Welcome everyone to UMC's 2026 Third Quarter Earnings Conference Call. All lines have been placed in mute to prevent background noise. After the presentation, there will be a question and answer session. Please follow the instructions given at the time if you would like to ask the question. For your information, this conference call is now being broadcasted live over the internet. Webcast replay will be available within two hours after the conference is finished. Please visit our website www.umc.com under the Investor's Event section. Now I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.

Thank you and welcome to UMC's conference call for the third quarter of 2026. I'm joined by Mr. Jason Wang, CEO of UMC. and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the third quarter financial results, followed by our CEO's key message to address UMC's focus and fourth quarter 2026 guidance. Once our CEO and CFO complete their remarks, there will be a Q&A session. UNC's quarterly financial reports are available at our website, www.unc.com, under the Investors' Financials section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties That could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentation materials. which is being broadcast live through the internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's third quarter 2026 financial results.

Thank you, Michael. I'd like to go through the third quarter 2026 investor conference presentation material which can be downloaded or viewed in real time from our website. Starting on page four, the third quarter of 2026 Consolidated revenue was 74.24 billion NT, with gross margin rate at 34%. Net income attributable to the shareholder of the parent was 16.43 billion NT, and the earnings per ordinary share were 1.32 NT dollars. Capacity utilization rate in the third quarter reached 92%, compared to 85% in the previous quarter. And overall, EPS for the quarter was 1.32 NT, and on page 5, revenue grew 8% sequentially to reach 74.2 billion NT. As we stated earlier, gross margin rate also improved from 32.5% in the previous quarter to 34% in this quarter, or NT, 25.2 billion NT dollars. And EPS per U.S. ADS is 0.206 U.S. dollars. For the year-over-year comparison on page 6, revenue grew 16.1% to 204 billion NT. And gross profit also grew 30.8% year-over-year. to 65.3 billion, or 32% of the gross margin rate. With the help of the non-operating income, overall net income attributable to the shareholder of the parent grew 136.5% year over year to reach 74.86 billion NT for the first nine months of the year. EPS for the first three quarters reached $6 in NT dollar terms or $0.945 per ADS in US dollar terms. On page seven, our balance sheet at the end of third quarter, total equity is $470 billion NT dollars with cash account for about $142 billion on the September 30th. For blended ASP in the third quarter was relatively stable remain firm compared to the previous quarter on page eight. For revenue breakdown on page nine, there's very little change for quarter two compared to quarter three of 2026 for revenue breakdown by geography. On page 10, Our revenue breakdown by customer type also remained virtually unchanged for IDM with about 14% of the total revenue and fabulous account for the others. For revenue breakdown by application, consumers stayed unchanged at around 32% when communication and computer also stayed quarter over quarter unchanged. On page 12, our 22 and 28 nanometer revenue still account for more than one-third, reach about 35% of the total pie chart, and 40 nanometer is around 16%, and 65 nanometer is about 19%. Our quarterly capacity continue to increase slightly, mainly coming from our 12I facility in Singapore. and for quarter four of 2026, we expect the capacity for overall UMC reach about 1.33, 12-inch equivalent, 1.33 million for 12-inch equivalent capacity by Q4 2026. And capacity compared to the last quarter's estimate still remain unchanged around The above is the summary of UMC results for third quarter of 2026. More details are available in the report, which has been posted on our website. I will now turn the call over to CEO of UMC, Mr. Jason Wang. Thank you, Chi-Tung. Good evening, everyone.

