Climate Change Risk and Opportunity Management

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UMC independently develops an assessment tool by referring to the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations, and through relevant responsible divisions to conduct risk and opportunities analysis base on policies and regulations (including current and emerging regulation), market and technology changes, reputation, legal (including litigation), and physical risks to develop adaptation and mitigation strategies, and review the achievements periodically for the purpose of management by connecting to UMC’s Sustainable Strategy and Blueprint

TCFD Disclosure Framework and UMC Management

Governance	Board of Directors and Functional Committees: The Board oversees climate change risks, opportunities, coping strategies, and related promotion plans. The Board also oversees promotion results, including budget implementation, revision and addition; cost-effectiveness review; and following up on implementation results. It also oversees the Company's major fundraising, issuance, and private placement of equity securities that are related to climate change. (Frequency: At least annually, with quarterly reports based on issue development and demand.) ESG Steering Committee: Responsible for ESG governance, strategy, objective decision, systems or management guidelines and concrete promotional plans (including climate change). The committee reviews performance and target achievements quarterly and reports to the Board of Directors on a periodic basis. Corporate Sustainability Committee: In charge of setting sustainability direction and objective, enforcing systems or related management guidelines (including climate change). It reports on the evaluation of risks related to corporate governance, environmental, and social issues, as well as plans and their effectiveness to the ESG Steering Committee quarterly. If the results of climate change risk assessment have a significant impact on major corporate decisions, they will be escalated to the ESG Steering Committee for approval. Enterprise Risk Management Committee: The Committee coordinates related divisions to jointly review the Company's internal and external risks (including climate change risks), For company-wide significant risks, review the changes in risks and management status monthly and update the risk information. Regularly track the changes and report to the ESG Steering Committee quarterly based on the needs for risk improvement and development. Annually, compile the changes in risks, improvement actions, and management implementation status throughout the year and report to the ESG Steering Committee. Additionally, present the overall risk improvement actions to the ESG Steering Committee.
Strategy	According to UMC Climate Change Risk and Opportunity Assessment Methodology, short-term is defined as 3 years; mid-term is defined as 10 years; and long-term is over 10 years. UMC has formulated a climate change policy as the Company's highest guiding principle in responding to climate change, and has established the "UMC Low-Carbon Commitment" as the guideline for promoting its overall plan. Analyze the impact of climate change risks and opportunities on UMC's operations according to the TCFD framework. Conduct climate risk analysis for different scenarios, including transition scenarios based on International Energy Agency NZE (Net Zero), Announced Pledges Scenario (IEA APS), Nationally Determined Contributions (NDCs), Stated Policies Scenario (IEA STEPS), and physical scenarios according to SSP1-2.6 and SSP5-8.5 in sixth assessment report (AR6) of the Intergovernmental Panel on Climate Change (IPCC).
Risk Management	Identify possible policies, regulations, markets and technologies transitions, business reputation, and risks that may result in different scenarios for risk and opportunity analysis. Assessment scope includes UMC operation and upstream and downstream of value chain (such as suppliers and customers). With the participation of related divisions in the climate change risk and opportunity assessment task force, UMC developed adaptation and mitigation strategies for top three risks. The overall results and related countermeasures will be submitted to CS Committee for approval. Annual review on risks and opportunities of transitions in policies, regulations, technologies, markets and business reputation; every three to five years, when the IPCC and the Taiwan Climate Change Projection Information and Adaptation Knowledge Platform (TCCIP) updates climate scenarios, re-examinations and on-going corrections on the assessment results of physical risks, transition risks, and opportunities will be carried out.
Metrics and Targets	UMC has established climate-related risk and opportunity assessment management indicators such as water consumption, energy use, greenhouse gas emissions, and the technology development of low energy consumption products. Relevant emission information has been checked in accordance with the Greenhouse Gas (GHG) Protocol and the ISO 14064 Standard, and data verification by a third party has been commissioned. In addition to complying with regulations, the current status also complies with IEEE's standards for fluorinated greenhouse gas. Established standards for new fabs and new equipment to respond to climate change and greenhouse gas reduction regulations. Set year 2025 and year 2030 KPI targets for indicators including greenhouse gas, water, electricity reduction, and product design. For emissions reduction, UMC has also set its net zero by 2050 goal and its 2030 science-based target. Note: The target has been approved by Science Based Targets initiative (SBTi).

Climate Change Risk and Opportunity Assessment Procedure

Climate Change Risk and Opportunity Matrix

UMC conducts assessment according to the procedure above, 8 transition risks, 4 physical risks, and 5 opportunities are identified. List one financial impact and response plan of risk and opportunity as below, respectively:

Carbon tax/fee for greenhouse gas emission control risk

Scenario: IEA APS including NDCs
Assumptions:

1. Singapore’s carbon fee rate increases, with the rate rising to SGD 45 per ton in 2026 and assuming it will increase to SGD 80 per ton from 2030 to 2034.
2. Taiwan imposes a carbon fee. From 2025 to 2026, the rate is NT$300 per ton; from 2027 to 2028, the rate is assumed to be NT$600 per ton; and from 2033 to 2034, the rate is assumed to be NT$1,500 per ton.
3. Carbon fee are levied in Japan and mainland China, assuming a rate of NT$300~1200 per ton in the mid-term, while there are no regulations and requirements in the short-term.

