UMC Reports First Quarter 2015 Results

TAIPEI, Taiwan, April 29, 2015 /PRNewswire/ --

First Quarter 2015 Overview¹:

• Revenue: NT$37.65 billion (US$1.20 billion)
• Gross margin: 24.3%; operating margin: 10.9%
• Foundry revenue from advanced nodes: 9% from 28nm, 24% from 40nm
• Foundry capacity utilization rate: 93%
• Net income attributable to the stockholders of the parent: NT$3.98 billion (US$127 million)
• Earnings per share: NT$0.32; earnings per ADS: US$0.051

United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) ("UMC" or "The Company"), a leading global semiconductor foundry, today announced its consolidated operating results for the first quarter of 2015.

Revenue was NT$37.65 billion, with gross margin at 24.3% and operating margin at 10.9%. Net income attributable to the stockholders of the parent was NT$3.98 billion, with earnings per ordinary share of NT$0.32.

Mr. Po-Wen Yen, CEO of UMC, said "In the first quarter of 2015, our foundry revenue grew to NT$36.00 billion. Overall capacity utilization remained at 93%, bringing wafer shipments to 1.48 million 8-inch equivalent wafers. While 8" fabs continued to run at full capacity, 12" fabs recorded higher wafer shipments during 1Q15. Revenue contribution from 28nm and 40nm increased to 9% and 24% respectively, reflecting strong wafer demand for our leading edge technologies that helped enhance blended wafer ASP. For 2Q15, we anticipate wafer shipments to remain at similar levels as 1Q15, despite end-market uncertainties and customer inventory adjustments. We will pay close attention to market developments and adapt to any possible changes that may unfold. While progress continues on advanced logic, we have also qualified 55nm low power embedded flash IP from SST and Faraday to target auto, general purpose MCU, SIM/smartcard and Internet of Things (IoT) IC designs. The proliferation of connected devices will help UMC to realize more growth opportunities as these products will adopt our comprehensive logic/mixed-mode and specialty technologies."

CEO Yen continued, "With regards to UMC's global expansion progress, in March we held a groundbreaking ceremony in Xiamen, China to kick-off the construction of our new 12" fab project. When the building structure is completed, we expect the fab cleanroom to be ready for equipment move-in by 2Q 2016, with initial production scheduled for late 2016. For our flagship 12" Tainan fab, we recently held a public earth day event to promote environmental awareness to the community. As Taiwan experiences the worst drought in 10 years, UMC has committed to adopt more stringent measures on water & energy conservation and step up our efforts on waste reduction. With UMC's effective conservation infrastructure in place, our fabs' water recycling efficiency has reached up to 88%, saving more than 20 million tons of water in 2014. We have set higher goals to further reduce resource use by an additional 10% over current levels by 2020. In addition, UMC's Board of Directors proposed a dividend payout of NT$0.55 per share for fiscal 2014, which strikes a balance between business expansion and return on shareholder equity. We believe our commitment to manufacturing excellence with a focus on global expansion will secure UMC's long-term returns and enhance profitability to ensure shareholder value."

Summary of Operating Results

During 1Q15, wafer shipments increased 3.5% sequentially, which led to foundry revenue of NT$36.00 billion. New Business segment recorded NT$1.67 billion in sales, leading to consolidated revenue of NT$37.65 billion, up 1.1% from 4Q14. Net income from the foundry segment reached NT$4.03 billion, while New Business segment posted a net loss of NT$0.34 billion. From a consolidated basis, gross profit was NT$9.16 billion, or 24.3% of revenue, while operating income reached NT$4.10 billion or 10.9% of revenue. Net income attributable to the stockholders of the parent was NT$3.98 billion, compared to NT$4.56 billion in 4Q14.

Earnings per ordinary share for the quarter were NT$0.32. Earnings per ADS were US$0.051.  The basic weighted average number of outstanding shares in 1Q15 was 12,526,260,458, compared with 12,509,658,059 shares in 4Q14 and 12,479,924,736 shares in 1Q14.  The diluted weighted average number of outstanding shares was 12,660,046,525 in 1Q15, compared with 12,620,712,149 shares in 4Q14 and 13,157,984,032 shares in 1Q14.  The fully diluted share count on March 31, 2015 was approximately 12,778,967,000.  On March 31, 2015, UMC held 195 million treasury shares acquired from the 15th share buy-back programs.

Detailed Financials Section

Foundry revenue grew to NT$36.00 billion and New Business segment recorded NT$1.67 billion, resulting in a consolidated revenue of NT$37.65 billion. Depreciation increased 7.3% QoQ to NT$9.12 billion, primarily from new 28nm tools deployed for capacity expansion. Other manufacturing costs were up 4.5% QoQ to NT$19.38 billion, mainly from higher wafer shipments in 1Q15. Operating expenses declined 13.4% sequentially to NT$4.91 billion, mostly from the decrease in R&D expenses as costs related to 28nm programs in production were transferred to COGS. Net operating income was NT$4.10 billion.

Net non-operating income in 1Q15 was NT$255 million. Gain on disposal of investments was NT$190 million, while the volatility in currency markets led to an exchange loss of NT$77 million.

Cash inflow from operations was NT$16.87 billion. 1Q15 capital expenditures totaled NT$14.89 billion, including NT$14.85 billion for the foundry segment, resulting in a free cash inflow of NT$1.98 billion. Cash inflow from financing was NT$8.16 billion, mainly due to the acquisition of United Semiconductor (Xiamen) leading to the increase in other financial liabilities of NT$6.11 billion and bank loans of NT$1.72 billion. Total cash inflow in 1Q15 was NT$7.42 billion. Over the next 12 months, the company expects to repay NT$3.64 billion in bank loans.

