Taiwan semiconductor firm UMC pours billions into Singapore to claim a stake in the AI boom

UMC’s new plant (left), which is next to its existing fab facility, will take its annual production of integrated circuit wafers to 1.3 million in the next few years. Photo: SPH Media

After more than two decades of a relatively quiet existence here, one of the world’s top chipmakers has expanded its footprint in Singapore to capture a leading position in a frontier technology seen as crucial to AI data centres.

Taiwan-based United Microelectronics Corporation (UMC), which manufactures chips designed by other companies, started commercial production at its new US$5 billion (S$6.4 billion) fabrication plant here earlier in 2026, and is now investing billions more to ramp up its annual output.

The new facility is next to its first fab in Singapore’s Pasir Ris Wafer Fab Park, which started operations in 2004. The new fab is spread over 111,800 sq m, about the size of 16 football fields.

The chipmaker’s expansion plan will take its annual production of integrated circuit wafers – thin, round slices of silicon from which chips are carved out – to 1.3 million in the next few years. That will make Singapore UMC’s largest production base outside Taiwan.

Thomas Tey, UMC Singapore’s general manager, told The Straits Times that UMC will also double its number of skilled employees in Singapore from around 1,200 now to support the expansion.

He added that the strength of the research and development (R&D) staff at UMC’s Centre for Advanced Specialty Technologies here will also grow as the company increases its focus on new technologies to boost the computing and networking power needed for artificial intelligence workloads.

Chipmakers worldwide are struggling to keep up with the AI boom. But the massive build-up has also, after many years, given them the pricing power needed to invest in new manufacturing capacity and technologies.

UMC reported a 32.5 per cent jump in gross margin for its second quarter of 2026 versus a 29.2 per cent rise in the first quarter. The company increased its 2026 capital expenditure budget to US$2 billion, which included funding for its Singapore expansion and a new advanced-packaging facility in Taiwan.

Tey said there is land available in Pasir Ris wafer park for further expansion. “But we may have to be fast in making that decision, as most of our neighbours (in the park) are also expanding,” he added.

Singapore’s semiconductor industry – which accounts for one in 10 of the world’s chips and one-fifth of global semiconductor equipment produced annually – is going through a second wave of expansion.

The first wave came soon after the industrywide shortage of chip supply following the disruption caused by the Covid-19 pandemic and intensifying trade tensions between China and the US.

Both developments convinced chipmakers to diversify their supply chains by investing in neutral destinations such as Singapore which have developed infrastructure and a suitably mature industry ecosystem, and are also open to free trade.

Then, in 2022, OpenAI launched ChatGPT and changed the world of the internet, computing, and chipmaking forever.

This gave rise to hyperscale AI data centres around the world from 2024, and the second wave of chip industry expansion in Singapore with it, as demand surged for chips that can boost the “hardware triad” of computing power, memory capacity, and networking speed.

Hence, chipmakers have focused not only on increasing chip production but also on developing technologies that can avoid these bottlenecks.

UMC’s Taiwan operations will take the lead on advanced packaging, the technology that assembles and closely connects compute and memory chips, enabling faster data processing and greater energy efficiency.

Meanwhile, the Singapore operations will focus on silicon photonics and co-packaged optics, which use light instead of electrical signals to transmit data at higher speeds and with lower power consumption than copper-based connections in data centres.

“Silicon photonics and co-packaged optic technologies will be important growth drivers for UMC over the next several years,” Tey said.

Photonics is becoming increasingly critical as AI data centres scale to support increasingly demanding workloads, from generative AI to agentic and physical AI.

In July (2026), UMC’s Singapore 12-inch wafer fab delivered its first batch of photonic chips, designed by Singapore-based Silith Technology.

The two firms’ collaboration will support high-volume production of advanced silicon photonics chips, addressing the growing demand for high-speed AI optical interconnects in AI and data centre networks.

Chi Ren, UMC’s division director for technology development in Singapore, said photonic technology had been in the industry for decades.

Before the rise of AI, the technology was mainly used for long-haul communication through fibre-optic cables.

Now, the technology is being used to enhance high-speed connectivity inside data centres, replacing the copper wiring between server racks.

While Silith itself will be a major customer of UMC’s photonic solutions, the chipmaker has bigger plans to broaden its photonics market base.

Ren said the company will offer customers its platform to design and develop their own photonic integrated circuits (PICs), which UMC will then produce in Singapore. The chips are used in optical interconnects, which use light to move data between components in data centres.

The PIC platform is yet another initiative in UMC’s continuous efforts to contribute to Singapore’s chip R&D ecosystem.

UMC has frequent R&D engagements with A*STAR, the Institute of Microelectronics (IME), the Singapore Semiconductor Industry Association, and local universities.

It recently completed a three-day customised silicon photonics device testing and characterisation training conducted by IME.

Economic Development Board vice-president Xu Kaixian told ST: “Since establishing a presence here in 2004, UMC has continued to build new capacity and capabilities in Singapore to capture key growth areas, most recently in AI and next-generation computing.

“This underscores Singapore’s role in the global semiconductor supply chain, as companies leverage our advanced manufacturing ecosystem and engineering talent to scale emerging technologies.”

She added: “We hope to deepen such partnerships as we strengthen our semiconductor industry and create good manufacturing and R&D jobs for our workforce.”

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.