12A P6 production ramp lifts 22/28nm revenue contribution to 32%

2023 Year to Date EPS totaled NT$3.87

Third Quarter 2023 Overview¹:

• Revenue: NT$57.07 billion (US$1.77 billion)
• Gross margin: 35.9%; Operating margin: 26.8%
• Revenue from 22/28nm: 32%
• Capacity utilization rate: 67%
• Net income attributable to shareholders of the parent: NT$15.97 billion (US$495 million)
• Earnings per share: NT$1.29; earnings per ADS: US$0.200

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 2023.

Third quarter consolidated revenue was NT$57.07 billion, increasing 1.4% QoQ from NT$56.30 billion in 2Q23. Compared to a year ago, 3Q23 revenue declined 24.3% YoY from NT$75.39 billion in 3Q22. Consolidated gross margin for 3Q23 was 35.9%. Net income attributable to the shareholders of the parent was NT$15.97 billion, with earnings per ordinary share of NT$1.29.

Jason Wang, co-president of UMC, said, “During the third quarter, despite a 2.3% decrease in wafer shipments, quarterly revenue and gross margin remained firm QoQ which primarily attributed to the demand strength in computing and communication segments, continuous product mix enhancement as well as favorable currency movement. From end markets perspective, strength in computing applications were propelled by LCD controller, WiFi, codec and touch IC controllers while shipments in communication segments increased due to demand for RF front end IC and networking chips. Looking back at 2023, although foundry industry experienced a significant decline in market demand, UMC maintained solid structural profitability supported by firmness in blended ASP due to continuous product mix optimization efforts and the increasing contribution from specialty technologies. As UMC continues to introduce new specialty technologies to solidify our differentiation, we will strengthen the competitiveness of our customers and enhance their respective market position.”

Co-president Wang said, “For the fourth quarter, with the recent rush orders from PC and smartphones, we expect demand has gradually stabilized. However, customers still employ a cautious and conservative approach in maintaining lean inventory levels while automotive business conditions appear challenging. For 2024, we anticipate the production ramp of our 12A Phase 6 fab will further enhance revenue contribution from 22/28nm continuing the robust business traction for UMC. In addition, through our technology leadership, we will ramp up our offering on 22nm derivative products which will further our specialty technology product pipeline.”

Co-president Wang continued, “Talent is UMC's most important and highly valued asset. We respect the uniqueness of every employee and are committed to creating a diverse, equal, and inclusive workplace environment. Receiving the ‘HR Asia’ award for the ‘Best Employer in Asia’ in July is a recognition of our years of effort. Our goal is to create a culture of diversity and inclusivity in our workplace that enables employees to leverage their strengths, thereby playing a pivotal role in the Company's sustained growth and enduring success.”

Summary of Operating Results

Third quarter operating revenues slightly grew by 1.4% sequentially to NT$57.07 billion mainly lifted by a favorable exchange rate and a better product mix from wafer shipments. Revenue contribution from 40nm and below technologies increased to 45% of wafer revenue. Gross profit grew 1.0% QoQ to NT$20.46 billion, or 35.9% of revenue. Operating expenses remained flat QoQ to NT$5.72 billion. Net other operating income declined to NT$573 million. Net non-operating income reached NT$3.34 billion mainly reflecting the mark to market securities. Net income attributable to shareholders of the parent amounted to NT$15.97 billion.

Earnings per ordinary share for the quarter was NT$1.29. Earnings per ADS was US$0.200. The basic weighted average number of shares outstanding in 3Q23 was 12,371,129,866, compared with 12,348,986,144 shares in 2Q23 and 12,305,516,644 shares in 3Q22. The diluted weighted average number of shares outstanding was 12,566,773,628 in 3Q23, compared with 12,526,182,161 shares in 2Q23 and 12,635,661,561 shares in 3Q22. The fully diluted shares counted on September 30, 2023 were approximately 12,609,732,000.

Detailed Financials Section

Operating revenues grew slightly to NT$57.07 billion. COGS increased 1.6% to NT$36.61 billion. Gross profit grew 1.0% QoQ to NT$20.46 billion partly due to a better product mix. Operating expenses remained flat at NT$5.72 billion, as Sales & Marketing and G&A increased 2.7% and 0.9% respectively, while R&D declined 1.9% sequentially to NT$3.26 billion, representing 5.7% of revenue. Net other operating income was NT$573 million. In 3Q23, operating income decreased 2.3% QoQ to NT$15.31 billion.

Net non-operating income in 3Q23 increased to NT$3.34 billion, mainly from the NT$1.89 billion in net investment gain, the NT$0.62 billion in net interest income and the NT$0.51 billion in other gain.