Here I would like to share UMC's third quarter results. In the third quarter, we saw a healthy demand across all market segments. Driving a 7.3% growth in wafer shimmers to more than 1.2 million 12-inch equivalent wafers, a record high. Our overall fab utilization rate reached 92%, with several of our 12-inch fabs operating at full capacity, while 8-inch operations also saw a strong recovery. By technology note, our 20 to 28-millimeter business had another record-breaking quarter, With 22nm revenue now, accounting for 18.3% of wafer sales, as the customers continue to take out new products including display drivers, automotive radars, and fly-by ICs. In new business areas, active customer engagement for events packaging and silicon photonics-renewed robots. We expect this engagement to translate into a creative growth over the coming quarters as we run existing projects and support new product tables. Looking ahead to the fourth quarter, we expect the positive demand momentum to sustain, supporting stable shipments and utilization rates. Revenue from our specialty technology portfolio will continue to grow sequentially, driven in part by the ramp-up of our advanced packaging and silicon photonics businesses. We have seen a significant increase in demand for this new business area, and we are in the process of converting some existing capacity to address near-term unfulfilled demands. In the longer run, our due-track expansion plan in Singapore and Tainan will be crucial to ensure UMC's capacity growth and keep pace with our customers' needs. We are pleased to announce our Board of Directors today approved an additional Thank you. Now let's move on to fourth quarter 2026 guidance. Our wafer shipment will increase by no single digit. ASP in U.S. dollar will remain first. Gross margin will be comparable to the preceding quarter. Capacity utilization rate will be in the low 90% range. Our 2026 cash-based cash tax budget will be at US $2 billion. That concludes my comments. Thank you all for your attention. Now we are ready for questions.

Yes, thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question for any of today's speakers, Please press star key and number 1 on your telephone keypad, and you will enter the queue. After you are announced, please ask your question. If you find that your question has been answered before it is your turn to speak, please press star key and number 2 to cancel the question. Thank you. Our first question will be coming from Sunny Lin UBS. Go ahead, please.

Good afternoon. Thank you very much for taking my questions. Several questions from my side. So number one, now that UMC will finish 2026, I know any early view for 2027 based on our current visibility?

Yes. For 2027 early view, we expect the growth momentum established in 2026 will continue into the next year. Supported by the healthy demand across Our core business and growing opportunity in differentiated technology and high-value applications. If we look at this, in 2026, our growth has been driven primarily by a high wave of shipment, improving utilization and customer share gain. Looking ahead to 2027, we expect further growth, although with utilization already above 90% and several technologies, Operating at our near full capacity, our shipment growth will increasingly be constrained by available manufacturing capacity. So as it remains, a key growth, AI remains to a key growth driver, creating demand across power management, FPGA, and connectivity application. Meanwhile, the silicon photonics and advanced packaging are emerging as a new growth engine for UNC. addressing the next generation optics connectivity, power delivery, and memory bandwidth requirement for AI infrastructure. So beyond AI, we continue to see opportunity from customer market share gain and increasing function share across premier smartphone, automotive, industrial, and other specialty applications. Despite an uneven recovery in some end markets, with customer demand in selected technology already exceeding Our available capacity, we see opportunity to capture greater value from our existing manufacturing footprint through improved pricing and richer product or technology mix in 2027, alongside continuing the shipment growth. So while 2026 growth was driven primarily by volume utilization, we expect the 2027 to become increasing value driven.

Thank you very much. Very helpful and encouraging. And so on the pricing side, how should we think about the ASP environment for UMC, especially going to 2027? How are the negotiations with key clients progressing for the coming few quarters?

I mean, we are engaging with customers right now for our 2027 pricing, and we see a significant shift in pricing environment heading into 2027, supported by strengthening the customer demand and increasing high capacity in selected technologies. We see clear opportunity for pricing improvement across both our 8-inch and 12-inch business, while maintaining our discipline and value-based pricing approach. Importantly, we expect 20.7 to mark a turning point in our blended ASP trajectory, moving from an environment of ASP erosion toward to a meaningful positive uplift beginning in the first quarter. While we anticipate a 10% of blended ASP increase year-over-year, this is more than an incremental pricing improvement. It reflects both both of more constructive pricing environment and our increasing ability to capture values through a richer product and technology mix. Our record high 22 nanometer revenue contribution and continuous special technology momentum also provide a strong foundation while silicon photonics and advanced packaging create additional higher value growth opportunity at safe scale.

Thank you very much. Maybe a quick follow-up. So you mentioned 10% year-over-year improvement. Is that initial view for your Blender ASP improvement going to Q1?

No, that will be on a year-over-year basis.

So 10% will be your target through 2027, not just for Q1?

Yeah, as a whole, a year-over-year, as in 2026 year compared to 2027 year-over-year, yes.

And we will provide Q1 phase B guidance for the next quarter's earnings call.

Got it. And then maybe on the CAPEX, you just mentioned an additional $3 billion budget on top of the $5 billion budget announced a quarter ago. And so now, could you share a bit more color on how that translates into a capacity expansion in the coming few years? And then on silicon photonics and advanced packaging, How are you seeing the market demand overall in coming years?

