Sumco’s Higher Debt Levels in the Near Term Justified by More Customers in Japan

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.