United Microelectronics Corporation (NYSE:UMC) Q2 2025 Earnings Call Transcript

United Microelectronics Corporation (NYSE:UMC) Q2 2025 Earnings Call Transcript July 30, 2025

United Microelectronics Corporation misses on earnings expectations. Reported EPS is $0.1195 EPS, expectations were $0.14.

Operator: Welcome, everyone, to UMC’s 2025 Second Quarter Earnings Conference Call. [Operator Instructions]. And for your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference is finished. Please visit our website, www.umc.com, under the Investor Relations, Investors Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.

Jinhong Lin: Thank you, and welcome to UMC’s conference call for the second quarter of 2025. I’m joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the second quarter financial results, followed by our President’s key message to address UMC’s focus and third quarter 2025 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC’s quarterly financial reports are available at our website, www.umc.com, under the Investors Financials section. During this conference, we may make forward-looking statements based on management’s current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company’s control.

For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the Internet. Now I would like to introduce UMC’s CFO, Mr. Chi-Tung Liu, to discuss UMC’s second quarter 2025 financial results.

Chi-Tung Liu: Thank you, Michael. I’d like to go through the 2Q ’25 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4. Second quarter of 2025, consolidated revenue was TWD 58.8 billion, with a gross margin at around 28.7%. The net income attributable to the stockholder of the parent was TWD 8.9 billion and earnings per ordinary shares were TWD 0.71. Wafer shipment in quarter 2 increased to 967,000, up about 6.3% quarter-over-quarter. However, the effective NT dollar exchange rate also appreciated a similar magnitude from TWD 30.81 in Q1 — sorry, from TWD 32.89 in Q1 to TWD 30.81 in Q2. And utilization rate increased from 69% in Q1 to 76% in quarter 2.

Revenue as a result increased about 1.6% sequentially to TWD 58.75 billion. Gross margin, as we mentioned earlier, reached 28.7% or TWD 16.8 billion. This is already factored in around 3% of the ForEx impact, 3 percentage points in quarter 2. Net income reached TWD 8.8 billion or 15.1% net income percentage rate. EPS is TWD 0.71 in second quarter compared to TWD 0.62 in the previous quarter. On Page 6, for first half comparison, revenue increased by 4.7% to TWD 116 billion. Gross margin reached 27.7% compared to 33.1% in the same period of 2024. Net income attributable to the shareholders of the parent for first half of 2025 was TWD 16.67 billion or TWD 1.34 in EPS terms. Cash remained over TWD 100 billion, reached about TWD 111 billion at the end of first half of 2025.

Q&A Session

And total equity for the company is now around TWD 337.4 billion. ASP edged up a little bit in the second quarter, mainly due to the better product mix. On Page 9 (sic) [ 9 ], for revenue breakdown, there’s literally no change on a sequential comparison basis. Europe increased to 8% and Asia reached about 67% IDM up slightly to 19% compared to 18% in the previous quarter. In terms of application breakdown, the change is also very minor. Consumer went down to 33% by 1% and communication increased by 1% to 41%. Advanced technology revenue continued to increase and now revenue below 40-nanometer represent more than half of the total revenue, reached 55% in quarter 2 when 22 and 28-nanometer represent 40% of the company’s total revenue. On Page 13, the capacity breakdown, we will continue to see some minor capacity increase for the third quarter, capacity increase will come from mainly 12X Xiamen .

And after the first 6 months, our CapEx budget for year 2025 remain unchanged at an estimate of USD 1.8 billion. And the above is the summary of UMC results for second quarter 2025. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wang.

Jason S. Wang: Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC’s second quarter results. In the second quarter, the utilization rate increased to 76% as wafer shipment grew 6.2% quarter-over-quarter, primarily driven by communications in imaging signal processors, NAND controllers, WiFi and LCD controllers. While we experienced an increase in the overall utilization and the growth of our 22- and 28-nanometer portfolio, the unfavorable foreign exchange movement of the NT dollar kept our gross margin to 28.7% by nearly 3 percentage points. Revenue from our 22- and 28-nanometer portfolio continued to grow sequentially, now accounting for 40% of total sales, a record high in both percentage and absolute dollar terms.

