UMC Reports 2005 First Quarter Results: Company Foresees a Gradual Rec

UMC Reports 2005 First Quarter Results: Company Foresees a Gradual Recovery in Volume for 2Q05

    Business Editors/Technology Editors

    TAIPEI, Taiwan, China--(BUSINESS WIRE)--April 27, 2005--United Microelectronics Corporation (NYSE: UMC; TSE: 2303)

    First Quarter 2005 Overview(1):

--	Revenue declined 28.1% sequentially to NT$20.29 billion (US$643 million)
--	Net income increased 14.0% sequentially to NT$1.52 billion (US$48 million)
--	Wafer shipments totaled 564 thousand 8-inch equivalent wafers
--	EPS of NT$0.09; EPADS of US$0.014
--	Wafer shipments expected to increase sequentially in the low single-digit percentage range in 2Q05

    United Microelectronics Corporation (NYSE: UMC; TSE: 2303) ("UMC" or "the Company"), a leading global semiconductor foundry, today announced its unconsolidated operating results for the first quarter of 2005.
    "The first quarter was a challenging period for UMC. Our results reflected the anticipated soft demand caused by the industry-wide inventory correction. UMC's revenue totaled NT$20.29 billion in 1Q05, a 28.1% quarter-over-quarter decrease from 4Q04. At the same time, the gross margin for the quarter decreased to 15.1% from 23.0% in 4Q04," said UMC CEO Dr. Jackson Hu.
    Dr. Hu continued, "Over the course of the first quarter, we believe some of our customers have streamlined their inventories, especially in the consumer sector. Heading into the second quarter, we foresee a mild recovery in shipment volumes, which is a very positive sign for our business and leads us to believe that we have hit the bottom of the cycle."
    "We are most excited about the progress we have made with our 90nm processes. More than a dozen customers have selected UMC for 90nm process technology and we currently have over 50 products taped-out. Of these, some have already moved into mass production. We also believe that we are leading in the development of further generation technologies such as 80nm, 65nm and 45nm processes. Though we had some setbacks with the 0.13um generation that slowed our growth, our decision to develop 90nm technology in-house has already given us an excellent start, especially with the successful ramp-up of 90nm volume production for communication customers. In addition to this, we are aggressively increasing our exposure to the computer and consumer sectors for 90nm products. The design-wins that we have had so far in 2005 for 90nm and 0.13um processes have come from all major applications and will help UMC close the gap in market share that widened due to the challenges we encountered for 0.13um. In the short term, we expect our operating results to continue to be affected by the inventory correction and typical seasonality. However, we are confident that we will see noticeable improvements generated by our success with 90nm production and believe it will start to have a large impact on our profit in the next year or two."

    Summary of Operating Results

Operating Results ====================================================================== (Amount: NT$ million) 1Q05 4Q04 QoQ % 1Q04 YoY % change change ---------------------------------------------------------------------- Revenue 20,286 28,229 (28.1) 25,326 (19.9) Gross Profit 3,057 6,488 (52.9) 7,612 (59.8) Operating Expenses (2,755) (3,649) (24.5) (2,325) 18.5 Operating Income 302 2,839 (89.4) 5,287 (94.3) Non-op. Income (Expenses) 1,217 (1,506) (180.8) 1,639 (25.7) Net Income 1,519 1,333 14.0 6,894 (78.0) EPS (NT$ per share) 0.09 0.07 0.41 (US$ per ADS) 0.014 0.011 0.065 ----------------------------------------------------------------------

    Revenue decreased 28.1% quarter-over-quarter to NT$20.29 billion from NT$28.23 billion in 4Q04, and decreased 19.9% year-over-year from NT$25.33 billion in 1Q04. Gross profit for the quarter was NT$3.06 billion, or 15.1% of revenue, compared to NT$6.49 billion, or 23.0% of revenue in 4Q04. The decline in gross margin was mainly attributed to the decrease in revenue and the large amount of fixed costs associated with the lower capacity utilization rate in 1Q05. Operating income decreased 89.4% sequentially and 94.3% from 1Q04 to NT$302 million. Net income in 1Q05 was NT$1.52 billion, a sequential increase of 14.0% from 4Q04 and a 78.0% decrease over 1Q04.
    Earnings per ordinary share (EPS) for the quarter were NT$0.09. Earnings per ADS (EPADS) were US$0.014. This compares with 4Q04 earnings per ordinary share of NT$0.07 and earnings per ADS of US$0.011. One ADS represents five Taiwan-listed ordinary shares. The basic weighted average number of outstanding shares in 1Q05 was 16,602,337,157, compared to 16,960,076,025 shares in 4Q04 and 16,760,102,186 shares in 1Q04. The diluted weighted average number of outstanding shares was 16,678,163,409 in 1Q05, compared to 17,210,737,283 shares in 4Q04 and 17,228,955,112 shares in 1Q04. The decrease in basic and diluted weighted average outstanding shares in 1Q05 was due to the reclassification of SiS shares to treasury stock under the newly enacted SFAS No. 7.

