UMC's Benefits from Budding Recovery in Automotive and Industrial Markets

United Microelectronics is the world’s third-largest dedicated contract chip manufacturer, or foundry, by revenue. It makes integrated circuits for customers based on their proprietary designs. The company has long benefited from US and increasingly Asian semiconductor companies specializing in fabless (no factory) business models, bolstering demand for UMC's services. UMC, like all foundries, assumes the costs and capital expenditures of running factories amid a highly cyclical market for its customers. Such cyclicality stems from the fact that foundries tend to add excessive capacity during times of burgeoning demand that can result in underutilization during downturns that hamper profitability.