Summary of Newway Photomask Conference Call Company and Industry Overview - **Company**: Newway Photomask (688401.SS) - **Industry**: Semiconductor and Panel Manufacturing - **Core Products**: Photomasks used in semiconductor manufacturing and panel production, compatible with all generations of panel production lines from G2.5 to G11 [2][3] Key Insights from Management 1. **Growing Demand for Photomasks**: Management expressed optimism regarding increasing demand for photomasks in the semiconductor sector, aligning with expectations of rising capital expenditure (capex) in China’s semiconductor industry [1][3] 2. **Capex Growth Projections**: Anticipated growth in China’s semiconductor capex from **US$41 billion in 2024** to **US$43 billion and US$45 billion in 2025 and 2026**, respectively, driven by capacity expansions from foundries and memory players [1] 3. **Advanced Nodes Capacity Expansion**: Continuous capacity expansion is expected from local foundries in advanced nodes to support the development of local AI chips and the growing AI ecosystem [1] 4. **Localization Trend**: A rising trend towards localization in semiconductor production is anticipated, initially focusing on logic before expanding to memory over the next two years, which will benefit local suppliers of semiconductor production equipment (SPE) [1] 5. **Product Range and Precision**: The company primarily covers **130nm+ process nodes**, with capabilities extending to **90nm, 40nm, and 14nm**. Advanced nodes require higher precision and customization, leading to higher entry barriers for competitors [3] Capacity Expansion Plans - **Locations**: Management is committed to expanding capacity in **Chengdu and Xiamen**, focusing on photomasks for both semiconductors and Gen-8.6 OLED panels [3] - **Market Diversification**: The company aims for a balanced contribution from both semiconductor and panel markets in the long term [3] Investment Recommendations - **Buy Recommendations**: Analysts recommend buying stocks of companies involved in semiconductor production equipment, including Naura, AMEC, ACMR, Accotest, and Kematek, in light of the positive trends in the semiconductor industry [1] Additional Considerations - **Customization Needs**: Customers are increasingly requesting customized photomasks, necessitating close collaboration between Newway Photomask and its clients [3] - **Defect Tolerance**: Advanced nodes exhibit lower defect tolerance, which emphasizes the need for high precision in photomask manufacturing [3]

Summary of Photronics FY Conference Call Company Overview - **Company**: Photronics (NasdaqGS: PLAB) - **Market Cap**: Approximately $2.1-$2.2 billion as of the conference date [2][3] - **Fiscal Year End**: October - **Revenue Composition**: - Semiconductor Integrated Circuits (IC): 70%-75% of total revenue - Flat Panel Display (FPD): Remaining 25%-30% [4] Revenue Breakdown - **Geographic Revenue**: - Taiwan: 33% - China: 26% - FPD: 11% - IC: 15% [3] - **Customer Base**: Major customers include United Microelectronics (UMC), Samsung, and Semiconductor Manufacturing International Corporation (SMIC), each representing about 10% of revenue [4] Industry Trends - **Semiconductor Market Growth**: Expected to reach $1 trillion by 2030, with the photomask market historically at about 1% of the semiconductor market, potentially growing from $6-$6.5 billion to $10 billion over the next several years [12] - **Geopolitical Influences**: Increased diversification of semiconductor production locations due to geopolitical factors, with a shift towards reshoring in the U.S., Japan, Korea, and Europe [9] - **Outsourcing Trends**: Captive manufacturers like TSMC and Samsung are increasingly looking to outsource production, which benefits Photronics [10] Competitive Advantages - **Technological Edge**: Photronics has a competitive advantage in producing high-end photomasks, particularly for larger display sizes and advanced packaging opportunities [11][27] - **Operational Excellence**: The company has demonstrated consistent mid-30s% gross margins, a significant improvement from previous years [30] - **Global Footprint**: 11 cleanroom facilities worldwide, with significant expansions planned in the U.S. and Korea to enhance capacity and capabilities [14][15] Capital Expenditure and Investments - **CapEx Plans**: - $188 million spent in 2025, with a projected $330 million for 2026 due to expansions in the U.S. and Korea [29] - Expansion in Dallas, Texas, to support production down to 40 nanometers, with revenue expected to start in late fiscal 2026 [15] - **Joint Ventures**: Two joint ventures in Xiamen, China, and Taiwan, aimed at increasing earnings power and targeting high-end opportunities [19] Demand Environment - **High-End vs. Mainstream Demand**: - High-end demand is strengthening, particularly in Asia and the U.S., while mainstream markets remain sluggish [37][38] - Focus on high-end opportunities in China due to competitive pricing pressures from local players [48] Financial Health - **Cash Position**: $588 million in cash, with $422 million in joint ventures, indicating a focus on CapEx over share repurchases [31] - **Gross Margin Sustainability**: Consistent mid-30s% gross margins are expected to be maintained, driven by high-end product sales [30][33] Conclusion Photronics is well-positioned to capitalize on the growth of the semiconductor and flat panel display markets through strategic investments, a strong customer base, and a focus on high-end photomask production. The company is navigating geopolitical challenges and competitive pressures while maintaining a solid financial position and operational excellence.

