UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

November 14, 2023

Commission File Number: 001-15128

United Microelectronics Corporation
———————————————————————————————————
(Translation of registrant’s name into English)
 
No. 3 Li-Hsin 2nd Road
Hsinchu Science Park
Hsinchu, Taiwan, R.O.C.
———————————————————————————————————
(Address of principal executive office)
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:  [x] Form 20-F    [ ] Form 40-F
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  [ ]
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  [ ]
 
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
    United Microelectronics Corporation
     
Date: November 14, 2023 By: Chitung Liu

 
  Name:  Chitung Liu
  Title: CFO
     
 

 

 

 
 
EXHIBIT INDEX

Exhibit No.   Description

 
99.1   CONSOLIDATED FINANCIAL STATEMENTS
     

 

 

 

 

 

 

UNITED MICROELECTRONICS CORPORATION

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT AUDITORS

FOR THE NINE-MONTH PERIODS ENDED

SEPTEMBER 30, 2023 AND 2022

 

 

 

 

 

 

 

Address: No. 3 Li-Hsin 2nd Road, Hsinchu Science Park, Hsinchu, Taiwan, R.O.C.

Telephone: 886-3-578-2258

 

The reader is advised that these consolidated financial statements have been prepared originally in Chinese. In the event of a conflict between these financial statements and the original Chinese version or difference in interpretation between the two versions, the Chinese language financial statements shall prevail.

 

1 
 

 

       

 

 

Review Report of Independent Auditors

 

To United Microelectronics Corporation

 

Introduction

 

We have reviewed the accompanying consolidated balance sheets of United Microelectronics Corporation and its subsidiaries (collectively, “the Company”) as of September 30, 2023 and 2022, the related consolidated statements of comprehensive income for the three-month and nine-month periods ended September 30, 2023 and 2022 and consolidated statements of changes in equity and cash flows for the nine-month periods ended September 30, 2023 and 2022, and notes to the consolidated financial statements, including the summary of significant accounting policies (together “the consolidated financial statements”).  Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” as endorsed and became effective by Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on these consolidated financial statements based on our reviews.

 

Scope of Review

 

We conducted our reviews in accordance with the Standard on Review Engagements 2410, “Review of Financial Information Performed by the Independent Auditor of the Entity” of the Republic of China. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the Standards on Auditing of the Republic of China and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our reviews and the review reports of other independent auditors (please refer to the Other Matter paragraph of our report), nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2023 and 2022, and its consolidated financial performance for the three-month and nine-month periods ended September 30, 2023 and 2022, and its consolidated cash flows for the nine-month periods ended September 30, 2023 and 2022, in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting” as endorsed and became effective by Financial Supervisory Commission of the Republic of China.

 

2 
 

 

 

 

Other Matter – Making Reference to the Reviews of Other Independent Auditors

 

We did not review the financial statement of certain associates and joint ventures accounted for under the equity method. Our review, insofar as it related to the investments accounted for under the equity method balances of NT$28,015 million and NT$23,922 million, which represented 5.12% and 4.61% of the total consolidated assets as of September 30, 2023 and 2022, respectively, the related shares of profit or loss from the associates and joint ventures in the amount of NT$573 million, NT$153 million, NT$4,115 million and NT$(4,013) million, which represented 3.07%, 0.47%, 7.31% and (4.92)% of the consolidated income from continuing operations before income tax for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively, and the related shares of other comprehensive income from the associates and joint ventures in the amount of NT$226 million, NT$12 million, NT$208 million and NT$25 million, which represented 0.98%, 0.04%, 0.36% and 0.04% of the consolidated total comprehensive income for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively, are based solely on the reports of other independent auditors.

 

 

/s/ Yang, Yu-Ni

 

 

/s/ Hsu, Hsin-Min

 

 

Ernst & Young, Taiwan

 

 

October 25, 2023

 

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.

Accordingly, the accompanying consolidated financial statements and report of independent auditors are not intended for use by those who are not informed about the accounting principles or Standards on Auditing of the Republic of China, and their applications in practice.

 

3 
 

 

English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2023, December 31, 2022 and September 30, 2022
(Expressed in Thousands of New Taiwan Dollars)
                 
        As of 
Assets   Notes   September 30, 2023   December 31, 2022   September 30, 2022
Current assets                
 Cash and cash equivalents   4, 6(1)   $ 140,641,550   $ 173,818,777   $ 180,649,140
 Financial assets at fair value through profit or loss, current   4, 5, 6(2)   431,180     705,918   674,821
 Financial assets at fair value through other comprehensive income, current   4, 5, 6(3)   4,707,310     3,213,057   2,446,101
 Financial assets measured at amortized cost, current   4, 6(4)     71,492     861,817   896,103
 Contract assets, current   4, 6(21)   563,741     373,318   384,060
 Notes receivable   4    615     -   -
 Accounts receivable, net   4, 6(5)    30,404,235   36,444,510    43,586,419
 Accounts receivable-related parties, net   4, 7   700,266     530,577   1,255,658
 Other receivables    4   2,182,882     1,807,999   1,615,226
 Current tax assets   4     87,405    40,256     18,930
 Inventories, net   4, 5, 6(6)    36,560,576   31,069,960    30,101,698
 Prepayments       1,943,208     2,783,945   2,573,697
 Other current assets   6(21)   985,762     720,904   2,742,785
  Total current assets         219,280,222    252,371,038     266,944,638
                 
Non-current assets                
 Financial assets at fair value through profit or loss, noncurrent   4, 5, 6(2)    16,156,040   17,784,651   18,662,043
 Financial assets at fair value through other comprehensive income, noncurrent   4, 5, 6(3)    11,291,959   11,976,543   10,347,617
 Financial assets measured at amortized cost, noncurrent   4, 6(4)   278,891   7,491     16,277
 Investments accounted for under the equity method   4, 6(7), 7    43,163,604   35,086,289   32,909,670
 Property, plant and equipment   4, 6(8), 8     212,366,797    170,982,066   149,118,651
 Right-of-use assets   4, 6(9), 8   7,278,723     7,611,991   7,902,894
 Intangible assets   4, 6(10), 7   3,982,402     4,275,200   4,200,891
 Deferred tax assets   4   5,081,978     5,051,369   5,127,554
 Prepayment for equipment        20,557,370   19,439,559   16,427,894
 Refundable deposits   8   2,733,780     2,749,691   2,757,248
 Other noncurrent assets-others       5,099,190     5,716,204   4,978,543
  Total non-current assets         327,990,734    280,681,054     252,449,282
                 
Total assets       $ 547,270,956   $ 533,052,092   $ 519,393,920
                 
(continued)

 

4 
 
English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2023, December 31, 2022 and September 30, 2022
(Expressed in Thousands of New Taiwan Dollars)
                 
        As of 
Liabilities and Equity   Notes   September 30, 2023   December 31, 2022   September 30, 2022
Current liabilities                
    Short-term loans   6(11), 6(28)   $ 17,590,000   $ -   $ 217,285
    Financial liabilities at fair value through profit or loss, current   4, 6(12)                              655,219                              438,397    313,377
    Contract liabilities, current   4, 6(21)                           3,127,957                           3,546,815                           4,317,001
    Accounts payable                               8,370,695                           8,982,418                         10,037,509
    Other payables   4, 6(20), 6(22), 7                         22,623,213                         31,279,208                         26,755,261
    Payables on equipment                             15,945,530                         18,632,245                         19,402,535
    Current tax liabilities   4                           6,168,142                         15,407,351                         12,219,606
    Lease liabilities, current   4, 6(9), 6(28)                              523,373                              537,314                              559,355
    Other financial liabilities, current   6(28), 9(6)                                        -                         17,226,490                         17,458,875
    Current portion of long-term liabilities   4, 6(13), 6(14), 6(28)                         12,484,248                           7,586,644                         11,975,162
    Other current liabilities   4, 6(16), 6(17), 6(28), 7                           4,581,861                           4,928,283                           4,752,395
        Total current liabilities                             92,070,238                       108,565,165                       108,008,361
                 
Non-current liabilities                
    Contract liabilities, noncurrent   4, 6(21)                              452,340                              438,188                              515,830
    Bonds payable   4, 6(13), 6(28)                         27,977,418                         23,083,096                         23,081,626
    Long-term loans   6(14), 6(28)                         21,402,698                         16,794,289                         23,063,328
    Deferred tax liabilities   4                           4,272,227                           3,372,512                           2,125,378
    Lease liabilities, noncurrent   4, 6(9), 6(28)                           5,008,711                           5,199,781                           5,283,862
    Net defined benefit liabilities, noncurrent   4                           2,618,738                           2,869,402                           3,182,100
    Guarantee deposits   6(28)                         40,945,178                         30,518,585                         31,755,646
    Other noncurrent liabilities-others   4, 6(16), 6(18), 6(20), 6(28), 9(6)                           2,507,219                           6,760,135                           7,188,418
        Total non-current liabilities                           105,184,529                         89,035,988                         96,196,188
                 
           Total liabilities                           197,254,767                       197,601,153                       204,204,549
                 
Equity attributable to the parent company                
    Capital   4, 6(19)            
        Common stock                           125,031,392                       125,047,490                       124,821,235
    Additional paid-in capital   4, 6(19), 6(20)            
        Premiums                               3,997,662                           3,215,160                           3,215,160
        Treasury stock transactions                               4,531,955                           4,531,955                           4,531,955
        The differences between the fair value of the consideration paid or received from acquiring or                                3,039,275                              466,457                              466,457
            disposing subsidiaries and the carrying amounts of the subsidiaries                
        Recognition of changes in subsidiaries’ ownership                                            -                                        -                                    728
        Share of changes in net assets of associates and joint ventures accounted for using equity method                                  351,085                              196,359                              223,864
        Restricted stock for employees                               1,486,690                           2,221,709                           1,507,534
        Other                                   16,698                           1,746,193                              722,547
    Retained earnings   6(19)            
        Legal reserve                             30,472,125                         21,566,986                         21,566,986
        Special reserve                               2,734,058                           4,914,214                           4,914,214
        Unappropriated earnings                           170,325,099                       175,765,824                       156,870,484
    Other components of equity   4, 6(20)            
        Exchange differences on translation of foreign operations                             (1,682,318)                         (6,516,198)                         (3,829,854)
        Unrealized gains or losses on financial assets measured at fair value through other comprehensive income                             10,369,682                           3,782,141                              924,538
        Unearned employee compensation                                (996,190)                         (1,831,030)                         (1,125,451)
        Total equity attributable to the parent company                           349,677,213                       335,107,260                       314,810,397
                 
Non-controlling interests   6(19)                              338,976                              343,679                              378,974
    Total equity                           350,016,189                       335,450,939                       315,189,371
                 
Total liabilities and equity       $ 547,270,956   $ 533,052,092   $ 519,393,920
                 
The accompanying notes are an integral part of the consolidated financial statements.

