Thank you and welcome to UMC's conference call for the fourth quarter of 2025. I am joined by Mr.

Jason Wang, President of UMC, and Mr. Chih-Tung 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 and the first quarter 2026 guidance. Once our President and CFO complete their remarks, there will be a Q&A section.

UMC's quarterly financial reports are available at our website, www.umc.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 could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC 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.

Chih-Tung Liu, to discuss UMC's fourth quarter 2025 financial results.

Thank you, Michael. I'd like to go through the 4Q '25 investor conference presentation material, which can be downloaded or viewed in real time from our website.

Starting on page 4, the fourth quarter of 2025, consolidated revenue was NT$61.81 billion, with a gross margin around 30.7%. The net income attributable to the stockholder of the parent was NT$10.06 billion, and the earnings per ordinary share was NT$0.81.

Utilization rate in the fourth quarter is stayed the same as the previous one, around 78%. For the sequential comparison, revenue grew 4.5% quarter-over-quarter to NT$61.8 billion.

Gross margin improved to over 30% to now 30.7%, or gross margin of NT$18.95 billion. The non-operating income remained similar to that of last quarter.

The net income overall attributable is around NT$10.05 billion, or EPS of 0.81 in Q4 of 2025. For year-over-year comparison on page 6, revenue grew by 2.3% to reach NT$237.5 billion for the whole year of 2025.

Gross margin rate is around 29%, or NT$68.9 billion. For the net income attributable to the shareholder of the parent for year 2025 is around NT$41.7 billion, or 17.6% net income rate.

EPS for 2025 was 3.34, which is a decline compared to that of 3.8 in 2024. On page 7, our balance sheet at the end of 2025, cash amount still more than NT$110 billion, with total equity of the company is now NT$379.8 billion at the end of 2025.

For ASP on page 8, 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 9, for quarterly comparison, the change is mainly showing in the increase in Asia and Europe, with now North America represent about 21% in Q4 of last year.

For the full-year breakdown on page 10, the change is similar. We see North America drop from 25% in 2024 to 22% in 2025.

For page 11, IDM for Q4 revenue still represent about 20%, almost no change. For the full-year number on page 12, IDM account for 19%, increased by 3 percentage points to 19% in 2025.

For quarterly revenue breakdown by application, it remained almost similar quarter-over-quarter on page 13. For the annual performance on the application breakdown on page 4, consumer increased by 3 percentage points to 31% from 28% in the previous year.

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 represent 36% of the total revenue pool.

On page 16, for the full year, the increase of 22- and 28- revenue is 3 percentage point, and we also show about 2 percentage point increase in 40-nanometer on a year-over-year comparison. Capacity remained flat on quarter-over-quarter comparison base, but it will decline by roughly 1% due to the annual maintenance schedule.

On page 18, our latest forecast for 2026 capex plan is around $1.5 billion, which is slightly declined from $1.6 billion in the year of 2025. The above is the 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 Wang.

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 flattish wafer shipments amidst mild demand across most markets, the 4.5% revenue increase during the quarter was supported by favorable foreign exchange movement, as well as the sequential growth in our 22- and 28-nanometer business, which continues to improve our product mix. Within the 22- and 28-nanometer segment, 22-nanometer revenue increased 31% quarter-on-quarter to a record high, accounting for more than 13% of total fourth quarter revenue.

Looking at the full year, UMC delivered solid performance in 2025, with shipments increasing 12.3% and revenue in US dollar up 5.3% year-on-year. Going into the first quarter of 2026, we expect wafer demand to remain firm.

UMC is confident that 2026 will be another growth year as the tape-outs on our 22-nanometer 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 completed the new Phase 3 facility at our Singapore Fab 12i, which is already playing a central role in supporting customers to diversify supply chains. At the same time, we are striving to expand our footprint in the US through an innovative yet cost-effective modes of partnerships, such as our 12-nanometer collaboration with Intel and the recently announced MOU with Polar Semiconductor.

