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United Microelectronics Corp
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Welcome, everyone, to UMC's 2019 Fourth Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within an hour after the conference is finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. And now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. And Mr. Lin, please begin.
Thank you, and welcome to the UMC's Conference Call for the Fourth Quarter of 2019. I'm joined by Mr. Jason Wang, the President of UMC; and Mr. Qi Dong Lui, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results, followed by our President's key message to address UMC's focus and the first quarter 2020 guidance. Once our President and CFO complete their remarks, there will be a Q&A session.
UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors Financial section.
During this conference, we will make forward-looking statements based on the 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 company's control.
For these risks, please refer to UMC's filing with the SEC in the U.S. and the ROC security authorities. Now I would like to introduce UMC's CFO, Mr. Qi Dong Liu, to discuss our fourth quarter 2019 financial results.
Thank you, Michael. I would like to go through the 4Q '19 investor conference presentation material, which can be downloaded from our website.
Starting on Page 3, the fourth quarter of 2019, consolidated revenue was TWD 41.85 billion, with a gross margin at 15.7%. The net income attributable to the stockholder of the parent was TWD 3.84 billion, and earnings per ordinary shares was TWD 0.33 on $1. Our loading utilization rate in Q4 of 2019 was 92%, slightly better than 91% in the previous quarter and also 88% in the same quarter of last year. And revenue, TWD 41.8 billion was a record high for UMC.
On Page 4, our financial income statement on a sequential basis, revenue TWD 41.8 billion growth by 10.9% quarter-over-quarter. And gross margin, as a result, also grew 8.3% sequentially to TWD 6.96 billion or 15.7% gross margin.
And because the combination of our newly acquired U.S. -- Japan operations, so our operating expenses grew to TWD 6.1 billion, which lead to operating income of TWD 2.018 billion. With better stock market performance as well as strengthened renminbi versus U.S. dollars, our nonoperating income was again of TWD 946 million. And the total net income attributable to the stockholder of the parent was TWD 3.83 or an EPS of TWD 0.33.
So on Page 5, our year-over-year comparison. The full year revenue was TWD 148 billion, a small decline of 2% year-over-year, which mainly due to the weakness in the beginning of 2019.
Gross margin rate is around 14.4% or total gross margin of TWD 21.3 billion. And operating expenses is under control and reduced to TWD 21.8 billion for the full year. And as a result, the total net income attributable to the stockholder of the parent for the full 2019 was TWD 9.7 billion or equivalent to an EPS of TWD 0.82.
For balance sheet for the full year, our cash has accumulated to TWD 95.4 billion. And the total equity for the company is TWD 207 billion. So on Page 7, our ASP for the quarter was somewhat flattish compared to the previous quarter.
On Page 8, our revenue breakdown. And because of the combination of the new acquisition in Japan, our total revenue from Japan grew to 9% of the total pie compared to 2% in the previous quarter, and Asia remained as big as 55%, our single largest market. And North America is around 30%.
And for the full year, Asia is about 57%, and North America is 32%, and Japan, Europe, about 5% to 6% each. And for IDM, again, because of the combination of Japan operation, in Q4, IDM percentage jumped to 13% of the pie and fabless remaining 87%. For the full year, the difference is much less. It's similar to the previous year, around 8% to 9% for IDM.
On Page 12, our segment breakdown. Still, we see similar distributions among communication, computer and consumers, with communication as the single largest segment, around 54%. And for the whole year, we will continue to see more communication contribution to 52% for the whole year, and consumer is around 26%.
On Page 14, our total revenue coming from 40-nanometer and below is around 32%, with -- 28-nanometer is around 10%. And for the full year, we have minimum contribution from 14 and stable contribution from 28 and 40-nanometer, which in combine is around 34% for the full year of 2019.
On Page 16, our Q1 capacity here is factoring the annual maintenance already. But still, we see a somewhat flattish total capacity available in Q1 versus the previous quarter. Now our full year CapEx for the 2020, right now, the budget is around TWD 1 billion -- USD 1 billion, and 85% will be 12-inch related.
So the above is a summary of UMC results fourth quarter 2019. 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. Wang.
