AI And EV Demand Will Spur Capacity Investment

Key Takeaways

• Expansion into North America and Europe, backed by strong customer commitments and long-term agreements, supports resilient and predictable revenue growth.
  
• Focus on high-value specialty wafers and advanced technology nodes positions the company for higher margins and strong demand from AI and electrification markets.
  
• Rising costs, intensifying competition, and disruptive new technologies threaten profitability, while expansion and supply chain shifts increase financial and market risks for GlobalWafers.

Catalysts

Researches, develops, designs, manufactures and sells semiconductor ingots and wafers in Taiwan and internationally.

• While analysts broadly agree that GlobalWafers' North American and European expansions will enhance supply chain resilience and reduce tariff exposure, the market may be significantly underestimating the revenue and net margin upside once new capacity ramps, as 80% of US capacity is already secured under long-term agreement and demand is strong enough to consider accelerating additional capacity investment.
  
• The analyst consensus highlights strong customer commitment via long-term agreements (LTAs), but with more than half of total revenue already tied to LTAs and major customers actively seeking deeper collaboration, GlobalWafers stands to meaningfully outpace peers in stability of revenue growth and earnings predictability, especially as secular trends like AI and EV adoption accelerate wafer demand.
  
• The company's shift toward high-value 12-inch and specialty wafer (SOI, GaN, FZ) production is set to drive a meaningful rise in blended average selling prices and gross margins, given that specialty products are expected to grow up to fifteen percent annually and are in high demand for advanced AI, HPC, and electrification applications.
  
• GlobalWafers' position as a key supplier in mass production for advanced nodes under 7 nanometers, not merely at the qualification stage, enables the company to fully leverage the boom in AI and cloud infrastructure, potentially capturing greater market share and generating industry-leading revenue growth as logic and memory demand rises.
  
• With its aggressive capital discipline, upcoming government subsidies, tax credits (including the move to a thirty-five percent credit in the US from 2026), and a sharp decline in capital expenditures and depreciation post-expansion, the company is poised for a step-change increase in free cash flow and return on equity, sharply improving bottom-line earnings from 2026 onward.

GlobalWafers Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on GlobalWafers compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming GlobalWafers's revenue will grow by 14.3% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.3% today to 18.6% in 3 years time.
• The bullish analysts expect earnings to reach NT$17.5 billion (and earnings per share of NT$36.55) by about August 2028, up from NT$7.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 18.1x on those 2028 earnings, down from 23.1x today. This future PE is lower than the current PE for the TW Semiconductor industry at 25.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.84%, as per the Simply Wall St company report.

GlobalWafers Future Earnings Per Share Growth

Risks

• Persistent geopolitical fragmentation, tariff uncertainty, and currency fluctuations increase operational complexity and may drive up costs for GlobalWafers' global manufacturing, resulting in greater pressure on both gross and operating margins.
  
• Growing competition from Chinese wafer manufacturers and intense price erosion-especially apparent in the silicon carbide segment-exacerbate pricing pressure, leading to declining average selling prices and margin compression for GlobalWafers and adversely impacting net profits.
  
• The risk of technological disruption from advanced semiconductor materials such as compound semiconductors and graphene could reduce demand for traditional silicon wafers and shrink GlobalWafers' addressable market, limiting long-term revenue growth potential.
  
• The company's aggressive global expansion involves substantial capital expenditures and has already led to higher depreciation and asset write-downs, putting downward pressure on net earnings and increasing the risk of financial strain in the event of a cyclical downturn or delayed demand recovery.
  
• Structural trends toward vertical integration among major semiconductor companies may result in a decline of third-party wafer sourcing, threatening GlobalWafers' core revenue streams as more customers internalize their wafer supply chains.

Valuation

• The assumed bullish price target for GlobalWafers is NT$488.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of GlobalWafers's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NT$488.0, and the most bearish reporting a price target of just NT$290.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be NT$94.3 billion, earnings will come to NT$17.5 billion, and it would be trading on a PE ratio of 18.1x, assuming you use a discount rate of 10.8%.
  
• Given the current share price of NT$375.0, the bullish analyst price target of NT$488.0 is 23.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.