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UMC Reports Fourth Quarter 2024 Results

1. UMC's 4Q24 revenue decreased 0.2% sequentially, up 9.9% YoY. 2. Gross margin for 4Q24 was 30.4%, impacting profitability. 3. Investment in renewable energy aligns with sustainability goals for 2030. 4. 22/28nm technology showed 15% revenue growth in 2024. 5. Demand for AI and smart devices is expected to drive future growth.

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Why Bullish?

Despite a small decline in quarterly revenue, annual growth and technology advancements suggest potential upside, similar to earlier recovery trends in tech sectors.

How important is it?

The article's focus on revenue trends, technology advancements, and sustainability goals directly relates to UMC's operational strategy and market sentiment.

Why Long Term?

Investment in technology and capacity expansion supports UMC's growth strategy over the next several years, similar to past tech cycles.

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UMCTSMAMDNVDA
TAIPEI, Taiwan--(BUSINESS WIRE)--United Microelectronics Corporation (NYSE: UMC; TWSE: 2303) (“UMC” or “The Company”), a leading global semiconductor foundry, today announced its consolidated operating results for the fourth quarter of 2024. Fourth quarter consolidated revenue was NT$60.39 billion, decreasing 0.2% from NT$60.49 billion in 3Q24. Compared to a year ago, 4Q24 revenue increased 9.9%. Consolidated gross margin for 4Q24 was 30.4%. Net income attributable to the shareholders of the parent was NT$8.50 billion, with earnings per ordinary share of NT$0.68. Jason Wang, co-president of UMC, said, “Our fourth-quarter results met guidance, with wafer shipments and utilization slightly exceeding expectations. For full year 2024, revenue grew 4.4% year-on-year, reflecting a steady improvement in demand across communication, consumer, and computer segments. Our 22/28nm portfolio remained the largest contributor, with revenue increasing 15% in 2024. Notably, customers are showing strong interest in migrating to our 22nm specialty platforms for next-generation networking and display driver applications, which offer significant power savings and performance advantages over 28nm solutions. Tape-outs for 22nm products are accelerating and we expect to see higher revenue contribution from 2025 onwards.” Co-president Wang commented, “Looking into 2025, the semiconductor market is poised for another year of growth, driven by strong demand for AI servers as well as increasing semiconductor content in smartphones, PCs, and other electronic devices. To capture opportunities in this fast-moving market, UMC continues to invest in technology innovation, developing industry-leading specialty solutions to ride the next wave of system upgrades and stay ahead of the competition. Building on our technology foundation, UMC is also actively expanding our advanced packaging offering to help unleash the potential of AI in the coming years. In conjunction with technology development, our key capacity expansion projects are progressing as planned. Our new Singapore Phase 3 fab will enhance customers’ supply chain resilience, while the 12nm collaboration with our U.S. partner will offer customers a migration path beyond 22nm.” Co-president Wang added, “In the fourth quarter of 2024, we signed a major offshore wind purchase agreement, which is UMC’s largest renewable energy transaction to date. This agreement puts UMC well on track