Welcome, everyone, to UMC's 2025 Third Quarter Earnings Conference Call. [Operator Instructions] For your information, this conference call is now being broadcasted live over the Internet. Webcast replay will be available within 2 hours after the conference has finished. Please visit our website, www.umc.com, under the Investor Relations, Investors, Events section. Now, I would like to introduce Mr. Michael Lin, Head of Investor Relations at UMC. Mr. Lin, please begin.

Thank you, and welcome to UMC's conference call for the third quarter of 2025. I'm joined by Mr. Jason Wang, President of UMC; and Mr. Chi-Tung Liu, the CFO of UMC. In a moment, we will hear our CFO present the third quarter financial results, followed by our President's key message to address UMC's focus and fourth quarter 2025 guidance. Once our President and CFO complete their remarks, there will be a Q&A session. UMC's quarterly financial reports are available at our website, www.umc.com, under the Investors, Financial section. During this conference, we may make forward-looking statements based on management's current expectations and beliefs. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, including the risks that may be beyond the company's control. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC and the ROC security authorities. During this conference, you may view our financial presentations material, which is being broadcast live through the Internet. Now, I would like to introduce UMC's CFO, Mr. Chi-Tung Liu, to discuss UMC's third quarter 2025 financial results.

Thank you, Michael. I'd like to go through the third quarter 2025 investor conference presentation material, which can be downloaded or viewed in real time from our website. Starting on Page 4, in third quarter of 2025, consolidated revenue was TWD 59.13 billion, with gross margin at 29.8%. Net income attributable to the stockholder of the parent was TWD 14.98 billion and the earnings per ordinary share were TWD 1.2. Capacity utilization rate climbed to 78% in that quarter with wafer shipment just marked 1 million 12-inch equivalent wafers. On Page 5, on the sequential comparison, third quarter revenue of TWD 59.12 billion increased slightly compared to the previous quarter, mainly due to higher wafer shipment, although the NT dollar exchange rate was an unfavorable factor of around 3%. Gross margin also climbed on back of the better capacity utilization rate to 29.8%. And net income reached nearly TWD 15 billion or an EPS of TWD 1.2 per share in NT dollar terms. On year-over-year comparison, on Page 6, for the first 3 quarters, revenue grew 2.2% year-over-year to TWD 175.7 billion. Gross margin was around 28.4% or nearly TWD 50 billion for the first 3 quarters of 2025. Overall, net income for the first 3 quarters is down to TWD 2.54 per share compared to TWD 3.12 in the previous 3 quarters of 2024. On Page 7, cash still above TWD 100 billion, and total equity of the company is now TWD 361 billion at the end of third quarter of 2025. ASP on Page 8 shows we remain firm for the past 2 quarters. On Page 9, for revenue breakdown, we see -- we can see that the North America represents about 25% of the total revenue in the third quarter, which is 5% higher compared to 20%…

Thank you, Chi-Tung. Good evening, everyone. Here, I would like to share UMC's third quarter results. In the third quarter, we observed demand growth across most market segments, which drove a 3.4% increase in wafer shipments and improved utilization rate to 78%. In particular, we benefited from a pickup in sales of smartphones and notebooks, driving replenishment order from customers. Our 22-nanometer technology platform continues to provide us with the differentiation in the market, with 22-nanometer revenue now accounting for more than 10% of the total sales in 2025 alone, we are projecting over 50 product tape-outs, and we expect 22-nanometer contribution will continue to increase in 2026. Aligned with our strategy of providing customers with highly differentiated specialty technologies, we recently announced the readiness of our 55-nanometer BCD platform. In addition to mobile and consumer applications, the new platform is also complemented with the most rigorous automotive standards for automotive and industrial use. Looking ahead to the fourth quarter, we are anticipating wafer shipment to be comparable with third quarter's volumes, wrapping up 2025 with shipment growth in the low teens. UMC continues to deliver competitive process technologies that enable diverse applications, which position the company to benefit from a broad-based market recovery. With the 22-nanometer logic and specialty platform, in particular, we expect to drive growth. Now, let's move on to fourth quarter 2025 guidance. Our wafer shipment will remain flat. ASP in U.S. dollar will remain firm. Gross margin will be approximately in the high 20% range. Capacity utilization rate will be in the mid-70% range. Our 2025 cash-based CapEx budget will remain unchanged at USD 1.8 billion. That concludes my comments. Thank you all for your attention. Now, we are ready for questions.

