UMC Reports Second Quarter 2011 Results

Transcription

1 Contacts: Richard Yu / Bowen Huang / Jason Ho UMC, Investor Relations , ext / / richard_yu@umc.com / bowen_huang@umc.com / jason_ho@umc.com UMC Reports Second Quarter 2011 Results Q2 results meet guidance; global macroeconomic factors to dampen customer demand in 2H11 Second Quarter 2011 Overview 1 : Revenue: increased 0.1% QoQ to NT$28.15 billion (US$ million) Gross margin: 23.9%; operating margin: 11.8% Capacity utilization: 87% Net income: NT$3.19 billion (US$ million) Earnings per share: NT$0.26; earnings per ADS: US$0.05 Taipei, Taiwan, ROC August 3, 2011 United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) ( UMC or The Company ), a leading global semiconductor foundry, today announced its unconsolidated operating results for the second quarter of Revenue was NT$28.15 billion, a 0.1% quarter-over-quarter increase from NT$28.12 billion in 1Q11, and a 5.4% year-over-year decrease from NT$29.75 billion in 2Q10. Gross margin was 23.9%, operating margin was 11.8%, net income was NT$3.19 billion, and earnings per ordinary share were NT$0.26. Dr. Shih-Wei Sun, CEO of UMC, said: In Q2 2011, wafer shipments reached 1.15 million 8-inch equivalent wafers, in line with UMC s guidance. As we enter the third quarter of 2011, certain macroeconomic factors such as European and U.S. sovereign debt issues and emerging market inflation have led to unfavorable global economic conditions. These macro uncertainties have led customers to adopt a conservative outlook. Furthermore, customers have adjusted their order patterns in order to consume elevated inventory levels due to overstocking after Japan's March earthquake. This ongoing situation has negatively impacted the worldwide 1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with ROC GAAP, which differ in some material respects from generally accepted accounting principles in the United States. They are un-audited, unconsolidated, and represent comparisons among the three-month period ending Jun 30, 2011, the three-month period ending March 31, 2011, and the equivalent three-month period that ended Jun 30, For all 2Q11 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the Jun 30, 2011 exchange rate of NT$28.71 per U.S. Dollar. Page 1 of 11

2 semiconductor industry and will offset the high demand season traditionally seen during the second half of the year. Consequently, we anticipate UMC s business performance may reflect this weakened demand condition beyond Q3. During this period, we will further enhance our operations through active customer diversification, efficient business execution, and aggressive cost control measures. We will also focus on the opportunities ahead. UMC s CAPEX, which remains at US$1.8 billion for 2011, will support our advanced production ramp. UMC s R&D efforts will continue in earnest to prepare for customers future technology requirements. We will also leverage our foundry technologies to take advantage of the fast-growing mobile communication and computing markets with high performance/low power consumption requirements. UMC s volume production 40nm process is expected to reach 10% of revenue by the end of We are also smoothly developing our 28nm process and design IP platform, with the first of several 28nm customer products entering pilot production in Q3, For 65nm, UMC will benefit from the second wave of new customers targeting specialty technologies including analog, high voltage, CMOS image sensor, and embedded non-volatile memory products. We believe through the leadership of our cohesive, high caliber management team, healthy capital structure, and clearly defined business strategy, UMC will emerge from the downturn stronger and better positioned to capitalize on the business opportunities in 2012 and beyond. Page 2 of 11

