking time to read. Hope u learnt something from it. Did u give it a "Like"? Impt to me.. Lol..
      11-24
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  • RXU
    ·11-24
    thanks UMC
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  • Matrix Rev
    ·11-23
    nice to know
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  • cannot believe semiconductors are still doing well. But yeah, they do make people make money in the last few weeks
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    • JC888
      There are always new gadgets coming out. So I guessed semicon will be around for a while. They are shrinking in size though... Lol
      11-24
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  • Well does it really matter. I would watch the whole sector instead.
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  • This looks good but need to consider the state of the market
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  • JC888
    ·11-23
    Hi hi
    If you are reading this post, pls give a Like thereafter ok. Tks. The rating is important to me.... Tks again....
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  • ok
    Reply
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  • ngph
    ·11-24
    👍
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  • 海迷
    ·11-24
    ye
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  • darrius
    ·11-24
    wow
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  • CZUP
    ·11-24
    3
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  • STARBUY
    ·11-24
    ok
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  • chris12
    ·11-24
    Good
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