Thank you, Qi Dong. Good evening, everyone. Here, I would like to update the fourth quarter operating result of UMC. During the fourth quarter, we started to account for the foundry operation at our recent acquired USJC, which is the Fab 12M in Japan. In spite of the currency headwinds encountered in the foreign exchange market, our foundry revenue increased 10.9% quarter-over-quarter to TWD 41.83 billion, leading to a foundry operating margin of 4.9%.
Utilization rate increased to 92%, bringing wafer's shipment to TWD 2.04 million 8-inch equivalent wafers primarily driven by the communication and computing segments. For the year, our earnings per share increased to 41% year-over-year to TWD 0.82. Our continued disciplined CapEx approach also enabled UMC to generate a total of TWD 37.1 billion in free cash flow, up 19% year-over-year.
In terms of technology, we recently validated our 22-nanometer process on the USB 2.0 test vehicle, demonstrating the technology readiness of this design rule shrink from 28-nanometer. UMC's 22-nanometer process features a 10% area reduction as a power to performance ratio and enhance RF capabilities compared to our existing 28-High-K/Metal Gate technology.
Looking to the first quarter of 2020 based on the customer forecast, the overall business outlook appears to remain consistent with the previous quarter, primarily due to a stable wafer demand across wireless communication and computer peripheral segments. As we receive new product tape-out that will enter future production pipeline, we expect to benefit from 5G and IoT trends that will generate additional semiconductor demand, specifically in wireless device as well as power management applications. While our focus remains to maintain disciplined capital expenditure spending all the way into mid- to long-term customer and market demand, we have set up our 2020 CapEx budget of USD 1 billion.
UMC will continue to penetrate into new segments and expand our presence in the existing markets. Our core competence in process technology development and world-class foundry service will strengthen our position in delivering project and specialty manufacturing solutions.
Now I will like to address the Wuhan coronavirus situation here. Regarding the novel coronavirus outbreak, we promptly set up a cross-functional prevention team prior to Chinese New Year. That is specifically tasked with managing the potential risk of the coronavirus at UMC. Today, all of our operations remain normal. And we will continue to actively monitor the rate, both internally and externally, so we may better timely respond to any changes in this fluid situation.
Now let's move on to the first quarter 2020 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar is expected to remain flat. Gross profit margin will be in the mid-teens percentage range. Capacity utilization rate will be around to 90%. Our 2020 CapEx budget will be USD 1 billion.
That concludes my comments. Thank you all for your attention. Now we are ready for questions.
[Operator Instructions] And the first question is coming from Randy Abrams of Crédit Suisse.
Yes. I wanted to ask the first question. Just if you could give a look ahead to a view for 2020. Maybe an outlook for foundry sector, whether it's for the whole industry or stripping out the advanced technology you don't access. And then your view relative to that, how you expect UMC to perform?
And the second part, if you've discerned any changes from the virus at this stage, whether from the customer demand side or some of the activity from that at this stage?
Sure. Randy, thank you for the question. The first question is about the -- our view on the foundry outlook in 2020. We expect semi to grow in mid-single digits. And foundry segment to grow in high single-digit percentage range. And that's actually including the advanced now as well, okay? That's not exclude event, that's not focused on addressable only. Now if we look at the UMC growth in 2020, with USJC, our newly acquired fab, we will grow higher than the foundry industry. And without the USJC, we will grow in line or slightly better than the foundry industry. So that's kind of where we project at this point for 2020.
As far as for the question of the coronavirus impact, at this point, we are closely communicating with our customers to monitor the development of the situation. At this moment, there is no change in our Q1 demand, should the outbreak deteriorates into a situation, that may cause supply chain issues, and which we are looking at it closely in China, there could be some impact with the entire semiconductor industry. And at this point, there's no chance yet.
Okay. If I could ask you on the 28-nanometer, where last quarter, I think you saw some light at the end of the tunnel or some improvement. Could you maybe give an update on the applications you're qualifying and then timing to bring that in?
And maybe in that -- like, how you could see 28 ramp up as a percent of revenue through the year or toward year-end? And I also had a question just as you ramp back 28, how that would impact the gross margin where you get the benefit of filling the fab, but I guess relative to corporate average, how you see it whether it will be accretive to corporate gross margin or still dilutive to the margin?
