UMC Reports Second Quarter 2017 Results
United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) ("UMC" or "The Company"), a leading global semiconductor foundry, today announced its consolidated operating results for the second quarter of 2017.
Second quarter consolidated revenue was NT$37.54 billion, up from NT$37.42 billion in 1Q17 and up 1.5% YoY from NT$37.00 billion in 2Q16. 2Q17 consolidated gross margin was 18.0%. Net income attributable to the stockholders of the parent was NT$2.10 billion, with earnings per ordinary share of NT$0.17.
Jason Wang, newly appointed co-president of UMC, said, "In the second quarter of 2017, UMC's foundry revenue was NT$37.45 billion. Stable chip demand led to a utilization rate of 96%, bringing wafer shipments to 1.74 million 8-inch equivalents. Gross margin was 18.1%. We experienced robust demand for our mature technologies on both 8" and 12" manufacturing, led by strength in the computing and communication segments."
President Wang continued, "Looking into the third quarter, demand for our mature technologies remains firm. However, due to a softened outlook for 28nm, we project a sequentially flat quarter. Our 28nm HKMG business has become increasingly vulnerable due to high exposure among a few key customers. As a result, we are seeing the possibility that the decline of our 28nm HKMG business will extend into the second half of 2017."
Co-president SC Chien added, "Recently, UMC's board of directors appointed Mr. Jason Wang and I as co-presidents. I will take the lead in fab operations and technology development, while president Wang will be responsible for business management and corporate strategy. We will both implement measures to strengthen our foundry competitiveness in core manufacturing and drive operational efficiencies to enhance financial performance. Our goal is to unlock UMC's value and lead to positive cash flow."
Summary of Operating Results
Net operating revenues remained flat in 2Q17 at NT$37.54 billion, including NT$37.45 billion from the foundry segment. Revenue contribution from 14nm, 28nm and 40nm totaled 46%. Gross profit declined 9.3% to NT$6.74 billion, or 18.0% of revenue. Operating expenses decreased 14.2% to NT$5.33 billion. Net other operating income was NT$259 million, leading to an operating income of NT$1.67 billion. Net non-operating income was NT$448 million. Net income attributable to stockholders of the parent was NT$2.10 billion.
Earnings per ordinary share for the quarter was NT$0.17. Earnings per ADS was US$0.028. The basic weighted average number of outstanding shares in 2Q17 was 12,208,239,978, compared with 12,208,239,978 shares in 1Q17 and 12,334,888,329 shares in 2Q16. The diluted weighted average number of outstanding shares was 13,383,329,206 in 2Q17, compared with 13,418,016,296 shares in 1Q17 and 13,460,073,526 shares in 2Q16. The fully diluted share count on June 30, 2017 was approximately 13,799,408,000. On June 30, 2017, UMC held 400 million treasury shares acquired from the 16th and 17th share buy-back programs.
Detailed Financials Section
Net operating revenues remained at NT$37.54 billion. COGS increased to NT$30.80 billion, as depreciation was flat. Other manufacturing costs increased 3.9% to NT$19.70 billion, partly from higher wafer shipments. Gross profit was NT$6.74 billion. Operating expenses declined 14.2% to NT$5.33 billion. Sales & Marketing declined 10.3% to NT$1.05 billion. R&D expense decreased 18.7% to NT$3.25 billion, or 8.6% of net operating revenues. Net other operating income was NT$259 million, leading to an operating income of NT$1.67 billion.
Net non-operating income in 2Q17 increased to NT$448 million, which primarily resulted from a NT$807 million in exchange gain and a NT$272 million gain in disposal of investments.
Cash inflow from operating activities reached NT$14.82 billion. Cash outflow from investing activities totaled NT$8.11 billion, including NT$8.33 billion in CAPEX spending for the foundry segment, resulting in a free cash outflow of NT$6.48 billion. Cash inflow from financing activities was NT$707 million, mainly due to a NT$8.05 billion in bank loans offset by a NT$7.50 billion in redemption of bonds. Net cash inflow in 2Q17 was NT$7.32 billion. Over the next 12 months, the company expects to repay NT$1.44 billion in bank loans.
Cash and cash equivalents increased to NT$68.13 billion, mainly due a decrease in CAPEX spending in the foundry segment. Days of inventory decreased to 48 days.
Current liabilities increased to NT$87.70 billion, which included an increase in short-term credit/bonds NT$48.19 billion and a NT$6.11 billion in dividends payable. Long-term credit/bonds decreased to NT$51.24 billion. Total liabilities increased to NT$172.62 billion, leading to a debt to equity ratio of 81%.
Analysis of Revenue2 for Foundry Segment
Revenue from North American and European customers increased to 42% and 7% of sales respectively. Revenue contribution from Asia Pacific customers decreased to 47%.
14nm represented 1% of 2Q17 revenue, while 28nm contribution remains at 17%. 40nm accounted for 28% of sales.
Revenue from fabless customers declined to 91% in 2Q17.
Revenue from consumer and computer segments grew to 29% and 14% respectively. Communication business decreased to 48%.
(1) Computer consists of ICs such as CPU, GPU, HDD controllers, DVD/CD-RW control ICs, PC chipset, audio codec, keyboard controller, monitor scaler, USB, I/O chipset. Communication consists of handset components, broadband, WLAN, bluetooth, Ethernet, LAN, DSP, etc. Consumer consists of ICs used for DVD players, DTV, STB, MP3/MP4, flash controller, game consoles, DSC, smart cards, toys, etc.
