UMC Reports Third Quarter 2021 Results

Strategic focus in 5G, auto, AIoT markets will further strengthen UMC’s global leading specialty foundry position

Third Quarter 2021 Overview¹:

• Revenue: NT$55.91 billion (US$2.01 billion)
• Gross margin: 36.8%; Operating margin: 27.1%
• Revenue from 22/28nm: 19%
• Capacity utilization rate: 100%+
• Net income attributable to shareholders of the parent: NT$17.46 billion (US$627 million)
• Earnings per share: NT$1.43; earnings per ADS: US$0.257

United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) (“UMC” or “The Company”), a leading global semiconductor foundry, today announced its consolidated operating results for the third quarter of 2021.

Third quarter consolidated revenue was NT$55.91 billion, increasing 9.8% QoQ from NT$50.91 billion in 2Q21. Compared to a year ago, 3Q21 revenue grew 24.6% YoY from NT$44.87 billion in 3Q20. Consolidated gross margin for 3Q21 was 36.8%. Net income attributable to the shareholders of the parent was NT$17.46 billion, with earnings per ordinary share of NT$1.43.

Jason Wang, UMC co-president, said, “In the third quarter, we continued to experience robust chip demand across computing, consumer and communication end segments. Higher 12’’ wafer shipments in the quarter reflected ongoing product mix enhancements and partially contributed to the lift in blended ASP. Overall wafer shipments grew 2.6% QoQ to 2.50 million 8-inch equivalents. Revenue from 28nm technologies continued to rise while business engagements in 22nm have led to a growing number of customers’ tape outs across wireless, display, and IoT markets, further diversifying our product pipeline.”

Co-president Wang continued, “Looking into the fourth quarter, we anticipate wafer shipments and the ASP trend will remain firm. Capacity utilization across 8” and 12” facilities will continue to remain fully loaded, as gross margin continues to exhibit upward momentum, thanks to our team’s efforts in optimizing capacity productivity and product mix. The current business cycle provides an opportune time for UMC to strengthen customer relationships, along with our technology competitiveness and the incremental capacity growth to elevate our market position. Our focus on growing our comprehensive logic and specialty technology portfolio has been welcomed by our customers and we continue to broaden our product range to fulfill their needs. With the P5 & P6 expansion projects underway at our flagship 12A in Tainan, given the strong demand from our customers, we are well positioned to grow and capture additional market share in 2022.”

Co-president Wang added, “In addition, the company continue to make strides towards a greener future. Earlier this month, UMC was honored to receive the Green Chemistry Application and Innovation Award from Taiwan’s Environmental Protection Agency. The award recognizes our efforts to introduce chemical substitutes that minimize impact to the environment and the health of our employees. At our Outstanding Supplier Awards this year, UMC also took the opportunity to reiterate our commitment to achieve net zero carbon emissions by 2050 and to invite suppliers to work with us to build a low carbon supply chain. As a key semiconductor player, UMC understands that we have a responsibility to proactively respond to climate change and to promote sustainable practices in our industry. Together with our upstream and downstream partners, we will continue working towards our net zero carbon emissions target.”

Summary of Operating Results

Operating revenues in 3Q21 increased 9.8% to NT$55.91 billion which included higher 12” wafer shipments and the optimization in product mix. Revenue contribution from 40nm and below technologies was 37%. Gross profit grew 29.1% QoQ to NT$20.54 billion, or 36.8% of revenue. Operating expenses increased 7.0% to NT$6.64 billion. Net other operating income declined to NT$1.23 billion. Net non-operating income increased to NT$4.32 billion. Net income attributable to shareholders of the parent increased to NT$17.46 billion.

Earnings per ordinary share for the quarter was NT$1.43. Earnings per ADS was US$0.257. The basic weighted average number of outstanding shares in 3Q21 was 12,206,292,756, compared with 12,206,292,756 shares in 2Q21 and 12,107,651,452 shares in 3Q20. The diluted weighted average number of outstanding shares was 12,411,100,649 in 3Q21, compared with 12,382,592,798 shares in 2Q21 and 12,179,561,492 shares in 3Q20. The fully diluted shares counted on September 30, 2021 were approximately 12,427,179,000.

Detailed Financials Section

Operating revenues increased to NT$55.91 billion. COGS went up 1.0 % QoQ to NT$35.36 billion, as the 2.8% sequential decline in depreciation was offset by the 2.6% increase in other manufacturing costs mainly from higher wafer shipments in 3Q21. Gross profit increased 29.1% QoQ to NT$20.54 billion, reflecting the uptick in overall average selling price across 8” and 12” wafer shipments. Operating expenses increased 7.0% QoQ to NT$6.64 billion, as G&A grew 11.5% sequentially to NT$2.12 billion while Sales & Marketing increased 7.2% QoQ to NT$1.21 billion. R&D increased 4.3% to NT$3.30 billion, representing 5.91% of revenue. Net other operating income was NT$1.23 billion. In 3Q21, operating income grew 33.8% QoQ to NT$15.14 billion.

Net non-operating income in 3Q21 was NT$4.32 billion, primarily reflecting NT$4.53 billion in net investment gain and a NT$164 million in exchange gain, offset by a NT$367 million in net interest expense.

