United Microelectronics - Q3 2024
October 30, 2024
Transcript
Operator (participant)
Welcome, everyone, to UMC's 2024 third quarter earnings conference call. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at the time if you would like to ask a question.
For your information, this conference call is now being broadcast live over the internet. Webcast replay will be available within two hours after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations/Investors Event section. And now, I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.
Michael Lin (Head of Investor Relations)
Thank you, and welcome to UMC's conference call for the third quarter of 2024. I'm joined by Mr. Jason Wang, President of UMC, and Mr. Chitung Liu, the CFO of UMC. In a moment, we will hear our CFO present the third quarter financial result, followed by our President's key message to address UMC's focus and fourth quarter 2024 guidance. Once our President and CFO complete their remarks, there will be a Q&A section. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial 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 R.O.C. regulatory 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. Chitung Liu, to discuss UMC's third quarter 2024 financial result.
Chitung Liu (CFO)
Thank you, Michael. I'd like to go through the third quarter 2024 Investor Conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page four, the third quarter of 2024, consolidated revenue was NTD 60.5 billion, with gross margins at 33.8%. The net income attributable to the stockholders of the parent was NTD 14.5 billion, and earnings per ordinary shares were NTD 1.16. For the capacity utilization rate in the third quarter was 71%, which is slightly up from 68% in the previous quarter.
On page five, the sequential comparison, operating revenue grew 6.5% to NTD 60.5 billion. Gross margin was 33.8% compared to 35.2% in the previous quarter. Our net income in the third quarter was NTD 14.44 billion. This is compared to the NTD 13.77 billion numbers in the previous quarter. And for EPS, it's NTD 1.16 per share.
On page six, for the first three quarters of 2024, cumulative revenue grew 2.6% to NTD 171.9 billion. Gross margin rate was 33.3%. The decline of 4.4% or 2.5 percentage points was mainly due to the increase in depreciation that happened in 2024. For the net income for the first three quarters, it reached NTD 38.64 billion. For the net income attributable to the shareholder of the parent was NTD 38.71, which is equivalent to NTD 3.12 per share in EPS. On page seven is our balance sheet. Our cash post cash dividend payout still remained above NTD 100 billion.
The number is NTD 103.4 billion at the end of the third quarter. The total equity for the company now reached NTD 368.5 billion by the end of the third quarter of 2024. For third quarter 2024, on page eight, the ASP numbers remained resilient, flattish.
This is compared to the previous quarter; we didn't see much change for our blended ASP. On page 9, for revenue breakdown, Asia now represents 65% of our total revenue, and Europe declined by 2 percentage points from 7% to 5%. On page 10, IDM rebounded from 13% in the previous quarter now to 15% in the third quarter of 2024.
In terms of segment breakdown, communication also increased to 42% from 39% in the previous quarter, and the computer declined by 2% from 15% to 13%. On page 12, our 22 and 28 nanometer revenue in both absolute dollar amount and also percentage reached a record high of 35% in the third quarter of 2024, and 40 nanometer stayed around 13% in the third quarter.
For our capacity table on page 13, our 12A in Tainan continued to increase leading-edge capacity, and that will bring up the full-year capacity increase for UMC to above 7%, and the last page, on page 14, we revised, updated our annual CAPEX budget from previously NTD 3.3 billion to now NTD 3 billion even. This is just to reflect the update schedule, mainly for our Singapore capacity ramp, so the above is a summary of UMC results for third quarter 2024. 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 Wang (President)
Thank you, Chitung. Good evening, everyone. Here, I would like to share UMC's third quarter results. In the third quarter, we delivered results that were in line with the guidance. In particular, wafer shipment grew more than expected, increasing 7.8% sequentially due to a strong demand for 22 and 28 nanometer products. Our strategy is to develop specialty technology solutions that deliver best-in-class performance, and I am pleased to report that revenue in absolute dollar derived from our specialty portfolio is the record high in the third quarter, accounting for 53.1% of total sales.
In our industry, technology is fundamental. We continue to invest significantly in technology development every year to ensure we are ready to support customers' next-generation product features with more advanced solutions.
