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United Microelectronics Corporation: Investment Opportunity Still Exists

EqualOcean profile picture


  • The recent seller’s market is poised to expand with a strong demand for electronic chips in the foundry industry.
  • UMC’s revenue and profit margins broke a new record in 4Q 2020.
  • The company’s stock price is promising to rise further with an influx of clients and the positive annual financial results.
  • UMC can overturn fierce competition at the mature nodes with existing advantages.

Recently, United Microelectronics Corporation (NYSE:UMC) released its fourth-quarter earnings statement - its factory's utilization rate reached 99% by the end of 2020. It is expected to reach 100% full utilization in 1Q 2021. In July 2020, the market had a strong demand for 8-inch chip productions, especially for 28nm chips. UMC expects that the situation will last until 3Q 2021.

The current seller's market was mainly situated in the smart car industry. Electric vehicle chips have been in shortage since 2H 2020. At the beginning of December 2020, due to the shortage, Volkswagen stopped producing new vehicles, while Ford, General Motors, Toyota, and Nissan announced plans to reduce their output of vehicles. Meanwhile, the coronavirus pandemic sparked the global economic recession, increasing demands for digital devices such as notebooks, tablets, TVs, and game consoles for stay-at-home activities. The relevant chips are mainly produced by 8-inch semiconductor factories, further escalating the supply shortage in this realm. As a result, UMC's stock price has risen 300% since July 2020, reaching USD 10 per share. The following article will discuss whether UMC's stock price is likely to continue to grow.


UMC had a strong year in 2020. UMC's financial report shows that its revenue reached USD 1.59 billion in 4Q 2020, up 8.2% year-on-year and 0.9% month-on-month.

Notably, during the same period, its net profit reached 393 million, surging 206.3% year-on-year and 25% quarter-on-quarter. The company's net margin has increased to 24%, nearly three times the level in 2018.

In 2020, UMC also expanded its capital expenditure, which increased by 50% from USD 1 billion to around USD 1.5 billion since last year. The increased capital expenditure has a facile return - and a surging profit growth rate.

Rumors have it that UMC had won three large mature technique chip orders from

This article was written by

EqualOcean profile picture
EqualOcean is an investment research firm and information service provider focusing on China's Technology, Automotive and Consumer Internet sectors. With unique research and due diligence methodology, we provide tailored insights into a wide range of Chinese equities, empowering our clients' value-added decisions. Founded in 2014, EqualOcean is headquartered in Beijing and has offices in Shanghai, Shenzhen and New York.For more information, contact us at contact@equalocean.com.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (5)

Daytrader77 profile picture
It was worth the risk..

Bought at $2-3/share, I won't sell but will not be adding either..

Holding for the next 10+years..
Bag-Holder profile picture
I think the stock is already priced the near future growth rate. UMC has a lot of capex ahead if it wants to stay in the game. 40X future earning projection is a bit rich in this environment even with shortages. The semi business could turn on dime as it has done many times before.
Mark me a sceptic.
If you can't make money when your industry and your plants are running at 100% of capacity you are in the wrong business! There is NEVER a better time to raise prices than when you& your competitors can't keep up!!
cfrd profile picture
Overvalued after the run-up...This is a questionable analysis.
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