 

 

5 
 
English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
For the three-month and nine-month periods ended September 30, 2023 and 2022
(Expressed in Thousands of  New Taiwan Dollars, Except for Earnings per Share)
                   
      For the three-month periods ended September 30,   For the nine-month periods ended September 30,
  Notes   2023   2022   2023   2022
Operating revenues 4, 6(21), 7   $ 57,068,867   $ 75,391,589   $ 167,574,722   $ 210,869,549
Operating costs 4, 6(6), 6(10), 6(15),
6(20), 6(21), 6(22), 7
  (36,607,915)   (39,727,658)   (107,637,178)   (114,229,111)
Gross profit     20,460,952   35,663,931   59,937,544   96,640,438
Operating expenses 4, 6(5), 6(10), 6(15), 6(20), 6(22), 7                
 Sales and marketing expenses     (735,301)   (1,060,571)   (2,401,919)   (3,230,229)
 General and administrative expenses     (1,729,613)   (2,427,887)   (5,546,533)   (7,234,202)
 Research and development expenses     (3,255,295)   (3,304,471)   (9,339,267)   (9,546,769)
 Expected credit impairment gains (losses)      (1,490)   (650)   67,331   (2,388)
  Subtotal     (5,721,699)   (6,793,579)   (17,220,388)   (20,013,588)
Net other operating income and expenses 4, 6(16), 6(23)   572,641   1,286,907   2,750,179   4,028,600
Operating income     15,311,894   30,157,259   45,467,335   80,655,450
Non-operating income and expenses                  
 Interest income 4   1,042,421   567,459   3,560,433   1,022,139
 Other income 4   1,085,610   1,927,245   1,731,597   2,134,827
 Other gains and losses 4, 6(24)   (180,905)   (1,476,153)   276,553   (830,069)
 Finance costs 6(24)   (450,410)   (450,828)   (1,147,099)   (1,433,798)
 Share of profit or loss of associates and joint ventures 4, 6(7)   1,021,601   327,916   4,995,712   (3,557,052)
 Bargain purchase gain 4, 6(7)   494,001     -   494,001     -
 Exchange gain, net 4   324,188   1,292,810   883,815   3,579,599
  Subtotal     3,336,506   2,188,449   10,795,012   915,646
Income from continuing operations before income tax     18,648,400   32,345,708   56,262,347   81,571,096
Income tax expense 4, 6(26)   (2,682,608)   (5,003,346)   (8,015,335)   (12,672,667)
Net income     15,965,792   27,342,362   48,247,012   68,898,429
Other comprehensive income (loss) 6(25)                
Items that will not be reclassified subsequently to profit or loss                  
 Unrealized gains or losses from equity instruments investments measured at fair value through other comprehensive income 4   1,021,042   (2,346,582)   3,845,668   (7,041,947)
 Share of other comprehensive income (loss) of associates and joint ventures which will not be reclassified subsequently to profit or loss      30,976   (905,389)   1,503,358   (3,558,905)
 Income tax related to items that will not be reclassified subsequently 4, 6(26)   47,493   (29,445)   42,428   (190,740)
Items that may be reclassified subsequently to profit or loss                  
 Exchange differences on translation of foreign operations     5,854,132   7,622,357   4,349,130   12,755,060
 Share of other comprehensive income (loss) of associates and joint ventures which may be reclassified subsequently to profit or loss     248,501   54,033   169,593   166,724
 Income tax related to items that may be reclassified subsequently 4, 6(26)   (64,067)   (59,455)   315,186   (122,002)
Total other comprehensive income (loss)     7,138,077   4,335,519   10,225,363   2,008,190
Total comprehensive income (loss)     $ 23,103,869   $ 31,677,881   $ 58,472,375   $ 70,906,619
                   
 Net income (loss) attributable to:                  
  Shareholders of the parent     $ 15,970,917   $ 26,996,184   $ 47,794,836   $ 68,130,535
  Non-controlling interests     (5,125)   346,178   452,176   767,894
      $ 15,965,792   $ 27,342,362   $ 48,247,012   $ 68,898,429
                   
 Comprehensive income (loss) attributable to:                  
  Shareholders of the parent     $ 23,108,943   $ 31,331,661   $ 58,020,170   $ 70,138,636
  Non-controlling interests     (5,074)   346,220   452,205   767,983
      $ 23,103,869   $ 31,677,881   $ 58,472,375   $ 70,906,619
                   
 Earnings per share (NTD) 4, 6(27)                
  Earnings per share-basic      $   1.29   $   2.19   $   3.87   $   5.54
  Earnings per share-diluted      $   1.27   $   2.14   $   3.79   $   5.38
                   
The accompanying notes are an integral part of the consolidated financial statements.

 

 

6 
 
English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the nine-month periods ended September 30, 2023 and 2022
(Expressed in Thousands of New Taiwan Dollars)
                                                 
        Equity Attributable to the Parent Company        
        Capital       Retained Earnings   Other Components of Equity            
    Notes   Common Stock   Additional
 Paid-in Capital
  Legal Reserve   Special Reserve   Unappropriated
Earnings
  Exchange Differences on Translation of Foreign Operations    Unrealized
Gains or Losses
on Financial
Assets Measured
at Fair Value
through Other
Comprehensive
Income
  Unearned Employee Compensation   Total   Non-
Controlling
Interests
  Total Equity
Adjusted balance as of January 1, 2022   6(19)   $   124,832,476   $  47,898,093   $  15,734,416   $ 8,164,648   $  91,322,882   $ (16,629,547)   $  11,715,333   $   (2,212,441)   $   280,825,860   $ 157,092   $   280,982,952
 Appropriation and distribution of 2021 retained earnings   6(19)                                            
   Legal reserve         -     -   5,832,570     -   (5,832,570)     -     -     -     -     -     -
   Special reserve reversed         -     -     -   (3,250,434)   3,250,434     -     -     -     -     -     -
 Cash distributed from additional paid-in capital   6(19)     -     (37,446,370)     -     -     -     -     -     -     (37,446,370)     -     (37,446,370)
 Net income for the nine-month period ended September 30, 2022   6(19)     -     -     -     -   68,130,535     -     -     -   68,130,535   767,894   68,898,429
 Other comprehensive income (loss), for the nine-month period ended September 30, 2022   6(19), 6(25)     -     -     -     -     -   12,799,693     (10,791,592)     -   2,008,101   89   2,008,190
 Total comprehensive income (loss)         -     -     -     -   68,130,535   12,799,693   (10,791,592)     -   70,138,636   767,983   70,906,619
 Share-based payment transaction   4, 6(20)     (11,241)   40,500   -     -     -     -     -   1,086,990   1,116,249     -   1,116,249
 Share of changes in net assets of associates and joint ventures accounted for          -   135,975     -     -   (797)     -   797     -   135,975     -   135,975
  using equity method                                                
 Changes in subsidiaries’ ownership   4, 6(19)     -   1,366     -     -     -     -     -     -   1,366   (728)   638
 Non-Controlling Interests   6(19)     -     -     -     -     -     -     -     -     -   5,356   5,356
 Others   6(19)     -   38,681     -     -     -     -     -     -   38,681   (550,729)   (512,048)
Balance as of September 30, 2022   6(19)   $   124,821,235   $  10,668,245   $  21,566,986   $ 4,914,214   $   156,870,484   $   (3,829,854)   $ 924,538   $   (1,125,451)   $   314,810,397   $ 378,974   $   315,189,371
                                                 
Balance as of January 1, 2023   6(19)   $   125,047,490   $  12,377,833   $  21,566,986   $ 4,914,214   $   175,765,824   $   (6,516,198)   $ 3,782,141   $   (1,831,030)   $   335,107,260   $ 343,679   $   335,450,939
 Appropriation and distribution of 2022 retained earnings   6(19)                                            
   Legal reserve         -     -   8,905,139     -   (8,905,139)     -     -     -     -     -     -
   Special reserve reversed         -     -     -     (2,180,156)   2,180,156     -     -     -     -     -     -
   Cash dividends         -     -     -     -   (45,017,096)     -     -     -   (45,017,096)     -   (45,017,096)
 Net income for the nine-month period ended September 30, 2023   6(19)     -     -     -     -   47,794,836     -     -     -     47,794,836   452,176   48,247,012
 Other comprehensive income (loss), for the nine-month period ended September 30, 2023   6(19), 6(25)     -     -     -     -     -     4,833,880     5,391,454     -   10,225,334   29   10,225,363
 Total comprehensive income (loss)         -     -     -     -   47,794,836   4,833,880   5,391,454     -   58,020,170   452,205   58,472,375
 Share-based payment transaction   4, 6(20)     (16,098)   47,483     -     -     (5,170)     -     -   834,840   861,055     5,170   866,225
 Share of changes in net assets of associates and joint ventures accounted for          -   37,462     -     -   432,357     -   (432,357)     -   37,462     -   37,462
  using equity method                                                
 Disposal of investments accounted for under the equity method         -   117,264     -     -   (56)     -   56     -   117,264     -   117,264
 The differences between the fair value of the consideration paid or received from acquiring   9(6)     -   2,572,818     -     -     -     -     -     -   2,572,818     -   2,572,818
 or disposing subsidiaries and the carrying amounts of the subsidiaries                                                
 Changes in subsidiaries’ ownership   4, 6(19)     -     -     -     -   (292,225)     -     -     -   (292,225)     (14)   (292,239)
 Disposal of equity instruments investments measured at fair value through other    4, 6(3)     -     -     -     -   (1,628,388)     -     1,628,388     -     -     -     -
 comprehensive income                                                
 Non-Controlling Interests   6(19)     -     -     -     -     -     -     -     -     -   1,356   1,356
 Others   6(19)     -   (1,729,495)     -     -     -     -     -     -     (1,729,495)   (463,420)   (2,192,915)
Balance as of September 30, 2023   6(19)   $   125,031,392   $  13,423,365   $  30,472,125   $ 2,734,058   $   170,325,099   $   (1,682,318)   $  10,369,682   $   (996,190)   $   349,677,213   $ 338,976   $   350,016,189
                                                 
The accompanying notes are an integral part of the consolidated financial statements.