For instance, our 22 nanometer display driver solution was the first to be made available to the market and offers unparalleled performance, and we foresee strong payback momentum in the upcoming months. With regards to fourth quarter outlook, we are seeing demand stabilizing across end markets and a clear downward trend in inventory levels. Looking ahead, we have a number of exciting technologies and collaboration projects in the pipeline as we continue to align closely with our customers' product roadmap.
In addition, as we hear consistently from customers, UMC's diversified manufacturing footprint is also very important in supporting their long-term strategies. Our new fab extension in Singapore is nearing completion, while our collaboration with Intel remains on track. These projects will further enhance our value proposition to customers and strengthen our position in the foundry industry. Now, let's move on to fourth quarter 2024 guidance. Our wafer shipment will remain flat.
ASP in US dollars will remain flat. NT dollar appreciation may lead to a decline in our reported fourth quarter NT dollar revenue. Gross margin will be close to 30%. Capacity utilization rate will be in the high 60% range. Our 2024 cash-based CAPEX will be budgeted at $3 billion. That concludes my comments. Thank you all for your attention. Now, we are ready for questions.
Operator (participant)
Thank you, President Wang. And ladies and gentlemen, we will now begin our question-and-answer session. If you have a question for any of today's speakers, please press star one on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star two to cancel the question. Thank you. Now, please press star one on your keypad if you would like to ask the question. Thank you. And our first question will be coming from Sunny Lin of UBS. Go ahead, please.
Sunny Lin (Analyst)
Thank you very much. So my first question is on fourth quarter. So recall back in July, Jason, you mentioned there could be some seasonal slowdown into fourth quarter, but now it seems like you are able to hold out the revenue for fourth quarter. It's a bit better than expected. So what's driving the upside at this point in your view on 2025?
Jason Wang (President)
For fourth quarter, we foresee the trend in computing segment will be slightly better quarter over quarter than we originally expected. However, we'll be offset by a mild decline in communication and consumer segment. Net net, I think there will be more of a flat quarter from the ship-out point of view. For 2025 market outlook, although the global economy shows signs of recovery and the inventory level is improving, however, the forecast from our customers at this moment remains conservative. For 2025 early preview, we do expect to see an increase in our wafer shipments as well.
Sunny Lin (Analyst)
Got it. Thank you, Jason. So follow up on pricing. Lately, there's lots of noise and debates, but just wonder from your perspective, are you seeing stabilization or are you seeing another round of competition into year-end or 2025? And in first quarter this year, the company did offer a one-time reset for blended ASP that dropped about 4% to provide some customer support. And so any initial expectations based on your current negotiation with the clients, should we expect some blended ASP erosion into early 2025 as well?
Jason Wang (President)
On the ASP for the fourth quarter 2024 ASP, our pricing will remain flat as we guided. In terms of pricing situation, our UMC's pricing resilience has been well demonstrated during the demand-supply imbalance that reflects our ability to navigate the challenge that arises from the capacity oversupply. In our view, throughout the 2024, there are capacity oversupply situations, and we're maintaining our pricing resilience.
We do believe our pricing resilience will persist, giving our efforts on our technology value proposition and including our dominant position in high-end smartphone display leadership, some of the smartphone RF front-end modules. While we continue doing a product mix optimization and with our diversified manufacturing footprint, we believe our pricing will persist and the resilience will persist.
If we go into a 2025 pricing, we do foresee pricing outlook will resemble a similar pattern to 2024, where beginning of 2025 of a pricing adjustment will be, again, another one-off, which will reflect our alignment with the customer to cope with the market dynamics and gain market shares. The pricing scheme is within our discipline and financial guidance and will not change our overall pricing position and resilience.
Sunny Lin (Analyst)
Thank you, Jason. So for first quarter 2025, if there's another reset, would the magnitude be similar with first quarter this year?
Jason Wang (President)
I mean, we will provide that guidance in an upcoming call, but there will be a one-off.
Sunny Lin (Analyst)
Got it. No problem. Another question on gross margin. Fourth quarter revenue is guided to be flat. ASP is also flat, but you anticipate gross margin to fall to 30% from 34% in third quarter. What's the reason behind, and looking ahead, if based on a 30% or higher utilization rate, what will be the reasonable gross margin range that we should expect?