Core Insights - Photronics, Inc. has appointed Jeff Catlin as Senior Vice President of Global Sales to lead a unified sales strategy [1][3] - Mr. Catlin has over 20 years of leadership experience in the semiconductor industry, with a focus on building global sales organizations [2] - The semiconductor industry is diversifying and reshoring production to the U.S., creating opportunities for Photronics to capture growth in advanced technologies [3] Company Overview - Photronics is a leading manufacturer of photomasks for integrated circuits (IC) and flat panel displays (FPD), with over 56 years of experience [4] - The company operates 11 manufacturing facilities strategically located in Asia, Europe, and North America [4]

Core Viewpoint - Photronics, Inc. has appointed Michelle Almeida as an independent director to its Board of Directors effective January 1, 2026, which is expected to enhance the Board's strategic capabilities [1][2]. Company Overview - Photronics is a leading global manufacturer of photomasks for integrated circuits (IC) and flat panel displays (FPD), utilizing high precision quartz plates that contain microscopic images of electronic circuits [2]. - The company has been a trusted supplier in the photomask industry for over 50 years, having been founded in 1969 [2]. - Photronics operates 11 strategically located manufacturing facilities across Asia, Europe, and North America [2].

Market Outlook - The S&P 500 and Nasdaq are being pushed towards all-time highs as the Q4 earnings season approaches [1] - The earnings outlook for 2026 is strong, with growth expected across nearly all sectors of the economy [1] - The U.S. Federal Reserve is anticipated to cut interest rates again in 2026, contributing to a bullish market environment [1] Investment Strategy - Investors are encouraged to focus on best-in-class stocks, particularly those with a Zacks Rank 1 (Strong Buy) [2] - A Zacks screen can help identify top-ranked stocks from over 200 highly-rated companies [3] Stock Screening Criteria - The screening parameters include a Zacks Rank of 1, positive Q1 estimate revisions over the last four weeks, and top broker rating changes [4][5][6][7] Featured Stock: Photronics (PLAB) - Photronics is highlighted as a strong buy, being the only pure-play photomask company in the U.S. [7][10] - PLAB's stock surged 50% in the past month, reaching its highest levels in approximately 25 years [8][14] - The company is projected to grow its FY26 earnings by 9% and over 10% in the following year [11] - PLAB trades 30% below its average Zacks price target and at a nearly 50% discount compared to the Zacks Tech sector [14]

Group 1: Company Overview - Photronics, Inc. (NASDAQ: PLAB) is recognized as one of the 10 most undervalued semiconductor stocks to invest in, following a strong earnings report and consecutive analyst upgrades [1] - The company specializes in manufacturing semiconductor chips and provides photomasks that contain microscopic images of the circuits printed on these chips [3] Group 2: Analyst Ratings and Price Targets - D.A. Davidson analyst Thomas Diffely maintained a Buy rating on Photronics and raised the price target from $30 to $45 [1] - Craig-Hallum analyst Christian Schwab also assigned a Buy rating with a price target of $42 on the same day [1] Group 3: Market Dynamics and Company Strategy - The company is experiencing strong momentum, with its stock price doubling in less than a month due to favorable market conditions [2] - Management indicated that they prioritize production for higher-margin products, specifically 22nm and 28nm technologies, to mitigate pricing pressures [2] - Customers have adapted to supply chain disruptions caused by tariffs and geopolitical issues, leading to improved order planning [3]