[Operator Instructions] First, we'll have [indiscernible], Bank of America for questions.

My first question is regarding the near-term outlook. Could you discuss more in detail on how you see the business by end market is trending into the current quarter in fourth quarter? It seems the guidance is above seasonal, so just wondering if there's anything driving that. And also just your initial view into first half next year, did you get any feedback from your customers on the potential restocking, or in general, they are still pretty conservative at this stage?

Sure. I mean, while we're going into Q4, we can -- as I said, we wrap up the 2025 shipments to a low teens. It's now that we project the 2025 shipment growth was supported by our differentiated 22-nanometer technology and other specialty offerings across both 12- and 8-inch amid a broad-based market demand recovery. On the 12-inch size, shipment growth was driven by a strong momentum from 22-nanometer logic for ISP, Wi-Fi connectivity as well as the high-end smartphone display driver IC. In addition to 22 and 28, overall 12-inch wafer shipment will outpace our addressable market due to our comprehensive value-added specialty portfolio of nonvolatile memory, RFSOI and BCD. On the 8-inch size, we expect a high single-digit growth in 2025, mainly led by the PMIC and LDDI. So in summary, the strength of 22-nanometer and the specialty process across both 12-inch and 8-inch platform underpin our confidence in achieving a low teens percentage shipment growth in 2025. So for 2025 Q4, we remain -- the shipment outlook remain flat. If we're looking into the early look of 2026, I think we're still going to experience some seasonality, but if I look at the entire year, despite the ongoing global economic geopolitical uncertainty, we believe our 2025 business growth momentum will continue into 2026, where we expect the wafer shipment will increase year-over-year. In addition to some TAM expansion, our 22 eHV -- 22-nanometer eHV platform, which is serving the high-end smartphone OLED display driver application, will be one of the key growth engines. We expect the overall 22- and 28-nanometer revenue to achieve double-digit year-over-year growth in 2026. However, there's still going to be some seasonality that we may have to go through. So Q1 may be one of the challenging quarter for the year. Supported by…

Yes. That's pretty intensive. And I think just a quick follow-up to my first question is just when you mentioned the growth momentum could continue into 2026 compared with 2025, are you saying that the wafer shipment could actually still be growing by low teens next year at least? Because you mentioned a lot of growth drivers by applications just now, especially on 22-nanometer, 28-nanometer and also 8-inch. So just wondering whether you are implying that the wafer shipment could grow by another low teens at least for 2026?

I mean, we're not giving the blended -- the wafer shipment at this time. We're probably ready to provide you more clarity into Q1, but 22 and 28 particularly, yes, I think that when we go into 2026, we're still expecting a double-digit year-over-year growth.

And then my second question would be on your gross margin trend. I think for the fourth quarter, you guided flat shipment and also pricing. The FX seems to be -- foreign exchange seems to be more favorable at this stage. So why does the gross margin does not go higher than the third quarter? I'm just curious why that is the case. Or should we think about high 70% utilization is going to translate into like high 20 percentage gross margins going forward?

Gross margin in third quarter is actually, in fact, slightly higher than that of the previous quarter. The gross margin also primarily depends on utilization rate, ASP, product mix, depreciation and foreign exchange. As you know, even though the foreign exchange rate may be on a forecast basis, better than forecast, but still appreciate against U.S. dollars, our key receivable currency, so still in an unfavorable situation, as I mentioned earlier, that almost eat up about 3% of our total revenue. And we do expect the Q4 '25 gross margin still will remain in the bandwidth of high 20 percentage range. Despite the variables such as our depreciation, we will still see quarterly increase. And this year, we are facing 20% plus increase in annual depreciation expenses. So I hope that answers your questions.

