In a strategic move, Taiwanese chipmaker United Microelectronics Corp. (NYSE:UMC) is set to augment its U.S. production capabilities through a partnership with Intel (NASDAQ:INTC).
What Happened: UMC and Intel will jointly develop 12-nanometer chip technology
for contract production at three Intel facilities in Arizona, Nikkei Asia reported on Tuesday. The mass production, scheduled to commence in 2027, will primarily target communications and other applications.
UMC Co-President Jason Wang, during an Intel event in February, expressed enthusiasm about the alliance, stating it “broadens our addressable market and significantly accelerates our development roadmap.”
The collaboration between UMC and Intel is a strategic move to counter competition from TSMC and Samsung in the contract manufacturing space. In the recent past, Intel received up to $8.5 billion in subsidies from the U.S. government for advanced chip development. By teaming up with UMC on mature chips, Intel can divert more resources towards cutting-edge pursuits, such as 1.4-nm technology.
As for UMC, this partnership offers an opportunity to mass-produce more advanced chips compared to its primary 22-nm to 28-nm products and expand its customer base in North America, which currently contributes to less than 30% of its revenue.
Why It Matters: UMC, a stalwart of Taiwan’s chip industry, has been focusing on mature chips since the 2010s. The company experienced growth from 2020 to 2022 due to the global chip shortage, but revenue for the year ended December 2023 fell 20% to 222.5 billion New Taiwan dollars ($6.9 billion), marking the first drop in four years.
The collaboration also appeared after Intel and Taiwan Semiconductor Manufacturing Co encountered construction delays at their Arizona sites due to high costs and labor shortages in March. Around the same time, UMC reported a 3.07% year-on-year dip in its February sales.
Despite these challenges, demand for advanced 3nm chips from major clients like Apple, Intel, and AMD has been on the rise.
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