United Microelectronics Corporation (NYSE:UMC) Q2 2022 Earnings Conference Call July 27, 2022 5:00 AM ET Company Participants Michael Lin - Head of Investor Relations Jason Wang - President Qi Dong Liu - Chief Financial Officer Conference Call Participants Randy Abrams - Credit Suisse Brett Simpson - Arete Research Laura Chen - Citigroup Szeho Ng - China Renaissance Sunny Lin - UBS Charlie Chan - Morgan Stanley Gokul Hariharan - JPMorgan Frank Lee - HSBC Operator Welcome everyone to UMC's 2022 Second Quarte ...

PART I [ITEM 3 KEY INFORMATION](index=7&type=section&id=ITEM%203%20KEY%20INFORMATION) [Risk Factors](index=7&type=section&id=D.%20Risk%20Factors) The company faces risks from industry cyclicality, customer concentration, manufacturing complexity, and geopolitical tensions - The company identifies the **cyclical nature of the semiconductor industry**, periodic overcapacity, and vulnerability to economic downturns as significant risks to its business[21](index=21&type=chunk) - A significant portion of revenue comes from a small number of customers; in 2021, the top ten customers accounted for **54.5% of operating revenues**, making the company vulnerable to the loss of any key customer[41](index=41&type=chunk) - Substantial political risks are associated with operations in Taiwan, particularly due to the **tense relationship with the People's Republic of China (PRC)**, which could negatively affect business and investment value[73](index=73&type=chunk)[74](index=74&type=chunk) - The ability to deposit common shares into the ADS program is **restricted by R.O.C. law**, which may adversely affect the liquidity and price of the ADSs and cause a divergence from the common share price on the Taiwan Stock Exchange[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [ITEM 4 INFORMATION ON THE COMPANY](index=22&type=section&id=ITEM%204%20INFORMATION%20ON%20THE%20COMPANY) [History and Development of the Company](index=22&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) UMC operates a customer-driven foundry model, expanding its global footprint through strategic acquisitions and partnerships Wafer Sales by Application (2019-2021) | Application | 2019 % | 2020 % | 2021 % | | :--- | :--- | :--- | :--- | | Communication | 52.2 | 52.1 | 46.2 | | Consumer | 26.4 | 24.3 | 26.6 | | Computer | 13.6 | 13.9 | 16.7 | | Others | 7.8 | 9.7 | 10.5 | | **Total** | **100.0** | **100.0** | **100.0** | - The company's strategy focuses on a **customer-driven, partnership-based business model** to create a network of alliances among IDMs, IP/design houses, and foundries, aiming for synergistic growth[118](index=118&type=chunk)[120](index=120&type=chunk) - Strategic expansion includes the 2019 acquisition of the remaining 84.1% of Mie Fujitsu Semiconductor (now USJC) in Japan and the establishment of USCXM in Xiamen, China, to **bolster 12-inch wafer capacity** for advanced nodes[111](index=111&type=chunk)[112](index=112&type=chunk) - In September 2021, UMC entered into a strategic share exchange with Chipbond Technology Corporation, resulting in UMC and its subsidiary FORTUNE jointly holding approximately **9.09% of Chipbond's equity**[117](index=117&type=chunk) [Business Overview](index=26&type=section&id=B.%20Business%20Overview) The company operates global manufacturing facilities, achieving high capacity utilization while facing intense industry competition Capacity and Utilization (in thousands of 8-inch wafer equivalents) | Metric | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Total Estimated Capacity | 8,148 | 9,188 | 9,453 | | Total Output (Actual) | 7,227 | 8,902 | 9,871 | | Average Capacity Utilization | 88.7% | 96.9% | 104.4% | Geographic Breakdown of Operating Revenues (by Customer Location) | Region | 2019 % | 2020 % | 2021 % | | :--- | :--- | :--- | :--- | | Taiwan | 36.4 | 36.8 | 37.9 | | Singapore | 16.2 | 14.7 | 13.7 | | China (incl. Hong Kong) | 12.9 | 12.8 | 14.6 | | USA | 13.5 | 13.9 | 11.4 | | Japan | 6.6 | 8.7 | 6.4 | | Europe | 4.7 | 3.6 | 2.6 | | Others | 9.7 | 9.5 | 13.4 | | **Total** | **100.0** | **100.0** | **100.0** | - The company's primary competitors include **TSMC, SMIC, and Globalfoundries**, as well as the foundry operations of IDMs like Samsung and Intel[182](index=182&type=chunk) - UMC has pledged to reach **net-zero carbon emissions by 2050** and joined the RE100 initiative, committing to use 100% renewable energy by 2050[201](index=201&type=chunk) [Organizational Structure](index=40&type=section&id=C.