Chitung Liu (CFO)
So, for the fourth quarter margin lower guidance, it's largely due to a lower capacity utilization rate, the high 60 versus 71% in third quarter. Also, the NT dollar is a headwind because NTD 32.29 was the average Forex we used in the previous quarter. And this quarter, I think at least in the beginning, it even shoot up to nearly NTD 31.5 per US dollars. And also, the higher depreciation arise from capacity expansion.
This factor is going to impact us for relatively few quarters. I mean, we probably won't see the depreciation impact go away until a few quarters later. But most importantly, the gross margin, if we use EBITDA margin, actually the number are very similar quarter over quarter.
Sunny Lin (Analyst)
Got it. Thank you very much. That's all I have.
Jason Wang (President)
Thank you.
Operator (participant)
Thank you. Next one, Gokul Hariharan, JPMorgan. Go ahead, please.
Gokul Hariharan (Managing Director)
Hey, hi. My first question, Jason, just wanted to get your view on your customer behavior and inventory levels. I think you mentioned that inventory is kind of coming down across the supply chain. Let's say next six months, do you feel like there is some prospects from your customers to kind of get into a bit of a restocking cycle? Do we feel like we can get back to like a 75% to 80% kind of utilization in the near to medium term, or is that still going to be going to take some time given the inventory behavior from the customers seems like very, very cautious?
Jason Wang (President)
Sure, Gokul. Well, first, for the inventory outlook, from the application's perspective, overall inventory level within communication, consumer, and computing have returned to relative normal level after several quarters of digestion now. So we feel the inventory for those applications since get already back to the normal level. For the automotive and industrial segment, they will require more time and probably until end of the second quarter 2025 and to digest the inventory and return back to norm. After the inventory level return to norm, we do expect the demand pattern will follow the market seasonality.
Now, for the question that say, would there be a restocking and going back to higher utilization, is our belief that foundry industry is experiencing an oversupply situation due to the supply chain resilience considerations.
We can see the current utilization rate probably will be the bottom for the UMC and hopefully will rebound back to the average healthy level and to maybe between 80% plus and giving our continuous effort on technology differentiation, but that will subject to the market's behavior as well as the customer behavior and our technology differentiations, and meanwhile, we're constantly focused on our technology differentiation and with the hope that market will recover. Yeah.
Gokul Hariharan (Managing Director)
Got it. Thank you, and just a question on 8 inches. Feels like a lot of these issues are a lot more in play in 8 inches in terms of pricing as well as lower utilization. Is there anything strategic that UMC is considering? Are we at a point in the cycle of 8 inches that it is probably better to reduce the effective capacity that you have for 8 inches on a medium to long-term basis? Are we kind of at a point where there is enough capacity or enough products shifting from 8 to 12 inches that 8 inches doesn't really make much sense to have this much capacity?
Jason Wang (President)
You're absolutely correct. Anything is possible, but at this moment, we do not have any plan to reduce our 8 inches capacity. We do believe the overall market demand for 8 inches will remain steady, but we do see opportunity to get market share via differentiated technology solutions. So, we still have some expectation with our 8 inches recovery.
Our current 8 inches loading is under recovery, and we expect the 8 inches loading will gradually improve driven by the effort in strengthening our solution in BCD and high-voltage platform. After this few quarters, giving the positive feedback from our customer, we foresee the gradual improvement in 8 inches is very possible. Yeah.
Gokul Hariharan (Managing Director)
Okay. And maybe last question is on your partnership with Intel. Given there's a lot of noise about Intel cutting CapEx and considering restructuring, considering spin-off or kind of at least separation of business, etc., a lot of noise out there. Anything that you're observing in terms of your partnership on 12 nanometer with them? Any changes in the timeline? Are you still looking at the 2027 timeline? Is there a chance for any pull-in of the timeline given that we are almost like a year or at least like six to eight months into that partnership?
Jason Wang (President)
Sure. Well, good questions. Let me see. One is on our current partners' situation. I can tell you that the current 12 nanometer collaboration is progressing well. Our customer and partners are very positive on the potential of 12 nanometer business opportunity. The project's on track. Early engagement with the key customer has shown strong interest to pull in our 2027 production schedule. According to the early evaluation feedback from the key customers, our 12 nanometer performance will be very competitive in the industry.
