Deep|UMC: UTR Climbing QoQ; Entering Advanced Nodes and SiPho Manufacturing

Over the past two years, mature processes have been squeezed by weak demand for consumer electronics and aggressive capacity expansion in mainland China, leaving capacity utilization and foundry pricing under sustained pressure. However, starting from 2026, mature processes are breaking free from the downturn as demand begins to rebound. In addition to inventory restocking in consumer electronics, robust AI demand, geopolitical factors, and TSMC's gradual phase-out of mature processes are altogether reshaping the supply-demand dynamics of legacy nodes.

On the supply side, the explosion of AI and high-performance computing demand has led TSMC to highly concentrate the vast majority of its CapEx on advanced nodes below 5nm, crowding out new capacity investments in mature processes. The fixed costs of constructing new mature-node fabs remain prohibitively high. Driven by margin considerations, non-Chinese foundries generally lack the incentive to expand mature capacity, thereby constraining overall supply growth.

On the demand side, growth in AI server peripheral chips and power management ICs provides solid support for mature processes. Furthermore, supply chain restructuring driven by geopolitical tensions (the "China-Plus-One" strategy) is accelerating fabless customers' migration of mature-process orders from mainland China to alternative foundry hubs in Taiwan or Singapore.

Optical Communications and Advanced Process Layout