%20Organizational%20Structure) UMC operates through a global network of subsidiaries in key regions to support its international manufacturing and sales footprint - The company's organizational structure includes key wholly-owned subsidiaries such as UMC Group (USA), United Microelectronics (Europe) B.V., and United Semiconductor Japan Co., Ltd., which support its **global sales and manufacturing operations**[213](index=213&type=chunk) - UMC holds significant majority or full ownership in its manufacturing subsidiaries in China, including **Hejian Technology (Suzhou) Co., Ltd. (99.9985%)** and **United Semiconductor (Xiamen) Co., Ltd. (69.95%)**[213](index=213&type=chunk) [ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=41&type=section&id=ITEM%205%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) [Operating Results](index=43&type=section&id=A.%20Operating%20Results) The company achieved significant growth in 2021, with a 20.5% revenue increase and a substantial expansion in gross margin to 33.8% Key Financial Performance (2020 vs. 2021) | Metric | 2020 (NT$ million) | 2021 (NT$ million) | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenues | 176,821 | 213,011 | +20.5% | | Gross Profit | 38,997 | 72,050 | +84.8% | | Operating Income | 21,931 | 51,686 | +135.7% | | Net Income (Parent) | 22,861 | 51,246 | +124.2% | Wafer Sales by Process Technology (2019-2021) | Process Technology | 2019 % | 2020 % | 2021 % | | :--- | :--- | :--- | :--- | | 14nm and under | 0.0 | 0.0 | 0.1 | | 28nm | 11.3 | 13.6 | 19.8 | | 40nm | 23.1 | 23.3 | 18.8 | | 65nm | 14.7 | 17.4 | 18.8 | | 90nm | 13.6 | 11.5 | 8.2 | | 0.11/0.13 micron | 12.6 | 11.1 | 11.5 | | 0.15/0.18 micron | 13.1 | 12.8 | 12.5 | | 0.25/0.35 micron | 8.7 | 7.8 | 7.8 | | 0.50 micron or higher | 2.9 | 2.5 | 2.5 | - The average capacity utilization rate increased significantly, from 96.9% in 2020 to **104.4% in 2021**, reflecting strong demand and contributing to improved margins[218](index=218&type=chunk)[222](index=222&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) UMC maintains a strong liquidity position, funding significant capital expenditures through operating cash flow and debt financing Cash Flow Summary (in NT$ millions) | Cash Flow from | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Operating Activities | 54,904 | 65,745 | 90,352 | | Investing Activities | (31,682) | (40,112) | (62,163) | | Financing Activities | (9,867) | (25,601) | 12,490 | - Capital expenditures have been increasing, reaching **NT$50,120 million in 2021**, up from NT$28,104 million in 2020, primarily for equipment purchases[271](index=271&type=chunk) - The company is pursuing major expansion projects in Taiwan and Singapore to meet strong wafer demand, supported by **multi-year supply agreements** with customers[272](index=272&type=chunk) - In 2021, the company issued new domestic unsecured corporate bonds totaling **NT$14,600 million** and zero-coupon exchangeable bonds of **US$400 million** to fund capital expenditures[263](index=263&type=chunk)[264](index=264&type=chunk) [Research, Development, Patents and Licenses, Etc.](index=50&type=section&id=C.%20Research%2C%20Development%2C%20Patents%20and%20Licenses%2C%20Etc.) The company maintains a strong focus on R&D, investing 6.1% of operating revenues in 2021 to develop cost-effective technologies R&D Expenditures (2019-2021) | Year | R&D Expense (NT$ million) | % of Operating Revenues | | :--- | :--- | :--- | | 2019 | 11,860 | 8.0% | | 2020 | 12,896 | 7.3% | | 2021 | 12,935 | 6.1% | [ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=50&type=section&id=ITEM%206%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) [Directors and Senior Management](index=50&type=section&id=A.%20Directors%20and%20Senior%20Management) UMC's leadership includes an experienced executive team and a board composed of nine directors, including five independents - The board of directors is composed of nine members, with **five being independent directors**, indicating a majority-independent board structure[280](index=280&type=chunk) - Key leadership includes **Stan Hung as Chairman & Chief Strategic Officer**, **SC Chien and Jason Wang as Co-presidents**, and **Chitung Liu as Chief Financial Officer**[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk)[283](index=283&type=chunk)[289](index=289&type=chunk) [Compensation](index=52&type=section&id=B.%20Compensation) In 2021, aggregate compensation for directors was NT$31.3 million, while executive officers received NT$1,366.6 million 2021 Compensation Summary (in NT$ millions) | Group | Total Compensation | Bonus Component | | :--- | :--- | :--- | | Directors | 31.3 | - | | Executive Officers | 1,366.6 | 197.1 | | Directors & Senior Management | 473.0 | 46.1 | [Board Practices](index=52&type=section&id=C.%20Board%20Practices) The company's board operates with three-year terms and has established Audit, Remuneration, and Nominating committees - The board has established an Audit Committee, a Remuneration Committee, and a Nominating Committee, each **composed entirely of the company's five independent directors**[292](index=292&type=chunk)[293](index=293&type=chunk)[295](index=295&type=chunk) - Directors are elected for a **three-year term** at the annual general meeting of shareholders[291](index=291&type=chunk) [Employees](index=53&type=section&id=D.