    Detailed Financials Section

COGS & Expenses ====================================================================== (Amount: NT$ million) 1Q05 4Q04 QoQ % 1Q04 YoY % change change ---------------------------------------------------------------------- Revenue 20,286 28,229 (28.1) 25,326 (19.9) COGS (17,229) (21,741) (20.8) (17,714) (2.7) Depreciation (9,385) (9,363) 0.2 (8,591) 9.2 Other Mfg. Costs (7,844) (12,378) (36.6) (9,123) (14.0) Gross Profit 3,057 6,488 (52.9) 7,612 (59.8) Gross Margin (%) 15.1% 23.0% 30.1% Total Operating Exp. (2,755) (3,649) (24.5) (2,325) 18.5 G&A (447) (841) (46.8) (534) (16.3) Sales & Marketing (521) (658) (20.8) (478) 9.0 R&D (1,787) (2,150) (16.9) (1,313) 36.1 Operating Income 302 2,839 (89.4) 5,287 (94.3) Operating Margin (%) 1.5% 10.1% 20.9% ----------------------------------------------------------------------

    Depreciation and amortization totaled NT$10.71 billion in 1Q05, compared to NT$10.54 billion in 4Q04. Depreciation within COGS increased 0.2% to NT$9.39 billion, mainly due to the incremental depreciation from Fab12A. Total operating expenses decreased 24.5% to NT$2.76 billion from the high 4Q04 operating expenses due to cost saving activities. Going forward, total operating expenses will settle at a higher base as the expenses from UMCi are recognized on UMC's Income Statement starting in the second quarter. The R&D expense was 8.8% of revenue in 1Q05.

Non-operating Income (Expenses) ====================================================================== (Amount: NT$ million) 1Q05 4Q04 1Q04 ---------------------------------------------------------------------- Net Non-operating Income (Exp.) 1,217 (1,506) 1,639 Net Interest Income (Expense) 0 (4) (77) Net Investment Income (Loss) (1,705) (1,955) (582) Gain on Disposal of Investment 2,924 1,571 2,507 Exchange Gain (Loss) (172) (754) (42) Others 170 (364) (167) ----------------------------------------------------------------------

    Net non-operating income was NT$1.22 billion, including NT$2.92 billion of investment disposal gains and NT$1.71 billion of net investment losses. The gain on the disposal of investments included the sale of MediaTek and Novatek shares for NT$1,974 million and NT$950 million, respectively. Net investment losses mainly consisted of NT$1,206 million from UMCi and NT$555 million from UMCJ in 1Q05.

Cash Flow Summary ====================================================================== For the 3-Month For the 3-Month (Amount: NT$ million) Period Ended Period Ended Mar. 31, 2005 Dec. 31, 2004 ---------------------------------------------------------------------- Cash Flow from Operations 10,205 18,857 Net Income (Loss) 1,519 1,333 Depreciation & Amortization 10,705 10,541 Changes in working capital (684) 6,360 Others (1,335) 623 Cash Flow from Investing (7,446) (17,907) Capital Expenditures (3,564) (16,257) Others (3,882) (1,650) Cash Flow from Financing 2,593 (2,872) Net Cash Flow 5,352 (1,922) ----------------------------------------------------------------------

    The net cash inflow was NT$5.35 billion in 1Q05. Operating cash inflow was NT$10.21 billion, a NT$8.65 billion sequential decrease. Changes in working capital in 1Q05 were mainly due to a drop in notes and accounts receivable. The decrease in investing cash outflow primarily reflects lower CAPEX in 1Q05. The NT$2.59 billion of financing cash inflow was due to the increase in short-term loans and the exercise of employee stock options. Over the next 12 months, we expect to repay NT$2.82 billion in bonds and make an early repayment of NT$16.26 billion of UMCi's syndication loan.

Current Assets ====================================================================== (Amount: NT$ billion) 1Q05 4Q04 1Q04 ---------------------------------------------------------------------- Cash & Cash Equivalents 88.70 83.35 87.03 Notes & Accounts Receivable 9.31 10.70 15.57 Days Sales Outstanding 45 45 54 Inventory 6.91 8.54 8.41 Avg. Inventory Turnover 41 38 42 Total Current Assets 117.15 110.37 119.98 ----------------------------------------------------------------------

    Cash and cash equivalents increased by NT$5.35 billion to NT$88.70 billion mainly due to lower cash outflows from investing. The decline in notes and accounts receivable reflect the temporary downward trend of the business that occurred over the past several quarters. Days sales outstanding(2) remained flat at 45 days, and average inventory turnover increased to 41 days.

