UMC Reports 2008 Third Quarter Results: Weak Global Economic Conditions Impact Business Performance (Revenue down 2%)


    TAIPEI, Taiwan, Oct. 29 /Xinhua-PRNewswire-FirstCall/ --

    Third Quarter 2008 Overview (Note 1):

    -- Revenue decreased 1.9% sequentially to NT$24.75 billion (US$768 million)
    -- Gross profit margin of 17.6%, operating margin of 3.8%
    -- Net loss of NT$1.41 billion (US$44 million), included an impairment
       loss of NT$3.22 billion
    -- Revenue from 90nm technology and below was 38%
    -- Loss per ordinary share was NT$0.11; Loss per ADS was US$0.017

    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 September 30, 2008, the three-month period ending
            June 30, 2008, and the equivalent three-month period that ended
            September 30, 2007. For all 3Q08 results, New Taiwan Dollar (NT$)
            amounts have been converted into U.S. Dollars at the September 30,
            2008 exchange rate of NT$32.22 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 third quarter of 2008.

Dr. Shih-Wei Sun, CEO of UMC, said, "UMC's Q3 results were in line with our previous guidance, with 883 thousand 8-inch equivalent wafers shipped and overall utilization rate for the quarter at 79%. Customer demand for advanced 90nm and 65nm technologies remained steady, with revenue from 90nm and below processes slightly rising to 38%. Looking ahead to Q4, we see that the environment is more challenging than we previously anticipated. Customers have adopted a cautious attitude with regard to their wafer demand forecasts due to uncertainty related to the current global economic situation."

Dr. Sun continued, "UMC's strengths in financial structure, capital position, independent technology development and manufacturing capabilities will enable us to overcome the challenges of the current global economic crisis. Our management has a wealth of experience dealing with the extremes of the business cycle, and UMC's strategy of delivering customer-driven foundry solutions is designed to maximize benefits and profits for UMC and its customers over the long-term. We will continue to invest in developing advanced process technologies and expand our manufacturing capacity where necessary to increase our market share and penetration of business from our key foundry customers. Currently, 45/40nm is being prepared for pilot production this year, and development for the 28nm process is progressing smoothly in Fab 12A. At the same time, we continue to make significant achievements in enhancing productivity while successfully implementing cost control measures, and we anticipate further improvements going forward. I would like to emphasize the fact that our cost control measures will have no effect on our advanced technology research and development and the purchase of necessary equipment. These and other important expenditures will continue as planned so that we emerge from the current economic slowdown with even stronger long-term competitiveness. We will continue to pursue our foundry strategy, and are optimistic about the prospects of future growth and profitability once the global economy stabilizes and consumer confidence grows."


    Summary of Operating Results

    Operating Results

                                                     QoQ%                YoY%
    (Amount: NT$ million)     3Q08      2Q08       change     3Q07     change

    Revenue                 24,748     25,238       (1.9)   31,028     (20.2)
    Gross Profit             4,368      5,795      (24.6)    8,223     (46.9)
    Operating Expenses      (3,421)    (3,454)      (1.0)   (3,988)    (14.2)
    Operating Income           947      2,341      (59.5)    4,235     (77.6)
    Non-op. Income
     (Expenses)             (2,105)       120         --     5,764        --
    Net Income              (1,413)     2,397         --     9,233        --
    EPS(NT$ per share)       (0.11)      0.18         --      0.55        --
       (US$ per ADS)        (0.017)     0.028         --     0.085        --


Revenue decreased 1.9% quarter-over-quarter to NT$24.75 billion, from NT$25.24 billion in 2Q08. Gross profit was NT$4.37 billion, or 17.6% of revenue, compared to NT$5.8 billion, or 23% of 2Q08 revenue. Operating income decreased 59.5% sequentially to NT$947 million, or 3.8% of 3Q08 revenue. Weakening global semiconductor demand was the key reason for the decrease in revenue, gross profit and operating income during the third quarter. Net loss in 3Q08 was NT$1.41 billion, mainly due to an NT$3.22 billion impairment loss, compared to a net income of NT$2.4 billion in 2Q08.

Loss per ordinary share for the quarter was NT$0.11. Loss per ADS was US$0.017. This compares with 2Q08 EPS of NT$0.18 and EPADS of US$0.028. One ADS represents five Taiwan-listed ordinary shares. The basic weighted average number of outstanding shares in 3Q08 was 13,129,987,534, compared with 13,171,551,610 shares in 2Q08 and 15,411,526,795 shares in 3Q07. The diluted weighted average number of outstanding shares was 13,129,987,534 in 3Q08, compared with 13,178,233,102 in 2Q08 and 15,887,984,244 shares in 3Q07. The decrease on weighted average share count is due to the retirement of 348,583 thousand treasury shares acquired from the 8th share buyback program. The fully diluted share count on September 30, 2008 was 14,305,634 thousand. On September 30, 2008, UMC held 542,834 thousand treasury shares acquired from the 9th, 11th, and 12th share buy-back programs. UMC completed the 12th share buy-back program on October 2, 2008.

Detailed Financials Section

Depreciation and amortization totaled NT$9.22 billion in 3Q08, compared with NT$9.4 billion in 2Q08. Depreciation within COGS of NT$8.09 billion went up by 7.7% from 2Q08 and other manufacturing costs within COGS increased to NT$12.29 billion sequentially, mainly due to the higher cost allocation in 3Q08 caused by lower loading in 3Q08. Total operating expenses decreased by 1% to NT$3.42 billion. General & Administrative expenses dropped to NT$639 million, partially due to the accounting adjustment on the reserves of employee bonus. Sales & Marketing expenses increased to NT$673 million, mainly due to increase in IP Royalty fees. R&D expenses increased to NT$2.11 billion due to the increase expenses on RD mask. The total R&D expenses were 8.52% of revenue in 3Q08.

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