In 3Q23, cash inflow from operating activities was NT$19.06 billion. Cash outflow from investing activities amounted to NT$17.72 billion, which included NT$17.91 billion in capital expenditure, resulting in free cash inflow of NT$1.15 billion. Cash outflow from financing was NT$27.60 billion, primarily the NT$45.02 billion in cash dividend distribution and the NT$21.21 billion in other financial liabilities offset, the NT$21.37 billion in bank loans, the NT$10.00 billion in bond issuance and the NT$7.43 billion increase in deposits-in. Net cash outflow in 3Q23 totaled NT$22.46 billion. Over the next 12 months, the company expects to repay NT$2.15 billion in bank loans.

Cash and cash equivalents decreased to NT$140.64 billion. Days of inventory increased by 4 days to 89 days.

Current liabilities decreased to NT$92.07 billion. Long-term credit/bonds increased to NT$49.38 billion. Total liabilities declined to NT$197.26 billion, leading to a debt to equity ratio of 56%.

Analysis of Revenue²

Revenue from Asia-Pacific grew to 58% while business from North America remain unchanged at 27% of sales. Business from Europe stayed firm at 12% while contribution from Japan decreased to 3%.

Revenue contribution from 22/28nm grew to 32% of the wafer revenue, while 40nm contribution was 13% of sales.

Revenue from fabless customers accounted for 79% of revenue.

Revenue from the communication segment accounted for 46%, while business from consumer represented 23%. Business from computing applications grew to 13% as other segments declined to 18% of revenue.

(1) Computer consists of ICs such as CPU, GPU, HDD controllers, DVD/CD-RW control ICs, PC chipset, audio codec, keyboard controller, monitor scaler, USB, I/O chipset, WLAN. Communication consists of handset components, broadband, bluetooth, Ethernet, LAN, DSP, etc. Consumer consists of ICs used for DVD players, DTV, STB, MP3/MP4, flash controller, game consoles, DSC, smart cards, toys, etc.

Blended ASP Trend

Blended average selling price (ASP) grew slightly in 3Q23.

(To view blended ASP trend, please click here for 3Q23 ASP)

Shipment and Utilization Rate³

Wafer shipments declined by 2.3% QoQ to 1,788K in the third quarter, while quarterly capacity was 2,659K. Overall utilization rate in 3Q23 was 67%.

Capacity⁴

Total capacity in the third quarter increased to 2,659K 8-inch equivalent wafers. Capacity will grow in the fourth quarter of 2023 to 2,710K 8-inch equivalent wafers, primarily reflecting the 22/28nm capacity expansion at 12A Phase 6.

⁽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

CAPEX spending in 3Q23 totaled US$0.57 billion, as total expenditure year to date reached US$2.4 billion. 2023 cash-based CAPEX budget will be US$3.0 billion.

Fourth Quarter 2023 Outlook & Guidance

Quarter-over-Quarter Guidance:

• Wafer Shipments: Will decline by approximately 5%
• ASP in USD: Will remain flat
• Gross Profit Margin: Will be in the low-30% range
• Capacity Utilization: low-60% range
• 2023 CAPEX: US$3.0 billion

Recent Developments / Announcements

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

Conference Call / Webcast Announcement

Wednesday, October 25, 2023

Time: 5:00 PM (Taipei) / 5:00 AM (New York) / 10:00 AM (London)

A live webcast and replay of the 3Q23 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 company. The company provides high quality IC fabrication services, focusing on logic and various specialty technologies to serve all major sectors of the electronics industry. UMC’s comprehensive IC processing technologies and manufacturing solutions include logic/mixed-signal, embedded high-voltage, embedded non-volatile-memory, RFSOI and BCD. UMC has total 12 fabs in production with combined capacity of more than 850,000 8-inch equivalent wafers per month, and all of them are certified with IATF 16949 automotive quality standard. Most of UMC's 12-inch and 8-inch fabs with its core R&D are located in Taiwan, with additional ones throughout Asia. UMC is headquartered in Hsinchu, Taiwan, plus local offices in China, United States, Europe, Japan, Korea and Singapore, with worldwide total 20,000 employees. For more information, please visit: https://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 2023; 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 “Fourth Quarter of 2023 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.

- 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, 2023, the three-month period ending June 30, 2023, and the equivalent three-month period that ended September 30, 2022. For all 3Q23 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the September 30, 2023 exchange rate of NT$ 32.26 per U.S. Dollar.

²Revenue in this section represents wafer sales

³Utilization Rate = Quarterly Wafer Out / Quarterly Capacity

⁴Estimated 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.

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