UMC Reports First Quarter 2011 Results

Transcription

1 Contacts: Richard Yu UMC, Investor Relations Tel , ext richard_yu@umc.com UMC Reports First Quarter 2011 Results Q1 results in line with guidance; proposing NT$1.12 per share cash dividend First Quarter 2011 Overview 1 : Revenue: decreased 10.2% QoQ to NT$28.12 billion (US$ million) Gross margin: 27.5%; operating margin: 15.8% Capacity utilization: 90% Net income: NT$4.48 billion (US$ million) Earnings per share: NT$0.36; earnings per ADS: US$0.06 Taipei, Taiwan, ROC April 27, 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 first quarter of Revenue was NT$28.12 billion, a 10.2% quarter-over-quarter decrease from NT$31.32 billion in 4Q10, and a 5.3% year-over-year increase from NT$26.72 billion in 1Q10. Gross margin was 27.5%, operating margin was 15.8%, net income was NT$4.48 billion, and earnings per ordinary share were NT$0.36. Dr. Shih-Wei Sun, CEO of UMC, said: In Q1 2011, shipments reached 1.12 million 8-inch equivalent wafers. Capacity utilization was 90%, with revenue in line with projections. For Q2, we have tempered our expectations for revenue and profit, since more time is needed to accurately assess worldwide semiconductor demand due to Japan s March 11 th earthquake and its impact on the global supply chain. With regard to UMC s own operations, the company s supply of raw materials and equipment components remained secure, while production at our UMCJ factory in Tateyama, Japan, recovered in minimal time. Following the quake, we promptly 1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with ROC GAAP, which differ in some material respects from generally accepted accounting principles in the United States. They are un-audited, unconsolidated, and represent comparisons among the three-month period ending March 31, 2011, the three-month period ending December 31, 2010, and the equivalent three-month period that ended March 31, For all 1Q11 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the March 31, 2011 exchange rate of NT$29.41 per U.S. Dollar. Page 1 of 11

2 allocated resources to support customers' demands, while also assisting suppliers and partners that sustained earthquake damage with needed materials and supplies to help accelerate supply chain recovery." Dr. Sun emphasized: The next several quarters involve several uncertainties, such as the schedule for supply chain recovery, inflation in emerging markets, European sovereign debt, and exit of the US quantitative easing program. These factors may potentially impact the global economy as well as UMC s performance in the second half of the year. Nevertheless, UMC remains optimistic about mid to long-term foundry growth and will proceed rationally with financial discipline. To ensure our core competitiveness, the company is moving forward as planned with R&D and capacity expansion for advanced technologies. Revenue contribution from UMC s volume production 40nm technology is expected to continue growing in the second half of nm R&D collaboration with customers is also progressing smoothly and is scheduled for pilot production by mid-year. To maintain favorable ROE, the Board of Directors has proposed for shareholder approval a cash dividend payout of NT$1.12 per share. Going forward, we will further improve technology and service quality to enhance the company s performance for the maximum benefit of customers, shareholders, and UMC. Page 2 of 11

3 Summary of Operating Results Operating Results (Amount: NT$ million) 1Q11 4Q10 QoQ % change 1Q10 YoY % change Revenue 28,118 31,319 (10.2) 26, Gross Profit 7,742 10,052 (23.0) 6, Operating Expenses (3,300) (3,452) (4.4) (3,155) 4.6 Operating Income 4,442 6,600 (32.7) 3, Non-Operating Income Net Income 4,483 6,424 (30.2) 3, EPS (NT$ per share) (US$ per ADS) Revenue decreased 10.2% QoQ to NT$28.12 billion from NT$31.32 billion in 4Q10, and increased 5.3% YoY from NT$26.72 billion in 1Q10. Gross profit was NT$7.74 billion, or 27.5% of revenue, compared to NT$10.05 billion, or 32.1% of 4Q10 revenue. Operating income for the quarter was NT$4.44 billion, or 15.8% of revenue, compared to NT$6.60 billion, or 21.1% of 4Q10 revenue. The QoQ decrease in revenue was mainly due to lower blended ASP, appreciation of the NT dollar, and fewer wafer shipments. Net income in 1Q11 was NT$4.48 billion, compared to NT$6.42 billion in 4Q10. Earnings per ordinary share for the quarter were NT$0.36. Earnings per ADS 2 were US$ The basic weighted average number of outstanding shares in 1Q11 was 12,513,899,178, compared with 12,450,619,954 shares in 4Q10 and 12,638,040,544 shares in 1Q10. The diluted weighted average number of outstanding shares was 12,810,053,573 in 1Q11, compared with 12,576,463,301 shares in 4Q10 and 12,834,956,316 shares in 1Q10. The fully diluted share count on March 31, 2011 was approximately 13,695,580,000. On March 31, 2011, UMC held 458 million treasury shares acquired from the 13 th and 14 th share buy-back programs. 2 One ADS represents five Taiwan-listed ordinary shares. Page 3 of 11

