Letter to Shareholders

Dear Shareholders,

The Group is pleased to report that it has achieved a record-breaking revenue of S$271 million and net profit attributable to shareholders of S$53 million during the year. This represents a 65% increase from S$164 million revenue and 46% increase from S$36 million net profit attributable to shareholders recorded in the previous year. This makes FY2021 the most profitable year in UMS' history. This was attributable mainly to strong growth of the global semiconductor equipment industry and the result of our relentless pursuit for operational excellence.

In view of the Group's excellent financial performance, the Directors are proposing doubling the final dividend to 2 cents instead of a 1 cent final dividend (announced in 4QFY2020) to reward shareholders. Subject to the approval of the shareholders, the total dividends declared and proposed for FY2021 will reach 5 Singapore cents (3.5 cents in FY2020), despite the 1 for 4 bonus issue during the year.

Sales of new semiconductor manufacturing equipment hit new record in 2021

2021 has been a very good year for the semiconductor industry. According to Gartner, worldwide semiconductor revenue increased 25.1% in 2021 to total $583.5 billion, crossing the $500 billion threshold for the first time.

According to SEMI, the wafer fab equipment segment, which includes wafer processing, fab facilities, and mask/reticle equipment, is estimated to expand 43.8 percent to a new industry record of $88 billion in 2021.

This marks the third consecutive year of record high spending on fab equipment. The capacity buildout extends beyond the robust demand during the pandemic for electronics vital for remote work and learning, telehealth and other applications.

The equipment spending spree is led by foundry operators, accounting for an estimated 46 percent of IC equipment purchases, following by memory makers (37 percent). DRAM spending is forecast to decline while 3D NAND expenditures rise.

JEP Holdings Ltd - Associate to subsidiary

On 21 April 2021, the Group acquired 54,229,355 shares (or 13.10%) in Catalist-listed JEP Holdings Ltd. ("JEP") for S$10.8 million from Mr Zee Hoong Huay. Subsequently, the Group progressively acquired additional 72,851,511 shares in JEP (or 17.6%) for S$14.6 million from the open market as well as under the mandatory unconditional cash offer in accordance with Rule 14.1(b) of the Singapore Code on Take-overs and Mergers. As a result, the Group commenced the consolidation of JEP as a 71.39% owned subsidiary as at 30 June 2021. In 4Q 2021, the Group acquired additional 2,727,300 shares in JEP from the open market and increase its ownership of JEP to 72.21%.

The Group's additional investment in JEP worked well as it allows the Group to gain full control of JEP. JEP provided readily available manufacturing facilities in Singapore to support UMS' strong customer order flows - alleviating the production challenges faced in the Group's Penang campus due to the manpower crunch in Malaysia during the year.

Business performance

Revenue in all of the Group's core business segments grew substantially - as it logged its highest-ever annual revenue - surpassing S$250 million for the very first time. Compared to FY2020, semicon sales went up 59% while revenue in Others segment leapt 63%. Aerospace contributed about S$10 million in sales.

Semiconductor Integrated System sales grew to S$104.2 million in FY2021 - up 34% from S$77.6 million in FY2020. Component sales also shot up 84% to S$138.5 million in FY2021 from S$75.5 million in FY2020.

All of the Groups key geographical markets grew significantly in FY2021. Malaysia and the "Others" market reported the strongest growth - clocking in triple-digit sales increases. Compared to FY2020, revenue in Malaysia grew 181% and revenue in Others markets vaulted 480% in FY2021. Sales in Singapore, US and Taiwan rose 69%, 44% and 16% respectively.

Gross material margins in FY2021 remained stable at 52.8% compared to 53.3% in FY2020.

Group net profit shot up 59% to S$57.6 million while pre-tax profit more than doubled to S$79.4 million from S$38.9 million in FY2020. The record profit performance was achieved despite higher expenses. Employee costs, depreciation and other expenses went up 82%, 61% and 46% respectively mainly due to the consolidation of JEP. Income tax expense also jumped 739% in FY2021 due to higher profits as well as higher tax provisions for the Group's Malaysian entities which did not benefit from pioneer incentives enjoyed previously.

Outlook

The Group achieved exponential growth in FY2021 riding on pandemic-driven opportunities that are transforming the global digital landscape. Despite significant challenges and surging costs, the Group did better than ever!

This demonstrates UMS's operational resilience and its ability to meet the surge in customer's demands - overcoming tough operational issues such as supply chain disruptions, and severe manpower crunch.

The Group's order forecasts remain strong as its key customer has recently given positive guidance for FY2022. The strong momentum for its semiconductor systems continue to increase and it expects this strength to sustain into 2022.

New smart devices and innovative tech solutions as well as Artificial Intelligence ("AI") are lifting computing power to new heights. Digital acceleration of global economies arising from the ongoing virus pandemic will continue to step up chip production worldwide.

World Semiconductor Trade Statistics (WSTS) also predicted that the global semiconductor market will grow by 8.8 percent in 2022, to US$ 601 billion, driven by double-digit growth of the sensors and logic category. All regions and all product categories are expected to continue positive growth.

According to SEMI, global total semiconductor manufacturing equipment market is projected to expand 12.4 percent increase in 2022 to about $99 billion.

The Group's new Penang factory is scheduled for completion by end 2022. This will increase current production capacity substantially and position the Group well to take on new orders from potential new customers which are expanding in Southeast Asia.

Going forward, in addition to the strong semiconductor market outlook, the Group is also well-poised to tap post-pandemic growth opportunities - especially in the potential upswing in the aviation sector. JEP with its established track record in the aerospace industry stands to gain from the gradual aviation industry recovery.

According to Deloitte- Aircraft OEM production rates are expected to ramp up, especially for narrow-body aircraft. Broader global distribution of vaccines in 2022 should lead to higher levels of international travel as restrictions are eased and lifted, which should translate into higher demand for new wide-body aircraft. This should result in some new large orders from airlines.

Appreciation

On behalf of the Board, I would like to express our heartfelt appreciation to all our stakeholders, which include our shareholders, customers, business associates and partners, for their continuous support of UMS.

I would like to thank our fellow Board members for their invaluable advice and guidance over the years.

Last but not least, I want to single out our employees and express my special appreciation for their commitment, dedication and hard work. Without them, we would not have achieved what we did.