Semiconductor Industry Overview - The global probe card market is projected to reach $2.656 billion in revenue in 2024, with a CAGR of 7.45% from 2025 to 2031 [5] - The global MEMS probe card market is expected to reach $1.987 billion in revenue in 2024, accounting for 74.8% of the total probe card market [8] - The global photomask market is anticipated to reach $6.238 billion in revenue in 2024, with a CAGR of 4.63% from 2025 to 2031 [15] Probe Card Market Rankings - FormFactor leads the global semiconductor probe card market with a revenue of $625.96 million in 2024, representing a 25.72% year-over-year growth and a market share of 23.57% [11] - Technoprobe S.p.A. follows closely with a revenue of $613.51 million in 2024, showing a year-over-year growth of 20.89% and a market share of 23.10% [11] - MPI Corporation experienced significant growth of 54.55%, reaching $223.18 million in revenue in 2024, with a market share of 8.40% [11] Photomask Market Rankings - Photronics is the leading company in the photomask market with a revenue of $866.95 million in 2024, although it shows a decline of 2.82% year-over-year [18] - Toppan ranks second with a revenue of $752.09 million, reflecting a growth of 3.15% [18] - The "Other" category in the photomask market accounts for a significant share, with revenues increasing from $2,526.23 million in 2023 to $2,709.28 million in 2024, a growth of 7.25% [18] Market Growth Projections - The semiconductor industry is expected to see continued growth, with the probe card market and photomask market both showing positive trends in revenue and market share [5][15] - The overall semiconductor consumables market is projected to expand, driven by advancements in technology and increasing demand across various applications [20]

Core Insights - Photronics, Inc. is a key player in the semiconductor equipment industry, specializing in photomask technologies essential for semiconductor manufacturing [1] Financial Performance - The company reported an EPS of $0.60 for the quarter ending December 10, 2025, exceeding the estimated $0.47, resulting in a 27.66% earnings surprise [2] - Revenue for the quarter was approximately $215.77 million, surpassing the estimated $204.54 million by 4.45%, although it represents a slight decrease from $222.63 million in the same period last year [3] Market Position and Strategy - The strong performance in the fourth quarter, particularly in the U.S., is supported by positive forecasts from U.S. customers, which align with the company's investment plans in the region [4] - Expansion in Korea is expected to diversify the geographic revenue mix and enhance involvement in leading-edge chip designs [4] Financial Metrics - The company has a P/E ratio of approximately 15.17, indicating market valuation of its earnings, and a price-to-sales ratio of about 2.57 [5] - A low debt-to-equity ratio of nearly 0.000015 reflects minimal reliance on debt financing, showcasing a strong financial position [5]