%20Employees) As of year-end 2021, the company had 19,741 employees, primarily engineers and technicians, who participate in a profit-sharing plan Employee Headcount by Role (2019-2021) | Role | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Engineers | 11,328 | 11,377 | 11,606 | | Technicians | 7,416 | 7,211 | 7,318 | | Administrative Staff | 833 | 798 | 817 | | **Total** | **19,577** | **19,386** | **19,741** | - The board proposed an employee cash bonus of **NT$4,771 million (US$172 million)** related to 2020 retained earnings[297](index=297&type=chunk) [ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=54&type=section&id=ITEM%207%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) [Major Shareholders](index=54&type=section&id=A.%20Major%20Shareholders) As of March 2022, major shareholders include Hsun Chieh Investment (3.54%) and Silicon Integrated Systems (2.29%) Beneficial Ownership of Major Shareholders (as of March 29, 2022) | Name of Beneficial Owner | Number of Common Shares | Percentage (%) | | :--- | :--- | :--- | | Hsun Chieh Investment Co., Ltd. | 441,371,000 | 3.54% | | Silicon Integrated Systems Corp. | 285,380,424 | 2.29% | | Directors and executive officers as a group | 853,071,669 | 6.83% | [Related Party Transactions](index=54&type=section&id=B.%20Related%20Party%20Transactions) The company engages in arm's-length transactions with affiliated companies, primarily providing foundry services - The company generated **NT$2,816 million (US$102 million)** in operating revenues in 2021 from providing foundry services to two major related fabless design companies[303](index=303&type=chunk) [ITEM 8 FINANCIAL INFORMATION](index=54&type=section&id=ITEM%208%20FINANCIAL%20INFORMATION) [Consolidated Statements and Other Financial Information](index=54&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) The company settled legal proceedings with Micron Technology in 2021 with no material financial or operational effect - In November 2021, UMC and Micron Technology announced a global settlement agreement for all legal proceedings worldwide related to trade secret allegations, with **no material financial or operational effect** on UMC[308](index=308&type=chunk)[310](index=310&type=chunk) [Dividend Policy](index=55&type=section&id=Dividend%20Policy) The company's dividend policy balances shareholder returns and financial planning, with a proposed NT$3 per share distribution for 2022 Cash Dividend Per Share (2019-2021) | Year | Cash Dividend per Share (NT$) | | :--- | :--- | | 2019 | 0.58989396 | | 2020 | 0.80395653 | | 2021 | 1.59988820 | - On February 24, 2022, the board proposed a cash distribution from capital surplus of approximately **NT$3 per common share**, to be approved at the May 27, 2022 annual general meeting[312](index=312&type=chunk) [ITEM 10 ADDITIONAL INFORMATION](index=57&type=section&id=ITEM%2010%20ADDITIONAL%20INFORMATION) [Memorandum and Articles of Association](index=57&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company's articles outline its governance structure, including a nine-member board and shareholder rights - The board of directors consists of nine members, five of whom are independent directors, and has established an **Audit Committee composed of all independent directors**[324](index=324&type=chunk)[326](index=326&type=chunk) - The company's dividend policy targets a cash portion between **20% and 100% of the total dividend payout** for shareholders[344](index=344&type=chunk)[345](index=345&type=chunk) - The company is authorized to repurchase up to **10% of its issued common shares** for purposes such as employee compensation or maintaining credit[349](index=349&type=chunk) [Material Contracts](index=64&type=section&id=C.%20Material%20Contracts) UMC maintains material contracts for global sales, technology licensing with firms like IBM, and major facility construction - The company has ongoing sales and marketing support service contracts with its subsidiaries in key global markets, including the **USA, Europe, Korea, China, and Japan**[363](index=363&type=chunk) - UMC holds long-term patent cross-license agreements with major technology companies such as **IBM (until 2029 and 2035)** and **Avago Technologies (until 2023)**[365](index=365&type=chunk) - Significant construction contracts are active for building facilities at Fab 12A in Taiwan, with a total contracted amount exceeding **NTD 12.6 billion**[366](index=366&type=chunk) [Exchange Controls](index=67&type=section&id=D.