UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS WITH REPORT OF INDEPENDENT AUDITORS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2023 AND 2022 Address: No. 3 Li-Hsin 2nd Road, Hsinchu Science Park, Hsinchu, Taiwan, R.O.C. Telephone: 886-3-578-2258 The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpre ...

United Microelectronics Corp (NYSE:UMC) Q2 2023 Earnings Conference Call July 26, 2023 5:00 AM ET Company Participants Michael Lin - IR Chi-Tung Liu - CFO, SVP, Head, Corporate Governance & Company Secretary Jason Wang - President & Representative Director Conference Call Participants Randy Abrams - Crédit Suisse Brett Simpson - Arete Research Services Charlie Chan - Morgan Stanley Bruce Lu - Goldman Sachs Group Szeho Ng - China Renaissance Securities Gokul Hariharan - JPMorgan Chase & Co. Sunny Lin - UBS O ...

UMC 2Q23 Financial Review NOTE CONCERNING FORWARD-LOOKING STATEMENTS This presentation contains 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 1995. These forward looking statements include, but are not limited to, statements relating toanticipatedquarterlyFabcapacity, foundryca ...

Financial Position - Total assets as of March 31, 2023, reached NT$549,631,114 thousand, an increase from NT$533,052,092 thousand as of December 31, 2022, representing a growth of 3.3%[12] - Current assets decreased to NT$241,967,215 thousand as of March 31, 2023, from NT$252,371,038 thousand as of December 31, 2022, a decline of 4.3%[12] - Total non-current assets increased to NT$307,663,899 thousand as of March 31, 2023, from NT$280,681,054 thousand as of December 31, 2022, reflecting a growth of 9.6%[12] - Total liabilities as of March 31, 2023, were $194,081,051, a slight decrease from $197,601,153 as of December 31, 2022[15] - Total equity attributable to the parent company increased to $355,205,636 from $335,107,260 as of December 31, 2022, representing a growth of 6.5%[15] Revenue and Profitability - Operating revenues for Q1 2023 were $54,209,447, a decrease of 14.4% compared to $63,422,820 in Q1 2022[18] - Gross profit for Q1 2023 was $19,224,440, down 30.1% from $27,504,330 in Q1 2022[18] - Net income for Q1 2023 was $16,384,547, a decline of 18.4% from $20,065,623 in Q1 2022[18] - Total comprehensive income for Q1 2023 was $19,709,634, compared to $21,487,507 in Q1 2022, indicating a decline of 8.3%[18] - Operating income for Q1 2023 was $14,480,698, down 35.1% from $22,334,187 in Q1 2022[18] Cash Flow and Investments - Cash generated from operations for the three-month period ended March 31, 2023, was $28,733,130, compared to $30,340,563 in 2022, indicating a decrease of about 5.3%[23] - Cash flows from investing activities showed a net outflow of $29,586,209 compared to an inflow of $14,752,138 in the same period last year[25] - The acquisition of property, plant, and equipment amounted to $29,756,200, significantly higher than $10,802,553 in the previous year[25] - The company reported an increase in guarantee deposits of $2,327,873 compared to a decrease of $2,119 in the same period last year[25] Assets and Liabilities - Accounts receivable, net, fell to NT$26,674,425 thousand as of March 31, 2023, down 26.8% from NT$36,444,510 thousand as of December 31, 2022[12] - Inventories, net, increased to NT$32,678,867 thousand as of March 31, 2023, compared to NT$31,069,960 thousand as of December 31, 2022, reflecting a rise of 5.2%[12] - Current liabilities totaled $105,885,984 as of March 31, 2023, a decrease from $108,565,165 as of December 31, 2022[15] - The company reported a net gain of financial assets and liabilities at fair value through profit or loss of $(705,829) for the three-month period ended March 31, 2023, compared to $(2,417,830) in 2022, showing an improvement[23] Shareholder Information - Earnings per share for Q1 2023 were $1.31, compared to $1.61 in Q1 2022, reflecting a decrease of 18.6%[18] - The company reported a net income attributable to non-controlling interests of $201,545 for Q1 2023, compared to $258,088 in Q1 2022, a decrease of 22%[109] - Cash dividends for 2022 were set at NT$3.60 per share, totaling $45,017,096, marking the first cash dividend distribution since 2021[106] Research and Development - Research and development expenses for Q1 2023 were $2,766,607, a decrease from $3,032,939 in Q1 2022[18] Financial Instruments and Risk Management - The company has a liquidity risk management strategy that includes maintaining a balance between funding continuity and flexibility through cash, bank loans, bonds, and leases[184] - The Company limits credit risk by trading only with approved and creditworthy third parties and monitoring accounts receivable balances[181] - A 10% strengthening of NTD against USD would decrease profit by NT$988 million for the three-month period ended March 31, 2023[173] Accounting and Compliance - The company continues to evaluate the impact of newly issued accounting standards on its financial position and performance[40] - The company utilizes valuation techniques that maximize the use of observable inputs and minimize unobservable inputs for fair value measurement[194]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F (Mark One) ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ...

United Microelectronics Corp (NYSE:UMC) Q1 2023 Earnings Conference Call April 26, 2023 5:00 AM ET Company Participants Michael Lin - IR Chi-Tung Liu - CFO, SVP, Head, Corporate Governance & Company Secretary Jason Wang - President & Representative Director Conference Call Participants Randy Abrams - Crédit Suisse Brett Simpson - Arete Research Services Bruce Lu - Goldman Sachs Group Szeho Ng - China Renaissance Securities Charlie Chan - Morgan Stanley Sunny Lin - UBS Rick Hsu - Daiwa Securities Gokul Harih ...

[Independent Auditors' Report](index=2&type=section&id=Independent%20Auditors'%20Report) [Opinion](index=2&type=section&id=Opinion) The auditors issued an unqualified opinion on the consolidated financial statements for 2022 and 2021, affirming fair presentation in accordance with TIFRSs - The auditors have issued an unqualified opinion on the company's consolidated financial statements for the years ended December 31, 2022 and 2021[4](index=4&type=chunk) [Key Audit Matters](index=3&type=section&id=Key%20Audit%20Matters) Valuation of slow-moving inventories was the key audit matter for 2022, reflecting the complexity of estimating reserves in a rapidly changing semiconductor industry - The primary key audit matter was the valuation for slow-moving inventories, which amounted to a net value of **NT$31.1 billion** as of December 31, 2022[8](index=8&type=chunk) - The audit procedures included testing internal controls, evaluating management's reserve methodology, comparing reserves to historical data, and recalculating the inventory reserve[9](index=9&type=chunk) [Other Matter – Making Reference to the Audits of Component Auditors](index=3&type=section&id=Other%20Matter%20%E2%80%93%20Making%20Reference%20to%20the%20Audits%20of%20Component%20Auditors) The audit opinion partially relies on reports from other auditors for equity method investments, representing 4.84% of total assets in 2022 and impacting pre-tax income Equity Method Investments Audited by Other Auditors | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Investment Value (NT$ million)** | 25,801 | 39,806 | | **% of Total Assets** | 4.84% | 8.57% | | **Share of Profit/(Loss) (NT$ million)** | (2,553) | 8,380 | | **% of Pre-Tax Income** | (2.41)% | 13.56% | [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to NT$533.1 billion in 2022, driven by cash and PPE increases, while total liabilities and equity also rose, reflecting strong earnings retention Consolidated Balance Sheet Summary (in thousands of NT$) | Account | 2022 | 2021 | | :--- | :--- | :--- | | **Total Current Assets** | 252,371,038 | 233,273,433 | | **Total Non-Current Assets** | 280,681,054 | 231,153,338 | | **Total Assets** | **533,052,092** | **464,426,771** | | **Total Current Liabilities** | 108,565,165 | 105,453,729 | | **Total Non-Current Liabilities** | 89,035,988 | 77,770,158 | | **Total Liabilities** | **197,601,153** | **183,223,887** | | **Total Equity** | **335,450,939** | **281,202,884** | - Cash and cash equivalents increased significantly to **NT$173.8 billion** in 2022 from **NT$132.6 billion** in 2021[27](index=27&type=chunk) - Property, plant and equipment grew to **NT$171.0 billion** in 2022 from **NT$129.9 billion** in 2021, indicating significant capital investment[27](index=27&type=chunk) [Consolidated Statements of Comprehensive Income](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Operating revenues increased by 30.8% to NT$278.7 billion in 2022, with gross profit surging by 74.6% and net income attributable to the parent growing by 56.3% Consolidated Income Statement Highlights (in thousands of NT$) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Operating Revenues** | 278,705,264 | 213,011,018 | | **Gross Profit** | 125,764,377 | 72,049,629 | | **Operating Income** | 104,292,225 | 51,686,286 | | **Net Income (Parent)** | 87,198,291 | 55,780,255 | | **Basic EPS (NT$)** | 7.09 | 4.57 | | **Diluted EPS (NT$)** | 6.87 | 4.48 | [Consolidated Statements of Changes in Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity increased to NT$335.5 billion in 2022, primarily due to net income and other comprehensive income, partially offset by cash distributions - Total equity attributable to the parent company grew from **NT$281.0 billion** in 2021 to **NT$335.1 billion** in 2022[35](index=35&type=chunk) - Key changes in equity for 2022 included net income of **NT$87.2 billion**, other comprehensive income of **NT$2.4 billion**, and a cash distribution from additional paid-in capital of **NT$37.4 billion**[35](index=35&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased to NT$145.9 billion in 2022, while investing activities focused on PPE acquisition and financing involved dividend payments and bond redemption Consolidated Cash Flow Summary (in thousands of NT$) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | 145,860,529 | 90,351,891 | | **Net Cash used in Investing Activities** | (54,427,266) | (62,163,400) | | **Net Cash from (used in) Financing Activities** | (57,254,750) | 12,490,107 | | **Net Increase in Cash** | 41,196,646 | 38,574,095 | | **Cash and Cash Equivalents at End of Year** | **173,818,777** | **132,622,131** | - Acquisition of property, plant and equipment was a major cash outflow in investing activities, amounting to **NT$80.1 billion** in 2022, up from **NT$48.0 billion** in 2021[40](index=40&type=chunk) - Financing activities in 2022 were dominated by cash dividends and distributions from additional paid-in capital totaling **NT$37.4 billion**, and redemption of bonds amounting to **NT$13.3 billion**[40](index=40&type=chunk) [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [Summary of Significant Accounting Policies](index=16&type=section&id=Note%204.