Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

<ul>
<li>The GlobalWafers announced the deal to merge Siltronic did not get the approval by Germany government this morning. We maintain our Target Price for GlobalWafers doesn’t change at NT$880~960.
</li>
<li>The GlobalWafers points out that the results will not influence business activities, and the European market remains the importance for GlobalWafers.</li>
<li>
Comparing to 20s years ago, we think the semiconductor market has experienced a dramatic changes already.</li>
</ul>


The GlobalWafers announced the deal to merge Siltronic did not get the approval by Germany government this morning. We maintain our Target Price for GlobalWafers doesn’t change at NT$880~960.

The GlobalWafers points out that the results will not influence business activities, and the European market remains the importance for GlobalWafers.

Comparing to 20s years ago, we think the semiconductor market has experienced a dramatic changes already.


GlobalWafers (6488.TT): Maintain Target Price at NT$880-960 for Siltronic Mergence Failed

<ul>
<li>To merge with Siltronic has reached to 95% in probability for GlobalWafers now. Our target price for GlobalWafers doesn’t change at NT$880~960 and $1,200 if it finally past.  </li>
<li>Chinese government requested that GlobalWafers has to spin off its Denmark’s subsidiary 8” float zone (FZ) wafer within no more than 9 months at most.</li>
<li>Currently, Siltronic is delivering a GM of 25.6~32% during 1Q~3Q in 2021, which is competitive to Sumco, Shin Etsu. However, it shall be able to improve the GM further.</li>
</ul>


To merge with Siltronic has reached to 95% in probability for GlobalWafers now. Our target price for GlobalWafers doesn’t change at NT$880~960 and $1,200 if it finally past.  
Chinese government requested that GlobalWafers has to spin off its Denmark’s subsidiary 8” float zone (FZ) wafer within no more than 9 months at most.
Currently, Siltronic is delivering a GM of 25.6~32% during 1Q~3Q in 2021, which is competitive to Sumco, Shin Etsu. However, it shall be able to improve the GM further.


GlobalWafers (6488.TT): The Last Step to Go for Siltronic (WAF GR) Mergence

<ul>
<li>We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.</li>
<li>This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.</li>
<li>The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.</li>
</ul>


We think the chance for GlobalWafers mergence case to have the final approval could be high. Even if it finally failed, the raw wafer supply should be full until 2024.
This deal was granted by seven governments and organizations already. And it is still under review of Chinese and Japanese governments.
The deal will not change the worldwide raw wafer supply status, especially such supply tightness. To our understanding, the secrets to achieve success are cost reduction and resource management mostly.


Globalwafers (6488.TT): Stock Price Can Go Higher Even If Siltronic Mergence Case Failed

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>Both Siltronic and Globalwafers expected the transaction to be completed in H2 2021, which has not yet happened. The closing remains subject to receipt of further regulatory approvals.</li>
<li>The deal has to be renegotiated if China and Germany do not approve the deal by 31 January (although Siltronic expects this to happen), in the context of strong growth.</li>
<li>
Gross spread at the closing share price on 28 December is 3.1%. Recommendation is long WAF GR. There is the possibility of further upside in case of terms renegotiation.</li>
</ul>


Both Siltronic and Globalwafers expected the transaction to be completed in H2 2021, which has not yet happened. The closing remains subject to receipt of further regulatory approvals.
The deal has to be renegotiated if China and Germany do not approve the deal by 31 January (although Siltronic expects this to happen), in the context of strong growth.

Gross spread at the closing share price on 28 December is 3.1%. Recommendation is long WAF GR. There is the possibility of further upside in case of terms renegotiation.


Globalwafers/Siltronic: Possibility of Terms Renegotiation

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Year-on-year sales and profit comparisons turned positive in 2Q of FY Dec-21 and management is guiding for further improvement in 3Q. But the share price has dropped 23% since mid-July,Potential reasons for the sell-off include concern over the resurgent pandemic, price competition, an over-heated semiconductor market and plans for new green field investment, which could limit profitability.On the plus side, management reports that contract prices are firm, spot prices have started to rise and customer inventory has been declining. Supplies of both 300mm and 200mm silicon wafers remain tight.Taking an optimistic view of logic and memory demand over the next few years, we recommend buying into the current weakness.

Year-on-year sales and profit comparisons turned positive in 2Q of FY Dec-21 and management is guiding for further improvement in 3Q. But the share price has dropped 23% since mid-July,Potential reasons for the sell-off include concern over the resurgent pandemic, price competition, an over-heated semiconductor market and plans for new green field investment, which could limit profitability.On the plus side, management reports that contract prices are firm, spot prices have started to rise and customer inventory has been declining. Supplies of both 300mm and 200mm silicon wafers remain tight.Taking an optimistic view of logic and memory demand over the next few years, we recommend buying into the current weakness.

Taiwan

Globalwafers Co., Ltd. specializes in silicon wafer manufacturing and also provides solar wafers and crystal rods. The Company possesses a complete production line from ingot growth, slicing, etching, diffusion, polishing to epitaxy. Their products include Epi wafers, polished wafers, etched wafers, ultra thin wafers and deep diffusion wafers.

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Globalwafers (6488 TT)