%20Exchange%20Controls) Taiwan's liberalized exchange controls permit foreign investment in the securities market with annual remittance limits for residents - Foreign ownership limits in Taiwan Stock Exchange-listed companies have been lifted, allowing foreign investors to hold investments **without percentage limitations** unless specific laws impose restrictions[370](index=370&type=chunk) - R.O.C. companies may remit up to **US$50 million per calendar year**, and residents up to **US$5 million**, for transactions involving currency conversion[377](index=377&type=chunk) - Deposits of common shares into a depositary receipt facility are **restricted and require specific R.O.C. FSC approval**[382](index=382&type=chunk) [Taxation](index=69&type=section&id=E.%20Taxation) This section outlines R.O.C. and U.S. tax implications for security holders, including withholding taxes and capital gains treatment - For non-R.O.C. resident holders, dividends distributed by the company are subject to a **21% withholding tax** in Taiwan[386](index=386&type=chunk) - Gains from the sale of R.O.C. securities are generally **exempt from R.O.C. income tax**, though a 0.3% securities transaction tax applies to common share sales[387](index=387&type=chunk)[388](index=388&type=chunk) - The company does not believe it was a **Passive Foreign Investment Company (PFIC)** for the 2021 tax year, which would have adverse U.S. tax consequences for investors[408](index=408&type=chunk) [ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=75&type=section&id=ITEM%2011%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from interest rate and foreign currency fluctuations, which it manages via hedging strategies - The company's primary market risk exposures are from **interest rate movements** on borrowings and **foreign exchange rate movements**, particularly involving the U.S. dollar[420](index=420&type=chunk)[421](index=421&type=chunk) - A **10 basis point change in interest rates** would cause the profit for 2021 to decrease/increase by NT$39 million[805](index=805&type=chunk) - A **10% strengthening/weakening of the NTD against the USD** would decrease/increase the 2021 profit by NT$1,104 million[804](index=804&type=chunk) PART II [ITEM 15 CONTROLS AND PROCEDURES](index=80&type=section&id=ITEM%2015%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2021 - Management concluded that the company's **disclosure controls and procedures were effective** as of December 31, 2021[436](index=436&type=chunk) - Based on the COSO criteria, management assessed the **internal control over financial reporting as effective** as of December 31, 2021[438](index=438&type=chunk) - The independent registered public accounting firm, Ernst & Young, issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting[438](index=438&type=chunk)[442](index=442&type=chunk) [ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT](index=83&type=section&id=ITEM%2016A.%20AUDIT%20COMMITTEE%20FINANCIAL%20EXPERT) The board has identified three independent directors who qualify as audit committee financial experts under SEC rules - The board has determined that independent directors **Wenyi Chu, Wen-Hsin Hsu, and Kuang Si Shiu** are audit committee financial experts[449](index=449&type=chunk) [ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=83&type=section&id=ITEM%2016C.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) In 2021, the company paid its principal auditor, Ernst & Young, a total of NT$67.5 million in fees for various services Principal Accountant Fees (in thousands NT$) | Fee Category | 2020 | 2021 | | :--- | :--- | :--- | | Audit Fees | 61,508 | 56,226 | | Audit-related Fees | 11,538 | 7,577 | | Tax Fees | 3,977 | 3,719 | | **Total** | **77,023** | **67,522** | [ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS](index=84&type=section&id=ITEM%2016E.%20PURCHASE%20OF%20EQUITY%20SECURITIES%20BY%20THE%20ISSUER%20AND%20AFFILIATED%20PURCHASERS) The company periodically conducts share buy-back plans, with the most recent plan announced in June 2020 - The company has conducted several share buy-back plans, with the 21st plan announced on June 5, 2020, to purchase up to **200 million shares**[457](index=457&type=chunk) Share Repurchases (June 2020) | Month | Total Shares Purchased | Average Price (NT$) | Shares Purchased as Part of Plan | Max Shares Remaining Under Plan | | :--- | :--- | :--- | :--- | :--- | | June 2020 | 76,000,000 | 15.80 | 76,000,000 | 124,000,000 | [ITEM 16G. CORPORATE GOVERNANCE](index=84&type=section&id=ITEM%2016G.