%20Summary%20of%20Significant%20Accounting%20Policies) The consolidated financial statements are prepared on a historical cost basis, adhering to TIFRSs, with key policies covering consolidation, revenue recognition, and inventory valuation - The financial statements are prepared on a historical cost basis, except for financial instruments measured at fair value, and comply with TIFRSs[61](index=61&type=chunk)[62](index=62&type=chunk) - Revenue from contracts with customers is recognized when performance obligations are satisfied, following the five-step model of IFRS 15[162](index=162&type=chunk)[163](index=163&type=chunk) - Inventories are valued at the lower of cost (weighted-average) and net realizable value[110](index=110&type=chunk) [Contents of Significant Accounts](index=38&type=section&id=Note%206.%20Contents%20of%20Significant%20Accounts) This note provides detailed breakdowns of significant balance sheet and income statement items, including inventories, PPE, bonds, equity, revenues, and earnings per share [Inventories, Net](index=41&type=section&id=6(6)%20Inventories,%20Net) Net inventories increased to NT$31.1 billion in 2022, with work in process remaining the largest component, reflecting growth across all categories Inventory Breakdown (in thousands of NT$) | Category | 2022 | 2021 | | :--- | :--- | :--- | | Raw materials | 6,335,428 | 3,371,520 | | Supplies and spare parts | 7,161,216 | 5,106,770 | | Work in process | 14,897,926 | 14,043,143 | | Finished goods | 2,675,390 | 489,750 | | **Total** | **31,069,960** | **23,011,183** | [Property, Plant and Equipment](index=44&type=section&id=6(8)%20Property,%20Plant%20and%20Equipment) Net PPE increased to NT$171.0 billion in 2022, driven by NT$72.6 billion in additions, primarily for construction and equipment, indicating ongoing capacity expansion PPE Movement in 2022 (in thousands of NT$) | Category | As of Jan 1, 2022 | Additions | Disposals | As of Dec 31, 2022 (Net) | | :--- | :--- | :--- | :--- | :--- | | **Assets Used by the Company** | 127,989,504 | 72,596,881 | (6,560,736) | 169,163,819 | | **Assets Subject to Operating Leases** | 1,952,199 | - | (660) | 1,818,247 | | **Total PPE (Net)** | **129,941,703** | **-** | **-** | **170,982,066** | [Bonds Payable](index=51&type=section&id=6(13)%20Bonds%20Payable) Total bonds payable decreased to NT$28.2 billion in 2022, following the repurchase and cancellation of US$187.1 million of exchangeable bonds - On July 7, 2021, UMC issued **US$400 million** in zero-coupon exchangeable bonds due 2026, which are exchangeable into common shares of NOVATEK MICROELECTRONICS CORPORATION[230](index=230&type=chunk) - In 2022, the company repurchased and cancelled **US$187.1 million** of the principal amount of these exchangeable bonds[234](index=234&type=chunk) [Equity](index=63&type=section&id=6(19)%20Equity) UMC had 12.505 billion common shares issued in 2022, with a proposed cash dividend of NT$3.60 per share for 2022 earnings and a NT$37.4 billion distribution for 2021 2022 Proposed vs. 2021 Approved Earnings Appropriation | Item | 2022 (Proposed) | 2021 (Approved) | | :--- | :--- | :--- | | **Legal Reserve (NT$M)** | 8,905 | 5,833 | | **Cash Dividends (NT$M)** | 45,017 | - | | **Cash Dividend per Share (NT$)** | 3.60 | - | | **Cash from Add'l Paid-in Capital (NT$M)** | - | 37,446 | - The dividend policy allows for **20% to 100%** of distributable earnings to be paid as cash dividends, determined based on investment needs, competitive landscape, and capital expenditure forecasts[261](index=261&type=chunk) [Operating Revenues](index=67&type=section&id=6(21)%20Operating%20Revenues) Operating revenues reached NT$278.7 billion in 2022, predominantly from wafer sales, with Taiwan, China, and Singapore being the largest geographic markets Revenue by Geography (in thousands of NT$) | Region | 2022 | 2021 | | :--- | :--- | :--- | | Taiwan | 87,500,215 | 80,655,096 | | Singapore | 39,093,439 | 29,068,748 | | China (includes Hong Kong) | 46,146,545 | 31,176,136 | | Japan | 17,667,412 | 13,705,192 | | USA | 35,175,569 | 24,270,210 | | Europe | 8,831,645 | 5,628,998 | | Others | 44,290,439 | 28,506,638 | | **Total** | **278,705,264** | **213,011,018** | [Earnings Per Share](index=78&type=section&id=6(27)%20Earnings%20Per%20Share) Basic EPS increased to NT$7.09 in 2022 from NT$4.57 in 2021, with diluted EPS also rising, reflecting strong net income growth Earnings Per Share (in NT$) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Basic EPS** | 7.09 | 4.57 | | **Diluted EPS** | 6.87 | 4.48 | [Significant Contingencies and Unrecognized Contract Commitments](index=83&type=section&id=Note%209.%20Significant%20Contingencies%20and%20Unrecognized%20Contract%20Commitments) Future commitments include NT$42 billion for construction and NT$1.1 billion for patent licenses, alongside a global settlement with Micron Technology for trade secret litigation - UMC and Micron announced a global settlement agreement on November 26, 2021, resolving all legal proceedings worldwide concerning trade secret allegations[321](index=321&type=chunk) - The settlement resulted in a fine of **NT$20 million** and a one-time payment to Micron, which were recorded as non-operating losses with no material ongoing financial effect[321](index=321&type=chunk)[325](index=325&type=chunk) - As of December 31, 2022, the company had unrecognized commitments of approximately **NT$42 billion** for construction contracts and **NT$1.1 billion** for patent license agreements[322](index=322&type=chunk)[321](index=321&type=chunk) [Others (Financial Instruments and Risk Management)](index=85&type=section&id=Note%2012.%20Others%20(Financial%20Instruments%20and%20Risk%20Management)) The company's debt-to-capital ratio improved to 6.62% in 2022, with risk management strategies addressing foreign currency, interest rate, equity price, and credit risks Capital Structure Analysis | Metric | 2022 | 2021 | | :--- | :--- | :--- | | **Total Liabilities (NT$M)** | 197,601 | 183,224 | | **Net Debt (NT$M)** | 23,782 | 50,602 | | **Total Equity (NT$M)** | 335,451 | 281,203 | | **Total Capital (NT$M)** | 359,233 | 331,805 | | **Debt to Capital Ratio** | 6.62% | 15.25% | - A **10% strengthening** of the NTD against the USD would decrease profit by **NT$1.31 billion** in 2022[334](index=334&type=chunk) - Accounts receivable from the top ten customers represented **56%** of the total accounts receivable in 2022, indicating some customer concentration risk[343](index=343&type=chunk) [Operating Segment Information](index=96&type=section&id=Note%2014.%20Operating%20Segment%20Information) The company operates as a single wafer fabrication segment, with Taiwan holding the largest share of non-current assets and one major customer contributing significantly to revenues - The company operates under a single operating segment, which is wafer fabrication[383](index=383&type=chunk) - One customer (Customer A) accounted for a significant portion of revenue, representing **NT$24.1 billion** in 2022 and **NT$21.9 billion** in 2021[385](index=385&type=chunk) Geographic Non-Current Assets (in thousands of NT$) | Region | 2022 | 2021 | | :--- | :--- | :--- | | Taiwan | 130,812,383 | 81,505,018 | | Singapore | 29,080,766 | 10,610,974 | | China (includes Hong Kong) | 37,213,538 | 48,667,135 | | Japan | 10,736,562 | 10,010,255 | | **Total** | **207,863,887** | **150,838,197** |

Financial Data and Key Metrics Changes - In Q4 2022, consolidated revenue was TWD 67.84 billion, with a gross margin rate of 42.9% and net income attributable to shareholders of TWD 19 billion, resulting in earnings per share (EPS) of TWD 1.54 [6][10] - Revenue declined by 10% sequentially from the previous quarter, while total operating income decreased by approximately 20% to TWD 23.6 billion [6][10] - For the full year 2022, total revenue grew by 31% to TWD 278.7 billion, and operating income more than doubled to TWD 104 billion, with EPS increasing to TWD 7.09 from TWD 4.57 in the previous year [7][10] Business Line Data and Key Metrics Changes - The revenue breakdown showed that the North American market represented about 30% of total revenue, up from 23% in the previous quarter, while the Asian market saw a decline from 52% to 54% [7][10] - The communication segment remained the largest, accounting for 45% of total revenue, while the automotive segment grew by 82% year-over-year, now representing approximately 9% of total sales [8][12] Market Data and Key Metrics Changes - The quarterly breakdown indicated that IDM (Integrated Device Manufacturer) accounted for 19% and Fabless for 81% of revenue, with IDM remaining at about 15% for the full year [8] - The technology breakdown for Q4 showed that 22/28 nanometer technology represented 28% of revenue, while 40 nanometer accounted for about 17% [8] Company Strategy and Development Direction - The company is focusing on enhancing its specialty technology offerings and improving profitability through strategic customer relationships, particularly in the automotive segment [11][12] - UMC plans to implement strict cost control measures and defer certain capital expenditures in response to the soft global economic outlook for 2023 [13] Management's Comments on Operating Environment and Future Outlook - Management expects