Mitigation Plan: Greenhouse gas reduction, and promote three resolutions to achieve Net Zero
1. 1. Over the past two decades, UMC has carried out several programs for carbon reduction. For the next 30 years, UMC will continue to strive for its Science-Based Targets (SBTs) by enhancing its process technologies, increasing the percentage of renewable energy usage, and investing in emerging carbon reduction measures
  2. Three resolutions to achieve net zero:
    
    (1) Persistent and proactive carbon emissions reduction
    
    (2) 100% renewable energy
    
    (3) Investment in net-zero technologies

UMC continues to implement measures to reduce greenhouse gas emissions, the current cost of purchasing green electricity is projected to exceed NT$200 million in 2024 and over NT$5 billion in 2025 and 2030. The cost of replacing existing equipment with new L/S setups is estimated to exceed NT$100 million in 2024 and over NT$900 million in 2025 and 2030. The benefits include a reduction of approximately NT$9 million in carbon tax in 2024, with an estimated reduction of over NT$1 billion in carbon fees/carbon tax from 2025 to 2030.

Drought worsens and affects production

Scenario:
(1) IPCC AR6 SSP1-2.6 and SSP5-8.5
(2) Risk Analysis Results under the Scenario of Long-term Drought: Significant drought risks are observed in the inland regions of East Asia and the central and southern parts of Taiwan.
Assumptions:

1. Evaluation Parameter: The assessment is conducted based on the changes in the Standardized Precipitation Index (SPI). The higher the SPI value, the more severe the drought.
2. Baseline Value: The SPI values from years with severe droughts in recent history are used as the baseline. For Hsinchu, the SPI from 2020-2021 is used, and for Tainan, the SPI from 2022-2023 is used.
3. Using downscaling models, the annual rate of change in SPI severity under SSP1-2.6 and SSP5-8.5 scenarios is projected to estimate the financial loss over the assessment period.

Adaptation Plan: Develop and adopt diverse sources, such as reclaimed water and desalinated water
To reduce dependency on municipal water, the Company has diversified its water sources, include reclaimed water as alternative water sources. UMC Group’s reclaimed water consumption is mainly at Fab 12i in Singapore. When Fab 12i was built, reclaimed water (NEWaterNote) was introduced in the production of 300mm wafers. In 2024, Fab 12i’s reclaimed water reached 4 million tonnes, accounting for 97.6% of the fab’s total water withdrawal. UMC's fabs in Taiwan are also actively assessing reclaimed water utilization. Fab 12A in Taiwan introduced the use of reclaimed water in December 2022. Fab12A's reclaimed water usage reached 0.58 million tonnes. The reclaimed water used in Fab 12A and Fab 12i totaled 4.58 million tonnes, an increase of 16.9% compared to 2023. In addition to reclaimed water, UMC's fabs including Hsinchu and Tainan are also collaborating with the government's desalination system to plan the introduction of desalinated water, aiming to expand the usage of reclaimed and desalinated water, and set the goal of reclaimed and desalinated water usage ration of 16%、18%, and 32% in 2024, 2025, and 2030, respectively.

Note: NEWater is reclaimed water supplied by the Singapore Utilities Board after the wastewater has been treated to a high level of quality.

UMC will continue to invest in water trucks and self-implemented water-saving measures (including U water), as well as the purchase of recycled water and desalinated water. The investment cost for 2024 is approximately NT$14.7 million per year, with estimated annual costs exceeding NT$20 million per year within three years and exceeding NT$80 million per year within ten years. This financial calculation only accounts for the increased costs of recycled water and the contract fees for water trucks.

Note: Fixed costs such as tap water are excluded.

Increasing Revenue Share of Sustainable Products

UMC is committed to investing in the development of high-efficiency product technologies, providing semiconductor manufacturing services in clean technology fields such as automotive electronics, smart energy management, industrial automation, and system optimization, to reduce carbon emissions across the value chain, i.e., the end products of customers. To align its technology development with global carbon reduction goals, UMC has set phased targets to increase the revenue share of sustainable products by 2030. The Company continues to develop relevant technologies based on customer and market demands, such as the recently developed 28nm ultra-low power embedded high-voltage platform 28eHV-LP process technology. This technology uses the industry's smallest SRAM cells, reducing energy consumption by 15% without compromising image quality or data rate, thereby meeting the demand for battery power savings.In 2024, UMC produced energy-saving products such as low-power, low-leakage, and power management that accounted for 76.8 % of its revenue, with a financial contribution about NTD 138billion¹. The total investment in research and development is NTD 13.15 billion.

It is reported that ICT (Information Communication Technology) electronic end products help to save global energy by 3,900 billion kwh in 2030 in Taiwan Semiconductor supports sustainable development in 2024 latest published by Industrial Technology Research Institue, and the contribution rate from semiconductor in global electronic end products for energy saving is 28.4%, considering the ratio of revenue from energy-efficient products² in UMC in 2024 to output value in global semiconductor³ is 0.8%, it is estimatd to save 8.85 billion kwh, which is equivalent to 4.19 million ton CO₂ emission⁴.

The 2024 revenue in UMC is TWD 179.681 billion .
It is calculated according to the exchange rate of 32.781 TWD/USD on December 31, 2024, announced by central bank.
It is announced that the output value of global semiconductor is USD 526.8 billion by Semiconductor Industry Association in February in 2024.
Carbon emission factor is considered as 0.474 kg/CO₂e

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