The leadership UMC has built over the past few years across specialty technologies, including embedded high-voltage, non-volatile memory, and BCD, has and will continue to sustain stable business growth. Looking ahead to 2026 and beyond, we expect advanced packaging and silicon photonics to serve as the new growth catalyst, positioning UMC to address the evolving needs of a high performance of applications across AI, networking, consumer, automotive, and more.

Now let's move on to first quarter 2026 guidance. Our wafer shipments will remain flat.

ASP in US dollar will remain firm. Gross 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.

Good afternoon. Thank you very much for taking my questions.

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. For 2026, we expect AI-related segments remain as the primary growth driver in semi industry.

Furthermore, with the continuous commercial deployment of edge AI applications, demand for chips using 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 mid-teens in 2026.

The question for foundry market 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, as UMC, we estimate that our addressable market will grow by low single-digit percentage and UMC's growth were expected to outperform the average growth of our addressable market.

Got it. Thank you very much, Jason.

Then my second question is on pricing. Lots of discussions that obviously Chinese peers are raising pricing.

How should we think about the pricing outlook for mature foundry and for UMC through 2026? Would UMC be able to start to reflect better value?

If yes, which product categories should we expect more upside from here?

Okay. We do anticipate a more favorable ASP environment in 2026 versus 2025.

This outlook really reflect our disciplined pricing strategy and the positive impact on 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. We do think the 2026 pricing environment is more favorable now.

Now the question about which product, we don't comment pricing on specific product or any specific nodes, but in general, we do see the environment is more favorable now.

No problem. That's very helpful.

Then a follow-up will be on the overall industry supply versus demand for the coming few years. TSMC on the recent earnings conference talked about the plan to optimize capacity for mature nodes to better support core AI demand in coming few years.

From your perspective, how should we think about the opportunity here? Are you starting to see more client engagement for new products in the coming few years?

Oh, we always excited to see more customer engagements. More importantly is we need to prepare ourselves to cope with the market dynamics.

We welcome any opportunity to support our customers. We view this landscape shift as an opportunity to further optimize our product mix and gradually improve ASP and margin as well.

Got it. Then maybe lastly, just on your Singapore expansion, how quickly are you planning to ramp capacity in 2026 and in 2027?

How should you think about the differentiations of products that you have for Singapore versus the Taiwan capacities for 22- and 28-nanometer? Then with that, how should we forecast the depreciation in 2026 and 2027?

For the year of 2026, the capacity increase will be around 1.2% year-over-year for us. For our Singapore facility, the expansion will start in the second half of 2026.

Capacity deployment ramp from second half of 2026 will continue into the 2027. In terms the nodes available in our Singapore facility, it's our strategy that we have a geographically diverse manufacturing footprint between Taiwan, Singapore, Japan, and US.

From technology node coverage standpoint, we would like to coverage most nodes so the customer has a benefit of crossing different fab support.

As for the depreciation forecast, we are looking for some low-teens 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.

In a way, we will see the depreciation curve to peak either this year or next year with a very similar numbers.

Got it. Thank you very much.

Yes. Hi, Jason, Chi-Dong.

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 like-for-like pricing environment based on your current mid- to high-70 percentage of the utilization, if we strip out any of the consideration of the product mix improvement, are you able to improve or just to pass on your higher manufacturing cost or material costs to your customers at this stage, or you still receive a meaningful pushback from your customers? Thanks.

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 changes. For certain customers, we do have some adjust the pricing upward.

For certain customers, we still have some of the apply the one-time pricing adjustment at the beginning of the year to support their market share expansion as well as the competitiveness. Net-net, we think the environment is more favorable now in 2026.

Okay. Yeah.

When you talk about when you are supporting your customer to gain market share by strengthening their cost structure, doing 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 certain customers, we have adjust pricing upward, and for certain customers, we will apply the one-time pricing adjustment downward.

Yes.

Got it. Then just on the near term, 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 shipment for first quarter is still relatively flat?

Then what's your quick take for the first quarter overall business outlook? Just wondering whether 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 a significant changes due to the inventory restocking.

If you're looking into by applications, we expect the revenue contribution from consumer segment to increase, driven by the Wi-Fi and DTV and set-top box, while the revenue from the communication and automotive will decline due to a softer demand of ISP and DDI product.

