UMC Reports Fourth Quarter 2017 Results

Transcription

1 Contacts: Michael Lin / David Wong UMC, Investor Relations , ext jinhong_lin@umc.com david_wong@umc.com UMC Reports Fourth Quarter 2017 Results Full-year foundry revenue in USD increased 7%YoY Fourth Quarter 2017 Overview 1 : Revenue: NT$36.63 billion (US$1.23 billion) Gross margin: 17.2% Foundry revenue from 28nm: 15%; Foundry operating margin: 5.4% Foundry capacity utilization rate: 90% Net income attributable to stockholders of the parent: NT$1.77 billion (US$59 million) Earnings per share: NT$0.15; earnings per ADS: US$0.025 Taipei, Taiwan, ROC January 24, 2018 United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) ( UMC or The Company ), a leading global semiconductor foundry, today announced its consolidated operating results for the fourth quarter of Fourth quarter consolidated revenue was NT$36.63 billion, down 2.8% from NT$37.70 billion in 3Q17 and decreased 4.4% YoY from NT$38.31 billion in 4Q16. The consolidated gross margin in 4Q17 was 17.2%. Net income attributable to stockholders of the parent was NT$1.77 billion, with earnings per ordinary share of NT$0.15. Jason Wang, co-president of UMC, said, In the fourth quarter of 2017, UMC s foundry revenue was NT$36.54 billion. During the quarter, our capacity utilization from legacy 8 and 12 technologies continued to reflect robust demand, despite a decrease in 28nm HKMG contribution. The utilization rate of 90% led to overall wafer shipments of 1.67 million 8-inch equivalents. For the full year of 2017, UMC posted a 7% YoY revenue increase in US dollars as wafer shipments increased nearly 11% annually. As a result, our 2017 net income of the parent company grew nearly 16% year on year, despite experiencing unfavorable movement of the NT dollar in the 1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with TIFRSs recognized by Financial Supervisory Commission in the ROC, which is different from IFRSs issued by the International Accounting Standards Board. They represent comparisons among the three-month period ending December 31, 2017, the three-month period ending September 30, 2017, and the equivalent three-month period that ended December 31, For all 4Q17 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the December 31, 2017 exchange rate of NT$ per U.S. Dollar. Page 1 of 13

2 foreign exchange markets. Co-president Wang continued, Looking into the first quarter of 2018, we anticipate our foundry business to remain relatively flat. We are continuing our efforts to capture new 28nm business by working to secure new design opportunities, which will help rebuild our 28nm momentum as these new product tape outs are expected to enter production in the following months. In addition, we will leverage our manufacturing excellence to invest in areas with better ROI potential, including 12 mature technologies as well as tool and equipment upgrades at 8 facilities. As such, our 2018 CAPEX budget will be approximately US$1.1 billion. I believe our approach to optimizing the offerings across 8 and 12 mature technologies while moderating the pace of leading edge expansion will lead to sound financial performance that will preserve the best interests of our shareholders and employees. Page 2 of 13

3 Summary of Operating Results Operating Results (Amount: NT$ million) 4Q17 3Q17 QoQ % change 4Q16 YoY % change Net Operating Revenues 36,631 37,698 (2.8) 38,306 (4.4) Gross Profit 6,298 6,592 (4.5) 8,759 (28.1) Operating Expenses (5,198) (5,404) (3.8) (6,627) (21.6) Net Other Operating Income and Expenses Operating Income (Loss) 1,901 1, ,276 (16.5) Net Non-Operating Income and Expenses (152) 1,236 - (1,210) (87.4) Net Income Attributable to Stockholders of the Parent 1,771 3,473 (49.0) 2,548 (30.5) EPS (NT$ per share) (US$ per ADS) Net operating revenues in 4Q17 declined 2.8% to NT$36.63 billion, including NT$36.54 billion from the foundry segment. Revenue contribution from 40nm and below technologies remained at 45%. Gross profit declined 4.5% to NT$6.30 billion, or 17.2% of revenue. Operating expenses decreased 3.8% to NT$5.20 billion. Net other operating income was NT$801 million, leading to operating income of NT$1.90 billion. Net non-operating expense was NT$0.15 billion. Net income attributable to stockholders of the parent was NT$1.77 billion. Earnings per ordinary share for the quarter was NT$0.15. Earnings per ADS was US$ The basic weighted average number of outstanding shares in 4Q17 was 12,208,239,978, compared with 12,208,239,978 shares in 3Q17 and 12,208,239,978 shares in 4Q16. The diluted weighted average number of outstanding shares was 13,474,873,551 in 4Q17, compared with 13,441,188,010 shares in 3Q17 and 13,442,173,503 shares in 4Q16. The fully diluted share count on December 31, 2017 was approximately 13,890,953,000. On December 31, 2017, UMC held 400 million treasury shares acquired from the 16th and 17th share buy-back programs. Page 3 of 13