We are accelerating selected investments because several of our new growth business are moving from technology development into a commercial execution, which is faster than our original capacity roadmap anticipated. We are seeing three things happen at the same time. The market is expanding as the AI infrastructure drives higher requirements for bandwidth, power delivery, memory, performance, and system integration. Our customer engagement are also progressing from qualification into production ramps and capacity planning. And at the same time, our solution roadmap is moving forward. With the product already in mass production and additional product completing payouts, Thank you very much. Thank you. DTC and silicon capacitor and 20K for Teflon modulators. This next phase of the capacity will start its ramp in late 2028 and reach its planar scale by 2030. This is not a broad-based capacity expansion. We are directing our capital toward customer-backed growth opportunities that will fuel UNC's next phase of growth. So that will give you a bit of why we are accelerating and a milestone that we plan for those cat-hacks. For your question on the silicon photonics and advanced packaging, we believe UMC is well-positioned to capture the next wave of AI infrastructure opportunities through our competitive silicon photonics performance Phu Van Manufacturing Execution and Advanced Packaging Capability. So in silicon photonics, our data indicate that our PIC technology outperform peers in key parameters, such as propagation loss supported by our manufacturing high production yield now. Our 12-inch PIC platform already supported 1.6T optical application, while our 8-inch Teflon platform has completed 1.6T system validation with an industry-leading yield. Building on this achievement, our roadmap extends toward 300G per LAN and ultimately 400G per LAN solution for next-generation 3.2T applications supported by hybrid bonding, TSV, and chip-to-wave integrations. For the advanced packaging, We are making progress in two key solution areas, a DDC for power delivery and customized memory stacking, our discreet DDC solution for mobile and internet mass production discord. For AI and server applications, our substrate-embedded DDC solution has a completed payout and functional verifier. With our customized memory stacking solution has passed initial customer verification, to address the growing bandwidth requirement of AI inference. All those achievements demonstrate UMC's ability to translate technology innovation into the commercial execution now. By combining the device performance, manufacturing expertise, and close customer cooperation, we are expanding our role in next-generation AI infrastructure, helping the customer to address the three critical requirements include That's the optical connectivity, more efficient power delivery, and high memory bandwidth. So that's why we believe that we are in a great position to capture those opportunities.

Thank you. So it does sound like your capabilities are pretty competitive, but then for both silicon photonics and also advanced packaging, say for... I mean, we look at this on twofold, right? I mean, one is the demand side. Well, first, we are seeing an

Very strong demand driven by the AI-related applications for silicon photons and advanced packaging. In silicon photonics, we have been working with a leading customer. We recently achieved a milestone with multiple hyperscalers and qualified our 1.6T optical transceiver platform. Our 12-inch PIC platform supports the 1.6T application and the 8-inch Teflon. You know, complete the 1.6T validation and the over-demonstrated manufacturing yield. I mean, with the roadmap that's going to the next generation. And with all this, the end-of-end packaging, our discrete solution, like you said, and our first interposer with discrete DTC solution for the AI and server application as a completed table with a key customer, and those The focus of the customer discussion already moved to that, from validation to customer demand planning. So our current expansion plan applies to those customer commitments in terms of demand. But how about the overview? Based on what we see today, we do not believe we are building ahead of the market. Demand for silicon photonics and related AI infrastructure are going faster than qualifying the capacity is being added up. and we continue to monitor our peers' expansion and timing of the new industry supply closely too. Over capacity is an industry question, not just an UMC question. We look at how quickly end demand is growing relative to the capacity being added by overall industry. Based on the customer demand and industry capacity plan we see today, we believe the market can support it eventually we are planning. And meanwhile, UMC has been building the capacity in phases to mitigate risk. At the same time, we remain cautious and disciplined in how we add capacity. Most importantly, our capacity expansion is backed up by customer commitment, like I said earlier, and tied with the customer product roadmap, production ramp, and capacity requirements. Even with all this expansion, we expect customer demand to exceed our planned capacity Thank you. Sorry, last question, if I may. So recall a quarter ago you quantified the AI-related sales to be about $300 million for 2026, and you have a target to

and more than triple to over a billion by 2029. And so now with the accelerated expansion for both solar photonics and advanced packaging, how should we think about your AI revenue by 2029?