 

 

7 
 
English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine-month periods ended September 30, 2023 and 2022
(Expressed in Thousands of New Taiwan Dollars)
         
    For the nine-month periods ended September 30,
    2023   2022
Cash flows from operating activities:        
    Net income before tax   $ 56,262,347   $ 81,571,096
    Adjustments to reconcile net income before tax to net cash provided by operating activities:        
        Depreciation                       27,804,544                       31,536,365
        Amortization                         1,958,175                         2,155,939
        Expected credit impairment losses (gains)                             (67,331)                                2,388
        Net loss (gain) of financial assets and liabilities at fair value through profit or loss                           (168,392)                            896,807
        Interest expense                         1,060,548                         1,368,930
        Interest income                        (3,560,433)                        (1,022,139)
        Dividend income                        (1,731,597)                        (2,134,827)
        Share-based payment                            866,225                         1,116,887
        Share of loss (profit) of associates and joint ventures                        (4,995,712)                         3,557,052
        Gain on disposal of property, plant and equipment                           (216,476)                           (441,140)
        Gain on disposal of investments accounted for under the equity method                             (19,620)                                        -
        Loss on repurchases of bonds                                        -                            182,915
        Exchange loss on financial assets and liabilities                         1,188,481                         3,034,111
        Bargain purchase gain                           (494,001)                                        -
        Loss (gain) on lease modification                                   173                               (1,366)
        Amortization of deferred government grants                        (2,226,363)                        (3,183,725)
            Income and expense adjustments                       19,398,221                       37,068,197
        Changes in operating assets and liabilities:        
            Financial assets and liabilities at fair value through profit or loss                         2,256,874                           (310,252)
            Contract assets                           (204,729)                             (64,648)
            Notes receivable and accounts receivable                         5,999,448                        (9,001,918)
            Other receivables                             (73,359)                           (602,475)
            Inventories                        (5,446,760)                        (6,576,121)
            Prepayments                         1,306,725                        (3,048,362)
            Other current assets                                        -                             (57,220)
            Contract fulfillment costs                           (261,413)                             (56,070)
            Contract liabilities                           (476,711)                            526,918
            Accounts payable                           (584,183)                         1,559,946
            Other payables                        (8,635,295)                         4,641,822
            Other current liabilities                            195,046                              77,522
            Net defined benefit liabilities                           (250,664)                           (695,221)
            Other noncurrent liabilities-others                             (81,634)                             (12,213)
        Cash generated from operations                       69,403,913                     105,021,001
            Interest received                         3,373,131                            916,082
            Dividend received                         3,617,513                         4,119,483
            Interest paid                           (614,647)                           (818,724)
            Income tax paid                      (15,996,973)                        (4,333,087)
                Net cash provided by operating activities                       59,782,937                     104,904,755
         
(continued)

 

 

8 
 
English Translation of Consolidated Financial Statements Originally Issued in Chinese
UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine-month periods ended September 30, 2023 and 2022
(Expressed in Thousands of New Taiwan Dollars)
         
    For the nine-month periods ended September 30,
    2023   2022
Cash flows from investing activities:        
    Acquisition of financial assets at fair value through profit or loss   $ (754,659)   $ (918,289)
    Proceeds from disposal of financial assets at fair value through profit or loss                            402,256                            483,926
    Acquisition of financial assets measured at amortized cost                           (153,077)                        (1,694,441)
    Proceeds from redemption of financial assets measured at amortized cost                            670,121                       30,182,472
    Proceeds from disposal of investments accounted for under the equity method                            293,266                                        -
    Increase in prepayment for investments                                        -                               (2,012)
    Proceeds from capital reduction of investments accounted for under the equity method                            743,106                                        -
    Acquisition of property, plant and equipment                      (71,139,783)                      (44,176,236)
    Proceeds from disposal of property, plant and equipment                            184,160                            523,715
    Increase in refundable deposits                             (35,731)                           (533,139)
    Decrease in refundable deposits                              75,260                            177,459
    Acquisition of intangible assets                        (1,772,311)                        (2,315,673)
    Government grants related to assets acquisition                            556,740                            111,612
    Increase in other noncurrent assets-others                             (42,548)                           (222,074)
        Net cash used in investing activities                      (70,973,200)                      (18,382,680)
Cash flows from financing activities:        
    Increase in short-term loans                       24,600,000                            226,380
    Decrease in short-term loans                        (7,010,000)                        (1,985,756)
    Proceeds from bonds issued                       10,000,000                                        -
    Redemption of bonds                                        -                      (10,763,239)
    Proceeds from long-term loans                       15,381,730                            709,763
    Repayments of long-term loans                      (11,148,877)                      (11,650,434)
    Increase in guarantee deposits                       10,910,990                       15,723,566
    Decrease in guarantee deposits                        (1,207,600)                           (349,299)
    Cash payments for the principal portion of the lease liability                           (495,036)                           (538,134)
    Decrease in other financial liabilities                      (21,209,443)                                        -
    Cash dividends and cash distributed from additional paid-in capital                      (45,017,506)                      (37,447,687)
    Change in non-controlling interests                                1,356                                5,356
    Others                                        -                        (2,000,000)
        Net cash used in financing activities                      (25,194,386)                      (48,069,484)
Effect of exchange rate changes on cash and cash equivalents                         3,207,422                         9,574,418
Net increase (decrease) in cash and cash equivalents                      (33,177,227)                       48,027,009
Cash and cash equivalents at beginning of period                     173,818,777                     132,622,131
Cash and cash equivalents at end of period   $ 140,641,550   $ 180,649,140
         
         
The accompanying notes are an integral part of the consolidated financial statements.

 

 

9 
 

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Nine-Month Periods Ended September 30, 2023 and 2022

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Specified)

 

1.HISTORY AND ORGANIZATION

 

United Microelectronics Corporation (UMC) was incorporated in Republic of China (R.O.C.) in May 1980 and commenced operations in April 1982. UMC is a full service semiconductor wafer foundry, and provides a variety of services to satisfy customer needs. UMC’s ordinary shares were publicly listed on the Taiwan Stock Exchange (TWSE) in July 1985 and its American Depositary Shares (ADSs) were listed on the New York Stock Exchange (NYSE) in September 2000.

 

The address of its registered office and principal place of business is No. 3, Li-Hsin 2nd Road, Hsinchu Science Park, Hsinchu, Taiwan. The principal operating activities of UMC and its subsidiaries (collectively as “the Company”) are described in Notes 4(3) and 14.

 

2.DATE AND PROCEDURES OF AUTHORIZATION OF FINANCIAL STATEMENTS FOR ISSUE

 

The consolidated financial statements of the Company were authorized for issue in accordance with a resolution of the Board of Directors’ meeting on October 25, 2023.

 

3.NEWLY ISSUED OR REVISED STANDARDS AND INTERPRETATIONS

 

(1)The Company applied International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are endorsed by Financial Supervisory Commission (FSC) and become effective for annual periods beginning on or after January 1, 2023. There are no newly adopted or revised standards and interpretations that have material impact on the Company’s financial position and performance.

 

(2)Standards issued by International Accounting Standards Board (“IASB”) which are endorsed by FSC, but not yet adopted by the Company are listed below:

 

New, Revised or Amended Standards and Interpretations   Effective Date issued by IASB
Amendments to IAS 1 “Presentation of Financial Statements” - Classification of Liabilities as Current or Non-current   January 1, 2024
Amendments to IAS 1 “Presentation of Financial Statements” - Non-current Liabilities with Covenants   January 1, 2024
Amendments to IFRS 16 “Leases” - Lease Liability in a Sale and Leaseback   January 1, 2024
Amendments to IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial Instruments: Disclosures” - Supplier Finance Arrangements   January 1, 2024

 

10 
 

 

a.Amendments to IAS 1 “Presentation of Financial Statements” (IAS 1) - Classification of Liabilities as Current or Non-current

These are the amendments to paragraphs 69-76 of IAS 1 presentation of financial statements and the amended paragraphs related to the classification of liabilities as current or non-current.

 

b.Amendments to IAS 1 “Presentation of Financial Statements” - Non-current Liabilities with Covenants

The amendments improved the information companies provide about long-term debt with covenants. The amendments specify that covenants to be complied within twelve months after the reporting period do not affect the classification of debt as current or non-current at the end of the reporting period.

 

c.Amendments to IFRS 16 “Leases” (IFRS 16) - Lease Liability in a Sale and Leaseback

The amendments add seller-lessee additional requirements for the sale and leaseback transactions in IFRS 16, thereby supporting the consistent application of the standard.

 

d.Amendments to IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial Instruments: Disclosures” - Supplier Finance Arrangements

The amendments introduced additional information of supplier finance arrangements and added disclosure requirements for such arrangements.

 

The Company is currently evaluating the potential impact of the aforementioned standards and interpretations listed (a) - (d) to the Company’s financial position and performance, and the related impact will be disclosed when the evaluation is completed.

 

(3)Standards issued by IASB but not yet endorsed by FSC (the effective dates are to be determined by FSC) are listed below:
     
New, Revised or Amended Standards and Interpretations   Effective Date issued by IASB
IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures   To be determined by IASB
IFRS 17 “Insurance Contracts”   January 1, 2023
Amendments to IAS 21 “The Effects of Changes in Foreign Exchange Rates” - Lack of Exchangeability   January 1, 2025

 

11 
 

 

The potential effects of adopting the standards or interpretations issued by IASB but not yet endorsed by FSC on the Company’s financial statements in future periods are summarized as below:

 

a.Amendments to IFRS 10 “Consolidated Financial Statements” (IFRS 10) and IAS 28 “Investments in Associates and Joint Ventures” - Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures (IAS 28)

The amendments address the inconsistency between the requirements in IFRS 10 and IAS 28, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint venture. IFRS 10 requires full profit or loss recognition on the loss of control of a subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defined in IFRS 3 “Business Combinations” (IFRS 3) between an investor and its associate or joint venture is recognized in full.

 

IFRS 10 was also amended so that the gain or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors’ interests in the associate or joint venture.

 

b.IFRS 17 “Insurance Contracts” (IFRS 17)

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims.

 

Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

 

IFRS 17 was issued in May 2017 and it was amended in 2020 and 2021. The amendments include deferral of the date of initial application of IFRS 17 by two years to annual beginning on or after 1 January 2023 (from the original effective date of 1 January 2021), provide additional transition reliefs, simplify some requirements to reduce the costs of applying IFRS 17 and revise some requirements to make the results easier to explain. IFRS 17 replaces an interim Standard - IFRS 4 Insurance Contracts - from annual reporting periods beginning on or after 1 January 2023.

 

12 
 

 

c.Amendments to IAS 21 “The Effects of Changes in Foreign Exchange Rates” - Lack of Exchangeability

These amendments specify whether a currency is exchangeable into another currency and, when it is not, to determining the exchange rate to use and the disclosures to provide. The amendments apply for annual reporting periods beginning on or after 1 January 2025.

 

The Company is currently evaluating the potential impact of the aforementioned standards and interpretations listed (a) - (c) to the Company’s financial position and performance, and the related impact will be disclosed when the evaluation is completed.

 

4.SUMMARY OF MATERIAL ACCOUNTING POLICIES

 

(1)Statement of Compliance

 

The Company’s consolidated financial statements were prepared in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers (Regulations) and IAS 34 “Interim Financial Reporting” which is endorsed and become effective by FSC.

 

(2)Basis of Preparation

 

The consolidated financial statements have been prepared on a historical cost basis, except for financial instruments measured at fair value.

 

(3)General Description of Reporting Entity

 

a.Principles of consolidation

 

The same principles of consolidation have been applied in the Company’s consolidated financial statements as those applied in the Company’s consolidated financial statements for the year ended December 31, 2022. For the principles of consolidation, please refer to Note 4(3) of the Company’s consolidated financial statements for the year ended December 31, 2022.