Yes. And then just a relevant follow-up is in your cost structure. You have been able to manage the other manufacturing cost item quite nicely down in third quarter despite the fact that the labor cost is higher, electricity cost is higher and also the material or even the wafer shipment is slightly higher compared with second quarter. So could you just elaborate in more detail on how should we think about the other manufacturing costs, which I believe should be mostly variable cost? How should we think about that going to trend?

So part of our employee compensation is bonus, which is based upon profit sharing. So when we have a better quarter-over-quarter profit in the third quarter, we do have to factor in higher bonus, which increased the compensation expenses in the third quarter.

But it was still down compared with second quarter. So I was just wondering if there's any reason driving that decline and would that trend continue.

No, the trend will not continue. It will fluctuate along with our rolling profit recognition.

Next one, Charlie Chan, Morgan Stanley.

Congratulations for very strong results, especially on the gross margin side. So maybe starting with the so-called geopolitical uncertainty. So, Jason, can you elaborate a little bit what kind of macro uncertainty you see will continue in 2026? And I was asked by one of your customers about -- there seems to be some speculation about semi-tariff may come next January. So any kind of impact -- potential impact to your business or operation? And also another uncertainty, it was a couple of weeks ago, right, the rare earth kind of supply. Does your team run through some analysis about the potential impact if rare earth will be restricted again?

Sure. A couple of things, right? I mean, you mentioned about geopolitical dynamics on the tariffs. So maybe I'll start up on the tariff first. We do understand there are uncertainties and risks from the potential impact of tariffs, and we will remain cautious of those potential business impacts, and we'll be mindful in our business planning going into 2026. At this current point, we haven't seen anything yet, but we are cautious. The -- amidst the uncertainties, we'll also continue to focus on the fundamental of our business. That is the technology differentiation, manufacturing excellence and then customer trust to further strengthen our competitiveness -- competitive position. So I think we still have to go back to the fundamentals. For UMC, to address the geopolitical concerns, I do believe that UMC has a geo-diversified manufacturing site across the globe. And the global semiconductor landscape is evolving. Customer and governments are increasingly emphasizing the geographic diversification and supply chain resilience along with the tariff. But to address the structural changes and align with the customer needs, our strategic initiative, including the capacity buildup in Singapore and the U.S. and are designed to complement our Taiwan facility, will enable us to better support our customers across multiple regions. Over the long term, we are targeting a balanced capacity split between Taiwan and overseas locations, but we welcome any opportunity from our customer. Whether this is an impact or opportunity to us, we will probably have to position ourselves and ready for that dynamic changes. Yes.

So specific on semi tariff, right, I think we also went through this discussion last quarter or 2 quarters ago. So do you also hear that next January could be a final implementation of this semi tariff? And secondly, would UMC can get exemption from the semi tariff?

Well, I mean, your guess will be as good as my guess. So I'm not going to guess here.

I watch TV only.

Yes. So we're going to be cautious about this, and we're closely monitoring the progress and developments. And at the same time, given that we are investing into the U.S., so we're definitely going to present our case. But there's nothing else to update here. But if there's anything, we will definitely recall back.

Okay. Got you. And second question is about the -- your gross margin sustainability. I know this quarter, next quarter, some puts and takes, right? But just overall, right, next year, it seems like some of your industry peer, may just call it TSMC, kind of hike their wafer price. And recently, we are seeing that the back-end foundry, though it's not like your industry peer, but it's kind of your downstream supply chain, right, also attempt to hike the back-end foundry service price. So what was the UMC's kind of sort of potential wafer price hike into next year?

Well, like Chi-Tung mentioned earlier, margin reflects the result of ASP loading certain variable factors. So let's take the ASP specifically. For the ASP outlook, our 2025 ASP performance has remained firm amid a dynamic business environment, and it has remained stable at a healthy level throughout the year. And so -- and we expect the ASP will remain firm in Q4 2025. And for the 2026 outlook on ASP, we will provide more detail in the upcoming January 2026 conference call, as we are going through some discussion with our customers aligning that. So we probably have more detail to report in the next conference call.

