United Microelectronics Q2 Earnings Call Highlights

Key Points

• Second-quarter performance improved: Revenue rose 12.6% sequentially to TWD 68.73 billion, while wafer shipments increased 10.6% and utilization climbed to 85%. UMC expects third-quarter shipments to grow at a high-single-digit rate, with utilization above 90% and gross margin in the mid-30% range.
• AI-related growth is expanding: UMC delivered its first mass-produced 12-inch silicon photonics chip and expects AI-related revenue to approach $300 million in 2026 and exceed $1 billion within three years. However, management cautioned that recovery remains uneven, with handset, PC and consumer demand still weak.
• Investment spending is rising: UMC increased its 2026 capital-expenditure budget to $2 billion, funding Singapore silicon-photonics expansion and a new Taiwan advanced-packaging facility. The projects could begin production in late 2027 or early 2028, while the Intel 12nm program is expected to enter pilot production in 2027 and become more meaningful in 2028.

United Microelectronics NYSE: UMC reported higher second-quarter revenue, wafer shipments and utilization as demand strengthened in communications and consumer applications, while the company raised its 2026 capital-expenditure budget to support silicon photonics and advanced-packaging growth initiatives.

Second-quarter revenue rose 12.6% sequentially to TWD 68.73 billion. Gross margin increased to 32.5% from the prior quarter, while utilization improved to 85% from 79%. Wafer shipments climbed 10.6% quarter over quarter to 1.13 million 12-inch wafer equivalents.

Net income attributable to shareholders reached TWD 42.26 billion, or TWD 3.39 per share. CFO Chitung Liu said non-operating income, including investment and dividend income, totaled TWD 30 billion during the quarter and contributed to the reported profit.

For the first six months of 2026, UMC reported revenue of TWD 129.77 billion, up 11.3% from a year earlier. First-half net income was TWD 58.4 billion, or TWD 4.68 per share. The company ended the quarter with TWD 124.7 billion in cash and total equity of TWD 443.9 billion.

Third-Quarter Outlook Calls for Higher Utilization

CEO Jason Wang said UMC expects demand momentum to remain stable across computer, communications and consumer markets in the third quarter. The company forecast high-single-digit growth in wafer shipments, firm U.S.-dollar-denominated average selling prices, gross margin in the mid-30% range and utilization above 90%.

Wang said demand for power-management ICs, sensors and microcontrollers is expected to support third-quarter shipments. The company’s 8-inch portfolio is also experiencing a rebound, with 8-inch utilization expected to improve significantly and reach the mid-80% range. UMC’s 12-inch utilization remains above the corporate average, management said.

Revenue from UMC’s 22-nanometer and 28-nanometer operations reached a record high in the second quarter. The 22nm business represented 17.5% of quarterly sales, while the combined 22nm/28nm category accounted for 37% of revenue. Technologies below 14nm represented about 52% of revenue.

Management said Asia accounted for about 66% of revenue during the quarter, followed by North America at roughly 22%. Specialty offerings represented approximately half of UMC’s revenue, according to Wang.

AI Exposure and Silicon Photonics Plans

UMC said it made its first mass-production delivery of a 12-inch silicon photonics integrated circuit to a customer during the quarter. Wang described the delivery as a milestone demonstrating the company’s high-volume manufacturing capability, with a silicon photonics platform planned for broader customer availability in 2027.

The company defines its AI-related exposure broadly, including power management, connectivity, field-programmable gate arrays, advanced packaging and silicon photonics. Wang said AI-related revenue is projected to approach $300 million in 2026 and could exceed $1 billion within three years.

Management said near-term opportunities are emerging in silicon photonics, power and FPGA-related products, particularly on 40nm and 65nm technologies. Wang said the company sees its 12-inch silicon photonics offering as differentiated from 8-inch alternatives because of process-control, performance and yield advantages. UMC is also producing thin-film lithium niobate, or TFLN, modulators and is working on 400G-per-lane technology for 3.2T applications.

Wang said AI remains the semiconductor industry’s primary growth driver, with demand extending beyond compute into memory, connectivity and power. However, he said the recovery is not yet broad based, noting that handsets, PCs and notebooks are expected to see year-over-year declines. Inventory levels in smartphones and consumer markets have risen alongside weak end-market demand, while automotive and industrial inventory days remain above historical averages, he said.

Capital Spending Raised for New Facilities

UMC raised its 2026 capital-expenditure budget to $2 billion from $1.5 billion. The company’s board approved a plan to expand clean-room capacity at its Singapore P4 facility and construct a new fab in Tainan, Taiwan.

Wang said the Singapore P4 expansion is intended for silicon photonics capacity, while the Tainan P7 facility will support advanced packaging. The company plans to execute the projects in phases based on market validation, customer alignment and customer commitments.

In existing facilities, UMC plans to add power-management and silicon photonics capacity at Singapore P3, while Tainan’s 12A site will receive customized memory-stacking and discrete-through-silicon-via capacity. The company is also establishing TFLN capacity at an 8-inch facility.

Management said construction lead times are currently more than 20 months, suggesting production ramps from the new projects could begin in late 2027 or early 2028. Liu said the board has approved nearly $5 billion in total spending to be deployed across 2026 and 2027, with future investment dependent on phased expansion decisions.

Liu added that depreciation expense is expected to increase by low-teens percentages annually for at least the next two years as UMC expands facilities. While higher depreciation could affect gross margin, he said management expects the new silicon photonics and advanced-packaging projects to enhance EBITDA margins and support higher profitability over time.

Intel 12nm Program Remains in Development

UMC said its 12nm cooperation project with Intel is progressing smoothly. Process design kits are expected to be ready in late 2026, with customer design activity and product tape-outs anticipated in 2027. Wang said 2027 would likely represent an early pilot-stage ramp, with production becoming more meaningful in 2028.

The company said the Intel-related 12nm business model is expected to be accretive to UMC’s financial model. Management said it remains focused on executing the 12nm program before considering expansion into more advanced process nodes.

About United Microelectronics (NYSE:UMC)

United Microelectronics Corporation (UMC) is a Taiwan-based semiconductor foundry that provides wafer fabrication and related manufacturing services to a global customer base. Founded in 1980, the company operates as a pure-play foundry, producing integrated circuits for a range of customers including fabless semiconductor companies and integrated device manufacturers. UMC is publicly listed NYSE: UMC and focuses on high-reliability manufacturing rather than branding consumer products.

UMC's core services encompass wafer fabrication using a portfolio of process technologies, with particular emphasis on mature and specialty nodes that support analog, power-management, radio-frequency (RF), and mixed-signal applications.

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