UMC Reports Third Quarter 2020 Results

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 2020.

Third quarter consolidated revenue was NT$44.87 billion, compared to NT$44.39 billion in 2Q20 and up 18.9% YoY from NT$37.74 billion in 3Q19. Consolidated gross margin for 3Q20 was 21.8%. Net income attributable to the stockholders of the parent was NT$9.11 billion, with earnings per ordinary share of NT$0.75.

Jason Wang, co-president of UMC, said, “During the third quarter, consolidated operating margin reached 15.9%, while utilization rate remained firm at 97%. Wafer shipments reached 2.25 million 8-inch equivalent wafers. During Q3, work-from-home and home schooling trends continued to contribute to stable end market demand for applications in wireless connectivity, power management ICs used in smartphones as well as high speed interface I/O controllers found in computing devices. In addition to demand stability across various end markets, our 28nm revenue grew QoQ as customer product tape outs continued throughout the quarter. Moving forward, we expect to see a sustained increase in the number of 28nm tape outs, which will further diversify our 28nm exposure to end markets and customers.”

Co-president Wang continued, “Looking into the fourth quarter, demand from consumer and computer related applications will lead to a minor increase in wafer shipments, propelled by ongoing work-from-home initiatives and home schooling. Furthermore, we have seen an uptick in semiconductor demand due to more silicon content in particular applications such as newly deployed 5G smartphones, IoT devices and other consumer products. Therefore, the current industry landscape appears to show favorable supply and demand dynamics towards foundry; hence, UMC will pursue a delicate balance in strengthening our customer relationships while securing interests for our shareholders to ensure our long term growth.”

Summary of Operating Results

Operating revenues in 3Q20 remained flat at NT$44.87 billion. Revenue contribution from 40nm and below technologies increased to 37%. Gross profit declined 4.8% QoQ to NT$9.77 billion, or 21.8% of revenue. Operating expenses declined 3.0% to NT$5.51 billion. Net other operating income increased 126.9% to NT$2.87 billion, which included the sale of Nexpower Technology Corporation’s manufacturing plant, leading to an operating income of NT$7.13 billion. Net non-operating income was NT$2.07 billion. Net income attributable to stockholders of the parent grew 36.3% QoQ to NT$9.11 billion.

Earnings per ordinary share for the quarter was NT$0.75. Earnings per ADS was US$0.129. The basic weighted average number of outstanding shares in 3Q20 was 12,107,651,452, compared with 12,193,149,897 shares in 2Q20 and 11,708,239,978 shares in 3Q19. The diluted weighted average number of outstanding shares was 12,179,561,492 in 3Q20, compared with 12,262,774,432 shares in 2Q20 and 13,049,025,428 shares in 3Q19. The fully diluted share count as of September 30, 2020 was approximately 12,294,281,000. On September 30, 2020, UMC sold 105 million treasury shares acquired from the 21th share buy-back programs to its employees.

Detailed Financials Section

Operating revenues remained relatively flat at NT$44.87 billion. COGS increased 2.8% QoQ to NT$35.10 billion, which included low single digit increases in both depreciation and other manufacturing costs. Gross profit declined by 4.8% to NT$9.77 billion, partly due to the appreciation of the NT dollar. Operating expenses declined 3% QoQ to NT$5.51 billion, as sales and marketing expenses rose 8.7% QoQ to NT$1.01 billion. G&A expenses grew 4.9% to NT$1.61 billion. R&D expenses increased 3.5% sequentially to NT$3.31 billion, representing 7.4% of 3Q20 operating revenues. Net other operating income increased to NT$2.87 billion. In 3Q20, operating income increased 22.0% QoQ to NT$7.13 billion.

Net non-operating income in 3Q20 was NT$2.07 billion, mainly resulting from NT$3.94 billion in net investment gain and NT$259 million in exchange gain, which was partly offset by NT$1.82 billion in other losses and NT$314 million in net interest expense.

