UMC Adds $3.2 Billion To Capex Plan, Expects AI To Top A Quarter Of Sales In Three Years
CEO Jason Wang rejected overcapacity worries on the call, saying the expansion rests on customer commitments.
UMC's board approved about $3.2 billion in extra capital spending, CEO Jason Wang said on the chipmaker's third-quarter earnings call Wednesday, and he expects AI-related revenue to exceed a quarter of sales in three years. UMC is a semiconductor foundry that makes chips to its customers' designs.
Where the new money goes
Wang told analysts the spending targets silicon photonics, silicon capacitors and thin-film lithium niobate modulators, with capacity of roughly 18K, 22K and 20K respectively. The new phase starts installing in late 2028, runs into 2029 and reaches scale by 2030. Silicon photonics goes to Singapore, silicon capacitors to Tainan and the modulators to UMC's 8-inch operation.
An analyst at UBS noted the increase comes on top of a budget announced a quarter ago. Wang said several growth businesses are moving from development into commercial production faster than UMC's capacity roadmap anticipated.
AI-related revenue is close to $300 million in 2026, Wang said, and AI exposure will probably exceed a quarter of revenue in three years. He said 2027 will stay constrained because most new capacity arrives from late 2028.
Answering the overcapacity doubt
Pressed by the UBS analyst, Wang said "we do not believe we are building ahead of the market," and called overcapacity "an industry question, not just an UMC question." He said the expansion is backed by customer commitments and is being built in phases.
An analyst at Morgan Stanley said he did not believe AI demand would stay so strong into next year. Wang replied that UMC serves specific technology migrations, such as optical speeds moving from 1.6T toward 3.2T, not AI demand in general.
Asked about the spending schedule, Wang said it was "not at the right time" to give details while talks with equipment suppliers continue. He promised a clearer picture in the first quarter of next year.
Record quarter, pricing turn in 2027
UMC's third-quarter revenue was NT$74.24 billion, up 8% from the prior quarter, with a gross margin of 34% and utilization of 92%. Wang said 22-nanometer technology made up 18.3% of wafer sales, a record.
Wang said UMC expects blended average selling prices to rise about 10% in 2027 from 2026, a turn from years of erosion. The fourth-quarter outlook calls for wafer shipments up by a single digit and gross margin comparable to the third quarter. CFO Chi-Tung Liu said depreciation will rise for a couple of years and that gross margin is unlikely to approach its previous high.
Wang said a fuller view of spending milestones should come with first-quarter reporting next year.
Sources
- Taiwan's United Microelectronics Sees Trouble Brewing in Budget Smartphones, but Says Its Exposure Is Limited — benzinga.com
- AI revenue to reach US$300m this year, UMC says - Taipei Times — taipeitimes.com
- UMC Reports Third Quarter 2026 Results – Company Announcement - FT.com — Financial Times
- Taiwan's UMC Invests $3.2 Billion for Major Chip Capacity Expansion, ETCIO — cio.economictimes.indiatimes.com
- Taiwan's UMC Invests $3.2 Billion for Major Chip Capacity Expansion, ETManufacturing — manufacturing.economictimes.indiatimes.com