Okay. And on the cost side, expense side, Jason, you said at some interview that your team want to drive some costs down. But I feel like most of the components whatsoever. Most of what I'm hearing this commodity cost may go up, right? So on the cost side, do you have any preliminary outlook for 2026?

Without getting into specific cost projection or outlook, I think we can probably update you of the view in cost, our view of cost -- about cost. Cost competitiveness is always a mutual goal for us and our suppliers together, so in order to be competitive. So we're closely working with our suppliers. We'll continue to drive towards cost savings in 2026, and that has been going on for many years, but we are continuing to doing that into 2026. But that includes the combination of both internal and external efforts. It's not only working with the supplier, it's also internal efforts. For example, we have already started leveraging some smart manufacturing and AI technologies internally to enhance our fab efficiency and enabling our long-term operational competitiveness. So that's also a major piece of driving our cost goal. So I think there's many of the initiatives that we're deploying, and we working with the supplier -- supply chain is just one of them.

Okay. Okay. And last one, I will be back to the queue. So I know your company and your team have been running through a lot of strategic or marketing research, right? So recently, we picked up one data point I would like to share with you and also consult your view. Because of the T-glass shortage, right, we're starting to see tightness of BT substrate supply. From your perspective or UMC's perspective, would that kind of constrain your -- some of your customers' demand, for example, the consumer or smartphone SoC demand into 2026?

Well, we really haven't seen that, but we are closely monitoring the entire supply chain resilience. The current market is driven by this AI momentum. So there are various areas demonstrating potential supply concern. But so far, we have not seen any impact to us. But like you said, we all look out there and see if there's going to be any. But meanwhile, we are managing -- from our internal perspective, we are managing our supply resilience point of view. We want to ensure the supply assurance and as well as the -- both from supply and demand -- supply and demand as well as the quality standard and cost. So I think that's always been our initiative internally. So I would just have to say we haven't seen any impact on the recent market dynamic, but it's something always on our radar screen, and we continue monitoring it.

Yes. How about smartphone or PC demand recovery, if you have a crystal ball? Do you think that 2 major segments of the end demand will significantly recovery next year?

Well, I mean, at least for the Q4 '25, we expect the wafer shipment will remain flat, and the markets reflect pretty healthy inventory level as well. We see slightly communication segment decline in our segment, but the computing, consumer, automotive are slightly increased. So I'm not sure that's affected by that particular supply issue, but it reflects probably more end demand associated.

Next one, Laura Chen, Citi.

My first question is also about the margin outlook. Chi-Tung, you mentioned that the depreciation cost for this year were up about 20% plus year-on-year. But we know that actually in the first half, the depreciation cost increased almost like 30%. So does that mean that depreciation cost year-on-year increase trend to slowing down into Q4? With overall your utilization rate and also ASP seems to be resilient and also higher exposure on 28-nanometer, should we be looking for some of the potential upside of the gross margin?

Well, other than depreciation, there are other factors. Like Jason mentioned, we will have a clear view on the ASP, which is an important component for the margin equation. But just on depreciation alone, yes, the increased magnitude, we're down to about low teens in the year of 2026 versus 20-something in the 2025. And in the previous quarter, we also mentioned either '26 or '27 should be the peak of the recent depreciation curve. So on that regard, it does provide a good floor for helping our EBITDA margin.

Okay. Great. And also the second question is, I recall that we mentioned about the Interposer business before. We know that the AI demand is surging. So I just want to understand UMC, do you have any updated view on the Interposer strategy? And also, we know that UMC also have wafer-to-wafer technology. So just wondering what's the plan here. And also, do you want to further expand the capacities on Interposer?

