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On Friday, Goldman Sachs downgraded United Microelectronics Corp (2303:TT) (NYSE:UMC) stock from Neutral to Sell, adjusting the price target to NT$40.50 from the previous NT$44.50. The downgrade followed revisions to foreign exchange (FX) forecasts, which analysts believe will impact the company’s profitability due to a currency mismatch. United Microelectronics Corp’s revenues are primarily in U.S. dollars while a significant portion of its operating costs are in Taiwanese dollars.
The firm noted that the profitability of United Microelectronics Corp is expected to be directly affected by this currency discrepancy. Goldman Sachs also highlighted the increasing competition from mainland Chinese semiconductor firms as a persistent risk that could negatively influence UMC’s market position. Additionally, factors such as rising depreciation, growing costs for utilities and materials, and an unfavorable FX trend were cited as concerns.
Looking ahead to 2025, Goldman Sachs has revised its expectations for UMC’s financial performance. The firm now anticipates a year-over-year revenue decline of 1.8% in New Taiwan Dollar terms, a stark contrast to the previously forecasted 3.5% increase. Furthermore, gross margin (GM) and operating margin (OpM) projections have been lowered to 27.0% and 16.8%, respectively, down from the earlier estimates of 28.9% and 18.7%.
The revised price target and downgrade to a Sell rating reflect Goldman Sachs’ outlook on United Microelectronics Corp’s future earnings and market competitiveness. The analysis suggests that the semiconductor company may face challenges in maintaining its profitability amid adverse currency effects and increasing market pressures.
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