United Microelectronics Corporation (NEW)
UMC · NYSE
Next quarter
Expected to report Jan 27, 2027 — estimated from last year’s reporting date.
Consensus is $0.25 EPS for Dec 2026 across 1 estimates, ranging $0.25 to $0.25.
UMC Sep 2026
- 8.70%
- $0.23
- $0.21
- —
- —
Highlights
- Operating growth: Third-quarter revenue rose 8% sequentially to NT$74.24 billion and 25.6% year over year; gross margin improved to 34% from 32.5% in Q2.
- EPS miss: EPS was $0.21 versus consensus of $0.23, an 8.7% shortfall; reported EPS was NT$1.32 per ordinary share, or $0.206 per ADS.
- Record utilization and shipments: Capacity utilization reached 92%, up from 85% in Q2, while wafer shipments climbed 7.3% sequentially to a record above 1.2 million 12-inch-equivalent wafers.
- 2027 pricing outlook: UMC expects blended ASP to rise about 10% year over year in 2027, reflecting both pricing improvement and a richer product mix; management called it a turning point from ASP erosion.
- AI capacity investment: The board approved about $3.2 billion of additional capital expenditure for selected growth areas, targeting monthly capacity of 18,000 silicon-photonics wafers, 22,000 silicon-capacitor wafers and 20,000 TFLN modulators, with ramp beginning in late 2028.
- Fourth-quarter outlook: UMC expects low-single-digit shipment growth, firm U.S.-dollar ASP, gross margin comparable to Q3 and utilization in the low-90% range; 2026 cash-based CapEx remains $2 billion.
- Earnings mix: Nine-month net income rose to NT$74.73 billion from NT$31.54 billion, helped by NT$28.10 billion of equity-method profit and NT$7.05 billion of fair-value gains; the latter gains were concentrated in the first half.
- Liquidity: Cash and equivalents reached NT$142.62 billion at September 30, up from NT$110.66 billion at year-end; operating cash flow was NT$85.69 billion in the first nine months.
Analysis
UMC delivered a stronger operating quarter, though reported ADS EPS of $0.21 fell short of the $0.23 consensus by 8.7%. Revenue increased 8% sequentially to NT$74.24 billion, gross margin expanded 150 basis points to 34%, and utilization rose to 92% from 85% in Q2. Year over year, revenue grew 25.6% and gross profit increased 43.0% to NT$25.20 billion. Net income attributable to the parent was NT$16.43 billion, up from NT$14.98 billion a year earlier; ordinary-share EPS was NT$1.32 versus NT$1.20.
The defining story was tight capacity supporting stronger near-term demand and a more constructive pricing outlook. Shipments hit a record above 1.2 million 12-inch-equivalent wafers, and management expects low-single-digit shipment growth and comparable gross margin in Q4. For 2027, it anticipates roughly 10% blended ASP growth, but rising raw-material costs and higher depreciation are likely to constrain gross-margin progress. UMC is accelerating investment in AI-related specialty technologies: the board approved about $3.2 billion in additional expansion spending, with most new capacity not ramping until late 2028. Meanwhile, nine-month earnings more than doubled, but NT$28.10 billion of equity-method income and NT$7.05 billion of fair-value gains materially lifted the result, making the year-to-date net-income comparison stronger than the operating growth alone suggests.
Operating performance
Higher utilization and record shipments lifted quarterly revenue and margins. Operating income increased to NT$18.64 billion from NT$11.12 billion in Q3 2025, while parent-attributable net income rose to NT$16.43 billion from NT$14.98 billion. The reported $0.21 EPS was below the $0.23 consensus; UMC reported NT$1.32 per ordinary share and $0.206 per ADS.
- Sequential trend: Revenue grew 8% to NT$74.24 billion and gross margin rose from 32.5% to 34% versus Q2.
- Year-on-year trend: Revenue increased 25.6% from NT$59.13 billion; gross margin improved from about 29.8% and gross profit advanced 43.0% to NT$25.20 billion.