the current challenging environment to persist through Q1 2023, with wafer shipments projected to decline by high teens percentage range and capacity utilization at approximately 70% [14] - The company remains optimistic about long-term demand driven by digital transformation across industries, despite short-term inventory corrections [13][14] Other Important Information - The company has a cash-based CapEx budget of $3 billion for 2023, with 90% allocated to 12-inch related expansions [9] - The company is also experiencing a minor decline in available capacity due to maintenance but expects to return to normal levels by Q2 2023 [9] Q&A Session Summary Question: Discussion on the business cycle and inventory correction - Management indicated that they are still in the midst of an inventory correction, with some improvement expected in certain segments by the second half of 2023 [16][17] Question: Pricing strategy and customer negotiations - Management stated that pricing adjustments will have limited effects on demand creation, and they intend to maintain firm pricing while supporting customer competitiveness [20][21] Question: 2023 outlook and CapEx details - Management projected a low single-digit decline for the semiconductor industry in 2023, with a CapEx budget primarily focused on new capacity expansion and product mix upgrades [31][32] Question: 28-nanometer technology utilization - Management expects 28-nanometer utilization to hold up slightly better than the overall corporate average, despite a general decline in capacity utilization [29][30] Question: Geopolitical developments and supply chain diversification - Management acknowledged trends in supply chain diversification but noted that significant engagement and order opportunities may not materialize until after 2023 [65][68]

[Review Report of Independent Auditors](index=2&type=section&id=Review%20Report%20of%20Independent%20Auditors) This report presents the independent auditors' review of UMC's consolidated financial statements for the nine-month periods ended September 30, 2022 and 2021 [Introduction](index=2&type=section&id=Introduction) Independent auditors reviewed UMC's consolidated financial statements for the nine-month periods ended September 30, 2022 and 2021, with management responsible for their fair presentation - The consolidated financial statements for the nine-month periods ended September 30, 2022 and 2021 were reviewed by independent auditors[2](index=2&type=chunk) - Management is responsible for preparing and presenting the financial statements in accordance with R.O.C. regulations and IAS 34[2](index=2&type=chunk) [Scope of Review](index=2&type=section&id=Scope%20of%20Review) The review was conducted in accordance with R.O.C. auditing standards, involving inquiries and analytical procedures, which is less extensive than an audit - Reviews were conducted in accordance with Statement of Auditing Standards No. 65 of the Republic of China[3](index=3&type=chunk) - A review is substantially less in scope than an audit, and thus, an audit opinion is not expressed[3](index=3&type=chunk) [Conclusion](index=2&type=section&id=Conclusion) Based on the reviews, the auditors found no material misstatements in the consolidated financial statements for the periods ended September 30, 2022 and 2021 - The consolidated financial statements fairly present the Company's financial position, performance, and cash flows in all material respects as of and for the periods ended September 30, 2022 and 2021[4](index=4&type=chunk) - The statements comply with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34[4](index=4&type=chunk) [Other Matter – Making Reference to the Reviews of Other Independent Auditors](index=3&type=section&id=Other%20Matter%20%E2%80%93%20Making%20Reference%20to%20the%20Reviews%20of%20Other%20Independent%20Auditors) The auditors' review relied on reports from other independent auditors for investments in associates and joint ventures, which significantly impacted consolidated assets and income - The review relied on reports from other independent auditors for certain investments accounted for under the equity method[6](index=6&type=chunk) Impact of Equity Method Investments on Consolidated Financials (NT$ Million) | Metric | September 30, 2022 (NT$ million) | September 30, 2021 (NT$ million) | Percentage of Total Consolidated Assets (2022) | Percentage of Total Consolidated Assets (2021) | |:--------------------------------------------------------------------|:---------------------------------|:---------------------------------|:-----------------------------------------------|:-----------------------------------------------| | Investments accounted for under the equity method balances | 23,922 | 36,168 | 4.61% | 8.43% | | Share of profit or loss from associates and joint ventures (9-month)| (4,013) | 5,926 | (4.92)% of income before tax | 13.58% of income before tax | | Share of other comprehensive income (9-month) | 25 | 2,138 | 0.04% of total comprehensive income | 5.30% of total comprehensive income | [Notice to Readers](index=3&type=section&id=Notice%20to%20Readers) The consolidated financial statements are prepared in accordance with R.O.C. accounting principles and auditing standards, and are not intended for unfamiliar users - The consolidated financial statements are prepared according to R.O.C. accounting principles and practices[7](index=7&type=chunk) - The report is not intended for those unfamiliar with R.O.C. accounting principles or auditing standards[7](index=7&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) The consolidated balance sheets show total assets increased to **NT$519.39 billion** by September 30, 2022, from **NT$464.43 billion** at December 31, 2021, with total equity growing to **NT$315.19 billion** Consolidated Balance Sheet Highlights (NT$ Thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-------------------|:---------------|:---------------|:---------------| | Total assets | $519,393,920 | $464,426,771 | $428,792,631 | | Total liabilities | $204,204,549 | $183,223,887 | $171,188,907 | | Total equity | $315,189,371 | $281,202,884 | $257,603,724 | - Current assets increased to **NT$266.94 billion** as of September 30, 2022, from **NT$233.27 billion** at December 31, 2021, mainly due to a significant rise in cash and cash equivalents[10](index=10&type=chunk) - Non-current assets increased to **NT$252.45 billion** as of September 30, 2022, from **NT$231.15 billion** at December 31, 2021, primarily driven by increases in property, plant and equipment, and prepayment for equipment[10](index=10&type=chunk) - Current liabilities increased to **NT$108.01 billion** as of September 30, 2022, from **NT$105.45 billion** at December 31, 2021, with notable increases in payables on equipment and current tax liabilities[12](index=12&type=chunk) - Non-current liabilities increased to **NT$96.20 billion** as of September 30, 2022, from **NT$77.77 billion** at December 31, 2021, largely due to a substantial increase in guarantee deposits[12](index=12&type=chunk) [Unaudited Consolidated Statements of Comprehensive Income](index=6&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) UMC reported significant increases in operating revenues and net income for 9M 2022, with gross profit more than doubling, despite a decrease in non-operating income due to financial asset valuation losses Consolidated Statements of Comprehensive Income Highlights (NT$ Thousands) | Metric | 9M 2022 | 9M 2021 | YoY Change (NT$ Thousands) | YoY Change (%) | |:------------------------------------------------|:---------------|:---------------|:---------------------------|:---------------| | Operating revenues | $210,869,549 | $153,911,430 | $56,958,119 | 37.01% | | Operating costs | $(114,229,111) | $(104,965,145) | $(9,263,966) | 8.83% | | Gross profit | $96,640,438 | $48,946,285 | $47,694,153 | 97.44% | | Operating income | $80,655,450 | $34,069,981 | $46,585,469 | 136.74% | | Income from continuing operations before income tax | $81,571,096 | $43,629,300 | $37,941,796 | 86.96% | | Net income | $68,898,429 | $39,107,442 | $29,790,987 | 76.18% | | Total comprehensive income (loss) | $70,906,619 | $40,358,455 | $30,548,164 | 75.69% | | Earnings per share-basic (NTD) | $5.54 | $3.26 | $2.28 | 69.94% | | Earnings per share-diluted (NTD) | $5.38 | $3.21 | $2.17 | 67.60% | - Non-operating income and expenses decreased significantly from **NT$9.56 billion** in 9M 2021 to **NT$916 million** in 9M 2022, primarily due to a shift from a gain to a loss on financial asset valuations and a negative share of profit/loss from associates[14](index=14&type=chunk) [Unaudited Consolidated Statements of Changes in Equity](index=7&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) Total equity attributable to the parent company increased from **NT$280.98 billion** to **NT$314.81 billion** by September 30, 2022, driven by net income and other comprehensive income Key Changes in Equity Attributable to Parent Company (NT$ Thousands) | Metric | Jan 1, 2022 | Sep 30, 2022 | Change (NT$ Thousands) | |:--------------------------------------------------------------------|:---------------|:---------------|:-----------------------| | Total equity attributable to the parent company (Adjusted) | $280,825,860 | $314,810,397 | $33,984,537 | | Net income for the nine-month period ended September 30, 2022 | - | $68,130,535 | $68,130,535 | | Other comprehensive income (loss) for the nine-month period ended September 30, 2022 | - | $2,008,101 | $2,008,101 | | Cash distributed from additional paid-in capital | - | $(37,446,370) | $(37,446,370) | | Legal reserve | $15,734,416 | $21,566,986 | $5,832,570 | | Special reserve | $8,164,648 | $4,914,214 | $(3,250,434) | - Non-controlling interests increased from **NT$157 million** (adjusted) at January 1, 2022, to **NT$379 million** at September 30, 2022, mainly due to net income attributable to non-controlling interests[16](index=16&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=8&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) UMC generated substantial cash from operating activities in 9M 2022, while investing cash usage decreased and financing activities shifted to a net outflow due to bond redemptions and dividends Consolidated Statements of Cash Flows Highlights (NT$ Thousands) | Cash Flow Category | 9M 2022 | 9M 2021 | YoY Change (NT$ Thousands) | |:------------------------------------|:---------------|:---------------|:---------------------------| | Net cash provided by operating activities | $104,904,755 | $63,529,695 | $41,375,060 | | Net cash used in investing activities | $(18,382,680) | $(48,824,511) | $30,441,831 | | Net cash provided by (used in) financing activities | $(48,069,484) | $6,123,589 | $(54,193,073) | | Net increase in cash and cash equivalents | $48,027,009 | $19,056,824 | $28,970,185 | | Cash and cash equivalents at end of period | $180,649,140 | $113,104,860 | $67,544,280 | - The significant increase in cash from operating activities was driven by higher net income before tax and various income and expense adjustments[18](index=18&type=chunk) - Cash used in financing activities was primarily due to redemption of bonds (**NT$10.76 billion**) and cash dividends/distributions (**NT$37.45 billion**)[21](index=21&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed disclosures on UMC's accounting policies, significant accounts, financial instruments, risk management, and other relevant financial information [1. History and Organization](index=10&type=section&id=1.