Financial Data and Key Metrics Changes - The company reported fourth quarter revenue of $216 million, exceeding expectations and increasing 3% sequentially, but declining 3% year-over-year [4][13] - Non-GAAP diluted EPS was $0.60 per share, surpassing guidance [4][17] - Gross margin improved to 35%, and operating margin was 24%, both exceeding guidance [15][19] Business Line Data and Key Metrics Changes - Integrated Circuit (IC) revenue was $157 million, representing a 4% year-over-year decline, but high-end IC shipments reached a record 42% of total IC revenue [11][13] - Flat Panel Display (FPD) revenue was $58 million, declining 1% year-over-year due to order timing, but demand is expected to remain strong [12][14] Market Data and Key Metrics Changes - The high-end market remains strong, driven by investments in hyperscale data centers for AI rollouts, while the mainstream IC market is stabilizing but remains soft [10][11] - The company is experiencing strong demand in the U.S., which now represents 20% of total revenue, benefiting from reshoring efforts [13][11] Company Strategy and Development Direction - The company is executing strategic geographic expansions at existing facilities to enhance revenue contributions and diversify geographic revenue mix [5][6] - Investments are aligned with industry trends such as advanced node migration and regionalization, with a focus on higher-end nodes in the U.S. and Korea [6][8] - The company plans to increase capital expenditures to approximately $330 million in fiscal 2026 to drive future organic growth [19][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the high-end market's sustainability, supported by robust order patterns from existing core customers [10][58] - The company anticipates continued growth in high-end IC demand and is well-positioned to capitalize on outsourcing trends from captive manufacturers [50][49] Other Important Information - The company recognized a $16.8 million benefit from the reversal of a historical U.S. tax loss valuation allowance, reflecting improved performance and outlook [16][17] - Total cash and short-term investments increased to $588 million, including $422 million held in joint ventures [19] Q&A Session Summary Question: Market share relative to competitors - Management indicated that while a competitor has a larger market share in IC, Photronics is comparable in FPD, and they expect to capture more high-end shares due to growing U.S. demand [25][29] Question: Mainstream business and pricing competition - Management noted that the mainstream market in China is facing competition from local mask houses, but they are focusing on high-value product mixes to differentiate themselves [31][38] Question: G8.6 adoption in flat panel displays - Management expects gradual increases in G8.6 revenue contributions starting in fiscal 2026, as adoption expands in various applications [40][39] Question: Revenue potential from Allen, Texas facility - Management anticipates incremental revenue and profitability from the Allen facility, with revenue expected to start in the second half of fiscal 2026 [44][45] Question: Outsourcing trends from captive manufacturers - Management observed an increase in captives looking for outsourcing opportunities, which is expected to benefit Photronics due to its positioning in key regions [49][50]

Financial Data and Key Metrics Changes - The company reported Q4 revenue of $216 million, a 3% sequential increase but a 3% decline year-over-year [3][10] - Non-GAAP diluted EPS was $0.60 per share, exceeding guidance, while GAAP EPS attributable to shareholders was $1.07 per share, benefiting from a $16.8 million tax valuation allowance reversal [11][12] - Gross margin improved to 35%, and operating margin was 24%, both exceeding expectations [11] Business Line Data and Key Metrics Changes - Integrated Circuit (IC) revenue was $157 million, down 4% year-over-year, with high-end IC shipments reaching a record 42% of total IC revenue [10][8] - Flat Panel Display (FPD) revenue was $58 million, reflecting a 1% decline year-over-year due to order timing, but demand is expected to remain strong [11][8] Market Data and Key Metrics Changes - The high-end market remains strong, driven by investments in hyperscale data centers for AI, while the mainstream IC market is stabilizing after a period of softness [7][10] - The U.S. market showed particularly strong demand, validating the company's expansion initiatives [10][8] Company Strategy and Development Direction - The company is executing strategic geographic expansions at existing facilities to enhance revenue contributions and diversify geographic revenue mix [3][4] - Investments are aligned with two industry trends: advanced node migration and regionalization, with a focus on higher-end nodes in the U.S. and Korea [4][5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capturing more high-end market share due to reshoring efforts in the U.S. and strong demand for trusted products [22][23] - The company anticipates fiscal Q1 revenue between $217 million and $225 million, with operating margins between 23% and 25% [15] Other Important Information - The company plans to invest approximately $330 million in CapEx for fiscal 2026, focusing on organic growth and strategic opportunities [13][12] - Cash and short-term investments increased to $588 million, including $422 million held in joint ventures [13] Q&A Session Summary Question: Market share relative to competitors - Management indicated that while a competitor has a larger market share in IC, both companies are about the same size when considering FPD, where the competitor does not participate [19][22] Question: Competitive environment and mainstream business - Management noted that the mainstream market in China is facing competition from local mask houses, but the company is focusing on high-value products and key customers to differentiate itself [24][29] Question: Outsourcing trends and pricing - Management observed an increase in outsourcing opportunities from captive mask makers, particularly for high-end products, which generally command higher ASPs [42][39] Question: Long-term planning discussions with customers - Management reported an increase in long-term planning discussions with customers, indicating improved sentiment and order planning [43][45] Question: Revenue potential from new capacity - Management expects revenue from the Allen, Texas facility to begin in the second half of fiscal 2026, with incremental revenue and profitability anticipated [34][35]