4 Detailed Financials Section Gross margin dropped to 27.5%, mainly due to a combination of lower ASP, softer loading, and the strengthening NT dollar. The total R&D expense was 7.8% of revenue in 1Q11. Depreciation within COGS decreased slightly in Q1, and will start to increase starting in Q2. COGS & Expenses (Amount: NT$ million) 1Q11 4Q10 QoQ % change 1Q10 YoY % change Revenue 28,118 31,319 (10.2) 26, COGS (20,376) (21,267) (4.2) (20,156) 1.1 Depreciation (5,840) (5,879) (0.7) (6,907) (15.4) Other Mfg. Costs (14,536) (15,388) (5.5) (13,249) 9.7 Gross Profit 7,742 10,052 (23.0) 6, Gross Margin (%) 27.5% 32.1% 24.6% Total Operating Exp. (3,300) (3,452) (4.4) (3,155) 4.6 G&A (668) (732) (8.7) (603) 10.8 Sales & Marketing (452) (486) (7.0) (545) (17.1) R&D (2,180) (2,234) (2.4) (2,007) 8.6 Operating Income 4,442 6,600 (32.7) 3, Net non-operating income during 1Q11 showed a slight increase QoQ to NT$432 million. The gain from other items includes valuation gain from embedded options of exchangeable bonds. The net investment loss can be attributed to investment loss accounted for under the equity method. Non-Operating Income (Expenses) (Amount: NT$ million) 1Q11 4Q10 1Q10 Net Non-Operating Income Net Interest Income Net Investment Income (Loss) (420) (147) 8 Gain on Disposal of Investment Exchange Gain (Loss) (30) Other Gain Page 4 of 11

5 Operating cash inflow was NT$12.67 billion. Free cash flow 3 for 1Q11 was negative NT$90 million, as CAPEX spending for the quarter was NT$12.76 billion. Net cash outflow was NT$1.90 billion in 1Q11. Cash Flow Summary (Amount: NT$ million) For the 3-Month Period Ended Mar. 31, 2011 For the 3-Month Period Ended Dec. 31, 2010 Cash Flow from Operations 12,667 15,312 Net Income 4,483 6,424 Depreciation & Amortization 7,317 6,977 Changes in Working Capital 106 1,990 Other 761 (79) Cash Flow from Investing (14,474) (22,012) Capital Expenditures (12,757) (20,034) Other (1,717) (1,978) Cash Flow from Financing (120) 907 Short-Term Loans (54) 198 Long-Term Loans (69) 200 Transfer of treasury stock Other 3 (1) Effect of Exchange Rate 23 (203) Net Cash Flow (1,904) (5,996) Cash and cash equivalents decreased to NT$31.03 billion. During 1Q11, inventory turnover increased to 53 days to accommodate customers quarter-end adjustments and UMC proactively increasing raw materials inventory to buffer against Japan s earthquake impact. Current Assets (Amount: NT$ billion) 1Q11 4Q10 1Q10 Cash & Cash Equivalents Notes & Accounts Receivable Days Sales Outstanding Inventories Avg. Inventory Turnover Total Current Assets Current liabilities decreased to NT$38.37 billion. Total liabilities decreased to NT$42.66 billion in 1Q11. UMC s debt to equity ratio decreased to 19%. Liabilities (Amount: NT$ billion) 1Q11 4Q10 1Q10 Total Current Liabilities Accounts Payable Short-Term Credit / Bonds Payable on Equipment Other Long-Term Liabilities Total Liabilities Debt to Equity 19% 20% 19% 3 Free cash flow = Operating cash flow Capital expenditures Page 5 of 11