Right now, we're working diligently with both our partner and key customer to further accelerate the schedule as requested. Overall, we're cautiously optimistic about that progress, and we'll update you accordingly. I can tell you the next milestone right now is the key milestone we're looking at. The new product tapeout will take place in 2026 from the key customers.
Gokul Hariharan (Managing Director)
Got it. Yeah. Thank you very much.
Jason Wang (President)
Thank you.
Operator (participant)
Thank you. Next one, Laura Chen, Citi. Go ahead, please.
Laura Chen (Research Analyst)
Thank you very much for taking my question. My question is also about Intel's cooperation. Can you give us more details or any color of what kind of applications that could be? And also, how should we share the profit or the capacity we have reserved for that 2026 or 2027 onward FinFET process?
Jason Wang (President)
First of all, for the application, it's mainly focused on communication and consumer product. And beyond that, there could be many other product pipelines from the derivatives that we are continuing working closely with our customer. As far as the capacity and the profit sharing, I mean, we are not liberal to update you the profit sharing scheme.
However, from a capacity standpoint, we believe there is a sufficient capacity to expand, and we just have to align with our customer and along with our partner to gradually put that expansion plan together. Once we have a clear picture on the initial number, and we'll share with you accordingly.
Chitung Liu (CFO)
Yeah. It's really based upon the customer adoption rate rather than constrained by the capacity. Yeah.
Laura Chen (Research Analyst)
Okay. Thank you. And also, my second question is also about gross margin outlook. Jason mentioned that industry-wise, we see the oversupply situation. And also, on the other hand, we have some ongoing expansion. So I'm just wondering that do we have any idea about what kind of structure gross margin we are looking for in the longer term?
Jason Wang (President)
Well, I mean, first of all, we are continuing to invest toward the future in developing new solutions in larger advanced specialty technology. Therefore, we anticipate a rising depreciation burden during the ramp-up phase of the capacity expansion, Chitung actually touched earlier. Secondly, given the rising cost of goods in utility, renewable energy, and carbon tax, which our industry is experiencing, and we have to continue to deploy aggressive cost management and to offset those headwinds in cost. And we'll constantly manage the projection of those impacts.
So given that, we still project that we feel we are confident that UMC will maintain a solid structural profitability in the long term and maybe post the 2025, once the depreciation numbers get to the level we expected, we'll get back to the low 30% to low 40% range, which we believe that will be a healthy level of long-term gross margin target for us.
Laura Chen (Research Analyst)
Can you kind of assume that given our current utilization rate is only at about 60% to 70% range, and with the inventory digestion almost done, and structurally, we will see that the 30% kind of at the relatively trough level in the longer term?
Chitung Liu (CFO)
I think there are many factors. So it's very difficult for us to commit the absolute numbers. So what Jason just mentioned is there are several headwinds coming, and we are also working diligently to offset the impact. So overall, we do believe our structure profitability should be intact. And especially for year 2025 and 2026, we will focus more on our EBITDA margin, which really has no major reason will be differed materially compared to the previous down cycle.
Laura Chen (Research Analyst)
Okay. Very clear. Thank you.
Operator (participant)
Thank you. Next one, Charlie Chan, Morgan Stanley. Go ahead, please.
Charlie Chan (Research Analyst)
Hello. Jason, Chitung, good afternoon. So yeah, my first question is also regarding the quarterly pricing, but I wanted to take a step back, right, to compare your current status versus maybe two years ago. Two years ago, I remember when you commented about your product mix, right? You said 70% is not commodity, and some of those are kind of single source, right? So customers wouldn't care about your pricing. But I remember a couple of quarters ago, that mix came down a little bit to like 50%, maybe half your business. Yeah, but now I'm confused, right?
Because supposedly, those commodity businesses should already go away given the competition. So, your exposure to those single source or differentiated products should be even higher than before. In that case, why you still need to do like a one-time pricing adjustment at the beginning of next year? That's my first question.
Jason Wang (President)
Sure. Sure. I mean, you're right from a product mix standpoint. Given there is an oversupply situation in the industry, so we also have to closely work with our customers to compete in their marketplace. So the pricing discussion is more associated with closely working with our customers to gain market shares, not only associated with our stickiness with our customers.
