United Microelectronics Corporation 2020 Annual Report Printed on February 24, 2021 UMC Annual Report Information Can Be Accessed from the Following Websites: https://www.umc.com https://mops.twse.com.tw Annual Report TSE Code: 2303 NYSE Symbol: UMC 2020 Spokesperson Fab 8F Securities Dealing Institution Chitung Liu 3 Li-Hsin 6th Rd., Hsinchu Science Park, Hsinchu, Horizon Securities Co., Ltd. Senior Vice President and Taiwan 30078, R.O.C. Stock Registration Department Chief Financial Officer 886 (3) 578 2258 3F, No.236 Hsin-Yi Rd. Sec. 4, Taipei, Taiwan 886 (2) 2658 9168 10680, R.O.C. [email protected] Fab 8S 886 (2) 2326 8818 16 Creation 1st Rd., Hsinchu Science Park, http://www.honsec.com.tw Acting Spokesperson(s) Hsinchu, Taiwan 30077, R.O.C. Jinhong Lin 886 (3) 578 2258 ADR Depositary and Registrar Finance Division J.P. Morgan Depositary Receipts Senior Director Fab 12A 383 Madison Avenue, 11th Floor 886 (2) 2658 9168 18, 20 Nan-Ke 2nd Rd., & 57 Nan-Ke 3rd Rd., New York, NY 10179, U.S.A. [email protected] Southern Taiwan Science Park, Sinshih, Tainan, General Contact：1 (800) 990 1135 Taiwan 74147, R.O.C. Outside the USA：1 (651) 453 2128 David Wong 886 (6) 505 4888 http://www.adr.com Finance Division Manager Singapore Branch ADR Exchange Marketplace 886 (2) 2658 9168 3 Pasir Ris Drive 12, Singapore 519528 NYSE Euronext [email protected] 65 6213 0018 11 Wall Street, New York, NY 10005, U.S.A. Subsidiary in Mainland China Headquarters 1 (212) 656 3000 HJ 3 Li-Hsin 2nd Rd., Hsinchu Science http://www.nyse.com 333 Xinghua St., Suzhou Industrial Park, Suzhou, Park, Hsinchu, Taiwan 30078, R.O.C. Ticker/Search Code: UMC 886 (3) 578 2258 Jiangsu Province 215025, P.R.C. 0512 65931299 Euro Convertible Bond Exchange Taipei Office Marketplace Subsidiary in Mainland China 8F, 68 Sec. 1, Neihu Rd., Taipei, Taiwan Singapore Exchange Securities Trading USCXM 11493, R.O.C. Limited 899 Wan Jia Chun Road, Xiang’an District, Xiamen, 886 (2) 2658 9168 2 Shenton Way Fujian Province, P.R.C. #02-02 SGX Centre 1 0592 7687888 Fab 8A Singapore 068804 3, 5 Li-Hsin 2nd Rd., Hsinchu Science 65 6236 8888 Subsidiary in Japan Park, Hsinchu, Taiwan 30078, R.O.C. USJC http://www.sgx.com 886 (3) 578 2258 ECB Search Code: ISIN XS1228110000 3-1 Kinko-cho, Kanagawa-ku, Yokohama, Kanagawa, Japan Fab 8C & Fab 8D Auditors 81 45 620 2682 6, 8 Li-Hsin 3rd Rd., Hsinchu Science Ernst & Young, Taiwan Park, Hsinchu, Taiwan 30078, R.O.C. Wan-Ju Chiu, Hsin-Min Hsu Wavetek 886 (3) 578 2258 9F, No. 333, Sec. 1 Keelung Road, 10 Chuangxin 1st Rd., Hsinchu Science Park, Taipei, Taiwan 11012, R.O.C. Fab 8E Baoshan Township, Hsinchu, 886 (2) 2757 8888 17 Li-Hsin Rd., Hsinchu Science Park, Taiwan 30076, R.O.C. http://www.ey.com Hsinchu, Taiwan 30078, R.O.C. 886 (3) 578 1259 886 (3) 578 2258 Corporate Website https://www.umc.com United Microelectronics Corporation | Annual Report 2020 Table of Contents Letter to Shareholders 4 Capital Overview 99 100 Capital and Shares Corporate Profile 8 106 Issuance of Corporate Bonds 9 Corporate Profile and Date of Establishment 111 Preferred Shares 10 Corporate Milestones 112 American Depositary Receipts 114 Employee Stock Option Handling Status 114 Issuance of New Restricted Employee Shares Corporate Governance Report 13 115 Status of New Shares Issuance in Connection with 14 Corporate Organization Mergers and Acquisitions 16 Directors’ and Managers’ Information 115 Financing Plans and Execution Status 37 Corporate Governance Practices 93 Certified Public Accountant (CPA) Fee Information Operations Overview 120 93 Information of CPA Change 121 Business Activities 93 UMC’s Chairman, Presidents, Chief Financial Officer, and 128 Overview of Market, Production, and Sales Managers in Charge of Its Finance and Accounting Operations Did Not Hold Any Positions in UMC’s Independent Auditing Firm or Its 134 Employees Affiliates in the Most Recent Year 135 Environmental Expenditure Information 94 Change in Shareholding of Directors, Managers and Major 135 Labor Relations Shareholders Who Own 10% or More of UMC Shares 139 Major Contracts 96 Relationship Among the Top 10 Shareholders 97 Shares Held by the Company, Directors, Managers and Companies Directly or Indirectly Controlled by the Company, and the Comprehensive Shareholding Ratio Based on Combined Calculation 2 Review of Financial Position, Operating 141 Financial Review 182 Results, Risk Management 183 Condensed Balance Sheets 142 Financial Position 185 Condensed Statements of Comprehensive Income 143 Financial Performance 187 Financial Analysis 144 Cash Flow 191 Audit Committee’s Review Report 144 Major Capital Expenditures from Recent Years and 192 Financial Statements – Consolidated Impact on Company’s Finance and Business 269 Financial Statements – Parent Company 144 Main Reasons