%20CORPORATE%20GOVERNANCE) The company's governance practices are governed by R.O.C. law but are largely aligned with NYSE standards - UMC's board has a **majority of independent directors** (five out of nine), aligning with NYSE standards[461](index=461&type=chunk) - The company has established nominating and remuneration committees **composed entirely of independent directors**, similar to NYSE requirements[462](index=462&type=chunk)[463](index=463&type=chunk) - A key difference from NYSE standards is that shareholder approval for equity compensation plans **follows R.O.C. requirements**, which grant more authority to the board[464](index=464&type=chunk) PART III [ITEM 18 FINANCIAL STATEMENTS](index=86&type=section&id=ITEM%2018%20FINANCIAL%20STATEMENTS) The company's audited financial statements received an unqualified opinion, with slow-moving inventory valuation as a critical audit matter - The independent auditor, Ernst & Young, issued an **unqualified opinion** on the consolidated financial statements for the three years ended December 31, 2021[477](index=477&type=chunk) - The critical audit matter identified by the auditor was the **'Valuation for Slow-Moving Inventories'** due to the significant management judgment involved in estimating the reserve[481](index=481&type=chunk)[483](index=483&type=chunk) Consolidated Balance Sheet Highlights (in NT$ thousands) | Account | Dec 31, 2020 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **366,454,101** | **450,955,341** | | Total Current Assets | 164,305,911 | 233,273,433 | | Total Non-Current Assets | 202,148,190 | 217,681,908 | | **Total Liabilities** | **143,314,539** | **186,580,294** | | Total Current Liabilities | 79,481,143 | 108,249,378 | | Total Non-Current Liabilities | 63,833,396 | 78,330,916 | | **Total Equity** | **223,139,562** | **264,375,047** | Consolidated Income Statement Highlights (in NT$ thousands) | Account | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | | Operating Revenues | 148,201,641 | 176,820,914 | 213,011,018 | | Gross Profit | 21,314,972 | 38,997,101 | 72,049,629 | | Operating Income | 4,883,545 | 21,931,227 | 51,686,286 | | Net Income | 4,576,250 | 20,851,667 | 50,578,180 | | Basic EPS (NTD) | 0.71 | 1.93 | 4.27 |

United Microelectronics Corporation (NYSE:UMC) Q1 2022 Earnings Conference Call April 27, 2022 5:00 AM ET Company Participants Michael Lin - Head of IR Qi Dong Liu - CFO, SVP, Head of Corporate Governance & Company Secretary Jason Wang - President Conference Call Participants Randy Abrams - Credit Suisse Brett Simpson - Arete Research Bruce Lu - Goldman Sachs Charlie Chan - Morgan Stanley Gokul Hariharan - JPMorgan Sunny Lin - UBS Szeho Ng - China Renaissance Nicolas Baratte - Macquarie Frank Lee - HSBC Pat ...

United Microelectronics Corporation (NYSE:UMC) Q4 2021 Results Earnings Conference Call January 25, 2022 4:00 AM ET Company Participants Michael Lin - Head of Investor Relations Qi Dong Liu - CFO, Senior VP, Head of Corporate Governance & Company Secretary Jason Wang - President Conference Call Participants Randy Abrams - Credit Suisse Szeho Ng - China Renaissance Bruce Lu - Goldman Sachs Roland Shu - Citigroup Frank Lee - HSBC Sunny Lin - UBS Charlie Chan - Morgan Stanley Gokul Hariharan - JPMorgan Operato ...

```markdown [Consolidated Financial Statements](index=1&type=section&id=Consolidated%20Financial%20Statements) [Review Report of Independent Auditors](index=2&type=section&id=Review%20Report%20of%20Independent%20Auditors) Ernst & Young, Taiwan, reviewed consolidated financial statements, concluding no material misstatements based on limited scope and reliance on other auditors for certain investments - The auditors expressed a review conclusion, not an audit opinion, indicating no material modifications are needed for conformity with accounting standards[4](index=4&type=chunk) - The review's scope is substantially less than a full audit, primarily involving inquiries and analytical procedures[3](index=3&type=chunk) - Reliance was placed on other independent auditors for certain investments in associates and joint ventures, representing **8.43% of total consolidated assets** and **13.58% of consolidated income before tax** for the nine-month period[5](index=5&type=chunk) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to **NT$428.8 billion** by September 30, 2021, with liabilities increasing to **NT$171.2 billion**, leading to total equity of **NT$257.6 billion** Consolidated Balance Sheet Summary (in thousands of NTD) | Account | Sep 30, 2021 | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $211,603,426 | $164,305,911 | $163,476,888 | | **Total Non-Current Assets** | $217,189,205 | $213,210,464 | $204,767,041 | | **Total Assets** | **$428,792,631** | **$377,516,375** | **$368,243,929** | | **Total Current Liabilities** | $84,545,361 | $78,243,526 | $59,150,624 | | **Total Non-Current Liabilities** | $86,643,546 | $63,499,747 | $88,178,342 | | **Total Liabilities** | **$171,188,907** | **$141,743,273** | **$147,328,966** | | **Total Equity** | **$257,603,724** | **$235,773,102** | **$220,914,963** | | **Total Liabilities and Equity** | **$428,792,631** | **$377,516,375** | **$368,243,929** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Operating revenues reached **NT$153.9 billion** for the nine months ended September 30, 2021, with net income attributable to the parent company more than doubling to **NT$39.8 billion** Consolidated Comprehensive Income Summary (in thousands of