UMC Reports 2007 First Quarter Results Anticipates a Gradual Recovery in 2Q07

    TAIPEI, Taiwan, May 2 /Xinhua-PRNewswire-FirstCall/ --

    First Quarter 2007 Overview (Note 1):

    -- Revenue declined 11.8% sequentially to NT$23.03 billion (US$696
    -- Net income was NT$1.46 billion (US$44 million)
    -- Revenue from 90nm technology and below was 21% of total revenue
    -- EPS of NT$0.08; EPADS of US$0.012

    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
            unconsolidated, and represent comparisons among the three-month
            period ending March 31, 2007, the three-month period ending
            December 31, 2006, and the equivalent three-month period that
            ended March 31, 2006. For all 1Q07 results, New Taiwan Dollar
            (NT$) amounts have been converted into U.S. Dollars at the March
            31, 2007 exchange rate of NT$33.09 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 first quarter of 2007.

"1Q07 was a challenging quarter for UMC. Our results reflected the anticipated soft demand caused by the industry-wide inventory correction," said UMC Chairman and CEO, Dr. Jackson Hu.

Dr. Hu continued, "For Q2, we have noticed that customers' inventory levels have been continuously going down. Starting from June, demand for communications applications such as cell phone and consumer applications including DTV and panel driver ICs has picked up strongly. Demand for the computer segment is also starting to recover, although it is not as strong as the other two segments yet. If the demand continues to remain as strong as we are seeing now, Q3 revenue will be very strong, which will significantly improve the overall bottom line."

"As far as new technology development is concerned, multiple 65nm programs are moving forward smoothly. Yield improvement is extremely encouraging. Besides the existing 65nm products that have been in production, additional business contributions from this technology node will start to come in later this year. Furthermore, we are working with multiple customers to prepare IP for 45nm technologies. We expect to have multiple product tape-outs in Q3 this year and to have working prototypes in Q4, 2007. "

"Particularly noteworthy is the fact that more and more IDMs are becoming fab-lite or fabless. This trend will help expand business for the foundries. Specifically, It will help UMC diversify into other product areas, such as CPU and memory. Currently, we are working with many customers to explore mutual beneficial opportunities in these areas. This trend will allow us to collaborate with our IDM customers more closely in developing future technologies such as 45nm and 32nm. As usual, our industry is full of challenges and opportunities. We are optimistic about the foundry industry's future as well as UMC's own business outlook."

    Summary of Operating Results

    Operating Results
                                                 QoQ %               YoY %
    (Amount: NT$ million)     1Q07      4Q06    change     1Q06     change

    Revenue                 23,025    26,112    (11.8)    24,384     (5.6)
    Gross Profit             3,676     5,453    (32.6)     3,255     12.9
    Operating Expenses      (3,658)   (4,081)   (10.4)    (3,170)    15.4
    Operating Income            18     1,372    (98.7)        85    (78.8)
    Non-op. Income
     (Expenses)              1,719     5,288    (67.5)    14,090    (87.8)
    Net Income               1,459     5,689    (74.4)    12,286    (88.1)
    EPS   (NT$ per share)     0.08      0.33       --       0.66       --
          (US$ per ADS)      0.012     0.050       --      0.100       --

UMC's revenue totaled NT$23.03 billion in 1Q07, a 11.8% quarter-over- quarter decrease from NT$26.11 billion in 4Q06, and a 5.6% decrease year-over- year from NT$24.38 billion in 1Q06. Gross profit for the quarter was NT$3.68 billion, or 16.0% of revenue, compared to NT$5.45 billion, or 20.9% of revenue in 4Q06. The decline in gross margin was mainly attributed to the decrease in revenue and lower capacity utilization rate in 1Q07. Operating income decreased 98.7% sequentially and 78.8% from 1Q06 to NT$18 million. Net income in 1Q07 was NT$1.46 billion, a sequential decrease of 74.4% from 4Q06 and an 88.1% decrease over 1Q06.

Earnings per ordinary share (EPS) for the quarter were NT$0.08. Earnings per ADS (EPADS) were US$0.012. This compares with 4Q06 EPS of NT$0.33 and EPADS of US$0.050. One ADS represents five Taiwan-listed ordinary shares. The basic weighted average number of outstanding shares in 1Q07 was 17,775,610,526, compared with 17,730,038,769 shares in 4Q06 and 18,691,630,516 shares in 1Q06. The diluted weighted average number of outstanding shares was 17,904,075,495 in 1Q07, compared with 18,355,281,822 shares in 4Q06 and 19,312,316,024 shares in 1Q06. The fully diluted share count on March 31, 2007 was 19,212,513 thousand. On March 31, 2007, UMC still held 1,342,067 thousands treasury shares, which were acquired from previous buy-back programs. The increase in basic weighted average outstanding shares in 1Q07 was due to new share issuance for the exercise of employee stock options.

    Detailed Financials Section

    COGS & Expenses
                                                    QoQ %               YoY %
    (Amount: NT$ million)     1Q07      4Q06       change    1Q06     change

    Revenue                   23,025    26,112     (11.8)   24,384      (5.6)
    COGS                      (19,349)    (20,659)          (6.3)    (21,129)          (8.4)
            Depreciation                        (7,649)      (8,569)        (10.7)    (10,566)        (27.6)
            Other  Mfg.  Costs              (11,700)    (12,090)          (3.2)    (10,563)          10.8
        Gross  Profit                              3,676          5,453          (32.6)        3,255            12.9
        Gross  Margin  (%)                      16.0%          20.9%                --          13.3%                --
        Total  Operating  Exp.            (3,658)      (4,081)        (10.4)      (3,170)          15.4
            G&A                                              (678)          (840)        (19.3)          (532)          27.4
            Sales  &  Marketing                  (650)          (546)          19.0            (612)            6.2
            R&D                                          (2,330)      (2,695)        (13.5)      (2,026)          15.0
        Operating  Income                            18          1,372          (98.7)              85          (78.8)
        Operating  Margin  (%)                0.1%            5.3%                --            0.3%                --


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