To The Moon

Intro.

This is rather-lengthy post as we delve into the complex world of semiconductor.

It reads like a mystery novel filled with intrigue and historic behind the scenes, making this a very insightful look into a sector, regarded as “boring & mundane”.

Ready ?

The Collab.

On 02 May 2025, at Intel's Foundry Direct Connect 2025 event, $United Microelectronics(UMC)$ and $Intel(INTC)$ shared the stage for the first time, to outline their joint development of a 12nm semiconductor. (see below)

Doing so, INTC dodges $Taiwan Semiconductor Manufacturing(TSM)$, while still tapping into a unique Taiwanese capability; that is reverse-engineering TSMC-compatible processes without infringing on patents.

As China floods the market with mature-node chips and INTC struggles to fill its own underused fabs, this partnership offers mutual survival and maybe something more.

That’s the bold theory put forward by :

• Chin-Tay Shih - former ITRI president & NTHU honorary professor.

• Tain-Jy Chen - former CEPD minister & NTU economics professor emeritus.

Glossary.

ITRI - Industrial Technology Research Institute, is a world-leading, non-profit applied research and development organization based in Taiwan.

NTHU - National Tsing Hua University is a public research university in Hsinchu, Taiwan. Founded in Beijing.

After China’s civil war, then president Mei Yiqi and other academics relocated with retreating Nationalist government to Taiwan, where the university was re-established in 1956.

CEPD - Council for Economic Planning and Development, was a former government agency in Taiwan responsible for drafting national economic development plans and assessing development projects.

In 2014, it merged with other agencies to form the National Development Council (NDC). 

NTU - National Taiwan University, is a national public research university in Taipei, Taiwan.

Founded in 1928 during Japanese rule as Taihoku Imperial University.

It is the 7th Imperial Universities of the Empire of Japan and oldest university in Taiwan, supervised by the Ministry of Education.

The Book.

In Shih & Chen’s new book, From the Periphery to Innovation: How Taiwan’s Semiconductor Industry Became the Heart of the World, offers one of the most in-depth analyses to date on the island’s chip industry.

The English edition is expected to be released in the US by the end of 2025.

Aboriginal art - mother & child

No UMC, no TSMC.

UMC, spun off from ITRI’s Electronics Research and Service Organization in 1980.

It was already profitable in its first year by riding the wave of the electronic watch boom.

That early success, Shih and Chen argued, gave the Taiwanese government, confidence to back a second, more ambitious semiconductor initiative, the VLSI (very large scale integration) Project, that led to the founding of TSMC.

By nature, semiconductors require constant reinvestment in next-generation technologies.

While UMC was profitable, it wasn’t generating enough to fund future expansion.

Between 1982 and 1987, UMC’s NT$1.73 billion in profits, fell (very) short of what was needed to build a new fab.

In 1983, UMC requested an additional NT$10 billion in capital from its largest shareholder (the government) but was denied.

At the time, UMC followed the IDM (integrated device manufacturer) business model, vertically integrating (i) product design, (ii) manufacturing, and (iii) sales.

As Chen reflected, “Because we’re (Taiwan) a small country with small companies, we could only focus on niche products like music cards and electronic watch ICs, that did not generate much profit.”

That realization prompted a strategic pivot.

The government’s NT$10 billion investment ultimately went into a fab that adopted a pure-play foundry model, that would become TSMC.

A few years later, UMC also transitioned to a foundry model.

In 2017, when Jason Wang and S.C. Chien took over as co-presidents, UMC announced it would no longer invest in nodes more advanced than 12nm, citing limited customer demand.

Since then, its process roadmap has largely plateaued at 28nm.

Legacy Node Battlefield

As stated by Wang in media interviews, UMC’s strategy was to avoid direct competition with TSMC, by:

• Pulling resources out of advanced nodes.

• Focus solely on “making an impact in mature processes.

As a result, UMC became a dominant force in OLED display driver ICs, thanks to its early lead in developing 28nm high-voltage processes.

However, their failure to anticipate US-China tech war that has dramatically upended UMC’s game plan.

As China prepares to flood the market with mature-node capacity, the once-safe 28nm-and-below segment is turning into a red ocean.

Intel’s Alliance 3 Key advantages

In January 2024, UMC announced a surprise partnership with INTC to develop and manufacture a 12nm process platform, an area where Chinese foundries have struggled to gain traction.

The project housed in Intel’s Ocotillo campus (Arizona), using Fabs 12, 22, and 32, with foundry services expected to launch in 2027.

