【Unimicron FY2026 Q2 Earnings Call】Gross Margin Surges 6.8pp to 24.8%, EPS Hits NT$8.45, Full-Year Capex Revised Up to NT$53.7 Billion

AI Demand Ignites Unimicron's Gross Margin Surge, Q2 EPS of NT$8.45 Nearly Surpasses Full-Year Historical Levels

"More than half of the gross margin growth came from price adjustments, and our AI orders will be even stronger in the second half," said Unimicron Technology CFO Chung Ming-Feng, unable to hide his optimism during the earnings call. The global substrate leader's second-quarter 2026 financial report exceeded market expectations on nearly every key metric: consolidated revenue reached NT$42.89 billion (approximately $1.3 billion), up 15% quarter-over-quarter and 32% year-over-year; gross margin surged from 18% in the first quarter to 24.8%, a jump of 6.8 percentage points; net profit attributable to the parent company was NT$13.12 billion (approximately $403.4 million), with earnings per share (EPS) of NT$8.45, far surpassing the previous quarter's NT$3.28 and the prior year's NT$0.02.

Strong demand for AI GPUs and HPC, combined with a significant improvement in product mix, kept Unimicron's substrate and PCB capacity utilization rates high—over 90% for ABF substrates, approximately 80-85% for BT, and about 85-90% for PCBs. The influx of high-end orders directly reflected in the gross margin, with quarterly gross profit reaching NT$10.64 billion (approximately $327.2 million), a 58% increase from the first quarter.

Key Financial Data: Revenue, Gross Profit, and Profitability All Surge

Item	Q2 2026	Q1 2026	Q2 2025	QoQ	YoY
Consolidated Revenue (NT$B)	42.89	37.45	32.47	+15%	+32%
Gross Profit (NT$B)	10.64	6.73	4.26	+58%	+150%
Gross Margin (%)	24.8	18.0	10.8	+6.8pp	+14.0pp
Operating Income (NT$B)	6.65	2.73	0.29	+144%	—
Operating Margin (%)	15.5	7.3	0.9	+8.2pp	+14.6pp
Net Profit Attributable to Parent (NT$B)	13.12	5.24	0.03	+150%	—
EPS (NT$)	8.45	3.28	0.02	+157%	—
Non-Operating Net Income (NT$B)	8.93	—	—	—	—
Note: Non-operating income includes NT$9.21 billion (approximately $283.2 million) in financial asset gains, NT$560 million (approximately $17.2 million) from the disposal of the Hukou plant, and a NT$1.37 billion (approximately $42.1 million) impairment loss provision for the Unimicron Tongpai plant in China.

Chung Ming-Feng explained that the combination of strong core business performance and non-operating contributions pushed quarterly EPS to a level nearly equivalent to a full year's earnings in the past. As of the end of June, the company held approximately NT$93.1 billion (approximately $2.9 billion) in cash. Following the completion of a $1.355 billion overseas depositary receipt offering in July, the debt ratio is expected to decline from 59.2% to approximately 52%, further strengthening the company's financial position.

Revenue Structure Evolution: ABF Substrate Revenue Share Exceeds 50%, AI Data Center Becomes the Main Application

Unimicron has internally reclassified its product application categories, with IoT now encompassing PCs, notebooks, and consumer products, while handsets are categorized under Communication. Looking at the second quarter by product and application segment, ABF substrates and AI Data Center showed the most significant increases in both share and absolute value:

Revenue Share and Change by Product Segment

Product Segment	Q2 Revenue Share	Q1 Revenue Share	QoQ Value Change	YoY Value Change
ABF Substrate	52%	49%	+22%	+51%
BT Substrate	9%	10%	-3%	-4%
HDI	27%	27%	+14%	+29%
Traditional PCB	9%	11%	-1%	+14%
Rigid-Flex	2%	2%	+9%	-14%
Others	1%	1%	—	—

Revenue Share and Change by Application

Application Category	Q2 Revenue Share	Q1 Revenue Share	QoQ Value Change	YoY Value Change
AI Data Center	61%	59%	+20%	+71%
IoT	24%	25%	+8%	-3%
Communication	5%	6%	-11%	-1%
Auto	3%	4%	+7%	-26%
The remainder is attributed to other applications.

CMO Judy added that ABF's rapid growth was not only driven by the ramp-up of AI GPU and ASIC shipments but also benefited from the overall shift of memory chip supply towards AI. While the BT market experienced some headwinds, ABF gained more chip support. The company has simultaneously initiated BT capacity conversion, reallocating some CSP facilities and technologies to support ABF composite substrates, a transformation expected to be completed within one to one and a half years.

Q3 Outlook: Revenue and Gross Margin to Rise in Tandem, AI Share to Reach 70%

Management provided a clear optimistic signal for the second half. Chung Ming-Feng stated, "Third-quarter revenue will grow compared to the second quarter, and gross margin also has a chance to move higher." The momentum comes from three drivers: the continued expansion of high-end AI order share, capacity utilization rates remaining fully loaded, and product price increases negotiated with customers.

• Substrate AI Products: The share exceeded 60% in the first half and has the potential to reach 70% in the second half, covering GPUs, AI ASICs, Server CPUs/DPUs, and AI Networking.
• PCB AI Products: Also above 60% in the first half, targeting 65-70% in the second half, primarily driven by AI system boards and 1.6T/800G optical communication modules.

