UMC Reports 2007 Second Quarter Results:

Recovery Expected to Continue into 3Q07

    TAIPEI, Taiwan, Aug. 1 /Xinhua-PRNewswire-FirstCall/ --

    Second Quarter 2007 Overview (Note 1):
    -- Revenue increased 9% sequentially to NT$25.10 billion (US$764 million)
    -- Operating profit margin improved to 4.9% from 0.1% in 1Q07
    -- Net income was NT$4.91 billion (US$149 million)
    -- EPS of NT$0.28; EPADS of US$0.043

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 reviewed, unconsolidated, and represent comparisons among the three-month period ending June 30, 2007, the three-month period ending March 31, 2007, and the equivalent three-month period that ended June 30, 2006. For all 2Q07 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the June 30, 2007 exchange rate of NT$32.86 per U.S. Dollar.

United Microelectronics Corporation (NYSE: UMC) (TSE: 2303) ("UMC" or "the Company"), a leading global semiconductor foundry, today announced its unconsolidated operating results for the second quarter of 2007.

"We noticed signs of recovery from our customers in the second quarter, leading to a 9.8% increase in wafer shipments," said Dr. Jackson Hu, CEO at UMC. "This increase contributed to a 9% growth in quarter-over-quarter revenue and a meaningful increase in operating income."

Dr. Hu continued, "Starting from June, we have seen a continuous reduction of our customers' inventory levels. In fact, quite a few of them are currently experiencing inventory levels that are lower than normal. This situation leads us to foresee strong demand across the board for all applications in Q3. Due to much improved product and customer mixes, we are taking full advantage of this seasonally strong demand. In Q3, total wafer shipment is expected to increase by 20%, while average utilization rate will be greater than 90%. ASP will stay flat. 12-inch fab utilization rates will be slightly stronger than the average loading for our 8-inch fabs, while our 6" fab will be fully loaded. In terms of revenue contribution, sales from 90nm and 65nm technologies will increase to 25%. Our CAPEX remains unchanged at US$1.0 billion to US$1.2 billion for 2007."

"On the advanced technology front, we continue to work with several customers on multiple products. The production yields for 65nm products have been very satisfactory. However, we have noticed that customer demand for 65nm product is still in the early stage of development, and a meaningful percentage of revenue from 65nm may not be seen until early 2008. For 45nm, we will have product tape-out in Q3. We believe that applications will make good use of the increasing chip density offered by Moore's Law, which will enable the integration of more and more features on a single chip. The future of the semiconductor industry will be defined by the proliferation of these SoCs. Electronic product companies will utilize these chips to roll out a continuous stream of innovative products that feature increased functionality, lower power consumption and higher performance, and current innovative products such as the game console Wii and the iPhone can be manufactured more cost effectively."



    Summary of Operating Results

    Operating Results
                                                 QoQ %             YoY %
    (Amount: NT$ million)     2Q07      1Q07     change   2Q06    change

    Revenue                  25,097    23,025      9.0   25,751    (2.5)
    Gross Profit              4,958     3,676     34.9    5,171    (4.1)
    Operating Expenses       (3,732)   (3,658)     2.0   (3,541)    5.4
    Operating Income          1,226        18   6711.1    1,630   (24.8)
    Non-op. Income
     (Expenses)               4,182     1,719    143.3    5,076   (17.6)
    Net Income                4,911     1,459    236.6    6,052   (18.9)
    EPS (NT$ per share)        0.28      0.08       --     0.34      --
        (US$ per ADS)         0.043     0.012       --    0.052      --

Revenue increased 9.0% quarter-over-quarter to NT$25.10 billion, from NT$23.03 billion in 1Q07. Gross profit was NT$4.96 billion, or 19.8% of revenue, compared to NT$3.68 billion, or 16.0% of 1Q07 revenue. Operating income of NT$1.23 billion increased 6711.1% sequentially. Better capacity utilization and activities on cost control were the key reasons for the increase in revenue, gross profit and operating income during the second quarter. Net income in 2Q07 was NT$4.91 billion, an increase of 236.6% compared with NT$1.46 billion in 1Q07.

Earnings per ordinary share (EPS) for the quarter were NT$0.28. Earnings per ADS (EPADS) were US$0.043. This compares with 1Q07 EPS of NT$0.08 and EPADS of US$0.012. One ADS represents five Taiwan-listed ordinary shares. The basic weighted average number of outstanding shares in 2Q07 was 17,780,114,848, compared with 17,775,610,526 shares in 1Q07 and 17,468,679,418 shares in 2Q06. The diluted weighted average number of outstanding shares was 18,413,194,360 in 2Q07, compared with 17,904,075,495 shares in 1Q07 and 18,138,816,706 shares in 2Q06. The fully diluted share count on June 30, 2007 was 18,416,674 thousand. On June 30, 2007, UMC held 1,342,067 thousands treasury shares acquired from the 7th, 8th, 9th, and 11th share buy-back programs. The 192,067 thousand treasury shares from the 7th buy-back program were expired in May/07 and will be retired in July/07.

Detailed Financials Section

Depreciation and amortization totaled NT$9.21 billion in 2Q07, compared with NT$9.19 billion in 1Q07. Depreciation within COGS of NT$7.90 billion went up by 3.3% from 1Q07. Other manufacturing costs within COGS increased to NT$12.24 billion sequentially due to increased wafer shipments. Total operating expenses increased by 2% to NT$3.73 billion. R&D expenses of NT$2.31 billion remained virtually flat from 1Q07. The total R&D expenses were 9.2% of revenue in 2Q07.



        COGS & Expenses
                                                  QoQ %               YoY %
    (Amount: NT$ million)     2Q07      1Q07      change    2Q06     change

    Revenue                 25,097    23,025         9.0        25,751            (2.5)
        COGS                                      (20,139)    (19,349)            4.1      (20,580)          (2.1)
            Depreciation                    (7,899)      (7,649)            3.3        (9,965)        (20.7)
            Other  Mfg.  Costs          (12,240)    (11,700)            4.6      (10,615)          15.3
        Gross  Profit                          4,958          3,676            34.9          5,171            (4.1)
        Gross  Margin  (%)                    19.8%          16.0%              --            20.1%              --
        Total  Operating  Exp.        (3,732)      (3,658)            2.0        (3,541)            5.4
            G&A                                          (691)          (678)            1.9            (676)            2.2
            Sales  &  Marketing              (732)          (650)          12.6            (761)          (3.8)
            R&D                                      (2,309)      (2,330)          (0.9)      (2,104)            9.7
        Operating  Income                  1,226                18        6711.1          1,630          (24.8)
        Operating  Margin  (%)              4.9%            0.1%              --              6.3%              --

 


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