4 Detailed Financials Section Net operating revenues decreased 2.8% to NT$36.63 billion. COGS decreased to NT$30.33 billion, as depreciation declined 1.4% to NT$10.99 billion. Other manufacturing costs fell 3.1% to NT$19.34 billion. Gross profit was NT$6.30 billion. Operating expenses declined 3.8% to NT$5.20 billion. General and Administrative (G&A) expenses increased 17.5% to NT$1.16 billion. Sales & Marketing fell 11.8% to NT$0.94 billion and R&D expense decreased 7.6% to NT$3.09 billion, or 8.4% of net operating revenues. Net other operating income was NT$801 million, leading to an operating income of NT$1.90 billion. COGS & Expenses (Amount: NT$ million) 4Q17 3Q17 QoQ % YoY % 4Q16 change change Net Operating Revenues 36,631 37,698 (2.8) 38,306 (4.4) COGS (30,333) (31,106) (2.5) (29,547) 2.7 Depreciation (10,990) (11,145) (1.4) (11,314) (2.9) Other Mfg. Costs (19,343) (19,961) (3.1) (18,233) 6.1 Gross Profit 6,298 6,592 (4.5) 8,759 (28.1) Gross Margin (%) 17.2% 17.5% 22.9% Operating Expenses (5,198) (5,404) (3.8) (6,627) (21.6) G&A (1,164) (991) 17.5 (1,521) (23.5) Sales & Marketing (944) (1,070) (11.8) (1,282) (26.4) R&D (3,090) (3,343) (7.6) (3,824) (19.2) Net Other Operating Income & Expenses Operating Income 1,901 1, ,276 (16.5) Net non-operating expense in 4Q17 was NT$152 million, which primarily resulted from the difference in the exchange gain of NT$500 million offset by an NT$542 million in net interest expense and net investment loss of NT$80 million. Non-Operating Income and Expenses (Amount: NT$ million) 4Q17 3Q17 4Q16 Non-Operating Income and Expenses (152) 1,236 (1,210) Net Interest Income and Expenses (542) (538) (418) Net Investment Gain and Loss (80) 478 (1,138) Gain and Loss on Disposal of Investment (22) 538 1,023 Exchange Gain and Loss (496) Other Gain and Loss (8) (18) (181) Page 4 of 13

5 Cash inflow from operating activities reached NT$12.90 billion. Cash outflow from investing activities totaled NT$6.03 billion, including NT$10.96 billion in CAPEX spending for the foundry segment, resulting in a free cash inflow of NT$1.94 billion. Cash inflow from financing activities was NT$5.21 billion, mainly from a NT$5.40 billion in bond issuance. Net cash inflow in 4Q17 was NT$11.74 billion. Over the next 12 months, the company expects to repay NT$2.52 billion in bank loans. Cash Flow Summary (Amount: NT$ million) For the 3-Month Period Ended Dec. 31, 2017 For the 3-Month Period Ended Sep. 30, 2017 Cash Flow from Operating Activities 12,899 11,447 Net income before tax 1,749 2,865 Depreciation & Amortization 13,227 13,487 Loss (gain) on disposal of investments 22 (538) Impairment loss on financial assets Exchange gain on financial assets and liabilities (642) (541) Changes in working capital (655) (2,971) Income tax paid (152) (933) Other (904) (222) Cash Flow from Investing Activities (6,034) (4,984) Capital expenditures (10,961) (7,288) Proceeds from disposal of AFS financial assets Acquisition of intangible assets (360) (251) Other 4,974 1,992 Cash Flow from Financing Activities 5,214 (4,604) Bank loans (41) 1,482 Bonds Issued 5,400 - Cash dividends 9 (6,112) Other (154) 26 Effect of Exchange Rate (343) (54) Net Cash Flow 11,736 1,805 Page 5 of 13

6 Cash and cash equivalents increased to NT$81.68 billion. Days of inventory increased to 53 days. Current Assets (Amount: NT$ billion) 4Q17 3Q17 4Q16 Cash and Cash Equivalents Notes & Accounts Receivable Days Sales Outstanding Inventories, net Days of Inventory Total Current Assets Current liabilities increased to NT$88.06 billion, mainly resulting from an increase in Short-Term Credit/Bonds. Total liabilities increased to NT$ billion, leading to a debt to equity ratio of 84%. Liabilities (Amount: NT$ billion) 4Q17 3Q17 4Q16 Total Current Liabilities Notes & Accounts Payable Short-Term Credit / Bonds Payable on Equipment Other Long-Term Credit / Bonds Long-Term Investment Liabilities Total Liabilities Debt to Equity 84% 79% 77% Page 6 of 13