Okay, first of all, you remember. Now, our AI-related business span a broad range of specialty semiconductor solutions. All those applications are becoming increasingly important contributors to our growth going forward. So we are expanding our capacity like we reported and investing in technology, manufacturing infrastructure to address all those growing demands. Our AI-related revenue It is close to $300 billion in 2026. But looking ahead in three years, we expect our AI exposure will probably exceed a quarter of our revenue now.

A quarter of UMC sales maybe by 2029? Yes. Got it. Thank you very much. Sorry, let me get back to the queue. Thank you.

Thank you. Next one, Laura Chan, Citi. Go ahead, please.

Yes, hi. Thank you for taking my questions. Good afternoon, gentlemen. Just a quick follow-up on the 10% increase on pricing. It's more like a blended ASP increasing or like-to-like increase into next year?

It is a blended, yeah. So, yeah. It's more an incremental pricing improvement. You reflect both The pricing environment improved and our increase captured the other products, reach a product and a different product mix, yes.

Okay, got it. Very clear. And also, we think we have various different plans for AI-related applications. Can you give us more color about that? What are the capacities? How much the capacity we are planning for the silicon photonics, including in Taiwan and also many in Singapore? And also on the Tiflin, we are ahead of our peers. So just wondering, can you also give us update about the capacity build-up plan and in maybe two years, how big the capacity we are looking for? Thank you.

Given the current... and the facility and two schedules is, you know, we're doing all this expansion in phases and we're going to continue updating you in terms of progress. Meanwhile, we're still working closely with our supplier. Hopefully, we can accelerate and expedite those installations. Meanwhile, as I mentioned earlier, if I look at the overall CAPEX plan, which approved by our board, the capacity Bill Duck is approximately 18K for silicon photonics, 22K for DTC, which is silicon capacitor, and 20K for Teflon modulator. And at this current stage, we project the initial install will happen in late 2028 and going into 2029 and reach the scale by 2030. Now, for the location-wise, we are focused on the silicon photon in Singapore facility, and the silicon capacitor in our Tainan facility, and the Teflon will be in our 8-inch operation.

Sure, thank you very much. Just also very quickly, I know probably we will talk more next year, But I think given the high iteration rate, it's already like 90% plus, and also pricing into next year is more favorable. So are we seeing that any structure growth margin upside based on current visibility?

So certainly the price increase likely to happen in the first quarter. So we are also... Seeing some headwinds from the increased raw material cost, which we need to work hard to offset the impact. So it's our view that the structure probability remains intact. So EBDAR margin certainly we will see in good shape if we compare it to the previous cycle. But due to the stronger than expected KPAX led by stronger customer demand, so depreciation will be higher and gross margin as a result is unlikely to see near the previous high level. So we will maintain a disciplined spending and try to capture the Megatrend of the AI Growth Opportunity.

Okay, thank you. Very helpful.

Thank you. Next one, Haos Lu, Bank of America. Go ahead, please.

Yes, thanks, Manager Kim, for taking my question. I think just starting from price high by 10% young year, you clarified it is going to be on a blended basis. Would you be able to share on the like-for-like basis How much is it going to be hiking? And how much of the depth of the price hike is related to the cost pass-through? And how much of that is because of the tighter supply-demand landscape?

Well, I mean, first of all, if we look at the – on a very high level, like I said, we expect 2027 will mark a turning point. The A3 – We're moving from historical erosion to uplift. And so we are talking to our customers across the broad range of the applications. Now, the conversation actually is more complicated. One is there are current contractual relationship, a portion of that, and secondly, and focus on different know and application and technology. So they are various. There is a mix of the pricing adjustment. So therefore, it's a lot easier to look at this from the blended basis. And so instead going to every specific area because they are quite complex in terms of the mix.

