3Q results in line with guidance; Revenue from leading edge 40nm and specialty technologies continues to grow

(PRNewswire) —

Third Quarter 2012 Overview[1]:

• Revenue: increased 3.3% QoQ to NT$28.53 billion (US$973.22 million)
• Gross margin: 24%; operating margin: 12.7%
• Capacity utilization: 84%
• Net income: NT$2.42 billion (US$82.46 million)
• Earnings per share: NT$0.19; earnings per ADS: US$0.032

United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) ("UMC" or "The Company"), a leading global semiconductor foundry, today announced its unconsolidated operating results for the third quarter of 2012.

Revenue was NT$28.53 billion, a 3.3% quarter-over-quarter increase from NT$27.62 billion in 2Q12, and a 13.3% year-over-year increase from NT$25.19 billion in 3Q11.  Gross margin was 24%, operating margin was 12.7%, net income was NT$2.42 billion, and earnings per ordinary share were NT$ 0.19.

Dr. Shih-Wei Sun, CEO of UMC, said, "In 3Q 2012, both UMC's revenue and operating profit continued to grow.  Wafer shipments reached 1.13 million 8-inch equivalent wafers, with overall capacity utilization at 84%.  Increased 40nm revenue contribution led to higher average selling price, which contributed to 3Q revenue growth.  With the share of 40nm sales growing from 9% to 13% quarter-over-quarter due to solid 40nm chip demand, we anticipate our 15% year-end internal revenue target from 40nm to be achieved ahead of schedule.  In addition to 40nm, we are providing our customers with the most competitive and innovative embedded flash specialty technologies for the rising touch-sensor chipset market.  This platform has been successfully adopted by numerous industry leading customers with many products currently in mass production.  We are optimistic that these specialty technologies will inject UMC with new growth momentum in the coming future."

Dr. Sun continued, "28nm progress is within our expectation, with yield enhancement of design-in products continuing to improve.  For first-wave 28nm product matching business, we are seeing evident yield progression for ported ICs after adjusting our process and device parameters during recent months.  UMC also successfully taped out a mobile communication product in 3Q using our 28nm high-k/-metal-gate (gate-last) process.  We are subsequently collaborating closely with customers for their 28nm mobile communication & computing, wired & wireless connectivity, DTV, data storage controller, and programmable logic products.  Meanwhile, based on our IBM FinFET licensing, UMC has decided to aggressively develop 14nm FinFET technology on 20nm metal.  14nm FinFET will deliver the most optimal low-power and high-performance solution to offset the cost impact from using double patterning lithography."           

Dr. Sun added, "Foundry is prone to both inventory correction and industry cycles.  We expect the present inventory adjustment to continue into early next year.  The momentum of the demand recovery in 2013 will be determined by macroeconomic conditions, end demand strength and the transition progress for new products entering the market.  In the meantime, UMC will continue to enhance its customer composition and product mix, and further exercise flexible capacity deployment to accommodate evolving production requirements.  UMC is also strengthening its tailored cooperation with leading-edge and specialty technology customers for specific products and applications to provide a full-range of 'Customer-Driven Foundry Solutions.'"     

Summary of Operating Results

Revenue increased 3.3% QoQ from NT$27.62 billion in 2Q12 to NT$28.53 billion in 3Q12, and increased 13.3% YoY from NT$25.19 billion in 3Q11.  Gross profit was NT$6.85 billion, or 24.0% of revenue, compared to NT$6.74 billion, or 24.4% of 2Q12 revenue.  Operating income for the quarter was NT$3.61 billion, or 12.7% of revenue, compared to NT$3.18 billion, or 11.5% of 2Q12 revenue.  Net income in 3Q12 was NT$2.42 billion, compared to NT$2.99 billion in 2Q12.

Earnings per ordinary share for the quarter were NT$0.19.  Earnings per ADS were US$0.032.  The basic weighted average number of outstanding shares in 3Q12 was 12,628,658,938, compared with 12,621,506,549 shares in 2Q12 and 12,606,278,572 shares in 3Q11.  The diluted weighted average number of outstanding shares was 13,309,367,195 in 3Q12, compared with 13,469,988,568 shares in 2Q12 and 13,378,728,208 shares in 3Q11.  The fully diluted share count on September 30, 2012 was approximately 14,077,180,000.  On September 30, 2012, UMC held 300 million treasury shares acquired from the 14th share buy-back programs.

Detailed Financials Section

Revenue increased 3.3% QoQ to NT$28.53 billion from NT$27.62 billion in 2Q12, mainly due to increased average selling price from rising 40nm revenue contribution.  Depreciation within COGS increased slightly due to new capacity added to Fab 12A.  General and Administration expenses decreased to NT$515 million, mainly due to the drop of employee bonus accrual adjustment.  R&D expense declined as a result of lowered mask usage due to several advanced technology programs having already started in 2Q12.  The total R&D expense was 7.8% of revenue in 3Q12.