 

13 
 

 

b.The consolidated entities are as follows:

 

As of September 30, 2023, December 31, 2022 and September 30, 2022

                 
           

Percentage of ownership (%)

As of

Investor   Subsidiary   Business nature  

September 30,

2023

 

December 31,

2022

 

September 30,

2022

UMC   UMC GROUP (USA)   IC Sales   100.00   100.00   100.00
UMC   UNITED MICROELECTRONICS (EUROPE) B.V.   Marketing support activities   100.00   100.00   100.00
UMC   UMC CAPITAL CORP.   Investment holding   100.00   100.00   100.00
UMC   GREEN EARTH LIMITED (GE)   Investment holding   100.00   100.00   100.00
UMC   TLC CAPITAL CO., LTD. (TLC)   Venture capital   100.00   100.00   100.00
UMC   UMC INVESTMENT (SAMOA) LIMITED   Investment holding   100.00   100.00   100.00
UMC   FORTUNE VENTURE CAPITAL CORP. (FORTUNE)   Consulting and planning for venture capital   100.00   100.00   100.00
UMC   UMC KOREA CO., LTD.   Marketing support activities   100.00   100.00   100.00
UMC   OMNI GLOBAL LIMITED (OMNI)   Investment holding   100.00   100.00   100.00
UMC   SINO PARAGON LIMITED   Investment holding   100.00   100.00   100.00
UMC   BEST ELITE INTERNATIONAL LIMITED (BE)   Investment holding   100.00   100.00   100.00
UMC   UNITED SEMICONDUCTOR JAPAN CO., LTD.   Sales and manufacturing of integrated circuits   100.00   100.00   100.00
UMC and FORTUNE   WAVETEK MICROELECTRONICS CORPORATION (WAVETEK)   Sales and manufacturing of integrated circuits   80.12   80.14   80.14
TLC   SOARING CAPITAL CORP.   Investment holding   100.00   100.00   100.00
SOARING CAPITAL CORP.   UNITRUTH ADVISOR (SHANGHAI) CO., LTD.   Investment holding and advisory   100.00   100.00   100.00
GE   UNITED MICROCHIP CORPORATION   Investment holding   100.00   100.00   100.00
FORTUNE   TERA ENERGY DEVELOPMENT CO., LTD. (TERA ENERGY)   Energy technical services   99.01   100.00   100.00
                     

 

14 
 

 

TERA ENERGY   EVERRICH ENERGY INVESTMENT (HK) LIMITED (EVERRICH-HK)   Investment holding   100.00   100.00   100.00
EVERRICH-HK   EVERRICH (SHANDONG) ENERGY CO., LTD.   Solar engineering integrated design services   100.00   100.00   100.00
OMNI   UNITED MICROTECHNOLOGY CORPORATION (CALIFORNIA)   Research and development   100.00   100.00   100.00
OMNI   ECP VITA PTE. LTD.   Insurance   100.00   100.00   100.00
WAVETEK   WAVETEK MICROELECTRONICS CORPORATION (USA)   Marketing service   100.00   -   -
WAVETEK   WAVETEK MICROELECTRONICS INVESTMENT (SAMOA) LIMITED (WAVETEK-SAMOA)   Investment holding   -   100.00   100.00
WAVETEK- SAMOA   WAVETEK MICROELECTRONICS CORPORATION (USA)   Marketing service   -   100.00   100.00
BE   INFOSHINE TECHNOLOGY LIMITED (INFOSHINE)   Investment holding   100.00   100.00   100.00
INFOSHINE   OAKWOOD ASSOCIATES LIMITED (OAKWOOD)   Investment holding   100.00   100.00   100.00
OAKWOOD   HEJIAN TECHNOLOGY (SUZHOU) CO., LTD. (HEJIAN)   Sales and manufacturing of integrated circuits   99.9985   99.9985   99.9985
HEJIAN   UNITEDDS SEMICONDUCTOR (SHANDONG) CO., LTD.   Integrated circuits design services   100.00   100.00   100.00
UNITED MICROCHIP CORPORATION and HEJIAN   UNITED SEMICONDUCTOR (XIAMEN) CO., LTD. (USCXM)   Sales and manufacturing of integrated circuits   100.00   71.86   69.95

 

(4)Other Material Accounting Policies

 

Apart from the accounting policies which are described below, the same accounting policies of consolidation have been applied in the Company’s consolidated financial statements as those applied in the Company’s consolidated financial statements for the year ended December 31, 2022. For the summary of material accounting policies, please refer to Note 4 of the Company’s consolidated financial statements for the year ended December 31, 2022.

 

15 
 

 

Income Tax

 

Income tax expense (benefit) is the aggregate amount of current income tax and deferred income tax included in the profit or loss for the period.

 

Current income tax

 

Current income tax assets and liabilities for the current period and prior periods are measured using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity rather than profit or loss.

 

The additional income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the shareholders’ meeting.

 

Deferred income tax

 

Deferred income tax is determined using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in financial statements at the reporting date.

 

Deferred tax liabilities are recognized for all taxable temporary differences, except:

 

a.When the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences;

 

b.In respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax losses and unused tax credits, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax losses and unused tax credits can be utilized, except:

 

a.Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences;

 

b.In respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

 

16 
 

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and liabilities reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax relating to items recognized outside profit or loss is not recognized in profit or loss but rather in other comprehensive income or directly in equity. Deferred tax assets are reassessed and recognized at each reporting date. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

 

Deferred tax assets and liabilities offset each other, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities, and the deferred taxes relate to the same taxable entity and the same taxation authority.

 

According to the temporary exception in the International Tax Reform – Pillar Two Model Rules (Amendments to IAS 12), deferred tax assets and liabilities related to Pillar Two income tax will not be recognized nor disclosed.

 

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at the acquisition date, might be realized and recognized subsequently as follows:

 

a.Acquired deferred tax benefits recognized within the measurement period that result from new information about facts and circumstances that existed at the acquisition date shall be applied to reduce the carrying amount of any goodwill related to that acquisition. If the carrying amount of that goodwill is nil, any remaining deferred tax benefits shall be recognized in profit or loss;

 

b.All other acquired deferred tax benefits realized shall be recognized in profit or loss, other comprehensive income or equity.

 

The Company has considered whether it is probable that a taxation authority will accept the uncertain tax treatments used in its income tax filings. If the Company concludes that it is probable that the taxation authority will accept an uncertain tax treatment, the Company determines the taxable profit, tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain tax treatment, the Company makes estimates using either the most likely amount or the expected value of the tax treatment, depending on which method the Company expects to better predict the resolution of the uncertainty. The Company reassesses a judgement or estimate if the facts and circumstance change.

 

17 
 

 

5.SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

 

The same significant accounting judgments, estimates and assumptions have been applied in the Company’s consolidated financial statements for the nine-month period ended September 30, 2023 as those applied in the Company’s consolidated financial statements for the year ended December 31, 2022. For significant accounting judgments, estimates and assumptions, please refer to Note 5 of the Company’s consolidated financial statements for the year ended December 31, 2022.

 

6.CONTENTS OF SIGNIFICANT ACCOUNTS

 

(1)Cash and Cash Equivalents

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Cash on hand and petty cash   $6,218   $6,023   $5,784
Checking and savings accounts   44,988,886   42,422,443   38,973,472
Time deposits   90,473,585   125,467,386   133,821,549
Repurchase agreements collateralized by government bonds and corporate notes   5,172,861   5,922,925   7,848,335
Total   $140,641,550   $173,818,777   $180,649,140

 

(2)Financial Assets at Fair Value through Profit or Loss

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Financial assets mandatorily measured at fair value through profit or loss            
Common stocks   $8,537,490   $10,275,563   $10,488,811
Preferred stocks   2,755,136   2,939,939   3,068,375
Funds   4,888,095   5,044,702   5,469,630
Convertible bonds   245,449   230,365   310,048
Others   161,050   -   -
Total   $16,587,220   $18,490,569   $19,336,864
             
Current   $431,180   $705,918   $674,821
Non-current   16,156,040   17,784,651   18,662,043
Total   $16,587,220   $18,490,569   $19,336,864

 

18 
 

 

(3)Financial Assets at Fair Value through Other Comprehensive Income

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Equity instruments            
Common stocks   $15,822,694   $15,007,053   $12,622,827
Preferred stocks   176,575   182,547   170,891
Total   $15,999,269   $15,189,600   $12,793,718
             
Current   $4,707,310   $3,213,057   $2,446,101
Non-current   11,291,959   11,976,543   10,347,617
Total   $15,999,269   $15,189,600   $12,793,718

 

a.These investments in equity instruments are held for medium to long-term purposes and therefore are accounted for as fair value through other comprehensive income.

 

b.Dividend income recognized in profit or loss from equity instruments designated as fair value through other comprehensive income were listed below:

 

   

For the three-month periods

ended September 30,

    2023   2022
Held at end of period   $676,175   $1,431,931
Derecognized during the period   142,535   -
Total   $818,710   $1,431,931

 

   

For the nine-month periods

ended September 30,

    2023   2022
Held at end of period   $1,052,336   $1,431,931
Derecognized during the period   142,535   -
Total   $1,194,871   $1,431,931

 

Please refer to Note 6(7) for derecognition of the equity instrument investment in SILICON INTEGRATED SYSTEMS CORP. (SIS) during the period.

 

c.The Company reclassified its equity instrument investment in SIS as investments accounted for under the equity method. Details on derecognition of such investments are as follow:

 

   

For the nine-month periods

ended September 30,

 
    2023   2022
Fair value on the date of disposal   $3,035,999   $-
Cumulative gains (losses) reclassified to retained earnings due to derecognition   $(1,628,388)   $-
           

 

19 
 

 

d.UMC issued unsecured exchangeable bonds where the bondholders may exchange the bonds at any time on or after October 8, 2021 and prior to June 27, 2026 into NOVATEK common shares which UMC holds and accounts for as equity instruments investments measured at fair value through other comprehensive income. Please refer to Note 6(13) for the Company’s unsecured exchangeable bonds.

 

(4)Financial assets measured at amortized cost

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Financial assets measured at amortized cost            

Time deposits with original

maturities over three months

  $350,383   $849,308   $892,380
Bonds   -   20,000   20,000
Total   $350,383   $869,308   $912,380
             
Current   $71,492   $861,817   $896,103
Non-current   278,891   7,491   16,277
Total   $350,383   $869,308   $912,380

 

(5)Accounts Receivable, Net

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Accounts receivable   $30,552,570   $36,653,611   $43,800,850
Less: loss allowance   (148,335)   (209,101)   (214,431)
Net   $30,404,235   $36,444,510   $43,586,419

 

Aging analysis of accounts receivable:

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Neither past due   $27,360,367   $30,545,437   $39,021,589
Past due:            
≤ 30 days   2,440,410   5,303,765   3,899,226
31 to 60 days   139,308   130,408   187,071
61 to 90 days   5,574   3,247   21,620
91 to 120 days   186   7,886   18,768
≥ 121 days   606,725   662,868   652,576
Subtotal   3,192,203   6,108,174   4,779,261
Total   $30,552,570   $36,653,611   $43,800,850

 

20 
 

 

Movement of loss allowance for accounts receivable:

 

   

For the nine-month periods

ended September 30,

    2023   2022
Beginning balance   $209,101   $194,491
Net recognition (reversal) for the period   (60,766)   19,940
Ending balance   $148,335   $214,431

 

The collection periods for third party domestic sales and third party overseas sales were month-end 30 - 60 days and net 30 - 60 days, respectively.

 

An impairment analysis is performed at each reporting date to measure expected credit losses (ECLs) of accounts receivable. For the receivables past due within 60 days, including not past due, the Company estimates an expected credit loss rate to calculate ECLs. For the nine-month periods ended September 30, 2023 and 2022, the expected credit loss rates were not greater than 0.2%. The rate is determined based on the Company’s historical credit loss experience and customer’s current financial condition, adjusted for forward-looking factors such as customer’s economic environment. For the receivables past due over 60 days, the Company applies the aforementioned rate and assesses individually whether to recognize additional expected credit losses by considering customer’s operating condition and debt-paying ability.