Liabilities ====================================================================== (Amount: NT$ billion) 1Q05 4Q04 1Q04 ---------------------------------------------------------------------- Total Current Liabilities 19.88 23.28 26.20 Accounts Payable 3.81 4.44 4.65 Short-term Credit / Bonds 6.68 4.72 9.69 Others 9.39 14.12 11.86 Long-term Liabilities 33.60 33.61 44.58 Total Liabilities 56.48 63.18 77.44 Debt to Equity 21% 24% 32% ----------------------------------------------------------------------

    Total liabilities decreased by NT$6.7 billion, to NT$56.48 billion in 1Q05. UMC's Debt to Equity ratio was down to 21% at the end of 1Q05.

    Blended Average Selling Price Trend

    The blended average selling price (ASP) for the quarter was down 12% sequentially in US Dollar terms compared to the previous quarter.

    (To view ASP trend, visit http://www.umc.com/english/investors/1Q05_ASP_trend.asp)

    Analysis of Revenue(3)

Revenue Breakdown by Region ---------------------------------------------------------------------- Region 1Q05 4Q04 3Q04 2Q04 1Q04 ====================================================================== North America 49% 49% 44% 44% 43% ---------------------------------------------------------------------- Asia Pacific 38% 32% 33% 35% 37% ---------------------------------------------------------------------- Europe 11% 16% 19% 17% 16% ---------------------------------------------------------------------- Japan 2% 3% 4% 4% 4% ----------------------------------------------------------------------

    The percentage of revenue from European customers decreased to 11% in 1Q05 due to soft demand, especially from the IDMs.

Revenue Breakdown by Geometry ---------------------------------------------------------------------- Geometry 1Q05 4Q04 3Q04 2Q04 1Q04 ====================================================================== 90nm 7% 8% 2% 1% 0% ---------------------------------------------------------------------- 0.13um 20% 19% 18% 13% 12% ---------------------------------------------------------------------- 0.15um 12% 16% 15% 12% 9% ---------------------------------------------------------------------- 0.15um less than x less than=0.18um 20% 19% 25% 27% 29% ---------------------------------------------------------------------- 0.18um less than x less than=0.25um 10% 12% 14% 19% 19% ---------------------------------------------------------------------- 0.25um less than x less than=0.35um 20% 17% 17% 19% 21% ---------------------------------------------------------------------- 0.5um and above 11% 9% 9% 9% 10% ----------------------------------------------------------------------

    The percentage of revenue from leading-edge 90nm and 0.13um sales remained flat overall, but decreased in terms of revenue due to soft demand from communication customers. The percent of revenue from 0.35um increased to 20% mainly due to stronger demand from consumer customers. The percentage of revenue from 0.18um and below technologies decreased to 59% from 62%.

Revenue Breakdown by Customer Type ---------------------------------------------------------------------- Customer Type 1Q05 4Q04 3Q04 2Q04 1Q04 ====================================================================== Fabless 69% 66% 68% 70% 72% ---------------------------------------------------------------------- IDM 31% 34% 32% 30% 28% ---------------------------------------------------------------------- System 0% 0% 0% 0% 0% ----------------------------------------------------------------------

    The contribution from IDM customers decreased to 31% in 1Q05 from 34% in 4Q04 due to inventory adjustments.

Revenue Breakdown by Application (1) ---------------------------------------------------------------------- Application 1Q05 4Q04 3Q04 2Q04 1Q04 ====================================================================== Computer 24% 24% 20% 20% 24% ---------------------------------------------------------------------- Communication 45% 49% 44% 44% 42% ---------------------------------------------------------------------- Consumer 26% 23% 32% 32% 30% ---------------------------------------------------------------------- Memory 2% 1% 2% 2% 3% ---------------------------------------------------------------------- Others 3% 3% 2% 2% 1% ---------------------------------------------------------------------- (1) Computer consists of ICs such as HDD controllers, DVD-ROM/CD-ROM drives ICs, LCD drivers, graphic processors, and PDAs. Communication consists of xDSL, DSP, WLAN, LAN controllers, handset components, caller ID devices, etc. Consumer consists of ICs used for DVD players, game consoles, digital cameras, smart cards, toys, etc. Memory consists of DRAM, SRAM, Flash, EPROM, ROM, and EEPROM.

    Revenue from the communication market decreased to 45% of total revenue in 1Q05, primarily due to inventory digestion by some wireless communication customers. Revenue from the consumer segment increased as percent of total revenue to 26% in 1Q05 because demand from LCD panel driver ICs remained strong during the quarter.