That's pretty clear. 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 I can have a probably provide you with this. If we look at the whole year, with the new project of a multi multiple specialty technology across the embedded high-voltage, non-volatile memory, power management IC, RF-SOI, it supports the end markets in communication, consumer, automotive, and AI server, which will ramp in second half 2026.

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. That may be deviate from the traditional seasonality, but as far for us, we think the the overall shipment for the year will be a growth year and as well as second half will be better than first half.

Okay. 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 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.

With the currently a forecast of our customer, we do see gains on all across segment, all applications. We do see some share gains on those applications.

Right now the forecast does show us that's more of a share gain instead of market end-market demand associated.

Okay. Thank you so much, Jason, Chi-Dong.

That's pretty helpful.

Thank you.

Hi. Thank you for taking my question.

I just have a couple questions about the future growth driver, particularly in the remark you mentioned about the advanced packaging and silicon photonics. My first question will be besides the interposer, what else we might have the sound engagement for advanced packaging?

For interposer, what's the capacity expansion plan for 2026? My second question will be the silicon photonics, 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 will be grateful.

Thanks.

Oh, okay. A big question.

Let me see if I can cover this. If I look back, I understand you asked for 2026, but let me look back this.

We have delivered a very solid 2025 performance, with a 12.3% shipment growth and 5.3% revenue growth, which outperform our addressable market. This result is supported by our differentiated 22-nanometer technology and other specialty offering across both 12-inch and 8-inch amidst a broad-based market demand recovery.

Building on the 2025, we do view 2026 as a year of both continuity and evolution. We believe that UMC will once again taking shares and outperform its addressable market, and we will also see several positive inflations.

As our guidance suggests, we are seeing a more favorable pricing environment. This will result 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-nanometer collaboration with Intel, which should start see tape-outs in 2027. Now that's the existing one.

Your question about silicon photonics and advanced packaging, secondly, we see 2026 as a pivotal year for those high-performance, high-potential opportunities, such like the silicon photonics and advanced packaging. We are making those deliberate choice, working with IMEC to invest and skill them into significant driver for our future.

If you ask specifically about the advanced packaging, and they are two distinct opportunity for advanced packaging: one, we call enabler; the other, we call it and expander. Let us explain this.

I know it's a bit long, but bear with me. For enabler, we are seeing the 2.5D and 3D packaging, as well as the chiplets, move well beyond just the data center and ultra-high-end chip and start to spread across the broader market.

Over time, we expect advanced packaging to be adopt even on mature nodes. A good example is RF-SOI.

We have mentioned many times, where we're already in production. In addition to the RF-SOI, 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 customer is better power efficiency, small form factor, and more differentiated product. 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 of our already established business in the long run. Under the tent expander, we also believe advanced packaging will help UMC address new opportunities.

For example, customer 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 customer in advanced packaging currently and expect more than 20 new tape-outs in 2026.

We foresee revenue in 2027 will be a significant year for us. The capacity question you have, that capacity plan will be aligned with the customer ramp plan and market outlook.

You also asked about the silicon photonics. For silicon photonics, we are developing solutions which include PIC, EIC, OIO, OCS, and CPO.

Our collaboration 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 12-inch PIC aiming for pluggable product, which is expected to ramp this year.

We'll also combine our advanced packaging know-how with the silicon photonics 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 pathfinding on heterogeneous material, such as the TFLN.

Those technology 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.

Those are all integrated all together. That's why I give you a bit of a longer answer.

I hope that explains it.

Thank you. Let me just quick follow up and rephrase my question.

For silicon photonics, what's the earliest timetable we can see the revenue contribution most likely?

For the 12-inch PIC, for the pluggable product, will be expecting to ramp this year.

Okay. Because as I know about the interposer currently is the interposer also the bottleneck for our partner to expand their capacity.

Is there any color we can get how much capacity growth for the interposer, like how much year-on-year growth or something like that?

Right now the capacity planning will be aligned with the customer for the 2027 ramp.

We'll

probably provide you some clarity when that comes. Right now the 2026 will focus on the tape-outs.

Thank you.

