United Microelectronics Corporation (UMC) could be a solid addition to your portfolio given its recent upgrade to a Zacks Rank #1 (Strong Buy). An upward trend in earnings estimates -- one of the most powerful forces impacting stock prices -- has triggered this rating change. The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Esti ...

Core Viewpoint - United Microelectronics Corporation (UMC) has faced significant selling pressure, resulting in a 9.1% decline in stock price over the past four weeks, but analysts anticipate better earnings than previously expected, indicating potential for recovery [1]. Group 1: Technical Indicators - UMC's Relative Strength Index (RSI) is at 29.9, suggesting that the heavy selling may be exhausting, which could lead to a price rebound as the stock seeks to return to its previous equilibrium of supply and demand [3]. - The RSI is a momentum oscillator that ranges from 0 to 100, with a reading below 30 typically indicating that a stock is oversold, thus presenting potential entry opportunities for investors [2]. Group 2: Fundamental Indicators - There has been a strong consensus among sell-side analysts to raise earnings estimates for UMC, resulting in a 2.3% increase in the consensus EPS estimate over the last 30 days, which often correlates with near-term price appreciation [4]. - UMC holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, further supporting the potential for a turnaround [4].

Core Insights - United Microelectronics Corporation (UMC) currently holds a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while GlobalFoundries Inc. (GFS) has a Zacks Rank of 3 (Hold) [1] - UMC has a forward P/E ratio of 12.18, significantly lower than GFS's forward P/E of 28.63, suggesting UMC may be undervalued [2] - UMC's PEG ratio is 4.24 compared to GFS's 5.05, indicating UMC has a more favorable earnings growth outlook relative to its valuation [2] - UMC's P/B ratio stands at 1.82, while GFS's P/B ratio is 1.97, further supporting UMC's stronger valuation metrics [2] - UMC has received a Value grade of A, while GFS has a Value grade of C, highlighting UMC's superior valuation attractiveness [3] Valuation Metrics - UMC's forward P/E ratio is 12.18, while GFS's is 28.63 [2] - UMC's PEG ratio is 4.24, compared to GFS's 5.05 [2] - UMC's P/B ratio is 1.82, while GFS's is 1.97 [2] Investment Outlook - UMC has experienced stronger estimate revision activity and possesses more attractive valuation metrics than GFS, making it a more appealing option for value investors [3]

Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of United Microelectronics Corporation (UMC) and GlobalFoundries Inc. (GFS) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earn ...

Photomick Introduction United Microelectronics Corporation (NYSE:UMC) reported Q2 earnings relatively recently, so I wanted to revisit the company to see how it performed, where it is heading in the long term, and whether my strong buy position still stands. The last time I covered the company was back in April, when I said that the worst seemed to have passed. The latest quarter cemented that view further, and I feel even more confident in the company’s long-term outlook. I think an investment in Unite ...