Our industry-leading 22- and 28-nanometer solutions continue to win adoption by customers, and we expect to see further market share gains in wireless communications over the coming quarters. We have always believed that with the right differentiation, 22/28-nanometer is a strong and long-lasting node with a robust product pipeline. In addition, the new Phase 3 facility at our Singapore Fab 12i set to start production in 2026 will enable UMC to better serve customers seeking diversified manufacturing for enhanced supply chain resilience. Looking ahead to the third quarter, we expect a mild increase in wafer shipments. However, adverse foreign exchange movement will lead to a decline in NT dollar revenue. We are closely monitoring the near-term uncertainties and risks as the market anticipate U.S. tariff policies.

To navigate macro and geopolitical headwinds, including foreign exchange risks, UMC will continue to actively manage our foreign exchange exposure and maintain financial flexibility to enhance our financial structure and business resilience. Now let’s move on to the third quarter 2025 guidance. Our wafer shipment will increase by low single-digit percentage. However, NT dollar-denominated revenue is fully exposed to fluctuation in the foreign exchange rate. For instance, a 5% appreciation in the NT dollar will result in a corresponding 5% reduction in reported NT dollar revenue. ASP in the U.S. dollar will remain firm. Q3 gross margin will be approximately Q2 gross margin subject to the foreign exchange effect. Therefore, our Q3 gross margin will be approximately equal to that of Q2 under the assumption the foreign exchange rate is at the current level.

Capacity utilization rate will be in the mid-70% range. Our 2025 cash-based CapEx budget will remain unchanged at USD 1.8 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions.

Operator: [Operator Instructions] Now first, we’ll have Brad Lin, Bank of America for questions.

Brad Lin: I have 2 questions. The first one will be on the ASP trend. So what’s the initial outlook and view on the ASP trend into 2026, given the higher expense and cost? Obviously, we are happy to learn the stable ASP in near term. But yes, any initial view for 2026?

Jason S. Wang: Well, I mean, typically, we don’t guide anything beyond that, beyond 2025. So as you said, we can talk about the near term of ASP outlook, but you’ll be interested in looking into a longer-term ASP projection. And so let’s share about the ASP strategy. We’ll continue — our goal is to continue to differentiate our technology offering and product mix and to maintain and improve our ASP resilience. We want to further widen the gap in technology offerings while increase the revenue contribution by those respective nodes. Following our rollout of the 22- and 28-nanometer technologies, we’ll continue to provide specialty technology in 40- and 55- nanometer node where the percentage of our revenue contribution, competing with the pricing foundries will continue to decline.

For the near term, our CFO actually mentioned our Q2 ASP saw a low single-digit increase driven by the higher 22 and 28 product mix. And in Q3, we expect the product mix remains unchanged. Therefore, ASP will remain firm for this year.

Brad Lin: Got it. And my second question would be, well, we have seen, well, in the presentation, 14-nanometer and below mix are listed in the slide at 0 for a while but still listed in there. So should we expect the number to increase? And will that be from 12-nanometer or potentially also 6-nanometer?

Jason S. Wang: Well, 12-nanometer is still a bit far for us. And the — for that particular program and the cooperation with Intel is progressing well and remain on track according to the project milestone. At present, our both teams are working on verifying silicon performance for the pilot line. And we expect that the early PDK will be ready for this first wave of customer in June 2026. So the — we expect customer product tape-out to begin in 2027. So we’ll probably see some revenue in that time frame. So I think that’s the 12. The — and we continue [ margin in ] that direction. If we go beyond that — we don’t have any concrete plan for anything beyond the 12-nanometer today. Our efforts — our development effort will continue to focus on that.