- Product mix: 22/28 nm accounted for about 35% of revenue, and 22 nm alone represented 18.3% of wafer sales; blended ASP remained relatively stable versus Q2.
Demand and utilization
Management described healthy demand across market segments, with selected technologies already constrained by available capacity. Q3 shipments rose 7.3% sequentially to more than 1.2 million 12-inch-equivalent wafers, a record, and utilization reached 92% versus 85% in Q2. Several 12-inch fabs were at full capacity, while 8-inch operations also recovered. Management cautioned that utilization below 100% can reflect a mismatch between demand and fab configuration, including capacity being converted for new technologies, rather than idle facilities.
- Q4 guidance: Shipments are expected to increase by a low-single-digit rate, utilization to remain in the low 90% range, U.S.-dollar ASP to stay firm and gross margin to be comparable with Q3.
- End-market balance: AI, communications, automotive and industrial demand remained robust; management noted softer near-term conditions in some PC-related areas and weaker prospects in lower- and mid-end smartphones.
Pricing and margins
UMC said 2027 marks a change in its blended ASP trajectory, from erosion toward an expected year-on-year increase of about 10%. This is a company-wide blended figure, incorporating both like-for-like pricing and richer product and technology mix; management did not provide a like-for-like breakdown. Stronger demand, tight capacity in selected technologies and inflationary cost increases are part of customer discussions. The pricing opportunity is not expected to translate directly into higher gross margin: depreciation is expected to grow at least at a low-single-digit rate in 2027 and may rise further in 2028, while raw-material costs are also increasing. Management expects a healthy EBITDA margin structure but said those costs will pressure gross margin.
AI technology expansion
UMC is shifting investment toward customer-backed opportunities in silicon photonics, advanced packaging and related specialty technologies. Management said AI-related revenue is close to $300 million in 2026 and could exceed a quarter of total revenue in about three years. Near-term growth remains constrained by available capacity; most of the newly planned capacity is scheduled to start ramping in late 2028 and reach full scale by 2030.
- Additional investment: The board approved about $3.2 billion of additional capital expenditure to accelerate selected expansion; the 2026 cash-based CapEx budget remains $2 billion.
- Planned monthly capacity: Approximately 18,000 wafers for silicon photonics, 22,000 for DTC/silicon capacitors and 20,000 for TFLN modulators. The planned locations are Singapore for silicon photonics, Tainan for silicon capacitors and existing 8-inch operations for TFLN.
- Commercial progress: UMC said its 12-inch PIC platform supports 1.6T optical applications and its 8-inch TFLN platform has completed 1.6T system validation. A discrete eDTC mobile solution is entering mass production; the company also reported progress in AI/server DTC and customized memory stacking.
Non-operating earnings
The year-to-date earnings surge included substantial investment-related contributions, so it was not solely a reflection of foundry operations. Nine-month net income was NT$74.73 billion versus NT$31.54 billion in 2025, while operating income rose to NT$44.87 billion from NT$31.72 billion. Equity-method profit reached NT$28.10 billion, compared with NT$1.49 billion a year earlier, and other gains included NT$7.05 billion of fair-value gains versus NT$0.11 billion. In Q3, however, fair-value movements were a NT$1.12 billion loss, compared with a NT$1.20 billion gain a year earlier; equity-method profit was NT$1.68 billion versus NT$1.25 billion.
Cash and capital
Cash and cash equivalents increased to NT$142.62 billion at September 30 from NT$110.66 billion at December 31, 2025. Operating cash flow was NT$85.69 billion in the first nine months, against NT$66.86 billion a year earlier. Capital expenditure on property, plant and equipment was NT$32.61 billion over the period, and UMC paid NT$32.70 billion in cash dividends and repurchased NT$3.10 billion of treasury stock. Management said it will keep investment disciplined while meeting customer demand and acknowledged that the expansion will add depreciation over the coming years.