3 Summary of Operating Results Operating Results (Amount: NT$ million) 2Q11 1Q11 QoQ % change 2Q10 YoY % change Revenue 28,150 28, ,745 (5.4) Gross Profit 6,718 7,742 (13.2) 8,805 (23.7) Operating Expenses (3,398) (3,300) 3.0 (3,368) 0.9 Operating Income 3,320 4,442 (25.3) 5,437 (38.9) Non-Operating Income (53.0) Net Income 3,192 4,483 (28.8) 5,273 (39.5) EPS (NT$ per share) (US$ per ADS) Revenue increased 0.1% QoQ to NT$28.15 billion from NT$28.12 billion in 1Q11, and decreased 5.4% YoY from NT$29.75 billion in 2Q10. Wafer shipments increased 2.2% QoQ; however, the associated revenue growth was mostly offset by the appreciation of the NT dollar. Gross profit was NT$6.72 billion, or 23.9% of revenue, compared to NT$7.74 billion, or 27.5% of 1Q11 revenue. Operating income for the quarter was NT$3.32 billion, or 11.8% of revenue, compared to NT$4.44 billion, or 15.8% of 1Q11 revenue. Net income in 2Q11 was NT$3.19 billion, compared to NT$4.48 billion in 1Q11. Earnings per ordinary share for the quarter were NT$0.26. Earnings per ADS 2 were US$ The basic weighted average number of outstanding shares in 2Q11 was 12,513,899,178, compared with 12,513,899,178 shares in 1Q11 and 12,449,924,578 shares in 2Q10. The diluted weighted average number of outstanding shares was 13,013,072,483 in 2Q11, compared with 12,810,053,573 shares in 1Q11 and 12,638,413,042 shares in 2Q10. The fully diluted share count on June 30, 2011 was approximately 14,349,267,000. On June 30, 2011, UMC held 458 million treasury shares acquired from the 13th and 14th share buy-back programs. 2 One ADS represents five Taiwan-listed ordinary shares. Page 3 of 11

4 Detailed Financials Section Higher COGS reflected increasing depreciation and wafer shipments in 2Q11. Total operating expenses increased to NT$3.40 billion, mainly due to the increase in R&D wafers and expenses for advanced process nodes. The total R&D expense was 7.9% of revenue in 2Q11. COGS & Expenses (Amount: NT$ million) 2Q11 1Q11 QoQ % change 2Q10 YoY % change Revenue 28,150 28, ,745 (5.4) COGS (21,432) (20,376) 5.2 (20,940) 2.3 Depreciation (6,495) (5,840) 11.2 (6,832) (4.9) Other Mfg. Costs (14,937) (14,536) 2.8 (14,108) 5.9 Gross Profit 6,718 7,742 (13.2) 8,805 (23.7) Gross Margin (%) 23.9% 27.5% 29.6% Total Operating Exp. (3,398) (3,300) 3.0 (3,368) 0.9 G&A (588) (668) (12.0) (679) (13.4) Sales & Marketing (585) (452) 29.4 (553) 5.8 R&D (2,225) (2,180) 2.1 (2,136) 4.2 Operating Income 3,320 4,442 (25.3) 5,437 (38.9) Net non-operating income during 2Q11 reached NT$203 million, predominantly from disposal gains of Chipbond and KYEC. Net investment loss was NT$253 million, including NT$150 million from decreased valuation of ProMos shares. At the end of 2Q11, UMC held NT$117 million worth of ProMos' common shares. Non-Operating Income (Expenses) (Amount: NT$ million) 2Q11 1Q11 2Q10 Net Non-Operating Income Net Interest Income Net Investment Loss (253) (420) (203) Gain on Disposal of Investment Exchange Gain Other Gain Page 4 of 11