    Capacity(4)

    Capacity for 1Q05, including UMCi, was 950 thousand 8-inch equivalent wafers. The incremental increase in capacity of 32 thousand 8-inch equivalent wafers during 1Q05 was mainly due to capacity expansion at Fab12A and UMCi. On April 1, 2005 we fully transferred all of UMCi's capacity to our Singapore branch and renamed UMCi's 12-inch fab as Fab 12i. UMC's estimated capacity in 2Q05 will increase to 970 thousand 8-inch equivalent wafers, primarily due to additional 300mm capacity from Fab 12A and Fab 12i.

Annual Capacity in thousands of 8-inch wafer equivalents --------------------------------------------------------------------- FAB Geometry (um) 2004 2003 2002 2001 ===================================================================== Fab 6A 6" 3.5 - 0.45 346 352 349 345 --------------------------------------------------------------------- Fab 8AB 8" 0.5 - 0.25 796 801 853 943 --------------------------------------------------------------------- Fab 8C 8" 0.35 - 0.15 386 325 355 460 --------------------------------------------------------------------- Fab 8D 8" 0.18 - 0.09 256 238 214 290 --------------------------------------------------------------------- Fab 8E 8" 0.5 - 0.18 401 354 376 474 --------------------------------------------------------------------- Fab 8F 8" 0.25 - 0.15 349 342 312 351 --------------------------------------------------------------------- Fab 8S (1) 8" 0.25 - 0.15 131 0 0 0 --------------------------------------------------------------------- Fab 12A 12" 0.18 - 0.065 392 234 119 22 --------------------------------------------------------------------- Fab 12i(2) 12" 0.13 - 0.065 101 0 0 0 ===================================================================== Total (3) 3,158 2,646 2,578 2,885 ===================================================================== YoY Growth Rate 19% 3% -11% 24% ---------------------------------------------------------------------

Quarterly Capacity in thousands of 8-inch wafer equivalents ---------------------------------------------------------------------- FAB 2Q05E 1Q05 4Q04 3Q04 ====================================================================== Fab 6A 86 86 86 86 ---------------------------------------------------------------------- Fab 8AB 204 204 204 200 ---------------------------------------------------------------------- Fab 8C 100 101 101 99 ---------------------------------------------------------------------- Fab 8D 68 72 72 65 ---------------------------------------------------------------------- Fab 8E 101 101 102 102 ---------------------------------------------------------------------- Fab 8F 95 95 95 92 ---------------------------------------------------------------------- Fab 8S (1) 71 71 71 60 ---------------------------------------------------------------------- Fab 12A 160 139 127 113 ---------------------------------------------------------------------- Fab 12i (2) 85 81 60 29 ====================================================================== Total (3) 970 950 918 846 ----------------------------------------------------------------------

(1) Former fab of SiSMC, which was acquired from Silicon Integrated Systems in July 2004. (2) Former fab of UMCi, a UMC wholly owned subsidiary in December 2004 that was merged into UMC in April 2005 (3) 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.

    Shipment and Utilization Rate(5)

Wafer Shipments ---------------------------------------------------------------------- 1Q05 4Q04 3Q04 2Q04 1Q04 ====================================================================== Wafer Shipments ('000 8-inch eq.) 564 657 791 710 647 ----------------------------------------------------------------------

Quarterly Capacity Utilization Rate ---------------------------------------------------------------------- 1Q05 4Q04 3Q04 2Q04 1Q04 ====================================================================== Utilization Rate 63%(1) 72% 94% 99% 100%(2) ---------------------------------------------------------------------- Total Capacity ('000 8-inch eq.) 950 918 846 714 680 ----------------------------------------------------------------------

(1) 1Q05 utilization rate was calculated based on 1Q05 available capacity, which is about 94% of total capacity after factoring in a 6% productivity loss due to annual scheduled maintenance.

(2) 1Q04 utilization rate was calculated based on 1Q04 available capacity, which is about 95% of total capacity after factoring in a 5% productivity loss due to annual scheduled maintenance.

    Wafer shipments declined by 14% sequentially to 564 thousand 8-inch equivalent wafers from 657 thousand wafers. The utilization rate for the quarter was 63%, after factoring in a 6% productivity loss due to scheduled annual maintenance.

