Summary of GlobalWafers Conference Call Company Overview - **Company**: GlobalWafers (6488 TT) - **Industry**: Semiconductor Wafers Key Financial Results (2Q25) - **Revenue**: NT$16,008 million, up 2.7% QoQ and 4.5% YoY [5] - **Gross Profit**: NT$4,123 million, down 16.7% YoY [5] - **Gross Margin (GM%)**: 25.8%, down from 32.3% YoY [5] - **Operating Profit**: NT$2,438 million, down 27.6% YoY [5] - **Net Income**: NT$1,682 million, down 41.6% YoY [5] - **Earnings Per Share (EPS)**: NT$3.52, down 41.5% YoY [5] Core Insights - **Market Outlook**: GWC anticipates some half-on-half (HoH) sales growth in 2H25 and year-on-year (YoY) growth in 2026 in US dollar terms [3][10] - **Capital Expenditure (Capex)**: Expected to remain similar to 2024 levels but significantly reduced in 2026 [3] - **Long-term Growth**: Despite a weaker semiconductor market, GWC expects a return to positive sales growth in 2025 and acceleration in 2026 [4] - **Gross Profit Margin (GPM)**: Expected to remain weaker than previous up-cycles due to higher depreciation, utility costs, and foreign exchange headwinds [4][10] Investment Ratings and Target Price - **Current Rating**: Outperform [4] - **Target Price**: NT$453.00, based on a 12x multiple of 2026E EPS [4][8] Additional Considerations - **Customer Inventory**: Reported to be down, with strong demand for leading-edge nodes [10] - **Cost Management**: The company is attempting to pass on cost increases to customers [10] - **US Market Entry**: GWC received its first grant/subsidy in the US in 2Q25, which may benefit from TSMC's aggressive long-term capex plans in the US [10] - **Prepayments**: Continue to decline sequentially due to an oversupply situation [10] Financial Projections - **Revenue Growth**: Expected to recover with a projected growth of 9.5% in 2025 and 19.4% in 2026 [9] - **Net Debt to Equity Ratio**: Expected to rise to 49.4% in 2025 [9] - **Return on Equity (ROE)**: Projected to improve to 15.9% by 2026 [9] Conclusion GlobalWafers is navigating a challenging semiconductor market but is positioned for potential growth in the coming years, supported by strategic cost management and market demand dynamics. The company's long-term outlook remains positive despite short-term challenges.

Financial Data and Key Metrics Changes - Total net sales for Q3 2024 reached €7.5 billion, exceeding guidance due to increased DPV system sales and higher installed base management sales [6] - Net system sales amounted to €5.9 billion, comprising €2.1 billion from EUV sales and €3.8 billion from non-EUV sales [6] - Gross margin for the quarter was 50.8%, while net income was €2.1 billion, representing 27.8% of total net sales, resulting in an EPS of €5.28 [7][8] - Free cash flow improved to €534 million, although pressure remains due to low order intake and high inventory levels [8] - Q3 net system bookings totaled €2.6 billion, with a backlog exceeding €36 billion at the end of the quarter [10] Business Line Data and Key Metrics Changes - Installed base management sales for Q3 were €1.54 billion, driven by higher service and upgrade revenue [7] - Net system bookings were balanced between memory (54%) and logic (46%) [10] Market Data and Key Metrics Changes - The recovery in traditional end markets is slow, with customers remaining cautious [10] - The company expects China business to normalize to about 20% of total revenue, reflecting a return to historical levels [20][21] Company Strategy and Development Direction - The company continues to focus on advancing EUV technology, with significant improvements in throughput and performance expected from new models [14][16] - Long-term growth drivers in semiconductor markets remain strong, particularly in AI and energy transition applications [23][24] - The company plans to build capacity to meet future demand, despite current market softness [52] Management's Comments on Operating Environment and Future Outlook - Management noted that while AI is a key driver for industry recovery, other segments are recovering more slowly than anticipated, extending recovery into 2025 [17][18] - The company has adjusted its 2025 revenue expectations to the lower half of the previously provided range, anticipating €30 billion to €35 billion [20][21] - Management expressed cautious optimism regarding customer demand, particularly in light of competitive dynamics and market uncertainties [60][61] Other Important Information - The company declared a second quarterly interim dividend of €1.52 per ordinary share, payable on November 7, 2024 [12] - R&D expenses for Q4 are expected to be around €1.09 billion, with SG&A expenses at approximately €300 million [12] Q&A Session Summary Question: What is driving the normalization of China demand? - Management indicated that normalization is due to a combination of backlog adjustments and cautious views on export controls, expecting China to represent about 20% of total sales [27][28] Question: How does the 2025 gross margin guidance reflect changes in immersion shipments? - Management clarified that immersion expectations have not dramatically changed since the 2022 Investor Day, but the overall mix and volume of EUV units have significantly impacted gross margin expectations [31][34] Question: How much of the EUV shipment cuts will spill over to 2026? - Management noted that customer feedback indicates tools are being pushed out, which could mathematically lead to some orders moving into 2026 [38][39] Question: What is the outlook for installed base management growth in 2025? - Management expects healthy double-digit growth in installed base management, driven by service and upgrade revenues [45] Question: How is the company managing capacity targets in light of updated 2025 expectations? - The company is executing on long lead time items while slowing down short-term investments due to current market softness, preparing for future demand increases [52][53] Question: What is the expected impact of AI on future demand? - Management remains optimistic about AI driving demand, particularly in server markets, and anticipates developments in this area in the coming months [68][70]