 

(6)Inventories, Net

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Raw materials   $10,959,278   $6,335,428   $5,364,918
Supplies and spare parts   6,616,396   7,161,216   7,298,158
Work in process   17,096,546   14,897,926   16,409,826
Finished goods   1,888,356   2,675,390   1,028,796
Total   $36,560,576   $31,069,960   $30,101,698

 

a.For the three-month periods ended September 30, 2023 and 2022, the Company recognized NT$34,586 million and NT$37,947 million, respectively, in operating costs, of which NT$25 million was related to write-down of inventories and NT$47 million was related to reversal of write-down of inventories. For the nine-month periods ended September 30, 2023 and 2022, the Company recognized NT$101,785 million and NT$109,267 million, respectively, in operating cost, of which NT$714 million was related to write-down of inventories and NT$442 million was related to reversal of write-down of inventories.

 

b.None of the aforementioned inventories were pledged.

 

21 
 

 

(7)Investments Accounted for Under the Equity Method

 

a.Details of investments accounted for under the equity method are as follows:
             
    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Investee companies   Amount   Percentage of ownership or voting rights   Amount   Percentage of ownership or voting rights   Amount   Percentage of ownership or voting rights
Listed companies                        
SILICON INTEGRATED SYSTEMS CORP. (SIS)
(Note A)
  $3,560,586   19.02   $-   -   $-   -
FARADAY TECHNOLOGY CORP. (FARADAY) (Note B)   1,926,774   13.78   1,874,131   13.78   1,781,475   13.78
UNIMICRON TECHNOLOGY CORP. (UNIMICRON) (Note C)   13,554,651   13.05   13,460,838   13.27   12,642,854   13.27
Unlisted companies                        
MTIC HOLDINGS PTE. LTD. (Note D)   -   45.44   -   45.44   -   45.44
UNITECH CAPITAL INC.   524,000   42.00   426,070   42.00   393,975   42.00

TRIKNIGHT CAPITAL CORPORATION (TRIKNIGHT)

(Note E)

  2,742,347   40.00   2,117,678   40.00   2,158,585   40.00
HSUN CHIEH CAPITAL CORP.   237,130   40.00   210,690   40.00   212,434   40.00
PURIUMFIL INC.   10,879   40.00   14,840   40.00   15,288   40.00
HSUN CHIEH INVESTMENT CO., LTD. (HSUN CHIEH) (Note F)   11,193,887   36.49   9,530,916   36.49   8,726,089   36.49
YANN YUAN INVESTMENT CO., LTD. (YANN YUAN)   9,260,808   26.78   7,299,414   26.78   6,793,743   26.78
UNITED LED CORPORATION HONG KONG LIMITED   95,510   25.14   97,156   25.14   99,193   25.14
VSENSE CO., LTD. (Note D)   -   23.98   -   23.98   -   23.98
TRANSLINK CAPITAL PARTNERS I, L.P. (Note G)   57,032   10.38   54,556   10.38   86,034   10.38
Total   $43,163,604       $35,086,289       $32,909,670    

 

22 
 

 

Note A: In August 2023, the board chairman of SIS changed and became the same person as the board chairman of UMC. After considering the comprehensive conditions, including ownership interest held and representation on Board of Directors of SIS, etc., the Company determines that it owns significant influence over SIS and accounts for its investment in SIS as an associate. SIS was previously measured at fair value through other comprehensive income and reclassified as investments accounted for under the equity method. UMC’s share of the net fair value of SIS’s identifiable assets and liabilities was in excess of the fair value of the previously held investment in SIS at the acquisition date, and the difference was recognized as bargain purchase gain. Cumulative fair value change that was previously recognized in other comprehensive loss up to reclassification date was reclassified to retained earnings in the current period.

 

Note B: Beginning from June 2015, the Company accounts for its investment in FARADAY as an associate given the fact that UMC obtained the ability to exercise significant influence over FARADAY through representation on its Board of Directors.

 

Note C: Beginning from June 2020, the Company accounts for its investment in UNIMICRON as an associate given the fact that UMC obtained the ability to exercise significant influence over UNIMICRON through representation on its Board of Directors. On January 6, 2023, UNIMICRON issued new shares to merge with SUBTRON TECHNOLOGY CO., LTD. (SUBTRON) through share conversion. The share conversion ratio was 1 common share of SUBTRON to exchange 0.219 common shares of UNIMICRON. The 23 million shares of SUBTRON held by the Company were exchanged to 5 million common shares newly issued by UNIMICRON.

 

Note D: When the Company’s share of losses of an associate equals or exceeds its interest in that associate, the Company discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of that associate.

 

Note E: TRIKNIGHT executed a capital reduction and refunded NT$400 million based on UMC’s stockholding percentage in June 2023. UMC’s stockholding percentage remains unchanged.

 

23 
 

 

Note F: HSUN CHIEH executed a capital reduction and refunded NT$343 million based on UMC’s stockholding percentage in April 2023. UMC’s stockholding percentage remains unchanged.

 

Note G: The Company follows international accounting practices in equity accounting for limited partnerships and uses the equity method to account for these investees.

 

The carrying amount of investments accounted for using the equity method for which there are published price quotations amounted to NT$19,042 million, NT$15,335 million and NT$14,424 million, as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The fair value of these investments were NT$50,364 million, NT$28,416 million and NT$27,634 million as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

 

Certain investments accounted for under the equity method were reviewed by other independent accountants. Shares of profit or loss of these associates and joint ventures amounted to NT$573 million, NT$153 million, NT$4,115 million and NT$(4,013) million for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively. Share of other comprehensive income (loss) of these associates and joint ventures amounted to NT$226 million, NT$12 million, NT$208 million and NT$25 million for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively. The balances of investments accounted for under the equity method were NT$28,015 million, NT$25,801 million and NT$23,922 million as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

 

Although the Company is the largest shareholder of some associates, after comprehensive assessment, the Company does not own the major voting rights as the remaining voting rights holders are able to align and prevent the Company from ruling the relevant operation. Therefore, the Company does not control but owns significant influence over the aforementioned associates.

 

None of the aforementioned associates were pledged.

 

b.Financial information of associates:

 

There is no individually significant associate for the Company. When an associate is a foreign operation, and the functional currency of the foreign entity is different from the Company, an exchange difference arising from translation of the foreign entity will be recognized in other comprehensive income (loss). Such exchange differences recognized in other comprehensive income (loss) in the financial statements for the three-month and nine-month periods ended September 30, 2023 and 2022 were NT$24 million, NT$42 million, NT$35 million and NT$111 million, respectively, which were not included in the following table.

 

24 
 

 

The aggregate amount of the Company’s share of all its individually immaterial associates that are accounted for using the equity method were as follows:

 

    For the three-month periods ended September 30,
    2023   2022
Income (loss) from continuing operations   $1,021,601   $327,916
Other comprehensive income (loss)   255,135   (893,494)
Total comprehensive income (loss)   $1,276,736   $(565,578)

 

   

For the nine-month periods

ended September 30,

    2023   2022
Income (loss) from continuing operations   $4,995,712   $(3,557,052)
Other comprehensive income (loss)   1,639,384   (3,503,477)
Total comprehensive income (loss)   $6,635,096   $(7,060,529)

 

c.Details of UMC’s stock (thousand shares) held by the Company’s associates are as follows:

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

HSUN CHIEH   441,371   441,371   441,371
YANN YUAN   192,963   192,963   192,405
SUBTRON, the subsidiary of UNIMICRON (Note A)   47   -   -
SIS (Note B)   266,580   -   -
Total   900,961   634,334   633,776

 

Note A: Beginning from January 2023, SUBTRON becomes an associate of the Company.

 

Note B: Beginning from August 2023, SIS becomes an associate of the Company.

 

25 
 

 

(8)Property, Plant and Equipment

 

a.For the nine-month period ended September 30, 2023:

 

Assets Used by the Company:

 

Cost:

 

    Land   Buildings  

Machinery

and equipment

  Transportation equipment  

Furniture

and fixtures

  Leasehold improvement   Construction in progress and equipment awaiting inspection   Total
As of January 1, 2023   $1,470,216   $37,597,769   $953,819,688   $64,923   $8,061,993   $63,075   $55,363,943   $1,056,441,607
Additions   -   70,968   -   -   -   -   58,825,175   58,896,143
Disposals   -   (2,664)   (5,327,710)   -   (24,140)   -   -   (5,354,514)
Transfers and reclassifications   -   721,892   55,186,277   5,888   862,261   425   (47,386,390)   9,390,353
Exchange effect   (43,047)   (33,573)   6,794,530   539   12,854   1,576   493,403   7,226,282
As of September 30, 2023   $1,427,169   $38,354,392   $1,010,472,785   $71,350   $8,912,968   $65,076   $67,296,131   $1,126,599,871

 

Accumulated Depreciation and Impairment:

 

    Land   Buildings  

Machinery

and equipment

  Transportation equipment  

Furniture

and fixtures

  Leasehold improvement   Construction in progress and equipment awaiting inspection   Total
As of January 1, 2023   $-   $22,731,506   $857,737,785   $51,597   $6,697,517   $59,383   $-   $887,277,788
Depreciation   -   1,054,168   25,765,212   3,691   368,354   2,812   -   27,194,237
Disposals   -   (2,664)   (5,320,294)   -   (24,074)   -   -   (5,347,032)
Exchange effect   -   40,236   6,806,022   256   18,161   1,645   -   6,866,320
As of September 30, 2023   $-   $23,823,246   $884,988,725   $55,544   $7,059,958   $63,840   $-   $915,991,313
Net carrying amount:                                
As of September 30, 2023   $1,427,169   $14,531,146   $125,484,060   $15,806   $1,853,010   $1,236   $67,296,131   $210,608,558

 

Assets Subject to Operating Leases:

 

Cost:

                     
    Land   Buildings  

Machinery

and equipment

 

Furniture

and fixtures

  Total
As of January 1, 2023   $545,787   $2,443,247   $6,345   $1,334,291   $4,329,670
Transfers and reclassifications   -   -   -   35,145   35,145
Exchange effect   (6,568)   10,506   -   2,421   6,359
As of September 30, 2023   $539,219   $2,453,753   $6,345   $1,371,857   $4,371,174

 

26 
 

 

Accumulated Depreciation and Impairment:

                     
    Land   Buildings  

Machinery

and equipment

 

Furniture

and fixtures

  Total
As of January 1, 2023   $-   $1,202,812   $6,345   $1,302,266   $2,511,423
Depreciation   -   71,165   -   20,785   91,950
Exchange effect   -   7,197   -   2,365   9,562
As of September 30, 2023   $-   $1,281,174   $6,345   $1,325,416   $2,612,935
Net carrying amount:                    
As of September 30, 2023   $539,219   $1,172,579   $-   $46,441   $1,758,239

 

b.For the nine-month period ended September 30, 2022:

 

Assets Used by the Company:

 

Cost:

 

    Land   Buildings  

Machinery

and equipment

  Transportation equipment  

Furniture

and fixtures

  Leasehold improvement   Construction in progress and equipment awaiting inspection   Total
As of January 1, 2022   $1,491,343   $36,827,480   $897,806,699   $55,959   $7,305,174   $61,282   $22,856,033   $966,403,970
Additions   -   288,509   -   -   -   -   44,821,027   45,109,536
Disposals   -   (69,360)   (4,645,760)   -   (17,119)   (2,433)   (69,712)   (4,804,384)
Transfers and reclassifications   -   210,196   36,584,620   91   407,648   -   (33,879,726)   3,322,829
Exchange effect   (53,610)   376,248   21,905,883   1,018   77,236   4,830   186,666   22,498,271
As of September 30, 2022   $1,437,733   $37,633,073   $951,651,442   $57,068   $7,772,939   $63,679   $33,914,288   $1,032,530,222