%20HISTORY%20AND%20ORGANIZATION) United Microelectronics Corporation (UMC) was established in May 1980 in R.O.C. and began operations in April 1982 as a semiconductor wafer foundry - UMC was incorporated in May 1980 and commenced operations in April 1982 as a full-service semiconductor wafer foundry[24](index=24&type=chunk) - UMC's ordinary shares are listed on the Taiwan Stock Exchange (TWSE) since July 1985, and its American Depositary Shares (ADSs) on the New York Stock Exchange (NYSE) since September 2000[24](index=24&type=chunk) [2. Date and Procedures of Authorization of Financial Statements for Issue](index=10&type=section&id=2.%20DATE%20AND%20PROCEDURES%20OF%20AUTHORIZATION%20OF%20FINANCIAL%20STATEMENTS%20FOR%20ISSUE) The consolidated financial statements were authorized for issue by a resolution of the Board of Directors' meeting on October 26, 2022 - The consolidated financial statements were authorized for issue by the Board of Directors on October 26, 2022[25](index=25&type=chunk) [3. Newly Issued or Revised Standards and Interpretations](index=10&type=section&id=3.%20NEWLY%20ISSUED%20OR%20REVISED%20STANDARDS%20AND%20INTERPRETATIONS) This section details the adoption of new or revised accounting standards and interpretations, including amendments to IAS 37, and evaluates the impact of other unadopted standards - The Company adopted amendments to IAS 37, 'Onerous Contracts - Cost of Fulfilling a Contract,' effective January 1, 2022[27](index=27&type=chunk)[380](index=380&type=chunk) Impact of IAS 37 Amendments (as of January 1, 2022, NT$ Million) | Item | Impact (NT$ Million) | |:--------------------------|:---------------------| | Increase in other current liabilities | $220 | | Decrease in retained earnings | $(154) | | Decrease in non-controlling interest | $(66) | - Standards issued by IASB but not yet adopted by the Company include amendments to IAS 1, IAS 8, IAS 12 (effective January 1, 2023), and IFRS 16 (effective January 1, 2024), as well as IFRS 10 and IAS 28 (effective date to be determined)[30](index=30&type=chunk)[31](index=31&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[387](index=387&type=chunk)[388](index=388&type=chunk) - The Company is currently evaluating the potential impact of these unadopted standards on its financial position and performance[32](index=32&type=chunk)[38](index=38&type=chunk)[386](index=386&type=chunk)[392](index=392&type=chunk) [4. Summary of Significant Accounting Policies](index=13&type=section&id=4.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The consolidated financial statements adhere to R.O.C. Securities Issuers' Regulations and IAS 34, prepared on a historical cost basis with fair value measurements for financial instruments - Consolidated financial statements are prepared in accordance with R.O.C. Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34[39](index=39&type=chunk)[393](index=393&type=chunk) - The statements are prepared on a historical cost basis, with exceptions for financial instruments measured at fair value[40](index=40&type=chunk)[394](index=394&type=chunk) - The principles of consolidation are consistent with those applied for the year ended December 31, 2021[41](index=41&type=chunk)[395](index=395&type=chunk) - The Company's consolidated entities include various subsidiaries involved in IC sales, marketing support, investment holding, venture capital, and manufacturing of integrated circuits, with UMC holding **100% ownership** in most direct subsidiaries[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk) [5. Significant Accounting Judgments, Estimates and Assumptions](index=16&type=section&id=5.%20SIGNIFICANT%20ACCOUNTING%20JUDGMENTS%2C%20ESTIMATES%20AND%20ASSUMPTIONS) The significant accounting judgments, estimates, and assumptions applied in the consolidated financial statements for 9M 2022 are consistent with those used for the year ended December 31, 2021 - Significant accounting judgments, estimates, and assumptions remain consistent with the prior year's consolidated financial statements (December 31, 2021)[47](index=47&type=chunk)[401](index=401&type=chunk) [6. Contents of Significant Accounts](index=17&type=section&id=6.%20CONTENTS%20OF%20SIGNIFICANT%20ACCOUNTS) This comprehensive section details the balances and movements of various significant accounts, including cash, financial assets, receivables, inventories, investments, property, plant and equipment, intangible assets, loans, bonds, equity, and operating results [6(1) Cash and Cash Equivalents](index=17&type=section&id=6(1)%20Cash%20and%20Cash%20Equivalents) Cash and cash equivalents significantly increased to **NT$180.65 billion** as of September 30, 2022, from **NT$132.62 billion** at December 31, 2021, primarily driven by a substantial rise in time deposits Cash and Cash Equivalents (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:----------------------------------------------------------|:---------------|:---------------|:---------------| | Cash on hand and petty cash | $5,784 | $5,684 | $5,976 | | Checking and savings accounts | 38,973,472 | 33,738,883 | 32,083,517 | | Time deposits | 133,821,549 | 88,876,572 | 70,906,502 | | Repurchase agreements collateralized by government bonds and corporate notes | 7,848,335 | 10,000,992 | 10,108,865 | | Total | $180,649,140 | $132,622,131 | $113,104,860 | - Time deposits saw a significant increase of **NT$44.94 billion** from December 31, 2021, to September 30, 2022[49](index=49&type=chunk)[403](index=403&type=chunk) [6(2) Financial Assets at Fair Value through Profit or Loss](index=17&type=section&id=6(2)%20Financial%20Assets%20at%20Fair%20Value%20through%20Profit%20or%20Loss) Total financial assets at fair value through profit or loss slightly decreased to **NT$19.34 billion** as of September 30, 2022, mainly due to a decrease in common stocks Financial Assets at Fair Value through Profit or Loss (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-----------------|:---------------|:---------------|:---------------| | Common stocks | $10,488,811 | $13,289,438 | $11,175,964 | | Preferred stocks | 3,068,375 | 2,602,622 | 2,886,963 | | Funds | 5,469,630 | 3,862,932 | 3,671,038 | | Convertible bonds| 310,048 | 691,303 | 491,877 | | Total | $19,336,864 | $20,446,295 | $18,225,842 | | Current | $674,821 | $945,021 | $939,421 | | Non-current | 18,662,043 | 19,501,274 | 17,286,421 | - UMC's subsidiary, FORTUNE VENTURE CAPITAL CORP., exchanged shares with CHIPBOND TECHNOLOGY CORPORATION on November 5, 2021, obtaining **14 million** common shares[50](index=50&type=chunk)[404](index=404&type=chunk) [6(3) Financial Assets at Fair Value through Other Comprehensive Income](index=18&type=section&id=6(3)%20Financial%20Assets%20at%20Fair%20Value%20through%20Other%20Comprehensive%20Income) Total financial assets at fair value through other comprehensive income decreased to **NT$12.79 billion** as of September 30, 2022, primarily due to a decrease in common stocks, with dividend income of **NT$1.43 billion** Financial Assets at Fair Value through Other Comprehensive Income (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-----------------|:---------------|:---------------|:---------------| | Common stocks | $12,622,827 | $19,683,806 | $13,519,470 | | Preferred stocks | 170,891 | 151,859 | 141,897 | | Total | $12,793,718 | $19,835,665 | $13,661,367 | | Current | $2,446,101 | $8,482,334 | $6,452,239 | | Non-current | 10,347,617 | 11,353,331 | 7,209,128 | Dividend Income from Equity Instruments (NT$ Thousands) | Period | 9M 2022 | 9M 2021 | |:---------------------------------------|:-------------|:-------------| | Held at end of period | $1,431,931 | $465,679 | | Derecognized during the period | - | - | | Total | $1,431,931 | $465,679 | - UMC exchanged shares with CHIPBOND on November 5, 2021, obtaining **53 million** common shares for strategic cooperation[52](index=52&type=chunk)[406](index=406&type=chunk) - UMC issued unsecured exchangeable bonds, allowing bondholders to exchange them for NOVATEK common shares, which are accounted for as equity instruments measured at fair value through other comprehensive income[54](index=54&type=chunk)[408](index=408&type=chunk) [6(4) Financial assets measured at amortized cost](index=19&type=section&id=6(4)%20Financial%20assets%20measured%20at%20amortized%20cost) Financial assets measured at amortized cost significantly decreased to **NT$912.38 million** as of September 30, 2022, primarily due to a large reduction in time deposits Financial Assets Measured at Amortized Cost (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:----------------------------------------------------|:-------------|:-------------|:-------------| | Time