Well, the latest development on the advanced packaging space, we will continue preparing our advanced packaging solution for this growing market associated with the energy consumption of cloud AI and the edge AI market. For UMC, we are developing the 2.5D Interposer with DTC, the deep trench capacitor, and discrete DTC to address the power efficiency requirement in all AI, HPC, PC, notebook and smartphone space. And second, UMC is leveraging the scalable 3D wafer-to-wafer packaging stacking and the TSV to enhance the -- enhance our specialty technology offering. We are in the mass production of extremely small form factor for the 5G and 6G RFIC right now by leveraging the wafer-to-wafer stacking technology. Based on the success of the 5G and 6G RFIC that works through the wafer-to-wafer stacking, we are also developing memory-to-memory stacking and memory-to-logic stacking service for the high-bandwidth computing requirements. So our technology really is associated with the center with the DTC capability and the wafer-to-wafer stacking capability. Right now, still within our current capacity size, there's no expansion planned, but there are a lot of customer interests and engagement being developed right now.

Okay. Great. Can you also give us some like idea how is that kind of business opportunity growing into the next few years?

I mean, as we anticipated, the cloud AI and the edge AI market will probably taking out in the next 2 years or so. And so we think preparing those technology capability today will position us well to serve that market when the market comes. I think many customers are engaging in that discussion and exploring the product roadmap at this stage. But in terms of the actual volume and the ramp-up schedule, I would expect it's going to probably be in late 2026 or sometime in 2027.

Next one, Sunny Lin, UBS.

Congrats on the very good outlook. Very glad to see business stabilizing and improving. So my first question is on the pricing. I understand more specific guidance should be provided in January or in early 2026, but I want to get a bit more color on the latest progress on your engagement with the clients. So in 2024 and 2025, basically, you provided roughly mid-single-digit type of price reset for across the board. And so how should we expect like going to early 2026? Would it be fair to assume that now given the improving supply/demand, even if any price decline should be lower than the magnitude in early 2024 and early 2025?

Well, I mean, this is definitely -- I mean, that's our goal, right? I mean -- but while we are still in discussion and aligning with our customers, I can't really quote that. I have to really see the data before I can comment about it. But throughout the annual discussions and the patterns in January, we'll probably continue engaging in similar discussion. But in terms of the magnitude of it, I think it's kind of too early to guide at this point.

Got it. Maybe a follow-up on blended ASP. There are still some concerns that there may be some overhang from LTAs expiring in the coming few quarters that could weigh on your blended ASP. And so Jason, could you maybe provide a bit more color on if any impact or that impact is already gone mostly?

I mean, LTA is one of the mechanisms that help us and our customers working other partners, not only based on the ASP, it's also we based on that, providing a mutual commitment for us to put in capacity to support the customer. At the same time, the customer demonstrate some commitment for the business engagement. So LTA will continue serving that purpose. Well, given the market dynamics, we're always working closely with our customers and to support them and gaining market shares without losing the market share and gaining the market shares and also with the market dynamics in terms of commercial needs, so -- but at the same time, we have to balance in terms of CapEx returns. So it is a complicated process and discussion, and we've been doing that for the past 2 years, and we'll continue supporting our customers to march into that direction, finding a win-win solution based on the LTA arrangement. But the future commitment of LTA remains intact, yes.

Got it. So maybe one question on 2026, just to make sure that I got the right number. So for 2026, Jason earlier, did you mention the target would be to grow business by double digit?

I mentioned about the 22- and 28-nanometer that we expect the momentum will go into 2026, and we expect a double-digit growth year-over-year, yes. For the...

Got it. And maybe a question on Singapore expansion. So if any like latest update that you could share with us in terms of how quickly the capacities will be ramped in 2026?

We -- I think the milestone has not changed. We project that the 12 IP3 production ramp will start in January 2026, and it will ramp up with a higher volume starting in second half of 2026. And that milestone schedule remains.

Got it. Maybe last question. So in terms of dividend policy, given the improving cash flow outlook in the coming few years, would the company consider maybe revisiting the dividend policy to change to like absolute cash dividend? Would that be possible?

It's not impossible, but we always try to strike a good balance between the high percentage payout ratio and absolute dividends. So I think that strategy or that position will continue.

