United Microelectronics Corporation (NEW)

Welcome everyone to UMC's 2025 Fourth Quarter Earnings Conference Call. All lights have been placed on mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask a question. For your information, this conference call is now being broadcast live over the internet. Webcast replay will be available within two hours after the conference is finished. please visit our website, www.umc.com, under the Investor Relations, Investors Events section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.

Thank you and welcome to UMC's conference call for the fourth quarter of 2025. I am joined by Mr. Jason Wong, President of UMC. and Mr. Chi-Dung Liu, the CFO of UMC. In a moment, we will hear our CFO present the fourth quarter financial results, followed by our President's key message to address UMC's focus on the first quarter 2026 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website. www.unc.com under the Investors' Financials section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that will cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of this risk and uncertainties, please refer to our recent and subsequent filings with the SEC and the IOC security authorities. During this conference, you may view our financial presentation material, which is being broadcast live through the internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Dung Liu. to discuss UNC's fourth quarter 2025 financial results.

Thank you, Michael. I'd like to go through the 4Q25 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on page four, the fourth quarter of 2025, consolidated revenue was 61.81 billion NT, with a gross margin around 30.7%. The net income attributable to the stockholder of the parent was 10.06 billion NT, and the earnings per ordinary shares was 0.81 NT dollars. Utilization rate in the fourth quarter stayed the same as the previous one, around 78 percent. For the sequential comparison, revenue grew 4.5 percent quarter-over-quarter to 61.8 billion NT. Gross margin improved to over 30% to now 30.7%, or gross margin of $18.95 billion NT. And the non-operating income remained similar to that of last quarter. And the net income overall attributed to shareholder of the parent is around 10.05 billion NT or EPS of 0.81 in Q4 of 2025. For year-over-year comparison on page six, revenue grew by 2.3 percent to reach 237.5 billion NT for the whole year of 2025. Post-margin rate is around 29 percent or 68.9 billion NT And for the net income attributable to the shareholder of the parent for year 2025 is around 41.7 billion NT or 17.6 percent net income rate. EPS for 2025 was 3.34, which is a decline compared to that of 3.8 in 2024. On page seven, our balance sheet at the end of 2025, cash amounts due more than 110 billion NT with total equity of the company is now 379.8 billion NT dollars at the end of 2025. For ASP on page eight, you can tell for the last three quarter or four, it pretty much remained similar level for our blended ASP for throughout the 2025. For revenue breakdown on page nine, for quarterly comparison, the change is mainly showing in the increase in Asia and Europe with now North America represents about 21% in Q4 of last year. For the full year breakdown on page 10, the change is similar. We see North America dropped from 25% in 2024 to 22% in 2025. For page 11, IDM for Q4 revenue still represent about 20 percent, almost no change. But for the full year number on page 12, IDM account for 19 percent, increased by three percentage points to 19 percent in 2025. For quarterly revenue breakdown by application, it remains almost similar quarter over quarter on page 13. For the annual performance on the application breakdown on page four, consumer increased by three percentage points to 31% from 28% in the previous year. And we continue to see 22 nanometer to be our key driver of growth for the recent quarter and also forward-looking as well. So 22 and 28 revenue in Q4-25 now represents 36 percent of the total revenue pool. On page 16, for the full year, the increase of 22 and 28 revenue is three percentage points, and we also show about two percentage point increase in 40 nanometer on a year-over-year comparison. Capacity remains flat. quarter-over-quarter comparison base, but it was declined by roughly 1% due to the annual maintenance schedule. On page 18, our latest forecast for 2026 KPAC plan is around $1.5 billion, which is slightly declined from $1.6 billion in the year of 2025. The above is a summary of UMC's results for Q4 2025. More details are available in the report, which has been posted on our website. I will now turn the call over to President of UMC, Mr. Jason Wong. Thank you, Chih-Tung. Good evening, everyone.

