UMC prices $1.8B convertible bonds for fab expansion, shares fall 11%
What's the deal? United Microelectronics CorporationDealroom has a profile for this one. Try Dealroom → priced $1.8 billion of overseas convertible bonds, sending the Taiwanese chipmaker's shares down more than 11% on Monday. The offering consists of two $900 million tranches carrying a 0% annual coupon, according to a filing with the US Securities and Exchange Commission.
The terms. Both tranches can convert into newly issued UMC common shares. Tranche A converts at an initial US$5.85 per share, a 32.5% premium to UMC's October 5 close, while Tranche B converts at US$5.19, a 17.5% premium.
If all bonds convert at their initial prices, UMC estimates shareholder dilution at about 2.34% — a figure it called "limited." The bonds issue on October 13, with one tranche maturing in 2031 and the other in April 2028.
What's the endgame? UMC said proceeds will buy machinery and equipment and fund plant construction. In July, it raised its 2026 capital expenditure budget to $2 billion after the board approved expanding cleanroom capacity at its Singapore P4 facility and building a new fab in Tainan, Taiwan.
Why now? The spending push follows stronger demand. Q2 revenue reached US$1.99B, up 17% from a year earlier, with wafer shipments rising 10.6% sequentially; 22- and 28-nanometer technologies made up 37% of quarterly wafer revenue. UMC expects Q3 shipments to grow a high-single-digit percentage and utilisation to exceed 90%.
CEO Jason Wang said the company must prepare in advance "to capture future AI-driven opportunities." UMC said the expansion will roll out in phases to balance customer demand with capital discipline.
The signal: At $1.8 billion, this ranks among the largest post-IPO convertible rounds for Taiwanese semiconductor firms — above the 96th percentile of comparable deals. The pairing of a zero-coupon raise with an aggressive capacity buildout shows chipmakers racing to fund AI-era manufacturing, even at the cost of near-term shareholder sentiment.
Read more: finance.yahoo.com
Image credit: IBM Research