[Review Report of Independent Auditors](index=2&type=section&id=Review%20Report%20of%20Independent%20Auditors) [Conclusion and Scope](index=2&type=section&id=Conclusion%20and%20Scope) Ernst & Young, Taiwan, concluded that UMC's consolidated financial statements for H1 2024 and 2023 are fairly presented based on a limited scope review - The auditors issued a clean review conclusion, finding no material misstatements in the financial statements[6](index=6&type=chunk) - The review excluded certain equity-method associates and joint ventures, representing **5.12% of total consolidated assets**, relying on other auditors' reports[8](index=8&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to NT$587.0 billion by June 30, 2024, driven by PP&E, while liabilities rose and equity slightly decreased Key Balance Sheet Items (in thousands of NTD) | Account | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $207,214,698 | $216,797,392 | $239,032,757 | | **Property, Plant and Equipment** | $274,030,951 | $239,123,248 | $198,618,079 | | **Total Assets** | $586,961,945 | $559,186,927 | $553,195,664 | | **Total Current Liabilities** | $124,973,558 | $99,014,733 | $142,978,303 | | **Total Liabilities** | $230,870,264 | $199,608,355 | $226,307,619 | | **Total Equity** | $356,091,681 | $359,578,572 | $326,888,045 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Operating revenues slightly increased in H1 2024, but operating income, net income, and EPS all declined year-over-year Six-Month Performance Comparison (in thousands of NTD, except EPS) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | **Operating Revenues** | $111,431,389 | $110,505,855 | | **Gross Profit** | $36,882,654 | $39,476,592 | | **Operating Income** | $25,555,933 | $30,155,441 | | **Net Income** | $24,204,809 | $32,281,220 | | **Basic EPS (NTD)** | $1.95 | $2.58 | | **Diluted EPS (NTD)** | $1.93 | $2.53 | Three-Month Performance Comparison (in thousands of NTD, except EPS) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | **Operating Revenues** | $56,799,290 | $56,296,408 | | **Operating Income** | $13,891,432 | $15,674,743 | | **Net Income** | $13,775,214 | $15,896,673 | | **Basic EPS (NTD)** | $1.11 | $1.27 | [Consolidated Statements of Changes in Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased to NT$356.1 billion by June 2024, primarily due to NT$37.6 billion in cash dividends, partially offset by net income - Key changes in equity for H1 2024 include **NT$24.2 billion net income**, **NT$37.6 billion cash dividend distribution**, and **NT$9.3 billion other comprehensive income** from foreign operations translation[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased to NT$43.5 billion in H1 2024, while investing and financing activities resulted in a net decrease in cash Cash Flow Summary (in thousands of NTD) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $43,547,628 | $40,724,027 | | **Net Cash used in Investing Activities** | $(45,046,127) | $(53,252,770) | | **Net Cash provided by (used in) Financing Activities** | $(12,144,390) | $2,407,942 | | **Net Decrease in Cash** | $(10,889,220) | $(10,721,885) | - Acquisition of property, plant, and equipment was the largest cash outflow at **NT$48.5 billion** for the six-month period[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. History and Organization](index=10&type=section&id=Note%201.%20HISTORY%20AND%20ORGANIZATION) UMC, a Taiwan-incorporated semiconductor wafer foundry since 1980, is listed on both the TWSE and NYSE - UMC is a semiconductor wafer foundry established in **1980**, with dual listings on the **TWSE** and **NYSE**[25](index=25&type=chunk) [6. Contents of Significant Accounts](index=17&type=section&id=Note%206.%20CONTENTS%20OF%20SIGNIFICANT%20ACCOUNTS) This section details significant balance sheet and income statement accounts, including PP&E increases, revenue disaggregation, and equity changes [Property, Plant and Equipment](index=25&type=section&id=6.8%20Property,%20Plant%20and%20Equipment) Net PP&E significantly increased to NT$274.0 billion by June 2024, driven by NT$50.5 billion in additions from capital expenditure PP&E Movement (Assets Used by the Company, in thousands of NTD) | Description | Six Months Ended June 30, 2024 | | :--- | :--- | | **Beginning Balance (Jan 1, 2024)** | $237,376,554 (Net) | | **Additions** | $50,452,113 | | **Disposals** | $(17,522) (Net) | | **Depreciation** | $(20,376,482) | | **Ending Balance (June 30, 2024)** | $272,299,801 (Net) | [Equity](index=42&type=section&id=6.19%20Equity) The company's dividend policy allows 20-100% of distributable earnings as cash dividends, with NT$3.00 per share approved for FY2023 Dividend Distribution | Fiscal Year | Appropriation of Earnings (in thousands NTD) | Cash Dividend per Share (NTD) | | :--- | :--- | :--- | | **2023** | $37,587,102 | $3.00 | | **2022** | $45,017,096 | $3.60 | - The **cash dividend per share for 2023** was adjusted to **NT$3.00011747** due to restricted stock cancellation[116](index=116&type=chunk) [Operating Revenues](index=46&type=section&id=6.21%20Operating%20Revenues) H1 2024 operating revenues slightly increased to NT$111.4 billion, primarily from wafer sales, with Taiwan showing significant growth Revenue by Geography (Six Months Ended June 30, in thousands of NTD) | Region | 2024 | 2023 | | :--- | :--- | :--- | | **Taiwan** | $40,828,087 | $31,509,653 | | **USA** | $27,722,802 | $31,044,831 | | **China (includes Hong Kong)** | $16,861,007 | $14,138,303 | | **Korea** | $12,920,950 | $13,753,012 | | **Europe** | $8,354,862 | $12,532,246 | | **Japan** | $4,741,566 | $7,522,787 | | **Total** | **$111,431,389** | **$110,505,855** | Revenue by Product (Six Months Ended June 30, in thousands of NTD) | Product | 2024 | 2023 | | :--- | :--- | :--- | | **Wafer** | $105,885,331 | $105,070,128 | | **Others** | $5,546,058 | $5,435,727 | | **Total** | **$111,431,389** | **$110,505,855** | [Earnings Per Share](index=58&type=section&id=6.27%20Earnings%20Per%20Share) Basic EPS decreased to NT$1.95 and diluted EPS to NT$1.93 for H1 2024, reflecting lower net income compared to H1 2023 Earnings Per Share (NTD) | EPS Type | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | **Basic** | $1.95 | $2.58 | | **Diluted** | $1.93 | $2.53 | [7. Related Party Transactions](index=60&type=section&id=Note%207.%20RELATED%20PARTY%20TRANSACTIONS) Significant related party transactions include NT$1.44 billion in operating revenues from associates and NT$534 million in FARADAY share acquisitions - Operating revenues from associates reached **NT$1,438 million** in H1 2024, an increase from the prior year[160](index=160&type=chunk) - The company acquired **1,723 thousand shares** of FARADAY TECHNOLOGY CORP. for **NT$534 million** in H1 2024[164](index=164&type=chunk) - Key management personnel compensation for H1 2024 was **NT$879 million**, a decrease from H1 2023[167](index=167&type=chunk) [9. Significant Contingencies and Unrecognized Contract Commitments](index=65&type=section&id=Note%209.%20SIGNIFICANT%20CONTINGENCIES%20AND%20UNRECOGNIZED%20CONTRACT%20COMMITMENTS) The company has NT$20.8 billion in unrecognized construction commitments, and the Micron Technology trade secret case is globally settled - Unrecognized construction contract commitments for operational expansion totaled approximately **NT$20.8 billion** as of June 30, 2024[171](index=171&type=chunk) - The trade secret litigation with Micron Technology is fully resolved, with UMC completing its probation and sentence termination on January 27, 2024[172](index=172&type=chunk) [12. Others (Financial Risk Management)](index=67&type=section&id=Note%2012.%20OTHERS) This section outlines financial risk management, including market, credit, and liquidity risks, with sensitivity analysis and debt-to-capital ratio details - The debt-to-capital ratio increased to **23.47%** by June 30, 2024, up from **15.72%** at year-end 2023[232](index=232&type=chunk) - A **10% NTD appreciation against the USD** would decrease H1 2024 profit by **NT$783 million**[185](index=185&type=chunk) - A **5% change in listed financial asset prices** would impact H1 2024 profit by **NT$261 million**[189](index=189&type=chunk) [14. Operating Segment Information](index=84&type=section&id=Note%2014.%20OPERATING%20SEGMENT%20INFORMATION) The company operates as a single reportable segment, wafer fabrication, with no material accounting policy differences from consolidated statements - UMC operates as a single reportable segment: **wafer fabrication**[237](index=237&type=chunk) [Attachments](index=85&type=section&id=Attachments) [Attachment 11: Investment in Mainland China](index=104&type=section&id=Attachment%2011%20Investment%20in%20Mainland%20China) Accumulated investment in Mainland China reached NT$60.4 billion (USD 1.87 billion) by June 2024, below the MOEA-set upper limit Investment in Mainland China (as of June 30, 2024) | Description | Amount (in thousands of NTD) | | :--- | :--- | | **Accumulated Investment** | $60,415,446 | | **Investment Amount Authorized by MOEA** | $91,227,153 | | **Upper Limit on Investment** | $213,467,627 | - Hejian Technology's Board approved the disposal of its **100% interest in UNITEDDS SEMICONDUCTOR (SHANDONG) CO., LTD.** on April 2, 2024[279](index=279&type=chunk)

