Earnings Positives Fail to Help UMC Crashes to Limit-Down
The Taiwan market intraday index on the 29th once slumped to 46266.74 points, down 768.84 points, while the UMC group showed an extreme split. Foundry major UMC released positive signals at its earnings call on the 28th, with utilization breaking above 90% and 2027 average selling prices up about 10% YoY. On the 29th its shares opened lower and moved lower, hit by large sell orders to the 115.5 limit-down price, briefly locked down before the lock was opened. Fellow group silicon IP maker Faraday saw explosive buying, surging to 231.5 for its 2nd straight limit-up, sharply diverging from its parent.
Heavy Selling Pressure, 25.2% Pullback From Peak
Looking at UMC's chips and price action, since October it has been hit by two heavy selling forces from convertible-bond arbitrage and expanded foreign-investor selling. The stock fell from a wave high of 154.5 to an intraday low of 115.5 on the 29th, a cumulative 25.2% decline. The three institutional investors all sold heavily, with combined net selling exceeding 350,000 lots. The heavy selling broke through all short-term moving-average supports and was the core factor driving the stock to limit-down, with buying demand completely absent.
92% Utilization, Additional Capacity Expansion
On the outlook, UMC CEO Wang Shi said at the earnings call that strong mature-process demand lifted utilization to 92%, with clear room for price improvement in both 8-inch and 12-inch businesses, and 2027 is expected to be an inflection point for ASPs with a positive upturn starting next year's first quarter. In addition, the UMC board approved additional capital expenditure of about US$3.2 billion, about NT$103.2 billion, to expand silicon photonics, silicon capacitors and TFLN modulator capacity, with capacity expected to ramp by end-2028 and full volume production in 2030, and raised its AI-related revenue outlook to 20% to 25% of revenue in 2029.
Institutions See Up to 188, Faraday Posts Back-to-Back Limit-Ups
In contrast to UMC's plunge to limit-down, Faraday benefited from advanced-process order wins and surged to 231.5 on the 29th for its 2nd straight limit-up. On UMC's outlook, analysts noted that although 2027 earnings improvement will be limited by tight capacity and higher depreciation, they are positive on silicon photonics and advanced packaging demand, raising the target price to 160 and maintaining an Overweight rating; two other foreign brokerages are also positive on higher utilization and the long-term AI布局, giving target prices of 143 and 188 respectively, waiting for on-market chip overhang to be digested.