Market Chatter: United Microelectronics Refutes Speculation of Building Production Site in US

Technology stocks were edging higher premarket Wednesday, with the SPDR S&P Semiconductor ETF advancing nearly 1% and The Technology Select Sector SPDR Fund up 0.3%.

Jabil shares were up past 10% after the company raised its fiscal 2025 outlook for core earnings and net revenue.

United Microelectronics stock was over 3% higher after the company said it has signed a 30-year power purchase agreement with Fengmiao I Offshore Wind Farm to buy more than 30 billion kilowatt-hours of power.

Ericsson's patents in 5G wireless technology were infringed by smartphones made by Lenovo's Motorola Mobility, a US International Trade Commission judge said in an initial ruling. Ericsson shares were up 0.4% pre-bell.

The broad market exchange-traded fund SPDR S&P 500 ETF Trust was up 0.3% and the actively traded Invesco QQQ Trust advanced 0.3% in Wednesday's premarket activity as traders anticipate another interest rate cut following the Fed's policy meeting later in the day.

US stock futures were also higher, with S&P 500 Index futures up 0.3%, Dow Jones Industrial Average futures advancing 0.2%, and Nasdaq futures gaining 0.1% before the start of regular trading.

US mortgage applications fell 0.7% in the week ended Dec. 13 as 30-year fixed mortgages with loan balances of $766,550 or less rose to 6.75%, with refinancing activity down 3%, the Mortgage Bankers Association said Wednesday.

The November housing starts and permits bulletin, and the Q3 current account report will be released at 8:30 am ET.

The Atlanta Fed Business Inflation Expectations for December report posts at 10 am ET, followed by the weekly EIA petroleum status bulletin at 10:30 am ET.

The US Federal Reserve will announce its policy-rate decision at 2 pm ET in Washington, followed by a 2:30 pm ET press conference with Chair Jerome Powell.

In premarket activity, bitcoin was down by 1.7% and the cryptocurrency fund ProShares Bitcoin Strategy ETF was 1.7% lower.

Power Play:

Technology

Technology Select Sector SPDR Fund gained 0.5%, and the iShares US Technology ETF was 1% higher, while the iShares Expanded Tech Sector ETF was flat. Among semiconductor ETFs, SPDR S&P Semiconductor ETF was up 0.9%, while the iShares Semiconductor ETF rose by 1%.

United Microelectronics shares were up more than 3% in recent Wednesday premarket activity after the company said it had signed a 30-year power purchase agreement with Fengmiao I Offshore Wind Farm to buy over 30 billion kilowatt-hours of power.

Winners and Losers:

Energy

The iShares US Energy ETF was inactive, while the Energy Select Sector SPDR Fund was up by 0.3%.

Oil States International stock was up 2.6% before Wednesday's opening bell after the company said late Tuesday it closed the sale of an idled Houston Ship Channel facility, generating $24.8 million in net proceeds.

Industrial

Industrial Select Sector SPDR Fund advanced 0.2%, the Vanguard Industrials Index Fund gained 0.1%, while the iShares US Industrials ETF (IYJ) was inactive.

Azul stock was up 2.5% premarket after the company said late Tuesday its Azul Secured Finance subsidiary has commenced offers to exchange its outstanding 11.500% senior secured second out notes due 2029 and 10.875% senior secured second out notes due 2030.

Consumer

The Consumer Staples Select Sector SPDR Fund was up 0.1% while the Vanguard Consumer Staples Fund advanced 0.4%. The iShares US Consumer Staples ETF was inactive, and the Consumer Discretionary Select Sector SPDR Fund lost 0.2%. The VanEck Retail ETF and the SPDR S&P Retail ETF were inactive.

Tesla's shares were down 1.5% pre-bell after news outlets reported, citing a letter sent to staff, that the company's Shanghai plant manager, Song Gang, had left the company.

Health Care

The Health Care Select Sector SPDR Fund advanced 0.2%. The Vanguard Health Care Index Fund was up 0.3% while the iShares US Healthcare ETF was inactive. The iShares Biotechnology ETF gained 0.2%.

Merck stock was up 1.4% premarket after the company and Hansoh Pharma said Wednesday they had signed a global license deal under which Merck will develop, produce, and commercialize HS-10535, an investigational oral GLP-1 receptor agonist.

Financial

Financial Select Sector SPDR Fund advanced 0.2%. Direxion Daily Financial Bull 3X Shares was up 0.8%, while its bearish counterpart Direxion Daily Financial Bear 3X Shares was 0.7% lower.

Broadridge Financial Solutions shares were up 1% pre-bell Wednesday after the company said it has partnered with the Crypto Carbon Ratings Institute to launch an integrated platform designed to help European companies meet new sustainability reporting requirements under the European Union's Markets in Crypto-Assets regulations.