6 Analysis of Revenue 4 The percentage of revenue from Asia grew to 35%, reflecting the relative strength of Asia-based communication and computer customers. Revenue from 65nm and below remained 35% of total revenue, with 40nm accounting for 6% of UMC s Q1 revenue contribution as demand remains steady for advanced process nodes. The percentage of revenue from IDM customers increased to 28% in 1Q11 due to increased IDM outsourcing. Revenue Breakdown by Region Region 1Q11 4Q10 3Q10 2Q10 1Q10 North America 51% 53% 46% 46% 47% Asia Pacific 35% 30% 40% 42% 42% Europe 13% 16% 13% 11% 10% Japan 1% 1% 1% 1% 1% Revenue Breakdown by Geometry Geometry 1Q11 4Q10 3Q10 2Q10 1Q10 40nm and below 6% 5% 4% 3% 1% 40nm<x<=65nm 29% 30% 26% 21% 17% 65nm<x<=90nm 15% 16% 14% 18% 22% 90nm<x<=0.13um 23% 20% 24% 22% 25% 0.13um<x<=0.18um 13% 14% 15% 18% 18% 0.18um<x<=0.35um 9% 10% 12% 13% 11% 0.5um and above 5% 5% 5% 5% 6% Revenue Breakdown by Customer Type Customer Type 1Q11 4Q10 3Q10 2Q10 1Q10 Fabless 72% 73% 78% 81% 81% IDM 28% 27% 22% 19% 19% Computer sector revenue contribution grew from 11% to 14% QoQ to reflect strengthening demand in PC related areas such as optical storage devices. Revenue Breakdown by Application (1) Application 1Q11 4Q10 3Q10 2Q10 1Q10 Computer 14% 11% 12% 13% 13% Communication 57% 56% 53% 54% 59% Consumer 26% 30% 32% 31% 26% Memory 1% 1% 1% 1% 1% Others 2% 2% 2% 1% 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) decreased in US dollar terms during 1Q11, mainly due to the annual price adjustment that occurs at the beginning of the year. Unit: USD 1,500 1, Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Shipment and Utilization Rate 5 Wafer shipments decreased 1.1% sequentially to 1,120K in 1Q11, compared to 1,132K 8-inch equivalent wafers shipped in 4Q10. As wafer capacity increased in Q1, overall utilization rate for the quarter was 90%. Wafer Shipments (8 K equivalents) Wafer Shipments 1Q11 4Q10 3Q10 2Q10 1Q10 1,120 1,132 1,202 1,156 1,033 Quarterly Capacity Utilization Rate 1Q11 4Q10 3Q10 2Q10 1Q10 Utilization Rate 90% 94% >99% 100% 88% Total Capacity (8 K equivalents) 1,259 1,234 1,220 1,183 1,154 5 Utilization Rate = Quarterly Wafer Out / Quarterly Capacity Page 7 of 11

8 Capacity 6 Capacity during the first quarter was 1,259K 8-inch equivalent wafers. The increase in total capacity is mainly due to advanced capacity expansion at 12 fabs. The estimated installed capacity in 2Q11 will increase to 1,330K 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 2Q11E 1Q11 4Q10 3Q10 Fab6A 6" Fab6A Fab8A 8" Fab8A Fab8C 8" Fab8C Fab8D 8" Fab8D Fab8E 8" Fab8E Fab8F 8" Fab8F Fab8S (1) 8" Fab8S Fab12A 12" Fab12A Fab12i (2) 12" , Fab12i Total (3) 4,791 4,586 4,507 4,308 Total (3) 1,330 1,259 1,234 1,220 YoY Growth Rate 4% 2% 5% 7% (1) Former fab of SiSMC, which was acquired from Silicon Integrated Systems in July (2) Former fab of UMCi, a UMC wholly-owned subsidiary since December 2004 that was merged into UMC in April 2005 (3) 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 first quarter 2011, UMC s year-to-date CAPEX totaled US$432 million. (1) 2005 CAPEX contained UMC 2005 full-year CAPEX and UMCi CAPEX during 1Q05. UMC Capital Expenditure by Year - in US$ billion Year CAPEX $ 1.8 $ 0.55 $ 0.35 $ 0.9 $ 1.0 $0.7 (1) 2011 CAPEX Plan 8" 12" Total UMC 13% 87% 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 Mar. 17, 2011 UMC Sponsors Management Thesis Award Mar. 16, 2011 Mar. 14, 2011 UMC Board of Directors Announces Annual Shareholders Meeting Proposals - Shareholder cash dividend of NT$14,034 million or NT$1.12 per share - Employee cash bonus of NT$2,477 million. - To issue unsecured zero coupon euro convertible bond not exceeding US$500 million - To acquire up to 30% equities of the holding company of He Jian Technology - The 2011 AGM will be held June 15, 2011 at the UMC Recreation Center in Hsinchu UMC Donates Power Electronics Lab Equipment to NTU Mar. 10, 2011 UMC to Provide Foundry Services for Sanken Electric Mar. 09, 2011 UMC Participates in EU 7 th Framework Programme Feb. 16, 2011 UMC Singapore Awarded Premium Trade Status Jan. 26, 2010 UMC 4Q 2010 Financial Results Second Quarter of 2011 Outlook & Guidance Quarter-over-Quarter Guidance: Wafer shipments and ASP: Flat Capacity utilization: Mid 80% range Gross margin: Low to mid 20% range Segments: Consumer and computer segments will outpace the communication sector. Page 9 of 11

10 Conference Call / Webcast Announcement Wednesday, April 27, 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 A live webcast and replay of the 1Q11 results announcement will be available at 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 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