United Microelectronics Beats On Q2 Earnings, Expands Margins Aided By ASP And Wafer Shipment, Issues Q3 Guidance

United Microelectronics Corp UMC reported second-quarter FY21 revenue grew year-on-year to $1.83 billion above the analyst consensus of $1.78 billion. Consolidated revenue rose 14.7% Y/Y.
The growth reflects slightly higher wafer shipment, enhanced blended product mix, and revenue contribution from 40-nm.
Strong demand fueled by 5G adoption and digital transformation underpinned its strong performance in Q2.
The manufacturing facilities exceeded 100% utilization while overall wafer shipments rose 3.0% Q/Q to 2.44 million 8-inch equivalents.
Revenue from 28-nm technologies continued to grow sequentially, fueled by applications incorporated into 4G/5G smartphones, Solid State Drive, and Digital TV.
The gross margin expanded 820 basis points to 31.3%. Continued product optimization and cost reduction efforts helped to develop the gross margins. It also reflected the uptick in overall average selling price across 8" and 12" wafer shipments.
The operating margin expanded by 900 basis points to 22.2%.
Earnings per ADS of $0.176 beat the analyst consensus of $0.13.
The company generated $1.5 billion in operating cash flow during the six months ended Jun. 30.
It held $4.5 billion in cash and equivalents.
Outlook: United Microelectronics estimates the demand to stay robust in Q3, driven by 5G and EV trends. The company expects supply tightness across 8" and 12" facilities. It estimates the adoption rate of the 22-nm technologies to gain traction, reflected by a pickup in customers' 22-nm product tape-outs in connectivity and display applications. The company aims to strengthen its position in OLED display driver, RFSOI, and imaging applications.
The company estimates wafer shipment to rise by 1%-2% in Q3 and the ASP in USD to increase 6%.
It expects the gross margin in the mid 30% range. The predicted capacity utilization is 100%.
FY21 CAPEX estimate is $2.3 billion.
Price action: UMC shares traded higher by 2.93% at $9.50 in the premarket session on the last check Wednesday.

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