And that would broaden specialty technology portfolio on both ends. And so that is definitely on our road map. But once we have more concrete update, we will be shared with you. Currently, the most important step is to deliver the highly competitive solution for mass production and 12-nanometer through our cooperation with our partners. And for anything beyond that, we will explore the future opportunity through the partnership arrangement, which we believe that will be mutual beneficial.

Operator: Next one, Charlie Chan, Morgan Stanley.

Charlie Chan: My first question is about the tariff impacts your customers’ behavior? Do you see kind of pull in? And what does it impact to your second half sustainability or outlook?

Jason S. Wang: Sure. We do observe some demand upside in the Q2 and as well as Q3 is partly driven by the inventory buildup in anticipation of a potential U.S. tariffs. And so for UMC’s first half ’25 results, which is in line with our guidance as the Q2 wafer shipment increased 6.2% quarter-over-quarter. While the Q3 demand increased on a higher base, we expect the shipment will still grow mildly sequentially. And so there are some observations about that. But given the 2025 market dynamics, such as the adjustment to the U.S. policies and ongoing geopolitical and macro uncertainty, the usual seasonal pattern may be different. Along with our customers, we’re closely monitoring those end market signals.

Charlie Chan: I see. And I think lots of discussion about the future advanced packaging technology. So Jason, can you share with us about your business development here? And also, I think you have some interposer capacity, how are we going to utilize those capacity going forward? And maybe some color about the potential applications.

Jason S. Wang: Sure. Well, I mean, we’re not missing — we don’t want to miss out on the advanced packaging opportunity. We are preparing our advanced packaging solution for what we see for the growing energy consumption of the cloud AI as well as the potential growth in the edge AI market. So first, to address the power efficiency requirement for the high computing processor, UMC is developing the 2.5D interposer with DTC and discrete DTC, which is — that’s going to be the road map coming up. And right now, we are — the current interposer is moving on to the next generation, and we’re waiting for it to — waiting for to introduce this and expect to ramp after that. Second, the UMC is leveraging the scalable 3D wafer-to-wafer stacking and TSV to enhance the competitiveness of our specialty technology.

We are currently in mass production for the extremely small form factor for the 5G and 6G RFIC. And based on the success of the 5G and 6G RFIC with the wafer-to-wafer stacking, we are also developing memory to memory stacking and memory to logic stacking service for the high-bandwidth computation requirements.

Charlie Chan: Okay. And my last question, again, is always want to consult — your pick up your points about the semiconductor cycle. But I believe this is the third consecutive year, we don’t see the second half recoveries. What do you think is happening on this semiconductor industry? Why we don’t see seasonality or so-called cyclicality? Because I remember in the past, you have like up cycle and shortage overcapacity and then correction. But we don’t see that anymore.

Jason S. Wang: I mean certainly, the visibility is actually lower nowadays. You’re absolutely right. When we start the year in 2025, we actually expect the 2025 growth outlook will be slightly better than our addressable market. We think our addressable market is going to grow slightly at a low single digit. And we think we — at this moment, we still expect our 2025 growth outlook will remain unchanged. So that stays. And — but beyond the 2025 or 2026, we have to closely working with our customers and sharing their visibility and as well as the monitoring the DOI situation. As of today, I think the DOI is getting to the healthy level. We’ve seen that DOI approaching to the healthy level about a quarter or 2 quarters ago. And right now, the computer, consumer and communication segment is still healthy, remain healthy.

And while the automotive and industrial still remain high. So I think while monitoring the macroeconomics as well as the DOI and then we can only hope that soon later, we will see the up cycle. But right now, the visibility is pretty low.

Charlie Chan: So maybe tied again Brad’s question about wafer pricing. So yes, because obviously, FX impact over Taiwan, Taiwan foundry a lot in terms of gross margin. Would there be a factor you can put on the table to negotiate with your customers for next year’s pricing?