Here I would like to share UMC's fourth quarter results. In the fourth quarter, Our results were in line with the guidance. With the flat-ish wafer shipments amid mild demand across most markets, the 4.5% revenue increase during the quarter was supported by favorable foreign exchange movements as well as a sequential growth in our 22 and 28-nm systems, which continues to improve our product mix. With the 22 and 28-nm segment, 22-nm, revenue increased 31% quarter-on-quarter to a record high, accounting for more than 13% of total fourth-quarter revenue. Looking at the four-year, UMC delivered solid performance in 2025, with Sherman increasing 12.3% and revenue in U.S. dollar up 5.3% year-on-year. Going into the first quarter of 2026, we expect waiver demand to remain firm UMC is confident that 2026 will be another growth year as a tape-out on our 22-nm platform accelerate, and other new solutions continue to gain business traction. We have been working hard to lay the foundation for our next phase of growth, investing for the future in both capacity and technology. In 2025, we complete the phase new Phase III facility at our Singapore F12I, which is already playing a central role in supporting customers to diversify supply chain. At the same time, we are striving to expand our footprint in the U.S. through an innovative yet cost-effective mode of partnerships, such as our 12-millimeter cooperation with Intel and the recently announced MOU with the Polar Semiconductor. The leadership UMC has built over the past few years across specialty technologies, including embedded high voltage, non-volatile memory, and VCB, has and will continue to sustain sustainable business growth. Looking ahead to 2026 and beyond, we expect advanced packaging and silicon photonics to serve as new growth catalysts. positioning UMC to address the evolving needs of a high performance of application across AI, networking, consumer, automotive, and more. Now let's move on to first quarter 2026 guidance. Our weight for shipment will remain flat. ASP in US dollars will remain firm. Source margin will be approximately in the high 20% range. capacity utilization rate will be in the mid-70% range. Our 2026 cash-based CapEx budget will be US $1.5 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions.

Yes, thank you, President Wang. And ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, please press star key and number one on your telephone keypad and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star key and number two to cancel the question. Now please press star one on your keypad to ask the question. Thank you. Now first question will be coming from Sunny Ling, UBS. Go ahead, please.

Good afternoon. Thank you very much for taking my questions. So I have a few questions. Number one, Jason, may we have your thoughts on overall market outlook for 2026, and then for Semi versus Foundry, and if UMC can continue to outgrow your addressable market for this year?

Sure. Well, for 2026, We expect AI-related segment remain as the primary growth driver in SEMI industry. And furthermore, with the continuous commercial deployment of HAI applications, demand for chip using a general-purpose server is also expected to rise. In contrast, the adverse effect of memory supply imbalance could put some pressure on specific consumer electronics, but overall, the semiconductor industry is projected to grow by meetings in 2026. The question for foundry market, we believe that AI demand will remain strong and is the main contributor behind the low 20% growth projection in the foundry market this year. On the other hand, although the memory pricing may impact demand of the foundry market at this time, We, the UMC, we estimate that our addressable market will grow by low single-digit percentage, and UMC's growth was expected to outperform the average growth of our addressable market.

Got it. Thank you very much, Jason. So then my second question is on pricing. Lots of discussions, and obviously Chinese peers are raising pricing. So how should we think about the pricing outlook for mature foundry and for UMC through 2026? Will UMC be able to start to provide better value? And if yes, which product categories should we expand more upside from here?

Okay, well, we do anticipate a more favorable ASP environment in 2026 versus 2025. This outlook really reflects our disciplined pricing strategy and the positive impact from multiple reasons, product mix optimization, loading improvement, and reduced exposure to more commoditized market segments. As you're referring to China players, we expect the strong growth momentum in our 22 nanometer demand to support our product mix in 2026 as well. Overall, our pricing strategy remains consistent and is anchored to the value where we deliver technology differentiation and manufacturing excellence. So we do think the 2056 pricing environment is more favorable now. Now, the question about which product, and I mean, we don't comment pricing on specific product or any specific note. But in general, we do see the environment is more favorable now.

No problem. That's very helpful. And then a follow-up would be on the overall industry supply versus demand for the coming few years. Here you can see on the recent earnings conference talk about the plan to optimize capacity for mature nodes to better support cloud AI demand in coming few years. So from your perspective, how should we think about the opportunity here Are you excited to see more client engagement for new products in the coming few years?

We're always excited to see more customer engagement. But more importantly is we need to prepare ourselves to cope with the market dynamics, and we welcome any opportunity to support our customers. So we view this landscape shift as an opportunity to further optimize our product mix and gradually improve ASP and margin as well.

