United Microelectronics Corporation (UMC), Taiwan's No. 2 contract chipmaker, announced on Tuesday that its Singapore facility has started producing initial high-volume silicon photonics wafers. The firm intends to meet the increasing need for rapid optical links used in AI and large-scale data center environments.
According to UMC, the partnership with SILITH Technology - a Singapore-based fabless chip designer - enabled the team to advance the silicon photonics platform from concept to manufacturing-ready status within 18 months, thereby ensuring the technology can underpin future AI systems.
This technology is critical for high-speed data transmission and processing, and its market is expanding significantly thanks to increasing data volumes and the need for quicker optical communications. Polaris Market Research estimates the global silicon photonics market will reach $3.71 billion by 2026.
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This milestone underscores the growing importance of silicon photonics in enabling faster and more energy-efficient data transmission, which is vital for AI training and inference workloads. By achieving high-volume production in Singapore, UMC is positioning itself to serve hyperscaler data center customers who require reliable optical interconnects. The city-state's semiconductor ecosystem, which already includes investments by King Yuan Electronics and Vanguard International Semiconductor, provides a robust foundation for expanding manufacturing capabilities.
The rapid expansion of AI workloads has intensified the need for high-bandwidth, low-latency interconnects. Silicon photonics, which uses light to transmit data within chips and between servers, offers a path to overcome the limitations of traditional electrical signaling. UMC's partnership with SILITH Technology accelerated the development of this platform, compressing the timeline from concept to manufacturing to just 18 months - a sign of the urgency in the market. Industry analysts expect that as data centers continue to scale, silicon photonics will become a standard component in optical transceivers and co-packaged optics.
Additionally, UMC intends to offer its proprietary 12-inch silicon photonics platform to clients for product development starting in 2027.
Citi analysts anticipate a brighter outlook for UMC in the latter part of the year, projecting a 13% sequential sales increase in Q2 2026 along with a rebound in gross margins. Bolstering this positive sentiment, UMC posted robust results: June revenues surged 22.85% from a year earlier to NT$23.12 billion ($719.21 million), while first-half total sales climbed 11.28%.
Nevertheless, UMC's shares dropped almost 5% on the Taiwan stock exchange on Tuesday, though they later recovered some ground to end 1.6% down.
UMC joins a larger trend of Taiwanese technology companies increasing their production capacity in Singapore, which is emerging as a key regional center for worldwide chip supply chains. This expanding cluster features King Yuan Electronics Corp and Vanguard International Semiconductor Corporation - a TSMC-backed foundry that recently teamed up with Dutch firm NXP Semiconductors to construct a $7.8 billion fabrication facility in Singapore.
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