UMC Posts Record Quarterly Revenue and Shipments, Approves $3.2 Billion Expansion Budget

Record output brings a bigger investment commitment

United Microelectronics Corporation has approved an additional US$3.2 billion capital expenditure budget after third quarter revenue reached NT$74.24 billion and wafer shipments exceeded 1.2 million units, both records. The Taiwanese chipmaker is preparing for stronger demand for components used in artificial intelligence, optical communications and advanced packaging.

At its October 28, 2026 investor briefing, chief executive Wang Shih said the company expected its average selling price to rise about 10% in 2027. He also set an ambition for AI related business to reach 25% of revenue within three years, with the more specific description putting that target on a quarterly basis.

UMC's factories operated at 92% of capacity during the third quarter, up from 85% in the preceding quarter. Several plants processing wafers measuring 12 inches across were already full, while operations using wafers measuring 8 inches recovered strongly.

Those figures explain the company's changing priorities. With less unused factory space available, UMC expects growth to depend increasingly on earning more from each wafer, through both better prices and a greater share of more valuable products.

The investment approval, equivalent to approximately NT$102.781 billion, comes alongside a stated US$2 billion cash capital expenditure plan for 2026. The additional authorization supports expansion extending beyond the current year, with equipment installation for new capacity expected to begin near the end of 2028.

Stronger factory earnings, lower net profit

Third quarter revenue rose 8% from the preceding quarter, while shipments increased 7.3%. UMC measures those shipments as equivalent wafers of 12 inches, a common unit that allows production on different wafer sizes to be compared.

Gross margin rose to 34%, from 32.5% in the second quarter. Put simply, UMC retained NT$34 from every NT$100 of sales after covering the direct costs of making its products, before other operating expenses and taxes.

Operating profit increased 24.7% from the preceding quarter to NT$18.64 billion, producing an operating margin of 25.1%. That faster growth in operating profit than in revenue shows how fuller factories and a stronger product mix improved the earnings generated by the manufacturing business.

Net profit attributable to the parent company nevertheless fell 61.1% from the second quarter to NT$16.434 billion because income outside the main business declined. Earnings per share were NT$1.32. The factory business therefore improved even as the final profit figure dropped.

For January through September, revenue reached NT$204.01 billion, up 16.1% from a year earlier. Net profit rose 136.5% to NT$74.865 billion, and earnings per share reached NT$6. The gross margin for those nine months was 32%, an increase of 3.6 percentage points.

The third quarter revenue increase from a year earlier was given as 25.6%, although another published figure put it at 16.1%, matching the growth rate stated for the first nine months. The quarterly revenue total and its 8% increase from the preceding quarter were consistent.

Why UMC expects prices to rise in 2027

Wang said UMC expected pricing improvements across both its wafer businesses, with positive changes beginning in the first quarter of 2027. Annual price negotiations were already in their later stages at the October briefing.

The forecast for a roughly 10% increase concerns the blended average selling price, or ASP. This measures the average price across the products UMC sells. It can rise when the company charges more for an existing product, when customers buy a greater share of expensive products, or through both changes together.

UMC expects both effects in 2027. Strong demand and tight capacity create room for price increases, while specialty manufacturing, silicon photonics and advanced packaging can lift the value of the production mix. Rising materials costs also form part of the pricing discussion.

Capacity use above 90% makes this shift more urgent. Increasing shipments becomes harder when several manufacturing processes are already close to full. Higher revenue per wafer offers another route to growth while new factories and equipment are being prepared.

AI demand reaches beyond the main processor

UMC's AI ambitions cover power management chips, field programmable gate arrays, connectivity, silicon photonics and advanced packaging. These products perform different jobs around a computing system, from controlling electricity to moving information between components.

A field programmable gate array, usually shortened to FPGA, is a chip whose functions can be configured after manufacturing. Power management chips regulate the electricity supplied to electronic components. Both can benefit as AI systems require more computing equipment and more complex supporting electronics.

UMC put its expected AI related revenue for 2026 at close to US$300 million. Management aims to increase AI's share of company revenue to 25% within three years, approximately by 2029. Wang's more specific formulation was for that share to be reached in a single quarter, while broader descriptions presented it as a revenue mix target.

The target links several businesses at different stages of development. Some components are already in production, while others have completed design work or early customer checks. Their progress toward larger orders will determine how quickly the AI revenue share grows.

Optical connections become a manufacturing priority

UMC's silicon photonics platform uses wafers measuring 12 inches and can support optical communications applications rated at 1.6 terabits per second. Silicon photonics brings optical functions onto chips, helping equipment transmit information using light.

Fast optical links matter when large computing systems must exchange huge amounts of data. UMC says its platform has reached mature manufacturing yields, meaning a sufficiently high share of the devices produced meet requirements, and can support customers as they upgrade their products.

The development roadmap extends toward applications rated at 3.2 terabits per second. UMC is also working with HyperLight on thin film lithium niobate, known as TFLN, and says several other customers are discussing that technology.