7 Analysis of Revenue 2 for Foundry Segment Revenue from Asia Pacific declined to 45% while sales from North American customers remained flat at 43%. Revenue contribution from Japan increased to 3%. Revenue Breakdown by Region Region 4Q17 3Q17 2Q17 1Q17 4Q16 North America 43% 43% 42% 41% 48% Asia Pacific 45% 47% 47% 50% 45% Europe 9% 8% 7% 5% 4% Japan 3% 2% 4% 4% 3% 14nm accounted for 2% of 4Q17 revenue, while 28nm contribution remained at 15%. Revenue Breakdown by Geometry Geometry 4Q17 3Q17 2Q17 1Q17 4Q16 14nm and below 2% 1% 1% 0% - 14nm<x<=28nm 15% 15% 17% 17% 22% 28nm<x<=40nm 28% 29% 28% 29% 26% 40nm<x<=65nm 12% 12% 12% 13% 14% 65nm<x<=90nm 5% 6% 5% 4% 3% 90nm<x<=0.13um 12% 12% 12% 11% 11% 0.13um<x<=0.18um 13% 12% 12% 13% 11% 0.18um<x<=0.35um 10% 10% 10% 10% 10% 0.5um and above 3% 3% 3% 3% 3% Fabless customers represented 91% of revenue in 4Q17. Revenue Breakdown by Customer Type Customer Type 4Q17 3Q17 2Q17 1Q17 4Q16 Fabless 91% 90% 91% 93% 93% IDM 9% 10% 9% 7% 7% Communication business increased to 49%. Revenue from the consumer segment declined to 29%. Revenue Breakdown by Application (1) Application 4Q17 3Q17 2Q17 1Q17 4Q16 Computer 13% 14% 14% 12% 13% Communication 49% 47% 48% 51% 53% Consumer 29% 31% 29% 28% 26% Others 9% 8% 9% 9% 8% (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. 2 Revenue in this section represents wafer sales Page 7 of 13

8 Blended ASP Trend for Foundry Segment Blended average selling price (ASP) remained unchanged in 4Q17. Unit: USD 1,500 1, Q16 1Q17 2Q17 3Q17 4Q17 Shipment and Utilization Rate 3 for Foundry Segment During 4Q17, wafer shipments decreased 4.5% to 1,670K. Capacity increased by 1.3% QoQ to 1,886K, resulting in an overall utilization rate of 90% in 4Q17. Wafer Shipments (8 K equivalents) Wafer Shipments 4Q17 3Q17 2Q17 1Q17 4Q16 1,670 1,748 1,741 1,678 1,656 Quarterly Capacity Utilization Rate 4Q17 3Q17 2Q17 1Q17 4Q16 Utilization Rate 90% 96% 96% 96% 94% Total Capacity (8 K equivalents) 1,886 1,861 1,816 1,742 1,794 3 Utilization Rate = Quarterly Wafer Out / Quarterly Capacity Page 8 of 13

9 Capacity 4 for Foundry Segment Total capacity in the fourth quarter was 1,886K 8-inch equivalent wafers. We expect that first quarter capacity will decline to 1,858K 8-inch equivalent wafers, mainly due to fewer working days and tool maintenance. Annual Capacity in thousands of wafers Geometry FAB (um) Quarterly Capacity in thousands of wafers FAB 1Q18E 4Q17 3Q17 2Q17 WTK 6" WTK Fab 8A 8" Fab 8A Fab 8C 8" Fab 8C Fab 8D 8" Fab 8D Fab 8E 8" Fab 8E Fab 8F 8" Fab 8F Fab 8S 8" Fab 8S Fab 8N 8" Fab 8N Fab 12A 12" Fab 12A Fab 12i 12" Fab 12i Fab 12X 12" Fab 12X Total (1) 7,304 6,983 6,617 6,323 Total 1,858 1,886 1,861 1,816 YoY Growth Rate 5% 6% 5% 4% (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. Capacity total figures are expressed in 8-inch equivalent wafers. CAPEX for Foundry Segment CAPEX spending in 4Q17 was US$364 million, bringing 2017 s total CAPEX to US$1.4 billion. Our 2018 CAPEX budget will be approximately US$1.1 billion. Capital Expenditure by Year - in US$ billion Year CAPEX $ 1.4 $ 2.8 $ 1.9 $ 1.4 $ CAPEX Plan 8" 12" Total 33% 67% US$1.1 billion 4 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 9 of 13

