United Microelectronics Earnings Call Highlights Mixed Tailwinds

United Microelectronics ((UMC)) has held its Q4 earnings call. Read on for the main highlights of the call.

United Microelectronics Strikes Constructive Tone Despite Margin Headwinds in Latest Earnings Call

United Microelectronics (UMC) delivered a cautiously upbeat message in its latest earnings call, underscoring solid shipment growth, improving product mix and disciplined capital spending, even as management acknowledged near-term margin pressure from higher depreciation, inflation and selective price concessions. Overall, the narrative leaned positive, with management positioning 2026 as a growth year supported by advanced-node and specialty-technology momentum, while investors are asked to look through some earnings volatility as strategic projects ramp over the next several years.

Q4 Revenue Growth Signals Stabilizing Demand

UMC’s fourth quarter of 2025 showed signs of stabilizing demand, with consolidated revenue reaching TWD 61.81 billion, up 4.5% quarter-on-quarter. This sequential improvement suggests that the business is emerging from the industry downturn with healthier order patterns. The Q4 performance reflects a combination of better utilization, firm demand in key segments and an improved product mix, giving investors some confidence that the company has passed the bottom of the cycle.

Stronger Q4 Margins and Profitability

Profitability in Q4 2025 improved meaningfully, with gross margin rising to about 30.7% and gross profit at TWD 18.95 billion. Net income attributable to shareholders was around TWD 10.05–10.06 billion, translating into earnings per share (EPS) of TWD 0.81. The return to a 30%-plus gross margin underscores better manufacturing efficiency and product mix, even before the full benefit of newer technologies and more favorable pricing fully materializes.

Full-Year Shipment and USD Revenue Growth Underscore Volume Momentum

For full-year 2025, wafer shipments climbed 12.3% year-on-year, while revenue in U.S. dollars increased 5.3%. This divergence between shipment growth and USD revenue growth points to some pricing and mix challenges, but still indicates solid volume momentum. The figures suggest that UMC continued to gain traction with customers and keep fabs relatively busy in a still-recovering semiconductor cycle.

Steady Full-Year Revenue, Solid Earnings and Strong Balance Sheet

UMC’s 2025 revenue reached TWD 237.5 billion, up 2.3% from the prior year. Net income attributable to owners was approximately TWD 41.7 billion, implying a net income rate of around 17.6%, and full-year EPS came in at TWD 3.34. The company maintained a robust financial position, with cash on hand exceeding TWD 110 billion and total equity at TWD 379.8 billion, providing ample flexibility to fund capex, sustain dividends and navigate market volatility.

22nm Surge and Healthier Product Mix

A key highlight was the continued strength in 22-nanometer, where Q4 revenue jumped 31% quarter-on-quarter to a record level and accounted for more than 13% of total revenue. Combined, 22nm and 28nm represented 36% of Q4 revenue, up about 3 percentage points year-on-year. This shift toward more advanced, higher-value nodes supports a firmer average selling price (ASP) outlook and bodes well for medium-term margin resilience as demand for these nodes broadens.

Specialty Technologies Anchor a Diversified, Higher-Value Portfolio

Specialty technologies now account for roughly half of UMC’s overall revenue, underscoring its differentiation beyond commoditized nodes. Within this, embedded high-voltage solutions contribute around 30% of specialty revenue, highlighting a strong foothold in power-related and mixed-signal applications. This diversified, higher-value portfolio helps buffer the company against cyclical swings in any single end market and underpins its strategy to focus on specialty and mature nodes rather than leading-edge scaling.

Shifts in Geographic and IDM Customer Mix

UMC’s customer base is evolving, with integrated device manufacturer (IDM) accounts rising to 19% of full-year revenue, up three percentage points. Geographically, North America’s share slipped from 25% in 2024 to 22% in 2025, while Asia and Europe gained share. This shift may reflect softer trends at some U.S. customers but also broadening adoption across other regions. A more balanced regional footprint can reduce concentration risk and offer more stable revenue streams over time.

CapEx Discipline and Singapore Expansion Set Up Future Capacity

The company reiterated a disciplined capital spending approach, guiding cash-based CapEx at USD 1.5 billion for 2026, slightly below the USD 1.6 billion spent in 2025. UMC has completed Phase III of its Singapore Fab 12i, with capacity expansion slated to begin in the second half of 2026 and ramp into 2027. This measured capacity build supports supply-chain diversification and ensures that new capacity better aligns with demand rather than exacerbating industry oversupply.

