Financial Data and Key Metrics Changes - In Q2 2025, consolidated revenue was NT$ 8.9 billion with a gross margin of approximately 28.7% [7] - Net income attributable to shareholders was NT$ 8.9 billion, with earnings per share (EPS) of NT$ 0.71, up from NT$ 0.62 in the previous quarter [10] - Utilization rate increased from 59% in Q1 to 76% in Q2, contributing to a 1.6% sequential revenue increase [8][14] - For the first half of 2025, revenue increased by 4.7% year-over-year, while gross margin decreased from 33.1% in the same period of 2024 to 27.7% [10] Business Line Data and Key Metrics Changes - Revenue from the 22 and 28 nanometer portfolio accounted for 40% of total sales, marking a record high [15] - Consumer application revenue decreased to 33%, while communication application revenue increased to 41% [11] - The revenue contribution from below 40 nanometer technology represented more than half of total revenue, reaching 55% in Q2 [12] Market Data and Key Metrics Changes - Revenue from Europe increased to 8%, while Asia accounted for approximately 67% of total revenue [11] - The company observed a sound demand upside in Q2, partly driven by inventory buildup in anticipation of potential U.S. tariffs [28] Company Strategy and Development Direction - UMC aims to enhance supply chain resilience through the new Phase III facility at the Singapore Fab12i, set to start production in 2026 [15] - The company is focused on maintaining and improving ASP resilience through technology differentiation and product mix [20][21] - UMC plans to actively manage foreign exchange exposure and maintain financial flexibility to navigate macroeconomic uncertainties [16] Management's Comments on Operating Environment and Future Outlook - Management noted that adverse foreign exchange movements could lead to a decline in NT dollar revenue, with a 5% appreciation in the NT dollar resulting in a corresponding 5% reduction in reported revenue [16] - The semiconductor industry is experiencing lower visibility, with expectations for growth in 2025 remaining unchanged despite macroeconomic uncertainties [34][36] - Management expressed confidence in the continued growth of the 22 and 28 nanometer business, supported by strong demand and differentiated technology [57] Other Important Information - The cash-based capital expenditure (CapEx) budget for 2025 remains unchanged at US$ 1.8 billion [12][17] - The company is closely monitoring the inventory situation, which is currently healthy, particularly in the automotive and industrial segments [51] Q&A Session Summary Question: What is the initial outlook on the ASP trend in 2026? - Management stated that they do not provide guidance beyond 2025 but aim to maintain ASP resilience through technology differentiation and product mix [20] Question: How is the tariff impacting customer behavior? - Management observed an inventory buildup in anticipation of potential U.S. tariffs, affecting demand in Q2 and Q3 [28] Question: What is the current pace of ramp-up for the Singapore fab? - The ramp-up for the Singapore facility is projected to start in January 2026, focusing on communication applications [42] Question: What is the outlook for gross margins? - Management aims to improve gross margins back to reasonable levels through technology development and improved product mix [46][48] Question: How is the pricing behavior in the communications segment? - Pricing remains a topic of discussion, influenced by capacity availability, with current pricing behavior being subject to market conditions [82] Question: What is the status of the Intel partnership? - The collaboration with Intel is progressing well, with milestones on track for the 12 nanometer program [61]

Investment Rating - The report maintains a "Buy" rating for several companies including NAURA, SICC, SUMCO, Shin-Etsu Chemical, Mitsubishi Electric, and Infineon [2]. Core Insights - The report highlights significant growth in local production and demand for silicon wafers and SiC substrates in China, with local coverage expected to increase from 41% to 54% for 12-inch silicon wafers and from 80% to 87% for 6-inch SiC substrates by 2027E [1][6]. - Pricing trends indicate a decline in average selling prices (ASP) for 8-inch silicon wafers at a CAGR of -10% from 2024 to 2026E, while 12-inch wafers are expected to decline at -6% CAGR during the same period. SiC substrate ASP is projected to decrease from US$443 in 2024 to US$384 in 2026E [1][6]. - Capacity expansion is notable, with 12-inch silicon wafer capacity expected to grow at a CAGR of 21% from 2024 to 2027E, significantly outpacing the 3% CAGR for 8-inch silicon wafers. SiC substrate capacity is also set to expand at 26% and 96% CAGR for 6-inch and 8-inch substrates, respectively [1][6]. - The report anticipates a consolidation in the industry, with the top three Chinese silicon wafer suppliers projected to cover 36% of domestic demand by 2027E, up from 26% in 2024 [1]. Summary by Sections China TAM - The total addressable market (TAM) for silicon wafers in China is projected to grow from US$1.999 billion in 2021 to US$4.511 billion by 2030E, with a notable increase in shipments from 36,962k units in 2021 to 103,570k units by 2030E [37]. - The SiC substrate market is expected to grow from US$197 million in 2021 to US$2.770 billion by 2030E, driven by rising EV penetration and SiC adoption rates [39]. - The GaN devices market is projected to expand from US$66 million in 2021 to US$1.611 billion by 2030E, supported by applications in EVs, data centers, and consumer electronics [42]. Supply and Demand Dynamics - Local suppliers' capacity expansion in silicon wafers is primarily driven by logic and memory clients, while SiC substrate capacity is expanding due to increased adoption in EVs and fast charging technologies [43]. - The report notes that local suppliers are expected to cover 75% of SiC substrate demand in China by 2025E, increasing to 84% by 2027E [6][39]. - The demand for SiC and GaN is anticipated to replace IGBT in high power and high frequency applications, with SiC penetration rates projected to reach 75% in EVs by 2030E [52]. Pricing Trends - The ASP for silicon wafers is expected to decline, with 8-inch wafers decreasing at a CAGR of -10% and 12-inch wafers at -6% from 2024 to 2026E [1][6]. - SiC substrate pricing is also expected to narrow, making SiC MOSFETs more competitive against silicon IGBTs [1]. Industry Consolidation - The report indicates a trend towards consolidation in the silicon wafer industry, with the top three suppliers expected to significantly increase their market share in China by 2027E [1].