UBS Global Silicon Wafers: Substantial Price Increases Are Necessary to Ensure Sufficient Wafer Supply in Two Years
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UBS expects silicon wafer supply and demand to tighten across all sizes over the next two years, with conditions growing tighter from 2027 onward. It raised 2026 demand growth forecasts for 12-inch and 8-inch wafers to 11% each (from 9% and 8%) on healthier customer inventories and stronger restocking, and lifted utilization forecasts to 84%/91%/99% for 12-inch over 2026–28 (previously 82%/88%/94%) and 80%/90%/97% for 8-inch. Producers remain expansion-shy after the 2023–25 downcycle — current operating margin of 12.3% and ROE of 6.8% compare with 18.3% and 19.1% in 2017–22 — and sector capex has fallen from US$5,621mn in 2023 to US$4,844mn in 2024, US$2,755mn in 2025 and US$1,806mn expected in 2026, including just US$189mn at GlobalWafers. Without materially higher prices to incentivize expansion, severe shortages from 2028 could constrain industry growth. Chinese competition looks manageable: NSIG, China's largest wafer maker, sells 12-inch wafers at an ASP of just US$54 versus an industry US$100–120, with most shipments still non-production wafers, while recertification requirements and performance gaps limit adoption by overseas customers. UBS rates Shin-Etsu, GlobalWafers and Siltronic Buy and SUMCO Neutral. GlobalWafers' target was cut from NT$2,000 to NT$1,750 (forward P/B 8.5x to 7.5x; 2026E EPS -7%, 2027/28E -14%), though sales growth should accelerate in 4Q26 and 2027; Siltronic's target was raised from €105 to €120.
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