Taiwan's second-largest chipmaker starts mass production in Singapore; Citi sees improving outlook

Taiwan's United Microelectronics Corporation (UMC), the second-largest contract chipmaker in the country, has officially commenced mass production of silicon photonics wafers at its facility in Singapore. This strategic move comes as a response to the surging demand for high-speed optical interconnects, particularly in AI and hyperscaler data center networks. In collaboration with SILITH Technology, a local fabless chip design firm, UMC has successfully transitioned its silicon photonics platform from development to production in just 18 months. This advancement is expected to enhance the infrastructure needed for next-generation AI technologies. Furthermore, UMC plans to introduce its own 12-inch silicon photonics platform for customer product development by the year 2027. Analysts at Citi have expressed optimism regarding UMC's prospects in the latter half of the year, predicting a 13% increase in sales quarter-on-quarter for the second quarter of 2026, alongside a recovery in gross margins. UMC's strong financial performance supports this positive outlook, with June sales skyrocketing by 22.85% year-on-year, totaling NT$23.12 billion (approximately $719.21 million), and cumulative sales for the first half of the year up by 11.28%. Despite a nearly 5% drop in stock prices during Tuesday's trading session in Taiwan, UMC later mitigated some losses, closing down by 1.6%. This development is part of a larger trend among Taiwanese technology companies expanding their manufacturing capabilities in Singapore, which is rapidly establishing itself as a crucial hub in the global semiconductor supply chain. Key players in this growing ecosystem include King Yuan Electronics Corp and Vanguard International Semiconductor Corporation, the latter of which has recently teamed up with the Netherlands-based NXP Semiconductors to establish a $7.8 billion production facility in Singapore. The silicon photonics market is projected to reach approximately $3.71 billion by 2026, driven by increasing data traffic and the demand for faster optical communication technologies, according to Polaris Market Research.