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The chipmaker is accelerating expansions in Singapore and Tainan to chase AI demand, and its stock fell around 9% the next day

Wed 11 Nov 2026 · 17:07 EST · 3 min read

In Technology

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United Microelectronics Corporation (UMC) wants a bigger piece of the AI buildout, and it is willing to pay for it.

On October 28, 2026, the company approved an additional capital expenditure budget of approximately $3.2 billion to speed up facility expansions in Singapore and Tainan, Taiwan. Investors responded the way investors often do when a company announces it will spend billions: they sold first and asked questions later.

The new money sits on top of UMC’s existing $2 billion cash-based CAPEX outlook for 2026, which the company maintained. Put simply, UMC isn’t swapping out its old spending plan. It is stacking a much larger one on top.

What UMC is building, and what it reported

The expansions are aimed at specialized technologies that matter for AI infrastructure. These include advanced packaging, silicon photonics, silicon capacitors, and lithium niobate modulators.

Silicon photonics uses light instead of electrical signals to move data between chips. Lithium niobate modulators help encode data onto light signals, a building block for faster optical connections.

None of this will arrive overnight. UMC expects initial production ramps from the expansions by late 2028, with full capacity reached by 2030.

The announcement came alongside UMC’s third-quarter 2026 earnings, which gave management a fairly strong backdrop for asking shareholders to be patient. The company reported record wafer shipments for the quarter.

Revenue reached NT$74.24 billion, up 25.6% year-over-year and 8% from the prior quarter. Operating margin came in at 25.1%.

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Capacity utilization was 92%. In plain terms, UMC’s factories were running close to full, which helps explain why the company wants more of them.

The 22nm process contributed 18.3% of total wafer sales in the quarter.

Management’s pitch for the long haul

UMC paired the spending news with forward-looking projections meant to justify the outlay.

Management projects approximately 10% year-over-year growth in blended average selling price (ASP) in 2027. Blended ASP is essentially the average price UMC gets per wafer across its product mix, so rising ASP suggests the company expects to sell more valuable products or command better pricing.

The company also expects AI-related revenue to exceed 25% of total revenue by 2029.

Why the stock dropped anyway

Despite record shipments and revenue growth north of 25%, UMC shares fell around 9% on October 29, the day after the announcement. The concern centered on margin pressure.

The logic is straightforward. New fabs and equipment get depreciated over time, and that depreciation shows up as a cost on the income statement. Add higher operating expenses during an expansion, and profitability can get squeezed before the new capacity generates any revenue.

What this means for investors and the foundry landscape

For shareholders, the question is one of timing. The costs of this expansion arrive relatively soon, while the payoff is scheduled for late 2028 through 2030.

The 92% utilization rate is a reasonable argument for expanding. A business running near capacity has limited room to take on new orders without adding factory space.

The specific technologies UMC is targeting focus on specialized areas like optical interconnects, packaging, and components such as silicon capacitors. AI infrastructure isn’t only about the processors themselves — data centers need ways to connect chips, move data efficiently, and package components together, and those are the niches UMC is pointing its capital toward.

There are a few concrete markers to watch. The first is whether the projected roughly 10% blended ASP growth in 2027 materializes. The second is the trajectory of operating margin from its 25.1% level as expansion costs begin to hit. The third is progress toward the goal of AI-related revenue topping 25% of total revenue by 2029. Finally, the late 2028 production ramp in Singapore and Tainan is the milestone that turns spending into sales.

Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.

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