Based on the current utilization rate, it represents a very limited exposure to the product that are price-sensitive from our perspective to our customers. So from a stickiness point of view, the comment remains intact. However, to continue to support our customers to be competitive in their marketplace, we do need to consider that. Yeah.
Charlie Chan (Research Analyst)
Okay. I see. Thank you. It's very helpful. And then do you observe that the major foundry TSMC's also be more flexible on the mature nodes pricing? Is that one of the reasons that you also want to adjust your price early next year?
Jason Wang (President)
I mean, we don't comment on specific companies or our peers. I mean, but in general, we need to get closer with the market price. If that's representing the narrowing of the margin, I mean, the range of the market price, then we have to respond. In a way, we are working with our customers. We are actually closely with our customers together to cope with this market dynamics.
The bottom line is we both need to be competitive. From our side, we need to provide a competitive and differentiated technology solution, and at the same time, be commercially competitive as well and to gain our market share, yes, and with our customers together.
Charlie Chan (Research Analyst)
I see. Thank you. And regarding the differentiated products, I'm wondering, can you comment a little bit about your high-end smartphone display driver IC market share? I remember the third quarter revenue or utilization was pretty good. This is probably one of the reasons. So when I look at your first quarter UTRs decline, is that also because your kind of market share is giving back to your competitor for this specific product line?
Jason Wang (President)
A few things, right? I mean, one is our utilization guidance actually reduced, mainly because our capacity increased. And we have guided the wafer out will be similar, right? So it will be flat. So we don't think there's a market share loss situation. Now, going back to the specific 22 and 28, the display driver OLED market, I mean, we remain as the market leader in this display driver IC space. And we are the first to roll out the 22 eHV as well, giving the early ramp and tablet pipeline. And we foresee our position will not change. Yeah.
Charlie Chan (Research Analyst)
Gotcha. So maybe last, one to two small questions while we're having you. So that interposer business, I mean, over the past 12 months, there's definitely a need for non-TSMC CoWoS supply chain. But into next year, it seems like TSMC is even more dominant in this CoWoS capacity supply. And there's some migration to newer technology like silicon bridge. So I know this was discussed a few months ago. But now, do you think your interposer capacity can be fully utilized next year?
Jason Wang (President)
Oh, certainly. I think there's a—I mean, right now, the capacity like we reported in the past is about 6K. And currently, we support the current version of the interposer. And that will actually continue into 2025, at least early 2025. And following that, we have a pipeline engagement with multiple customers and with different product lines as well.
So we do have expectation that this will continue. And there may be a chasm between in terms of the migration path and the schedule. But however, we do have confidence that those capacities will be used. And if not, we also, in addition to that, we're actually in discussion with the customer if that requires additional capacity for us.
Charlie Chan (Research Analyst)
Okay. Yeah. That to me is not easy to reconcile, right? Because I think currently, your major customers, obviously, is the biggest AI semi company. So it makes sense for them to have a dual source, right? Meaning buying interposer from TSMC and maybe second source from your foundry. But when you talk about other customers may use your interposer, would they also be a dual source? Or they're kind of use a single source from your interposer?
Jason Wang (President)
Well, that's a variance, right? I mean, there's multiple customers, multiple types of programs. And with a different solution as well. So they are multiple sourcing. They are single source. So they are numerous engagement projects that we are in discussion with right now.
Charlie Chan (Research Analyst)
Okay. Okay. So you're confident that that can be fully utilized or even considering to add some capacity?
Jason Wang (President)
Yes. Right. Yes.
Charlie Chan (Research Analyst)
Okay. Yeah. And last one, maybe to Chitung, electricity cost impact. Does that already show in your first quarter margin impact? Or how do we think about the margin sensitivity to Taiwan's electricity cost hike?
Chitung Liu (CFO)
Oh, fourth quarter guidance already embedded the electricity utility price hike. So we foresee headwinds such as utility rate hike and other inflationary pressures. So we will continue to deploy aggressive cost management efforts, such as focusing on multi-sourcing strategy and streamlining process flow, supply chain pricing management, and power reduction measures on facility and tools. Also, we will continue to drive automation transformation and leverage our flexible work hours during tool maintenance, which will align with our holiday season.
So this is the measure we will implement, especially when our capacity utilization rate is not up to the level we hoped. So we certainly believe this will help UMC at least to largely offset some cost headwinds and ensure our long-term financial resilience.