Okay, because the reason why I'm asking this question is because your utilization has been improving by 16% from fourth quarter last year to fourth quarter this year based on your guidance. but your pricing has been relatively stable. So just wondering why your customers suddenly decided to accept this price hike by 10% in 2007 if in the past couple of quarters you have been striving to improve your utilization by 16% but the blended pricing has been relatively more stable but now you are seeing an infliction of that. Is it because of the product mix or

The product mix is part of it, and part of it is really reflecting the inflationary cost increase. We are seeing, like Chi-Tung mentioned earlier, we are seeing some of the rising cost headwinds and also additional depreciation associated with our investment. So while we're anticipating that while the The overall, the customer demand are increasing and increasing high capacity on selected technology. So combination of those resolving in the conversation with the customer. And I think the customer understand the overall industry of kindness in terms of capacity and also understand the rising cost, so in a variable space. So that's why I think we, you know, I think this is a, You know, it's naturally a conversation that we will have at this current point with the customer. And we usually do this on a yearly basis. So, again, we started this conversation in Q3, and with the alignment going into Q4, we are at a very late stage of those conversations, so we have a fairly confidence with the guidance that we just provided.

That is very helpful. And the second question is probably just on your current expectation for the consumer and market demand in 2017. Because the supply chain seems to be suggesting that the unit demand across smartphones, TVs, and PCs could be down from the unit demand perspective. And so if that effectively affects your utilization, keeping at around low 90 percentage levels instead of further hiking to close to full levels, Would your customers be able to request for some price discounts or pushback on the price hike through Plan 27? And how would you deal with it?

Oh, I mean, first of all, let me kind of explain about the utilization outlook. We are expecting the capacity utilization to remain at a very healthy level. You know, in this year, we improved by 85%. In Q2 to above 90% in the second half of 2026 already, with several of our 8-inch and 12-inch fans operating at a full loading at this current point. And we are seeing the AI-driven upside demand, such as the power management and FPGA, which we cannot fulfill the demand today. And the backlog PO is piling up. We will continue to optimize the production efficiency Thank you very much. Thank you. So we are working diligently to address this capacity configuration mismatch. We are upgrading our manufacturing capability to support our long-term product mix optimization as well. For instance, we are converting one of our 8-inch flats to expanding Teflon capacity. And while we're converting that, the loading will be lower. But it doesn't mean that the facility is not being occupied and work on it. So while we're strengthening our circum-photonics roadmap and positioning UMC's future growth, all those are critical for our future growth. And so we are managing that through this activity. So that said, the 90-some percent doesn't translate to a vacancy in terms of capacity. It's more of a mismatch situation.

Okay, yeah, and just a quick question before jumping back to the Q is, it is very encouraging to see that you approved KTEX, additional KTEX to support your new businesses, including Silicon Photonics, Teflon, and Silicon Capacitor. But would you be able to provide the timeframe on your spending through the next few years? Because last time you guided, 2027 KTEX could be up to like $3 billion. But now, with the incremental KTEX, would you be able to just provide an update on that? And relatedly is, How should we think about the economies of scale of your new business, including Teflon, silicon capacitor, as well as silicon photonics, that by 2029, when these capacities start to run to a certain scale, would those business be, the gross margins for those business, would they be comparable to the corporate average, or still going to be below because of the higher depreciation burden? Thanks.

Well, I mean, first of all, we can provide you the update when the update is more clear to us. Like you know, we have both approval and now we are closely working with the supplier to make sure that we can accelerate and expedite the schedule so when those information are concluded and we'll be able to give you more concrete outlook in terms of milestones. Meanwhile, we are facing the different capacity in a different time frame. But since we're still in motion of that negotiation, we're probably not at the right time to provide you that. But on a high level, we feel very comfortable with those demands. The only thing we worry about now is we can't really get them fast enough to our facility. So, let us work on that and when going into the Q1 next year, we should give you a more clear picture with the next phase. Now, in terms of each of the economics scale and the benefits to our business, The circumpotentals were run in 2027, followed the advanced packaging in 2028 because of the authority reasons. And I think all those will be accretive to our current model because right now they're above our current corporate average, higher than our corporate average compared to existing solutions.

So by the time these new businesses start to ramp in 2028, 2029, those businesses should be carrying higher than corporate average margins, even with higher depreciation.

That's what we have modeled right now. Under the same circumstance, for the same ramp, if you compare it to, say, previously, 2028, of course, the curve looks better.

Got it. That's very helpful. Thank you so much.

Thank you. As a reminder, please press star key and number one on your keypad if you would like to ask the question. Thank you. Next, we'll have Charlie Chan, Morgan Stanley for questions. Go ahead, please.