 

Accumulated Depreciation and Impairment:

 

    Land   Buildings  

Machinery

and equipment

  Transportation equipment  

Furniture

and fixtures

  Leasehold improvement   Construction in progress and equipment awaiting inspection   Total
As of January 1, 2022   $-   $21,184,969   $810,904,881   $47,108   $6,222,383   $55,125   $-   $838,414,466
Depreciation   -   1,095,406   29,449,352   3,014   342,579   1,893   -   30,892,244
Disposals   -   (69,360)   (4,591,258)   -   (16,790)   (2,423)   -   (4,679,831)
Transfers and reclassifications   -   161   (6,345)   -   -   -   -   (6,184)
Exchange effect   -   230,577   20,322,651   712   68,894   4,984   -   20,627,818
As of September 30, 2022   $-   $22,441,753   $856,079,281   $50,834   $6,617,066   $59,579   $-   $885,248,513
Net carrying amount:                                
As of September 30, 2022   $1,437,733   $15,191,320   $95,572,161   $6,234   $1,155,873   $4,100   $33,914,288   $147,281,709

 

27 
 

 

Assets Subject to Operating Leases:

 

Cost:

                     
    Land   Buildings  

Machinery

and equipment

 

Furniture

and fixtures

  Total
As of January 1, 2022   $549,010   $2,422,389   $-   $1,312,703   $4,284,102
Disposals   -   -   -   (660)   (660)
Transfers and reclassifications   -   (1,228)   6,345   107   5,224
Exchange effect   (8,179)   30,842   -   10,614   33,277
As of September 30, 2022   $540,831   $2,452,003   $6,345   $1,322,764   $4,321,943

 

Accumulated Depreciation and Impairment:

                     
    Land   Buildings  

Machinery

and equipment

 

Furniture

and fixtures

  Total
As of January 1, 2022   $-   $1,095,113   $-   $1,236,790   $2,331,903
Depreciation   -   70,892   -   49,195   120,087
Disposals   -   -   -   (660)   (660)
Transfers and reclassifications   -   (161)   6,345   -   6,184
Exchange effect   -   18,188   -   9,299   27,487
As of September 30, 2022   $-   $1,184,032   $6,345   $1,294,624   $2,485,001
Net carrying amount:                    
As of September 30, 2022   $540,831   $1,267,971   $-   $28,140   $1,836,942

 

c.Details of interest expense capitalized were as follows:

 

   

For the nine-month periods

ended September 30,

    2023   2022
Interest expense capitalized   $5,971   $827
Interest rates applied   1.48% - 1.65%   1.46% - 1.61%

 

d.Please refer to Note 8 for property, plant and equipment pledged as collateral.

 

28 
 

 

(9)Leases

 

The Company leases various properties, such as land (including land use right), buildings, machinery and equipment, transportation equipment and other equipment with lease terms of 1 to 31 years, except for the land use rights with lease term of 50 years. Most lease contracts of land located in R.O.C state that lease payments will be adjusted based on the announced land value. The Company does not have purchase options of leased land at the end of the lease terms.

 

a.The Company as a lessee

 

(a)Right-of-use Assets

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Land (including land use right)   $5,525,152   $5,714,166   $5,864,483
Buildings   164,046   124,420   220,997
Machinery and equipment   1,570,200   1,748,244   1,798,110
Transportation equipment   17,667   21,485   15,606
Other equipment   1,658   3,676   3,698
Net   $7,278,723   $7,611,991   $7,902,894

 

    For the three-month periods ended September 30,
    2023   2022
Depreciation        
Land (including land use right)   $94,812   $93,324
Buildings   22,719   30,509
Machinery and equipment   50,369   51,516
Transportation equipment   3,195   3,030
Other equipment   827   1,039
Total   $171,922   $179,418

 

   

For the nine-month periods

ended September 30,

    2023   2022
Depreciation        
Land (including land use right)   $282,531   $264,967
Buildings   70,728   91,570
Machinery and equipment   152,305   155,295
Transportation equipment   10,062   8,761
Other equipment   2,731   3,441
Total   $518,357   $524,034

 

29 
 

 

i.For the nine-month periods ended September 30, 2023 and 2022, the Company’s addition to right-of-use assets amounted to NT$174 million and NT$1,094 million, respectively.

 

ii.Please refer to Note 8 for right-of-use assets pledged as collateral.

 

(b)Lease Liabilities

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Current   $523,373   $537,314   $559,355
Non-current   5,008,711   5,199,781   5,283,862
Total   $5,532,084   $5,737,095   $5,843,217

 

Please refer to Note 6(24) for the interest expenses on the lease liabilities.

 

b.The Company as a lessor

 

The Company entered into leases on certain property, plant and equipment which are classified as operating leases as they did not transfer substantially all of the risks and rewards incidental to ownership of the underlying assets. The main contracts are to lease the dormitory to the employees with cancellation clauses. Please refer to Note 6(8) for relevant disclosure of property, plant and equipment for operating leases.

 

(10)Intangible Assets

 

For the nine-month period ended September 30, 2023:

 

Cost:

 

    Goodwill   Software   Patents and technology license fees   Others   Total
As of January 1, 2023   $15,012   $5,669,787   $3,422,432   $2,953,984   $12,061,215
Additions   -   1,197,520   45,717   328,499   1,571,736
Write-off   -   (1,443,237)   (1,806,545)   (350,949)   (3,600,731)
Reclassifications   -   (9,276)   -   -   (9,276)
Exchange effect   -   (97,488)   44,728   (10,814)   (63,574)
As of September 30, 2023   $15,012   $5,317,306   $1,706,332   $2,920,720   $9,959,370

 

30 
 

 

Accumulated Amortization and Impairment:

 

    Goodwill   Software   Patents and technology license fees   Others   Total
As of January 1, 2023   $7,398   $2,689,397   $2,597,513   $2,491,707   $7,786,015
Amortization   -   1,301,671   226,515   302,707   1,830,893
Write-off   -   (1,443,237)   (1,806,545)   (350,949)   (3,600,731)
Exchange effect   -   (40,584)   11,397   (10,022)   (39,209)
As of September 30, 2023   $7,398   $2,507,247   $1,028,880   $2,433,443   $5,976,968
Net carrying amount:                    
As of September 30, 2023   $7,614   $2,810,059   $677,452   $487,277   $3,982,402

 

 

For the nine-month period ended September 30, 2022:

 

Cost:

 

    Goodwill   Software   Patents and technology license fees   Others   Total
As of January 1, 2022   $15,012   $4,845,037   $4,491,164   $3,348,071   $12,699,284
Additions   -   2,112,847   -   346,299   2,459,146
Write-off   -   (1,440,796)   (1,344,682)   (628,496)   (3,413,974)
Reclassifications   -   (12,579)   -   -   (12,579)
Exchange effect   -   (102,637)   451,392   (13,154)   335,601
As of September 30, 2022   $15,012   $5,401,872   $3,597,874   $3,052,720   $12,067,478

 

Accumulated Amortization and Impairment:

 

    Goodwill   Software   Patents and technology license fees   Others   Total
As of January 1, 2022   $7,398   $2,913,824   $3,324,667   $2,808,462   $9,054,351
Amortization   -   1,241,006   372,476   431,406   2,044,888
Write-off   -   (1,440,796)   (1,344,682)   (628,496)   (3,413,974)
Exchange effect   -   (61,302)   253,831   (11,207)   181,322
As of September 30, 2022   $7,398   $2,652,732   $2,606,292   $2,600,165   $7,866,587
Net carrying amount:                    
As of September 30, 2022   $7,614   $2,749,140   $991,582   $452,555   $4,200,891

 

31 
 

 

The amortization amounts of intangible assets were as follows:

 

    For the three-month periods ended September 30,
    2023   2022
Operating costs   $293,285   $307,638
Operating expenses   $295,507   $346,805

 

   

For the nine-month periods

ended September 30,

    2023   2022
Operating costs   $942,690   $1,008,714
Operating expenses   $888,203   $1,036,174

 

(11)Short-Term Loans

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Unsecured bank loans   $17,590,000   $-   $217,285

 

   

For the nine-month periods

ended September 30,

    2023   2022
Interest rates applied   1.60% - 2.65%   0.33% - 3.60%

 

(12)Financial Liabilities at Fair Value through Profit or Loss, Current

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Embedded derivatives in exchangeable bonds   $655,219   $438,397   $313,377

 

(13)Bonds Payable

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Unsecured domestic bonds payable   $33,100,000   $23,100,000   $25,100,000
Unsecured exchangeable bonds payable   5,757,373   5,757,373   6,314,451
Less: Discounts on bonds payable   (545,276)   (672,686)   (785,523)
Total   38,312,097   28,184,687   30,628,928
Less: Current or exchangeable portion due within one year   (10,334,679)   (5,101,591)   (7,547,302)
Net   $27,977,418   $23,083,096   $23,081,626

 

32 
 

 

a.UMC issued domestic unsecured corporate bonds. The terms and conditions of the bonds are as follows:
                 
Term   Issuance date   Issued amount   Coupon rate   Repayment
Ten-year   In mid-June 2014   NT$3,000 million   1.95%   Interest will be paid annually and the principal will be repayable in June 2024 upon maturity.
Five-year   In late March 2017   NT$6,200 million   1.15%   Interest was paid annually and the principal was fully repaid in March 2022.
Seven-year   In late March 2017   NT$2,100 million   1.43%   Interest will be paid annually and the principal will be repayable in March 2024 upon maturity.
Five-year   In early October 2017   NT$2,000 million   0.94%   Interest was paid annually and the principal was fully repaid in October 2022.
(Note)
Seven-year   In early October 2017   NT$3,400 million   1.13%   Interest will be paid annually and the principal will be repayable in October 2024 upon maturity.
Five-year   In late April 2021   NT$5,500 million   0.57%   Interest will be paid annually and the principal will be repayable in April 2026 upon maturity.
Seven-year   In late April 2021   NT$2,000 million   0.63%   Interest will be paid annually and the principal will be repayable in April 2028 upon maturity.
Ten-year (Green bond)   In late April 2021   NT$2,100 million   0.68%   Interest will be paid annually and the principal will be repayable in April 2031 upon maturity.
Five-year   In mid-December 2021   NT$5,000 million   0.63%   Interest will be paid annually and the principal will be repayable in December 2026 upon maturity.
Five-year (Green bond)   In mid-September 2023   NT$10,000 million   1.62%   Interest will be paid annually and the principal will be repayable in September 2028 upon maturity.

 

Note:In accordance with the corporate bond repayment clauses, UMC transferred NT$2,057 million in cash to the agency on September 30, 2022, one business day prior to the repayment date, in preparation for the payment of principal and interest due on October 3, 2022 and accounted for it as other current assets.