Next one, Gokul Hariharan, JPMorgan.

So just wanted to understand a little bit more on the pricing. I know that you're in pricing negotiations with customers. Could we talk a little bit about 22 and 28? How is the pricing trend there? Do you expect that there is any concession that you may need to make on 22 and 28 pricing or that is going to be reasonably firm? And maybe also the same question on the 8-inch portion of the capacity as well, given some of your competitors are also kind of putting down or kind of exiting some of the 8-inch capacity?

Well, our pricing strategy has been very consistent, and we will work closely with our customers and -- for protecting and gaining market shares. So that remains. That will not change. So in the particular number, the ASP guidance, I think it's better that we have all the picture together and to share with you. But in terms of pricing strategy and positioning, that has not changed. We do believe that the pricing is a combination of our value proposition from technology differentiation, our manufacturing capability, reliable capacity and the diversified manufacturing locations, so on. So we think there's a lot to offer. And along with the mutual commitment with many of the customers, we believe that we will strive to a right balance for the pricing discussion. However, again, from the specific guidance on ASP outlook, I will probably prefer to wait until we finish up. I don't want to mislead you at this point. So -- but -- and that goal is whether it's 22- or 28-nanometer and as well as the 8-inch because each technology node has a different market dynamics, and we will work within that dynamics. Meanwhile, you're talking about if we see anything on the 8-inch opportunity or due to any other, our peers. We don't typically comment about our competitors. We believe our market share increase in 2025 in 8-inch, but not just 8-inch, overall 8-inch and 12-inch legacy nodes. And we believe those nodes remain a sweet spot for a wide range of analog reach products. So we'll continue to strengthen our product portfolio, focus on those spaces. And hopefully, we can increase our market shares. We continue to optimize our existing platform and developing a new solution to better address that market need. This is the area that UMC has built some long-standing relationship and trusted relationship with our customers. So we believe this structural trend will reinforce our position as the preferred foundry partner for customers in this needs. And that will actually help us to sustain our maybe growth in both 8- and 12-inch legacy nodes over the long run.

Got it. Yes, clear on the pricing that we can wait for January. But I think I just wanted to also ask on the semiconductor Section 232 tariffs. How are the discussions with your customers going? And let's say, there is a 15% to 20% tariffs on exports, which needs to be offset with any kind of U.S. investment or U.S. capacity that you have. How does UMC manage that situation? And which are the investments, or if any, that can qualify for that kind of an offset? I mean, for some of your peers, I think that is pretty clear. But I just wanted to understand how UMC is considering the situation.

Well, I kind of touched that earlier. Our -- we have been a very diversified manufacturing -- look, we have a very diversified manufacturing location in the past. And so we have very -- I think we're pretty much very complement to the current market dynamic. The current geographically discussion on diversification, supply chain resilience, I think our past initiatives serve that, and so we'll just continue. We may alter that, making some adjustment about that strategy, but not significantly. For instance, we're including building capacity in Singapore and U.S., and it's very much aligned to that direction. Of course, the tariff situation, whether it is X percentage, we don't know yet for Taiwan, but we know some areas already came out at 15% and which -- that's where we have our manufacturing sites. So customers are in discussion in interest of making sure that they have access to those facilities and to those locations. So we are definitely entertaining that conversation in a manner of growing our business engagement. So we hope that becomes more of an opportunity to us, not just a negative impact. Now, for some area that is not clear yet, and we have to navigate through that, it's our belief that we have very smart people in this industry. And despite how -- which direction it goes, we will navigate through this process and finding a win-win solution of mutual benefits.

Yes, just following up on that, Jason, I think geographical diversification is one aspect, but also the second aspect is U.S. capacity, right? So is your understanding that your 12-nanometer collaboration with Intel kind of counts as U.S. investment and U.S. capacity, given I think the total investment is actually quite small, even though you are actually shouldering a lot of the technology-related task.