Nope, got it, got it. And then maybe lastly, just on your Singapore expansion, how quickly are you planning to ramp capacity in 2026 and in 2027? And how should you think about the differentiations of products that you have for Singapore versus the Taiwan capacities for 22 and 28 nanometer? And then with that, how should we forecast the depreciation in 2026 and 2027?

Well, first of all, for the year of 2026, the capacity increase will be around 1.2% year-over-year for us. And for our Singapore facility, the expansion will start in the second half of 2026. And we'll capacity deployment rent from second half of 2026 will continue into the 2027. In terms of the note available in our Singapore facility, It's our strategy that we have a geographically diverse, I mean, spectrum grouping between Taiwan, Singapore, Japan, and U.S., and the technology. No coverage standpoint, we would like to coverage most of those. So the customer has a benefit of crossing different spectrums.

As for the depreciation forecast, we are looking for some like low-teen annual increase in the full-year depreciation expenses. As for next year, we don't have the exact number yet, but it's very likely to be the similar amount for 2026. So, in a way, we will see the depreciation curve to peak either this year or next year with very similar numbers.

Got it. Thank you very much.

Thank you. Next one, Haos Liu, Bank of America. Go ahead, please.

Yes. Hi, Jason. Jidong, congrats on the results, and thanks for taking my questions. I would actually like to follow up on the pricing. If we look at the life-for-life pricing environments, based on your current mid- to high-70% of the utilization, if we strip out any of the consideration of the product mix improvements, Are you able to improve or just to pass on your higher manufacturing cost or material cost to your customers at this stage? Or you still receive a meaningful pushback from your customers?

Thanks. Well, I mean, the pricing discussion is always ongoing. The overall pricing strategy remains consistent, as I mentioned earlier. In the 2026, we do see some market dynamics. So for certain customers, we do have some adjusted pricing offer. And for certain customers, we still have some of the pricing, I mean, the one-time pricing adjustment at the beginning of the year to support their market share expansion as well as the competitiveness. So net-net, we think the involvement is more favorable now in 2026.

Okay, yeah. So when you talk about when you are supporting your customer to gain market share by strengthening their cost structure, do you mean you are actually adjusting down your pricing for those customers or it is actually up for this year?

We have a mix of that. For a certain customer, we have adjusted pricing upward. And for a certain customer, we will apply the one-time price adjustment downward, yes.

Okay, got it. And then just on the interim, a couple of your Fabless customers recently talked about earlier and also stronger inventory restocking because of the memory price hike. I was just wondering what impacts your first quarter outlook here if your customers are seeing stronger inventory pulling in the traditional low season. Why is your first quarter still relatively flat? And then what's your put and take for the first quarter overall business outlook? Just wondering which part of the business is actually relatively stronger and weak? Thank you.

For Q1, by segment, we are actually in line with our addressable market seasonality. We didn't see significant changes due to the inventory restocking. But if you're looking into by applications, we expect the revenue contribution from consumer segments to increase, driven by the Wi-Fi and DTV and set-up box, while the revenue from the communication and automotive will decline due to a solid demand of ISP and DDI products.

Okay, that's pretty clear. And then, since you just mentioned about the seasonality, are you expecting this year's seasonality to look pretty similar to the previous few years that first quarter could be relatively light, and second quarter and third quarter, you will be able to see relative strength into the year.

I can probably provide you with this. If we look at the whole year, with the new project of a multiple specialty technology across the embedded high voltage, non-biotech memory, power management, IC, RFSOI, It supports the end markets in communication, consumer, automotive, and AI server, which will ramp in second half 2026. So we're more looking at this year that our second half will outperform the first year. First half, I'm sorry. The second half will be better than the first half. So that may deviate from the traditional seasonality, but as far as for us, we think the overall for the year will be a growth year, and as well as second half will be better than the first half.

Okay, yeah, and last question before I'm back in the queue is that just based on the comment you had just now, what is the underlying market unit demand assumption you have right now? Is it smartphone business? the overall smartphone market will actually grow or decline based on your current base case scenario that second half will be better, or it is actually already factoring a relatively more conservative expectation that smartphone, TV, PC, these kind of consumer markets will actually see a unit decline? Thanks.

Always with the current forecast on our customer, I mean, we do see gains across segments, all applications. we do see some share gains on those applications. So right now, the forecast does show us that more of a share gain instead of market demand associated.

Okay. Thank you so much, Jason.

