UMC Reports 2008 Fourth Quarter Results

Customer demand stabilized, while UMC will continue with R&D efforts to maintain long-term competitiveness

    TAIPEI, Taiwan, Feb. 10 /PRNewswire-Asia-FirstCall/ --

    Fourth Quarter 2008 Overview (Note 1):

    -- Revenue decreased 25.1% sequentially to NT$18.54 billion (US$566
       million)
    -- Gross profit margin of 10.2%, operating margin of -6.3%
    -- Net loss of NT$23.51 billion (US$717 million)
    -- Net cash inflow of NT$10.93 billion, with cash & cash eq. of NT$36.12
       billion at Q4 end
    -- Loss per share of NT$1.81; Loss per ADS of US$0.276

    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 December 31, 2008, the
    three-month period ending September 30, 2008, and the equivalent three-
    month period that ended December 31, 2007. For all 4Q08 results, New
    Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the
    December 31, 2008 exchange rate of NT$32.77 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 fourth quarter of 2008.

Dr. Shih-Wei Sun, CEO of UMC said, "The global economic recession in 4Q08 also impacted UMC, characterized by a sharp drop in customer demand during the quarter. For the quarter, wafer shipments dropped to 567 thousand 8-inch equivalent wafers. Customers still remain conservative about end market demand and are strictly controlling their purchase orders and inventory levels. However, UMC's internal indicators have shown signs that the demand drop may have bottomed out, and we are closely watching for signs of recovery. Although it is difficult to predict upcoming industry conditions, UMC R&D for advanced technologies remains on schedule as originally planned. Many customers are adopting our 40/45nm technologies with customer products currently in pilot production using low-power and high-performance logic processes. In addition, we have already proven high-k/metal-gate (HK/MG) technology with yielding 45nm SRAM test products. This is an important milestone for UMC's HK/MG technology. We are also an industry leader in 28nm, having independently developed the foundry industry's first fully functional 28nm SRAM chip. These technology breakthroughs will further enhance our long-term competitiveness."

Mr. Chitung Liu, CFO of UMC said, "UMC always follows financial accounting standards strictly, and we hope that our financial report can timely reflect the company's overall financial status. UMC had net non-operating losses of NT$21.78 billion in 4Q08, separated into three main parts: (1) under the impact of the global financial crisis, we recognized investment losses of NT$12.32 billion and other-than-temporary losses on financial assets of NT$2.82 billion pursuant to ROC GAAP SFAS No. 5 and SFAS No. 34, respectively; (2) the impairment losses for goodwill and idle assets totaling NT$4.07 billion were recognized pursuant to SFAS No. 35; (3) the loss on decline in market value of inventories, NT$2.68 billion, was recognized pursuant to SFAS No. 10. However, UMC had net cash inflow of NT$10.93 billion during 4Q, since all of the aforementioned non-operating losses were non-cash charges."

Dr. Sun continued, "In the second half of 2008, UMC took solid steps towards enhancing UMC operations, including improving production efficiency, implementing cost rationalization policies, and streamlining human resource allocation. Through cost-control measures, we have lowered our operating breakeven point to approximately 60% utilization rate. Going forward, we will continue to enhance execution and monitor results to look for areas that can be further improved upon. UMC has independent R&D and solid manufacturing capabilities backed by a healthy financial structure, and supported through sufficient operating capital. We will continue to strengthen the development of our advanced technologies, and follow our Customer-Driven Foundry Solution strategy to provide customized solutions to our global foundry customers."

    Summary of Operating Results



    Operating Results
                                                     QoQ%              YoY%
    (Amount: NT$ million)      4Q08       3Q08      change    4Q07    change

    Revenue                   18,541     24,748     (25.1)   27,621    (32.9)
    Gross Profit               1,899      4,368     (56.5)    5,649    (66.4)
    Operating Expenses        (3,073)    (3,421)    (10.2)   (4,323)   (28.9)
    Operating Income (Loss)   (1,174)       947        --     1,326       --
    Non-op. Income
     (Expenses)              (21,784)    (2,105)    934.9     1,097       --
    Net Income (Loss)        (23,510)    (1,413)   1563.8     1,359       --
    EPS   (NT$ per share)      (1.81)     (0.11)       --      0.14       --
          (US$ per ADS)       (0.276)    (0.017)       --     0.021       --


Revenue decreased 25.1% QoQ to NT$18.54 billion, from NT$24.75 billion in 3Q08, and decreased 32.9% YoY, from NT$27.62 billion in 4Q07. Weaker-than- expected wafer shipments were a key factor to the significant decrease in revenues. Gross profit was NT$1.9 billion, or 10.2% of revenue, compared to NT$4.37 billion, or 17.6% of 3Q08 revenue. Operating loss for the quarter was NT$1.17 billion, or 6.3% of revenue, compared to an operating profit of 947 million, or 3.8% of 3Q08 revenue. Net loss in 4Q08 was NT$23.51 billion, mainly due to a net non-operating loss of NT$21.78 billion.

Loss per ordinary share for the quarter was NT$1.81. Loss per ADS was US$0.276. One ADS represents five Taiwan-listed ordinary shares. The basic weighted average number of outstanding shares in 4Q08 was 12,971,740,926, compared with 13,129,987,534 shares in 3Q08 and 13,100,167,505 shares in 4Q07. The diluted weighted average number of outstanding shares was 12,971,740,926 in 4Q08, compared with 13,129,987,534 shares in 3Q08 and 13,578,655,652 shares in 4Q07. The fully diluted share count on December 31, 2008 was 13,614,857 thousand. During 4Q08, UMC retired 555,715,736 treasury shares, or 4.1% of total issued shares, acquired from the 9th, 11th, and 12th share buy-back program. UMC announced its 13th share buy-back program on December 16, 2008, with a plan to repurchase a maximum of 300,000,000 shares within the 2008/12/17~2009/02/16 period.

    Detailed Financials Section



    COGS & Expenses
                                                    QoQ%               YoY%
    (Amount: NT$  million)          4Q08            3Q08              change          4Q07        change

        Revenue                                      18,541        24,748          (25.1)      27,621          (32.9)
        CoGS                                          (16,642)    (20,380)        (18.3)    (21,972)        (24.3)
            Depreciation                        (7,682)      (8,086)          (5.0)      (7,985)          (3.8)
            Other  Mfg.  Costs                (8,960)    (12,294)        (27.1)    (13,987)        (35.9)
        Gross  Profit                              1,899          4,368          (56.5)        5,649          (66.4)
        Gross  Margin  (%)                      10.2%          17.6%                --          20.5%                --
        Total  Operating  Exp.            (3,073)      (3,421)        (10.2)      (4,323)        (28.9)
            G&A                                              (428)          (639)        (33.0)          (906)        (52.8)
            Sales  &  Marketing                  (679)          (673)            1.0            (882)        (23.0)
            R&D                                          (1,966)      (2,109)          (6.8)      (2,535)        (22.4)
        Operating  Income                    (1,174)            947                --          1,326                --
        Operating  Margin  (%)              (6.3%)          3.8%                --            4.8%                --


 


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