UMC Reports 2001 Fourth Quarter and Full-Year Results, Sees Better Days Ahead

Gross Profit and Gross Margin

Gross profit for the quarter was a loss of NT$288 million, compared with gross profit of NT$17.52 billion for 4Q00 and a loss of NT$2.54 billion for 3Q01. Gross margin for the quarter was negative 2.1 percent, compared with gross margin of 55.0 percent for 4Q00 and negative 21.2 percent for 3Q01. Total sales generated in 4Q01 from LPD inventory were NT$465 million, with COGS of NT$1.28 billion. Since the Company had pre-booked LPD inventory loss in 2Q01, in 4Q01 NT$834 million were reimbursed in the non-operating income line. Gross profit of UMC's foundry business excluding LPD inventory for 4Q01 was NT$523 million, representing gross margin of 4 percent (Licensed Product Division, LPD, was closed in August 2001).

Operating Expenses

Operating expenses for the quarter increased YoY by 68.5 percent to NT$4.89 billion, or 35.0 percent of net sales for the quarter, from 9.1 percent for the year-ago quarter at NT$2.90 billion, and from 31.1 percent for 3Q01 at NT$3.72 billion. R&D expenditures continued to represent a large portion of operating expenses. In 4Q01, R&D expenditures, as a percentage of net sales, amounted to 16.4 percent. Factors that contributed to the rise in operating expenses for the quarter, as a percentage of sales, were increasing activities of new design tapeouts, 12-inch fab 12A startup, and the resumption of regular employee salary adjustments, which were originally halted in mid-2001.

Investment Income (Loss)

Investment loss for 4Q01 was NT$366 million, compared with an investment income of NT$684 million for 4Q00 and an investment loss of NT$651 million for 3Q01. Investment losses for 4Q01 included results of Trecenti, with a loss NT$532 million and UMCJ, with a loss of NT$77 million flowing through UMC's book.

Capacity & Capital Expenditures

Capital expenditures for fiscal year 2001 were approximately US$1.1 billion. For 2002, UMC expects to make capital expenditures of approximately US$800 million. The majority of this amount will be destined to 300-mm processing equipment and advanced copper modules.

-0-

    Tables VI offers a detailed breakdown of UMC's planned CAPEX by
year. The 2002(e) CAPEX figure does not include UMCJ, UMCi or the
UMC-Hitachi joint venture in Japan, Trecenti.


Table VI          Capital Expenditures by Year

======================================================================
CAPEX PLAN - in billion of US$
----------------------------------------------------------------------
Year        1998         1999         2000         2001        2002(e)
----------------------------------------------------------------------
            $1.7         $1.9         $2.8         $1.1          $0.8
======================================================================

    Table VII summarizes the estimated annual full capacity of each
fab for the years 1999 through 2001 and the expected capacity at each
fab for 2002. Because the capacity migration to increase finer
line-width capacity, effective 8-inch fabs capacity shrink in 2002(e).

Table VII   Annual Capacity in Thousands of 8-inch Wafer Equivalents,
            Excluding JVs' & Subsidiaries'

======================================================================
FAB               Geometry     1999      2000       2001      2002(e)
----------------------------------------------------------------------
Fab 5A(1)   5"      >0.8       159        33         --            --
----------------------------------------------------------------------
Fab 6A      6"    3.5-0.45     318        348        345          349
----------------------------------------------------------------------
Fab 8A      8"  0.35 - 0.25    375        491        528          470
----------------------------------------------------------------------
Fab 8B(2)   8"  0.35 - 0.18    405        435        415           --
----------------------------------------------------------------------
Fab 8C      8"  0.35 - 0.15    213        416        460          394
----------------------------------------------------------------------
Fab 8D      8"  0.25 - 0.13     --         94        290          251
----------------------------------------------------------------------
Fab 8E      8"  0.35 - 0.18    180        373        474          374
----------------------------------------------------------------------
Fab 8F      8"  0.25 - 0.15     --        139        351          312
----------------------------------------------------------------------
Fab 12A    12"  0.18 - 0.15     --         --         22          125
----------------------------------------------------------------------
Total
(8" eq.)                      1650       2329        2885        2275
----------------------------------------------------------------------
Growth Rate                   35%         41%         24%        -21%
======================================================================

(1) Fab 5A was sold in 2Q00

(2) Equipment of Fab 8B was sold in January, 2002.

(3) One 6-inch wafer is converted into 0.5625 8-inch equivalent
    wafer; one 12-inch wafer is converted into 2.25 8-inch equivalent
    wafer.

    Table VIII summarizes the estimated quarterly full capacity from
1Q01 through 4Q02(e).

Table VIII        Quarterly Capacity Plan by Fab2

======================================================================
FAB          1Q01   2Q01  3Q01  4Q01  1Q02(e) 2Q02(e) 3Q02(e)  4Q02(e)
----------------------------------------------------------------------
Fab 6A        79     88    89    89     82      89      89        89
----------------------------------------------------------------------
Fab 8A       125    133    135  135    113      119     119      119
----------------------------------------------------------------------
Fab 8B        94    105    108  108     --       --      --       --
----------------------------------------------------------------------
Fab 8C       107    117    118  118     93      100     100      101
----------------------------------------------------------------------
Fab 8D        65     75     75   75     59       64      64       64
----------------------------------------------------------------------
Fab 8E       114    120    120   120    90       94      95       95
----------------------------------------------------------------------
Fab 8F        81     90     90    90    75       79      79       79
----------------------------------------------------------------------
Fab 12A                      7    15    15       20      30       60
======================================================================
Total        665    728    742   750     527            565          576            607
(8-inch  eq.)
======================================================================

 

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