deposits with original maturities of over three months | $892,380 | $28,843,470 | $30,569,746 | | Bonds | 20,000 | 20,000 | - | | Total | $912,380 | $28,863,470 | $30,569,746 | | Current | $896,103 | $28,854,684 | $30,560,960 | | Non-current | 16,277 | 8,786 | 8,786 | - The substantial decrease in current financial assets measured at amortized cost is mainly attributed to the reduction in time deposits[56](index=56&type=chunk)[410](index=410&type=chunk) [6(5) Accounts Receivable, Net](index=19&type=section&id=6(5)%20Accounts%20Receivable%2C%20Net) Net accounts receivable increased to **NT$43.59 billion** as of September 30, 2022, with the majority not past due and a slight increase in loss allowance Accounts Receivable, Net (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:---------------------|:-------------|:-------------|:-------------| | Accounts receivable | $43,800,850 | $34,818,600 | $32,930,659 | | Less: loss allowance | (214,431) | (194,491) | (193,024) | | Net | $43,586,419 | $34,624,109 | $32,737,635 | Aging Analysis of Accounts Receivable (NT$ Thousands) | Aging Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-----------------|:-------------|:-------------|:-------------| | Neither past due | $39,021,589 | $30,758,397 | $29,652,119 | | Past due: ≤ 30 days | 3,899,226 | 3,294,617 | 2,527,432 | | Past due: ≥ 121 days | 652,576 | 575,293 | 580,691 | Movement of Loss Allowance for Accounts Receivable (NT$ Thousands) | Period | 9M 2022 | 9M 2021 | |:------------------------------------------|:-----------|:-----------| | Beginning balance | $194,491 | $206,084 | | Net recognize (reversal) for the period | 19,940 | (13,060) | | Ending balance | $214,431 | $193,024 | - The expected credit loss rates for receivables past due within 60 days were not greater than **0.2%** for both 2022 and 2021 periods[60](index=60&type=chunk)[414](index=414&type=chunk) [6(6) Inventories, Net](index=20&type=section&id=6(6)%20Inventories%2C%20Net) Net inventories increased to **NT$30.10 billion** as of September 30, 2022, driven by increases in raw materials, supplies, and work in process Inventories, Net (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-------------------------|:-------------|:-------------|:-------------| | Raw materials | $5,364,918 | $3,371,520 | $4,003,039 | | Supplies and spare parts | 7,298,158 | 5,106,770 | 4,776,513 | | Work in process | 16,409,826 | 14,043,143 | 13,793,221 | | Finished goods | 1,028,796 | 489,750 | 576,919 | | Total | $30,101,698 | $23,011,183 | $23,149,692 | - For the nine-month period ended September 30, 2022, operating costs related to inventories were **NT$109.27 billion**, including **NT$442 million** from reversal of write-down of inventories[61](index=61&type=chunk)[415](index=415&type=chunk) - For the nine-month period ended September 30, 2021, operating costs related to inventories were **NT$101.31 billion**, including **NT$412 million** from reversal of write-down of inventories[61](index=61&type=chunk)[415](index=415&type=chunk) [6(7) Investments Accounted for Under the Equity Method](index=21&type=section&id=6(7)%20Investments%20Accounted%20for%20Under%20the%20Equity%20Method) Investments accounted for under the equity method decreased to **NT$32.91 billion** as of September 30, 2022, with significant influence over listed and unlisted associates Investments Accounted for Under the Equity Method (NT$ Thousands) | Investee Company (Type) | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | Ownership (%) | |:------------------------|:-------------|:-------------|:-------------|:--------------| | FARADAY TECHNOLOGY CORP. (Listed) | $1,781,475 | $1,779,618 | $1,715,969 | 13.78% | | UNIMICRON TECHNOLOGY CORP. (Listed) | 12,642,854 | 10,418,777 | 9,790,131 | 13.27% | | HSUN CHIEH INVESTMENT CO., LTD. (Unlisted) | 8,726,089 | 14,092,662 | 13,378,381 | 36.49% | | YANN YUAN INVESTMENT CO., LTD. (Unlisted) | 6,793,743 | 9,741,234 | 8,710,349 | 26.78% | | Total | $32,909,670 | $41,692,084 | $38,321,811 | | - UMC accounts for investments in FARADAY and UNIMICRON as associates due to significant influence through Board representation[72](index=72&type=chunk)[426](index=426&type=chunk) Share of Profit/Loss and Comprehensive Income from Associates (NT$ Thousands) | Metric | 9M 2022 | 9M 2021 | |:----------------------------------------------|:-------------|:-------------| | Share of profit or loss of associates and joint ventures | $(3,557,052) | $6,003,910 | | Share of other comprehensive income (loss) of associates and joint ventures | $(3,503,477) | $2,237,570 | | Total comprehensive income (loss) | $(7,060,529) | $8,241,480 | - The fair value of listed equity method investments was **NT$27.63 billion** as of September 30, 2022, compared to a carrying amount of **NT$14.42 billion**[73](index=73&type=chunk)[427](index=427&type=chunk) [6(8) Property, Plant and Equipment](index=24&type=section&id=6(8)%20Property%2C%20Plant%20and%20Equipment) The net carrying amount of property, plant and equipment was **NT$147.28 billion** as of September 30, 2022, with **NT$45.11 billion** in additions during the nine-month period Net Carrying Amount of Property, Plant and Equipment (NT$ Thousands) | Category | Sep 30, 2022 | Sep 30, 2021 | |:----------------------------------------|:-------------|:-------------| | Assets Used by the Company | $147,281,709 | $123,708,498 | | Assets Subject to Operating Leases | $1,836,942 | $1,993,411 | - Additions to assets used by the Company amounted to **NT$45.11 billion** for the nine-month period ended September 30, 2022[435](index=435&type=chunk) Interest Expense Capitalized (NT$ Thousands) | Period | 9M 2022 | 9M 2021 | |:--------------------------------------|:--------|:--------| | Interest expense capitalized | $827 | $- | | Interest rates applied | 1.46%-1.61% | - | [6(9) Leases](index=27&type=section&id=6(9)%20Leases) Right-of-use assets totaled **NT$7.90 billion** as of September 30, 2022, with additions of **NT$1.09 billion**, and lease liabilities amounted to **NT$5.84 billion** Right-of-Use Assets, Net (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:--------------------------------|:-------------|:-------------|:-------------| | Land (including land use right) | $5,864,483 | $4,877,702 | $4,940,327 | | Buildings | 220,997 | 284,011 | 269,300 | | Machinery and equipment | 1,798,110 | 1,940,084 | 1,999,879 | | Transportation equipment | 15,606 | 18,704 | 21,505 | | Other equipment | 3,698 | 6,344 | 7,514 | | Net | $7,902,894 | $7,126,845 | $7,238,525 | - Additions to right-of-use assets amounted to **NT$1.09 billion** for the nine-month period ended September 30, 2022[447](index=447&type=chunk) Lease Liabilities (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:------------|:-------------|:-------------|:-------------| | Current | $559,355 | $557,873 | $549,414 | | Non-current | 5,283,862 | 4,510,881 | 4,621,991 | | Total | $5,843,217 | $5,068,754 | $5,171,405 | [6(10) Intangible Assets](index=29&type=section&id=6(10)%20Intangible%20Assets) The net carrying amount of intangible assets was **NT$4.20 billion** as of September 30, 2022, with **NT$2.46 billion** in additions, primarily software Net Carrying Amount of Intangible Assets (NT$ Thousands) | Category | Sep 30, 2022 | Sep 30, 2021 | |:--------------------------|:-------------|:-------------| | Goodwill | $7,614 | $7,614 | | Software | 2,749,140 | 2,285,221 | | Patents and technology license fees | 991,582 | 1,243,610 | | Others | 452,555 | 655,280 | | Total | $4,200,891 | $4,191,725 | - Additions to intangible assets for the nine-month period ended September 30, 2022, amounted to **NT$2.46 billion**, mainly in software[452](index=452&type=chunk) Amortization of Intangible Assets (NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:-----------------|:-------------|:-------------| | Operating costs | $1,008,714 | $607,019 | | Operating expenses | $1,036,174 | $1,515,334 | [6(11) Short-Term Loans](index=30&type=section&id=6(11)%20Short-Term%20Loans) Short-term loans significantly decreased to **NT$217.29 million** as of September 30, 2022, with interest rates ranging from 0.33% to 3.60% Short-Term Loans (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-------------------|:-------------|:-------------|:-------------| | Unsecured bank loans | $217,285 | $1,924,124 | $2,134,625 | - Interest rates applied for short-term loans ranged from **0.33% to 3.60%** for the nine-month period ended September 30, 2022[457](index=457&type=chunk) [6(12) Financial Liabilities at Fair Value through Profit or Loss, Current](index=31&type=section&id=6(12)%20Financial%20Liabilities%20at%20Fair%20Value%20through%20Profit%20or%20Loss%2C%20Current) Current financial liabilities at fair value through profit or loss decreased substantially to **NT$313.38 million** as of September 30, 2022, mainly due to embedded derivatives Financial Liabilities at Fair Value through Profit or Loss, Current (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:---------------------------------------------|:-------------|:-------------|:-------------| | Embedded derivatives in exchangeable bonds | $313,377 | $2,380,599 | $1,417,422 | | Forward contracts | - | - | 8,350 | | Total | $313,377 | $2,380,599 | $1,425,772 | - The decrease is mainly attributed to the change in valuation of embedded derivatives in exchangeable bonds[458](index=458&type=chunk) [6(13) Bonds Payable](index=31&type=section&id=6(13)%20Bonds%20Payable) Net bonds payable remained stable at **NT$23.08 billion** as of September 30, 2022, following the repurchase and cancellation of **US$166.5 million** in exchangeable bonds Bonds Payable, Net (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:----------------------------------------------|:-------------|:-------------|:-------------| | Unsecured domestic bonds payable | $25,100,000 | $31,300,000 | $26,300,000 | | Unsecured exchangeable bonds payable | 6,314,451 | 10,817,047 | 10,817,047 | | Less: Discounts on bonds payable | (785,523) | (1,580,389) | (1,654,536) | | Total | 30,628,928 | 40,536,658 | 35,462,511 | | Less: Current or exchangeable portion due within