That's pretty helpful. Thank you. Thank you. Next one, Felix Pan, KGI. Go ahead, please.

Hi, thank you for taking my question. I just have a couple of questions about the future growth driver, particularly in the remark you mentioned about advanced packaging and silicon for nothing. So my first question will be, besides the interposer, what else we might have some engagement for advanced packaging? And for interposer, what's the capacity expansion plan for 2026? And my second question will particularly in the Singapore FAB, a lot of rumor about your potential customer. Is there any color, any client engagement, or any contribution can generate from this segment? Any color would be grateful. Thanks.

Oh, okay. A big question. So, let me see if I can cover that. Well, if I look back, I mean, I understand you asked for 2026, but let me look back at this. We have delivered a very solid 2025 performance with a 12.3 percent shimmon growth and 5.3 percent revenue growth, which outperform our addressable market. This result is supported by our differentiated 22-nm technology and other specialty offering across both 12-inch and 8-inch, amid a broken world-class market, the world-based market demand recovery. And building on the 2025, we do view 2026 as a year of both continuity and evolution. We believe the UMC will once again taking shares and outperform its addressable market, and we will also see several positive inflation. First of all, As our guidance suggests, we are seeing a more favorable pricing environment. This will result in tighter supply globally, as well as our differentiated technology and geographical footprint, which will drive our growth for the next few years. We are on track with our 12-nm cooperation with Intel, which it should start to take out in 2027. Now, that's the existing one. And your question about silicon photonics and advanced packaging, Secondly, we see 2026 as a pivotal year for those high-performance, high-potential opportunities, such, you know, like the circum-photonics and advanced packaging. And we are making those deliberated choice, you know, working with, you know, IMEC to invest and scale them into a significant driver for our future. If you ask specifically about the advanced packaging and there are two distinct opportunities for advanced packaging. One we call enabler. The other we call a temp expander, layers expander. I know it's a bit long, but bear with me. So for enabler, we are seeing the 2.5D and 3D packaging as well as the chipless move well beyond just the data center and also high-end chips. and start to spread across the broader market. Over time, we expect advanced packaging to be adopted even on mature nodes. A good example is RFSOI. We have mentioned it many times. While we're already in production, in addition to the RFSOI, we're also exploring other applications with the leading partners and believe we are at least two to three years ahead of our competition. What this really means for customers is better power efficiency, more form factor, and more differentiated product. And for UMC, it is a strategic win-win. We believe our leadership in advanced packaging will enable us to capture more shares, sustain our higher ASP, and drive better margin in many already established business in the long run. On the 10th expender, we also believe that advanced packaging will help UMC address new opportunities For example, customers are coming to us for AI-related applications. This is not necessarily just the XPU related, but we are adding value by stacking memory with the logic, adding DTC to the stack, or selling the discrete DTC. We are also working with our partner to enable a total solution. Meanwhile, we are working with more than 10 customers in advanced packaging currently. It extends more than 20 new tape-outs in 2026. We foresee revenue in 2027 will be a significant year for us. And the capacity question you have, that capacity claim will be aligned with the customer rent plan and market outlook. You also asked about the silicon photonics. For silicon photonics, we are developing solutions which includes PIC, OIO, OCS, and CPO. Our collaboration with IMEX allow us to deliver industry standard PDK to our customer in 2027. In addition to platform preparation, we also work with the customer on captive technology of a 12-inch PIC, aiming for pluggable product, which is expected to rent this year. We'll also combine our advanced packaging know-how with the circumference, as many of the applications require the integration and different substrates, process, technology, and materials. Looking ahead to achieve 1.6T bandwidth and beyond, we're working with both customer and vendor for the path binding on heterogeneous materials, such as the TFLM, those technologies could also be used in additional applications such as quantum computing. Again, we hope to integrate the new material via advanced packaging technology as well. So those are all integrated all together. That's why I gave you a bit of a longer answer. I hope that explains it.

Okay, thank you. But let me just quick follow up and rephrase my question. So for silicon photonics, what's the earliest timetable we can see the revenue contribution like? like most likely?

For the 12-inch PIC, for the plugable part, I will be expecting to rent this year.

Okay. And about the, because as I know about the interposer, currently, interposer is also the bottleneck for our partner to expand their capacity. So, is there any color we can how much capacity grows for the interposer, like how much year-on-year growth or something like that?