Jason S. Wang: I mean we continue working with our customers in terms of pricing compensation closely, but those are more of a tactical conversation. I think fundamentally, like I reported earlier, we — I think our key focus is try to differentiate our technology offering and so that we can continue to enhance our product mix improve the ASP resilience. And that’s what we’re marching. And we have a very clear road map today on many fronts of our technology development. So our goal is going to further widen the gap in technology offering and increase the revenue contribution from those respective nodes and technology offering and which we think that we can make sure that our ASP can remain resilient.

Operator: Next one, Gokul Hariharan, JPMorgan.

Gokul Hariharan: First of all, for the Singapore fab 28-nanometer and 22-nanometer expansion, could you talk a little bit about what is the current pace of the ramp-up and the kind of customers that you’re ramping up there? Obviously, some of the pricing negotiations that you had back in ’22 and ’23, obviously, had some price escalators. Could you talk a little bit about whether those price escalators still exist given the environment has definitely changed somewhat. So that’s on the 28-nanometer part, yes.

Jason S. Wang: Sure. Well, for the 12i Singapore facility, given the current market dynamics and customer alignment, we project the 12i Phase 3 production ramp will start in January 2026. And it will ramp up with a higher volume starting in the second half of 2026. And that’s the current ramp plan. Many of this ramp schedule and alignment is based on the customers’ close communications. And right now, given the application ramp-up is going to be mainly in the communication with our 22-nanometer high-voltage devices, and we still believe our 22 and 28-nanometer high solution are differentiated from the market. And so the ASPs still remain very healthy at this point.

Gokul Hariharan: Got it. Secondly, on gross margins, so we are roughly in the mid-70s utilization, and we’re kind of in the mid- to high 20s gross margin. I think depreciation definitely started to grow again and it looks like it’s going to grow into the next couple of years as you bring in 12i. So could you talk a little bit about what is kind of the realistic pathway for us to get back to that mid-30s gross margins or low to mid-30s gross margins that we have talked about. Currency is not something that we control, but maybe talk about some of the other factors. Like is that kind of like a realistic goal that you’re pursuing? And can — I think back to some of the previous questions, can pricing be a realistic tool to kind of get there? Or is it more challenging to use price as a tool together?

Jason S. Wang: Absolutely. I mean it’s definitely our mission to continue to improve the gross margin back to the reasonable level. Given the current loading is frustrating — fluctuating around the 70%, that’s definitely putting some pressure in terms of the gross margin, while the depreciation increase. And so the focus is very clear. I kind of answered Charlie earlier that we are focused on technology development, technology offering, even a new technology offering and partnership engagement and with the product mix improved, and we think that we have a path going back to the reasonable level. For the past, we have been maintaining our foundry shares in our addressable market segment. Based on our current design pipeline, we anticipate more share gains in 2026 as well as going into 2027, particularly in the 22- and 28- nanometer bucket today.

Now while we rolled out the other technology offering, we think this will continue to improve and we will definitely march to the direction to go back to the right level of the gross margin level.

Chi-Tung Liu: If I may add on to that, our annual depreciation growth is going to peak out. So if you recall, in year 2023, our depreciation expense increased by more than 20% year-over-year and similar magnitude for 2024 — sorry, similar magnitude for this year, for 2025. So therefore, ’26 and ’27, the increased magnitude will be a lot less, could drop down to single digits. So hopefully, we will have better cost structure moving into year 2026 and ’27.

Gokul Hariharan: Maybe one more question on the high-voltage side for 28 and 22. Jason, do we have a pathway below 22-nanometer for high-voltage given there’s been some discussion about some of the driver IC-related products moving below that, be it to some kind of a FinFET node, but enabling high voltage?

Jason S. Wang: It’s definitely on our road map today. They are. And while we still believe the 22 High D will be the most compelling and competitive solution today as well as next couple of years. And — but yes, the FinFET solution of the high voltage is on our road map, yes.

Gokul Hariharan: And any time line in terms of when you think customers will start demanding this?

Jason S. Wang: That we’re still aligning with our customers. And again, it’s contemplating between the value proposition of the 22 versus the next node. And we are closely working on that. And I don’t have a specific time frame, but I kind of don’t want to give a guess right now because — given all the data on hand, we’re still seeing the 22-nanometer high voltage will have a lag. There will probably be another year to closer to 2 years.