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 are largely focused on the interposer side of the equation?

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 this a much wider array of products other than just data center ASIC?

Sure. We have reported in our advanced packaging space, we have building on some of the capability from wafer-to-wafer stacking and the TSV, as well the interposer, the 2.5D, and the many different capability.

Then the way we see it, like I explained, for the enabler is we can apply those to many of the current product that we currently serve. Then one example I mentioned is the RF-SOI.

We have a wafer-to-wafer hybrid bonding with the RF-SOI solution for the mobile space already. Then some of these capability can be built for the DTC, deep trench capacitor, for the stacking, as well some of the customers looking at a discrete DTC already.

We're combining some of the capability into stacking the logic and the memory. Of course, we do not provide memory ourselves, the customer will have to provide memory wafer to us.

Then we can provide the wafer-to-wafer hybrid bonding on those. On one hand, the way we see it is advanced packaging is a capability per se, and but it applies to a product, and then we call it enabler and also expander.

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. It's our belief, if it's for the form factor reason or for the higher performance reason, and many different applications will start adapting the advanced packaging.

We think this is going to be a broad acceptance on the advanced packaging space.

Got it. 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.

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-nanometer capacity, all from 65-nanometer capacity.

From those common tools space, we're already allocating to this area. Now for the unique tools, and we'll put into a plan for the future expansion and for the customer ramp profile.

We believe that will probably happen in 2027.

Got it. Understood.

That's clear. Another question I had is on just your expectations for the communication, consumer segment, which is north of 70% of revenue, given all these concerns about smartphone, PC.

How are you budgeting for this? Are your customers telling you that they are 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 unit perspective going through the year?

We also cautious about that topic. As of today, we have not observed any demand impact on our customers' forecast for the year despite that recent search in that price.

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 tightness, because the supply typically prioritize in 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 headwind are probably manageable, and we'll continue monitoring the situation closely with our customer together.

Got it. Last question is on the geographic split of revenues.

I think 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 fab is Intel fab, while you are essentially the provider of customers and some degree of IP as well into it? 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 exited capacity in mainland China?

For the 12-nanometer project with Intel, overall, the 12-nanometer collaboration project with Intel continues to advance smoothly. We remain on schedule to deliver the PDK and associated IP to customer in 2026.

Furthermore, we anticipate the product tape-outs will commence in 2027, making the significant step toward a commercialized deployment and future revenue growth. Right now, UMC and Intel are working closely to ensure successful tape-outs and efficient ramp-up for the mass production.

As the project advanced, it is expect to further strengthen UMC's position in the US, right, for customer as well for us because the geodiversification manufacturing. Right now, the application on the 12-nanometer collaboration including for that some digital TV, Wi-Fi connectivity, and high-speed interface product.

In terms the business model, and it's not available for us to comment. It is a win-win strategy that we see and will be very synergized for both parties as well for our customer.

We have very high confidence this will be a win-win model.

Okay. Any thoughts on the Xiamen capacity?

Yes. For the Xiamen, I kind of touched that earlier as well.

Our core part of our competitive advantage is our geographically diverse manufacturing footprint. The Xiamen played one of the important base for us, and particularly for the local customer.

At this point, the fab is actually at a full capacity. We're running at a full utilization as well.

We'll continue seeing a many different engagement coming to this. We will across regionally optimize this 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 still in the mid-70s as of Q1, right? 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 have had in the past, or that requires a much higher level of utilization that is probably not happening this year given your low single-digit foundry growth expectation?

Sure. The high utilization is one of important factor, but that's not the only factor.

We want to make sure the pricing strategy is enable not only ourselves, is our customer to be competitive as well. We do see the pricing environment is getting more favorable to foundry because the loading reason.

The magnitude of that, we probably have to continue manage it, and if we have a clarity, we will share that with you.

Got it. Thank you.

Thank you for taking my question. I just have a very quick one.

As I saw the company announced that they started the mass production of SuperFlash generation 4. Just wonder how much revenue contribution from the non-volatile memory business in the past quarter or maybe past year?

Also, how much revenue is contributed by the power management ICs for the server-related applications? Thank you.