and Improvement Plans for Recent Annual Reinvestment Policies and Profit or Loss, and Investment Plans for the Coming Year 145 Risk Management and Evaluation 154 Other Necessary Supplements Social Responsibility 155 156 Description of Corporate Social Responsibility 158 About Social Charity 162 Environmental Protection, Safety and Health Management Instructions Special Disclosures 168 169 Summary of Affiliated Enterprises 181 Issuance of Private Placement Securities 181 Acquisition or Disposal of UMC Shares by Subsidiaries 181 Other Necessary Supplements 181 Disclosures of Events Which May Have a Significant Influence on Stockholders’ Equity or Share Price, in Compliance with Item 3, Paragraph 2 in Article 36 of the Securities and Exchange Law of the R.O.C. 3 Dear Shareholders, In 2020, global confirmed cases and deaths from COVID-19 continued to rise, dealing the economy a major setback and significantly impacting people’s lives. UMC’s management team addressed this unsteady situation by imposing corporate safety policies that met or exceeded those set forth by the government, confronting the epidemic head-on with our employees and working together to maintain normal operations and stable growth. 2020 Business Summary After adjusting UMC’s business strategy, the company has transformed Advanced Technologies Development into a semiconductor foundry leader focusing on specialty technologies. UMC’s advanced technology platforms including 14FFC (14nm FinFET We accomplished this by first strengthening the company’s financial Compact), 22nm ultra-low power (22ULP), 22nm ultra-low leakage structure, then expanding production capacity in a cost-competitive (22ULL) and 28nm High Performance Compact (28HPC+) process manner and optimizing our product portfolio. Examining the current technologies have already entered production. 28HPC+ was designed results reveals solid performance in the areas of strategic positioning, to support image signal processor (ISP) in 2020 and is undergoing an technology, production capacity, yield, profitability and sustainable engineering upgrade for 2021. Other newly released processes in 2020 operation. UMC’s 2020 revenue grew 19% over the prior year. Our include mmWave using 55nm, 40nm and 28nm to fulfill high performance foundry segment shipped a total of 8.9 million 8-inch equivalent wafers and low power product requirements for mobile devices, Internet of for the year, growing 24% YoY. Capacity utilization reached 97% in Things (IoT), 5G, automotive electronics and industrial radar that use 2020, growing 8% YoY. Full year revenue reached NTD 176.8 billion, mmWave. with 22.05% gross margin rate and 12.45% operating margin rate. Profit attributable to the parent company was NTD 29.19 billion or an Specialty Process Technologies Pipeline earnings per share of NTD 2.42. In 2020, UMC invested NTD 12.9 billion For specialty processes, UMC’s 28nm high voltage (HV) platform was in R&D. The cash based capex in 2020 was USD 1 billion, which was the industry’s first such technology to enter mass production and is being mainly invested in new R&D process equipment and production capacity utilized for driver ICs used in high resolution organic light-emitting display expansion at Southern Taiwan Science Park Fab 12A, Xiamen Fab 12X (AMOLED) panels. 22nm embedded high voltage (22eHV) development and Suzhou Fab 8N, as well as product mix optimization across all fabs. is also underway and on schedule. 4 Letter to Shareholders Our Radio Frequency Silicon On Insulator (RFSOI) technology has met the stringent requirements of all 4G/5G mobile phones for RF switches. Currently, 90nm RFSOI is in mass production with 55nm RFSOI under development. At the same time, 40nm RFSOI development has begun with the intent to capture the 5G/mmWave mega-trend. For embedded flash memory technology (eFlash), 40nm SST has been introduced into mass production, while 28nm SST development progress is in line with expectations and will fulfill the demand for IoT products. 40nm Resistive Random Access Memory (ReRAM) has entered mass production. Development of 22nm Resistive Random Access Memory (ReRAM) and 22nm Embedded Magneto-resistive Random Access Memory (eMRAM) technologies are progressing as planned and will be designed into Al Internet of Things (AIoT) applications. In addition, we are actively investing in the development of gallium nitride (GaN) and microwave platforms to penetrate high-efficiency power component and 5G microwave component markets. Growing Intellectual Property Portfolio Facing intense global competition, UMC has paid special attention patents and IP protection. The overall number of patents granted to UMC has maintained steady growth. A total of 484 domestic and foreign patents were obtained in 2020,