Thank you. Hi, Jason and Chi-Tung. Again, congratulations for a very strong execution results. So, my first question is probably to Jason that I know previously I asked you about some concerns about the non-AI part of demand offsetting the AI upside, right? But realistically, do you see any kind of cuts recently from non-AI segments? And do you have a preliminary assumption for next year's PC, smartphone market? Thank you. Well, I mean, right now we expect a positive demand momentum to sustain from 2026 into 2027, Q4 and 2027.

So on a high level, we're seeing the momentum will continue to sustain. and obviously the AI remains the key growth driver. So there's no worry on the AI side. Beyond AI, we continue to see opportunity from customer market share gain as well and increase the foundry share. That's for UMC because we primarily serving the premier smartphone and automotive and industrial space and we see Thank you. Thank you. Thank you. We also see some decline in computers because we see a soft demand in the computer AI, LCD controller, EDI, and Wi-Fi space. So while the communication and automotive industry and AI remains non-AI, the communication, the automotive industry remains robust, we do see some weakness show up in the PC space.

Got it. So those kind of workings are all being considered. Yeah, so thank you. And I'm sorry, but I hope to clarify a little bit about blended ASP of 10% because I use the 8-inch, 12-inch blended ASP, and 12-inch mix increase will bring up lots of blended ASP, right? But I wanted to make sure, are you... Oh, okay. Blended ASP increased by 10%.

Is that 12-inch plus age blended ASP or a different product mix? So you are referring to the age.

to be up 10%.

It's a company-wide blended SP as we reported. Although we didn't disclose the number, but we do have an annual number for 2026. And the 10% we are referring is for the whole company on the whole year, 2027. It's going to be about 10% year-over-year increase, including like-for-like price increase as well as the richer product mix. Okay, gotcha.

Okay, okay. But you don't want to break it down to, like, for example, if you remove the 12-inch mid-change, what would be kind of likely to, like, would you be able to come to that?

It's a very complicated process, and some of the technologies are totally different, or different products, so it's very difficult to Give you a generalized idea, but 10% is probably the best indication for now.

Got it, thanks. And last one is probably kind of a very open question. Yeah, because we kind of think AI demand strength is a no-brainer, right? I think when Jason talked about we're not worried about AI demand, but the recent capital... AI infrastructure demand, no matter near cloud financing, there's AR issue, right? So I'm not sure how visible is UNC on this real kind of AI demand, especially for your product that you have exposed to. How can you be sure it's so under supply? Yeah, just a kind of open question because a crypto market is a reaction. I just don't believe that AI demand will be so sustainable into next year.

Well, I mean, you know, the AI demand is not in general AI demand. So when we talk about what we are serving, really in the selected technology and focus, for instance, on the optical space, I think the RAMBOT is just starting. And so it's more of a... to be a replacement mold. And so to us, I think the silicon photonics is really a new space that we're entering, as well as the industry is entering into. The PIC platform that we're offering, the Teflon, is all associated with that. While the industry is moving from the 1.6T, moving into the 1.6T and for the future, 3.2T, We actually think this demand will be continued robust. The event packaging is really a solution that we talk about the DTC, Deep Change Capacity solution, a capacity solution, right? And they are more of a device that can be implemented in multiple different areas. The power integration, all this power will continue driving the industry going forward. So I think with all those solutions, I think the market will continue, the demand will continue to be robust.

Got you. So even like AI processor slowdown, those kind of kick-out migration, like 1.6 to 3.2T, and et cetera. Those will continue, so you are not that worried about overall AI demand expansion pace.

Yeah, because if you just look at it, truly what drives that demand is the compute and also power and speed, right? So really, I mean, the optical speed requirement and the power integration requirement is more of a forward-looking type of application We're not talking about the AI domain in general. We're talking about technology migration to support the future growth and meeting the system requirements.

Understood. Very clear. Thank you. Yeah, I also agree that ETC, the deep-trend capacity is a very important modern trend. Thank you, Jason. Thank you, Chi-Tung. Super helpful. Thanks. Thank you.

Next one, Goku Hanihalan, JP Morgan. Go ahead, please.

Hi. Thanks, Jason and Chi-Tung, for taking my questions. First of all, I just want to clarify, Jason, you mentioned long-term AI revenues can be 25%. Was it 25% of current revenue, roughly $9 billion, or do you think it will grow to 25% of revenues in 2030, which is probably a much bigger number? I just wanted to clarify that.