    CAPEX

UMC Capital Expenditure by Year - in US$ billion ---------------------------------------------------------------------- Year 2004 2003 2002 2001 2000 1999 ---------------------------------------------------------------------- CAPEX $1.53 $0.37 $0.8 $1.1 $2.8 $1.9 ----------------------------------------------------------------------

2005 CAPEX Plan ---------------------------------------------------------------------- 8" fab 12" fab 12" R&D Total ====================================================================== UMC US$1-1.5 4% 78% 18% billion ---------------------------------------------------------------------- UMCJ US$34 100% - - million ----------------------------------------------------------------------

    The amount of capital expenditure spent in 1Q05 was US$113 million for UMC and US$84 million for UMCi. UMC's 2005 CAPEX is still expected to be between US$1 billion and US$1.5 billion.

    Long-term Investments(6)

Consolidated Long-term Investments as of March 31, 2005

As of End of 1Q05 As of End of 4Q04 ---------------------------------------------------------------------- (Amount: NT$ million) Book Fair Book Fair value % value % value % value % ====================================================================== Foundry Industry 35,673 56 32,584 38 41,235 59 36,281 41 ---------------------------------------------------------------------- Strategic Semiconductor Investments 11,138 18 33,454 39 12,028 17 33,232 38 ---------------------------------------------------------------------- Other Investments 16,854 26 19,884 23 16,515 24 18,813 21 ====================================================================== Total 63,665 100 85,922 100 69,778 100 88,326 100 ----------------------------------------------------------------------

    As of March 31, 2005, the total book value of long-term investments held by UMC was NT$63.67 billion, and the estimated fair value of long-term investments was NT$85.92 billion. The decrease in book value of foundry industry investments was mainly due to the recognition of losses in the Company's investments in UMCi and UMCJ. The decrease in book value of strategic semiconductor investments is mainly due to the disposal of several investments. The increase in other investments is due to an increase in the share price of several investments. By the end of 2Q05, the book value of foundry industry investments will decrease significantly after we transferred all of UMCi's business, operations and assets, with a book value NT$21.87 billion as of 1Q05, to UMC's Singapore branch in April 2005.

    Recent Developments / Announcements

Apr. 11, 2005 UMC Expands X Architecture Support -- First Pure- Play Foundry to Provide Qualified 90-nm Design Rules

Apr. 1, 2005 UMC and UMCi Complete Merger

Mar. 17, 2005 UMC Board of Directors Announces Proposals for its Annual Shareholders Meeting

Mar. 7, 2005 UMC and Virage Logic Announce Qualification of Embedded Non-Volatile Memory Technology on UMC's 0.18um Logic Process

Feb. 24, 2005 JMicron Develops Serial ATA II (3.0 Gbps) PHY Core on UMC's 0.13 Micron Process

Feb. 16, 2005 UMC Under Investigation related to Hejian Technology Corporation in Mainland China. The investigation had no influence on the operation of the Company

Feb. 2, 2005 UMC 4Q 2004 Financial Results

Feb. 1, 2005 UMC and Ansoft Address RFCMOS Design Requirements with On-Chip Spiral Inductor Library

Please visit UMC's website http://www.umc.com/english/news/index.asp for further details regarding the above announcements.

    Second Quarter of 2005 Outlook & Guidance

    Quarter-over-quarter Guidance:

--	Wafer shipments: to increase by low single digit % points
--	Wafer ASP in US$: to decline by high single digit % points
--	Capacity utilization rate: approximately 60%
--	Profitability: approaching gross profit breakeven
--	Percentage of 0.18um & below revenues: temporary contraction due to stronger demand for mature technology, though sales from 90nm is expected to exceed 10%
--	The consumer segment is expected to be the strongest while the computer segment is expected to show a seasonal slowdown

    Conference Call / Webcast Announcement

Wednesday, April 27, 2005

Time: 8:00 PM (Taipei) / 8:00 AM (New York) / 1:00 PM (London)

Dial-in numbers and Access Codes: Asia/Europe: +1-617-847-8706 North America: 800-237-9752 Access Code: UMCCall

A live webcast and replay of the 1Q05 results announcement will be available at www.umc.com under the "Investor Relations \ Investor Events" section.

    About UMC

    UMC (NYSE: UMC, TSE: 2303) is a leading global semiconductor foundry that manufactures advanced process ICs for applications spanning every major sector of the semiconductor industry. UMC delivers cutting-edge foundry technologies that enable sophisticated system-on-chip (SoC) designs, including 90nm copper, 0.13um copper, and mixed signal/RFCMOS. UMC is also a leader in 300mm manufacturing; Fab 12A in Taiwan and Singapore-based Fab 12i are both in volume production for a variety of customer products. UMC employs approximately 10,500 people worldwide and has offices in Taiwan, Japan, Singapore, Europe, and the United States. UMC can be found on the web at http://www.umc.com.

