UMC (2303.TW): Stronger near-term fundamentals with AI upside in the longer term

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UMC (2303.TW): Stronger near-term fundamentals with AI upside in the longer term

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29 Jul 2026 12:01:03 ET │ 18 pages

UMC (2303.TW)

Stronger near-term fundamentals with AI upside in the longer term

CITI'S TAKE

UMC delivered a solid 2Q26, with revenue rising 12.6% QoQ to NT$68.7bn,

GM to 32.5%, and UTR up to 85% from 79% in 1Q26. Management guided

3Q26 wafer shipments to grow by high-single-digit %, UTR to reach low- Buy

90%, and GM improving to mid-30% range, supported by PMIC, sensors Short-Term View: Upside

and MCUs. More importantly, UMC is repositioning its portfolio toward AI-

Price (29 Jul 26 13:30) NT$102.50related specialty technologies, including silicon photonics, advanced

packaging, connectivity and power management. AI revenue is projected to Target price NT$125.00↑

approach US$300mn in 2026 and exceed US$1bn within three years. While from NT$88.00consumer demand remains mixed, improving UTR and more constructive

pricing trend should support earnings growth, partly offset by higher Expected share price 22.0%depreciation from new capacity investments. return

Expected dividend yield 3.5%

Capex shifts toward silicon photonics and advanced packaging — UMC raised its Expected total return 25.5%2026 capex budget from US$1.5bn to US$2bn and approved roughly US$5bn of

investment over the next 2-3 years. The new investment targets AI-related specialty Market Cap NT$1,289,141M

opportunities. Singapore expansion will support silicon photonics, power- US$39,820M

management processes and related specialty technologies, while the new Tainan

facility will provide infrastructure for advanced packaging. Unlike a standardized

platform such as CoWoS, UMC’s strategy is to offer flexible packaging capabilities.