For Intel, whose CPUs rely on cutting-edge nodes, these 12nm lines are considered legacy.

In the past, such lines were either upgraded or phased out.

The UMC partnership offers a way to monetize INTC’s underutilized assets.

Comments from a foreign equity analyst - “It is a symbiotic deal, Intel needs utilization, UMC needs capacity”.

UMC CFO and spokesperson Chi-Tung Liu confirmed in May 2025, nearly all of the company’s critical R&D efforts are now centered on the 12nm platform, that is currently in customer onboarding phase.

According to a source familiar with the program, the partnership brings 3 major advantages.

1. 12nm is the most advanced node that does not require EUV lithography, making it a sweet spot in terms of price-performance. Customers stick with 12nm because it’s more cost-efficient”.

2. The node falls under US export controls, making it significantly harder for Chinese foundries eg. SMIC to obtain the necessary equipment and EDA tools, allowing 12nm to act as a defensive buffer as China scales its mature-node output.

3. While UMC publicly positions the Intel collaboration as a hedge against China, in reality it is about grabbing market share from TSMC, as TSMC essentially owns the 12nm space.

The remaining question is “how much UMC can take from TSMC will be the key indicator of whether this 12nm strategy succeeds”. The first batch of customer products will be critical.

If INTC-UMC succeed, others still on the fence may follow. If demand grows, Intel has placed no cap on the fab capacity UMC can use.

Why UMC?

Why would Intel risk IP leakage by effectively leasing its legacy fabs to a Taiwanese partner?

Answer: Intel wants to learn how to build “T-like” processes. UMC knows how to do it.

“UMC’s greatest value is that it knows how to do T-like”, said a former TSMC executive.

Simply put, when customers are unwilling to redesign for Intel’s native process, Intel must adapt its technology to match TSMC’s as closely as possible.

That’s the only way to win over customers with minimal friction.

As explained by an IC design executive:

• To truly achieve T-like compatibility, the (i) process technology, (ii) design rules, and (iii) PDKs (process design kits) must closely mirror TSMC’s, without infringing on its patents.

A UMC executive further elaborated:

• Key is to wait for TSMC products’ launches.

• Next, reverse-engineer product’s structure and characteristics.

• Then work around the patents so that when customers use our T-like process, customers can’t tell the difference. There’s a ton of know-how involved.

• UMC is probably the best in the world at doing T-like.

Because of this capability, it has sparked industry speculation that Intel might eventually acquire UMC.

There were also rumors about GFS making a move, but the real talks were between UMC and INTC, said one senior industry insider.

When asked whether INTC had considered acquiring UMC, CFO Chi-Tung Liu replied flatly, “Not to my knowledge.”

To be fair, INTC’s new CEO, Lip-Bu Tan, is still in the early stages of a corporate overhaul amid considerable leadership turnover.

During such a turbulent period, the future of UMC partnership, initiated by former CEO Pat Gelsinger, remains uncertain.

The most pressing questionis whether INTC still has the will to fully commit to the foundry business.

Analysis & Recovery Timeline.

UMC has experienced significant stock price volatility in recent years, with a notable decline in 2024, by about -19%. (see below)

Luckily, this was followed by a rebound in 2025. (see below)

As of 16 Jul 2025, its closing price was $7.44, suggesting UMC has begun recovering from its recent lows.

Coming 3–6 months will be critical for UMC. (see below)

In late 2025, the 1st batch of customer products launches on the 12nm UMC-Intel platform.

Positive outcomes could quickly reverse sentiment and drive a sustained stock rally.

Having said that, risks remain, in terms of:

• Market adoption.

• Global chip cycles.

• UMC’s ability to capture share from TSMC.

Fundamental & Technical signals:

• 2025 YTD revenue growth: UMC reported a +7.26% rise in June 2025 net sales, with YTD revenue up +4.65%. This indicates improving business fundamentals.

• Sentiment: Market sentiment is currently "bearish," with a Fear & Greed Index in the “fear” zone and a 14-day RSI of 43.96, suggesting that the stock is neither overbought nor deeply oversold at the moment.

• Short-term outlook: Forecasts predict UMC shares could average $8.34 by September 2025 (within 2 months), representing an +11% –26% upside from current levels, though with some expected volatility.

• Outlook for January 2026 suggests a potential average target of $8.35, with lows around $6.63 and highs approaching $10.

Last but not least, UMC pays a decent dividend too, unlike AAPL, NVDA etc…

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