Well, I mean, I can't comment about the big or small, but the investment is investment, and we are putting capacity in the U.S. And the starting point of the 12-nanometer only lays a solid foundation for us to explore maybe even other collaboration opportunity as well. So that also -- if there's anything to update, we will update you, but that could also represent even more investment, right? So -- but it's just -- we're not ready to update you anything yet. But even I look at the 12-nanometer today, that is quite significant in terms of investment.

Got it. Maybe one last question on the advanced packaging bit. I think you last time updated, I think, around 6K or so of wafer capacity for 2.5D IC packaging. Is that still where we are in terms of the capacity? And for your 2.5D packaging with deep trench capacitor, what is the application? Is it slightly different application that you're targeting compared to the mainstream market and that's why you're kind of waiting on the capacity expansion while the industry is still like really asking for a lot of capacity?

No, the 2.5D Interposer 6K today stays there. There is no expansion plan beyond that given the technology road map migrating to the DTC and we're developing the DTC capability. And for that, we're serving the AI, HPC, PC, notebook and smartphone space. And so our advanced packaging roadmap will center on the DTC going into, yes, 2026.

And would you say that the 6K is now fully utilized or you still have a lot of slack in that 6K capacity right now?

I mean, as the product is migrating to DTC, that's why we're not expanding the capacity on the 2.5D right now.

Okay. Okay. Fair enough. And this DTC capacity, how significant do you think it is going to become in terms of revenues? Let's say, I think you were expecting end of '26 ramp-up, so let's say, in 2027, is that a fairly significant part of your total portfolio? Or is it still going to be quite small, similar to the Interposer-related revenues that has been more like a single digit -- low single-digit kind of percentage of revenue?

I think it's kind of too early to predict that. A part of the market is associated with the edge AI market and which we have to wait until that has more clarity. And so I think at this point, it's too early to project that. But in terms of technology-wise, I think that's definitely the core of the next generation. So we need to make sure that we have prepared for it.

Next one, Janco Venter, Arete.

I just wanted to follow up on the investment into the U.S. and just get an update on the state of the PDK. And then also, we just want to understand the business model around this engagement on 12-nanometer. Is it revenue share? Is it profit share? And then just secondly, on that, will it be cannibalistic to the 22, 28-nanometer customers as you start migrating to 12-nanometer? Any color that you can add to that to help us just understand this opportunity would be quite helpful.

Sure. From a project standpoint, the -- currently, the 12-nanometer cooperation with Intel is progressing well and remain on track according to the project milestone. And we expect the early PDK will be ready for the first wave of customers in January 2026. And both UMC and Intel are aligning with the customer device spec to facilitate the ramp-up. Overall, the collaboration is proceeding as scheduled, and customer product tape-out is expected at beginning of 2027. So that is the update on the 12-nanometers. The business model itself, we are working collaboratively together and engaging with the customer and the actual business model that we're probably not elaborate to share right now. But once -- I think that will be a -- the business revenue recognition, once it's ready, we'll update that. And the cooperation model is actually very structured and -- but just we'll probably have to report that after we're into production. I think that's the 2 questions you have, right? Did I miss any?

Yes. That makes sense. Yes, that's right. Maybe just one follow-up. And I think you touched on this earlier where you talked about potentially looking at further investments. Now, if we look at -- actually, we were trying to understand if there's scope perhaps to extend this agreement to single-digit nodes because if you look at Intel's business, they fully depreciated 7-nanometer. And it seems like an obvious area to extend the agreement. Is this something that you would potentially be looking at? And does that make strategic sense for UMC?

Well, I mean, the -- yes, the simple answer is yes, right? And -- but we have to starting from -- we have to start it from the 12-nanometer. So we had to make sure that executed well, so we can lay a solid foundation on that. For technology beyond 12-nanometer, we are open to explore the future opportunity through the partnership arrangement that are mutually beneficial. I would say the cooperation with Intel is strengthening UMC's strategic position in U.S. significantly and for the U.S. market and also broaden our addressable market while adhering our disciplined CapEx approach. So we are very committed to this partnership. And so far, the project is actually progressing well.

