管理層發言
Welcome, everyone, to UMC's 2025 Third Quarter Earnings Conference Call. For your information, this conference call is now being broadcasted live over the Internet. A webcast replay will be available within 2 hours after the conference has 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 third quarter of 2025. I'm joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the third quarter financial results, followed by our President's key message to address UMC's focus and fourth quarter 2025 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.umc.com, under the Investors, Financial 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 presentations material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's third quarter 2025 financial results.
Thank you, Michael. I'd like to go through the third quarter 2025 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4, in the third quarter of 2025, consolidated revenue was TWD 59.13 billion, with gross margin at 29.8%. Net income attributable to the stockholder of the parent was TWD 14.98 billion and the earnings per ordinary share were TWD 1.2. Capacity utilization rate climbed to 78% in that quarter with wafer shipment just marked 1 million 12-inch equivalent wafers. On Page 5, on the sequential comparison, third quarter revenue of TWD 59.12 billion increased slightly compared to the previous quarter, mainly due to higher wafer shipment, although the NT dollar exchange rate was an unfavorable factor of around 3%. Gross margin also climbed on the back of the better capacity utilization rate to 29.8%. And net income reached nearly TWD 15 billion or an EPS of TWD 1.2 per share in NT dollar terms. On year-over-year comparison, on Page 6, for the first 3 quarters, revenue grew 2.2% year-over-year to TWD 175.7 billion. Gross margin was around 28.4% or nearly TWD 50 billion for the first 3 quarters of 2025. Overall, net income for the first 3 quarters is down to TWD 2.54 per share compared to TWD 3.12 in the previous 3 quarters of 2024. On Page 7, cash still above TWD 100 billion, and total equity of the company is now TWD 361 billion at the end of the third quarter of 2025. ASP on Page 8 shows we remain firm for the past 2 quarters. On Page 9, for revenue breakdown, we can see that North America represents about 25% of the total revenue in the third quarter, which is 5% higher compared to 20% in the previous quarter. On the contrary, Asia declined by nearly 4 percentage points to 63% in the third quarter of 2025. IDM versus fabless remains unchanged on Page 10 for the third quarter of 2025. On Page 11, we noticed the communication and computers edge up in terms of sales mix when consumers declined by nearly 4 percentage points to 29% in the third quarter. On Page 12, the segment sales breakdown by technology, 22 and 28 still remain our main technology node, when 22 continued to climb in terms of percentage. Total 22 and 28 revenue reached about 35%. For 40-nanometer and 65-nanometer revenue, somewhat unchanged, at about 17% and 18%, respectively. For our quarterly capacity for the third quarter, we see a minor increase coming out of our 12-inch Xiamen fab with now the monthly capacity is nearly 32,000 wafers per month, and total available capacity will remain flat for the coming quarters. On the last page of my presentation, our annual CapEx is heading to our budget number of $1.8 billion with 90% in 12-inch and 10% in 8-inch. The above is a summary of UMC results for the third quarter of 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, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's third quarter results. In the third quarter, we observed demand growth across most market segments, which drove a 3.4% increase in wafer shipments and improved utilization rate to 78%. In particular, we benefited from a pickup in sales of smartphones and notebooks, driving replenishment orders from customers. Our 22-nanometer technology platform continues to provide us with differentiation in the market, with 22-nanometer revenue now accounting for more than 10% of the total sales in 2025 alone. We are projecting over 50 product tape-outs, and we expect the 22-nanometer contribution will continue to increase in 2026. Aligned with our strategy of providing customers with highly differentiated specialty technologies, we recently announced the readiness of our 55-nanometer BCD platform. In addition to mobile and consumer applications, the new platform is also complemented with the most rigorous automotive standards for automotive and industrial use. Looking ahead to the fourth quarter, we are anticipating wafer shipments to be comparable with third quarter's volumes, wrapping up 2025 with shipment growth in the low teens. UMC continues to deliver competitive process technologies that enable diverse applications, which position the company to benefit from a broad-based market recovery. With the 22-nanometer logic and specialty platform, in particular, we expect to drive growth. Now, let's move on to fourth quarter 2025 guidance. Our wafer shipment will remain flat. ASP in U.S. dollars will remain firm. Gross margin will be approximately in the high 20% range. Capacity utilization rate will be in the mid-70% range. Our 2025 cash-based CapEx budget will remain unchanged at USD 1.8 billion. That concludes my comments. Thank you all for your attention. Now, we are ready for questions.