Sure. Well, the -- we've been reporting many quarters about the 28 contribution to us. And we've been talking about this fragment in the market and we're still at this recovery mode. So we expect to see the 28-nanometer contribution in Q1, '20 will still be under the recovery mode, but we are confident in improving our 28 utilization in second half '20. We -- what we foresee is our -- found our key 28 project engagement will start to enter volume production in third quarter '20, mainly driven by the wireless communication ICs. And the -- as far for the gross margin...
Yes. For the gross margin, I think any recovery in the currently underutilized 28-nanometer capacity will be incremental positive to our overall corporate gross margin.
Okay. Great. And then last question, just on the CapEx of $1 billion, with the 85% 12-inch and then the rest 8-inch, could you maybe lay out in capacity additions where like the fabs are -- where you expect to increase the actual wafer capacity?
Sure. The way that you break it down first is between 8-inch and 12-inch. But the other way we look at it is more we split into 3 different categories. 1/3 of the CapEx will for the noncapacity related. For example, our general budget. So the 1/3 will count for the increase of capacity, major for 28 nanometers in our 12X, the Xiamen facility. And the other 1/3 is truly upgrade throughout our overall capacity pool. So the overall capacity growth wave will be low single digits year-over-year in 2021. While we have been -- the budget for 2020 is more of a capacity plan for the 2021.
Okay. And on the 28, if you could give an update how much capacity you have? I think maybe you last update it was, if I were right, 39,500 and 5,000 in Xiamen. But if you can maybe give an update how much you have for 28? And how much you may expand 28?
Well, the 28 monthly capacity will remain unchanged at the 45,000 to 46,000 a month in 2020. And what we budgeted for the 2020 CapEx is mainly for the increase of 2021. Yes.
So just -- I'll add into that. The Xiamen capacity likely to reach full of 25,000 wafer per month by mid of 2021.
The next question is coming from Charlie Chan of Morgan Stanley.
Happy New Year. And first of all, I want to follow up the question regarding the 28-nanometer demand. So you said that demand comes on the wireless semiconductor. So my question is that, what kind of wireless? Because most of the smartphone AP already migrated to 12-nanometer or below.
And secondly, do you classify the AMOLED driver IC and image signal processor as the water-resistant conductor for 28-nanometer?
Sure. First, Happy New Year to you, too. The -- yes, the answer is yes. We are considering the Wi-Fi devices and display drivers ICs and the -- some sensor device, they are considered as the application for the 28 nanometers. Yes.
Okay. Thanks for clarification. And second thing is that we are being -- seems that lots of [ tolling ] edge are in tightness and some order overflow from those bigger players. So can you please comment, which process nodes you see are in tightness or even in a shortage? And second thing is that do you see any possibility that you have to select customers even hike the price for -- in the coming quarters.
Okay. Well, that's more a question for across all nodes. So let me see if I can break it down this way. The -- we see tightness of the -- capacity tightness across the 8-inch advanced nodes, okay, which is anything more than the 0.18 micron. And we see the 12-inch, all the legacy nodes, we found that 90-nanometer all the way to 55 nanometers, okay? And the 40 -- for the 40 nanometers, and we see some decline in the Q4 '19 and largely due to the weakened demand.
But in the long-term view, we are continue cautiously monitoring the [ no ] migration and about this particular -- 40 nanometers. So that's kind of how we look at the market right now.
Okay. So do you expect that timing will continue? And you have to kind of be more firm on your pricing or even doing some price hike at headquarters?
Well, I mean, we do think this tightness will continue, in particular on those nodes I highlighted. And the -- in terms of pricing we still have to align with the market price. So -- and we'll continue working closer with our customers based on the market price trend. Yes.
Okay. And lastly, maybe some update on the lawsuit with Micron. Maybe Qi Dong or Jason can help us because this has been a very big overhang to the stock and it has been for more than a year, right?
So we really hope to kind of get some clarification regarding the status and the timing, potential impact to company's finance and operation. You'll be very helpful for [indiscernible].
Yes. We understand that. Yes. Right now, the litigation is still ongoing. Given the case is under the judicial process, we do not have any update information -- updated information. So if there is any significant development, we will disclose them accordingly. So there's truly not much of an update right now. Yes.