In 3Q21, cash inflow from operating activities was NT$22.13 billion. Cash outflow from investing activities amounted to NT$23.22 billion, which included NT$17.88 billion in capital expenditure, resulting in free cash flow of NT$4.25 billion. Cash outflow from financing activities was NT$9.69 billion, mainly from a NT$19.87 billion in the distribution of cash dividend and a NT$4.51 billion in payment in bank loans, offset by a NT$11.16 billion in bond issuance and a NT$3.74 billion payment as capacity deposit for 12A P6. Net cash outflow in 3Q21 was NT$10.90 billion. Over the next 12 months, the company expects to repay NT$6.75 billion in bank loans.

Cash and cash equivalents decreased to NT$113.11 billion. Days of inventory increased by a day to 59 days.

Current liabilities decreased to NT$84.55 billion, which included a NT$24.26 billion in short-term credit/bonds. Long-term credit/bonds increased slightly to NT$51.09 billion. Total liabilities declined to NT$171.19 billion, leading to a debt to equity ratio of 66%.

Analysis of Revenue²

Revenue from Asia-Pacific increased to 65% as business from North America remained at 22% of sales. Business from Europe was 7% while contribution from Japan declined to 6%.

Revenue contribution from 22/28nm was 19% of the wafer revenue, while 40nm contribution stayed at 18% of sales.

Revenue from fabless customers accounted for 86% of revenue.

Revenue from the communication segment declined to 46%, while business from computer applications remained at 17%. Business from consumer applications increased to 27% as other segments accounted for 10% of revenue.

Blended ASP Trend

Blended average selling price (ASP) grew in 3Q21.

(To view blended ASP trend, please click here for 3Q21 ASP)

Shipment and Utilization Rate³

In 3Q21, wafer shipments increased 2.6% QoQ to 2,503K, while quarterly capacity grew to 2,383K. Overall utilization rate in 3Q21 exceeded 100%.

Capacity⁴

Total capacity in the third quarter grew by 0.5% QoQ to 2,383K 8-inch equivalent wafers. Capacity is expected to slightly increase in the fourth quarter to 2,419K 8-inch equivalent wafers, mainly reflecting the capacity expansion at Fab 12i, 12M, 12X and 8N.

CAPEX

CAPEX spending in 3Q21 was US$642 million. Full year 2021 CAPEX is budgeted at US$2.3 billion, which includes the company’s collaborative Fab 12A P6 expansion plan with customers.

Fourth Quarter 2021 Outlook & Guidance

Quarter-over-Quarter Guidance:

• Wafer Shipments: To increase by 1-2%
• ASP in USD: To increase by 1-2%
• Gross Profit Margin: To be in the high-30% range
• Capacity Utilization: 100%
• 2021 CAPEX: US$2.3 billion

Recent Developments / Announcements

Please visit UMC’s website for further details regarding the above announcements

Conference Call / Webcast Announcement

Wednesday, October 27, 2021

A live webcast and replay of the 3Q21 results announcement will be available at www.umc.com under the “Investors / Events” section.

About UMC

UMC (NYSE: UMC, TWSE: 2303) is a leading global semiconductor foundry. The company provides high quality IC production with a focus on both logic and specialty technologies to serve every major sector of the electronics industry. UMC’s comprehensive technology and manufacturing solutions include logic/RF, embedded high voltage, embedded flash, RFSOI/BCD and IATF-16949 automotive manufacturing certification for all its manufacturing facilities. UMC operates 12 fabs that are strategically located throughout Asia with a maximum capacity of approximately 800,000 8-inch equivalent wafers per month. The company employs approximately 19,500 people worldwide, with offices in Taiwan, China, United States, Europe, Japan, Korea and Singapore. For more information, please visit: http://www.umc.com.

Safe Harbor Statements

This press release contains forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and as defined in the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding anticipated financial results for the third quarter of 2021; the expected wafer shipment and ASP; the anticipated annual budget; capex strategies; environmental protection goals and water management strategies; impact of foreign currency exchange rates; expected foundry capacities; the ability to obtain new business opportunities; and information under the heading “Third Quarter of 2021 Outlook and Guidance.”

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual performance, financial condition or results of operations of UMC to be materially different from what is stated or may be implied in such forward-looking statements. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, but not limited to: (i) dependence upon the frequent introduction of new services and technologies based on the latest developments in the industry in which UMC operates; (ii) the intensely competitive semiconductor, communications, consumer electronics and computer industries and markets; (iii) the risks associated with international business activities; (iv) dependence upon key personnel; (v) general economic and political conditions; (vi) possible disruptions in commercial activities caused by natural and human-induced events and disasters, including natural disasters, terrorist activity, armed conflict and highly contagious diseases; (vii) reduced end-user purchases relative to expectations and orders; and (viii) fluctuations in foreign currency exchange rates. Further information regarding these and other risk factors is included in UMC’s filings with the United States Securities and Exchange Commission, including its Annual Report on Form 20-F. All information provided in this release is as of the date of this release and are based on assumptions that UMC believes to be reasonable as of this date, and UMC does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

The financial statements included in this release are prepared and published in accordance with Taiwan International Financial Reporting Standards, or TIFRSs, recognized by the Financial Supervisory Commission in the ROC, which is different from International Financial Reporting Standards, or IFRSs, issued by the International Accounting Standards Board. Investors are cautioned that there may be significant differences between TIFRSs and IFRSs. In addition, TIFRSs and IFRSs differ in certain significant respects from generally accepted accounting principles in the ROC and generally accepted accounting principles in the United States.

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