In 3Q20, cash inflow from operating activities was NT$18.54 billion. Cash outflow from investing activities totaled NT$5.69 billion, which included NT$7.42 billion in capital expenditure, resulting in free cash flow of NT$11.12 billion. Cash outflow from financing activities totaled NT$13.65 billion, primarily from NT$9.77 billion in the distribution of cash dividend and NT$4.72 billion in the repayment of bank loans, offset by NT$1.68 billion in the sale of treasury stock to employees. Net cash outflow in 3Q20 was NT$1.03 billion. Over the next 12 months, the company expects to repay NT$6.83 billion in bank loans.

Cash and cash equivalents decreased to NT$98.84 billion. Days of inventory decreased to 60 days.

Current liabilities decreased to NT$59.15 billion, mainly from NT$9.77 billion in the payment of cash dividends and NT$0.92 billion from the decline in short-term credit/bonds. Total liabilities declined to NT$147.33 billion, leading to a debt to equity ratio of 67%.

Analysis of Revenue2

Revenue from Asia Pacific rose to 57% as business from North America declined to 30% of sales. Business from Europe rose to 6% while contribution from Japan decreased to 7%.

Revenue contribution from 28nm increased to 14% while 40nm business remained unchanged at 23% of sales.

Revenue from fabless customers stayed at 88% of revenue.

Revenue from the communication segment increased to 54%, while business from computer applications declined to 13%. Business from consumer applications remained unchanged at 24% as other segments decreased to 9%.

Blended ASP Trend

Blended average selling price (ASP) increased slightly in 3Q20.

(To view blended ASP trend, please click here for 3Q20 ASP)

Shipment and Utilization Rate3

In 3Q20, wafer shipments increased 1.6% QoQ to 2,254K, while quarterly capacity rose 0.7% QoQ to 2,308K. As a result, the overall utilization rate in 3Q20 was 97%.

Capacity4

Total capacity in the third quarter totaled 2,308K 8-inch equivalent wafers. We foresee fourth quarter capacity will grow to 2,311K 8-inch equivalent wafers, mainly reflecting capacity increase at Fab 12X.

(1) One 6-inch wafer is converted into 0.5625 (62/82) 8-inch equivalent wafer; one 12-inch wafer is converted into 2.25 (122/82) 8-inch equivalent wafers. Total capacity figures are expressed in 8-inch equivalent wafers.

CAPEX spending in 3Q20 was US$252 million, leading to a total of US$540 million in capital expenditure investment during the first nine months of 2020. Full year 2020 CAPEX is budgeted at US$1.0 billion.

Fourth Quarter 2020 Outlook & Guidance

Quarter-over-Quarter Guidance:

• Wafer Shipments: To increase by 1-2%
• ASP in USD: To increase by 1%
• Gross Profit Margin: To remain flat
• Capacity Utilization: mid-90% range
• 2020 CAPEX: US$1 billion

Conference Call / Webcast Announcement

Thursday, October 29, 2020

Time: 5:00 PM (Taipei) / 5:00 AM (New York) / 09:00 AM (London)

A live webcast and replay of the 3Q20 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 more than 750,000 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 sales for first quarter; product releases and market shares; opportunities in the 5G and IoT markets; anticipated wafer demands in market segments; execution of corporate strategies; repayment of bank loans; expected foundry capacities; the ability to obtain new business opportunities; and information under the heading “First Quarter of 2020 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 risks 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.

- FINANCIAL TABLES TO FOLLOW -

1Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with TIFRSs recognized by Financial Supervisory Commission in the ROC, which is different from IFRSs issued by the International Accounting Standards Board. They represent comparisons among the three-month period ending September 30, 2020, the three-month period ending June 30, 2020, and the equivalent three-month period that ended September 30, 2019. For all 3Q20 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the September 30, 2020 exchange rate of NT$ 29.10 per U.S. Dollar.

2 Revenue in this section represents wafer sales

3 Utilization Rate = Quarterly Wafer Out / Quarterly Capacity

4 Estimated capacity numbers are based on calculated maximum output rather than designed capacity. The actual capacity numbers may differ depending upon equipment delivery schedules, pace of migration to more advanced process technologies, and other factors affecting production ramp-up.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029005539/en/