Taiwan-based semiconductor giant United Microelectronics Corp (UMC) delivered a strong performance in the third quarter of fiscal 2024, reporting a 6% year-on-year revenue increase to $1.91 billion (NT$60.49 billion). This outpaced analyst expectations of $1.88 billion, indicating a robust demand environment for UMC’s products.
The company also saw a sequential increase in revenue, rising by 6.5% from the previous quarter. This growth was driven by a combination of factors, including steady demand across key markets and a clear downward trend in inventory levels. UMC’s earnings per ADS also beat analyst estimates, coming in at $0.183 compared to the expected 17 cents.
While the news was positive, UMC’s gross margin declined by 210 basis points year-over-year to 33.8%. This suggests that despite the revenue growth, the company is facing pressure on profitability, potentially due to rising production costs. Despite this, UMC remains optimistic about the future, citing a number of exciting technology and collaboration projects in the pipeline. These initiatives are designed to align with customer product roadmaps and strengthen UMC’s position in the semiconductor industry.
The company also highlights its diversified manufacturing footprint as a key advantage, emphasizing the importance of its new fab expansion in Singapore. UMC expects to maintain steady wafer shipments and average selling prices (ASP) in the fourth quarter, with capacity utilization projected to be in the high-60% range. However, geopolitical uncertainties continue to loom over the company’s prospects.
Ex-President Donald Trump’s recent comments on the CHIPS Act, criticizing Taiwan’s role in the U.S. chip industry and threatening tariffs, have added to the volatility surrounding the semiconductor sector. Trump’s statements, along with previous questioning of the U.S. defense commitment to Taiwan, have raised concerns about potential disruptions to the global chip supply chain.
The impact of these geopolitical tensions on UMC’s future performance remains to be seen. Despite the strong third-quarter results, the company faces a challenging environment marked by fluctuating demand and potential trade tensions. UMC’s stock performance has reflected this uncertainty, with the stock losing 11% year-to-date. Analyst downgrades from firms like Morgan Stanley and Goldman Sachs have further weighed on the stock, highlighting the potential for volatility in the future.
Despite the recent challenges, UMC’s commitment to innovation, its diverse manufacturing footprint, and its strong customer relationships offer potential for future growth. The company’s ability to navigate the geopolitical landscape and maintain its competitive position in the semiconductor industry will be key to its success in the coming years.
