UMC Reports Third Quarter 2017 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 2017.

Third quarter consolidated revenue was NT$37.70 billion, flat from NT$37.54 billion in 2Q17 and down 1.2% YoY from NT$38.16 billion in 3Q16. 3Q17 consolidated gross margin was 17.5%. Net income attributable to the stockholders of the parent was NT$3.47 billion, with earnings per ordinary share of NT$0.28.

Jason Wang, co-president of UMC, said, “In the third quarter of 2017, UMC’s foundry revenue was NT$37.61 billion. In 3Q17, we continued to sustain stable utilization rates across our 8” and 12” mature technologies, driven by strong chip demand in consumer and computing peripheral segments. Our 8” facilities remained nearly full while mature 12” fabs operated above 90% capacity, lifting overall wafer shipments to 1.75 million 8-inch equivalents. Our 12” fab in Xiamen, Fab 12X, also began shipping 28nm wafers, with yield rates and chip performance reaching the same quality as our Tainan Fab 12A.”

President Wang continued, “Looking into 4Q17, we expect the business environment to decline, due to typical year-end seasonal adjustment. In addition, we foresee 28nm HKMG demand to soften. As we develop and redefine new process technologies according to market demand, we expect to enhance UMC’s market share by penetrating into emerging applications including IoT, 5G wireless and industrial segments, which will spur new waves of growth opportunities. UMC’s recent selection as a DJSI global component for the 10th consecutive year also highlights our active involvement in environment protection and sustainable manufacturing practices, demonstrating our commitment to setting higher corporate social responsibility standards.”

Summary of Operating Results

Net operating revenues remained flat in 3Q17 at NT$37.70 billion, including NT$37.61 billion from the foundry segment. Revenue contribution from 40nm and below technologies remained flat at 45%. Gross profit declined 2.2% to NT$6.59 billion, or 17.5% of revenue. Operating expenses increased 1.4% to NT$5.40 billion. Net other operating income was NT$441 million, leading to operating income of NT$1.63 billion. Net non-operating income was NT$1.24 billion. Net income attributable to stockholders of the parent was NT$3.47 billion.

Earnings per ordinary share for the quarter was NT$0.28. Earnings per ADS was US$0.046. The basic weighted average number of outstanding shares in 3Q17 was 12,208,239,978 compared with 12,208,239,978 shares in 2Q17 and 12,208,239,978 shares in 3Q16. The diluted weighted average number of outstanding shares was 13,441,188,010 in 3Q17, compared with 13,383,329,206 shares in 2Q17 and 13,402,233,597 shares in 3Q16. The fully diluted share count on September 30, 2017 was approximately 13,857,267,000. On September 30, 2017, UMC held 400 million treasury shares acquired from the 16th and 17th share buy-back programs.

Detailed Financials Section

Net operating revenues remained flat at NT$37.70 billion. COGS increased to NT$31.11 billion, as depreciation remained at NT$11.15 billion. Other manufacturing costs increased 1.3% to NT$19.96 billion, mainly due to higher wafer shipments. Gross profit was NT$6.59 billion. Operating expenses increased 1.4% to NT$5.40 billion. General & Administrative expense declined 4.3% to NT$991 million. R&D expense increased 3.0% to NT$3.34 billion, or 8.9% of net operating revenues. Net other operating income was NT$441 million, leading to an operating income of NT$1.63 billion.

Net non-operating income in 3Q17 increased to NT$1.24 billion, which resulted from an NT$776 million in exchange gain and an NT$538 million gain in disposal of investments.

Cash inflow from operating activities reached NT$11.45 billion. Cash outflow from investing activities totaled NT$4.98 billion, including NT$7.29 billion in CAPEX spending for the foundry segment, resulting in a free cash inflow of NT$4.16 billion. Cash outflow from financing activities was NT$4.60 billion, mainly from the effect of an NT$6.11 billion cash dividend payout and an NT$1.48 billion increase in bank loans. Net cash inflow in 3Q17 was NT$1.81 billion. Over the next 12 months, the company expects to repay NT$1.32 billion in bank loans.

Cash and cash equivalents increased to NT$69.94 billion. Days of inventory increased to 49 days.

Current liabilities decreased to NT$82.36 billion, mainly resulting from an NT$6.11 billion in payout of cash dividends. Total liabilities decreased to NT$169.74 billion, leading to a debt to equity ratio of 79%.

Analysis of Revenue2 for Foundry Segment

Revenue from Asia Pacific and North American customers remained flat at 47% and 43% of sales respectively. Revenue contribution from Japan declined to 2%.

14nm continued to represent 1% of 3Q17 revenue, while 28nm contribution declined to 15%. 40nm accounted for 29% of sales.

Revenue from fabless customers accounted for 90% in 3Q17.

Communication business decreased to 47%. Revenue from the consumer segment grew to 31% while computer remained at 14%

(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 ASP Trend for Foundry Segment

Blended average selling price (ASP) remained unchanged in 3Q17

(To view ASP trend, visit http://www.umc.com/english/investors/3Q17_ASP_trend.asp)

Shipment and Utilization Rate3 for Foundry Segment

Wafer shipments increased to 1,748K in 3Q17. Quarterly capacity increased 2.5% QoQ to 1,861K, leading to an overall utilization rate of 96% in 3Q17.

Capacity4 for Foundry Segment

Total capacity in the third quarter was 1,861K 8-inch equivalent wafers. Estimated capacity in the fourth quarter will increase to 1,886K 8-inch equivalent wafers, primarily due to capacity expansion at Fab 12X and Fab 12A as well as enhancements to production capabilities at Fab 8S, Fab 8N and Fab 8F.

(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.

CAPEX for Foundry Segment

CAPEX spending in 3Q17 totaled US$241 million. Full year 2017 CAPEX plan is budgeted for US$1.7 billion.

Fourth Quarter of 2017 Outlook & Guidance

Quarter-over-Quarter Guidance:

• Wafer Shipments: To decrease 3-4%
• ASP in USD: To decline by approximately 1%
• Profitability: Gross profit margin will be in mid-teens % range
• Foundry Segment Capacity Utilization: High 80% range
• 2017 CAPEX for Foundry Segment: US$1.7 billion

Recent Developments / Announcements

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

Conference Call / Webcast Announcement

Wednesday, October 25, 2017

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

Dial-in numbers and Access Codes:

USA Toll Free: 1-866 836-0101

Taiwan Number: 02-2192-8016

Other Areas: +886-2-2192-8016

Access Code: UMC

A live webcast and replay of the 3Q17 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 IC production for applications spanning every major sector of the electronics industry. UMC’s comprehensive foundry solutions enable chip designers to leverage the company’s sophisticated technology and manufacturing, which include high volume 28nm High-K/Metal Gate technology, 14nm FinFET mass production, ultra-low power platform processes specifically developed for Internet of Things (IoT) applications and the automotive industry’s highest-rated AEC-Q100 Grade-0 manufacturing capabilities for the production of ICs found in vehicles. UMC’s 11 wafer fabs are strategically located throughout Asia and are able to produce nearly 600,000 wafers per month. The company employs over 19,000 people worldwide, with offices in Taiwan, 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 introduction of new services and technologies, future outsourcing, competition, wafer capacity, 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. 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 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. 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) 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. 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.

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.

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 September 30, 2017, the three-month period ending June 30, 2017, and the equivalent three-month period that ended September 30, 2016. For all 3Q17 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the September 30, 2017 exchange rate of NT$ 30.30 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.

- FINANCIAL TABLES TO FOLLOW -

View source version on businesswire.com: http://www.businesswire.com/news/home/20171025005479/en/