to achieving our goal of 50% renewable energy use by 2030 as part of our roadmap to net zero emissions and 100% renewable energy by 2050. Our commitment to best practices in sustainable development continued to be recognized by key ESG benchmarks. In the 2024 Dow Jones Sustainability Indices (DJSI) results announced in December, UMC is proud to achieve the top ranking in the semiconductor industry, marking UMC’s 17th consecutive year of being recognized as one of the most sustainable companies globally.” Summary of Operating Results Operating Results (Amount: NT$ million) 4Q24 3Q24 QoQ % change 4Q23 YoY % change Operating Revenues 60,386 60,485 (0.2 ) 54,958 9.9 Gross Profit 18,343 20,429 (10.2 ) 17,806 3.0 Operating Expenses (6,748 ) (6,559 ) 2.9 (6,635 ) 1.7 Net Other Operating Income and Expenses 362 230 57.7 1,252 (71.1 ) Operating Income 11,957 14,100 (15.2 ) 12,423 (3.8 ) Net Non-Operating Income and Expenses (1,443 ) 2,464 - 2,227 - Net Income Attributable to Shareholders of the Parent 8,497 14,472 (41.3 ) 13,195 (35.6 ) EPS (NT$ per share) 0.68 1.16 1.06 (US$ per ADS) 0.104 0.177 0.162 Fourth quarter operating revenues declined 0.2% sequentially to NT$60.39 billion. Revenue contribution from 40nm and below technologies represented 50% of wafer revenue. Gross profit decreased 10.2% QoQ to NT$18.34 billion, or 30.4% of revenue. Operating expenses increased 2.9% to NT$6.75 billion. Net other operating income increased 57.7% to NT$0.36 billion. Net non-operating expenses totaled NT$1.44 billion. Net income attributable to shareholders of the parent amounted to NT$8.50 billion. Earnings per ordinary share for the quarter was NT$0.68. Earnings per ADS was US$0.104. The basic weighted average number of shares outstanding in 4Q24 was 12,481,192,676, compared with 12,436,436,695 shares in 3Q24 and 12,414,087,724 shares in 4Q23. The diluted weighted average number of shares outstanding was 12,610,756,874 in 4Q24, compared with 12,559,358,115 shares in 3Q24 and 12,589,138,701 shares in 4Q23. The fully diluted shares counted on December 31, 2024 were approximately 12,614,345,000. Detailed Financials Section Operating revenues decreased to NT$60.39 billion. COGS grew 5.0% to NT$42.04 billion, which included 13.3% sequential increase in depreciation. Gross profit decreased 10.2% QoQ to NT$18.34 billion. Operating expenses increased to NT$6.75 billion, as R&D grew 7.8% sequentially to NT$4.33 billion or 7.2% of revenue, while Sales & Marketing decreased 13.0% to NT$0.62 billion and G&A also declined 1.6% QoQ to NT$1.79 billion. Net other operating income was NT$0.36 billion. In 4Q24, operating income declined 15.2% QoQ to NT$11.96 billion. COGS & Expenses (Amount: NT$ million) 4Q24 3Q24 QoQ % change 4Q23 YoY % change Operating Revenues 60,386 60,485 (0.2 ) 54,958 9.9 COGS (42,043 ) (40,056 ) 5.0 (37,152 ) 13.2 Depreciation (11,841 ) (10,449 ) 13.3 (9,006 ) 31.5 Other Mfg. Costs (30,202 ) (29,607 ) 2.0 (28,146 ) 7.3 Gross Profit 18,343 20,429 (10.2 ) 17,806 3.0 Gross Margin (%) 30.4 % 33.8 % 32.4 % Operating Expenses (6,748 ) (6,559 ) 2.9 (6,635 ) 1.7 Sales & Marketing (623 ) (717 ) (13.0 ) (823 ) (24.3 ) G&A (1,791 ) (1,820 ) (1.6 ) (1,930 ) (7.2 ) R&D (4,334 ) (4,022 ) 7.8 (3,945 ) 9.9 Expected Credit Impairment gain (loss) 0 (0 ) - 63 (99.4 ) Net Other Operating Income & Expenses 362 230 57.7 1,252 (71.1 ) Operating Income 11,957 14,100 (15.2 ) 12,423 (3.8 ) Net non-operating expenses in 4Q24 was NT$1.44 billion, primarily reflecting the NT$2.61 billion