分析師問答
First, we'll have Bank of America for questions.
My first question is regarding the near-term outlook. Could you discuss more in detail how you see the business by end market is trending into the current quarter and fourth quarter? It seems the guidance is above seasonal, so just wondering if there's anything driving that. And also just your initial view into the first half of next year, did you get any feedback from your customers on the potential restocking, or in general, are they still pretty conservative at this stage?
Sure. As we approach Q4, we are finalizing our shipments for 2025 at a low teens growth rate. This growth is driven by our unique 22-nanometer technology and various specialty products across both 12- and 8-inch markets, supported by a broad recovery in market demand. In the 12-inch category, growth has been boosted by strong demand for 22-nanometer logic in ISP, Wi-Fi connectivity, and high-end smartphone display driver ICs. Overall, 12-inch wafer shipments are expected to surpass our target market due to our diverse portfolio including non-volatile memory, RFSOI, and BCD technologies. For the 8-inch segment, we anticipate high single-digit growth in 2025, primarily from PMIC and LDDI. In summary, the strength of our 22-nanometer technology and specialty processes in both 12-inch and 8-inch platforms reinforces our expectation for low teens shipment growth in 2025. For Q4 of 2025, the shipment outlook remains steady. Looking ahead to early 2026, we may see some seasonal variations, but overall, we expect our growth momentum from 2025 to carry into 2026, with wafer shipments projected to increase year-over-year. The expansion of our 22-nanometer eHV platform for high-end smartphone OLED displays is expected to be a significant growth driver, and we anticipate double-digit revenue growth for our 22- and 28-nanometer products in 2026. However, we may face some seasonality issues, particularly in Q1, which could pose challenges. Strong customer uptake of our 22-nanometer technology and our progress in RFSOI for smartphone RF devices will contribute to our growth in 2026. Additionally, our upgraded PMIC solutions are expected to enhance our recovery in the 8-inch market. We project PMIC sales to grow in the high single-digit range in 2025, with this momentum continuing into 2026. Our initiatives to improve our technology competitiveness, especially for PMIC applications, are beginning to show positive results, which will strengthen our market position and growth prospects for 2026. Beyond 2026, we will keep developing new technologies to maintain our competitive edge and expand our addressable market, including 12-nanometer FinFET and advanced packaging. Our technology portfolio is well-equipped to meet the rising demand for power efficiency, high-bandwidth data transfer, and enhanced connectivity. Overall, we are cautiously optimistic about 2026, though it's still early to provide specific quarterly guidance.
Yes. That's pretty intensive. And I think just a quick follow-up to my first question is just when you mentioned the growth momentum could continue into 2026 compared with 2025, are you saying that the wafer shipment could actually still be growing by low teens next year at least? Because you mentioned a lot of growth drivers by applications just now, especially on 22-nanometer, 28-nanometer, and also 8-inch. So just wondering whether you are implying that the wafer shipment could grow by another low teens at least for 2026?
We're not providing the wafer shipment details at this moment. We expect to give you more clarity regarding Q1, but specifically for 22 and 28, we do anticipate a double-digit year-over-year growth as we move into 2026.
I have a second question regarding your gross margin trend. For the fourth quarter, you indicated that shipments and pricing would remain flat. The foreign exchange situation seems to be more favorable right now. Can you explain why the gross margin isn't expected to exceed the third quarter? I'm also curious if we should anticipate that high 70% utilization will lead to gross margins in the high 20 percentage range going forward.
Gross margin in the third quarter is actually, in fact, slightly higher than that of the previous quarter. The gross margin also primarily depends on utilization rate, ASP, product mix, depreciation and foreign exchange. As you know, even though the foreign exchange rate may be on a forecast basis, better than forecast, but still appreciated against U.S. dollars, our key receivable currency, so still in an unfavorable situation, as I mentioned earlier, that almost eats up about 3% of our total revenue. And we do expect the Q4 '25 gross margin will still remain in the bandwidth of high 20 percentage range. Despite the variables such as our depreciation, we will still see quarterly increases. And this year, we are facing a 20% plus increase in annual depreciation expenses. So I hope that answers your question.