NTD) | Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :--- | :--- | :--- | :--- | :--- | | **Operating Revenues** | $55,906,677 | $44,870,454 | $153,911,430 | $131,524,561 | | **Gross Profit** | $20,544,011 | $9,769,269 | $48,946,285 | $28,149,009 | | **Operating Income** | $15,135,136 | $7,132,884 | $34,069,981 | $16,392,621 | | **Net Income** | $17,351,943 | $9,009,588 | $39,107,442 | $16,290,911 | | **Net Income (Parent)** | $17,460,235 | $9,106,271 | $39,831,225 | $17,993,985 | | **Total Comprehensive Income** | $16,981,870 | $10,399,993 | $40,358,455 | $17,144,918 | | **Basic EPS (NTD)** | $1.43 | $0.75 | $3.26 | $1.50 | | **Diluted EPS (NTD)** | $1.41 | $0.75 | $3.21 | $1.44 | [Consolidated Statements of Changes in Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity attributable to the parent company increased to **NT$257.4 billion** by September 30, 2021, primarily driven by net income and other comprehensive income, partially offset by cash dividends - Total equity increased to **NT$257.6 billion** as of September 30, 2021, from **NT$235.8 billion** at the beginning of the year[12](index=12&type=chunk) - Key changes in equity for the nine-month period ended Sep 30, 2021, include **net income of NT$39.8 billion**, **cash dividends paid of NT$19.9 billion**, and **total comprehensive income of NT$41.1 billion**[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated **NT$63.5 billion** in cash for the nine months ended September 30, 2021, with **NT$48.8 billion** used in investing activities, leading to a **NT$19.1 billion** net increase in cash Consolidated Cash Flow Summary (in thousands of NTD) | Cash Flow Activity | 9M 2021 | 9M 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $63,529,695 | $49,672,885 | | **Net cash used in investing activities** | ($48,824,511) | ($22,674,228) | | **Net cash provided by (used in) financing activities** | $6,123,589 | ($22,448,834) | | **Effect of exchange rate changes** | ($1,771,949) | ($1,203,221) | | **Net increase in cash and cash equivalents** | $19,056,824 | $3,346,602 | | **Cash and cash equivalents at end of period** | $113,104,860 | $98,839,079 | - The increase in cash used for investing activities was primarily due to a significant rise in the acquisition of property, plant, and equipment, which grew to **NT$33.3 billion** in 9M 2021 from **NT$14.6 billion** in 9M 2020[14](index=14&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) [1. History and Organization](index=10&type=section&id=1.%20HISTORY%20AND%20ORGANIZATION) United Microelectronics Corporation (UMC), a semiconductor wafer foundry incorporated in May 1980, is listed on both the Taiwan Stock Exchange and the New York Stock Exchange - UMC is a semiconductor wafer foundry incorporated in May 1980 and commenced operations in April 1982[16](index=16&type=chunk) - The company's shares are publicly listed on both the Taiwan Stock Exchange (TWSE) and the New York Stock Exchange (NYSE)[16](index=16&type=chunk) [3. Newly Issued or Revised Standards and Interpretations](index=10&type=section&id=3.%20NEWLY%20ISSUED%20OR%20REVISED%20STANDARDS%20AND%20INTERPRETATIONS) The company adopted new IFRS standards effective January 1, 2021, with no material impact, and expects no material impact from upcoming standards effective January 1, 2022 - The company applied all new and revised IFRS standards effective January 1, 2021, with no material impact on its financial position or performance[18](index=18&type=chunk) - Upcoming standards effective January 1, 2022, including amendments to IFRS 3, IAS 16, and IAS 37, are not expected to materially impact the company[19](index=19&type=chunk)[22](index=22&type=chunk) [4. Summary of Significant Accounting Policies](index=13&type=section&id=4.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Consolidated financial statements are prepared on a historical cost basis, complying with IAS 34, detailing consolidation principles and accounting for embedded derivatives in exchangeable bonds - The financial statements were prepared in accordance with IAS 34 "Interim Financial Reporting" on a historical cost basis, except for financial instruments measured at fair value[28](index=28&type=chunk)[29](index=29&type=chunk) - The report provides a comprehensive list of consolidated subsidiaries and their respective ownership percentages across reporting periods[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - For exchangeable bonds, embedded derivatives are separated and accounted for as financial liabilities at fair value through profit or loss if not closely related to the host contract[36](index=36&type=chunk) [6. Contents of Significant Accounts](index=17&type=section&id=6.