Strategic Technology Partnerships Point to Multi-Year Growth Engines

UMC highlighted progress on several strategic initiatives. Its 12-nanometer collaboration with Intel remains on track, with process design kits and IP delivery expected in 2026 and tape-outs in 2027. In parallel, the company is building momentum in silicon photonics with 12-inch PIC pluggable products and expanding its advanced packaging capabilities, with more than 20 new advanced packaging tape-outs expected in 2026. While revenue from these programs will ramp over 2026–2027, they represent important long-term growth and margin drivers.

Improved EBITDA Margin and Ongoing Efficiency Drive

Management reported an improvement in 2025 EBITDA margin compared with 2024, crediting both product-mix improvement and operational initiatives. These include cost reduction programs, productivity enhancements and efficiency measures designed to counter inflationary pressures on labor, materials and utilities. Such initiatives are crucial as higher depreciation and input costs threaten to squeeze profitability in the near term.

Full-Year EPS Decline Highlights Profitability Pressure

Despite higher shipments and modest revenue growth, EPS declined to TWD 3.34 in 2025 from TWD 3.80 in 2024. This underscores the impact of higher costs, pricing pressure and currency or mix effects, and shows that volume growth alone has not yet fully translated into improved per-share earnings. For investors, the drop in EPS serves as a reminder that UMC is still managing through the later stages of the downcycle and absorbing elevated depreciation from recent investments.

Near-Term Margin Pressure and Q1 2026 Outlook

Management flagged that margins will come under pressure in the near term. For Q1 2026, UMC expects gross margin to fall to the high-20% range, down from around 30.7% in Q4, driven mainly by higher depreciation and inflationary production and material costs. Depreciation is projected to rise at a low-teens percentage rate in 2026 and could peak this year or next, creating a temporary drag on profitability even as demand trends improve.

Utilization and Capacity Constraints Temper Upside

UMC reported utilization of roughly 78% in Q4 but guided to the mid-70% range for Q1 2026. Capacity was flat quarter-on-quarter and is set to decline by about 1% near term due to maintenance, with only a modest 1.2% year-on-year capacity increase expected in 2026. The company also noted that its Xiamen fab is running at full capacity, limiting headroom in that region. These factors mean that short-term upside will be constrained more by capacity and utilization dynamics than by demand alone.

Uncertain ASP Upside Amid Pricing Negotiations

While management anticipates a more favorable ASP environment in 2026, they stressed that pricing discussions are ongoing and declined to quantify node-specific price changes. The magnitude of ASP improvement will depend on utilization levels, product mix and negotiations with key customers. This introduces some uncertainty over how much of the expected demand and mix improvement will flow through to revenue and margins.

Mixed Pricing Actions and Targeted Concessions

UMC acknowledged that it has taken mixed pricing actions, including one-time price concessions for certain strategic customers to help them defend market share. These targeted adjustments could cap near-term ASP and margin expansion in specific product lines. However, management appears to view these concessions as strategic, aimed at preserving long-term relationships and volumes that support fab loading and future growth.

Execution and Timing Risks in New Growth Areas

The company was candid about the execution and timing risks associated with advanced packaging, silicon photonics and the Intel 12nm program. These initiatives have multi-year ramp timelines, with tape-outs and commercial ramping expected mainly in 2026–2027. As a result, their near-term revenue contribution will be limited and dependent on successful qualification, customer adoption and end-market demand, leaving some uncertainty around the exact timing of earnings uplift.

Forward-Looking Guidance and 2026 Outlook

Looking ahead, UMC guided for Q1 2026 wafer shipments to be flat quarter-on-quarter, with ASPs in U.S. dollars remaining firm, gross margin in the high-20% range and utilization in the mid-70% range. For full-year 2026, cash-based CapEx is set at about USD 1.5 billion, with overall capacity expected to grow roughly 1.2% year-on-year. Singapore Phase III capacity will be deployed in the second half of 2026 and ramp into 2027. Management expects depreciation to increase at a low-teens pace and potentially peak in the next year or so. Despite these cost headwinds, UMC expressed confidence that 2026 will be a growth year, aiming to outgrow its addressable market, which it sees expanding at a low single-digit rate, while the broader foundry market is expected to grow in the low-20% range.

In sum, United Microelectronics delivered a measured but constructive earnings call, balancing evidence of improving demand, stronger product mix and disciplined capex with realistic acknowledgment of margin pressure and execution risks. Volume growth, specialty technologies and strategic partnerships are setting up multi-year opportunities, even as higher depreciation, selective price concessions and modest capacity gains temper near-term profit expansion. For investors, UMC’s story is increasingly one of stable balance sheet strength and gradual structural improvement, with 2026 positioned as a transition year toward more sustainable growth.