United Microelectronics Q2 Earnings Call Highlights AI Expansion Plans

UMC Posts Strong Q2 Results

UMC delivered second-quarter earnings of 54 cents per ADS, surpassing the Zacks Consensus Estimate of 16 cents. Revenues reached $2.18 billion, beating the Zacks Consensus Estimate of $2.06 billion.

The company reported consolidated revenues of NT$68.73 billion, up 12.6% sequentially and 17% year over year. Gross margin improved to 32.5%, while operating income increased 32.6% quarter over quarter to NT$14.95 billion.

UMC’s wafer shipments increased 10.6% sequentially to 1.129 million 12-inch equivalent wafers, lifting utilization to 85% from 79% in the previous quarter. Revenues from 22nm and 28nm technologies reached a record level, representing 37% of wafer revenues.

United Microelectronics Targets AI Growth Opportunities

CEO Jason Wang said UMC expects AI-related business to expand through solutions including power management, connectivity, FPGA, advanced packaging and silicon photonics. He stated that AI-related revenues are projected to approach $300 million in 2026 and exceed $1 billion within three years.

Wang noted that AI demand is broadening beyond computing into memory, connectivity and power requirements. He said UMC’s specialty semiconductor portfolio positions the company to participate in these emerging opportunities.

UMC’s CEO also identified silicon photonics and advanced packaging as key long-term growth areas, with these businesses expected to expand its addressable market.

UMC Expands Capacity Plans

UMC increased its 2026 capital expenditure budget to $2 billion from the previous $1.5 billion plan. The company said spending will support cleanroom expansion at its Singapore P4 facility and construction of a new fab foundation in Tainan, Taiwan.

Wang explained that expansion will be executed in phases based on market validation and customer commitments. The approach is intended to provide capacity flexibility while maintaining capital discipline.

CFO Chi-Tung Liu said the board approved nearly $5 billion of investment across 2026 and 2027, with additional phases dependent on customer demand and execution milestones.

United Microelectronics Guides for Higher Utilization

United Microelectronics expects third-quarter wafer shipments to rise by high single digits, with U.S. dollar ASP remaining firm. Management guided for capacity utilization above 90% and gross margin in the mid-30% range.

Wang said demand strength is being supported by power management ICs, sensors and microcontrollers. He also noted that UMC’s 8-inch portfolio is seeing a strong rebound, while mature 12-inch capacity remains well utilized.

CFO Liu said higher utilization is the primary driver behind expected gross margin improvement, although depreciation from new facilities will affect margin progression as expansion projects advance.

UMC Addresses Margin & Demand Questions

During the Q&A, a JPMorgan analyst asked whether improving utilization could allow gross margins to exceed prior cycle highs. Liu said UMC expects EBITDA margins to improve steadily, while gross margins will depend on depreciation expenses from new capacity investments.

A Morgan Stanley analyst questioned customer inventory levels amid uneven semiconductor demand. Wang said UMC remains cautious but does not view current inventory conditions as a level requiring concern.

Management also said pricing discussions with customers have become more constructive as industry conditions improve, with stronger pricing trends expected in 2027.

United Microelectronics Maintains Strategic Focus

UMC highlighted silicon photonics as a differentiating technology, noting its 12-inch platform is designed to provide stronger process control and performance benefits. The company also discussed expanding advanced packaging capabilities across multiple applications.

Management said advanced packaging engagement includes more than 10 active customers and more than 35 products under discussion. The company expects future capacity additions to support these opportunities as demand develops.

UMC ended the quarter with cash and cash equivalents of NT$124.71 billion and generated NT$23.97 billion in free cash flow during the period.

Zacks Rank & Style Scores Signals

UMC currently sports a Zacks Rank #1 (Strong Buy), reflecting favorable earnings estimate revision trends under the Zacks Rank methodology. The Zacks Rank may change as analysts revise earnings expectations following new company results. You can see the complete list of today’s Zacks #1 Rank stocks here.

The stock has a Value Score of C, Growth Score of C, Momentum Score of A and VGM Score of B. Zacks Style Scores range from A to F and evaluate value, growth and momentum characteristics, with stronger scores representing more favorable attributes in each category.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research