    (1) Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with ROC GAAP, which differ in some material respects from generally accepted accounting principles in the United States. They are unaudited, unconsolidated, and represent comparisons among the three-month period ending March 31, 2005, the three-month period ending December 31, 2004, and the equivalent three-month period that ended March 31, 2004. For all 1Q05 results, New Taiwan Dollar (NT$) amounts have been converted into U.S. dollars at the exchange rate of NT$31.57 to one U.S. dollar.

    (2) Days Sales Outstanding = 365/ ((Operating revenues for the three-month period end *4)/((Beginning NR&AR balance, net + Ending NR&AR balance, net)/2))
    Average Inventory Turnover = 365/((COGS for the three-month period end *4)/((Beginning Inventory balance, net + Ending Inventory balance, net)/2))

    (3) Revenue in this section represents net wafer sales. All revenue breakdown tables exclude JV's and subsidiaries.

    (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.

    (5) Quarterly utilization rate = Quarterly wafer out / Estimated quarterly capacity

    (6) The long-term investment information disclosed is UMC Group consolidated data, which includes UMC, Hsun Chieh Investment Corp., Fortune Venture Capital Corp. and UMC Capital Corp. For publicly quoted investments, fair value is calculated by multiplying the average daily closing price of the last month of the accounting period (March of 2004) with the number of shares owned by the UMC Group as of March 31, 2005. Otherwise, book value or underlying equity net value of investments is taken as recorded on the balance sheet at the end of the accounting period (March 31, 2005) and is used as the fair value.

    Safe Harbor Statements

    Except for statements in respect of historical matters, the statements in this release contain "forward-looking statements" within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. 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, among other things: our dependence upon the frequent introduction of new services and technologies based on the latest developments in our industry; the intensely competitive semiconductor, communications, consumer electronics and computer industries and markets; the risks associated with international global business activities; our dependence upon key personnel; general economic and political conditions, including those related to the semiconductor, communications, consumer electronics and computer industries; possible disruptions in commercial activities caused by natural and human-induced events and disasters, including terrorist activity, armed conflict and highly contagious diseases, such as SARS; reduced end-user purchases relative to expectations and orders; fluctuations in foreign currency exchange rates; and those risks identified in the section entitled "Risk Factors" in UMC's Annual Report on Form 20-F for the year ended December 31, 2003 filed with the U.S. Securities and Exchange Commission on June 17, 2004.
    The financial statements included in this release are unaudited and unconsolidated, and prepared and published in accordance with ROC GAAP. Investors are cautioned that there are many differences between ROC GAAP and U.S. GAAP, as described in note 31 to the financial statements on Form 20-F for the year ended December 31, 2003 filed with the U.S. Securities and Exchange Commission on June 17, 2004.
    The forward-looking statements in this release reflect the current belief of UMC as of the date of this release and UMC undertakes no obligation to update these forward-looking statements for events or circumstances that occur after such date or to reflect the occurrence of unanticipated events.

    - FINANCIAL TABLES TO FOLLOW -

UNITED MICROELECTRONICS CORPORATION Unaudited Condensed Unconsolidated Balance Sheet As of March 31, 2005 Figures in Million of New Taiwan Dollars (NT$) and U.S. Dollars (US$)

March 31, 2005 -------------------------- US$ NT$ % -------- -------- -------- ASSETS Current Assets Cash and Cash Equivalents 2,810 88,699 27.4% Marketable Securities 97 3,059 1.0% Notes & Accounts Receivable 295 9,311 2.9% Inventories 219 6,912 2.1% Other Current Assets 290 9,166 2.8% -------- -------- -------- Total Current Assets 3,711 117,147 36.2% -------- -------- --------

Non-Current Assets Funds and Long-term Investments 2,102 66,365 20.5% Other Financial Assets 37 1,163 0.4% Property, Plant and Equipment 4,082 128,884 39.8% Intangible Assets 38 1,194 0.4% Other Assets 273 8,618 2.7% -------- -------- -------- Total Non-Current Assets 6,532 206,224 63.8% -------- -------- -------- TOTAL ASSETS 10,243 323,371 100.0% ======== ======== ========

LIABILITIES Current Liabilities Short-term Loans 122 3,858 1.2% Payables 392 12,356 3.8% Current Portion of Long-term Interest-Bearing Liabilities 89 2,820 0.9% Other Current Liabilities 27 848 0.3% -------- -------- -------- Total Current Liabilities 630 19,882 6.2% -------- -------- --------

Non-Current Liabilities Bonds Payable 1,064 33,595 10.4% Other Liabilities 95 3,005 0.9% -------- -------- -------- Total Non-Current Liabilities 1,159 36,600 11.3% -------- -------- -------- TOTAL LIABILITIES 1,789 56,482 17.5% -------- -------- --------

STOCKHOLDERS' EQUITY Capital Stock 5,647 178,285 55.1% Capital Reserve 2,701 85,279 26.4% Retained Earnings, Unrealized Long-term Investment Loss and Translation Adjustment 1,024 32,309 10.0% Treasury Stock (918) (28,984) -9.0% -------- -------- -------- TOTAL STOCKHOLDERS' EQUITY 8,454 266,889 82.5% -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 10,243 323,371 100.0% ======== ======== ========

------------------------------------------------------------ Note: New Taiwan Dollars have been translated into U.S. Dollars at the March 31, 2005 exchange rate of NT$31.57 per U.S. Dollar. All figures are in ROC GAAP.