Charlie Chan (Research Analyst)
Okay. That's very, very clear. Thanks, Jason and Chitung, thanks for your answers. Thank you.
Chitung Liu (CFO)
Thank you.
Operator (participant)
Thank you. Next one, Brad Linn, Bank of America Merrill Lynch. Go ahead, please.
Brad Linn (SVP)
Thank you for taking my question. So I have a question on the, well, RFSOI. We have learned the strong potential of RFSOI, especially in the smartphone. Can the management elaborate the expected growth trajectory over the maybe next two years? How is the customer demand shaping up so far for this technology? If I may, I would also like to ask about a similar question, but about another technology, which is the OLED driver IC, especially for the FinFET stage. Thank you.
Jason Wang (President)
Sure. Well, I mean, on the RFSOI space, for the past few years, and we're definitely getting our market position in the RFSOI in the antenna and switch space. And we continue expanding our solution from this antenna switch to the LNA and while expanding the broader band coverage in 5G, which we developed the derivative, the 40 nanometer RFSOI to address the emerging FR3, the 7 to 24 GHz band with the most optimized and competitive performance solution.
And additionally, we have the wafer-to-wafer hybrid bonding solution for the RF front-end and module for all the advanced 5G applications from the space considerations. So, I think we're starting to have a full spectrum of the RFSOI solution from our successes in the radio and the antenna and the switch space. So that's for the RFSOI.
On the OLEDs, our industry-leading eHV solution has consistently been the top choice for the display driver IC for the high-end smartphones. In addition, we have also expanded our driver IC to serve growing needs of notebook and tablet OLED panels. So it's already beyond smartphones. And beyond the 28 and 22 nanometers, we also have the 40 nanometer FinFET DDI solution in our product pipeline. So I think we're prepared for the consideration of FinFET. But meanwhile, for the 22 and the FinFET, it's still under the exploratory stage.
In our view, the 22 nanometers will be the mainstream OLED driver for at least the next two to three years. And the technology migration beyond 22 is on the roadmap. We are evaluating the trade-off between the 22 and FinFET to align the schedule. Yeah.
Brad Linn (SVP)
Thank you very much. Another question would be on the geopolitical things. Basically, well, the US is having a very important election soon. Well, thank you.
Jason Wang (President)
Okay. Well, it's such a big question. Let me see. The geopolitical outlook taking place in the semiconductor industry, we have to say it's unprecedented and inevitable. And such initiatives have led to a supply chain resilience. At the same time, it has created a capacity experiencing oversupply situation due to the supply chain resilience considerations. So obviously, that is the downside risk. And however, UMC is one of a few foundry suppliers who can support a global fab operations. We have envisioned a need for diversified manufacturing strategy for many years ago.
And while at the same time, we believe the fundamental competitiveness is a strength of our technology differentiation. So we have deployed our technology in all our diversified manufacturing footprint to support our customer best we can.
With the diversified manufacturing footprint and competitive technology offering, I think that will set us apart from our peer to mitigate that oversupply risk. Now, the opportunities. Our diversified manufacturing site provides supply chain resilience to our customers. That's become one of the possibilities for the upsides. We welcome any opportunity from our customer. There are many ongoing porting projects already, which will materialize after 2025. So there are some downside as well as some upsides. Yeah.
Brad Linn (SVP)
So, would you be considered more upside than downside?
Jason Wang (President)
It's probably hard to gauge right now.
Brad Linn (SVP)
Okay. Got it.
Jason Wang (President)
I do think we have the right position to do so to engage and capture those opportunities. Hopefully, and that can offset the downside, but it's kind of hard to gauge at this point because there's also other market landscape changes, for instance, end markets, market share changes, so that will be a change in terms of customer mix as well, so we have to step by step and continue monitoring the progress.
Brad Linn (SVP)
Right. Thank you. So, the, well, strong interest for the customers for our, well, the fab in the collaboration with Intel about that project, would that be also attributed to some of the geopolitical tension?
Jason Wang (President)
We think so because, I mean, there's one additional, the footprint for us. And it's the first one in the Western for us as well. And however, the fundamentals still going back to technology competitiveness as well. Given the 12 FinFET collaboration projects, we have confidence that we have a good solution and we have a complete competitive solution. And along with the Western footprint, we do think that's a value proposition for our customers. Yes.
