Company Reports

Sumco, Sino-American Silicon, and its subsidiary GlobalWafers all said artificial intelligence applications are driving up wafer demand, filling up 300mm capacity and mildly supporting 200mm ones. GlobalWafers inked a 10-year long-term agreement with Micron and said more are being discussed.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with around 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the US. We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 8.2%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers and new Chinese entrants. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

For the June quarter, Sumco guides revenue to increase by 10% sequentially, with operating loss narrowing to JPY 2.5 billion. Management's tone is less enthusiastic compared with the optimism from peers and downstream. Shares fell 6% following the earnings after doubling in the last three months.

Sumco guides March-quarter guidance with revenue down 5% sequentially at JPY 100 billion and its operating loss widening to JPY 6 billion, despite mentioning a favorable outlook for 300mm wafers driven by artificial intelligence.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with around 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the US We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 7.5%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers and new Chinese entrants. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

Sumco's fourth-quarter guidance was short of PitchBook consensus, with revenue flat sequentially at JPY 100 billion and operating loss widening by 5 times to JPY 10 billion, citing a weak recovery in non-AI applications and weak spot pricing. The shares cratered 20% after earnings.

Second-quarter operating margins of GlobalWafers, its parent Sino-American Silicon, and competitor Sumco all dropped sequentially. All three firms were hurt by the strong US dollar and incurred ramp-up costs for their new facilities. The trio expects sales to be flattish or slightly up half on half.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with almost 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the US We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 6.2%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers and new Chinese entrants. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

First-quarter 2025 operating margins of GlobalWafers, its parent Sino-American Silicon, and competitor Sumco all declined sequentially. All three firms suffered from tepid 200 mm wafer shipments and incurred ramp-up costs for their new facilities.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with almost 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the US We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 6.6%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers and new Chinese entrants. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with more than 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the US We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 7.8%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers and new Chinese entrants. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

Sumco's fourth-quarter 2024 revenue was JPY 99 billion, down 5% year on year. Gross margin fell 288 basis points from the year-ago quarter to 16.4%. The numbers were above guidance. Sumco will stop producing wafers with a diameter smaller than 150 mm to improve profitability by the end of 2026.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with more than 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the U.S. We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 6.2%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

We keep our fair value estimates on GlobalWafers, its parent Sino-American Silicon, Sumco, and National Silicon Industry Group, at TWD 620, TWD 255, JPY 1,760, and CNY 3.70 per share, respectively. Because of lower-than-expected utilization, we have cut our 2024 gross margin and EPS forecasts for all these names but leave our afteryears forecasts intact. All wafer names except NSIG are undervalued as we believe the market is still split on the outlook of automotive and industrial semiconductor demand and underestimates the boost on wafer demand from artificial intelligence applications.

We trim our fair value estimates on GlobalWafers, its parent company Sino-American Silicon (SAS), and Sumco to TWD 620 from TWD 710, TWD 255 from TWD 281, and JPY 1,760 from JPY 1,940, respectively, after factoring in softer 2024 and 2025 outlooks, while afteryears’ growth rates are largely unchanged. Both SAS and GlobalWafers are undervalued, in our view, with SAS attractive to investors looking for dividends and GlobalWafers attractive to those timing cyclical lows of the wafer sector. We remain skeptical about Sumco’s long-term profitability as the firm’s dominant position on cutting-edge wafers does not translate into higher operating margins, but we find the stock fairly valued amid lower expectations of a recovery in 2025.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with more than 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the U.S. We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 7.5%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

We keep our fair value estimate of Sumco at JPY 1,940 per share after making minor changes to our model. While Sumco may see a larger recovery in the second half of 2024, we reckon the company is overvalued, as its ongoing expansion in Japan strains its balance sheet and it is letting its peer GlobalWafers have a monopoly in high-end wafers in the US from 2025.

We keep our Sumco fair value estimate at JPY 1,940, despite the disappointing outlook for the first half of 2024, as the firm echoes chipmakers’ comments as to a second-half recovery, and there is higher visibility on new foundries in Japan. Sumco is overvalued, in our opinion, as we believe the market discounted solvency risks following Sumco’s higher debt levels to fund its countercyclical expansion drive.

Sumco is the second-largest semiconductor-grade silicon wafer manufacturer in the world, with more than 20% market share. Its main sites are in Japan and Taiwan, and smaller ones in Indonesia and the U.S. We believe the company has turned too conservative in expansion after being devastated by previous overexpansion before the global financial crisis of 2007-09. Hence, we foresee Sumco’s five-year sales CAGR to be 7.5%, slightly underperforming the 8% of the semiconductor silicon wafer market due to market share loss to GlobalWafers. Like other semiconductor companies, Sumco benefits from demand growth in data centers, artificial intelligence, and automotive electronics.

We maintain our fair value estimates for Globalwafers, Sino-American Silicon, or SAS, Sumco, and National Silicon Industry Group, or NSIG, at TWD 590, TWD 227, JPY 1,940, and CNY 4.10, respectively, after the common message of a sluggish fourth quarter to be followed by a mild recovery in 2024. SAS is our top pick in the sector as they are best positioned to benefit from incremental semiconductor factories in the U.S. and profitability has been resilient despite the current downturn. NSIG is extremely overvalued in our view as its market capitalization is on par with its larger peers despite being only 25% of the size in terms of revenue, and it is unlikely to generate free cash flow before 2027.