United Microelectronics Corporation (UMC) has announced the commencement of mass production at its Singapore facility, with Citigroup analysts expressing optimism for the company's performance in the latter half of the year.

On Tuesday, the Taiwanese semiconductor foundry, also known as UMC, confirmed that its Singapore plant has successfully produced its first batch of silicon photonics wafers. This move addresses the growing demand for high-speed optical interconnect technology driven by artificial intelligence and data center networks from major cloud service providers.

In a statement, UMC detailed its collaboration with Singapore-based fabless chip design company SILITH Technology. The joint teams advanced the silicon photonics chip platform from the research and development phase to a production-ready stage in just 18 months. This technology is positioned to support the infrastructure for next-generation AI systems.

The company further outlined its roadmap, planning to introduce its proprietary 12-inch silicon photonics chip platform by 2027 for customer product development.

Citigroup analysts have projected a favorable business trajectory for the foundry in the second half of the year. They anticipate a 13% quarter-over-quarter revenue increase for the second quarter of 2026, alongside a recovery in gross margins.

This positive outlook from Wall Street is supported by UMC's recent strong financial performance. The company reported June revenue of NT$231.2 billion (approximately US$7.1921 billion), representing a significant year-over-year increase of 22.85%. Cumulative revenue for the first half of the year also rose by 11.28% compared to the same period last year.

Despite these fundamentals, the stock market reaction was negative. Shares of United Microelectronics (UMC) on the Taiwan stock exchange experienced a sharp decline during Tuesday's trading session, falling nearly 5% at one point before paring losses to close down 1.6%.

UMC is part of a broader trend of Taiwanese tech companies expanding their manufacturing footprint in Singapore. The city-state is increasingly becoming a crucial regional hub in the global semiconductor supply chain.

The local semiconductor cluster continues to grow, with companies like Yuan Long Electronics and Vanguard International Semiconductor, which is partly owned by TSMC, establishing operations there. Vanguard recently entered into a partnership with Dutch firm NXP Semiconductors to invest US$7.8 billion in building a new wafer fabrication plant in Singapore.

Silicon photonics technology is central to ultra-high-speed data transmission and processing. Fueled by the global surge in data traffic and the expansion of high-speed optical communication needs, the silicon photonics market is experiencing rapid growth. According to data from Polaris Market Research, the global silicon photonics market size is projected to reach approximately US$3.71 billion by 2026.