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UMC Acquires SiS Subsidary Company, SMC


Hsinchu, Taiwan, February 26, 2004 – UMC (NYSE: UMC), a world leading semiconductor foundry, and SiS Microelectronics Corp. (SMC) today announced that in the respective meetings of the Boards of Directors of both companies, a plan to merge the companies was approved and a merger agreement signed. The agreement will result in one surviving company, UMC. UMC predicts that this merger will give it even more space to grow revenues and earnings as the semiconductor industry continues its recovery.

SMC, originally a part of Silicon Integrated Systems Corp. (SiS), is a foundry company that operates one 8" wafer fab. SMC was spun-off from SiS, an IC design and product company, to form a dedicated wafer foundry company at the end of 2003 after the approval of its Board of Directors and shareholders at their respective meetings.

Improved economic conditions are the major driving force behind this merger. The current recovery in the semiconductor industry began to accelerate in the second half of 2003, and has caused capacity utilization rate at UMC to rise dramatically. By the end of 2003, capacity utilization reached 100%, making it impossible for UMC to meet all of the requirements of its global customer base. In view of the long-lead time it takes to build a new fab, well in excess of one year, and costs that would likely exceed one billion US dollars, UMC concluded that a merger with SMC is the most effective method to quickly meet customer demand, relieve production bottlenecks, and maximize growth in response to the strong recovery in industry conditions. The merger allows UMC to accelerate capacity expansion and achieve improved economies of scale, as well as avoid the massive capital outlay that construction of a new fab would require. With this merger, UMC will recognize revenues and profits from the operations of SMC's fab, thereby achieving greater financial transparency.

SMC also sees a strong rational in this merger with UMC. Since spinning off from SiS to become an independent foundry company, it has had to deal with the intense competitive forces that characterize the IC manufacturing industry. This merger is the most effective way for it to widen its customer base and gain access to UMC's advanced production technologies. The company expects to greatly strengthen its competitiveness and profitability through this merger. SiS, a pure fabless company, can also more sharply focus its energies on IC design, as it becomes a major customer of one of the world’s foundries, UMC.

UMC will issue 357 million new shares to accommodate the acquisition that is valued at NT$10.7 billion. The value of the merger was set based on many factors, including the profitability, net asset values, current operating conditions, technology capabilities and future growth prospects of the two companies. After the merger, UMC can quickly integrate the acquired production resources to lower operational costs, increase operational scale, and raise profitability. All of these factors will help UMC to raise its international competitiveness in an industry characterized by fast development and the growing trend towards concentration of capital and technology. The merger is expected to result in a strong long-term positive contribution to the equity of shareholders of UMC, SMC and SiS.

About UMC
UMC (NYSE: UMC, TSE: 2303) is a leading global semiconductor foundry that manufactures advanced process ICs for applications spanning every major sector of the semiconductor industry. UMC delivers cutting-edge foundry technologies that enable sophisticated system-on-chip (SOC) designs, including 90nm copper, 0.13um copper, embedded DRAM, and mixed signal/RFCMOS. UMC is also a leader in 300mm manufacturing; Fab 12A in Taiwan is currently in volume production for a variety of customer products, while Singapore-based UMCi has just entered volume production. UMC employs over 8,500 people worldwide and has offices in Taiwan, Japan, Singapore, Europe, and the United States. UMC can be found on the web at



In Taiwan
Alex Hinnawi
(886) 2-2700-6999 ext.6958



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