United Microelectronics Corp
Morningstar Rating for Stocks | Fair Value | Economic Moat | Capital Allocation |
---|---|---|---|
TWD 25.00 | Dbztk | Kvzklwyr |
UMC’s Long-Term Oversupply Risks Remain Despite Strong Results and Guidance
Business Strategy and Outlook
United Microelectronics is the world’s third-largest dedicated contract chip manufacturer, or foundry. It makes integrated circuits for customers based on their proprietary IC designs. The company has long benefited from United States and, increasingly, Asia semiconductor companies switching from integrated device manufacturers to fabless business models, bolstering demand for United Microelectronics' services. United Microelectronics, like all foundries, assumes the costs and capital expenditures of running factories amid a highly cyclical market for its customers. Such cyclicality stems from the fact that foundries tend to add excessive capacity during times of burgeoning demand that can result in underutilization during downturns that hamper profitability.