one year | (7,547,302) | (17,458,959) | (15,379,660) | | Net | $23,081,626 | $23,077,699 | $20,082,851 | - UMC issued SGX-ST listed currency-linked zero coupon exchangeable bonds in July 2021, with an issue amount of **US$400 million** and a maturity date of July 7, 2026[463](index=463&type=chunk) - During the nine-month period ended September 30, 2022, the Company repurchased and cancelled **US$166.5 million** of outstanding exchangeable bonds[467](index=467&type=chunk) [6(14) Long-Term Loans](index=35&type=section&id=6(14)%20Long-Term%20Loans) Net long-term loans increased to **NT$23.06 billion** as of September 30, 2022, with interest rates ranging from 0.86% to 4.66% Long-Term Loans, Net (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:--------------------|:-------------|:-------------|:-------------| | Subtotal | $27,491,188 | $36,624,907 | $37,754,537 | | Less: Current portion | (4,427,860) | (19,873,011) | (6,748,436) | | Total | $23,063,328 | $16,751,896 | $31,006,101 | - Interest rates applied for long-term loans ranged from **0.86% to 4.66%** for the nine-month period ended September 30, 2022[471](index=471&type=chunk) - UMC has various revolving credit lines with banks, with unused lines of credit ranging from **NT$0.3 billion** to **NT$3.4 billion** as of September 30, 2022[474](index=474&type=chunk)[475](index=475&type=chunk)[476](index=476&type=chunk)[478](index=478&type=chunk)[479](index=479&type=chunk) [6(15) Post-Employment Benefits](index=39&type=section&id=6(15)%20Post-Employment%20Benefits) Total pension expenses for 9M 2022 were **NT$1.41 billion** for defined contribution and **NT$25 million** for defined benefit plans - For the defined contribution plan, UMC and its domestic subsidiaries contribute **6%** of each employee's salary monthly[479](index=479&type=chunk) Total Pension Expenses (NT$ Thousands) | Plan Type | 9M 2022 | 9M 2021 | |:----------------------|:-------------|:-------------| | Defined contribution | $1,413,000 | $1,221,000 | | Defined benefit | $25,000 | $17,000 | - For the defined benefit plan, UMC contributes **2%** of employees' total salaries and wages monthly to a pension fund managed by government-designated authorities[481](index=481&type=chunk) [6(16) Deferred Government Grants](index=40&type=section&id=6(16)%20Deferred%20Government%20Grants) Deferred government grants decreased to **NT$5.69 billion** as of September 30, 2022, and are amortized as income over the useful lives of related equipment Deferred Government Grants (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:---------------------------------------|:-------------|:-------------|:-------------| | Beginning balance | $8,543,798 | $10,207,109 | $10,207,109 | | Arising during the period | 112,055 | 2,498,990 | 2,466,153 | | Recorded in profit or loss: Other operating income | (3,184,168) | (4,069,055) | (3,027,832) | | Exchange effect | 216,416 | (93,246) | (170,530) | | Ending balance | $5,688,101 | $8,543,798 | $9,474,900 | | Current (classified under other current liabilities) | $3,266,874 | $4,096,742 | $4,136,795 | | Non-current (classified under other noncurrent liabilities-others) | 2,421,227 | 4,447,056 | 5,338,105 | - Government grants related to equipment acquisitions are amortized as income over the useful lives of the related equipment[482](index=482&type=chunk) [6(17) Refund Liabilities](index=41&type=section&id=6(17)%20Refund%20Liabilities) Refund liabilities, classified under other current liabilities, amounted to **NT$778.46 million** as of September 30, 2022 Refund Liabilities (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-----------------|:-------------|:-------------|:-------------| | Refund liabilities | $778,463 | $724,207 | $832,031 | [6(18) Decommissioning liabilities](index=41&type=section&id=6(18)%20Decommissioning%20liabilities) Decommissioning liabilities were recognized at **NT$336.97 million** as of September 30, 2022, for dismantling and restoration costs Decommissioning Liabilities (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:-------------------------|:-------------|:-------------|:-------------| | Decommissioning liabilities | $336,966 | $- | $- | - The Company recognized decommissioning liabilities for the present value of estimated dismantling and restoration costs during the nine-month period ended September 30, 2022[485](index=485&type=chunk) [6(19) Equity](index=41&type=section&id=6(19)%20Equity) UMC's capital stock consists of **12.48 billion** issued common shares, with **140 million** ADSs traded on the NYSE, and retained earnings policies prioritize various distributions - UMC had **26 billion** common shares authorized and **12.48 billion** shares issued as of September 30, 2022, each with a par value of **NT$10**[486](index=486&type=chunk) - As of September 30, 2022, **140 million** ADSs were traded on the NYSE, representing **698 million** common shares (1 ADS = 5 common shares)[486](index=486&type=chunk) - UMC issued **1 million** restricted stocks for employees in June 2021 and has recalled/cancelled restricted stocks in April 2021, November 2021, and March 2022[487](index=487&type=chunk)[488](index=488&type=chunk) - On September 3, 2021, UMC approved a share exchange with CHIPBOND, issuing **61 million** common shares for **53 million** newly issued CHIPBOND common shares[488](index=488&type=chunk) Appropriation of Earnings (NT$ Thousands) | Item | 2021 | 2020 | |:----------------|:-------------|:-------------| | Legal reserve | $5,832,570 | $3,197,890 | | Special reserve | (3,250,434) | (2,857,666) | | Cash dividends | - | 19,875,842 | - The shareholders' meeting on May 27, 2022, approved a cash distribution from additional paid-in capital of **NT$37.45 billion** (**NT$3 per share**)[493](index=493&type=chunk) [6(20) Share-Based Payment](index=44&type=section&id=6(20)%20Share-Based%20Payment) Total compensation costs for share-based payments were **NT$1.12 billion** for restricted stock and **NT$170 million** for stock appreciation rights in 9M 2022 - In September 2020, UMC offered **105 million** shares of treasury stock to employees, with compensation costs recognized at fair value[496](index=496&type=chunk) - Shareholders approved a restricted stock plan in May 2022 to issue up to **50 million** common shares to employees without consideration, vesting over four years based on service and performance conditions[497](index=497&type=chunk) Compensation Costs for Share-Based Payments (9M, NT$ Thousands) | Plan Type | 9M 2022 | 9M 2021 | |:------------------------------|:-------------|:-------------| | Restricted stock plan | $1,117,000 | $1,134,000 | | Stock appreciation right plan | $170,000 | $205,000 | - The cash-settled stock appreciation right plan grants employees rights to the intrinsic value of UMC common shares, with compensation costs measured at fair value using the Black-Scholes Option Pricing Model[501](index=501&type=chunk)[503](index=503&type=chunk) [6(21) Operating Revenues](index=46&type=section&id=6(21)%20Operating%20Revenues) Operating revenues for 9M 2022 increased to **NT$210.87 billion**, primarily from wafer sales, with Taiwan, Singapore, and China as major geographic contributors Operating Revenues by Product (NT$ Thousands) | Product | 9M 2022 | 9M 2021 | |:--------|:---------------|:---------------| | Wafer | $202,364,060 | $147,874,101 | | Others | 8,505,489 | 6,037,329 | | Total | $210,869,549 | $153,911,430 | Operating Revenues by Geography (9M 2022, NT$ Thousands) | Region | 9M 2022 | 9M 2021 | |:---------------------------|:---------------|:---------------| | Taiwan | $73,215,198 | $57,538,173 | | Singapore | 28,638,192 | 21,501,077 | | China (includes Hong Kong) | 35,024,280 | 22,124,839 | | Japan | 12,912,201 | 10,110,553 | | USA | 24,755,406 | 17,834,727 | | Europe | 6,306,530 | 4,121,772 | | Others | 30,017,742 | 20,680,289 | | Total | $210,869,549 | $153,911,430 | Operating Revenues by Timing of Recognition (NT$ Thousands) | Timing of Revenue Recognition | 9M 2022 | 9M 2021 | |:------------------------------|:---------------|:---------------| | At a point in time | $208,896,833 | $152,495,014 | | Over time | 1,972,716 | 1,416,416 | | Total | $210,869,549 | $153,911,430 | - Contract assets, net, increased to **NT$384.06 million** as of September 30, 2022, from **NT$319.62 million** at December 31, 2021[508](index=508&type=chunk) - Contract liabilities increased to **NT$4.83 billion** as of September 30, 2022, from **NT$4.08 billion** at December 31, 2021[509](index=509&type=chunk) [6(22) Operating Costs and Expenses](index=49&type=section&id=6(22)%20Operating%20Costs%20and%20Expenses) Total employee benefit expenses increased to **NT$36.18 billion** in 9M 2022, with depreciation and amortization expenses totaling **NT$31.33 billion** and **NT$2.16 billion**, respectively Employee Benefit Expenses (9M, NT$ Thousands) | Category | Operating costs (2022) | Operating expenses (2022) | Total (2022) | Operating costs (2021) | Operating expenses (2021) | Total (2021) | |:------------------------------|:-----------------------|:--------------------------|:-------------|:-----------------------|:--------------------------|:-------------| | Salaries | $22,466,502 | $10,491,518 | $32,958,020 | $17,181,506 | $8,565,319 | $25,746,825 | | Labor and health insurance | 1,045,579 | 363,791 | 1,409,370 | 892,549 | 355,072 | 1,247,621 | | Pension | 1,120,567 | 318,292 | 1,438,859 | 937,769 | 300,218 | 1,237,987 | | Other employee benefit expenses | 259,322 | 112,285 | 371,607 | 205,603 | 84,123 | 289,726 | | Total Employee Benefits | $24,891,970 | $11,285,486 | $36,177,856 | $19,217,427 | $9,304,732 | $28,522,159 | Depreciation and Amortization Expenses (9M, NT$ Thousands) | Category | Operating costs (2022) | Operating expenses (2022) | Total (2022) | Operating costs (2021) | Operating expenses (2021) | Total (2021) | |:-------------|:-----------------------|:--------------------------|:-------------|:-----------------------|:--------------------------|:-------------| | Depreciation | $29,992,188 | $1,339,357 | $31,331,545 | $31,483,928 | $1,423,580 | $32,907,508 | | Amortization | 