Gokul Hariharan: Understood. Maybe one last question. Several of the consumer fabless companies are guiding down Q3 quite meaningfully. Your own wafer orders are slightly moving up in Q3. Should we expect that there could be a pickup in Q4? Like every year seems to be a different seasonality, but just wanted to understand how you think about that inventory cycle for many of the Asian consumer fabless companies, which are your key customers as well.

Jason S. Wang: Sure. I mean the inventory situation actually is quite healthy with still a major segment already. And auto and industrial, I think they’re still kind of high, but the rest is actually quite healthy. At this point, given the visibility, we do not guide Q4 at this time. But our view for the full year 2025 will remain unchanged. And again, I kind of touched that earlier that we expect our addressable market will grow by the low single digit, and we will still outgrow the addressable market in 2025. And the biggest challenge nowadays is really the visibility given the macro uncertainties and the geopolitical concerns, I think the customer is being cautious. It doesn’t mean that they don’t have demand. The question is they kind of want to play this thing in a different manner.

So we’re working closely with them. And meanwhile, Q2 is growing, Q3 slightly, sequentially. And Q4, we just have to play and see, and we will definitely report that in next quarter. But meanwhile, we’ve seen the overall 2025 projection, it’s still unchanged. Yes.

Operator: Next question, Sunny Lin, UBS.

Sunny Lin: So my first question is on 28-nanometer. So if we look at Q2, Jason, what’s driving the revenue upfront? Is it driven by the 22- nanometer migration? Or is it through a product mix upgrade? And then looking ahead, could you share a bit more on your share gain in wireless communications and maybe some of the other products going to 2026?

Jason S. Wang: Okay. Well, for the near term, the 22 and 28 revenue contribution increase is mainly coming out from the communication in Q2, computing and communications segment, but mainly on communications in Q2. Going forward, we are highly, highly confident in the continuous growth of 22- and 28- nanometers business in 2025 and beyond, going into 2026. The strong demand outlook is supported by the continued tape-out momentum, many different applications, thanks to the customers, of course, and — but again, it’s really supported by UMC’s differentiated technology and the regional manufacturing footprint as well. This includes our 12i fab in Singapore, which the P3 fab expansion is on track, and we are on track to ramp in 2026.

It will begin contribute in the revenue in the second half of 2026, and this will further strengthen our 22 and 28 capacity and support for the growing demand. The combination of the technology proposition, manufacturing quality and well-positioned capacity setup will ensure our 22 and 28 will remain the core growth engine for the next year, ’26, yes.

Sunny Lin: So on 12i, would you be able to price the wafers a bit higher, given a higher cost structure? And when you talk about high volume production starting from second half of 2026, any type of capacity that we should expect?

Jason S. Wang: Well, I mean, we kind of don’t want to call exactly capacity size, but we are quickly ramping our P3. And we look at this 22 and 28 capacity on a total basis between our own facilities. And I think the old utilization rate across the different facilities on 22 and 28 were above corporate average. Even today, they are above our corporate average. And the question about the — I kind of missed your earlier question, the first question.

Sunny Lin: Pricing for Singapore. Would you be able to price a bit higher given cost is higher as well?

Jason S. Wang: No matter, I missed this. It’s a sensitive subject. Well, right now, again, our pricing position is based on our technology offering our value proposition. And I think this — that’s the baseline of the ASP. In terms of the diversified location, we have to work with our customers to understand the needs, right? So we want them to stay competitive and we want them to acknowledge the differentiated offering of our technology as well as the geolocation benefit. So we — it’s a subject that we will talk about with our customers, but mainly on the technology differentiation as well as their competitiveness.

Sunny Lin: Got it. That’s helpful. I have a question on the Intel partnership. Seems like Intel is becoming less proactive in pursuing the foundry ambitions with the new management. So I wonder how does that affect the business development with the UMC? And let’s say, if Intel want to scale down and then look to maybe sell the capacities, in that case, would UMC be interested in acquiring the capacity, assuming the price is reasonable?

