United Micro: Overstretched Valuation Amid Weakening Consumer Demand and Limited Upside from TSMC Capacity Rationalization, Justifying Sell Rating

Bank of America Securities analyst Mike Yang reiterated a Sell rating on United Micro yesterday and set a price target of $6.80.

Mike Yang has given his Sell rating due to a combination of factors tied to United Micro’s demand outlook, capacity utilization, and valuation. While he acknowledges a better-than-expected first quarter 2026 driven by earlier inventory replenishment, he believes this is a temporary boost rather than the start of a sustained upcycle. With roughly four-fifths of revenue linked to consumer-oriented chips, he expects weakening consumer electronics demand in 2026 to drag on wafer shipments from the second quarter onward, even if product mix improvements offer modest pricing support.
At the same time, Yang argues that potential benefits from legacy-node capacity rationalization at TSMC are likely to bypass UMC because TSMC is prioritizing reallocating customers within its own mature fabs or upgrading them technologically. As a result, UMC’s fabs are projected to remain only partially utilized, limiting its ability to pass higher costs through to customers. Although he slightly raises his earnings forecasts and price objective, he projects only low single‑digit earnings growth in 2025–2027, which he views as inconsistent with the stock’s recent run-up to about 20x 2027 earnings. In his view, the market has become overly optimistic about incremental business from TSMC and co-packaged optics themes, leaving the current valuation stretched and justifying a Sell (Underperform) recommendation.