in net investment loss, offset by the NT$0.88 billion in exchange gain, and the NT$0.29 billion in net interest income. Non-Operating Income and Expenses (Amount: NT$ million) 4Q24 3Q24 4Q23 Non-Operating Income and Expenses (1,443 ) 2,464 2,227 Net Interest Income and Expenses 290 324 880 Net Investment Gain and Loss (2,614 ) 2,791 1,750 Exchange Gain and Loss 877 (652 ) (405 ) Other Gain and Loss 4 1 2 In 4Q24, cash inflow from operating activities was NT$32.98 billion. Cash outflow from investing activities totaled NT$16.97 billion, which included NT$18.93 billion in capital expenditure, resulting in free cash flow of NT$14.04 billion. Cash outflow from financing was NT$14.31 billion, primarily from NT$10.50 billion in bank loans and NT$3.40 billion in redemption of bonds. Net cash flow in 4Q24 amounted to NT$1.59 billion. Over the next 12 months, the company expects to repay NT$5.53 billion in bank loans. Cash Flow Summary (Amount: NT$ million) For the 3-Month Period Ended Dec. 31, 2024 For the 3-Month Period Ended Sep. 30, 2024 Cash Flow from Operating Activities 32,977 17,347 Net income before tax 10,514 16,564 Depreciation & Amortization 13,463 12,702 Share of loss (profit) of associates and joint ventures 1,800 (843 ) Income tax paid (137 ) (3,755 ) Changes in working capital & others 7,337 (7,321 ) Cash Flow from Investing Activities (16,968 ) (23,927 ) Decrease (increase) in financial assets measured at amortized cost 564 (1,988 ) Acquisition of PP&E (18,275 ) (21,729 ) Acquisition of intangible assets (877 ) (499 ) Others 1,620 289 Cash Flow from Financing Activities (14,305 ) (12,750 ) Bank loans (10,495 ) 25,050 Redemption of bonds (3,400 ) - Cash dividends - (37,585 ) Others (410 ) (215 ) Effect of Exchange Rate (111 ) 1,073 Net Cash Flow 1,593 (18,257 ) Beginning balance 103,407 121,234 Changes in non-current assets held for sale - 430 Ending balance 105,000 103,407 Cash and cash equivalents increased to NT$105.00 billion. Days of inventory decreased 5 days to 80 days. Current Assets (Amount: NT$ billion) 4Q24 3Q24 4Q23 Cash and Cash Equivalents 105.00 103.41 132.55 Accounts Receivable 33.34 33.74 29.59 Days Sales Outstanding 51 50 50 Inventories, net 35.78 38.09 35.71 Days of Inventory 80 85 89 Total Current Assets 189.68 193.61 216.80 Current liabilities decreased to NT$75.26 billion. Long-term credit/bonds decreased to NT$55.53 billion. Total liabilities decreased to NT$192.02 billion, leading to a debt to equity ratio of 51%. Liabilities (Amount: NT$ billion) 4Q24 3Q24 4Q23 Total Current Liabilities 75.26 88.27 99.02 Accounts Payable 7.63 9.01 7.53 Short-Term Credit / Bonds 19.51 30.86 29.54 Payables on Equipment 10.52 14.89 19.20 Other 37.60 33.51 42.75 Long-Term Credit / Bonds 55.53 58.13 45.24 Total Liabilities 192.02 205.80 199.61 Debt to Equity 51 % 56 % 56 % Analysis of Revenue2 Revenue from Asia Pacific decreased to 61%, while business from North America was 25% of sales. Business from Europe increased to 11%, while contribution from Japan was 3%. Revenue Breakdown by Region Region 4Q24 3Q24 2Q24 1Q24 4Q23 North America 25 % 26 % 25 % 25 % 23 % Asia Pacific 61 % 65 % 64 % 63 % 62 % Europe 11 % 5 % 7 % 8 % 11 % Japan 3 % 4 % 4 % 4 % 4 % Revenue contribution from 22/28nm slightly decreased to 34% of the wafer revenue, while 40nm contribution grew to 16% of sales. Revenue Breakdown by Geometry Geometry 4Q24 3Q24 2Q24 1Q24 4Q23 14nm and below 0 % 0 % 0 % 0 % 0 % 14nm

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