Investment Rating - The report assigns a positive investment rating to UMC, indicating expectations of outperforming the benchmark index by more than 20% in the next six months [52]. Core Insights - UMC's Q2 2024 revenue reached NT$56.799 billion, reflecting a quarter-over-quarter increase of 3.97% and a year-over-year increase of 0.89% [3][8]. - The gross margin for Q2 2024 was 35.2%, up 4.3 percentage points quarter-over-quarter and 17.0 percentage points year-over-year [3][10]. - The operating profit margin was 24.5%, showing a quarter-over-quarter increase of 3.1 percentage points and a year-over-year increase of 5.4 percentage points [3][10]. - UMC expects wafer shipments to grow in the low single digits in Q3 2024, with average selling prices remaining strong and gross margins projected between 30-40% [3][21]. Summary by Sections Overall Performance - UMC achieved revenue of NT$56.799 billion in Q2 2024, with a gross margin of 35.2% and an operating profit margin of 24.5% [3][8][10]. Revenue Structure (Q1 2024 to Q2 2024) - **Process Technology Breakdown**: - 14nm and below: 0% - 22/28nm: 33% - 40nm: 12% - 65nm: 15% - 90nm: 12% - Above 90nm: 28% [3][19]. - **Geographical Breakdown**: - North America: 25% - Asia: 64% - Europe: 7% - Japan: 4% [11]. - **Customer Type Breakdown**: - Fabless: 87% - IDM: 13% [13]. - **End Market Breakdown**: - Communication: 39% - Computing: 15% - Consumer: 31% [16]. Q3 2024 Performance Guidance - UMC anticipates low single-digit growth in wafer shipments for Q3 2024, with a capacity utilization rate around 60% and a capital expenditure budget of USD 3.3 billion for 2024 [3][21].