Okay. And just to clarify, in your opening remarks -- I'm sorry, the answer to Randy's question, you said that your 2020 revenue is going to outgrow the foundry industry without including the Japan fab. Is that the right takeaway?
Yes. I said, with all the Japan fab, we will grow in line or slightly better than the foundry industry. Yes.
Okay. So what is the reason that you're outgrowing or gaining market share? Because I can understand TSMC can get it because they continue investing kind of advanced mills, right?
But from -- for you guys, you're also competing with the Chinese vendors, but Chinese vendor seems to be very confident. They are well positioned for the Chinese customers' growth, right? So can you give us some elaboration why you can outgrow?
Sure. Well, first of all, we expect to capture high growth from the wireless communication, including early 5G rollout opportunities in both logic and specialty technologies. And obviously, the change, we believe, is mainly driven by the demand pickup. That's one reason. And second is, of course, market share again in 2020.
Okay. So in which segment you're gaining share?
The -- well, I mean, let me do it -- let me go it this way. The -- if we look at the market trend, and we already start observing some of the evidence by, one, increasing power and RF application such as a transceiver and switch that in a 5G phone and a base station, that's one area.
Second is increase of OLED adoption in a smartphone. Okay. And that's second, which will fuel the OLED driver IC. We also touched that earlier too, the driver. And the third is the multi-camera modules, that buying the smartphone that will drive the sensor and the controller wafer demand. And also, we look -- we saw the upgrades in the Wi-Fi standard for the faster connectivities requirement and we will get benefits on that as well. So this is probably I can think of 4 different areas. Yes.
For that outsourcing of AMOLED driver IC and the ISP from Korea customer, do you think there's something structural? I mean maybe they have some internal fab shortage this year. But long term, how solid and how sustainable do you think this outsourcing is going to be?
Well, we usually don't comment on any specific customer. And so it's -- I don't think it's appropriate for me to comment that. Yes.
Okay. Sure. Yes. Just if you can give us some perspective from -- kind of high-level strategy perspective, right? Why this could be structural? I think that should be helpful. I mean not maybe for some specific customers but just for the sector or industry overall. Is that possible?
I think the changing in the market space does fuel the increase of the wafer semiconductor demand, right? So that's [indiscernible]. So this -- I will say that's the opportunity that we are participating right now. Yes.
And the next question is coming from Gokul Hariharan of JPMorgan.
First of all, could you talk a little bit about how you expect depreciation to shape up in 2020? And with Fujitsu fab consolidation and higher CapEx compared to last year, what is our expectation of depreciation going into 2021?
I think previously, we had expected, I think, 2021, probably would be the year where we will see a meaningful drop off in depreciation expenses. Is there a change to that, given the increase in CapEx and the expansion on 28-nanometer? That's my first question, and I had a couple of follow ups too, sir.
So for depreciation, in 2019, it declined about 5% to 6%, as we expected. And because of the combination of Japanese fab, our 2020 expectation in terms of depreciation decline is around low single digit. And of course, yes, as we mentioned earlier, the peak of the 28 spending was about 4 years ago. So 2021 or 2022, we will start to see even much bigger rate of decline in terms of our depreciation expenses.
Could we be a little bit more specific, given we are spending a little bit more CapEx? Are we thinking about like 15%, 20% decline in depreciation in '21 or it's going to be more gradual than that?
I think it probably would be a little bit more gradual than that. But still, our spending for 2018 and 2019, both are around 0.7 billion only. So still, I think the mega trend won't change much, but the magnitude for 2021 probably will be less than what you mentioned.
Got it. Also, given the roughly 10% accretion on revenue side from the Fujitsu quotation, could you also comment about what is the margin impact from consolidating this fab? Is it additive, in fact, to gross margin or is it similar to corporate average?
So for the Q4, the first quarter, they are slightly above breakeven. And as we mentioned earlier, we are driving the synergy, and it may take up to 2 to 3 quarters. So we do expect the contribution to improve over time. And that's the current situation.
They are in black in Q4 already. And we expect they will continue to be profitable in Q1 of this year.