I'm referring to the revenue in the next three years.

Okay, so in three years it can be 25% of total revenue. Yes, right. Okay, okay, understood. Thank you very much. And could you talk a little bit about your any indication on revenue contribution from Silicon Photonics and The embedded deep-range capacitor for next year, given those things to be ramping earlier. And also on Telecom Photonics, any aspirations you have in terms of where you want your market positioning to be, given you are starting off later than competition, but you also have some unique advantages here?

Well, I mean, we are currently running at full capacity. So we said, you know, this year will be somewhere at the $300 million range. And for the new act, the mass majority of the capacity will start coming in line in late 2028. So 2027 is still going to be under the constraints. While we try to optimize, like I said, we try to reconfigure some of our facilities. Hopefully we can optimize some of the short-term, but we are under the constraints for 2027. So we'll probably be able to share some lights in the next quarter. But again, it's not going to be significant because the capacity is not So that's the revenue for 2027. And what was your second question? I'm sorry.

Yeah, secondly, what is your aspiration from a silicon photonics market share perspective, given you are starting a little bit later than your competitors, but you also are kind of migrating straight to 12-inch, We're already starting to see some, like, at least test results which are comparable or better than your competition. Just wanted to highlight and think about, like, where we could end up in our next market share.

Well, of course, yes. I mean, the aspirations are very high. And we have very high confidence, you know, in terms of our decision and moving into a 12-inch directly without going through the 8-inch. Right now, I think the decision actually did pay off. We have demonstrated, you know, with our 12-inch PIC technology, we already demonstrated better performance in many of the key parameters and our customer and their end customer. And right now, the product is being validated and qualified by the end customer as well. And with the production yields get to the manufacturer level, We think our 12-inch PIC platform is ready to support the customer for their current 1.6T optical application and going into the next generation as well. Now, the tablet is a little bit different situation. I think we're much, much ahead of anyone else in the tablet development. I think the customer also see a benefit between the integration of the putting Teflon modulator with our 12-inch PIC solution. And so, you know, because that's, I mean, our advanced packaging preparation is also barefoot now because with the hybrid bonding, the chip-to-wafer, So just to follow up on the Teflon engagement, Jason,

Is this mainly going to be HyperLite whom you're going to be supporting or are there a broader set of customers that you've already got beyond HyperLite which I think you've already invested in them and kind of publicly announced as well?

Yeah, I mean, we announced the HyperLite partnership because HyperLite was a very early adopter of the Tableau and so I think we're very pleased with that program and Because we already demonstrated with HyperLight and we see a very strong interest in the Teflon solution now, not just from HyperLight, from many different customers in the space.

Okay, okay. And maybe on the 2027, given your capacity constraint, any read on how much I guess my reaction is just not enough

I think we want to improve that number any way we can. Right now, the biggest, you know, the best way to explain that is going not enough.

Okay. Okay.

So, Chi-Tung, I just wanted to also lastly examine the gross margin, puts and takes, Obviously, price increase than at ASP of 10% or thereabouts is quite positive. If you carry the utilization gains from Q4 into all of next year, it also is positive. Could you give us some indication on how depreciation is going to shape up? I think last quarter you mentioned depreciation will be moving higher. But it looks like the pace might be a little bit more. So are we saying that we are largely going to be in this similar gross margin range, or can we still squeeze out some gross margin expansion into next year, even with heavier investments coming through?

So depreciation is going to be certainly higher, and maybe a couple years in a row. And we are talking about low single-digit depreciation growth. Thank you very much. We are expecting ASC improvement, and we are expecting higher utilization.

and all those who will provide support to our probability for 2027. And at the same time, we are anticipating rising cost halving and additional depreciation, which is associated with our investment decision. Our priority now is to maintain a healthy probability profile while continuing to invest in different differentiated technology and support our long-term growth. Thank you.

Thank you very much. Thank you. And ladies and gentlemen, we thank you for all your questions. That concludes today's Q&A session. And I'll turn things over to UMC Head of IR for closing remarks. Thank you.

Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact IR at umc.com. Have a good day.

Thank you, and ladies and gentlemen, that concludes our conference for 3Q26. Thank you for your participation in UMC's conference. There will be a webcast replay within two hours. Please visit www.umc.com Thank you again. Goodbye.