Commodities

Front-month US West Texas Intermediate crude oil advanced 0.9% to $70.70 per barrel on the New York Mercantile Exchange. Natural gas gained 1.6% to $3.36 per 1 million British Thermal Units. United States Oil Fund increased by 0.6%, while the United States Natural Gas Fund was 0.6% lower.

Gold futures for February gained marginally by 0.03% to $2,662.90 an ounce on the Comex, while silver futures retreated 0.1% to $30.90 an ounce. SPDR Gold Shares advanced 0.1%, while the iShares Silver Trust was down by 0.4%.

United Microelectronics UMC shares have lost 19.9% in the year-to-date period against the Zacks Electronics - Semiconductors industry’s rise of 44.3% and the broader Zacks Computer & Technology sector’s return of 27.4%.

UMC has also underperformed its peers, such as Toshiba and Taiwan Semiconductor TSM, which offer similar semiconductor manufacturing services. Taiwan Semiconductor has returned 83.5% YTD, whereas Toshiba has lost 7.9% over the same time frame.

The underperformance can be attributed to intense competition in the semiconductor foundry service market, rising supply-chain constraints due to geopolitical tensions and higher inflationary costs.

YTD Performance

However, UMC is benefiting from its expanding portfolio and growth in wafer shipments, which increased 7.8% sequentially in the third quarter of 2024. This growth was largely due to strong demand for 22 nanometer (nm) and 28 nm products, which helped offset other market challenges.

These advanced nodes are essential in producing high-performance chips used in various industries, including consumer electronics and automotive, where demand has remained robust.

Expanding Portfolio Aids UMC Prospects

Expanding portfolio has been a key catalyst. Revenues from UMC’s specialty technology portfolio accounted for 53.1% of total sales in the third quarter of 2024. This portfolio includes advanced solutions like its 22-nm display driver technology, which is gaining strong momentum.

Building on this success, in June, UMC launched its 22 nm embedded high voltage technology platform, the most advanced display driver IC solution, enhancing power efficiency and visual experiences for premium displays in mobile devices.

UMC’s diversified manufacturing footprint, highlighted by the near completion of its new fab expansion in Singapore, enables the company to support customers’ long-term strategies while strengthening its position in the semiconductor industry. This expansion is critical to meeting increasing demand and providing advanced solutions.

In addition to technological advancements, UMC is also investing in the future workforce. In October, United Microelectronics signed a Memorandum of Understanding with Ngee Ann Polytechnic to enhance training for engineering talents and expand the workforce for the growing semiconductor industry.

UMC Benefits From a Strong Partner Base

UMC’s expanding partner base, which includes Intel INTC, Infineon IFNNY and Cadence, has been a major growth driver.

UMC’s collaboration with Intel focuses on developing a 12-nm semiconductor process platform. It leverages Intel’s U.S.-based manufacturing capabilities and FinFET transistor design expertise, combined with UMC’s extensive foundry experience in mature nodes.

The partnership with Intel aims to address high-growth markets such as mobile, communications infrastructure, and networking, offering global customers a more resilient and diversified supply chain.

The collaboration with Infineon expands automotive microcontroller production at UMC’s Singapore fab, leveraging Infineon’s eNVM (embedded non-volatile memories) technology. As the automotive market grows, this partnership ensures UMC meets the rising demand for automotive semiconductors.

UMC’s collaboration with Cadence on 3D-IC reference flow accelerates time to market for edge AI and wireless communication applications. This gives UMC a competitive edge, enabling it to stay ahead of the growing demand for advanced semiconductor solutions.

Earnings Estimates Show Upward Movement

For the fourth quarter of 2024, the Zacks Consensus Estimate for UMC revenues is pegged at $1.88 billion, indicating a year-over-year increase of 44.77%.

The Zacks Consensus Estimate for fourth-quarter 2024 earnings is pegged at 17 cents per share, which has increased by a penny in the past 30 days.

United Microelectronics Price and Consensus

United Microelectronics Corporation price-consensus-chart | United Microelectronics Corporation Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

UMC Shares: Buy, Hold or Sell?

UMC shares are currently trading at a significant discount, as suggested by a Value Score of A.

The forward 12-month Price/Sales ratio for UMC stands at 2.33X, significantly below the industry average of 9.22X.

Price/Sales (TTM)

UMC’s strong demand for advanced technology products like 22 and 28 nm solutions and expanding partner base has been noteworthy.

However, the appreciation of the NT (New Taiwan) dollar against the U.S. dollar is expected to lead to a decline in reported NT dollar revenue for the fourth quarter of 2024, which could hurt UMC’s financial results.

United Microelectronics currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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