Yes. And then just a relevant follow-up is in your cost structure. You have been able to manage the other manufacturing cost item quite nicely down in the third quarter despite the fact that the labor cost is higher, electricity cost is higher and also the material or even the wafer shipment is slightly higher compared with the second quarter. So could you just elaborate in more detail on how should we think about the other manufacturing costs, which I believe should be mostly variable costs? How should we think about that trend?
So part of our employee compensation is bonus, which is based upon profit sharing. So when we have a better quarter-over-quarter profit in the third quarter, we do have to factor in higher bonuses, which increased the compensation expenses in the third quarter.
But it was still down compared with the second quarter. So I was just wondering if there's any reason driving that decline and would that trend continue?
No, the trend will not continue. It will fluctuate along with our rolling profit recognition.
Next one, Charlie Chan, Morgan Stanley.
Congratulations on the strong results, particularly regarding gross margins. To start with the geopolitical uncertainties, Jason, could you provide some insights on the macro uncertainties you anticipate will persist in 2026? One of your customers inquired about speculation regarding a potential semi-tariff next January. Could you share any possible impacts this might have on your business or operations? Additionally, a couple of weeks ago, there was some concern regarding rare earth supply. Has your team conducted any analysis on the potential effects if restrictions on rare earth materials are implemented again?
Sure. There are a few points to address. Regarding the tariffs, we recognize the uncertainties and risks they pose and will approach our business planning for 2026 with caution. Although we haven't seen any immediate effects yet, we remain vigilant. Despite these uncertainties, we will continue to prioritize the core aspects of our business, such as technology differentiation, manufacturing excellence, and building customer trust to strengthen our competitive position. For UMC, we have established manufacturing sites around the world to mitigate geopolitical concerns. The global semiconductor landscape is changing, with customers and governments focusing more on geographic diversification and supply chain resilience. Our strategic initiatives, including expanding capacity in Singapore and the U.S., are intended to complement our operations in Taiwan, allowing us to better support customers in various regions. Long-term, we aim for a balanced capacity distribution between Taiwan and international locations, and we are prepared to adapt to any changes or opportunities that arise.
So specific on semi-tariffs, right? I think we also went through this discussion last quarter or 2 quarters ago. So do you also hear that next January could be the final implementation of this semi-tariff? And secondly, can UMC get an exemption from the semi-tariff?
Well, I mean, your guess will be as good as mine. So I'm not going to guess here.
I watch TV only.
Yes. So we're going to be cautious about this, and we're closely monitoring the progress and developments. And at the same time, given that we are investing in the U.S., so we're definitely going to present our case. But there's nothing else to update here. But if there's anything, we will definitely recall back.
Okay. Got you. And second question is about your gross margin sustainability. I know this quarter, next quarter, some puts and takes, right? But just overall, right, next year, it seems like some of your industry peers, maybe TSMC, kind of hike their wafer price. And recently, we are seeing that the back-end foundry, though it's not like your industry peer, but it's kind of your downstream supply chain, also attempting to hike the back-end foundry service price. So what was UMC's kind of sort of potential wafer price hike for next year?
Well, like Chi-Tung mentioned earlier, margin reflects the result of ASP loading certain variable factors. So let's take the ASP specifically. For the ASP outlook, our 2025 ASP performance has remained firm amid a dynamic business environment, and it has remained stable at a healthy level throughout the year. And so we expect the ASP will remain firm in Q4 2025. And for the 2026 outlook on ASP, we will provide more detail in the upcoming January 2026 conference call, as we are going through some discussion with our customers aligning that. So we probably have more detail to report in the next conference call.
Okay. And on the cost side, expense side, Jason, you said at some interviews that your team want to drive some costs down. But I feel like most of the components whatsoever. Most of what I'm hearing is that commodity cost may go up, right? So on the cost side, do you have any preliminary outlook for 2026?
Without getting into specific cost projection or outlook, I think we can probably update you on our view on cost. Our cost competitiveness is always a mutual goal for us and our suppliers together, so in order to be competitive. So we're closely working with our suppliers. We'll continue to drive towards cost savings in 2026, and that has been going on for many years, but we are continuing to do that into 2026. But that includes a combination of both internal and external efforts. It's not only working with the supplier; it's also internal efforts. For example, we have already started leveraging some smart manufacturing and AI technologies internally to enhance our fab efficiency and enabling our long-term operational competitiveness. So that's also a major piece of driving our cost goal. So I think there are many initiatives that we're deploying, and working with the supply chain is just one of them.