Okay. And last question from me. Could you talk a little bit about how the current situation on 8-inch utilization demand capacity and pricing? And if the coronavirus situation deteriorates and the current weakness that you're seeing in kind of IC demand persist, if there is a lower expectation on 5G demand itself, does this affect your 8-inch utilization or demand? Or 8-inch, you would say, is relatively less impacted?
Well, our Q4 '19, the 8-inch is at a low 90% utilization rate. And in Q1 '20, our utilization will be in mid-90 range. We are expecting to see higher 8-inch utilization rate after the Q1 '20, so we remain confident about this outlook of the 8-inch. And the -- in terms of the virus outbreak, as we reported earlier, based on the communication with our customers, at this point, there's no change in Q1 yet.
And the next one is coming from the Szeho Ng of China Renaissance Securities.
With the company now turning a lot more cash generative, I'm wondering whether the company will continue to pay out special dividend or to raise the payout ratio over 100%.
So our last year pay ratio was 100% already, so it's probably difficult to get higher than that. For this coming year, of course, we will continue with our high-dividend payout policy, and we will propose that to our Board in due course.
Okay. Great. And the other question, again, on the Japanese fab, I believe it is still not fully loaded, right? Would the company consider to move more business from Taiwan to Japan or how easy would that be?
Well, that's part of our synergy plans. In addition to streamline the material procurement and fab productivity, hence then we also try to bridge in product from the [ Taiwan fab ] to the Japan fab. So that is part of our activities. Yes.
And the customers are actually quite receptive to that arrangement, right? To move from the Taiwan fab to Japan fab?
Well, yes. I mean yes, we are aligned with our customers for those activities. Yes.
And the next question is coming from Zheng Lu of Goldman Sachs.
This is Bruce. So I need to clarify one thing that 28-nanometer profitability was similar to corporate average even with full capacity, is that right?
No. That's not the way we look at this. I mean any recovery in the 28-nanometer capacity utilization, which we expect to see that starting from mid of this year will be incrementally positive to our current corporate average profitability.
Okay. But that will be still around, like, 20%, 30% range. Is that right?
No. I didn't say that. I mean it's quite complicated, even for the same 28-nanometer technology, different customers will have different profit margins, not to mention the different fabs will have also very different profit structures.
Okay. So my question is that we -- I'm actually very surprised to see the 28-nanometer capacity expansion. If you used USD 1 billion CapEx, 70%, 80% for 20 other there. So for 28, your 28-nanometer capacity might increase by 20%, 30% in 2021. But TSMC, the biggest 28-nanometer capacity provider, suggests the industry is oversupplied. And do you expand this incremental capacity for your 28 will be margin accretive, ROE accretive?
If you put whole actions in one picture, yes, because our current Xiamen factory will be the main area for 28-nanometer expansion. And right now, Xiamen factory is only about 70% equipped. And the remaining 30%, 35%, once we reach the full capacity, the whole earning -- profitability structure will be a lot more ideal and will be also much easier to reach a breakeven positions with the fully equipped 25,000 wafer per month set, compared to their current status.
Yes. But my question is that, by the end of 2020, assuming you are increasing your capacity for 28, that's based on that you have the full capacity for 28 by the end of 2020, right? So you will have a better profitability by then. And with the initial incremental capacity, will that be a margin and ROE accretive?
They won't be equivalent to our current corporate average, but they will be much better than its current single fab profitability. So we will see a pretty significant profitability improvement because of the economy of scale benefit for that one particular fact.
I see. What is the revenue concentration for your 28-nanometer to a single customer or as a single end customers? Do you see the high revenue concentration on that? Because we are trying to evaluate a risk for that.
Yes. Let me answer you in a different way, first. Our top 10 customer are around 55% to 60%, as always. And top 2, top 3 customers, sometimes, it's around 10%. And for 28 nanometer, we are now at more than a dozen of customers. So the diversity may not be specified the whole company but also are quite diversified. So I don't have 28-nanometer customer list for you right now. But the concentration won't be too much higher than our corporate average.
I see. Understand. Last question is that, the management guided by -- foundry industry growth as high single digit. And this is much lower than what -- since you guided for the foundry industry. Can I know the differences?
Well, we all have a different view and look at this the market outlook. So it's -- our intelligence is telling us, the outlook for 2020 will be somewhere at the high single digits. So that's why we do our outlook. Yes.