%20CONTENTS%20OF%20SIGNIFICANT%20ACCOUNTS) This section details significant balance sheet and income statement accounts, including cash, receivables, inventories, property, plant, equipment, liabilities, equity, and revenue disaggregation [6(1) Cash and Cash Equivalents](index=17&type=section&id=6(1)%20Cash%20and%20Cash%20Equivalents) Cash and Cash Equivalents (in thousands of NTD) | Category | Sep 30, 2021 | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | :--- | | Checking and savings accounts | $32,083,517 | $20,163,007 | $22,749,618 | | Time deposits | $70,906,502 | $66,939,601 | $66,620,686 | | Repurchase agreements | $10,108,865 | $6,939,663 | $9,462,999 | | **Total** | **$113,104,860** | **$94,048,036** | **$98,839,079** | [6(4) Accounts Receivable, Net](index=19&type=section&id=6(4)%20Accounts%20Receivable,%20Net) - Net accounts receivable increased to **NT$32.7 billion** as of September 30, 2021, from **NT$27.1 billion** at the end of 2020[46](index=46&type=chunk) - The majority of accounts receivable (**NT$29.7 billion**) were not past due as of September 30, 2021[47](index=47&type=chunk) [6(5) Inventories, Net](index=20&type=section&id=6(5)%20Inventories,%20Net) Inventories, Net (in thousands of NTD) | Category | Sep 30, 2021 | Dec 31, 2020 | Sep 30, 2020 | | :--- | :--- | :--- | :--- | | Raw materials | $4,003,039 | $5,507,002 | $5,789,390 | | Supplies and spare parts | $4,776,513 | $4,290,672 | $4,409,770 | | Work in process | $13,793,221 | $11,872,971 | $11,611,815 | | Finished goods | $576,919 | $881,841 | $1,052,435 | | **Total** | **$23,149,692** | **$22,552,486** | **$22,863,410** | [6(8) Property, Plant and Equipment](index=24&type=section&id=6(8)%20Property,%20Plant%20and%20Equipment) - The net carrying amount of property, plant, and equipment was **NT$125.7 billion** as of September 30, 2021, a decrease from **NT$132.8 billion** at the end of 2020[7](index=7&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - For the nine-month period ended September 30, 2021, additions to construction in progress and equipment awaiting inspection amounted to **NT$25.4 billion**[65](index=65&type=chunk) [6(13) Bonds Payable](index=32&type=section&id=6(13)%20Bonds%20Payable) - Total bonds payable increased to **NT$35.5 billion** as of Sep 30, 2021, from **NT$18.7 billion** at year-end 2020, primarily due to new domestic and exchangeable bond issuances[93](index=93&type=chunk) - In April 2021, the company issued three tranches of domestic unsecured corporate bonds totaling **NT$9.6 billion** with maturities of five, seven, and ten years[94](index=94&type=chunk) - On July 7, 2021, UMC issued **US$400 million** in zero-coupon exchangeable bonds due 2026, exchangeable into common shares of Novatek Microelectronics Corporation[98](index=98&type=chunk) [6(18) Equity](index=42&type=section&id=6(18)%20Equity) - As of September 30, 2021, UMC had **12,423 million common shares** issued out of an authorized **26,000 million shares**[116](index=116&type=chunk) - The shareholders' meeting on July 7, 2021, approved the appropriation of 2020 earnings, including a cash dividend of **NT$1.60 per share**, totaling **NT$19.88 billion**[124](index=124&type=chunk)[125](index=125&type=chunk) - The dividend policy allows for **20% to 100% of distributable earnings** as cash dividends and **0% to 80%** as stock dividends, reflecting the company's capital-intensive nature and growth phase[123](index=123&type=chunk) [6(20) Operating Revenues](index=48&type=section&id=6(20)%20Operating%20Revenues) Revenue by Product (in thousands of NTD) | Product | 9M 2021 | 9M 2020 | | :--- | :--- | :--- | | Wafer | $147,874,101 | $126,504,900 | | Others | $6,037,329 | $5,019,661 | | **Total** | **$153,911,430** | **$131,524,561** | Revenue by Geography (in thousands of NTD) | Geography | 9M 2021 | 9M 2020 | | :--- | :--- | :--- | | United States | $57,538,173 | $48,646,272 | | Taiwan | $21,501,077 | $19,107,943 | | China | $22,124,839 | $16,160,546 | | Japan | $10,110,553 | $12,938,723 | | Europe | $17,834,727 | $18,250,342 | | Singapore | $4,121,772 | $4,868,267 | | Other Asia | $20,680,289 | $11,552,468 | | **Total** | **$153,911,430** | **$131,524,561** | [6(26) Earnings Per Share](index=60&type=section&id=6(26)%20Earnings%20Per%20Share) Earnings Per Share (NTD) | Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 | | :--- | :--- | :--- | :--- | :--- | | **Basic EPS** | $1.43 | $0.75 | $3.26 | $1.50 | | **Diluted EPS** | $1.41 | $0.75 | $3.21 | $1.44 | [7. Related Party Transactions](index=63&type=section&id=7.%20RELATED%20PARTY%20TRANSACTIONS) The company engaged in significant related party transactions, including NT$1.8 billion in operating revenues from associates and NT$1.36 billion in key management personnel compensation - Operating revenues from associates for the nine months ended Sep 30, 2021, were **NT$1,797 million**, up from **NT$1,585 million** in the prior year period[180](index=180&type=chunk) - Key management personnel compensation for the nine months ended Sep 30, 2021, totaled **NT$1,358 million**, a significant increase from **NT$426 million** in the same period of 2020, largely due to higher share-based payments[188](index=188&type=chunk) [9. Significant Contingencies and Unrecognized Contract Commitments](index=68&type=section&id=9.