Net non-operating income during 3Q12 decreased QoQ to NT$83 million.  Net investment loss can be attributed to investment loss accounted for under equity method, mainly losses from UMC Japan and Nexpower.  Gain on disposal of investment was NT$1.54 billion, including NT$1.47 billion from Novatek and NT$70 million from King Yuan Electronics.  Increase to other loss was mainly from the loss on valuation of financial liabilities.

Operating cash inflow was NT$10.18 billion. Free cash flow for 3Q12 was negative NT$1.51 billion, as CAPEX spending for the quarter was NT$11.69 billion.  The NT$5.25 billion of financing cash outflow was mainly from the payment of cash dividends of NT$6.32 billion. Net cash outflow was NT$4.52 billion in 3Q12.

Due to the cash dividend payment and CAPEX spending, cash and cash equivalents decreased to NT$32.05 billion in 3Q12.  The one-day increase in average inventory turnover reflected an inventory build to accommodate higher 40nm and 28nm customer demand.

Total liabilities decreased to NT$35.07 billion in 3Q12, mainly due to the cash dividend payment of NT$6.32 billion to stockholders.  Consequently, UMC's debt to equity ratio decreased to 33%.

Analysis of Revenue[3]

The percentage of revenue from North America increased to 50%, reflecting the relative strength of North America-based computer and consumer customers.  

Revenue contribution from 40nm and below grew from 9% in 2Q12 to 13% in 3Q12, reflecting strong customer demand for this leading edge node.  We anticipate the 15% year-end internal revenue target from 40nm to be achieved ahead of schedule.

The percentage of revenue from Fabless customers increased slightly from 82% to 83% in 3Q12.

Computer and consumer demand in 3Q12 both showed greater QoQ strength, including flash controller, DTV/STB, and SDDI.

Blended Average Selling Price Trend

The slight increase in blended average selling price (ASP) during 3Q12 was mainly from better product mix due to higher 40nm revenue contribution.

(To view ASP trend, visit http://www.umc.com/english/investors/3Q12_ASP_trend.asp)

Shipment and Utilization Rate[4]

Wafer shipments decreased 0.7% sequentially to 1,133K in 3Q12, compared to  1,142K 8-inch equivalent wafers in 2Q12.  Due to both wafer shipment and total capacity being at similar levels, overall utilization rate for the quarter remained flat from 2Q12 at 84%.

Capacity[5]

Capacity during the third quarter was 1,376K 8-inch equivalent wafers.  The estimated capacity for the fourth quarter will increase to 1,401K 8-inch equivalent wafers as advanced capacity expansion continues at Fab12A in Tainan.

CAPEX

The capital expenditure budget remains unchanged at US$2 billion. By the end of the third quarter, UMC's year-to-date CAPEX spending totaled US$1.3 billion.

Fourth Quarter of 2012 Outlook & Guidance

Quarter-over-Quarter Guidance:

• Wafer shipment: To decrease by approximately 7-9%
• Wafer ASP in US$: To increase by approximately 2%
• Gross Margin: To be in high teen percentage points
• Capacity utilization: Mid to high 70% range
• Segments: Communication segment will outpace consumer and computer segments 

Recent Developments / Announcements

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

Conference Call / Webcast Announcement

Wednesday, October 31, 2012

A live webcast and replay of the 3Q12 results announcement will be available at www.umc.com under the "Investor Relations \ Investor 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 customer-driven 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 is underway for Phases 5&6, with future plans for Phases 7&8. The company employs over 13,000 people worldwide and has offices in Taiwan, Japan, Singapore, Europe, 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 concerning these risks is included in UMC's filings with the U.S. SEC, including on Form F-1, F-3, F-6 and 20-F, each as amended.

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 on Form F-1, F-3, F-6 and 20-F, 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 unaudited and unconsolidated, and prepared and published in accordance with ROC GAAP.  Investors are cautioned that there are many differences between 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.

Note:

[1] Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with ROC GAAP, which differ in some material respects from generally accepted accounting principles in the United States.  They are un-audited, unconsolidated, and represent comparisons among the three-month period ending Sep 30, 2012, the three-month period ending Jun 30, 2012, and the equivalent three-month period that ended Sep 30, 2011.  For all 3Q12 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the Sep 30, 2012 exchange rate of NT$29.31 per U.S. Dollar.

[2] One ADS represents five Taiwan-listed ordinary shares.

[3] Revenue in this section represents wafer sales.

[4] Utilization Rate = Quarterly Wafer Out / Quarterly Capacity

[5] 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 -

Contacts:

Bowen Huang
UMC, Investor Relations
+ 886-2-2658-9168, ext. 16957
Email Contact

SOURCE United Microelectronics Corporation

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United Microelectronics Corporation Web: http://www.umc.com