Brad Linn (SVP)
Got it. Thank you very much, Jason.
Operator (participant)
Next one, Bruce Lu, Goldman Sachs. Go ahead, please.
Bruce Lu (Analyst)
Hi. Thank you for taking my question. Jason, you just mentioned the 28 nanometer. You do see the oversupply situation. Can you share with us what kind of oversupply magnitude for 28 for next year, maybe the year after? And the second level is that within 28, you have certain derivative process like high voltage or any specialty. Can you also share with that what kind of supply demand situation for the specialty process within 28?
Jason Wang (President)
Sure. Focus on 28. So Bruce, one is giving you a perspective. In third quarter, our 22 and 28 wafer shipments reached a record high. And our loading utilization in 22 and 28 is above our corporate average. So the 22 and 28 currently loading still demonstrates some resilience here despite there is additional capacity opened up. Whether those are effective capacity or not will remain to be seen. And for third quarter, the 28 and 22 still resilient.
Now, going to fourth quarter, as well as the 2025, the 22 and 28 will be our growth driver business and in different applications from communication, computing, and consumer segments. And I think our 22 and 28 business will continue to grow. So we have a good confidence with our 22 and 28 loading situation despite there's a capacity oversupplies.
The competition will probably be more intense, but we have to continue tracking that progress from the market landscape. Now, from our plan, ourselves, is we continue migrating our product into 22 nanometers. Currently, the 22 nanometer larger product has already entered production, which that can help us be part of our peers and set part of our peers. We also think the DDI and ISP migration to 22 is happening. We foresee a strong takeoff momentum on 22 nanometers for communication and consumer segments.
So, I think that's another data for you that it's not just a 28 capacity. It's also we have to continue to roll out our 22 nanometer solutions. From a derivative and the DDI is high voltage, we're not stopped there. There will be a derivative beyond that from the non-volatile memory and as well as the RFSOI.
And those is also in the pipeline on our roadmap. So, we will continue pushing that. Hopefully, we can create that technology differentiation for our customer as well as maintaining or even increase our market position in the 28 and 22 space.
Bruce Lu (Analyst)
Just quick follow-up. Are we talking about our oversupply situation? Are we talking about like 5% oversupply or 10% or just like 1% to 2% oversupply situation as an overall 28?
Jason Wang (President)
I mean, I don't have a specific data on hand to share with you. I can look into it and give you an update. Meanwhile, we continue tracking the overall capacity build-up on all different nodes. But at the same time, we are measuring in terms of the effectiveness and addressable market in terms of what kind of solution they address, not just the 28 logic. So, the data may be a bit fragmented, but let me just gather that, maybe get you an update later. Yeah.
Bruce Lu (Analyst)
Okay. Thank you. So, the second question is more for Chitung Liu. I mean, what kind of depreciation growth we're going to see for next year? I'm assuming that you're cutting your CapEx for this year. It will be mostly for maintenance CapEx and some of the infrastructure CapEx for next year. So the depreciation growth is somehow more predictable for next year because you are mentioning that you're going to maintain the EBITDA margin, which is around 45%, I believe, at the current level. So I want to know what's the depreciation growth for next year?
Chitung Liu (CFO)
Yeah. EBITDA margin is close to low 40s. And for the depreciation increase in 2024, it's a little bit over 20%. And next year, the number will be similar or probably slightly higher.
Bruce Lu (Analyst)
You mean the growth will be slightly higher than this year in terms of like 20%?
Chitung Liu (CFO)
Yes.
Bruce Lu (Analyst)
I see. Thank you.
Operator (participant)
Thank you. As a reminder, please press star one on your keypad if you would like to ask the question. Thank you. Okay. There are no further questions at this point. We thank you for all your questions. That concludes today's Q&A session. And I'll turn it over to UMC head of IR for closing remarks.
Chitung Liu (CFO)
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 UMC at [email protected]. Have a good day. Thank you.
Operator (participant)
Thank you. Ladies and gentlemen, that concludes our conference for third quarter 2024. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com under the investors event section. You may now disconnect. Thank you and goodbye.