12-Inch Wafer Expansion Will Fuel Global Semiconductor Momentum

Key Takeaways

• Ongoing global expansion and specialty product growth position GlobalWafers to benefit from rising AI, high-performance computing, and green energy demand, boosting future margins.
  
• Geographically diverse manufacturing and government subsidies enhance revenue stability, reduce costs, and strengthen resilience against trade and geopolitical risks.
  
• Sustained market pressures, rising costs, and currency volatility threaten profitability, while dependence on major contracts exposes the company to heightened revenue and earnings instability.

Catalysts

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

• The company is nearing completion of a major global capacity expansion, particularly in 12-inch wafers aligned with strong demand from AI, high-performance computing, and advanced processes (below 7nm/2nm). As these new facilities ramp up and transition from the sample/qualification stage to mass production, they are expected to materially increase revenue and improve gross/operating margins beginning late 2025 and into 2026.
  
• Inventory corrections across the semiconductor ecosystem are largely complete, with customers showing optimism and inventory levels normalizing. This is expected to drive a recovery in wafer demand and order volumes, supporting higher capacity utilization rates-especially already strong for 12-inch and specialty wafers-which should positively impact revenue and operating leverage.
  
• The global push toward nearsourcing and supply chain localization-exacerbated by trade/tariff/geopolitical risks-is benefiting GlobalWafers' geographically diverse manufacturing footprint. This allows the company to flexibly allocate production to avoid tariffs, capture local incentives/subsidies, and win long-term supply contracts, enhancing both revenue stability and net margin resilience.
  
• Specialty wafers (SOI, SiC, GaN) and other value-added products are expected to grow 10–15% CAGR, driven by growth in green energy applications, automotive electrification, and differentiated high-end markets such as power electronics and AI hardware. Increasing mix of these higher-margin products will raise average selling prices and expand gross/net margins over the coming years.
  
• U.S. government incentives (CHIPS Act, AMIC direct payment) and incoming government subsidies in other countries will materially offset expansion costs and capital intensity, lowering effective CapEx and reducing depreciation drag on earnings. As subsidies are recognized, and as expansion-related costs decline post-2025, earnings and margins should recover and accelerate, supporting future EPS and return on equity.

GlobalWafers Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GlobalWafers's revenue will grow by 8.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.3% today to 17.3% in 3 years time.
• Analysts expect earnings to reach NT$14.2 billion (and earnings per share of NT$29.72) by about September 2028, up from NT$6.6 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting NT$15.9 billion in earnings, and the most bearish expecting NT$10.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 18.4x on those 2028 earnings, down from 27.1x today. This future PE is lower than the current PE for the TW Semiconductor industry at 31.1x.
• 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 10.63%, as per the Simply Wall St company report.

GlobalWafers Future Earnings Per Share Growth

Risks

• Intensified price erosion in the silicon carbide (SiC) wafer segment-down 40–50% over the past two years-with continued market oversupply and weak demand could significantly depress GlobalWafers' revenues and gross margins, especially given the company's current strategy to prioritize cost reduction over shipment volume in this area.
  
• Uncertainty around global tariffs, particularly the U.S. Section 232 investigation and possible higher tariffs on Taiwanese wafer imports compared to competitors, could erode competitiveness in key markets and add cost pressure, impacting net margins and revenue growth.
  
• Ongoing FX headwinds-mainly NT dollar appreciation versus the U.S. dollar and other global currencies-have already led to notable foreign exchange losses and will continue to negatively affect reported revenues, operating income, and shareholder equity if currency volatility persists.
  
• Difficulty in passing increased energy and material costs onto customers in a subdued demand environment means GlobalWafers may have to absorb much of the inflationary input costs, risking further contraction in operating and net profit margins.
  
• Heavy reliance on long-term agreements (LTAs) for more than half of revenue suggests vulnerability if key customers renegotiate terms or reduce orders, potentially resulting in sharper revenue and earnings volatility should the industry face another downturn or further consolidation.

Valuation

• The analysts have a consensus price target of NT$405.808 for GlobalWafers based on their expectations of its future earnings growth, profit margins and other risk factors. 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 analyst's consensus, you'd need to believe that by 2028, revenues will be NT$82.2 billion, earnings will come to NT$14.2 billion, and it would be trading on a PE ratio of 18.4x, assuming you use a discount rate of 10.6%.
• Given the current share price of NT$372.0, the analyst price target of NT$405.81 is 8.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.