 

33 
 

 

b.On July 7, 2021, UMC issued SGX-ST listed currency linked zero coupon exchangeable bonds. In accordance with IFRS 9, the value of the exchange right, call option and put option (together referred to as Option) of the exchangeable bonds was separated from the host and accounted for as “financial liabilities at fair value through profit or loss, current”. The effective rate of the host bond was 3.49%. The terms and conditions of the bonds are as follows:

 

i.Issue Amount: US$400 million

 

ii.Period: July 7, 2021 - July 7, 2026 (Maturity Date)

 

iii.Redemption:
(i)UMC may, at its option, redeem in whole or in part at the principal amount of the bonds with an interest calculated at the rate of -0.625% per annum (the Early Redemption Amount) at any time after the third anniversary from the issue date and prior to the Maturity Date, if the closing price of the common shares of NOVATEK MICROELECTRONICS CORPORATION (NOVATEK) on the TWSE, converted into U.S. dollars at the prevailing exchange rate, for 20 out of 30 consecutive trading days prior to the publication of the redemption notice is at least 130% of the quotient of the Early Redemption Amount multiplied by the then exchange price (converted into U.S. dollars at the Fixed Exchange Rate), divided by the principal amount of the bonds. The Early Redemption Amount will be converted into NTD based on the Fixed Exchange Rate (NTD 27.902=USD 1.00), and this fixed NTD amount will then be converted using the prevailing exchange at the time of redemption for payment in USD.
(ii)UMC may redeem the outstanding bonds in whole, but not in part, at the Early Redemption Amount, in the event that over 90% of the bonds have been previously redeemed, repurchased and cancelled or exchanged.
(iii)In the event of any change in ROC taxation resulting in increase of tax obligation or the necessity to pay additional interest expense or increase of additional costs to UMC, UMC may redeem the outstanding bonds in whole, but not in part, at the Early Redemption Amount. Bondholders may elect not to have their bonds redeemed but with no entitlement to any additional amounts or reimbursement of additional taxes.
(iv)All or any portion of the bonds will be redeemable at put price at the option of bondholders on July 7, 2024 at 98.14% of the principal amount.
(v)In the event that the common shares of NOVATEK cease to be listed or are suspended from trading for a period equal to or exceeding 30 consecutive trading days on the TWSE, each bondholder shall have the right to require UMC to redeem the bonds, in whole but not in part, at the Early Redemption Amount.
(vi)Upon the occurrence of a change of control (as defined in the indenture) of UMC, each bondholder shall have the right to require UMC to redeem the bonds, in whole but not in part, at the Early Redemption Amount.

 

34 
 

 

iv.Terms of Exchange:
(i)Underlying Securities: Common Shares of NOVATEK
(ii)Exchange Period: The bonds are exchangeable at any time on or after October 8, 2021 and prior to June 27, 2026, into NOVATEK common shares. If for any reason UMC does not have sufficient NOVATEK common shares to deliver upon the exchange of any bond, then, UMC will pay to the exchanging bondholder an amount in U.S. dollars equal to the product of the volume-weighted average closing price per NOVATEK common share on the TWSE for five consecutive trading days starting from and including the applicable exercise date (as defined in the indenture) (or such fewer number of trading days as are available within ten days starting from and including the applicable exercise date) each converted into USD at the prevailing rate on the day preceding the applicable trading day and the number of NOVATEK common shares that UMC is unable to deliver. Provided, however, that if the exercise date falls within 5 business days from the beginning of, and during, any closed period, the right of the converting holder of the bonds to vote with respect to the shares it receives will be subject to certain restrictions.
(iii)Exchange Price and Adjustment: The exchange price was originally NT$731.25 per NOVATEK common share. The exchange price will be subject to adjustments upon the occurrence of certain events set out in the indenture. The exchange price was NT$533.8 per NOVATEK common share on September 30, 2023.

 

v.Redemption on the Maturity Date:

The bonds will be redeemed with 96.92% principal amount on the maturity date unless:

(i)UMC shall have redeemed the bonds at the option of UMC, or the bonds shall have been redeemed at option of the bondholder,
(ii)The bondholders shall have exercised the exchange right before maturity, or
(iii)The bonds shall have been redeemed or repurchased by UMC and cancelled.

 

For the nine-month periods ended September 30, 2023 and 2022, the Company has repurchased and cancelled the outstanding principal amount of exchangeable bonds totaling nil and US$166.5 million with derecognition of the related derivative financial liabilities, respectively. The difference between the repurchased amount and the carrying amount recognized in non-operating other gains and losses was immaterial.

 

35 
 

 

(14)Long-Term Loans

 

a.Details of long-term loans as of September 30, 2023, December 31, 2022 and September 30, 2022 were as follows:
         
    As of    
Lenders  

September 30,

2023

 

December 31,

2022

 

September 30,

2022

  Redemption
Secured Long-Term Loan from Mega International Commercial Bank (1)   $6,082   $9,732   $10,948   Repayable quarterly from October 24, 2019 to October 24, 2024 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from Mega International Commercial Bank (2)   14,824   18,000   18,000   Repayable quarterly from February 23, 2022 to February 22, 2027 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from Mega International Commercial Bank (3)   49,824   60,500   -   Repayable quarterly from December 22, 2022 to February 23, 2027 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from Taiwan Cooperative Bank (1)   26,757   35,676   38,649   Repayable quarterly from October 19, 2015 to October 19, 2025 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from Taiwan Cooperative Bank (2)   -   4,375   6,563   Repayable monthly from May 31, 2019 to May 31, 2023 with monthly interest payments.
Secured Long-Term Loan from Taiwan Cooperative Bank (3)   23,000   32,000   35,000   Repayable monthly from August 13, 2020 to August 13, 2025 with monthly interest payments.
Secured Long-Term Loan from Taiwan Cooperative Bank (4)   12,414   16,552   18,103   Repayable monthly from October 29, 2020 to August 29, 2025 with monthly interest payments.
Secured Long-Term Loan from Taiwan Cooperative Bank (5)   65,229   84,166   90,479   Repayable monthly from April 15, 2021 to April 15, 2026 with monthly interest payments.  Interest-only payment for the first year.
Secured Syndicated Loans from China Development Bank and 6 others (1)   -   1,915,577   10,504,114   Repayable semi-annually from October 20, 2016 to October 19, 2024 with semi-annually interest payments.  Interest-only payment for the first and the second year.

 

36 
 

 

Secured Syndicated Loans from China Development Bank and 6 others (2)   $12,035,465   $12,415,200   $12,597,200   Repayable semi-annually from March 19, 2021 to March 18, 2031 with semi-annually interest payments.  Interest-only payment for the first and the second year.
Secured Long-Term Loan from First Commercial Bank   38,524   47,000   47,000   Repayable monthly from December 2, 2021 to December 2, 2026 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from KGI Bank   21,000   21,000   21,000   Repayable semi-annually from December 27, 2021 to December 25, 2026 with monthly interest payments.  Interest-only payment for the first and the second year.
Secured Long-Term Loan from Shanghai Commercial Bank (1)   18,037   22,200   22,200   Repayable monthly from January 19, 2022 to December 15, 2026 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from Shanghai Commercial Bank (2)   4,980   -   -   Repayable quarterly from March 23, 2023 to March 15, 2028 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from Shanghai Commercial Bank (3)   45,000   -   -   Repayable quarterly from June 6, 2023 to March 15, 2028 with monthly interest payments.  Interest-only payment for the first year.
Secured Long-Term Loan from CTBC Bank   131,750   -   -   Repayable semi-annually from September 25, 2023 to September 25, 2028 with monthly interest payments.  Interest-only payment for the first and the second year.
Unsecured Long-Term Loan from Bank of China   1,759,381   1,797,364   1,856,932   Repayable semi-annually from June 24, 2023 to June 24, 2026 with quarterly interest payments.
Unsecured Long-Term Loan from Bank of Taiwan (1)   -   -   375,000   Repayable quarterly from March 10, 2022 to December 10, 2024 with monthly interest payments.
Unsecured Long-Term Loan from Bank of Taiwan (2)   1,500,000   2,000,000   450,000   Repayable quarterly from March 24, 2023 to December 24, 2025 with monthly interest payments.

 

37 
 

 

Unsecured Revolving Loan from First Commercial Bank (1)

(Note A and B)

  $300,000   $300,000   $300,000   Settlement due on February 25, 2026 with monthly interest payments.

Unsecured Revolving Loan from First Commercial Bank (2)

(Note A and B)

  300,000   300,000   300,000   Settlement due on March 15, 2026 with monthly interest payments.

Unsecured Revolving Loan from First Commercial Bank (3)

(Note A and B)

  200,000   200,000   200,000   Settlement due on June 15, 2026 with monthly interest payments.
Unsecured Revolving Loan from Yuanta Commercial Bank (Note C)   3,000,000   -   600,000   Repayable annually from March 2, 2023 to March 2, 2026 with monthly interest payments.
Unsecured Revolving Loan from CTBC Bank (Note D)   4,000,000   -   -   Settlement due on July 20, 2025 with monthly interest payments.
Subtotal   23,552,267   19,279,342   27,491,188    
Less: Current portion   (2,149,569)   (2,485,053)   (4,427,860)    
Total   $21,402,698   $16,794,289   $23,063,328    

 

    For the nine-month periods ended September 30,
    2023   2022
Interest rates applied   1.61% - 6.56%   0.86% - 4.66%

 

Note A: First Commercial Bank approved the 1-year credit loan on April 14, 2022, which offered UMC a revolving line of credit of NT$2 billion starting from the approval date to April 13, 2023. As of December 31, 2022 and September 30, 2022, the unused line of credit were both NT$1.2 billion.

Note B: First Commercial Bank approved the 1-year credit loan on April 25, 2023, which offered UMC a revolving line of credit of NT$2 billion starting from the approval date to April 24, 2024. As of September 30, 2023, the unused line of credit was NT$1.2 billion.

Note C: UMC entered into a 5-year loan agreement with Yuanta Commercial Bank, effective from March 3, 2021. The agreement offered UMC a revolving line of credit of NT$4 billion. This line of credit will be reduced starting from the end of the second year after the contract date and every twelve months thereafter, with a total of four adjustments. The expiration date of the agreement is March 2, 2026. As of September 30, 2023, December 31, 2022 and September 30, 2022, the unused line of credit were nil, NT$4 billion and NT$3.4 billion, respectively.

 

38 
 

 

Note D: UMC entered into a 5-year loan agreement with CTBC Bank, effective from January 6, 2020. The agreement offered UMC a revolving line of credit of NT$2.9 billion. On December 24, 2021, UMC re-entered into the loan agreement with CTBC Bank, modifying the revolving line of credit limit to NT$4 billion. The expiration date of the agreement is July 20, 2025. As of September 30, 2023, December 31, 2022 and September 30, 2022, the unused line of credit were nil, NT$4 billion and NT$4 billion, respectively.

 

b.Please refer to Note 8 for property, plant and equipment and right-of-use assets pledged as collateral for long-term loans.

 

(15)Post-Employment Benefits

 

a.Defined contribution plan

 

The employee pension plan under the Labor Pension Act of the R.O.C. is a defined contribution plan. Pursuant to the plan, UMC and its domestic subsidiaries make monthly contributions of 6% based on each individual employee’s salary or wage to employees’ pension accounts. Pension benefits for employees of the Singapore branch and subsidiaries overseas are provided in accordance with the local regulations. Total pension expenses of NT$228 million, NT$489 million, NT$1,180 million and NT$1,413 million were contributed by the Company for the three-month and nine-month periods ended September 30, 2023 and 2022, respectively.

