United Microelectronics Corp. expects the average price of the wafers it makes to rise about 10% next year, a reversal for a foundry that has spent years cutting prices on older chipmaking technology. The Taiwanese contract chipmaker, which focuses on mature nodes, gave the outlook on Oct. 28 alongside third-quarter results that showed revenue up 25.6% from a year earlier to NT$74.24 billion, and a board decision to add about $3.2 billion to its expansion budget.

The pricing call matters well beyond UMC. Mature-node chips (22 nanometers and older) go into display drivers, car radar, Wi-Fi modules and the power-management parts inside AI servers. Their prices had been under pressure from new Chinese capacity, so a sustained increase would lift costs for device makers across Asia and improve margins for Taiwanese and Singaporean fabs that compete with mainland foundries.

UMC's fabs run near full

Chief Executive Jason Wang said demand was healthy in every market segment during the quarter. Wafer shipments rose 7.3% from the second quarter to a record 1.212 million 12-inch-equivalent wafers, and overall utilization climbed to 92% from 85%, according to the company's results release. A year earlier the rate was 78%.

Several 12-inch fabs ran at full capacity and 8-inch lines recovered strongly, Wang said. The 22nm node set another record, reaching 18.3% of wafer sales as customers taped out new display driver, automotive radar and Wi-Fi chips.

Gross margin improved to 34.0% from 32.5% in the second quarter and 29.8% a year earlier. Operating income rose 24.7% sequentially to NT$18.64 billion.

Net income attributable to shareholders was NT$16.43 billion, or NT$1.32 a share, up 9.7% from a year earlier. It fell 61.1% from the second quarter, but that comparison is distorted: the prior quarter included a net investment gain of about NT$30 billion, against NT$1.16 billion in the third quarter. For the first nine months, net income reached NT$74.86 billion, Chief Financial Officer Chitung Liu said on the call.

UMC guided for fourth-quarter wafer shipments to rise by a low single-digit percentage, with prices in U.S. dollars holding firm, gross margin similar to the third quarter and utilization in the low 90% range.

A turn in mature-node pricing for 2027

Responding to an analyst from UBS, Wang said UMC was negotiating 2027 prices with customers now and saw room for increases at both its 8-inch and 12-inch fabs. He described 2027 as a turning point, moving from price erosion to a positive uplift beginning in the first quarter. The 10% figure is a full-year blended average compared with 2026, he clarified, and the CFO said first-quarter price guidance would come with the next results.

The groundwork was laid earlier in the year. In May, TrendForce reported, citing local media coverage of UMC's shareholder meeting, that the company planned selective increases in the second half of 2026 tied to higher raw material costs and the more expensive Singapore expansion, with broader negotiations to follow in 2027.

Wang said growth in 2026 came mainly from volume and utilization. With several technologies already at or near full capacity, he expects shipment growth next year to be limited by available space, so revenue gains will depend more on value per wafer. He said he expects customer demand to exceed UMC's planned capacity. Reuters reported that the company also expects a decline in the personal computer segment.

Silicon photonics drives new spending

The extra $3.2 billion is aimed at businesses that are moving from development into production faster than UMC planned. Wang said the company is "directing our capital toward customer-backed growth opportunities," and gave capacity targets, according to a transcript of the call: about 18,000 wafers a month for silicon photonics, 22,000 for deep trench and silicon capacitors, and 20,000 for thin-film lithium niobate (TFLN) modulators. That phase will start ramping in late 2028 and reach full scale by 2030.

Silicon photonics uses light rather than electrical signals to move data between chips and servers, a growing bottleneck in AI data centers. Wang said UMC's 12-inch photonic platform already supports 1.6-terabit optical products. UMC expects AI-related revenue to make up 25% of total revenue within three years, according to Reuters.

The company did not give a timeline for the added spending, saying it was working with suppliers to bring schedules forward, Reuters reported. Its cash capital expenditure for 2026 remains about $2 billion. Wang said the expansion in Singapore and Tainan is needed for capacity to keep pace with customers; quarterly capacity is set to edge up to 1.337 million 12-inch-equivalent wafers in the fourth quarter from 1.325 million.

Investors have priced in much of the story. UMC shares had risen 147.5% this year by Oct. 28, against a 62.4% gain for the broader Taiwan market, Reuters reported, and closed up 4.5% that day ahead of the results. The Taiex has since given back ground, falling 5.7% in October as foreign investors sold.

UMC's balance sheet gives it room to spend. Cash rose to NT$142.62 billion at the end of September and the debt-to-equity ratio fell to 44% from 50% a quarter earlier. The next marker is first-quarter price guidance, due with fourth-quarter results in early 2027, which will show how much of the 10% target customers have accepted.