We don't have a breakdown provide. 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, this specialty revenue representing about 50% of our overall revenue. I can let you know the high-voltage is about 30% of that.

The rest of it, I would say, is combination of the non-volatile memory, as well as the BCD.

Thank you very much.

Hello. Hi, thank you for taking my question.

Good afternoon, gentlemen. I just want to follow up on the utilization rate and also the gross margin outlook.

Jason, you mentioned that the pricing environment seems to be improving, more favorable. Together with a firm shipment and a better product mix, as well as the utilization rate, how should we think about the gross margin trend?

You guided that will be high-20% for Q1, but with this favorable factors, how should we think about the margins throughout the year? That's my first question.

Yes. Gross margin can be highly dependent upon utilization rate, ASP, product mix, depreciation, and foreign exchange rate.

There's a lot of variables. Beyond this quarter, it's difficult for us to give a firm outlook.

For the first quarter guidance, which is high-20s, is mainly due to the higher costs, especially the higher depreciation expenses. As I mentioned, it will grow by low-teens in the full year of 2026.

As for 2026, we will continue to cope with the higher depreciation expenses, as well as the other inflationary pressure for our production, 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 efficiency.

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.

Sure. Thank you very much.

Also, I think for the advanced packaging and as well as the silicon photonics is one of the key things UMC may have a great opportunity. We know that UMC has already working on advanced packaging previously on interposer, probably.

Now we'll see more various different design. 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 interposer was exposed to very limited customer base and also narrow application. While we have engaged with more than 10 customer 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 exciting hot button. If you're referring to the overall revenue contribution, we'll probably give you more a guidance later.

If you looking at the packaging itself, it's going to be significantly larger than what we shipping today.

Okay. Thank you very much.

Okay. Thank you for taking my questions.

I want to go a little bit deeper for the silicon photonics. As you might know, that your peers like GlobalFoundries, Tower Semi are pretty vocal about that.

Can you tell us how big you think the addressable market for silicon photonics for you guys in two years? How do you win market?

What is the competitive advantage for you in this business? Other than working with IMEC.

The Singapore facility is not going to only serving the silicon photonics. Singapore facility is one of our important manufacturing sites.

It serves our worldwide customer on all different applications. It's part of our geographically diverse manufacturing strategy.

And

No, no, no. My question is for silicon photonics business strategy.

The silicon photonics strategy in Singapore, okay.

So No, no, no. I'm sorry.

Let me rephrase my question. The growth driver for UMC, one of it is the CPO.

I'm assuming it's having more business in the silicon photonics. For your peers like GlobalFoundries or Tower Semi, they are pretty vocal about the silicon photonics and have meaningful revenue contribution already.

For UMC perspective, what is your competitive advantage for UMC to win this business? How much business you can win or how big is the addressable market for you in two years?

Got it. For the silicon photonics, our strategy is simple.

Our collaboration with the IMEC allow us to deliver the industry-standard PDK to our customer in 2027, particularly in 12-inch. Many of our competitors is today at the 8-inch, and we are focused on this in 12-inch.

As we believe the 12-inch will have that advantage. Right now, we already have certain product that proven that performance is a better and on a pluggable product, and which we will expect to ramp this year.

Meanwhile, we're also combining the silicon photonics with our advanced packaging know-how. For many different type of applications that we can integrate that.

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.

That's mostly for plug-in, right? Because if you don't have the EIC, the pure CPO product might not be your key growth 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. Understand.

It's very clear. Next one is we do see that the progress for the Intel project for 12-nanometer is pretty smooth.

I just want to know, what is the next step? When we can see a further collaboration in 10, 7, and beyond?

Obviously, whatever you said, if the advantage 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. Our focus right now is on delivering the 12-nanometer platform to customer.

In the future, should it make sense for both UMC and Intel, as well as our customer, we will surely consider expanding our collaboration to other derivatives, as well as the technologies.

What is stopping now? What is the showstopper now?

I wouldn't call it stopping. I think the focus is a focus on 12-nanometer.

We have to deliver the 12-nanometer today and make sure that we deliver that program. We execute it well, and I think anything that makes sense from that on, like you said, I think that will be a discussion, yes.

