[Platinum] 3 Stocks to watch for AI revolution #3

#3 United Microelectronics Corporation (Ticker: UMC) 

United Microelectronics Corporation develops and manufactures integrated circuits (ICs), with a specific focus on logic and specialty technologies.   

– 12 fabrication facilities throughout Asia 

 –  More than 750,000 eight-inch wafers monthly 

In other words, the company provides many of the chips required for modern electronics like computers, mobile communication power management chips, medium and large size LCD screen driver chips, microcontrollers, audio chips and automotive electronics.  

There is currently a global semiconductor chip shortage that’s hitting the auto parts and car manufacturers, forcing some to idle plants while they wait for the supply to pick back up. Car manufacturers cannot make their cars because they don’t have the chips for these screens.

– General Motors temporarily idled its car and crossover plants in Kansas, Canada, and Mexico through mid-March, and said it could lose from $1.5 billion to $2 billion in 2021 because of the lack of chip supply.   

– Ford said the shortage could shave off from $1.5 billion to $2 billion in earnings in 2021.  

– AlixPartners anticipates the shortage will shave $60.6 billion from the global automotive industry in 2021.   

– IHS market expects 672,000 fewer automobiles will be built in the first quarter because of the shortage.  

These semiconductor chips have become integral to powering the entertainment systems and driver-assistance functions, as well as the power brakes and steering used in modern automobiles. And automakers need more of them — up to hundreds— in each new car.  At the same time, demand for laptops and cloud computing services has soared under the pandemic lockdowns, which has further fueled the demand surge. 

Semiconductor manufacturers also say rising interest for the new chips that go into 5G phones has slowed their capacity.  Orders for new chips that typically get filled from eight to 10 weeks are taking as long as six months to fulfill, leaving automakers and consumer-electronics manufacturers to scramble over limited supply.  

The Biden administration even said it would help with an executive order to identify and act to relieve supply chain choke points. The bottom line is that the shortage will translate into heightened demand for UMC’s products.

NUMBERS 

Q4 2021 

– Chip shipments rose 1.7% quarter-over-quarter to 2.55 million 8-inch equivalents.   

– Revenue increased 30.5% year-over-year to NT$59.1 billion (up from NT$45.3 billion in the same quarter a year ago)   

– In U.S. dollar terms, UMC achieved total fourth-quarter revenue of $2.14 billion, which topped estimates for $2.08 billion.   

– Earnings per ADS came in at $0.24, up from $0.17 per ADS in the fourth quarter of 2020. That also beat estimates for $0.21 per ADS.