Company Reports

We retain our fair value estimates on Taiwanese technology companies in our coverage following a powerful earthquake and multiple strong aftershocks near the eastern city of Hualien on April 3, namely: Advantech at TWD 337; Delta Electronics at TWD 331; GlobalWafers at TWD 710; Largan at TWD 3,000; MediaTek at TWD 1,400; Sino-American Silicon at TWD 281; Taiwan Semiconductor Manufacturing Co at TWD 950 (USD 151 per ADR); United Microelectronics Corp at TWD 70; and Win Semiconductors at TWD 245 per share.

After raising our long-term forecasts, we lift our respective fair value estimates for GlobalWafers and its parent Sino-American Silicon, or SAS, to TWD 710 per share from TWD 590, and to TWD 281 from TWD 227. Our long-term view is more bullish as the group has a clearer plan for financing its US expansion—making it more likely to enjoy a monopoly in US advanced wafer supply while rivals balk at having new US sites. SAS is undervalued and is our favorite in the sector, while GlobalWafers is fairly valued, in our view. We think the market remains worried about the current inventory correction and has overlooked the prospects regarding artificial intelligence beyond the cutting edge. The group’s expansion in the US and Japan remains on schedule.

GlobalWafers grew to become the third-largest semiconductor silicon wafer producer via more aggressive expansion than peers. It is the only wafer producer to operate factories in Europe, Asia, and the US. Such a diversified footprint is profitable due to a combination of having customers in all three regions and the firm’s track record to acquire distressed competitors during previous industry troughs. We view GlobalWafers’ new plant in Texas as a continuation of its boldness, and it will offer faster and more reliable supply to customers like Samsung and Texas Instruments.

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.

We maintain our fair value estimates for Globalwafers and its parent Sino-American Silicon Products, or SAS, at TWD 590 and TWD 227 per share, respectively. Both names are undervalued and still our picks in the sector. We think the market is worried about pricing pressure amid the current downturn and has overly discounted the prospects of secular growth in semiconductors. We view the group’s expansion in silicon wafer operations more favorably as Globalwafers’ new plant is in the United States where competing expansions are scarce.

We initiate coverage on semiconductor silicon wafer producers Sumco, GlobalWafers, Sino-American Silicon Products, or SAS, and National Silicon Industry Group, or NSIG, with fair value estimates of JPY 2,220, TWD 590, TWD 227, and CNY 5.50 per share, respectively. GlobalWafers and SAS are the most undervalued relative to our fair value estimates, and hence our picks in the sector. We think the market is worried about pricing pressure amid the current downturn and has discounted the prospects of secular growth in semiconductors. Conversely, NSIG is grossly overvalued to our fair value estimate, with a market cap larger than GlobalWafers today despite only having one-fourth of GlobalWafers' market share. We think the market assumes NSIG will unseat GlobalWafers as the third-largest wafer producer in 10 years’ time despite being technologically behind.

GlobalWafers grew to become the third-largest semiconductor silicon wafer producer via more aggressive expansion than peers. It is the only wafer producer to operate factories in Europe, Asia, and the U.S. Such a diversified footprint is profitable due to a combination of having customers in all three regions and the firm’s track record to acquire distressed competitors during previous industry troughs. We view GlobalWafers’ new plant in Texas as a continuation of its boldness, and it will offer faster and more reliable supply to customers like Samsung and Texas Instruments.