Unaudited Condensed Unconsolidated Income Statement Figures in Million of New Taiwan Dollars (NT$) and U.S. Dollars (US$) Except Per Share and Per ADS Data

Year over Year Comparison --------------------------------------- Three-Month Period Ended March 31, 2005 March 31, 2004 % --------------- --------------- ------- US$ NT$ US$ NT$ Chg. ------ -------- ------ -------- ------- Net Sales 643 20,286 802 25,326 -19.9% Cost of Goods Sold (546) (17,229) (561) (17,714) -2.7% ------ -------- ------ -------- ------- Net Gross Profit 97 3,057 241 7,612 -59.8% ------ -------- ------ -------- ------- 15.1% 15.1% 30.1% 30.1% Operating Expenses - Sales & Marketing 16 521 15 478 9.0% - General & Administrative 14 447 17 534 -16.3% - Research & Development 57 1,787 42 1,313 36.1% ------ -------- ------ -------- ------- 87 2,755 74 2,325 18.5% ------ -------- ------ -------- ------- Operating Income (Loss) 10 302 167 5,287 -94.3% 1.5% 1.5% 20.9% 20.9%

Net Non-Operating Income (Expenses) 38 1,217 52 1,639 -25.7% ------ -------- ------ -------- ------- Income (Loss) before Income Tax 48 1,519 219 6,926 -78.1% 7.5% 7.5% 27.3% 27.3%

Income Tax (Expense) Benefit (0) (0) (1) (32) -99.7% ------ -------- ------ -------- ------- Net Income (Loss) 48 1,519 218 6,894 -78.0% ====== ======== ====== ======== ------- 7.5% 7.5% 27.2% 27.2%

Earnings per Share 0.003 0.09 0.013 0.41 ------ -------- ------ -------- Earnings per ADS (2) 0.014 0.45 0.065 2.05 ------ -------- ------ -------- Weighted Average Number of Shares Outstanding (in millions) 16,602 16,760 -------- --------

---------------------------------------------------------------------- Quarter over Quarter Comparison --------------------------------------- Three-Month Period Ended March 31, 2005 Dec. 31, 2004 % --------------- --------------- ------- US$ NT$ US$ NT$ Chg. ------ -------- ------ -------- ------- Net Sales 643 20,286 894 28,229 -28.1% Cost of Goods Sold (546) (17,229) (688) (21,741) -20.8% ------ -------- ------ -------- ------- Net Gross Profit 97 3,057 206 6,488 -52.9% ------ -------- ------ -------- ------- 15.1% 15.1% 23.0% 23.0% Operating Expenses - Sales & Marketing 16 521 21 658 -20.8% - General & Administrative 14 447 27 841 -46.8% - Research & Development 57 1,787 68 2,150 -16.9% ------ -------- ------ -------- ------- 87 2,755 116 3,649 -24.5% ------ -------- ------ -------- ------- Operating Income (Loss) 10 302 90 2,839 -89.4% 1.5% 1.5% 10.1% 10.1%

Net Non-Operating Income (Expenses) 38 1,217 (48) (1,506)-180.8% ------ -------- ------ -------- ------- Income (Loss) before Income Tax 48 1,519 42 1,333 14.0% 7.5% 7.5% 4.7% 4.7%

Income Tax (Expense) Benefit (0) (0) (0) (0) -16.4% ------ -------- ------ -------- ------- Net Income (Loss) 48 1,519 42 1,333 14.0% ====== ======== ====== ======== ------- 7.5% 7.5% 4.7% 4.7%

Earnings per Share 0.003 0.09 0.002 0.07 ------ -------- ------ -------- Earnings per ADS (2) 0.014 0.45 0.011 0.35 ------ -------- ------ -------- Weighted Average Number of Shares Outstanding (in millions) 16,602 16,960 -------- --------

---------------------------------------------------------------------- Note: (1) New Taiwan Dollars have been translated into U.S. Dollars at the March 31, 2005 exchange rate of NT$31.57 per U.S. Dollar. All figures are in ROC GAAP. (2) 1 ADS equals 5 common shares.