Okay. I will return to the queue now. I understand your company and team have been conducting a lot of strategic and marketing research. Recently, I came across a data point that I would like to discuss with you and seek your opinion on. Due to the T-glass shortage, we are beginning to observe a tightening of BT substrate supply. From your perspective or UMC's perspective, do you think this could affect some of your customers' demand, particularly for consumer or smartphone SoC demand going into 2026?
We haven't observed any issues so far, but we are actively monitoring the resilience of our entire supply chain. The current market is influenced by the momentum of AI, which has raised potential supply concerns in various areas. However, we have not experienced any impact yet. We remain vigilant and are managing our internal supply resilience. Our goal is to ensure supply assurance along with meeting both supply and demand expectations, as well as maintaining quality standards and controlling costs. While we have not noticed any effects from the recent market dynamics, we keep it on our radar and continue to monitor the situation closely.
Yes. How about smartphone or PC demand recovery, if you have a crystal ball? Do you think that 2 major segments of the end demand will significantly recover next year?
Well, I mean, at least for the Q4 '25, we expect the wafer shipment to remain flat, and the markets reflect pretty healthy inventory levels as well. We see slightly communication segment decline in our segment, but the computing, consumer, and automotive are slightly increased. So I'm not sure that's affected by that particular supply issue, but it reflects probably more end demand associated.
Next one, Laura Chen, Citi.
My first question is also about the margin outlook. Chi-Tung, you mentioned that the depreciation cost for this year was up about 20% plus year-on-year. But we know that actually in the first half, the depreciation cost increased almost 30%. So does that mean that depreciation cost year-on-year increase trend is slowing down into Q4? With overall your utilization rate and also ASP seems to be resilient and also higher exposure on 28-nanometer, should we be looking for some potential upside in the gross margin?
Well, other than depreciation, there are other factors. Like Jason mentioned, we will have a clear view on the ASP, which is an important component for the margin equation. But just on depreciation alone, yes, the increased magnitude, we're down to about low teens in the year of 2026 versus 20-something in the 2025. And in the previous quarter, we also mentioned either '26 or '27 should be the peak of the recent depreciation curve. So on that regard, it does provide a good floor for helping our EBITDA margin.
Okay. Great. And also the second question is, I recall that we mentioned about the Interposer business before. We know that the AI demand is surging. So I just want to understand UMC, do you have any updated view on the Interposer strategy? And also, we know that UMC also has wafer-to-wafer technology. So just wondering what's the plan here. And also, do you want to further expand the capacities on Interposer?
Well, the latest development in the advanced packaging space, we will continue preparing our advanced packaging solutions for this growing market associated with the energy consumption of cloud AI and the edge AI market. For UMC, we are developing the 2.5D Interposer with DTC, the deep trench capacitor, and discrete DTC to address the power efficiency requirement in all AI, HPC, PC, notebook, and smartphone space. And second, UMC is leveraging the scalable 3D wafer-to-wafer packaging stacking and the TSV to enhance our specialty technology offering. We are in the mass production of extremely small form factor for the 5G and 6G RFIC right now by leveraging the wafer-to-wafer stacking technology. Based on the success of the 5G and 6G RFIC that works through the wafer-to-wafer stacking, we are also developing memory-to-memory stacking and memory-to-logic stacking services for high-bandwidth computing requirements. So our technology really is associated with the center with the DTC capability and the wafer-to-wafer stacking capability. Right now, still within our current capacity size, there are no expansion plans, but there are a lot of customer interests and engagements being developed right now.
Okay. Great. Can you also give us some idea of how that kind of business opportunity is growing into the next few years?
I mean, as we anticipated, the cloud AI and the edge AI market will probably take off in the next 2 years or so. And so we think preparing those technology capabilities today will position us well to serve that market when the market comes. I think many customers are engaging in that discussion and exploring the product roadmap at this stage. But in terms of the actual volume and the ramp-up schedule, I would expect it's going to probably be in late 2026 or sometime in 2027.
