GlobalWafers Co Ltd: Expect 12-inch spot price and new contract to rise from 2H26; OW

Core Conclusion

GlobalWafers is exiting a cyclical trough with 12-inch silicon wafer prices poised to rise from 2H26, driven by full capacity utilization and a broader semiconductor demand recovery. The shift to flexible-pricing long-term agreements (LTAs) and the ramp of advanced products (12-inch SOI, GaN, SiC) should drive revenue and margin expansion. At current valuation of 26.7x 2026e P/E, the market underappreciates the earnings leverage from price hikes and product mix improvement.

What the Market Is Underappreciating

The market underestimates both the timing and magnitude of 12-inch wafer price increases from 2H26, the earnings leverage from new LTA structures (fixed volume with flexible pricing), and the contribution of next-generation products (12-inch SOI, GaN, SiC) to mix improvement. These factors together imply upward revision potential to consensus EPS beyond the current 2026e NT$24.92 and 2027e NT$34.65.

Evidence Chain

12-inch capacity is fully utilized, supporting price hikes from 2H26.
Management confirmed that 12-inch capacity is fully utilized. With broader semiconductor demand recovering, management expects 12-inch spot and new contract prices to rise from 2H26 to pass through higher production costs.
Investment implication: The pricing inflection point is within 6–12 months, directly boosting revenue and margins.

1Q26 revenue and EPS were in line, but gross margin missed due to cost ramp.
Revenue of NT$13,985 mn came within 0.2% of estimate; EPS of NT$3.97 was 3.2% below. Gross margin of 20.8% missed the 26.0% estimate by 520 bps, reflecting higher production costs and new capacity ramp.
Investment implication: The margin miss is a transitory cost headwind; as pricing recovers and utilization stays high, margins should normalize.

LTA fulfillment is improving, and new contracts will feature flexible pricing.
LTA fulfillment has improved, suggesting better pricing in 1H26. GWC is negotiating new LTAs but is not inclined to lock multi-year terms at current market pricing; instead, it is pursuing fixed volume with flexible pricing to protect margins against rising costs.
Investment implication: Flexible pricing reduces downside risk from locked-in low prices and improves earnings predictability.

Advanced products are gaining traction and will boost product mix.
12-inch SOI has entered mass production; GaN is fully utilized; 12-inch SiC remains in customer qualification. These new products are listed among key drivers for 2026 revenue growth.
Investment implication: Higher-value products shift the product mix upward, supporting ASP and margin expansion beyond cyclical recovery.

Management views 1Q26 as the trough, with recovery underway.
Management confirmed that 1Q26 is the trough. Combined with new products, new capacity, and rising wafer ASP (higher LTA mix and potential price hikes), 2026 revenue is expected to continue growing.
Investment implication: Earnings revisions should turn positive as the cycle inflects.

Key Disagreements & Risks

• Demand reversal: Global semiconductor demand recovery stalls or reverses, reducing wafer demand and delaying price hikes.
• Supply overhang: Increased wafer supply from competitors or new projects depresses pricing and margins.
• Cost pass-through failure: Higher production costs are not fully passed through if LTA pricing remains locked at low levels.
• Advanced product delays: Customer qualification delays for 12-inch SiC or SOI dampen the advanced product ramp.

Valuation & Trade Implications

At NT$666, the stock trades at 26.7x 2026e P/E and 13.0x 2026e EV/EBITDA. The residual income model (11.0% CoE, 10% intermediate growth, 4% terminal growth) yields a target of NT$588, implying 12% downside to current price. However, the Overweight rating reflects conviction that the cycle trough is behind and that earnings revisions (2026e EPS NT$24.92, 2027e NT$34.65) have room to rise as pricing power returns. Key catalysts: 2H26 price hike announcements, LTA renewals with better terms, and sustained capacity utilization.

Appendix Data Summary

Exhibit 1: GWC 1Q26 Earnings Review