Next one, Bruce Lu, Goldman Sachs.

Can you hear me?

Yes.

Yes. I just wanted to follow up the -- for the U.S. collaboration beyond 12-nanometer. What are the showstopper for us to move beyond 12-nanometer at the current stage? Or do we consider to go backwards to do like relative mature node capacity in U.S.?

I mean, that's an interesting question, right? I mean, the -- I think when we talk about this cooperation with Intel strengthened our positioning in the U.S. market, hopefully, we're not only limited at 12 nanometers and that if we can have a full potential of this position. And we -- so that's why we're actually very open to explore the future opportunities through this. So I don't think there's a -- I won't call any showstopper, but I think as long as it's mutually beneficial, I mean, we will definitely open to explore that. Now, is the exploration limited to the more advanced node or backward? I think we are also open to that. We're not limiting ourselves with that collaboration.

No, Jason, the question is that it's clearly mutually beneficial, right? So who has the ball? I mean, who doesn't want to move on?

I think, in any of the engagement, not just this, you require the market validation, you need to make sure you're doing your due diligence. So I think I will probably comment that all conversations are open and the due diligence need to be in place before we move forward. So it's not truly a showstopper. It's not going which sport, it is we have to make sure we conduct the appropriate process.

So in other ways, the prerequisite condition would be that you probably need to deliver 12 nanometers with like decent size of revenue, decent size of customer, then both sides might consider to move it on. Is that the right consideration?

Not -- I mean, I won't say that it is a prerequisite, but that is one of the important considerations. But more importantly is if this collaboration is economically beneficial to both sides. And so I think that the -- once we are more mature and ready, and we definitely will update you, but again, our position on this topic is we are open to that exploration.

Okay. So when can we expect to see the meaningful revenue contribution from 12-nanometer?

Well, I mean, right now, for the early product tape-out, it is going to be in 2027. And so we're probably going to start seeing some contribution in 2027, but then ramping after that though.

And in the interest of time, we're taking the last question. Last one, Charlie Chan, Morgan Stanley.

So it's actually wafer-on-wafer related. So, Jason, can you share with us who could be kind of memory partners? I mean, it seems like it requires a lot of so-called customized design interface, et cetera. So are those more Taiwanese partners or you have some global top memory partners for wafer-on-wafer? And secondly, if you can, can you share some potential kind of end applications and the timing for wafer-on-wafer?

On the wafer-to-wafer stacking capabilities, we are in mass production for some of the extremely small form factor devices in the RFIC space. We're talking about that because we believe if you look at the market is going, and we believe this technology will serve more than just a small form factor. It provides the option for the memory to memory, the logic to logic, logic to memory stacking options. So by providing the option to the customer, they say they can explore many different product applications. So at this point, the advanced packaging technology is developing into 2 cornerstones. One is the DTC capability. Another is on the wafer-to-wafer stacking capability. And then we -- once the technology is ready, then we can explore to many different applications.

On this wafer-on-wafer, do you see kind of advantage or differentiation to industry, for example, TSMC or China's -- I'm not sure, maybe XMC, yes, any sort of differentiation you may have?

Well, I mean, the developing differentiated technology is definitely on mandate. So we continue driving that technology differentiation. But at the same time, you have to make sure that you're part of the ecosystem, where the market is going. So we see this from a market standpoint. From a technology/product migration standpoint, we believe these are 2 very important capability and technology. So we're preparing ourselves to get that ready, and then, we can start exploring different business opportunities.

And ladies and gentlemen, thank you all for your questions. That concludes today's Q&A session. I'll turn it over to UMC Head of IR for closing remarks.

Thank you for attending this conference today. We appreciate your questions. As always, if you have any additional follow-up questions, please feel free to contact ir@umc.com. Have a good day.

And ladies and gentlemen, that concludes our conference for third quarter 2025. We thank you for your participation in UMC's conference. There will be a webcast replay within 2 hours. Please visit www.umc.com under the Investors, Events section. You may now disconnect. Thank you again. Goodbye.