Cash and cash equivalents increased to NT$53.63 billion, mainly due to the cash from operating activities, capital expenditures, and acquisition of United Semiconductor (Xiamen). The days of inventory decreased one day to 49 days.

Current liabilities decreased to NT$44.44 billion, largely reflecting the decrease in payable on equipment. Debt to equity ratio increased to 40%.

Analysis of Revenue² for Foundry Segment

Revenue contribution from North America increased to 47% in 1Q15, partly due to higher communication demand from North American customers.

28nm production ramp contributed 9% of 1Q15 revenue, benefiting from the strong demand from wireless devices, while 40nm business represented 24%.

1Q15 revenue from fabless customers remained at 90%.

Communication and consumer segments reflected sequential revenue growth, accounting for 56% and 26% of sales in 1Q15, respectively.

(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. Communication consists of handset components, broadband, WLAN, 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 Blended ASP Trend for Foundry Segment

Blended average selling price increased slightly in 1Q15.
(To view ASP trend, visit http://www.umc.com/english/investors/1Q15_ASP_trend.asp)

Shipment and Utilization Rate³ for Foundry Segment

Wafer shipments increased 3.5% quarterly to 1,481K in 1Q15 as overall capacity reached 1,583K, resulting in an overall utilization rate of 93% for the quarter.

Capacity⁴ for Foundry Segment

Total capacity during the first quarter increased to 1,583K 8-inch equivalent wafers. Continuous 28nm capacity expansion at Fab12A lifted quarterly capacity from 180K in 4Q14 to 183K in 1Q15. Capacity increase at Fab12i continued as 12" wafer capacity grew from 135K in 4Q14 to 139K in 1Q15. Estimated capacity during second quarter will grow by approximately 5% to 1,659K 8-inch equivalent wafers, due to ongoing 28nm capacity expansion deployment at Fab12A, 40nm capacity expansion at Fab12i and 8" expansion at Fab8N.

⁽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.Capacity total figures are expressed in 8-inch equivalent wafers.

*UMC sold part of plants and equipment to WTK; WTK figures represent 6-inch CMOS capacity.

CAPEX for Foundry Segment

In 1Q15, capital expenditure spending was US$470 million. Foundry capital expenditure budget for 2015 is expected to be approximately US$1.8 billion, with 87% of the amount used for 12" advanced capacity expansion.

Second Quarter of 2015 Outlook & Guidance

Quarter-over-Quarter Guidance:

• Foundry Segment Wafer Shipments: To remain flat
• Foundry Segment ASP in US$: To remain flat
• Foundry Segment Profitability: Gross profit margin will be in the mid-20 percentage range
• Foundry Segment Capacity Utilization: Approximately 90%
• 2015 CAPEX for Foundry Segment: US$1.8bn
• Guidance to New Business Segment: Revenue to be approximately NT$1.75bn and operating loss to be approximately NT$280mn

Recent Developments / Announcements

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

Conference Call / Webcast Announcement

Wednesday, April 29, 2015

A live webcast and replay of the 1Q15 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 that provides advanced technology and manufacturing for applications spanning every major sector of the IC industry. UMC's robust foundry solutions allow chip designers to leverage the company's leading-edge processes, which include 28nm poly-SiON and gate-last High-K/Metal Gate technology, mixed signal/RFCMOS, and a wide range of specialty technologies. Production is supported through 10 wafer manufacturing facilities that include two advanced 300mm fabs; Fab 12A in Taiwan and Singapore-based Fab 12i. Fab 12A consists of Phases 1-4 which are in production for customer products down to 28nm. Construction has been completed for Phases 5&6, with future plans for Phases 7&8. The company employs over 16,000 people worldwide and has offices in Taiwan, mainland China, Europe, Japan, Korea, Singapore, and the United States. UMC can be found on the web at http://www.umc.com

Note from UMC Concerning Forward-Looking Statements

Some of the statements in the foregoing announcement are forward looking within the meaning of the U.S. Federal Securities laws, including statements about future outsourcing, wafer capacity, technologies, business relationships and market conditions. Investors are cautioned that actual events and results could differ materially from these statements as a result of a variety of factors, including conditions in the overall semiconductor market and economy; acceptance and demand for products from UMC; and technological and development risks. Further information regarding these and other risks is included in UMC's filings with the U.S. Securities and Exchange Commission, including its registration statements and reports on Forms F-1, F-3, F-6 and 20-F and 6-K, in each case as amended. 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.

Safe Harbor Statements

This release contains forward-looking statements.  These statements constitute "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995.  You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning.  You can also identify them by the fact that they do not relate strictly to historical or current facts.

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) our dependence upon the frequent introduction of new services and technologies based on the latest developments in our industry; (ii) the intensely competitive semiconductor, communications, consumer electronics and computer industries and markets; (iii) the risks associated with international global business activities; (iv) our 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 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 U.S. Securities and Exchange Commission, including its registration statements and reports on Form F-1, F-3, F-6 and 20-F and 6-K, in each case as amended. 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 TIFRSs recognized by Financial Supervisory Commission in the ROC, which is different from 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 ROC GAAP and US GAAP.

This presentation is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.

Notes:

[1]Unless 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 Mar 31, 2015, the three-month period ending Dec 31, 2014, and the equivalent three-month period that ended Mar 31, 2014. For all 1Q15 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the Mar 31, 2015 exchange rate of NT$ 31.30 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.

Contacts:

Bowen Huang / David Wong
UMC, Investor Relations
+ 886-2-2658-9168, ext. 16900
[email protected]
[email protected]

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