Financial Data and Key Metrics Changes - In Q2 2024, consolidated revenue was NT$56.8 billion, with a gross margin of 35.2% and net income attributable to shareholders of NT$13.8 billion, resulting in an EPS of NT$1.1120 [5][6] - Revenue for the first half of 2024 was nearly flat compared to the same period last year at NT$111 billion, with a gross margin of approximately 33.1% [7] - Cash level at the end of Q2 2024 was around NT$121 billion, and total equity was NT$356 billion [7] Business Line Data and Key Metrics Changes - Wafer shipments increased by 2.5% quarter-over-quarter to NT$831,000 12-inch wafer equivalents, while the utilization rate decreased to 58% from 65% in the previous quarter [6][7] - Revenue distribution showed Asia at 64%, North America at 25%, and IDM declining from 18% to 13% [7] - The 20 to 28 nanometer business saw growth due to demand in Wi-Fi and digital TV applications, while the 40-nanometer segment declined from 14% to 12% [8] Market Data and Key Metrics Changes - The communication segment's revenue contribution decreased from 48% to 39%, while consumer and computer segments grew by single-digit percentages [7] - The automotive segment remains soft, impacting overall demand [10][60] Company Strategy and Development Direction - UMC is focusing on specialty technologies crucial for AI, 5G, and automotive applications, with recent announcements including a 3D IC solution and a 22-nanometer embedded high voltage platform [9][10] - The company expects to face margin pressure in the second half of 2024 due to increased depreciation expenses and higher utility rates, but aims to maintain resilience [10][11] - UMC's pricing strategy remains firm, with a focus on enhancing customer competitiveness [19][46] Management's Comments on Operating Environment and Future Outlook - Management anticipates a mild pickup in demand for communication and computing segments, but remains cautious about inventory management among customers [15][60] - The outlook for 2024 remains flattish, with expectations to outperform the addressable market [57] Other Important Information - The company plans to maintain a cash-based CapEx budget of $3.3 billion for 2024 [11] - The ramp-up for the Singapore 12-inch expansion is projected to start in January 2026, with high-volume production expected in the second half of 2026 [21] Q&A Session Summary Question: Utilization rate outlook and estimates for 2025 - Management is confident about Q3 wafer demand but expects a seasonal pattern in the second half of 2024, with a return to normalcy in 2025 as inventory levels improve [15] Question: Structural gross margin considerations - Depreciation is expected to increase by around 20% year-over-year for 2024, with similar trends anticipated for 2025 [17] Question: Update on Singapore expansion - The ramp-up schedule for the Singapore 12-inch expansion remains unchanged, with production starting in January 2026 [21] Question: Gross margin improvement factors - The better-than-expected gross margin in Q2 was primarily due to favorable foreign exchange rates [23][44] Question: Pricing dynamics between 12-inch and 8-inch - ASP remains firm, with expectations for 8-inch utilization to gradually improve, although reaching 95% may take time [26][27] Question: Revenue contribution from AI-related products - Current revenue contribution from interposer products is less than 4%-5% [30] Question: Competitive landscape and customer engagement - Management believes they have a competitive offering and will continue to engage with customers to maintain and grow market share [34][36] Question: Technology requirements for display driver ICs - UMC is advancing its technology offerings, including a 22-nanometer solution for high-end OLED displays, with production expected to ramp up in 2025 [39] Question: Future demand and inventory management - Management sees continuous inventory improvement across segments, with expectations for a healthier inventory level by the end of the year [55][60]

Core Viewpoint - United Microelectronics (UMC) is currently identified as a strong investment opportunity with a Zacks Rank of 2 (Buy) and a Value grade of A, indicating it is likely undervalued in the market [2][3]. Valuation Metrics - UMC has a Price-to-Book (P/B) ratio of 1.72, which is significantly lower than the industry average of 4.16, suggesting that UMC is undervalued compared to its peers [2]. - The stock's P/B ratio has fluctuated between a high of 1.96 and a low of 1.54 over the past year, with a median of 1.73 [2]. - UMC's Price-to-Sales (P/S) ratio stands at 2.81, again lower than the industry average of 3.97, reinforcing the notion of undervaluation [2]. Cash Flow Analysis - UMC's Price-to-Cash Flow (P/CF) ratio is 6.78, which is considerably lower than the industry average of 24.54, indicating a strong cash flow outlook relative to its market value [3]. - Over the past year, UMC's P/CF has ranged from a high of 7.31 to a low of 4.47, with a median of 6.05 [3]. Overall Investment Outlook - The combination of UMC's favorable valuation metrics and strong earnings outlook positions it as an attractive value stock in the current market [3].

Investors with an interest in Electronics - Semiconductors stocks have likely encountered both United Microelectronics Corporation (UMC) and Lattice Semiconductor (LSCC) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The prov ...