%20SIGNIFICANT%20CONTINGENCIES%20AND%20UNRECOGNIZED%20CONTRACT%20COMMITMENTS) UMC faces significant contingencies, including ongoing litigation and a settled class action, alongside substantial unrecognized commitments for construction, patent licenses, and a joint venture share purchase - The company has unrecognized construction contract commitments of approximately **NT$12.5 billion** as of September 30, 2021[191](index=191&type=chunk) - UMC is involved in ongoing litigation with Micron Technology in both Taiwan and the U.S. regarding alleged trade secret misappropriation[194](index=194&type=chunk)[195](index=195&type=chunk) - A financial liability is recognized for the commitment to purchase partners' investments in the USCXM 12" wafer foundry joint venture, amounting to **RMB 4.9 billion** plus interest, beginning in 2022[193](index=193&type=chunk) [12. Others (Financial Risk Management)](index=70&type=section&id=12.%20OTHERS) This section details the company's financial instruments and risk management policies, covering market, credit, and liquidity risks, capital management, and fair value hierarchy disclosures - The company's primary financial risks include market risk (currency, interest rate, equity price), credit risk, and liquidity risk[200](index=200&type=chunk) - The debt-to-capital ratio was **18.40%** as of September 30, 2021, compared to **16.83%** at year-end 2020 and **18.00%** as of September 30, 2020[247](index=247&type=chunk)[248](index=248&type=chunk) - A sensitivity analysis indicates that a **10% strengthening of the NTD against the USD** would decrease profit by **NT$1,284 million** for the nine-month period of 2021[203](index=203&type=chunk) [14. Operating Segment Information](index=86&type=section&id=14.%20OPERATING%20SEGMENT%20INFORMATION) UMC operates as a single reportable segment, wafer fabrication, manufacturing chips based on customer designs for diverse industries including communication, consumer electronics, and computers - The company operates as a single reportable segment: wafer fabrication[253](index=253&type=chunk) [Attachments](index=87&type=section&id=Attachments) [Attachment 11: Investment in Mainland China](index=105&type=section&id=ATTACHMENT%2011%20(Investment%20in%20Mainland%20China%20as%20of%20September%2030,%202021)) This attachment details UMC's investments in Mainland China, including HEJIAN TECHNOLOGY and USCXM, with accumulated investment of **NT$36.0 billion** well within the authorized limit Major Investments in Mainland China (as of Sep 30, 2021) | Investee Company | Main Business | Ownership % | Carrying Amount (NTD thousands) | | :--- | :--- | :--- | :--- | | HEJIAN TECHNOLOGY (SUZHOU) | Integrated circuits manufacturing | 99.9985% | $24,894,691 | | UNITED SEMICONDUCTOR (XIAMEN) | Integrated circuits manufacturing | 67.76% | $12,766,392 | - The total accumulated investment in Mainland China as of September 30, 2021, is **NT$36.0 billion**, against an authorized upper limit of **NT$154.5 billion**[308](index=308&type=chunk) [Attachment 12: Information of Major Shareholders](index=106&type=section&id=ATTACHMENT%2012%20(Information%20of%20major%20shareholders%20as%20of%20September%2030,%202021)) As of September 30, 2021, the only major shareholder listed is JPMorgan Chase Bank, N.A., acting as the depositary for the company's American Depositary Receipts (ADRs) - JPMorgan Chase Bank, N.A., as the depositary for ADRs, held **769,008,005 shares**, representing a **6.19% ownership stake** as of September 30, 2021[309](index=309&type=chunk) ```

Financial Performance (Q3 2021) - Operating Revenues reached NT$55907 million, a 98% increase compared to the previous quarter (2Q21) [10] - Gross Profit was NT$20544 million, representing 368% of Operating Revenues [10] - Net Income Attributable to Shareholders of the Parent was NT$17460 million, a 462% increase from 2Q21 [10] - EPS (Earnings Per Share) was NT$143, compared to NT$098 in 2Q21 [10] Financial Performance (Year-to-Date Sep 2021) - Operating Revenues totaled NT$153911 million, a 170% increase year-over-year [13] - Gross Profit reached NT$48946 million, representing 318% of Operating Revenues [13] - Net Income Attributable to Shareholders of the Parent was NT$39831 million, a 1214% increase compared to the same period in 2020 [13] - EPS was NT$326, compared to NT$150 for the same period in 2020 [13] Foundry Segment - Wafer Shipments reached 2503 thousand (8" wafer equivalent) in 3Q21 [8] - Utilization rate exceeded 100% in 3Q21 [9] Capital Expenditure - The 2021 Foundry Capital Expenditure Plan is set at $23 billion USD [28] - 85% of the capital expenditure is allocated to 12" wafers [28]