UMC Posts Strong Q2, Eyes Even Better Margins in Q3

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

UMC's Quarterly Net Surges

• Summary: United Microelectronics Corp., the world's second largest contract chip maker by revenue, reported a surge in Q2 net income to NT$6.05 billion (US$184 million) from NT$299 million last year -- easily beating consensus analysts' estimates of NT$4.43 billion. Revenue grew 32% on the quarter to NT$25.75 billion. UMC credited its gains to improved gross margins and nonoperating income, the latter which made up the bulk of earnings from the sale of holdings in chip designers MediaTek Inc. and SiRF Technology Holdings Inc. UMC said its outlook for the third quarter is positive, as wafer prices and margins should improve. It supplies chips for products such as mobile phones, digital cameras, and computers.
• Comment on related stocks/ETFs: United Microelectronics Corp. is traded both on the Taiwan Stock Exchange (TWSE: 2303) and the NYSE under ticker: (UMC). Its positive outlook for the current quarter should assuage some concerns over pricing and falling capacity utilization since in the article UMC's chairman Jackson Hu said its "wafer shipments are likely to be flat or to rise as much as 2% in the third quarter from the second quarter's 786,000 units, and factory use will be approximately 80%, roughly the same as it was in the second quarter." See two different perspectives from a few weeks back when Andy So found UMC to be oversold and the best value semiconductor stock. William Trent however, sent out a semi SOS questioning UMC's stated expected capacity utilization increase. Click here to read UMC's Q2 earnings conference call transcript.