Jason S. Wang: Well, first, I think it’s hard to comment any speculation, but the — and I don’t kind of — don’t want to comment about the partner’s priority within the company. But I can only comment about our program. And our current program with them, like I said earlier, the cooperation with Intel is progressing very well and the milestones remain on track. And most importantly, both parties are very committed to this 12-nanometer cooperation. And so I see no change at this point, and we still have very high expectation with this program.

Operator: [Operator Instructions] Next, we’ll have Laura Chen from Citi. I’m sorry, Laura just dropped the line and we’ll take the next one. Jason Zhang, CLSA.

Jason Zhang: Just wanted to follow-up the impact from the FX ratio. Can you provide your FX ratios for Q3?

Chi-Tung Liu: So first of all, every 1% move appreciation of NT dollars against U.S. dollars, it will erode our gross margin of about 0.4 to 0.5 percentage points. That’s where the 3 percentage point erosion come from on back of the 6% plus NT dollar appreciation against U.S. dollars. And for Q3, we don’t do forecast, but we are using current ForEx rate, which is nearly 29.8 when we give out our guidance. And a reminder, for quarter 2, the weighted average was 30.81.

Jason Zhang: My second question is in terms of the competition. It seems like your Chinese competitors now have better or higher utilization currently. So do we see a better market or lower competitions in the mature nodes? And how can UMC benefit from this lower competition?

Jason S. Wang: Well, at this point, more than half of our revenue comes from specialty technology solutions, which serve our customer demand in differentiated technologies. For instance, our 22/28, I kind of touched on earlier, is probably the most competitive solution in high- end smartphone OLED display market. In addition, our 22 ultra-low leakage and low-power technology will deliver another 30% to 50% better power saving compared to standard 28. So we are positioned ourselves as a specialty foundry partner focused on low leakage, low-power logic, embedded high voltage, BCD, embedded non-volatile memory, RFSOI solutions. We want to continue to provide specialty technology where the percentage of revenue contribution in this space will increase and the percentage of the revenue contribution competing with the Chinese foundries will continue to decline.

I think that’s our focus. And I think that we have making quite a bit of progress already, and we think there’s more room for us to improve on that.

Operator: Next one, Laura Chen, Citi.

Chia Yi Chen: Just a quick follow-up. I want to understand your view on the long-term gross margin outlook. We understand that there’s a lot of moving parts, rising depreciation and also currencies, et cetera. But we do see that recently the utilization rate is kind of improving back to high 70%. And as we’re moving into Q3 with the wafer shipment also going up, so what’s our view on our so-called long-term gross margin target? If you can give us some more color on that.

Jason S. Wang: Well, I mean the — right now, mid-70% is not great. And so obviously, loading will be one of the important focus. And to improve the loading, fundamentally, you have to provide competitive solutions to customers. So like I said, we focus on technology differentiation focus on new technology development and then following with the customer — key customer partners and engagement. So by doing that, we think the loading will increase. And so as well as the gross margin will get healthier. And the other one is, of course, the cost for the depreciation increase, and Chi-Tung also touched that earlier, this couple of years, we have a significant depreciation increase. And after this 2025, I think the increased percentage will start getting more mild.

And so while we improve the loading and maintaining the cost structure, and the next thing is, of course, the ASP management. From ASP management and with the more compelling solution and you have a more diversified manufacturing site and manufacturing quality. And we think the ASP will — the branded ASP will remain resilient. Not to mention, we will continue marching forward with our 12-nanometer development. And hopefully, that we can continue to improve the product mix as well. So giving all those is putting a road map for us to improve our market relevance and position as well as our financial performance. And for the past, we have already improved our structural profitability in terms of our breakeven point and continue. On that front, we already see an effect and benefit.

But going forward, there’s still work to do and combining all those, we think we have a road map to march into a better result.