But the gap is quite big.
I can't comment. I don't know how they calculate it.
Yes. We're trying to speak for ourselves.
Okay. Understand that because we need to -- I just tried to know the differences, though.
Of course, yes, because we don't have the detail of how they calculate it, so it's compared in the...
I see. But if they are having 50% market share for the whole market, and they are guiding for 20% for their revenue growth, if you are guiding for, like, high single digit for the industry growth, which means that rest of the foundry will be, like, low single-digit decline.
You can have two sides of data and making one story. So I think it will be difficult for us to answer that.
But when you calculate your stuff, you already factor in adjacency will grow by 20%, as they guided, right?
We use our market intelligence to come up with this high single-digit number.
[Operator Instructions] And the next question is coming from Sebastian Hou of CLSA.
The first question is on, well, what you don't just said about the improvement possibility in your Xiamen fab, so would that change the subsidy from the government you're receiving?
No. The subsidies we have already received in cash in our pocket. But accounting-wise, we have to recognize that along with our depreciation timetable, which is around 6 years, so we already recognize that for more than 2 or 3 years. So the remaining 3 to 4 years is intact.
Okay. So that's still coming through the operating -- the other incomes in operating line?
Yes. It's financial...
So basically, it's irrelevant to the actual profitability of your Xiamen fab right now.
Yes. The task might be different, but the subsidies-wise is -- the ballpark figure is about the same.
Okay. But net-net, it's still a positive to the company profit?
Yes. Yes. Sure.
Okay. Got it. And also in the prepared remarks, the Co-President mentioned that your – the company is receiving new product tape-outs to enter future production pipeline. Can you elaborate more about what type of the tape-out you're receiving and that make you excited?
Well, the outlook of the table is across a difference. There is nodes for the -- our 28-nanometer project engagement, we kind of talked about that earlier, mainly driven by the wireless communication ICs, including Wi-Fi, display drivers and others.
For the 8 inch, and we also touched that talking about the RF trans-switch and the transceiver and those areas, so there are 4 different various nodes. And -- but mainly, I will say, if you look at this, in general, is really a lot of this associated with the 5G rollout. And we see the 5G rollout does help in the overall semiconductor demand increase. So we see quite a bit of opportunity in there. Yes.
Okay. Got it. And in the -- when you mentioned about the 4 areas that you're seeing growth to drive likely above industry average growth earlier, and one of that is 5G smartphone and base station. So can you give us more details about what type of ICs that you are supplying into 5G smartphones and base stations?
Yes. The -- under the 5G infrastructure, such like the sub-6G, the RF SOI, the RF switch was associated with that. Power management also associated with that, and that's for the 8-inch. The -- some of the display requirement actually for the 5G smartphone, the AMOLED and that's the display driver that's related to 5G as well. And the -- and that's where the area we see in many of the opportunities.
Okay. Got it. And I have another question is about the -- your plan on the Fujitsu fab that you just acquired. I understand that you don't mention about it, it's already above breakeven now and probably will improve. But as you evaluate that, what -- how long does -- first is, how long does it take for that fab to reach the corporate average utilizing rate? And second is that once you reach the corporate average utilization rate, what's the profitability like? Will it be also be similar to the corporate average or still be interest rate devoted?
Well, again, our copper average hopefully is improving as a whole. So it's difficult to just benchmark to corporate average.
The goal is really to drive the synergy as of this newly acquired fab. And so far, it has been meeting or even exceeding our expectations. So we're pretty happy with the current achievement, and we do expect to see further benefit out of the whole integration effort.
But again, we cannot quote in terms of numbers, as we see no reason why this fab cannot have similar profitability as any single fab we have in Taiwan or Singapore.
Okay. I see. Last question for me. I think this probably might be addressed by the other analysts, but I sort of dialed in later, but you just -- just a follow-up on the depreciation outlook for 2021. With the new CapEx on 28 now in place, what's your updated view on the depreciation magnitude for 2021?
It's still on the decline trend. So again, back in 2019, the overall depreciation expenses declined by about 5% to 6%. And for 2020, we expect to see low single digit decline. We saw a little bit more decline rate in 2021.
Okay. We're a little bit more than low single digit?
A lot more than low single digit.
A lot more?
