A major sign that demand for chips is recovering! UMC.US (UMC.US)'s annual revenue, which focuses on mature processes, regains growth

According to the latest operating data released by UMC.US (UMC.US), which focuses on mature chip manufacturing processes such as 14nm and 28nm, on Tuesday, the chipmaker from Taiwan achieved revenue of NT$18.97 billion in December, an increase of 11.7% over the previous year. More importantly, UMC regained its growth trend in 2024, following a sharp drop in revenue of 20% for the full year of 2023. According to the data, from January to December, UMC's total revenue increased by 4.39%, reaching a cumulative total of approximately NT$232.3 billion.

For UMC, it was not easy to achieve growth throughout 2024. Continued sluggish demand due to excessive inventory of mature process chips since the end of 2022 can be described as severely damaging UMC's performance since 2023. Revenue continued to decline sharply for many quarters, and the total revenue for 2023 was extremely weak, which can be described as a sharp drop in demand for “non-AI chips.”

UMC's 2024 performance growth, which focuses on mature manufacturing processes, also largely shows that not only does demand for data center AI chips such as the Nvidia H100/H200 at the 5nm level continue to grow rapidly, leading to a sharp increase in sales of high-end process chip products, but demand for memory chips such as HBM and data center SSDs, which focus on enterprise-level AI, is also recovering. The overall demand for mature process chips of 14nm and above is also moving towards a recovery process, which means that the entire chip industry has begun to break free from a period of 2 years of weak demand and move towards a period of recovery and prosperity.

Unlike the “king of chip foundry” TSM.US (TSM.US), which focuses on the most advanced chip process processes (such as 5nm, 4nm, and 3nm), UMC provides mature process technology from 14nm to 28nm and higher, focusing on mature process nodes. These chip products based on UMC's mature nodes are widely used in communications, consumer electronics, automotive electronics and industrial fields. They focus on stable and cost-effective mature nodes to meet the overall needs of the traditional industrial sector and the mid-tier consumer electronics market. This is why some analysts believe that since demand for AI chips in data centers exploded, UMC's performance data is more representative of the “actual demand” of the chip industry as a whole than TSMC.

A team of analysts from Wall Street financial giant Bank of America (Bank of America) recently said in a report that chip stocks are likely to be one of the best-performing sectors in US stocks in 2025, and the contribution to the increase is expected to expand from chip companies such as the “Big Three AI Chips” that are fully benefiting from the AI boom to analog chips and electric vehicle chip stocks that have long outperformed the US stock market and the “non-AI” chip stocks of the Philadelphia Semiconductor Index.

“There is still plenty of room for chip stocks to rise after experiencing a sharp rise, and we think 2025 will show two different upward trend curves.” The team led by Bank of America analyst Vivek Alia wrote in this chip stock research report. “In the first half of the year, investment in artificial intelligence promoted by US cloud computing supercustomers and Nvidia's Blackwell architecture AI GPU deployment scale will maintain the upward trend in the stock prices of these chip companies closely linked to AI. In the second half of the year, if the global economy continues to recover, the market focus may shift to inventory replenishment and a recovery in automobile production, which means that automotive/industrial chip manufacturers that have had less crowded positions for a long time and have significantly outperformed the US stock market are expected to regain the favor of investors.”

The Bank of America analytical team led by Alia also said that overall, the overall sales volume of the semiconductor market is expected to increase by about 15% in 2025, to reach 725 billion US dollars on top of the strong growth in 2024. “This is still a very strong growth pace, although it has declined compared to the 20% forecast growth rate this year.” “The semiconductor market demand boom cycle often lasts about 2.5 years (followed by a 1-year decline cycle), and we are currently only in the middle of this semiconductor upward cycle, which began [in the fourth quarter of 2023].”