United Microelectronics (UMC) Q4 2014 earnings summary

Executive summary

• Q4 revenue was NT$37,235M, up 5.7% QoQ; foundry revenue rose 3.7% to NT$34,737M, including a one-time Fujitsu 40nm license fee.

• FY2014 revenue rose 13.1% to NT$140,012M; operating income reached NT$10,076M, while parent-attributable net income declined 3.9% to NT$12,141M.

• Foundry utilization was 93%, with shipments of 1.431M 8-inch-equivalent wafers; 28nm accounted for 7% of Q4 foundry revenue.

Financial highlights

• Q4 gross profit was NT$10,186M; consolidated gross margin was 27.4% and operating margin 12.2%. Net income was NT$4,464M and EPS NT$0.36.

• Including the Fujitsu fee, foundry gross and operating margins were 30.2% and 14.6%; excluding the fee, Q4 gross margin was 26.8%.

• FY2014 gross profit was NT$31,853M, up 35.2%; operating income was NT$10,076M, up 149.9%. Net income was NT$11,480M, down 5.2%, and EPS was NT$0.97.

• Excluding the Fujitsu fee, FY2014 foundry operating profit grew 74% YoY, driven mainly by wafer shipment growth and the 28nm ramp.

• Q4 foundry ASP was flattish QoQ; NT dollar depreciation of 1.5%–2% supported gross margin, with each 1% depreciation estimated to add 0.4–0.5 percentage points.

Outlook and guidance

• Q1 foundry wafer shipments were guided up 2%–3%, USD ASP up ~3%, gross margin in the mid-20% range, and utilization at ~90%.

• Q1 new-business revenue was guided at ~NT$2bn, with net loss attributable to the parent of ~NT$170m; total capacity was forecast at 1,583K 8-inch-equivalent wafers.

• 28nm was targeted to reach 15%–20% of total revenue by year-end 2015, with Q1 contribution expected in the high-single digits.

• Mature 12-inch node loading was expected to improve in H2 2015; 65nm improvement was expected from Q2, with 65nm and 90nm loading strengthening in H2.

• Foundry market growth was estimated at 10%–15% for 2015; management was optimistic on growth but gave no specific revenue target.