Analysts at GF Securities project that United Microelectronics (UMC.US) will see its shares strengthen, driven by progress in its photonic integrated circuit (PIC) business. In a note to clients, analyst Jeff Pu highlighted that UMC's stock trailed the Taiwan Weighted Index by 26% in the second half of July, following TSMC's (TSMC.US) commentary that mature process nodes are not in short supply. However, the shares have traded sideways this month as the market digests higher depreciation guidance and previously crowded long positions.
Pu now anticipates accelerated momentum in UMC's high-margin PIC segment, fueled by Hyperlight—which may be making significant headway with Google—and TeraHop. The firm forecasts wafer shipments to climb to 20,000 and 40,000 wafers per month by the fourth quarter of 2027 and 2028, respectively, with gross margins well above the company's average. GF Securities maintains a "Buy" rating, raising its target price from NT$135 to NT$160 (approximately $5 per ADS). Each UMC American Depositary Share on the New York Stock Exchange represents five ordinary shares traded in Taiwan.
Adding to the bullish narrative, United Microelectronics is collaborating with Intel on the co-development and manufacturing of a 12-nanometer process, with production slated to begin next year at an Intel fab in Arizona. Pu noted that management has reaffirmed the partnership remains on schedule, with tape-out expected on Intel 12 technology in 2027, and that capacity could expand beyond a single phase.
Where to direct your attention
The battle between bulls and bears is intensifying. While GF Securities and Arete Research have upgraded their stances on UMC, the overall consensus remains cautious, positioning the company as one of Wall Street's most contentious names in the debate over how to revalue mature-node foundries. On July 28, Bernstein reaffirmed its "Underperform" rating with a target price of $13.60, implying roughly 28.98% downside from the then-current price. This marks the firm's third consecutive bearish call, following similar ratings on July 7 and April 13, with a target of $7.40, making it the most persistent skeptic among UMC's covering analysts.
According to S&P Global, the consensus rating from four analysts is "Sell," with a 12-month average target price of $18.492. Bearish concerns center on three key issues. First, the second-quarter net profit of NT$42.26 billion included a one-time investment gain of approximately NT$30.05 billion, raising questions about the sustainability of core operational momentum. Second, TSMC's assertion that mature process nodes are no longer in short supply weakens UMC's pricing power. Third, depreciation expenses are expected to grow at a "low double-digit" percentage rate through 2027, while higher capital expenditures will pressure near-term profit release.
Between July 31 and August 24, UMC's ADR traded in a range of $17.07 to $20.85, closing at $18.83 on August 24 after briefly surging to $19.50 in pre-market trading—a clear reflection of the intense market debate. Since Arete Research's upgrade on August 10, bullish catalysts have been accumulating, but Bernstein's underperform rating and the overall "Underweight" consensus indicate that the market has yet to form a unified view on the pricing of UMC's PIC business.