Blended ASP Trend for Foundry Segment
Blended average selling price (ASP) remained unchanged in 2Q17.
(To view ASP trend, visit http://www.umc.com/english/investors/2Q17_ASP_trend.asp)
Shipment and Utilization Rate3 for Foundry Segment
Wafer shipments increased to 1,741K in 2Q17. Quarterly capacity increased 4.2% QoQ to 1,816K, leading to an overall utilization rate of 96% in 2Q17.
Capacity4 for Foundry Segment
Overall capacity in the second quarter was 1,816K 8-inch equivalent wafers. Estimated capacity in the third quarter will increase to 1,861K 8-inch equivalent wafers, primarily due to capacity expansion at Fab 12X and enhancements to production capabilities at Fab 8C, Fab 8F and Fab 8S.
(1)One 6-inch wafer is converted into 0.5625(62/82) 8-inch equivalent wafer; one 12-inch wafer is converted into 2.25(122/82) 8-inch equivalent wafers. Capacity total figures are expressed in 8-inch equivalent wafers.
CAPEX for Foundry Segment
CAPEX spending in 2Q17 totaled US$275 million. Full year 2017 CAPEX plan is budgeted for US$1.7 billion.
Third Quarter of 2017 Outlook & Guidance
Recent Developments / Announcements
Please visit UMC's website for further details regarding the above announcements
Conference Call / Webcast Announcement
Wednesday, July 26, 2017
Time: 5:00 PM (Taipei) / 5:00 AM (New York) / 10:00 AM (London)
Dial-in numbers and Access Codes:
A live webcast and replay of the 2Q17 results announcement will be
UMC (NYSE: UMC, TWSE: 2303) is a leading global semiconductor foundry that provides advanced IC production for applications spanning every major sector of the electronics industry. UMC's comprehensive foundry solutions enable chip designers to leverage the company's sophisticated technology and manufacturing, which include high volume 28nm High-K/Metal Gate technology, 14nm FinFET mass production, ultra-low power platform processes specifically developed for Internet of Things (IoT) applications and the automotive industry's highest-rated AEC-Q100 Grade-0 manufacturing capabilities for the production of ICs found in vehicles. UMC's 11 wafer fabs are strategically located throughout Asia and are able to produce nearly 600,000 wafers per month. The company employs over 19,000 people worldwide, with offices in Taiwan, China, Europe, Japan, Korea, Singapore, and the United States. UMC can be found on the web at http://www.umc.com.
Note from UMC Concerning Forward-Looking Statements
Some of the statements in the foregoing announcement are forward-looking within the meaning of the U.S. Federal Securities laws, including statements about introduction of new services and technologies, future outsourcing, competition, wafer capacity, business relationships and market conditions. Investors are cautioned that actual events and results could differ materially from these statements as a result of a variety of factors, including conditions in the overall semiconductor market and economy; acceptance and demand for products from UMC; and technological and development risks. Further information regarding these and other risks is included in UMC's filings with the U.S. Securities and Exchange Commission. UMC does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
Safe Harbor Statements
This release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, and as defined in the United States Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual performance, financial condition or results of operations of UMC to be materially different from what is stated or may be implied in such forward-looking statements. Investors are cautioned that actual events and results could differ materially from those statements as a result of a number of factors including, but not limited to: (i) dependence upon the frequent introduction of new services and technologies based on the latest developments in the industry in which UMC operates; (ii) the intensely competitive semiconductor, communications, consumer electronics and computer industries and markets; (iii) the risks associated with international business activities; (iv) dependence upon key personnel; (v) general economic and political conditions; (vi) possible disruptions in commercial activities caused by natural and human-induced events and disasters, including natural disasters, terrorist activity, armed conflict and highly contagious diseases; (vii) reduced end-user purchases relative to expectations and orders; and (viii) fluctuations in foreign currency exchange rates. Further information regarding these and other risks is included in UMC's filings with the United States Securities and Exchange Commission. All information provided in this release is as of the date of this release and are based on assumptions that UMC believes to be reasonable as of this date, and UMC does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.
The financial statements included in this release are prepared and published in accordance with Taiwan International Financial Reporting Standards, or TIFRSs, recognized by the Financial Supervisory Commission in the ROC, which is different from International Financial Reporting Standards, or IFRSs, issued by the International Accounting Standards Board. Investors are cautioned that there may be significant differences between TIFRSs and IFRSs. In addition, TIFRSs and IFRSs differ in certain significant respects from generally accepted accounting principles in the ROC and generally accepted accounting principles in the United States.
This presentation is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from the issuer or selling security holder and that will contain detailed information about the company and management, as well as financial statements.
1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with TIFRSs recognized by Financial Supervisory Commission in the ROC, which is different from IFRSs issued by the International Accounting Standards Board. They represent comparisons among the three-month period ending Jun. 30, 2017, the three-month period ending Mar. 31, 2017, and the equivalent three-month period that ended Jun. 30, 2016. For all 2Q17 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. Dollars at the Jun. 30, 2017 exchange rate of NT$ 30.42 per U.S. Dollar.
2 Revenue in this section represents wafer sales
3 Utilization Rate = Quarterly Wafer Out / Quarterly Capacity
4 Estimated capacity numbers are based on calculated maximum output rather than designed capacity. The actual capacity numbers may differ depending upon equipment delivery schedules, pace of migration to more advanced process technologies, and other factors affecting production ramp-up.
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