Well, right now, the capacity planning will be aligned with the customer for the 2027 RAN. So, we'll probably provide you some clarity when that comes. Right now, the 2026 will focus on the tape outs.

Okay, thank you.

Thank you. Next one, Goku Hailehalen, JP Morgan. Go ahead, please.

Hi, thanks for taking my question. Hi, Jason. Could you go a little bit deeper into that advanced packaging comment that you made? What is the involvement level of UMC in some of these advanced packaging solutions? Are you doing full stack or is it basically like previously where you were largely focused on the interposal side of the equation? And In terms of the tape-outs that you have, what are the nature of these tape-outs? Are these mostly data center ASIC-related products, or is it a much wider array of products other than just data center ASIC?

Sure. Well, first of all, we have reported, you know, in our advanced packaging space, we have building some of the capability from wafer to wafer, stacking and TSD capabilities. as well as the interposer, the 2.5D, and the many different capabilities. And then the way we see it, like I explained, for the enabler is we can apply those to many of the current products that we currently serve. And then one good example I mentioned is the RFSOI. So we have a wafer-to-wafer hyperbonding with the RFSOI solution for the for the mobile space already. And then some of the capability can be built for the DTC for the stacking, as well as some of the customers looking at discrete DTC already. And we're combining some of the capability into stacking the logic and the memory. Of course, we do not provide memory ourselves. memory wafer to us, and so then we can provide the wafer-to-wafer hyperbonding on those. So on one hand, the way we see it is advanced packaging is a capability per se, but it implies to a product, and then we call it an enabler and also expender. And meanwhile, the product coverage is all the way from the mobile space, power management discussion, for AI-related product, and also for the BCD application as well. So it's our belief, for the phone factor reason or for the higher performance reason, And many different applications will start adapting the advanced packaging. So we think this is going to be a broad acceptance on the advanced packaging space.

Got it. And any plans to further expand your interposer capacity? I think we had expanded, I think, up to 6K and then kind of stopped it there. Now some of that demand seems to be kind of coming back for one of your customers in China. So is there any plans to expand the capacity further?

There are discussions around that. Right now, if you look at the technology itself, we have some common tools in place already, which that we can leverage, all from our 40-millimeter capacity, all from 65-millimeter capacity. From those common tool space, we're already allocating to this area. Now, for the unique tools, and we'll bring the plan for the future expansion. and for the customer rent profile. And we believe that will probably happen in 2027.

Got it. Understood. That's clear. Another question I had is just your expectations for the communication consumer segment, which is north of 70% of revenue, given all the concerns about smartphone, PC. How are you budgeting for this? Are your customers telling you that they're really concerned about this memory cost inflation, or right now you still don't really hear that from the customers, that that's going to be a big issue from a user's perspective going through the year?

Well, we're also cautious about that topic. As of today, we have not observed any demand impact on our customer's forecast for the year, despite that recent surge in that price. And Our technology predominantly supported customers addressing the higher end of the market segment where the demand tends to be more resilient in the past and in the period of memory kindness. So because the supply usually typically prioritizes such high end, higher value device. While we remain attentive to the potential impact on the memory market and our current assessment is that any potential headwinds are probably manageable and we'll continue monitoring the situation closely with our customers together.

Got it. We look at this on the geographic split of revenues. Could you talk a little bit about the Intel 12 nanometer progress and any color on how you will be booking revenues or profits from this partnership given the The FAB is Intel's FAB, while you are essentially the provider of customers and some degree of IP as well into it. And secondly, on the Xiamen FAB, what is the strategy for the Xiamen FAB medium to long term, given many of your semiconductor peers in Taiwan have kind of progressively exceeded capacity in mainland China?

Well, for the 12-millimeter project with Intel, overall the 12-millimeter collaboration project with Intel continues to advance smoothly. We remain on schedule to deliver the PDK and associate the IP to customers in 2026. Furthermore, we anticipate a product payout will commence in 2027, making a significant step forward to a commercialized deployment and future revenue growth. Right now, UMC and Intel are working closely to ensure successful take-outs and an efficient framework for the mass production. As the project advances, it is expected to further strengthen UMC's position in the U.S., right, for customers as well as for us, because the geo-diversification manufacturing. Right now, the application on the 12-nm corroboration, including products on digital TV, Wi-Fi connectivity, and high-speed interface products. In terms of the business model, it's probably not available for us to comment, but it is a win-win strategy that we see and will be very synergized for both parties, as well as for our customers. we have very high confidence this will be a win-win model.

