Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 29, 2026 · Beat 4 of last 7 quarters
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UMC's results confirm that the AI infrastructure buildout is expanding beyond leading-edge compute into specialty areas like power management, connectivity, and silicon photonics, which are now driving meaningful growth for mature-node foundries. The company's capacity expansion and advanced packaging investments signal sustained demand for AI-related components, reinforcing the buildout's breadth across the semiconductor supply chain.
UMC reported Q2 2026 revenue of TWD 68.73 billion, up 12.6% sequentially, with gross margin expanding to 32.5% and utilization rising to 85%. Net income was TWD 42.26 billion (EPS TWD 3.39), boosted by TWD 30 billion in non-operating investment and dividend income. 22/28nm revenue reached a record 37% of sales, with 22nm at 17.5%. The company announced its first mass production delivery of a 12-inch photonics IC and plans to launch its silicon photonics platform for general customer use in 2027. Management raised 2026 CapEx to USD 2.0 billion and announced cleanroom expansion at Singapore P4 and a new fab in Tainan, executed in phases.
Management guided Q3 2026 wafer shipments up high single digits, ASP firm in USD, gross margin in the mid-30% range, and utilization above 90%. The 2026 CapEx budget was raised to USD 2.0 billion from USD 1.5 billion to support cleanroom expansion at Singapore P4 and a new fab in Tainan, with the Board approving the plan. Management expects AI-related revenue to reach approximately USD 300 million in 2026 and exceed USD 1 billion within three years, driven by silicon photonics, advanced packaging, power management, and connectivity. They see a more constructive pricing environment with annual pricing trend better than anticipated and more meaningful uplift expected in 2027. Depreciation is expected to increase by low teens annually for at least the next two years, pressuring gross margin, while EBITDA margin should improve steadily.
“The current revenue for 2026 is projected to close to approximately $300 million for this year. And looking ahead, in 3 years, we expect the AI exposure to exceed USD 1 billion.”
on AI revenue target
“So we will not categorize the current environment as a full-blown broad-based recovery yet. In the near term, we do acknowledge that consumer segment, including the handset, PC and notebook will experience a year-over-year decline.”
on Demand outlook
“We are not trying to maximize the short-term pricing based on the market cycle. Instead, we focus on maintaining a sustainable business model through value-based pricing that reflects our differentiated technology, manufacturing capability and long-term partnership with customers.”
on Pricing strategy
Does UMC have any indication or target of AI-related revenue? And can you give a breakdown of products?
AI-related business is driven by specialty semiconductor solutions including power management, connectivity, FPGA, advanced packaging, and silicon photonics. AI revenue is projected to be ~$300 million in 2026 and exceed $1 billion in three years.
Could you talk about the capacity expansion plan at Singapore P4 and the new fab in Tainan? What are the milestones and scale?
Expansion is driven by AI data center growth in connectivity and power, automotive electrification, and emerging applications. Singapore P4 cleanroom will support silicon photonics; Tainan 12A P7/P8 will support advanced packaging. Execution will be phased based on customer commitments. Construction lead time is ~20 months, with production ramp expected late 2027/early 2028.
Are you concerned about chip inventory accumulation at your customers given end market weakness?
We are cautious but not worried. DOI rose slightly in Q1, driven by HPC and early stocking due to memory prices. Smartphone and consumer DOI rising indicates weak end market. We expect semiconductor sales to stay strong in 2026, driving DOI up a few days, but we are tracking it.