 

b.Defined benefit plan

 

The employee pension plan mandated by the Labor Standards Act of the R.O.C. is a defined benefit plan. The pension benefits are disbursed based on the units of service years and average monthly salary prior to retirement according to the Labor Standards Act. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year and the total units will not exceed 45 units. The Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited with the Bank of Taiwan under the name of a pension fund supervisory committee. The pension fund is managed by the government’s designated authorities and therefore is not included in the Company’s consolidated financial statements. Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year. For the three-month and nine-month periods ended September 30, 2023 and 2022, total pension expenses of NT$11 million, NT$8 million, NT$34 million and NT$25 million, respectively, were recognized by the Company.

 

39 
 

 

(16)Deferred Government Grants

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Beginning balance   $4,677,444   $8,543,798   $8,543,798
Arising during the period   556,740   174,352   112,055
Recorded in profit or loss:            
Other operating income   (2,226,363)   (4,164,189)   (3,184,168)
Exchange effect   16,049   123,483   216,416
Ending balance   $3,023,870   $4,677,444   $5,688,101
             
Current (classified under other current liabilities)   $1,019,377   $2,681,842   $3,266,874
Non-current (classified under other noncurrent liabilities-others)   2,004,493   1,995,602   2,421,227
Total   $3,023,870   $4,677,444   $5,688,101

 

The significant government grants related to equipment acquisitions received by the Company are amortized as income over the useful lives of related equipment and recorded in the net other operating income and expenses.

 

(17)Refund Liabilities (classified under other current liabilities)

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Refund liabilities   $1,690,806   $1,139,227   $778,463

 

(18)Decommissioning liabilities (classified under other noncurrent liabilities-others)

 

    As of
   

September 30,

2023

 

December 31,

2022

 

September 30,

2022

Decommissioning liabilities   $468,829   $366,863   $336,966

 

Under certain applicable agreement, the Company is obligated to dismantling and removing the items of property, plant and equipment and restoring the site on which they are located. Accordingly, the Company recognized the liability pursuant to the present value of the estimated decommissioning and restoration cost during the nine-month periods ended September 30, 2023 and 2022.

 

40 
 

 

(19)Equity

 

a.Capital stock:

 

i.UMC had 26,000 million common shares authorized to be issued as of September 30, 2023, December 31, 2022 and September 30, 2022, of which 12,503 million shares, 12,505 million shares and 12,482 million shares were issued as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively, each at a par value of NT$10.

 

ii.UMC had 125 million, 135 million and 140 million ADSs, which were traded on the NYSE as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The total number of common shares of UMC represented by all issued ADSs were 623 million shares, 674 million shares and 698 million shares as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. One ADS represents five common shares.

 

iii.On December 5, 2022, UMC issued restricted stocks for its employees in a total of 23 million shares with a par value of NT$10 each. The aforementioned issuance of new shares was approved by the competent authority and the registration was completed. Please refer to Note 6(20) for the information of restricted stocks.

 

iv.In March 2022, October 2022 and April 2023, UMC has recalled and cancelled 1 million shares, 0.4 million shares and 2 million shares, respectively of unvested restricted stocks issued for employees according to the issuance plan. The aforementioned reduction of capital was approved by the competent authority and the registration was completed.

 

b.Retained earnings and dividend policies:

 

According to UMC’s Articles of Incorporation, current year’s earnings, if any, shall be distributed in the following order:

 

i.Payment of taxes.
ii.Making up loss for preceding years.
iii.Setting aside 10% for legal reserve, except for when accumulated legal reserve has reached UMC’s paid-in capital.
iv.Appropriating or reversing special reserve by government officials or other regulations.
v.The remaining, if applicable, may be distributed preferentially as preferred shares dividends for the current year, and if there is still a remaining balance, in addition to the previous year’s unappropriated earnings, UMC shall distribute it according to the distribution plan proposed by the Board of Directors according to the dividend policy and submitted to the shareholders’ meeting for approval.

 

41 
 

 

Because UMC conducts business in a capital intensive industry and continues to operate in its growth phase, the dividend policy of UMC shall be determined pursuant to factors such as the investment environment, its funding requirements, domestic and overseas competitive landscape and its capital expenditure forecast, as well as shareholders’ interest, balancing dividends and UMC’s long-term financial planning. The Board of Directors shall propose the distribution plan and submit it to the shareholders’ meeting every year. The distribution of shareholders’ dividend shall be allocated as cash dividend in the range of 20% to 100%, and stock dividend in the range of 0% to 80%.

 

According to the regulations of Taiwan FSC, UMC is required to appropriate a special reserve in the amount equal to the sum of debit elements under equity, such as unrealized loss on financial instruments and debit balance of exchange differences on translation of foreign operations, at every year-end. Such special reserve is prohibited from distribution. However, if any of the debit elements is reversed, the special reserve in the amount equal to the reversal may be released for earnings distribution or offsetting accumulated deficits.

 

The appropriation of earnings for 2022 and 2021 were approved by the shareholders’ meeting held on May 31, 2023 and May 27, 2022, respectively. The details of appropriation were as follows:

 

   

Appropriation of earnings

(in thousand NT dollars)

 

Cash dividend per share

(NT dollars)

    2022   2021   2022   2021
Legal reserve   $8,905,139   $5,832,570        
Special reserve   (2,180,156)   (3,250,434)        
Cash dividends   45,017,096   -   $3.60   $-

 

In addition, the shareholders’ meeting held on May 27, 2022 approved to distribute cash from additional paid-in capital of NT$37,446 million, at NT$3 per share.

 

The aforementioned 2022 and 2021 appropriation approved by shareholders’ meeting were consistent with the resolutions of the Board of Directors’ meeting held on February 22, 2023 and February 24, 2022, respectively.

 

The cash dividend per share for 2022 was adjusted to NT$3.60046348 per share. The adjustment was due to the decrease of outstanding common shares from cancellation of the restricted stock in April 2023.

 

Please refer to Note 6(22) for information on the employees and directors’ compensation.

 

42 
 

 

c.Non-controlling interests:

 

   

For the nine-month periods

ended September 30,

    2023   2022
Adjusted balance as of January 1   $343,679   $157,092
Attributable to non-controlling interests:        
Net income   452,176   767,894
Other comprehensive income (loss)   29   89
Share-based payment transactions   5,170   -
Changes in subsidiaries’ ownership   (14)   (728)
Non-controlling interests   1,356   5,356
Others   (463,420)   (550,729)
Ending balance   $338,976   $378,974

 

(20)Share-Based Payment

 

a.Restricted stock plan for employees

 

On May 27, 2022, the shareholders approved a compensation plan in their meeting to issue restricted stocks to qualified employees of the Company without consideration. The maximum shares to be issued are 50 million common shares. UMC is authorized to issue restricted stocks in one tranche or in installments, under the custody of trust institution, within two years from the date of receiving the effective declaration from the competent authority.

 

The issuance plan was authorized for effective registration by the Securities and Futures Bureau of the FSC and accordingly, 23 million shares of restricted stock for employees were issued without consideration on December 5, 2022. The life of the plan is four years. Beginning from the end of two years since the date of grant, those employees who fulfill both service period and performance conditions set by UMC are gradually eligible to the vested restricted stocks at certain percentage and time frame. For those employees who fail to fulfill the vesting conditions, UMC will recall and cancel their stocks without consideration. During the vesting period, the restricted stock holders are entitled the same rights as those of common stock holders including the right to receive dividends, but are restricted to sell, pledge, set guarantee, transfer, grant, or dispose the restricted stocks in any other ways. Related information can be obtained from the “Market Observation Post System” on the website of the TWSE.

 

43 
 

 

On June 10, 2020, the shareholders approved a compensation plan in their meeting to issue restricted stocks to qualified employees of UMC without consideration. The maximum shares to be issued are 233 million common shares. UMC is authorized to issue restricted stocks in one tranche or in installments, under the custody of trust institution, within one year from the date of receiving the effective declaration from the competent authority.

 

The issuance plan was authorized for effective registration by the Securities and Futures Bureau of the FSC and accordingly, 1 million shares and 200 million shares of restricted stock for employees were issued without consideration on June 9, 2021 and September 1, 2020, respectively. The life of the plan is four years. Beginning from the end of two years since the date of grant, those employees who fulfill both service period and performance conditions set by UMC are gradually eligible to the vested restricted stocks at certain percentage and time frame. For those employees who fail to fulfill the vesting conditions, UMC will recall and cancel their stocks without consideration. During the vesting period, the restricted stock holders are entitled the same rights as those of common stock holders including the right to receive dividends, but are restricted to sell, pledge, set guarantee, transfer, grant, or dispose the restricted stocks in any other ways. Related information can be obtained from the “Market Observation Post System” on the website of the TWSE.

 

The aforementioned compensation costs for the equity-settled share-based payment issued in 2022 and 2020 were measured at fair value based on the closing quoted market price of the shares on the grant date, NT$44.4, NT$53.0 and NT$21.8 per share, respectively. The unvested restricted stocks issued on the grant date for employees are recognized in unearned employee compensation as a transitional contra equity account and such account shall be amortized as compensation expense over the vesting period. For the three-month and nine-month periods ended September 30, 2023 and 2022, the compensation costs of NT$258 million, NT$358 million, NT$866 million and NT$1,117 million, respectively, were recognized in expenses by the Company.

 

b.Stock appreciation right plan for employees

 

In June 2021 and September 2020, the Company executed a compensation plan to grant 1 million units and 26 million units of cash-settled stock appreciation right to qualified employees of the Company without consideration, respectively. One unit of stock appreciation right to employees represents a right to the intrinsic value of one common share of UMC. The life of the plan is four years. Beginning from the end of two years since the date of grant, those employees who fulfill both service period and performance conditions set by the Company are gradually eligible to the vested stock appreciation right at certain percentage and time frame. For those employees who fail to fulfill the vesting conditions, the Company will withdraw their rights without consideration. During the vesting period, the holders of the stock appreciation right are not entitled the same rights as those of common stock holders of UMC.

 

44 
 

 

The compensation cost for the cash-settled share-based payment was measured at fair value initially by using Black-Scholes Option Pricing Model and will be remeasured at the end of each reporting period until settlement. As of September 30, 2023, the assumptions used are as follows:

 

   

Granted in

June 2021

 

Granted in

September 2020

Share price of measurement date (NT$/ per share)   $45.20   $45.20
Expected volatility   23.97% - 33.75%   25.75%
Expected life   0.69 - 1.69 years   0.92 years
Expected dividend yield   6.02%   6.02%
Risk-free interest rate   0.98% - 1.02%   0.99%

 

For the three-month and nine-month periods ended September 30, 2023 and 2022, the compensation costs of NT$18 million, NT$47 million, NT$84 million and NT$170 million, respectively, were recognized in expenses by the Company. The liabilities for stock appreciation right recognized which were classified under other payables and other noncurrent liabilities-others amounted to NT$191 million, NT$340 million and NT$304 million as of September 30, 2023, December 31, 2022 and September 30, 2022, respectively. The intrinsic value for the liabil