Okay, and any thoughts for the shaman capacity?

Yes. For the shaman, you know, I kind of touched that earlier as well. You know, I look at shaman not just shaman itself. You know, our core part of our competitive advantage is our geographically diverse manufacturing footprint. And the shaman, you know, play one of the, you know, important roles place for us, and particularly for the local customer. So the – and at this point, the FAP is actually at a full capacity. We are running at a full utilization as well. And we see – we're continuing to see many different engagement coming to this, and we will, you know, across regionally optimize this, you know, from the customer engagement and product loading standpoint.

Okay. Just one more on blended ASP. I think, Jason, you mentioned that the ASP environment is more favorable this year, but overall utilization is still in the mid-70s as of Q1, right? So do you expect that this year we could see a scenario that we could see blended ASPs moving up meaningfully, like 5% to 10% or something like that, like we've had in the past, or that requires the much higher level of utilization, that is probably not happening given your low single-digit foundry growth expectation.

Sure. I mean, the high utilization is one of the important factors, but that's not the only factor. You know, we want to make sure the pricing strategy is enabled not only ourselves, but our customers to be competitive as well. So, but we do see the pricing environment is getting more favorable to Foundry because the loading reason. And so, but the magnitude of that, we probably have to continue managing it. And if we have a clarity, we'll share that with you.

Got it. Yeah, thank you.

Thank you. Next one, Alex Chang, BNP. Go ahead, please.

Thank you for taking my question. Just a very quick one. I just saw the company announced that it started the mass production of the Super Flash Generation 4. So just wondering how much revenue contribution from the memory business in the past quarter or maybe past a year, and also how much revenue is contributed by the power management ICs for the server-related applications. Thank you.

Well, I mean, we don't have a breakdown provide, and the way that we break it down is based on the specialty technology that includes the high voltage and non-volatile memory and the BCD space. Right now, the specialty revenue representing about 50% of our overall revenue, and I can let you know the high voltage is about 30% of that, And the rest of that, I would say, is a combination of the nonvolatile memory as well as the VCD.

Thank you very much.

Thank you. Next one, Laura, Change City. Go ahead, please.

Hello, hi, thank you for taking my question, good afternoon, gentlemen. I just want to follow up on the iteration rate and also the gross margin outlook. Jensen, you mentioned that the pricing environment seems to be improving, more favorable, and together with the firm shipment and the bigger product mix as well as the iteration rate. So how should we think about the gross margin trend? you guided that will be high 20% for Q1, but with these variables factors, should we, what should we think about the margins throughout the year? That's my first question.

Yes, when cross margin can be highly dependent upon the transition rate, it's the, how that makes the creation and foreign exchange rate. So there's a lot of variables. So, beyond this quarter, it's difficult for us to give a firm outlook. For the first quarter guidance, which is the high 20s, it's mainly due to the higher cost, especially the higher depreciation expenses, as I mentioned. It will grow by low 10 in the full year of 2026. As for 2026, we will continue to cope with higher depreciation expenses as well as the other inflationary pressures for our production of raw material and other costs. To mitigate and cope with the headwinds, we will continue with our cost reduction efforts and also all the activities to improve our productivity and drive operation efficiencies. And these measures hopefully will help UMC to deliver a stable EBITDA margin and ensure our long-term financial resilience to remain intact. As a matter of fact, our 2025 EBITDA margin is actually a good improvement compared to that of 2024.

Yeah, sure. Thank you very much. And also, I think for the advanced packaging, as well as the silicon photonics, is one of the key things that UMC may have a great opportunity. We know that UMC is already working on advanced packaging. Previously on interposer, probably now we'll see more various different designs. So could you share with us what's about the revenue contributions of your advanced packaging right now, and how would that look like in two, three years?

Currently, the interval was exposed to very limited customer base and also narrow application. While we have engaged with more than 10 customers and expecting more than 20 new tape-outs in 2026, we do foresee that revenue of advanced packaging growth in 2027 will be significant.

Significant means that could that be like 5%, 10% or higher?