1,112,216 | 1,043,723 | 2,155,939 | 630,632 | 1,518,049 | 2,148,681 | - UMC's Articles of Incorporation mandate allocating no less than **5%** of profit as employees' compensation and no more than **0.2%** as directors' compensation[515](index=515&type=chunk) Employees' and Directors' Compensation (NT$ Thousands) | Compensation Type | 2021 | 2020 | |:--------------------------|:-------------|:-------------| | Employees' compensation – Cash | $4,770,909 | $2,581,675 | | Directors' compensation | 25,264 | 32,369 | [6(23) Net Other Operating Income and Expenses](index=51&type=section&id=6(23)%20Net%20Other%20Operating%20Income%20and%20Expenses) Net other operating income and expenses increased slightly to **NT$4.03 billion** in 9M 2022, driven by government grants and gains on asset disposal Net Other Operating Income and Expenses (NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:------------------------------------------|:-------------|:-------------| | Government grants | $3,736,949 | $3,947,701 | | Rental income from property, plant and equipment | 141,026 | 141,485 | | Gain on disposal of property, plant and equipment | 441,140 | 71,404 | | Others | (290,515) | (267,764) | | Total | $4,028,600 | $3,892,826 | - Government grants were the largest component of other operating income, contributing **NT$3.74 billion** in 9M 2022[518](index=518&type=chunk) [6(24) Non-Operating Income and Expenses](index=51&type=section&id=6(24)%20Non-Operating%20Income%20and%20Expenses) Non-operating income and expenses resulted in a net loss of **NT$830.07 million** in 9M 2022, a significant shift from a prior-year gain, primarily due to financial asset valuation losses Other Gains and Losses (NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:----------------------------------------------------------------------|:-------------|:-------------| | Gain (loss) on valuation of financial assets and liabilities at fair value through profit or loss | $(896,807) | $2,987,600 | | Loss on disposal of investments | - | (10,977) | | Others | 66,738 | 79,543 | | Total | $(830,069) | $3,056,166 | Finance Costs (NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:-------------------|:-------------|:-------------| | Interest expenses | | | | Bonds payable | $386,387 | $286,468 | | Bank loans | 832,672 | 974,247 | | Lease liabilities | 122,082 | 110,236 | | Others | 27,789 | 113 | | Financial expenses | 64,868 | 84,333 | | Total | $1,433,798 | $1,455,397 | [6(25) Components of Other Comprehensive Income (Loss)](index=52&type=section&id=6(25)%20Components%20of%20Other%20Comprehensive%20Income%20(Loss)) Total other comprehensive income was a gain of **NT$2.01 billion** in 9M 2022, influenced by large exchange differences on foreign operations translation Components of Other Comprehensive Income (Loss) (9M, NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:------------------------------------------------------------------------------------------------------|:---------------|:---------------| | Unrealized gains or losses from equity instruments investments measured at fair value through other comprehensive income | $(7,041,947) | $3,135,224 | | Share of other comprehensive income (loss) of associates and joint ventures (not reclassified) | $(3,558,905) | $2,259,582 | | Exchange differences on translation of foreign operations | 12,755,060 | $(4,002,655) | | Share of other comprehensive income (loss) of associates and joint ventures (may be reclassified) | 166,724 | (44,344) | | Total other comprehensive income (loss) (before tax) | $2,320,932 | $1,347,807 | | Income tax effect | $(312,742) | $(96,794) |\ | Total other comprehensive income (loss) (net of tax) | $2,008,190 | $1,251,013 | - A significant positive impact came from exchange differences on translation of foreign operations, which shifted from a loss of **NT$4.00 billion** in 9M 2021 to a gain of **NT$12.76 billion** in 9M 2022[526](index=526&type=chunk)[527](index=527&type=chunk) [6(26) Income Tax](index=55&type=section&id=6(26)%20Income%20Tax) Income tax expense significantly increased to **NT$12.67 billion** in 9M 2022, primarily due to higher current income tax charges Income Tax Expense Recorded in Profit or Loss (9M, NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:----------------------------------------------------------------------|:---------------|:---------------| | Current income tax charge | $12,987,039 | $3,457,508 | | Adjustments in respect of current income tax of prior periods | (585,806) | 86,308 | | Deferred income tax related to origination and reversal of temporary differences | 216,636 | 302,888 | | Deferred income tax related to recognition and derecognition of tax losses and unused tax credits | 60,651 | 1,000,917 | | Adjustment of prior year's deferred income tax | 8,264 | (308,116) | | Deferred income tax arising from write-down or reversal of write-down of deferred tax assets | (14,117) | (17,647) | | Income tax expense recorded in profit or loss | $12,672,667 | $4,521,858 | Deferred Income Tax Related to Other Comprehensive Income (Loss) (9M, NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:------------------------------------------------------------------------------------------------------|:-------------|:-------------| | Unrealized gains or losses from equity instruments investments measured at fair value through other comprehensive income | $(190,740) | $(117,822) | | Exchange differences on translation of foreign operations | $(99,743) | $16,638 | | Share of other comprehensive income (loss) of associates and joint ventures (may be reclassified) | $(22,259) | 4,390 |\ | Total income tax related to items that may be reclassified subsequently to profit or loss | $(122,002) | $21,028 | - UMC's Singapore branch received two tax incentives from the Singapore government, providing tax-exempt or concessionary tax rates for five years from August 2020 to July 2025[534](index=534&type=chunk) [6(27) Earnings Per Share](index=57&type=section&id=6(27)%20Earnings%20Per%20Share) Basic earnings per share increased to **NT$5.54** and diluted EPS to **NT$5.38** for 9M 2022, reflecting higher net income attributable to the parent company Earnings Per Share (NTD) | Metric | 9M 2022 | 9M 2021 | |:--------------------------------------------------------------------|:-------------|:-------------| | Net income attributable to the parent company | $68,130,535 | $39,831,225 | | Weighted-average number of ordinary shares for basic EPS (thousand shares) | 12,290,906 | 12,206,293 | | Earnings per share-basic | $5.54 | $3.26 | | Weighted-average number of ordinary shares after dilution (thousand shares) | 12,657,611 | 12,415,993 | | Earnings per share-diluted | $5.38 | $3.21 | - The increase in both basic and diluted EPS is primarily driven by the higher net income attributable to the parent company[538](index=538&type=chunk)[539](index=539&type=chunk) [6(28) Reconciliation of Liabilities Arising from Financing Activities](index=59&type=section&id=6(28)%20Reconciliation%20of%20Liabilities%20Arising%20from%20Financing%20Activities) Total liabilities from financing activities increased to **NT$175.24 billion** as of September 30, 2022, mainly due to increases in guarantee deposits and other financial liabilities Reconciliation of Liabilities from Financing Activities (NT$ Thousands) | Item | Jan 1, 2022 | Cash Flows | Non-cash changes (Foreign exchange) | Others (Note A) | Sep 30, 2022 | |:------------------------------------------|:---------------|:---------------|:------------------------------------|:----------------|:---------------| | Short-term loans | $1,924,124 | $(1,759,376) | $52,537 | $- | $217,285 | | Long-term loans (current portion included) | 36,624,907 | (10,940,671) | 1,806,952 | - | 27,491,188 | | Bonds payable (current portion included) | 40,536,658 | (10,763,239) | - | 855,509 | 30,628,928 | | Guarantee deposits (current portion included) | 14,369,769 | 15,374,267 | 2,202,442 | - | 31,946,478 | | Lease liabilities | 5,068,754 | (538,134) | 98,151 | 1,214,446 | 5,843,217 | | Other financial liabilities | 20,966,209 | - | 620,509 | 137,282 | 21,724,000 | - Guarantee deposits saw a substantial increase of **NT$17.58 billion**, primarily due to deposits for capacity reservation[541](index=541&type=chunk)[543](index=543&type=chunk) - Bonds payable decreased due to cash outflows from redemptions, while long-term loans also decreased due to repayments[541](index=541&type=chunk) [7. Related Party Transactions](index=60&type=section&id=7.%20RELATED%20PARTY%20TRANSACTIONS) Operating revenues from related parties significantly increased to **NT$4.84 billion** in 9M 2022, with key management personnel compensation also rising substantially - Related parties include FARADAY TECHNOLOGY CORP., UNIMICRON TECHNOLOGY CORP. (associates), SILICON INTEGRATED SYSTEMS CORP. (Company's director), and PHOTRONICS DNP MASK CORPORATION (other related party)[545](index=545&type=chunk) Operating Revenues from Related Parties (NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:-----------|:-------------|:-------------| | Associates | $4,797,869 | $1,797,271 | | Others | 39,399 | 25,762 | | Total | $4,837,268 | $1,823,033 | Key Management Personnel Compensation (NT$ Thousands) | Category | 9M 2022 | 9M 2021 | |:-------------------------|:-------------|:-------------| | Short-term employee benefits | $1,365,232 | $487,587 | | Post-employment benefits | 2,092 | 1,525 | | Share-based payment | 678,549 | 868,946 | | Others | 487 | 433 | | Total | $2,046,360 | $1,358,491 | - Accounts receivable from related parties, net, increased to **NT$1.26 billion** as of September 30, 2022, from **NT$566.34 million** at December 31, 2021[548](index=548&type=chunk) [8. Assets Pledged as Collateral](index=63&type=section&id=8.