Yes.
And the next question is coming from [ Stephen Chin of Alicia ] Capital.
This is [ Stephen from Alicia ] Capital. The first question, I would still like to follow up on the CapEx. So in the past few years, the CapEx has pretty disciplined. And this year, we see it higher. You already explained a reason. I'm just wondering if from the company management point of view, you still aim for disciplining CapEx and high-tech generation business model or we should treat this year as kind of an inflection point that you start to see more semiconductor counterweight opportunity, so you start to earn for more growth?
Well, our CapEx policy is -- remains the same, is disciplined CapEx policy. So we will continue to cautiously foresee with this approach. Our budget will be subject to the strengthened ROI criteria every year. And we -- when we do that, we actually factor in overall cash dividend payout to shareholders while ensuring affordable spending that will deliver our target organic growth. So it's a balance at, and we'll continue with our disciplined CapEx approach.
Understood. My second question is regarding your customer portfolio change regarding the -- I mean based on the geography breakdown. So in 2019, we see Asian customer percentage-wise increased quite significantly. Just wonder, do you consider this trend will continue?
I think in the past couple of years, we actually observed this trend actually a couple of years ago, it's not recent. And we think we will get to a situation we start actuating and this will be probably -- the outlook will be similar to what we've seen today.
Understood. Yes. And the next question is regarding -- also a follow up on your estimate for the foundry revenue growth. Still curious, do you consider those internal supply also as part of your number in your calculation? Or you only consider third-party foundry?
Can you repeat that question again?
Yes. The question is when you guided for the foundry market growth, I was just wondering if you consider those -- the [ quality ] foundry, but most of the revenue is for the internal demand. Do you consider that as part of your calculation?
No. I don't think we include that.
I see. Okay. And last question is, you mentioned about a 200-millimeter. If part of that -- the growth is under ISP switch, the automation about RF SOI. So I'm curious if you also see the RF SOI growth at 300-millimeter? And for you, in particular, do you see -- I mean, is that under [indiscernible] Do you see it is mainly on the RF SOI or you are also doing the FD SOI?
We are not participating in FD SOI today. And we're only referring to the RF SOI. And as the product migration trend, we do see the RF SOI will migrating by 8-inch to 12 inch. And as far as the 8-inch demand outlook, beside the RF switch, RF transceiver, we also see in the area, and we see a significance of power management ICs, the main as well.
Understood. And also congratulations to your good Q outlook.
And the next question is coming from Randy Abrams of Crédit Suisse.
Okay. Just had a few quick follow-up questions. One for the OpEx, where it's been running about 10% to 11% of sales. If you could talk about now how you kind of see that growing in the coming year, just in absolute or as a percent of revenue? And the other one, just the tax rate to use?
For OpEx, in absolute dollar terms, because of the addition of the Japanese operation, we do not see too much fluctuation in the absolute OpEx dollars. But because of the kind of optimistic outlook for the whole 2020, we do expect OpEx as a percentage of revenue will gradually trend down. So that's our goal.
And for tax, there's not much change in the current circumstance. And we do have some tax expenses reversal in Q4 of last year, which will result in tax credit instead of tax expenses for Q4 last year. But overall, we are talking about 10% plus/minus of our corporate tax average.
Okay. And then last question on the end markets, the stable first quarter, even with the Chinese figures, are pretty decent for shipments. Could you give maybe a split by the applications, what you're seeing, maybe areas that may be growing a bit in first quarter and any areas declining a bit?
Yes. The -- we see the Q1 the strongest is in the computer segment. Then the -- followed by the communication, and the consumer is weakest right now.
Computer segment, I guess, within that, because overall PC, there's, I guess, not that much happening, but is there something driving that to be better?
Yes. We actually see a lot of a high-speed I/O interface devices, the USB, the HDMI, the -- all those high-speed devices where we see quite a bit of demand increase.
Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I will turn things over to UMC Head of IR for closing remarks.
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 ir@umc.com. Have a good day. Thank you.
Thank you. And ladies and gentlemen, that concludes our conference for fourth quarter 2019. And we thank you for your participation in UMC's conference. There will be a webcast replay within an hour. Please visit www.umc.com under the Investors Events section. You may now disconnect. Goodbye.