Unaudited Condensed Unconsolidated Income Statement Figures in Million of New Taiwan Dollars (NT$) and U.S. Dollars (US$) Except Per Share and Per ADS Data

For the Three-Month Period Ended For the year Ended March 31, 2005 March 31, 2005 ---------------------- ---------------------- US$ NT$ % US$ NT$ % ------ -------- ------ ------ -------- ------ Net Sales 643 20,286 100.0% 643 20,286 100.0% Cost of Goods Sold (546) (17,229) -84.9% (546) (17,229)-84.9% ------ -------- ------ ------ -------- ------ Net Gross Profit 97 3,057 15.1% 97 3,057 15.1% ------ -------- ------ ------ -------- ------

Operating Expenses - Sales & Marketing 16 521 2.6% 16 521 2.6% - General & Administrative 14 447 2.2% 14 447 2.2% - Research & Development 57 1,787 8.8% 57 1,787 8.8% ------ -------- ------ ------ -------- ------ 87 2,755 13.6% 87 2,755 13.6% ------ -------- ------ ------ -------- ------ Operating Income (Loss) 10 302 1.5% 10 302 1.5%

Net Non-Operating Income (Expenses) 38 1,217 6.0% 38 1,217 6.0% ------ -------- ------ ------ -------- ------ Income (Loss) before Income Tax 48 1,519 7.5% 48 1,519 7.5%

Income Tax (Expense) Benefit (0) (0) 0.0% (0) (0) 0.0% ------ -------- ------ ------ -------- ------ Net Income (Loss) 48 1,519 7.5% 48 1,519 7.5% ====== ======== ====== ====== ======== ======

Earnings per Share 0.003 0.09 0.003 0.09 ------ -------- ------ -------- Earnings per ADS (2) 0.014 0.45 0.014 0.45 ------ -------- ------ -------- Weighted Average Number of Shares Outstanding (in millions) 16,602 16,602 -------- --------

---------------------------------------------------------------------- Note: (1) New Taiwan Dollars have been translated into U.S. Dollars at the March 31, 2004 exchange rate of NT$ 31.57 per U.S. Dollar. All figures are in ROC GAAP. (2) 1 ADS equals 5 common shares.

Unaudited Condensed Unconsolidated Statement of Cash Flows For The Three Months Ended March 31, 2005 Figures in Million of New Taiwan Dollars (NT$) and U.S. Dollars (US$)

US$ NT$ ----- ------ Cash flows from operating activities: Net Income 48 1,519 Depreciation & Amortization 339 10,705 Reversal on allowance for doubtful accounts (3) (90) Long-term investment loss accounted for under the equity method 54 1,705 Recovery on decline in market value and absolesence of inventories (1) (45) Gain on disposal of investments (93) (2,924) Loss on disposal of property, plant and equipment 1 31 Exchange gain on long-term liabilities (0) (12) Change in working capital & others (21) (684) ----- ------- Net cash provided from operating activities 324 10,205

Cash flows from investing activities : Decrease in other financial assets, net 9 300 Increase in long-term investments (62) (1,972) Proceeds from disposal of long-term investments 105 3,313 Acquisition of property, plant and equipment (113) (3,564) Proceeds from disposal of property, plant and equipment 2 52 Increase in other assets - others, net (2) (63) Increase in deferred charges (12) (374) Other receivables (163) (5,138) ----- ------ Net cash used in investing activities (236) (7,446)

Cash flows from financing activities : Increase in short-term loans, net 62 1,953 Employee stock option 20 640 ----- ------ Net cash provided from financing activities 82 2,593

----- ------ Net increase in cash and cash equivalents 170 5,352 ----- ------

Cash and cash equivalents at beginning of period 2,640 83,347

Cash and cash equivalents at end of period 2,810 88,699 ===== ======

---------------------------------------------------------------------- Note: New Taiwan Dollars have been translated into U.S. Dollars at the March 31, 2005 exchange rate of NT$ 31.57 per U.S. Dollar. All figures are in ROC GAAP.

--30--PP/ny*

CONTACT: UMC, Investor Relations Chitung Liu, +886-2-2700-6999 ext. 6957 chitung_liu@umc.com or Bowen Huang, +886-2-2700-6999 ext. 6957 bowen_huang@umc.com or Christensen IR Tip Fleming, +1-917-412-3333 tfleming@christensenir.com or Jane Liu, +852-2117-0861 jliu@christensenir.com

KEYWORD: CHINA TAIWAN INTERNATIONAL ASIA PACIFIC INDUSTRY KEYWORD: HARDWARE EARNINGS CONFERENCE CALLS SOURCE: United Microelectronics Corporation

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