5 Operating cash inflow was NT$10.59 billion. Free cash flow 3 for 2Q11 was NT$339 million, as CAPEX spending for the quarter was NT$10.26 billion. The NT$14.02 billion of financing cash inflow was mainly from the issuance of ECB. Net cash inflow was NT$14.35 billion in 2Q11. Cash Flow Summary (Amount: NT$ million) For the 3-Month Period Ended Jun. 30, 2011 For the 3-Month Period Ended Mar. 31, 2011 Cash Flow from Operations 10,594 12,667 Net Income 3,192 4,483 Depreciation & Amortization 7,598 7,317 Changes in Working Capital (793) 106 Other Cash Flow from Investing (10,108) (14,474) Capital Expenditures (10,255) (12,757) Other 147 (1,717) Cash Flow from Financing 14,019 (120) Bank Loans (1,262) (123) ECB Issued 14,365 - Employee Stock Option Other (2) 3 Effect of Exchange Rate (153) 23 Net Cash Flow 14,352 (1,904) Cash and cash equivalents increased to NT$45.38 billion due to the ECB issuance in 2Q11. Current Assets (Amount: NT$ billion) 2Q11 1Q11 2Q10 Cash & Cash Equivalents Notes & Accounts Receivable Days Sales Outstanding Inventories Avg. Inventory Turnover Total Current Assets Total liabilities increased to NT$66.63 billion in 2Q11, attributed to the addition of NT$14.03 billion of cash dividends payable to stockholders in current liabilities and the ECB in long-term liabilities. Consequently, UMC s debt to equity ratio increased to 32%, which will be lower in 3Q11 after the dividends paid out. Liabilities (Amount: NT$ billion) 2Q11 1Q11 2Q10 Total Current Liabilities Accounts Payable Short-Term Credit / Bonds Cash Dividends Payable Payable on Equipment Other Long-Term Liabilities Total Liabilities Debt to Equity 32% 19% 21% 3 Free cash flow = Operating cash flow Capital expenditures Page 5 of 11

6 Analysis of Revenue 4 The percentage of revenue from Asia Pacific grew to 39%, reflecting the relative strength of Asia Pacific based computer and consumer customers. Revenue Breakdown by Region Region 2Q11 1Q11 4Q10 3Q10 2Q10 North America 49% 51% 53% 46% 46% Asia Pacific 39% 35% 30% 40% 42% Europe 11% 13% 16% 13% 11% Japan 1% 1% 1% 1% 1% Revenue from 65nm and below grew to 37% of total revenue, with 40nm accounting for 6% of UMC s Q2 revenue contribution as demand remains steady for advanced process nodes. Revenue Breakdown by Geometry Geometry 2Q11 1Q11 4Q10 3Q10 2Q10 40nm and below 6% 6% 5% 4% 3% 40nm<x<=65nm 31% 29% 30% 26% 21% 65nm<x<=90nm 13% 15% 16% 14% 18% 90nm<x<=0.13um 24% 23% 20% 24% 22% 0.13um<x<=0.18um 12% 13% 14% 15% 18% 0.18um<x<=0.35um 9% 9% 10% 12% 13% 0.5um and above 5% 5% 5% 5% 5% The percentage of revenue from Fabless customers increased slightly to 73% in 2Q11 due to increased Fabless demand in Asia. Revenue Breakdown by Customer Type Customer Type 2Q11 1Q11 4Q10 3Q10 2Q10 Fabless 73% 72% 73% 78% 81% IDM 27% 28% 27% 22% 19% Revenue from the Consumer sector grew to 29% of total 2Q11 revenue was due to relatively stronger demand from DTV and STB in 2Q11. Weak feature phone related demand resulted in decreased Communication sector revenue contribution for Q2. Revenue Breakdown by Application (1) Application 2Q11 1Q11 4Q10 3Q10 2Q10 Computer 15% 14% 11% 12% 13% Communication 53% 57% 56% 53% 54% Consumer 29% 26% 30% 32% 31% Memory 1% 1% 1% 1% 1% Others 2% 2% 2% 2% 1% (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. Memory consists of DRAM, SRAM, Flash, ROM, and EEPROM. 4 Revenue in this section represents wafer sales. Page 6 of 11

7 Blended Average Selling Price Trend The blended average selling price (ASP) was flat during 2Q11. Unit: USD Blended ASP Trend 1,500 1, Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Shipment and Utilization Rate 5 Wafer shipments increased 2.2% sequentially to 1,145K in 2Q11, compared to 1,120K 8-inch equivalent wafers shipped in 1Q11. Since wafer capacity increased in Q2, overall utilization rate for the quarter dropped to 87%. Wafer Shipments (8 K equivalents) Wafer Shipments 2Q11 1Q11 4Q10 3Q10 2Q10 1,145 1,120 1,132 1,202 1,156 Quarterly Capacity Utilization Rate 2Q11 1Q11 4Q10 3Q10 2Q10 Utilization Rate 87% 90% 94% >99% 100% Total Capacity (8 K equivalents) 1,330 1,259 1,234 1,220 1,183 5 Utilization Rate = Quarterly Wafer Out / Quarterly Capacity Page 7 of 11

