United Microelectronics Corp. (NYSE:UMC) stock fell Wednesday after the Taiwan-based semiconductor foundry reported third-quarter 2026 earnings and revenue that missed Wall Street expectations.
Quarterly revenue rose 25.6% year over year to 74.24 billion New Taiwan dollars ($2.32 billion), below the analyst consensus estimate of $2.35 billion. Revenue increased 8% from the previous quarter.
The company reported earnings of 21 cents per American depositary share, missing analysts’ expectations of 23 cents.
United Microelectronics’ Margins and Utilization Improve
Gross margin expanded to 34% from 29.8% a year earlier, while operating margin increased to 25.1% from 18.8%, reflecting improved profitability.
Capacity utilization rose to 92%, compared with 85% in the previous quarter and 78% a year earlier.
The company’s 22- and 28-nanometer process technologies accounted for 35% of wafer revenue, down from 37% in the second quarter and unchanged from a year earlier.
The 40-nanometer technology segment contributed 16% of wafer revenue, up from 15% in the previous quarter but down from 17% a year earlier.
Capital expenditures totaled $373 million during the quarter.
CEO Jason Wang said broad-based customer demand, higher factory utilization and continued strength in advanced specialty technologies supported the company’s third-quarter performance.
Strong Demand Drives Record Wafer Shipments
Wang said healthy demand across all market segments lifted wafer shipments 7.3% to a company record of more than 1.2 million 12-inch-equivalent wafers.
Overall factory utilization reached 92%, with several 12-inch facilities operating at full capacity and 8-inch operations showing a strong recovery.
The company’s 22- and 28-nanometer business also delivered another record quarter. Revenue from 22-nanometer products reached 18.3% of wafer sales, supported by new customer products, including display drivers, automotive radar and Wi-Fi chips.
UMC expects to enter 2027 with high factory utilization, improving pricing prospects and growing demand for artificial intelligence-related specialty technologies. However, capacity constraints and rising costs remain challenges as the company expands production.
Wang identified AI as a key growth driver across power management, field-programmable gate arrays and connectivity applications.
He also highlighted silicon photonics and advanced packaging as emerging growth opportunities as AI infrastructure requires faster optical connections, improved power delivery and greater memory bandwidth.
Beyond AI, UMC expects market share gains among customers in premium smartphones, automotive, industrial and other specialty applications to support growth.
Wong also warned that the outlook for mid- and low-end smartphones is weaker than for other markets. However, he said UMC has relatively limited exposure to the budget smartphone segment, helping shield the chipmaker from softer demand in that category.
See More:
Top Value Stocks
UMC Expects Pricing to Drive Growth in 2027
Wang expects UMC’s growth in 2027 to shift from primarily higher shipment volumes and factory utilization toward increased revenue per wafer and a richer technology mix.
The company expects its blended average selling price to increase at least 10% year over year in 2027, supported by tighter capacity, pricing improvements and a higher-value product mix.
Management said customers recognize the tightening supply environment and rising input costs, supporting ongoing pricing negotiations.
UMC Accelerates Capacity Expansion
UMC’s board approved an additional $3.2 billion in capital expenditures to accelerate expansion in Singapore and Tainan as customer programs move from development to production faster than expected.
Wang said planned capacity includes approximately 18,000 wafers per month for silicon photonics, 22,000 for DTC and silicon capacitors, and 20,000 for modulators.
The next phase of expansion is expected to begin in late 2028, with production capacity increasing through 2030.
UMC also highlighted its collaboration with Hyperlight, an early adopter of its modulator technology, and said interest has expanded to additional customers.
Capacity Constraints and Rising Costs Pose Challenges
Management said demand for certain AI-related technologies already exceeds available production capacity, potentially limiting unit growth in 2027.
UMC is working to remove production bottlenecks and convert existing facilities to support higher-value products.
Wang also warned of rising raw material costs and increased depreciation expenses associated with the company’s capital investments.
Although improved pricing and factory utilization are expected to support profitability, those cost pressures could prevent gross margins from returning to previous peaks.
Fourth-Quarter Outlook
For the fourth quarter, UMC expects wafer shipments to increase by a low-single-digit percentage from the previous quarter, while average selling prices in U.S. dollars are expected to remain stable.
The company expects gross margin to remain comparable to the third quarter, with capacity utilization holding in the low-90% range. UMC also reiterated its 2026 capital expenditure forecast of $2 billion.
UMC Price Action: United Microelectronics shares were down 0.51% at $19.35 during premarket trading on Wednesday, according to Benzinga Pro data.
Photo via Shutterstock
