UMC begins mass production of silicon photonics wafers in Singapore as Citi turns positive

UMC launches silicon photonics production in Singapore

United Microelectronics Corporation (UMC), Taiwans second-largest contract chipmaker, said Tuesday it has begun mass production of silicon photonics wafers at its Singapore facility. The company said the new capability is intended to meet rising demand for high-speed optical interconnects in AI and hyperscaler data-center networks.

UMC reached production readiness in just 18 months through a collaboration with local fabless designer SILITH Technology. The joint development moved the silicon photonics platform from lab to manufacturing, and UMC said it plans to make a 12-inch silicon photonics platform available for customer product development by 2027.

Analysts at Citi see the companys prospects improving in the second half of the year. Citi forecasts a 13% quarter-on-quarter sales increase for UMC in the second quarter of 2026 and anticipates a recovery in gross margins, providing a more positive near-term outlook for the chipmaker.

Supporting investor optimism, UMC recently reported strong sales: June revenue rose 22.85% year-on-year to NT$23.12 billion (about $719.21 million), and first-half cumulative sales increased 11.28% compared with the prior year. Despite those figures, UMCs share price slipped nearly 5% during Tuesdays trading in Taiwan before trimming losses to finish about 1.6% lower.

UMCs expansion in Singapore is part of a broader trend of Taiwanese semiconductor companies increasing manufacturing footprints in the city-state, which is evolving into a regional hub for the global chip supply chain. That ecosystem includes players such as King Yuan Electronics and Vanguard International Semiconductor, the latter of which has teamed with Netherlands-based NXP Semiconductors to build a $7.8 billion fabrication plant in Singapore.

Silicon photonics which enables ultra-high-speed transmission and processing of data over optical links is a rapidly growing market driven by rising data traffic and the need for faster optical communication. Market data from Polaris Market Research estimates the global silicon photonics market will reach about $3.71 billion in 2026.

UMCs move highlights how established contract manufacturers are positioning to supply next-generation networking and AI infrastructure. By bringing silicon photonics into volume production and offering a 12-inch development platform, UMC is aiming to capture a share of demand as cloud providers and hyperscalers upgrade their data-center interconnects.

Key takeaway

UMCs Singapore ramp-up and the rapid development timeline with SILITH underscore the companys strategic push into silicon photonics at a time when both market demand and analyst sentiment exemplified by Citis forecast are turning more favorable. The short-term market reaction in Taiwan shows that even positive operational and sales momentum can be met with volatility, but UMCs new production capability positions it to participate in the next wave of optical infrastructure spending.