Lithium niobate can be used in optical modulators, devices that alter light to carry information. UMC sees an opportunity to combine these components with its photonic chips and packaging capabilities, including hybrid bonding, which joins components through closely connected surfaces.

Packaging projects move through customer checks

UMC's advanced packaging work focuses partly on supplying power efficiently and connecting memory. Packaging is the stage that brings chips and other components together so they can function inside a larger electronic system.

Standalone deep trench capacitors for mobile phones have entered mass production. These components store electrical charge in structures formed deep inside silicon, allowing useful capacitance to fit into a small area.

For AI and server applications, a version embedded in the package substrate has completed its final design stage and functional testing. The substrate is the supporting layer that carries components and electrical connections within a package. Placing capacitors there helps address power delivery close to the chips.

UMC has also completed initial customer validation for customized memory stacking. That process places memory components together vertically, supporting designs that need more memory capacity or faster movement of data within limited space.

Management expects these new businesses to generate gross margins above the company average once production reaches sufficient scale. The commercial opportunity therefore involves both additional sales and a potentially more profitable product mix.

Expansion has a timetable and unresolved location details

The additional US$3.2 billion budget is intended to accelerate capacity expansion. Wang identified Singapore and the Southern Taiwan Science Park in Tainan as investment locations. Thailand was also named in descriptions of the expansion, leaving the precise distribution of the additional budget across manufacturing sites unsettled.

Planned monthly capacity targets include about 18,000 wafers for silicon photonics, 22,000 for deep trench capacitors and 20,000 for optical modulators. These targets cover distinct product categories rather than a single interchangeable manufacturing line.

UMC expects equipment installation to begin near the end of 2028 and capacity to reach its intended scale in 2030. Until then, the company is converting some existing capacity to serve demand for photonics and advanced packaging.

Management says customer product roadmaps and order commitments support the expansion. Its approach connects investment to customers' planned product launches, while the gap between current demand and new capacity explains the use of existing facilities for newer applications.

The key milestones stretch across several years:

• Third quarter of 2026: Revenue and shipments reach records, with factory capacity use at 92%.
• October 28, 2026: UMC announces the additional US$3.2 billion budget and discusses its pricing and AI targets.
• First quarter of 2027: Positive pricing changes are expected to begin.
• Late 2028: Equipment installation for the planned new capacity is expected to start.
• Around 2029: UMC aims to reach a quarterly AI revenue share of 25% within its three year target period.
• 2030: The planned new capacity is expected to reach its intended scale.

Existing products still carry much of the business

UMC's established manufacturing processes remain central to its results. The 22 nanometer and 28 nanometer businesses together accounted for 35% of wafer sales in the third quarter. The 22 nanometer business alone reached a record 18.3% share.

Customers continued completing new designs for display driver chips, automotive radar and Wi-Fi products. This final design milestone, called tape out, allows a chip design to move toward manufacturing.

Communications represented 39% of revenue by application, followed by consumer electronics at 32%, computers at 13% and other uses at 16%. Communications and consumer electronics together therefore accounted for 71%, showing the continuing importance of markets beyond the emerging AI businesses.

Demand within those markets was uneven. Wang described strong demand for premium smartphones and industrial applications, alongside a healthy automotive recovery. Computers were weaker, including some display control and Wi-Fi components.

For the fourth quarter, Wang's detailed guidance put shipment growth at 1% to 3% from the preceding quarter, capacity use at 91% to 93%, selling prices broadly unchanged and gross margin near the third quarter level. Other published guidance gave shipment growth of 4% to 6% and a gross margin of 34% to 36%.

Investment brings costs before full production

UMC expects new equipment and higher materials costs to put pressure on margins in the nearer term. Depreciation, the accounting expense that spreads the cost of factory equipment over its useful life, is expected to increase at a percentage rate in the low single digits as investment proceeds.

The company's planned response combines stronger selling prices, high factory use and a larger contribution from specialty products. Each addresses a different part of profitability: prices affect revenue per wafer, fuller factories spread costs across more output, and the product mix determines the value of what is sold.

The timing matters. UMC expects pricing improvements in 2027, while major new capacity will take longer to install and reach scale. Existing production and customer adoption of newer technologies will carry the business through that interval.

Customers gain a supplier committing more resources to optical links, power delivery and memory integration. Investors face a business with stronger manufacturing earnings and ambitious growth targets, alongside the costs and execution demands of a substantial expansion.

Key Points

• UMC recorded third quarter revenue of NT$74.24 billion and shipments exceeding 1.2 million equivalent wafers of 12 inches.
• Factory capacity use rose to 92%, and gross margin reached 34%.
• The board approved an additional US$3.2 billion capital expenditure budget alongside the stated US$2 billion cash spending plan for 2026.
• Management expects blended average selling prices to rise about 10% in 2027.
• UMC aims for AI related business to reach 25% of quarterly revenue within three years.
• New capacity targets cover photonics, capacitors and optical modulators, with equipment installation expected from late 2028 and intended scale in 2030.