10 Brief Summary of Full Year 2017 Consolidated Results Consolidated revenue in NTD increased 1.0% YoY to NT$ billion, up from NT$ billion in Gross margin was 18.1%, compared to 20.5% in Operating margin was 4.4%, compared to 4.2% in Net income attributable to stockholders of the parent was NT$9.63 billion in EPS was NT$0.79, or EPADS was US$0.133 for The contribution from 28nm technologies and below remained at 17% in The revenue from 40nm in 2017 increased to 28%. Operating Results (Amount: NT$ million) YoY % change Net Operating Revenues 149, , Gross Profit 27,058 30,379 (10.9) Operating Expenses (22,143) (23,922) (7.4) Net Other Operating Income 1,653 (263) - & Expenses Operating Income 6,568 6, Net Non-Operating Income & 1,230 (1,347) - Expenses Income Tax Expenses (1,167) (984) 18.6 Net Income Attributable to Stockholders of the Parent 9,629 8, EPS (NT$ per share) (US$ per ADS) Annual Sales Breakdown in Revenue for Foundry Segment Region North America 43% 49% Asia Pacific 47% 44% Europe 7% 4% Japan 3% 3% Technology nm and below 1% - 14nm<x<=28nm 16% 17% 28nm<x<=40nm 28% 27% 40nm<x<=65nm 12% 16% 65nm<x<=90nm 5% 4% 90nm<x<=0.13um 12% 11% 0.13um<x<=0.18um 12% 12% 0.18um<x<=0.35um 10% 10% 0.5um and above 4% 3% Customer Type Fabless 91% 92% IDM 9% 8% Application Computer 13% 13% Communication 49% 53% Consumer 29% 27% Others 9% 7% Page 10 of 13

11 First Quarter of 2018 Outlook & Guidance Quarter-over-Quarter Guidance: Wafer Shipments: To increase 2-4% ASP in USD: To decrease by approximately 2% Profitability: Gross profit margin will be in the low teens % range Foundry Segment Capacity Utilization: Approximately 90% range 2018 CAPEX for Foundry Segment: US$1.1 billion Recent Developments / Announcements Dec. 21, 2017 UMC Announces Availability of 40nm SST Embedded Flash Process Nov. 30, 2017 UMC Fab 12i Wins Singapore s National Water Efficiency Award Nov. 15, 2017 Cypress Achieves Aerospace-Grade QML Certification for 65nm and 40nm SRAM at UMC Oct. 30, 2017 UMC Obtains LEED Gold Certification for Fab 12X Oct. 25, 2017 UMC 3Q 2017 Financial Results Please visit UMC s website for further details regarding the above announcements Page 11 of 13

12 Conference Call / Webcast Announcement Wednesday, January 24, 2018 Time: 5:00 PM (Taipei) / 4:00 AM (New York) / 09:00 AM (London) Dial-in numbers and Access Codes: USA Toll Free: Taiwan Number: Other Areas: Access Code: UMC A live webcast and replay of the 4Q17 results announcement will be available at under the Investors / Events section. About UMC UMC (NYSE: UMC, TWSE: 2303) is a leading global semiconductor foundry that provides advanced IC production for applications spanning every major sector of the electronics industry. UMC s comprehensive foundry solutions enable chip designers to leverage the company s sophisticated technology and manufacturing, which include high volume 28nm High-K/Metal Gate technology, 14nm FinFET mass production, ultra-low power platform processes specifically developed for Internet of Things (IoT) applications and the automotive industry s highest-rated AEC-Q100 Grade-0 manufacturing capabilities for the production of ICs found in vehicles. UMC s 11 wafer fabs are strategically located throughout Asia and are able to produce nearly 600,000 wafers per month. The company employs over 19,000 people worldwide, with offices in Taiwan, China, Europe, Japan, Korea, Singapore, and the United States. UMC can be found on the web at 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 introduction of new services and technologies, future outsourcing, competition, wafer capacity, 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 regarding these and other risks is included in UMC s filings with the U.S. Securities and Exchange Commission. 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. Page 12 of 13

13 Safe Harbor Statements This release contains forward-looking statements. These statements constitute forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and as defined in the United States 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) dependence upon the frequent introduction of new services and technologies based on the latest developments in the industry in which UMC operates; (ii) the intensely competitive semiconductor, communications, consumer electronics and computer industries and markets; (iii) the risks associated with international business activities; (iv) 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 natural disasters, 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 United States Securities and Exchange Commission. All information provided in this release is as of the date of this release and are based on assumptions that UMC believes to be reasonable as of this date, and 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 prepared and published in accordance with Taiwan International Financial Reporting Standards, or TIFRSs, recognized by the Financial Supervisory Commission in the ROC, which is different from International Financial Reporting Standards, or IFRSs, issued by the International Accounting Standards Board. Investors are cautioned that there may be significant differences between TIFRSs and IFRSs. In addition, TIFRSs and IFRSs differ in certain significant respects from generally accepted accounting principles in the ROC and generally accepted accounting principles in the United States. 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 13 of 13