Next one, Sunny Lin, UBS.
Congrats on the very good outlook. Very glad to see business stabilizing and improving. So my first question is on the pricing. I understand more specific guidance should be provided in January or in early 2026, but I want to get a bit more color on the latest progress on your engagement with the clients. So in 2024 and 2025, basically, you provided roughly mid-single-digit type of price resets across the board. And so how should we expect, like going to early 2026? Would it be fair to assume that now given the improving supply/demand, even if any price decline should be lower than the magnitude in early 2024 and early 2025?
Well, this is definitely our goal. However, while we are still discussing and aligning with our customers, I can't provide specific figures without seeing the data first. Throughout the annual discussions and the patterns in January, we will likely continue these discussions. But regarding the magnitude, I think it's a bit too early to provide guidance at this point.
Got it. Maybe a follow-up on blended ASP. There are still some concerns that there may be some overhang from LTAs expiring in the coming few quarters that could weigh on your blended ASP. And so Jason, could you maybe provide a bit more color on if any impact or that impact is already gone mostly?
LTA is one of the mechanisms that helps us and our customers collaborate with partners, not solely based on the average selling price, but also through a mutual commitment to provide capacity to support the customer. In return, the customer shows some dedication to the business engagement. LTA will continue to serve this purpose. Given the market dynamics, we're consistently working alongside our customers to support them and to gain market share while also maintaining it. We need to navigate complex commercial needs and balance capital expenditure returns. This process has been intricate and ongoing for the past two years, and we'll keep assisting our customers in moving forward toward a mutually beneficial solution under the LTA arrangement. The future commitment to LTA remains strong.
Got it. So maybe one question on 2026, just to make sure that I got the right number. So for 2026, Jason earlier, did you mention the target would be to grow business by double digits?
I mentioned about the 22- and 28-nanometer that we expect the momentum will go into 2026, and we expect a double-digit growth year-over-year, yes. For the...
Got it. And maybe a question on Singapore expansion. So if any latest update that you could share with us in terms of how quickly the capacities will be ramped in 2026?
I think the milestone has not changed. We project that the 12 IP3 production ramp will start in January 2026, with a higher volume ramping up starting in the second half of 2026. That milestone schedule remains.
Got it. Maybe last question. So in terms of dividend policy, given the improving cash flow outlook in the coming few years, would the company consider maybe revisiting the dividend policy to change to like absolute cash dividend? Would that be possible?
It's not impossible, but we always try to strike a good balance between the high percentage payout ratio and absolute dividends. So I think that strategy or that position will continue.
Next one, Gokul Hariharan, JPMorgan.
So just wanted to understand a little bit more on the pricing. I know that you're in pricing negotiations with customers. Could we talk a little bit about 22 and 28? How is the pricing trend there? Do you expect that there are any concessions that you may need to make on 22 and 28 pricing or that is going to be reasonably firm? And maybe also the same question on the 8-inch portion of the capacity as well, given some of your competitors are also kind of putting down or kind of exiting some of the 8-inch capacity?
Our pricing strategy has been consistent, and we will collaborate closely with our customers to protect and grow our market share. This approach will not change. Regarding the ASP guidance, it's best to wait until we have a complete picture to share. Our pricing strategy and positioning remain unchanged. We believe that our pricing reflects our value proposition, which includes technology differentiation, manufacturing capabilities, reliable capacity, and diverse manufacturing locations. We have much to offer, and with our mutual commitment to many customers, we aim to find the right balance in pricing discussions. However, I prefer to hold off on specific ASP guidance until we finalize our plans, as I don't want to mislead anyone right now. Whether it concerns 22, 28-nanometer, or 8-inch technology, each has its own market dynamics, and we will navigate those effectively. While we don’t usually comment on our competitors, we anticipate an increase in our market share in 2025 for both 8-inch and legacy nodes like 12-inch. We view these nodes as key markets for a variety of analog reach products. We will focus on strengthening our product portfolio in these areas and aim to increase our market share. We are continually optimizing our existing platform and developing new solutions to meet market demands. UMC has established long-term, trusted relationships with customers in this space, which reinforces our position as the preferred foundry partner and supports our growth in both 8-inch and 12-inch legacy nodes over the long term.