8 Capacity 6 Capacity during the second quarter was 1,330K 8-inch equivalent wafers. The increase in total capacity is mainly due to advanced capacity expansion at 12 fabs. The estimated installed capacity in 3Q11 will increase to 1,358K 8-inch equivalent wafers. Annual Capacity in thousands of 8-inch wafer equivalents Geometry FAB (um) Quarterly Capacity in thousands of 8-inch wafer equivalents FAB 3Q11E 2Q11 1Q11 4Q10 Fab6A 6" Fab6A Fab8A 8" Fab8A Fab8C 8" Fab8C Fab8D 8" Fab8D Fab8E 8" Fab8E Fab8F 8" Fab8F Fab8S 8" Fab8S Fab12A 12" Fab12A Fab12i 12" , Fab12i Total (1) 4,791 4,586 4,507 4,308 Total 1,358 1,330 1,259 1,234 YoY Growth Rate 4% 2% 5% 7% (1) One 6-inch wafer is converted into (6 2 /8 2 ) 8-inch equivalent wafer; one 12-inch wafer is converted into 2.25(12 2 /8 2 ) 8-inch equivalent wafers. CAPEX The capital expenditure budget remains unchanged. By the end of the second quarter in 2011, UMC s year-to-date CAPEX totaled US$787 million. UMC Capital Expenditure by Year - in US$ billion Year CAPEX $ 1.8 $ 0.55 $ 0.35 $ 0.9 $ CAPEX Plan 8" 12" Total UMC 14% 86% Approximately US$1.8 billion 6 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. Page 8 of 11

9 Recent Developments / Announcements July 27, 2011 July 26, 2011 Cypress and UMC Deliver ICs on New 65-Nanometer SONOS Embedded Flash Technology UMC Receives Award For Top 100 Recognizable Taiwan Brands Jun. 15, 2011 May. 10, 2011 UMC Shareholders Approve 2010 Annual Shareholders Meeting Proposals -Shareholder cash dividend of NT$14,034 million, or approximately NT$1.12 per share -Employee cash bonus of NT$2,477 million -Directors' remuneration of NT$21 million UMC Wins Global Views Monthly 2011 Healthy Workplace Award Apr. 29, 2011 UMC Files Form 20-F for 2010 with US Securities and Exchange Commission Third Quarter of 2011 Outlook & Guidance Quarter-over-Quarter Guidance: Revenue: Low teen percentage range decline, mostly driven by lower volume Operating Margin: Low single-digit percentage range Capacity utilization: Low 70% range Segments: Consumer and computer segments will outpace the communication sector. Page 9 of 11

10 Conference Call / Webcast Announcement Wednesday, August 3, 2011 Time: 8:00 PM (Taipei) / 8:00 AM (New York) / 1:00 PM (London) Dial-in numbers and Access Codes: USA Toll Free: UK Toll Free: Singapore and Other Areas: Access Code: UMC About UMC A live webcast and replay of the 2Q11 results announcement will be available at under the Investor Relations \ Investor Events section. UMC (NYSE: UMC, TWSE: 2303) is a leading global semiconductor foundry that provides advanced technology and manufacturing services for applications spanning every major sector of the IC industry. UMC s customer-driven foundry solutions allow chip designers to leverage the strength of the company s leading-edge processes, which include production proven 65nm, 45/40nm, mixed signal/rfcmos, and a wide range of specialty technologies. Production is supported through 10 wafer manufacturing facilities that include two advanced 300mm fabs; Fab12A in Taiwan and Singapore-based Fab12i are both in volume production for a variety of customer products. The company employs approximately 13,000 people worldwide and has offices in Taiwan, Japan, Singapore, Europe, and the United States. UMC can be found on the web at Please visit UMC s website for further details regarding the above announcements. Page 10 of 11

11 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 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. - FINANCIAL TABLES TO FOLLOW - Page 11 of 11