UMC starts silicon photonics wafer production in Singapore

United Microelectronics Corporation has begun mass production of silicon photonics wafers at its Singapore facility, a move tied directly to demand for faster data movement inside AI data centers. For investors, the announcement adds another data point to the chipmaker’s growth story as Citi says the company’s outlook is improving in the second half of 2026.

UMC, Taiwan’s second-largest contract chipmaker, said Tuesday that the Singapore site produced its first mass-manufactured silicon photonics wafers. Contract chipmakers, also called foundries, manufacture semiconductors designed by other companies.

Silicon photonics uses light, rather than only electrical signals, to move and process data at very high speeds. That matters in artificial intelligence infrastructure because AI systems require large amounts of data to travel quickly between chips, servers and networking equipment.

UMC said the wafers are aimed at high-speed optical interconnects for AI and hyperscaler data center networks. Hyperscalers are large cloud and data center operators that build computing infrastructure at very large scale.

From development to production

The company said it worked with SILITH Technology, a Singapore-based fabless chip design company, to bring the silicon photonics platform from development to production readiness in 18 months. A fabless chip company designs semiconductors but does not operate its own large-scale manufacturing plants.

UMC said the technology is intended to support next-generation AI infrastructure. The company also said it plans to make its own 12-inch silicon photonics platform available for customer product development by 2027.

The timing lines up with a broader investor focus on chips that sit outside the best-known AI processors. As data centers expand, networking, memory, power management and specialty manufacturing technologies have become more closely watched parts of the AI supply chain.

Citi sees a better second half

Citi analysts said they expect UMC’s outlook to improve in the second half of the year, according to CNBC. The bank forecast a 13% quarter-over-quarter increase in sales for the second quarter of 2026 and a recovery in gross margin, which measures how much revenue is left after the direct cost of making products.

UMC recently reported stronger sales figures. According to the company’s June sales report, revenue for the month rose 22.85% from a year earlier to NT$23.12 billion, or about $719.21 million. First-half cumulative sales increased 11.28%, UMC said.

The market reaction was more cautious on Tuesday. UMC’s shares in Taiwan fell nearly 5% during the session before reducing losses to trade 1.6% lower, CNBC reported.

Singapore’s chip role grows

UMC’s Singapore ramp also fits into a wider shift among Taiwanese technology companies adding manufacturing capacity in the city-state. Singapore has been building its role as a regional node in the global semiconductor supply chain.

CNBC cited King Yuan Electronics Corp. and Vanguard International Semiconductor Corporation among the Taiwanese-linked companies expanding in Singapore. Vanguard, which is backed by TSMC, recently partnered with Netherlands-based NXP Semiconductors on a $7.8 billion manufacturing plant in the city-state.

The market UMC is targeting is still relatively specialized, but it is expanding alongside data traffic and demand for faster optical communications. Polaris Market Research estimated the global silicon photonics market at $3.71 billion in 2026.

This story draws on original reporting from CNBC.