Got it. Yes, clear on the pricing that we can wait for January. But I think I just wanted to also ask on the semiconductor Section 232 tariffs. How are the discussions with your customers going? And let's say, there's a 15% to 20% tariff on exports, which needs to be offset with any kind of U.S. investment or U.S. capacity that you have. How does UMC manage that situation? And which are the investments, or if any, that can qualify for that kind of offset? I mean, for some of your peers, I think that is pretty clear. But I just wanted to understand how UMC is considering the situation.
I previously mentioned that we have a well-diversified manufacturing footprint. This has positioned us to align effectively with current market dynamics. Our past initiatives have prepared us to address concerns around geographic diversification and supply chain resilience. While we may make some minor adjustments to our strategy, the overall direction remains the same. We are moving forward with plans to expand capacity in Singapore and the U.S., which aligns with our goals. We are aware of the tariff situation and the impact it may have, with some being set at 15% in regions where we operate. Our customers are actively discussing their need for access to our facilities, and we are open to these conversations to enhance our business engagement. We see this as an opportunity rather than just a challenge. While there are still uncertainties to navigate, we are confident in our team's ability to find mutually beneficial solutions, regardless of how the situation evolves.
Yes, just following up on that, Jason, I think geographical diversification is one aspect, but also the second aspect is U.S. capacity, right? So is your understanding that your 12-nanometer collaboration with Intel kind of counts as U.S. investment and U.S. capacity, given I think the total investment is actually quite small, even though you are actually shouldering a lot of the technology-related tasks.
I can't comment on the scale of the investment, but we are indeed increasing our capacity in the U.S. The foundation we are establishing with the 12-nanometer technology will allow us to explore additional collaboration opportunities. If there are any updates, we will share them, but this could also lead to further investment. For now, we're not ready to provide any updates, but the significance of our 12-nanometer investment is notable.
Got it. Maybe one last question on the advanced packaging bit. I think you last time updated, I think, around 6K or so of wafer capacity for 2.5D IC packaging. Is that still where we are in terms of the capacity? And for your 2.5D packaging with deep trench capacitors, what is the application? Is it slightly different application that you're targeting compared to the mainstream market and that's why you're kind of waiting on the capacity expansion while the industry is still like really asking for a lot of capacity?
No, the 2.5D Interposer 6K today stays there. There is no expansion plan beyond that given the technology roadmap migrating to the DTC, and we're developing the DTC capability. And for that, we're serving the AI, HPC, PC, notebook, and smartphone space. And so our advanced packaging roadmap will center on the DTC going into, yes, 2026.
And would you say that the 6K is now fully utilized or do you still have a lot of slack in that 6K capacity right now?
I mean, as the product is migrating to DTC, that's why we're not expanding the capacity on the 2.5D right now.
How significant do you anticipate the DTC capacity will be in terms of revenues? You mentioned expecting a ramp-up by the end of 2026, so by 2027, will it represent a substantial portion of your total portfolio, or will it remain relatively small, akin to the Interposer-related revenues which have been more in the low single-digit percentage range?
I think it's kind of too early to predict that. A part of the market is associated with the edge AI market, and which we have to wait until that has more clarity. And so I think at this point, it's too early to project that. But in terms of technology-wise, I think that's definitely the core of the next generation. So we need to make sure that we have prepared for it.
Next one, Janco Venter, Arete.
I just wanted to follow up on the investment into the U.S. and just get an update on the state of the PDK. And then also, we just want to understand the business model around this engagement on 12-nanometer. Is it a revenue share? Is it a profit share? And then just secondly, on that, will it be cannibalistic to the 22, 28-nanometer customers as you start migrating to 12-nanometer? Any color that you can add to that to help us just understand this opportunity would be quite helpful.
Sure. From a project perspective, the 12-nanometer collaboration with Intel is progressing well and is on track with the project milestones. We expect the early PDK to be ready for the first group of customers in January 2026. Both UMC and Intel are aligning with customer device specifications to support the ramp-up. Overall, the partnership is moving forward as planned, with customer product tape-out anticipated at the beginning of 2027. Regarding the business model, we are collaborating closely with customers, but we cannot share detailed information at this time. We will provide updates on revenue recognition once it is ready. The cooperation model is well-structured, but we will likely report on it after we begin production. I think that addresses your two questions, correct? Did I overlook anything?