Oh, I think not more than that. But, I mean, if you're referring to the overall revenue contribution, you know, we will probably give you more, you know, guidance later. But if you're just looking at the packaging itself, it's going to be significantly larger than what we're shipping today.

Okay. Thank you very much.

Thank you. Next we'll have Bruce Liu, Goldman Sachs, for questions. Go ahead, please.

Okay. Thank you for taking my question. I want to go a little bit deeper for the single photonics. I mean, as you might know, your peers like Gobo Fungi, Tarsania, are pretty vocal about that. Can you tell us how big you think the addressable market for Singapore Photonics for you guys in two years and how do you win market? What is the competitive advantage for you in this business, though? I mean, other than working with iMac.

Well, I mean, the Singapore facility is not going to only serving the Silicon Photonics. Singapore facility is one of our important manufacturing sites. You know, we serve our worldwide customer all different applications. And so it's part of our geographical diverse manufacturing strategy. So, you know... No, no, no.

My question is for Silicon Photonics, our business strategy.

The Silicon Photonics strategy was in Singapore, I'll say.

No, no, no, no. I'm sorry. Let me rephrase my question. So the growth driver for UMC, one of the CTO, I'm assuming is, you know, having more business in the silicon photonics. You know, for your peers like, you know, Global Foundry or Tower Semi, they are pretty vocal about the, you know, silicon photonics and have, you know, meaningful revenue contribution already. For UMC perspective, you know, what is your competitive advantage for UMC to win this business, and how much business you can win, or how big is the addressable market for you in two years?

Got it. So for the Silicon Photonics, our strategy is simple. Our collaboration with IMEC allowed us to deliver the industry standard PDK to our customers in 2027, particularly in 12 inches. So many of our competitors today add an 8-inch, and we are focused on the 12-inch. And as we believe, the 12-inch will have that advantage. And right now, we already have certain products that have proven that performance is better on the plugable product, which we would expect to run this year. And meanwhile, we're also combining the silicon photonics with our advanced packaging know-how. So for many different types of applications that we can integrate that. So by doing that, we think we will be providing even more value from advanced packaging combining with silicon photonics at 12-inch. I think that's where we believe we are competitive.

But that's mostly for plug-in, right? Because if you don't have the EIC, you know, The pure CPO product might not be your key goal driver.

You're correct. We're not looking at a complete CPO package. We're looking at particularly in the PIC and OIO and OCS.

I see. I understand. It's very clear. Next one is we do see that the progress for the Intel project for 12 nanometers is pretty smooth. I just want to know what is the next step. I mean, when we can see a further collaboration in 10, 7, and beyond. I mean, obviously, whatever you said, you know, the 12-inch, you can also use the same argument for 7 nanometer. What's stopping you to do that?

You're also right on that. And our focus right now is on delivering the 12 nanometer platform to customers. In the future, should we make sense for both UNC and Intel as well as our customers, we will surely consider extending our collaboration to other derivatives as well as the technology.

But what is stopping now? What is the showstopper now?

I won't call it stopping. I think the focus is a focus on 12 nanometers. We have to deliver the 12 nanometers today and make sure that we deliver that program. We executed well, and I think anything that makes sense from that on, like you said, I think there will be a discussion, yes.

I see. because we are already assuming that you can deliver something in 27. So, you know, given that working for seven maybe need two, three years, we want to see the, you know, the project kickoff as soon as possible. That's all my question. Thank you.

As a reminder, please press star key and number one on your keypad if you would like to ask the question. Thank you. Now we'll have our last question, Sapho Neuberger-Berman. Go ahead, please.

Hi, Jason. It's been a while. And congrats on the progress you've made throughout these couple years. I just have a few questions. The first one is, On the market dynamics, I think previously, the Sony has asked about the TSMC is shrinking or defocusing on this to mature foundry process. And it looks like not just TSMC, but also the other foundries are seems to be doing some leading edge logic foundry are seems to be doing the same thing. And also part chip recently just to reach agreement with Micron which means they're trying to streamline and reorg some of the process too so it seems like there's a lot of supply is kind of being taken away because of the effects from the AI and crowding out some of these older nodes on the supply side seems to be that's actually decreasing And on the demand side, if you look at, I think TI just reported overnight, I think it seems like there's been more obvious recovery on the analog MCU phase. So on the demand side, that's also improving. But the supply side, that's actually decreasing. So it looks like supply-demand dynamics is moving to a more favorable situation. I think that explains why you were mentioning the pricing dynamics are favorable this year. So I'm just curious about your view. If we try to compare the current, like the mature foundries dynamic situation right now versus, I mean, back in 2021, when there's a severe shortage back then, how would you compare this time around versus last cycle?

