UMC, Vanguard: Great expectations but on false assumptions?

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UMC, Vanguard: Great expectations but on false assumptions?

27 July 2026

Asia Semiconductors & Global Memory

UMC and Vanguard have rallied by c. 150% & 65%, respectively, YTD on the thesis of price Mark Li

+852 2123 2645 increase & spillover demand from TSMC (Exhibit 1). Expectations are great, but we find on

mark.li@bernsteinsg.com false assumptions.

Yipin Cai, CFA “We are increasing our mature node capacity”, said TSMC. We believe TSMC is indeed

+852 2123 2669 phasing out its two oldest fabs (Fab 2 (6”) & Fab 5 (8”)), but even if the demand all moves to yipin.cai@bernsteinsg.com

UMC & Vanguard, it’d represent only 8-13% of their combined 6” & 8” capacity, or 4-6% of

Edward Hou, CFA their total capacity (Exhibit 2). Moreover, in the most recent earnings call, TSMC confirmed it

+852 2123 2623 is expanding mature-node capacity in Japan & Europe. The demand spilled over from TSMC,

edward.hou@bernsteinsg.com if any, is hardly meaningful.

Raising prices in 2027 amid high memory cost? UMC & Vanguard successfully raised

prices this year & some expect more to come, citing hikes from other foundries. Chinese

foundries benefit from localization & PSMC (6770 TT, not covered) sold a fab to Micron.

With their fabs fully utilized for a while, their price hikes are well-supported, but these

factors don’t apply to UMC & Vanguard. More importantly, “the mature node demand … is

not that strong”, said TSMC and we further worry the demand will be eventually hurt by high

memory costs.

Between UMC & Vanguard, we find Vanguard relatively better. TSMC indicated

mature-node demand is sluggish, but power management IC & CMOS image sensor are

exceptions. With over 75% of its revenue from power management (Exhibit 11), Vanguard

is thus relatively better positioned than UMC.