I see, because we are already assuming that you can deliver something in '27. Given that working for 7 maybe need 2 to 3 years, we want to see the project kick off as soon as possible.

That's all my questions. Thank you.

I see.

Sure.

Hi, Jason and Chih-Tung. It's been a while.

Congrats on the progress made throughout these couple of years. I just have a few questions.

The first one is on the market dynamics. I think previously, Sunny has asked about the TSMC is shrinking or defocusing on its mature foundry process.

It looks like not just TSMC, but also some leading-edge large foundries are seems to be doing the same thing. Also, Powerchip recently just reached agreement with Micron, selling its Tongluo fab, which means trying to streamline and reorg some of its foundry process too.

It seems that there's a lot of supply is kind of being taken away because of the crowding-out effects from the AI and crowding out some of this older nodes. On the supply side, seems to be that's actually decreasing.

On the demand side, I think TI just reported overnight, I think that it seems like there's been more obvious recovery on the analog and MCU space. On demand side, that's also improving, but the supply side that actually decreasing.

It looks like supply-demand dynamics is moving toward a more favorable situation. I think that explained why you were mentioning that the pricing dynamics is favorable this year.

I'm just curious about your view. If we try to compare the mature foundries dynamics situation right now versus back in 2021, when there's a severe shortage back then, how would you compare this time around versus last cycle?

That's a really good question. We saw some of the market movements, the changes.

We also did a deep dive on this demand and supply outlook. We think whether this is a short-term or long-term.

If you look at the driver behind this, you've mentioned this is truly more of the AI phenomenon ripple effect. We see that AI demand remained to be very strong, at least at the foreseeable future.

I think this momentum will continue driving the overall demand. Meanwhile, many of AI capability, will proliferating to even the other end-market devices, in the edge AI as well.

We think this will continue. On the economic standpoint, building any of the mature facility is not justifiable.

We do think this could last longer compared to the COVID time. I think this situation could be more of a structural going forward.

Again, this is at a very early stage of this market movement. We'll pay attention to it, and we'll continue monitoring the progress.

Meanwhile, is like I said earlier, I think it is more of a favorable pricing environment, but more importantly, is we need to prepare ourselves to cope with this market dynamics. We are welcome all the opportunity that for us to engage and supporting the customer.

The important focus today is we have to get ourselves ready to capture those opportunity.

Got it. Another question I have is your earlier comments on the pricing.

I think you offer maybe some discount to some of our strategic clients for their share gain, but also net-net-wise, also price is going up for majority of the clients. Net-net the blended ASP is still be positive.

I'm just curious about for those clients that you're offering some discount at the beginning of the year, what if down the road, if the next few months or quarter, situation become tighter and would you be able to reprice with this customers?

Those discussion will be ongoing. We're always working with our customer 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 will happen in the future. This pricing discussion will continue.

I think customer understand that, and then we just have to continue monitoring the market dynamic and maintain our competitiveness on both of the customer and ourselves.

Because of some of the pricing that start to effective on the January 1st this year, this was actually negotiated already in fourth quarter last year, right?

That's some alignment on that, on both volume and the pricing. If the volume has changed, of course, that's a different topic.

There are some volume dynamic in that as well.

Yeah. My question is actually that because a lot of the pricing that effective 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 dynamic 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?

You're right. Those also is on certain conditions.

If the condition has changed, there's some of the pricing are dynamic.

Yeah. Exactly.

That is what I'm trying to discuss with you. Because we also saw a lot of, the other different components or 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, in September, price is going up.

I'm just curious about that because when you negotiated some of this discount months ago, the supply-demand dynamic was not the same as today. Things remain fluid, dynamic, and it's still continue 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 centering about the pricing discussion. That core is not compromised.

Now if the condition has changed, yes, they always have some flexibility to it. One is called pricing strategy and position, and another it's called pricing negotiation.

That will be some flexibility, yes.

The condition started to change now.

Yes. We do think the pricing direction will be more favorable now, yes.

Cool. Thank you and happy New Year.

You too.

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 [email protected]. Have a good day.