Chia Yi Chen: Chi-Tung, can you also remind us what will be the depreciation cost increase for this year or maybe next year?

Chi-Tung Liu: This year is low 20% year-over-year. Next year is still a very rough estimate. But as I mentioned, the magnitude of increase will decline significantly maybe to below 10%.

Chia Yi Chen: Okay. My next question is also about our operation in China. As we know, we still have 2 fabs in China. Even though there’s always very fierce competition, do we see any possibility that our IDM customers, if they want to like entering the Chinese market, they can also leverage our capacity there, thus to be kind of differentiation as well? So can you give us more update on your current strategy in China?

Jason S. Wang: Well, I mean, first of all, the — with our diversified manufacturing sites, we’ll definitely be able to serve different customer needs. And if there is a customer who needs for their product to be produced in our China facility, that’s something that we very much welcome. The same thing that we have a customer moving from China to other locations, and we very much welcome that. And we believe with a diversified manufacturing offering will give us a benefit of supporting customers with their supply chain resilience needs. Right now, for the IDN customer moving into the China facility, certainly some signals, but I think the signal goes bilateral, multiple different ways. And so we are working closely with different customers. And hopefully, we can fulfill their desired needs, yes.

Operator: Next one, [ Tim Schultz ] [indiscernible].

Unidentified Analyst: I had 2, please. The first one is on pricing behavior and particularly just how rivals are behaving in terms of pricing in the communications segment. Is that disciplined pricing, particularly given the steady improvements in days of inventory? Or is pricing more challenging? And then I had a follow-up.

Jason S. Wang: When there’s ample capacity available, pricing become a CapEx topic. So not until the capacity becomes tightened, I think the pricing will always be a topic and — so I think from a behavior standpoint, it’s really subject to the capacity situation. So given that the current capacity situation in different regions are different, and I think that conversation is still quite often.

Unidentified Analyst: Okay. That’s very helpful. The second one was in terms of the collaboration with Intel. Good to know that the PDK 2026 production, 2027 still on track. I had a 2-parter there. It’s just in terms of the work you’re doing with your partner, do you see any impact from the headcount reductions? Does that does that influence that cooperation in any way? And then the second part, talking about gross margins and the outlook in ’27, ’28 this journey to get back into the 30s, obviously, loadings are the most critical factor. But does this cooperation with Intel play a material part in your medium-term gross margin outlook?

Jason S. Wang: From an absolute dollar term, yes, it will. Because of the business model that we have, if we — coming back to the question about the headcount and the commitment from our partners, it’s actually quite positive. And the — I think the — I think the program itself has been expanding from the R&D development, now get into the high-volume production preparation. So there’s a more involvement from different organizations. So I would say from the environment standpoint, from a different organization, it’s actually increased. But I can’t really comment about the second situation, but I can tell you, we see lot more activity from various different departments in organization because we’re moving from the R&D activity gradually start moving into a so-called high-volume production preparations. So you can see while we’re extending the activity scope, there’s actually more involved with the program today.

Operator: And now we are taking the last question, Alex Chang, BNP.

Alex Chang: I only have one follow-up question regarding to your China business. So can you comment like in terms of utilization, how is your China fab utilization versus the overall utilization? And in terms of the price pressure, have you seen it eased in recent months? Or what is the outlook for the price pressure in China?

Jason S. Wang: The 12X facility today is actually running at full capacity. So it’s above our corporate average. And the — since that we are — our different sites are mainly serving as the manufacturing facility, the business management is all centralized. So the — at this point, there is no pricing differentiation between different locations for us.

Operator: Ladies and gentlemen, we thank you for all your questions. That concludes today’s Q&A session. I’ll turn it over to UMC Head of IR for closing comments.

Jinhong Lin: Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact ir@umc.com. Have a good day.

Operator: Thank you. And ladies and gentlemen, that concludes our conference for second quarter 2025. Thank you for your participation in UMC’s conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors Events section. You may now disconnect. Thank you again. Goodbye.