%20ASSETS%20PLEDGED%20AS%20COLLATERAL) As of September 30, 2022, assets totaling **NT$24.83 billion** were pledged as collateral for various guarantees and loans Assets Pledged as Collateral (NT$ Thousands) | Asset Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:---------------------------|:-------------|:-------------|:-------------| | Refundable Deposits | $2,469,352 | $2,224,483 | $2,223,807 | | Buildings | 4,964,508 | 5,014,814 | 5,032,554 | | Machinery and equipment | 16,803,294 | 25,189,533 | 27,900,685 | | Transportation equipment | 815 | 1,802 | 2,119 | | Furniture and fixtures | 75,458 | 161,604 | 189,324 | | Right-of-use assets | 284,037 | 280,697 | 280,319 | | Total | $24,832,227 | $32,899,544 | $35,658,908 | - The pledged assets serve various purposes, including customs duty guarantees, collateral for land/dormitory leases, bank performance guarantees, letters of credit, and long-term loans[557](index=557&type=chunk)[559](index=559&type=chunk)[560](index=560&type=chunk) [9. Significant Contingencies and Unrecognized Contract Commitments](index=65&type=section&id=9.%20SIGNIFICANT%20CONTINGENCIES%20AND%20UNRECOGNIZED%20CONTRACT%20COMMITMENTS) UMC has significant contingencies including unused letters of credit (**NT$0.8 billion**), performance guarantees (**NT$1.8 billion**), and construction contracts (**NT$24.9 billion** unrecognized portion) - As of September 30, 2022, unused letters of credit for importing machinery and equipment amounted to **NT$0.8 billion**[561](index=561&type=chunk) - The Company has performance guarantees totaling **NT$1.8 billion**, mainly for litigations and customs tax[561](index=561&type=chunk) - Unrecognized royalties and development fees from patent license and intellectual property development contracts amounted to **NT$1.2 billion** as of September 30, 2022[561](index=561&type=chunk) - Unrecognized portions of construction contracts for operational expansion totaled approximately **NT$24.9 billion** as of September 30, 2022[561](index=561&type=chunk) - UMC settled legal proceedings with MICRON TECHNOLOGY, INC. regarding trade secrets in November 2021, resulting in a **NT$20 million** fine and no material financial or operational effect[566](index=566&type=chunk)[567](index=567&type=chunk)[568](index=568&type=chunk)[569](index=569&type=chunk) - UMC has a financial liability for purchasing other investors' stakes in UNITED SEMICONDUCTOR (XIAMEN) CO., LTD. (USCXM) for **RMB 4.9 billion**, starting from 2022[563](index=563&type=chunk) [10. Significant Disaster Loss](index=67&type=section&id=10.%20SIGNIFICANT%20DISASTER%20LOSS) There were no significant disaster losses reported for the periods presented - No significant disaster losses were reported[570](index=570&type=chunk) [11. Significant Subsequent Events](index=67&type=section&id=11.%20SIGNIFICANT%20SUBSEQUENT%20EVENTS) There were no significant subsequent events reported after the reporting period - No significant subsequent events were reported[570](index=570&type=chunk) [12. Others](index=67&type=section&id=12.%20OTHERS) This section provides details on the Company's financial instruments, risk management objectives and policies, and capital management, including market, credit, and liquidity risks [12(1) Categories of financial instruments](index=67&type=section&id=12(1)%20Categories%20of%20financial%20instruments) Total financial assets amounted to **NT$264.96 billion** and total financial liabilities were **NT$174.36 billion** as of September 30, 2022 Categories of Financial Instruments (NT$ Thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | Sep 30, 2021 | |:----------------------------------------------------------|:---------------|:---------------|:---------------| | **Financial Assets** | | | | | Financial assets at fair value through profit or loss | $19,336,864 | $20,446,295 | $18,225,842 | | Financial assets at fair value through other comprehensive income | 12,793,718 | 19,835,665 | 13,661,367 | | Financial assets measured at amortized cost (Cash and cash equivalents excluded) | 180,643,356 | 132,616,447 | 113,098,884 | | Receivables | 46,457,303 | 36,047,680 | 34,120,512 | | Refundable deposits | 2,757,248 | 2,358,549 | 2,410,884 | | Other financial assets | 2,969,600 | 28,863,470 | 30,639,713 | | **Total Financial Assets** | $264,958,089 | $240,168,106 | $212,157,202 | | **Financial Liabilities** | | | | | Financial liabilities at fair value through profit or loss | $313,377 | $2,380,599 | $1,425,772 | | Financial liabilities measured at amortized cost | | | | | Short-term loans | 217,285 | 1,924,124 | 2,134,625 | | Payables | 56,195,305 | 37,657,300 | 34,116,095 | | Guarantee deposits (current portion included) | 31,946,478 | 14,369,769 | 11,556,560 | | Bonds payable (current portion included) | 30,628,928 | 40,536,658 | 35,462,511 | | Long-term loans (current portion included) | 27,491,188 | 36,624,907 | 37,754,537 | | Lease liabilities | 5,843,217 | 5,068,754 | 5,171,405 | | Other financial liabilities | 21,724,000 | 20,966,209 | 20,683,185 | | **Total Financial Liabilities** | $174,359,778 | $159,528,320 | $148,304,690 | [12(2) Financial risk management objectives and policies](index=68&type=section&id=12(2)%20Financial%20risk%20management%20objectives%20and%20policies) The Company's financial risk management aims to manage market, credit, and liquidity risks through established policies, procedures, and internal controls - The Company's risk management objectives are to manage market risk, credit risk, and liquidity risk related to its operating activities[572](index=572&type=chunk) - Financial risk management involves established policies, procedures, and internal controls, with significant activities requiring Board and Audit Committee approval[572](index=572&type=chunk) [12(3) Market risk](index=68&type=section&id=12(3)%20Market%20risk) UMC is exposed to market risks including foreign currency, interest rate, and equity price risks, managed through natural hedges and financial instruments - Market risk includes currency risk, interest rate risk, and other price risk (e.g., equity price risk)[573](index=573&type=chunk) - Foreign currency risk is managed using natural hedges and spot/forward exchange contracts, with net investments in foreign subsidiaries not hedged[574](index=574&type=chunk) Foreign Currency Sensitivity Analysis (9M, NT$ Millions) | Currency | 10% Change in Exchange Rate | 9M 2022 Profit Impact | 9M 2021 Profit Impact | |:---------|:----------------------------|:----------------------|:----------------------| | USD | Strengthens/Weakens | Decrease/Increase by $455 | Decrease/Increase by $1,284 | | RMB | Strengthens/Weakens | Decrease/Increase by $405 | Increase/Decrease by $723 | | JPY | Strengthens/Weakens | Decrease/Increase by

Financial Data and Key Metrics Changes - In Q3 2022, consolidated revenue was TWD 75.39 billion, with a gross margin of 47.3% and net income attributable to shareholders of TWD 27 billion, resulting in earnings per share (EPS) of TWD 2.19, a significant increase from TWD 1.74 in the previous quarter [6][7] - Revenue grew by 4.6% sequentially, and the gross margin rate was 47%, translating to TWD 35.66 billion in absolute terms [6][7] - For the first three quarters of 2022, cumulative revenue increased by 37%, with a gross margin rate of approximately 45.8% [7][8] Business Line Data and Key Metrics Changes - The revenue percentage from the Asian market declined from 55% in the previous quarter to 52% in Q3 2022, while the IDM segment outperformed fabless, contributing about 17% of total revenue [8][9] - The 22/20 nanometer segment reached 25% of total revenue for the first time, driven by increased capacity from the P5 facility [9] Market Data and Key Metrics Changes - The automotive segment showed continuous double-digit growth, while consumer segments like PC and smartphone experienced prolonged inventory corrections [30][31] - The overall wafer shipment and average selling price (ASP) remained stable, with ASP expected to stay flat in Q4 2022 [10][12] Company Strategy and Development Direction - The company revised its 2022 capital expenditures down to USD 3 billion, focusing on capacity expansion in Tainan and Singapore to meet long-term supply commitments [12][13] - UMC aims to strengthen its position in the automotive and industrial segments while continuing to innovate in technology to capture growth opportunities in 5G, AIoT, and other markets [10][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged headwinds from demand weakness due to inflation and geopolitical factors, indicating that the semiconductor industry is expected to decline in 2023 [11][19] - Despite the challenges, UMC remains committed to its long-term growth strategy, focusing on technology differentiation and maintaining strong customer relationships [12][36] Other Important Information - The company plans to maintain its cash dividend policy, having paid out TWD 3 per share in Q3 2022, with cash on hand around TWD 180 billion post-dividend [8] - UMC is closely monitoring geopolitical risks and U.S. export controls, which have had limited impact on its operations so far [39][40] Q&A Session Summary Question: Outlook for Q4 and inventory correction - Management indicated that the consumer segment, particularly PC and smartphone, is undergoing a prolonged inventory correction, while the automotive segment remains stable [16][17] Question: CapEx reduction implications - The reduction in CapEx from USD 3.6 billion to USD 3 billion was due to equipment delays and a need to reprioritize projects amid market downturns [23][24] Question: Pricing strategy during downturn - Management emphasized that pricing strategies will reflect technology leadership and long-term partnerships, with limited changes expected unless significant market benefits arise [36][37] Question: Geopolitical risks and market share - UMC is monitoring geopolitical developments closely, with limited immediate impact on order flows, but remains open to potential opportunities arising from market shifts [39][40] Question: Automotive and industrial segment stability - The automotive segment is expected to remain stable, with ongoing collaboration with both IDM and fabless customers to expand business [42] Question: LTA commitments and capacity adjustments - Management confirmed that LTA commitments remain strong, and adjustments will be made to align with market conditions while fulfilling obligations [45][51]