Yes, that makes sense. Maybe just one follow-up. You mentioned earlier about looking at further investments. We would like to understand if there’s a possibility to extend this agreement to single-digit nodes, considering that Intel has fully depreciated the 7-nanometer technology. Would this be something you are considering, and does it align strategically for UMC?
Yes, the simple answer is yes. However, we need to begin with the 12-nanometer technology. It’s important that we execute that well to establish a solid foundation. For technologies beyond 12-nanometer, we are open to exploring future opportunities through mutually beneficial partnerships. I believe our cooperation with Intel is significantly strengthening UMC's strategic position in the U.S. market and expanding our addressable market, all while maintaining a disciplined capital expenditure approach. We are very committed to this partnership, and the project is progressing well so far.
Next one, Bruce Lu, Goldman Sachs.
Can you hear me?
Yes.
Yes. I just wanted to follow up on the U.S. collaboration beyond 12-nanometer. What are the showstoppers for us to move beyond 12-nanometer at the current stage? Or do we consider going backward to do like relative mature node capacity in the U.S.?
That's an interesting question. When we discuss our collaboration with Intel and how it strengthens our position in the U.S. market, I hope we can go beyond just the 12-nanometer technology and fully realize the potential of this partnership. We're very open to exploring future opportunities through this collaboration. I don't believe there are any major obstacles as long as it remains mutually beneficial. We are definitely willing to explore that. Whether the exploration is focused on more advanced technology or moving backward, we are open to both possibilities and not restricting ourselves in this collaboration.
No, Jason, the question is that it's clearly mutually beneficial, right? So who has the ball? I mean, who doesn't want to move on?
In any engagement, not just this one, it's essential to have market validation and to conduct due diligence. I believe all discussions are open, and we need to ensure due diligence is performed before proceeding. So, it's not really a barrier. We just need to ensure we follow the proper process.
So in other words, the prerequisite condition would be that you probably need to deliver the 12-nanometer with a decent size of revenue, decent size of customers, then both sides might consider to move it on. Is that the right consideration?
I won't say that it is a prerequisite, but it is one of the important considerations. More importantly, this collaboration needs to be economically beneficial to both parties. Once we are more mature and ready, we will provide updates. Our stance is that we are open to exploring this opportunity.
Okay. So when can we expect to see the meaningful revenue contribution from 12-nanometer?
Well, I mean, right now, for the early product tape-out, it is going to be in 2027. And so we're probably going to start seeing some contributions in 2027, but then ramping after that though.
And in the interest of time, we're taking the last question. Last one, Charlie Chan, Morgan Stanley.
So it's actually wafer-on-wafer related. So, Jason, can you share with us who could be kind of memory partners? I mean, it seems like it requires a lot of so-called customized design interface, etc. So are those more Taiwanese partners or do you have some global top memory partners for wafer-on-wafer? And secondly, if you can, can you share some potential kind of end applications and the timing for wafer-on-wafer?
We are currently in mass production for some very compact devices in the RFIC sector, focusing on our wafer-to-wafer stacking capabilities. We discuss this because we believe this technology will extend beyond just small form factors. It allows for various stacking options, such as memory to memory and logic to logic, as well as logic to memory. By giving customers these options, they will be able to explore a wide range of product applications. Presently, our advanced packaging technology is evolving around two main pillars: the DTC capability and the wafer-to-wafer stacking capability. Once the technology is fully developed, we will be able to explore numerous applications.
On this wafer-on-wafer technology, do you see any advantages or differentiations compared to the industry, for example, TSMC or possibly XMC?
Well, I mean, the developing differentiated technology is definitely on mandate. So we continue driving that technology differentiation. But at the same time, you have to make sure that you're part of the ecosystem, where the market is going. So we see this from a market standpoint. From a technology/product migration standpoint, we believe these are 2 very important capabilities and technologies. So we're preparing ourselves to get that ready, and then, we can start exploring different business opportunities.
And ladies and gentlemen, thank you all for your questions. That concludes today's Q&A session. I'll turn it over to UMC Head of IR for closing remarks.
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@umc.com. Have a good day.
And ladies and gentlemen, that concludes our conference for the third quarter of 2025. We thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you again. Goodbye.