I mean, that's a really good question. I mean, we, you know, we saw some of the market movements, the changes, And we also, you know, deep dive on this demand and supply outlook. And we think whether this is a short-term or long-term. If you look at the driver behind this, you know, we see, you mentioned this is truly more the AI phenomenon repo effect. And so we see that AI demand remains to be very strong at least at a foreseeable future. And I think this momentum will continue driving the overall demand. And meanwhile, many of the capability, AI capability, will be affiliating to even the other end market devices in edge AI as well. So we think this will continue. And from an economic standpoint, building any of the mature facility is not justifiable. So we do think this could last longer compared to the COVID time. And I think this situation could be more of a structure going forward. But again, this is at a very early stage of this market movement. So we'll pay attention to it and we'll continue monitoring the progress. Meanwhile, like I said earlier, I think it is more favorable pricing environment But more importantly is we need to prepare ourselves to cope with this market dynamic. So we are welcome all the opportunity that, you know, for us to engage in supporting the customer. But the important focus today is we have to get ourselves ready to capture those opportunities.

Got it. Another question I have is your earlier comments on the pricing. I think you offer some of the annual maybe some discount to some of our strategic clients for their share again, but also net-net-wise. It also seems to be pricing is going up for a majority of the clients, so net-net is going to still be the the SP still be positive. But I'm just curious about for those clients that you're offering some discount at the beginning of the year, down the road, if the next few months or quarter situation has become tighter, would you be able to reprice with these customers?

Those discussions will be ongoing. We're always working with our customers to reflect the market dynamics as well as the cost increases. I believe this conversation will surely happen. It happened in the past, it will happen now, and it will happen in the future. This pricing discussion will continue. I think customers understand that, and we just have to continue monitoring the market dynamic. and maintain our competitiveness on both the customer and ourselves.

Yeah, one thought on that, because of some of the pricing that started to effective on the January 1st this year, this was actually negotiated already in fourth quarter last year, right?

There's some alignment on that, both volume and the pricing. So if a volume has changed, of course, that's a different topic. So there are some volume dynamics in that as well.

Yeah, my question actually is that because a lot of the pricing that affected on January 1st, beginning of the year, was actually communicated a month or two months ago before that, toward the end of last year, when the time that the supply-demand dynamics haven't been really that tight as compared to some of the changes that happened in the just past couple weeks. Am I getting that right?

Yeah, you're right. Yeah, but those also is on certain conditions. So, given the condition has changed, some of the pricing are dynamic.

Yeah, yeah, exactly. That is what I'm trying to discuss with you because we also saw a lot of The other different components of different subsectors within the tech or semi-supply chain that, such as memory, I think the pricing were still down in July, August, but all of a sudden the September price is going up. So I'm just curious about that because when you negotiated some of this discount months ago, the supply demand was not the same as today. So things remain fluid, dynamic, and it's still going to be flexible and it's going to be dynamic and open for changes down the road if things are moving more favorably.

I think the core of the pricing strategy is that it has to be consistent and it has to anchor with the value that we deliver and also the customer competitiveness. That is the core. then usually that is how we're centering about the pricing discussion. So that four is not compromised. Now, if the condition has changed, yes, they always have some flexibility to it. So, you know, one is called pricing strategy and position, and another is called pricing negotiation. So there will be some flexibility, yes.

Yeah, and the condition has started to change now.

Yes. So we do think that it will be more feasible now.

Okay, cool.

Thank you, and Happy New Year.

Yeah, you too.

Thank you. Ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. I'll turn things over to UMC Head of IR for closing remarks. Thank you.

Thank you for attending this conference today. We appreciate your questions. As always, If you have any additional follow-up questions, please feel free to contact IR at UMC.com. Have a good day.

Thank you. And ladies and gentlemen, that concludes our conference for fourth quarter 2025. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com under the Investors Events section. You may now disconnect. Thank you again. Goodbye.