United Microelectronics Corporation began mass producing silicon photonics wafers at its Singapore facility, marking the first commercial output from the Taiwan chipmaker's Southeast Asian expansion.

The $719 million revenue company is targeting growing demand for high-speed optical interconnects in AI and hyperscaler data center networks. UMC partnered with Singapore-based SILITH Technology to bring the silicon photonics platform from development to production in 18 months.

UMC plans to make its own 12-inch silicon photonics platform available for customer product development by 2027. The technology enables ultra-high-speed data transmission and processing, essential for AI infrastructure.

Citi analysts forecast an improving outlook for UMC in the second half of 2026, predicting a 13% quarter-on-quarter sales jump in Q2 and gross margin recovery. The optimism follows strong recent performance, with June sales rising 22.85% year-on-year to NT$23.12 billion and first-half cumulative sales up 11.28%.

UMC shares fell nearly 5% in Taiwan trading Tuesday before paring losses to close 1.6% lower.

Singapore becomes semiconductor hub

The Singapore facility represents part of a broader wave of Taiwanese tech firms expanding manufacturing in the city-state. King Yuan Electronics and Vanguard International Semiconductor, backed by TSMC, have also established operations there.

Vanguard recently partnered with Netherlands-based NXP Semiconductors to build a $7.8 billion manufacturing plant in Singapore, cementing the country's position as a regional semiconductor hub.

Silicon photonics addresses rising data traffic and demand for faster optical communication. Polaris Market Research estimates the global silicon photonics market reached $3.71 billion in 2026, driven by AI infrastructure requirements.

UMC's Singapore production capability positions the company to serve hyperscale data center operators requiring advanced optical interconnect solutions for next-generation AI workloads.