In response to the demand surge, the board approved a significant increase in capital expenditure, raising the 2026 full-year budget from NT$34 billion (approximately $1.0 billion) to over NT$53.7 billion (approximately $1.7 billion), with the long-lead-time equipment budget further increased from NT$14.1 billion (approximately $433.6 million) to NT$31.6 billion (approximately $971.6 million). Funds are primarily allocated to: the third phase of Guangfu Plant 2 (capacity coming online in Q3 this year), the backend of Guangfu Plant 2 (capacity coming online in Q2 2027), Yangmei Plant 2 (ground broken, equipment move-in expected 2027-2028), and Yangmei Plant 3 (construction starting late this year to early next year). Chung Ming-Feng stated that this expansion plan is closely aligned with the demand timelines of core AI customers.

Battleground for Advanced Packaging: EMIB Mass Production Next Year, Customer Guarantees Profit, Mid-to-Long-Term Gross Margin Target of 50-60%

EMIB became the most intensely discussed topic during the earnings call Q&A. Judy candidly admitted that EMIB is a new technology with immature yields, and the company, along with two Japanese suppliers, is targeting a "50% yield" as the first-phase goal for mass production next year. Crucially, "The customer has already provided a profit guarantee. As long as we work hard to improve yields, our gross margin at a 50% yield will be higher than the current level."

When pressed by an HSBC analyst on what yield level would allow EMIB's gross margin to compare with CoWoS, Judy pointed out that EMIB eliminates the interposer, resulting in a higher substrate unit price. The customer negotiated a long-term contract based on a "pricing" model rather than an "adjustment" model from the initial design phase, allowing Unimicron to lock in profits from the early investment stage. "In the mid-to-long term, a gross margin of 50-60% is a reasonable target, but this won't come from price hikes alone; it must be built on a technological moat." She emphasized that when collaborating with customers to set substrate prices, the company now incorporates all future costs and yield ramp-up stages, making the profit curve smoother and more predictable.

Regarding the proportion of EMIB in capital expenditure, Judy disclosed: "Total EMIB-related investment accounts for less than 10% of overall capex, and within that portion, equipment truly dedicated to EMIB is only 15-20%." Most equipment can be flexibly switched between CoWoS, general HDI substrates, and EMIB, allowing customers to dynamically adjust between packaging solutions and reducing the risk of betting on the wrong technology.

In response to analyst questions about whether other customers might adopt EMIB, Judy responded that capacity is currently limited, and the company will focus on ramping up mass production for a single major customer before 2030, only discussing expansion once the technology matures.

Analyst Q&A Highlights: Margin Breakdown, Long-Term Profitability, Glass Substrates, and Thailand Plant Dynamics

Drivers Behind the Gross Margin Surge Morgan Stanley analyst Howard asked how the over 6-percentage-point gross margin increase could be broken down. Chung Ming-Feng provided an unusually specific breakdown: "Price factors accounted for over 50%, with the remainder coming from utilization rates, product mix, and yield improvements." This signals that Unimicron is moving beyond passive cost pass-through and beginning to wield stronger active pricing power.

Is a "50-60% Gross Margin" Feasible? Ann followed up on whether Unimicron could push its gross margin to 50-60%, comparable to key semiconductor material suppliers. Judy responded, "We are accumulating technological capabilities that allow our customers to widen the gap with competitors when working with us. When this value is established, 50-60% is a very reasonable figure." She stressed that this must be supported by R&D capabilities, not merely by raising quotes.

Glass Substrate Timeline Regarding the industry's much-anticipated glass substrates, Judy maintained a conservative stance: "There will be no mass production before 2030. We are currently only in R&D with two or three customers, and each customer's technology path and role division are different; it won't be developed solely by the substrate manufacturer." She added that the adoption of glass substrates will be highly customized, not a wholesale replacement of organic materials, and that substrate manufacturers must co-develop solutions with packaging houses and customers.

Thailand Plant and Optical Modules The Thailand plant will begin ramping up and undergoing customer certification in the second half of the year, with formal mass production next year. The total investment is NT$9-10 billion (approximately $276.8-307.5 million), primarily focused on Server HDI, positioned as a backup for Taiwan's production capacity. For 1.6T optical modules, the company is leveraging existing factories for rapid retrofitting, with capacity coming online in the fourth quarter, expected to contribute significantly to revenue and profit. Judy noted that 1.6T requires MCM processes, giving Taiwanese manufacturers like Unimicron, Zhen Ding, and Compeq, who possess inner-layer board production capacity, an advantage. Hyperscaler customers, due to information security considerations, will retain a certain proportion of orders within the Taiwanese supply chain.

Risks and Resilience: Raw Material Costs Rise but Prices Adjusted, Depreciation to Increase to NT$20.8 Billion

Chung Ming-Feng stated that while raw material costs have risen recently, the company has communicated closely with customers and moderately adjusted prices to reflect costs, without creating headwinds for gross margin. Full-year depreciation is estimated at approximately NT$20.8 billion (approximately $639.6 million), an increase of NT$2.5 billion (approximately $76.9 million) from last year, mainly reflecting the commissioning of new plants. Fortunately, the unit prices and gross margins of high-end products are robust enough to absorb the depreciation pressure.

Overall, Unimicron is currently in a sweet spot benefiting from both AI capital expenditure and technological dividends. From the substrate revenue share exceeding 50% and AI applications moving from 60% towards 70%, to EMIB opening a new profit model in advanced packaging, the message from the earnings call is clear: this component maker, which once struggled through the PC era, is proving its critical position in the AI era with quarter-after-quarter of increasingly strong numbers.