What does the company do?
Taiwan-listed GlobalWafers is the country’s largest silicon wafer maker and the third largest worldwide. A key material in the semiconductor industry, GlobalWafer’s products feed into the supply chains of technology leaders like TSMC, Samsung Electronics and Intel, giving the company exposure to a wide suite of structural trends globally such as increasing 5G adoption, rising demand for higher computing power and the acceleration of digitalisation and automation across various industries.
Why do we like the investment?
With a long history dating back to 1981, the company has steadily grown its scale and manufacturing expertise over the years through mergers and acquisitions, allowing it to capture orders from top-tier customers, which account for nearly half of the company’s annual sales. In addition, the increasingly consolidated nature of the industry means that major clients will stick to trusted suppliers like GlobalWafers for repeat orders, while the prohibitive cost of bringing on fresh wafer capacity will keep prospective new entrants at bay. This competitive edge has allowed GlobalWafers to generate high returns and sustainable cash flows through the years.
Over the course of 2020, the pandemic saw several trends emerge, such as remote working, increased e-commerce and logistics demand, and greater requirements on security, connectivity and digitalisation. Coupled with lockdown-induced disruptions and US-China trade disputes, this has led to a higher demand for chips as semiconductor companies sought to restock and meet this surge. In this environment of stronger demand and tighter supply, GlobalWafers has been able to capitalise on this opportunity to manage wafer prices and contracts. This strong showing is one of the key reasons why GlobalWafers is among the top performers for the Company over the period.
Looking ahead, GlobalWafers is further cementing its position in this industry by securing a majority stake in rival, Siltronic, which will take GlobalWafers to the position of second largest silicon wafer maker globally. Such a move within an already oligopolistic industry, where fortune favours the high quality executors, could mean that GlobalWafers are well positioned to benefit should there be a continued trend driving the semiconductor upcycle.
While GlobalWafers is a relatively newer holding in the Company, we have been heartened by our conversations with the company over several areas within ESG. This includes topics like talent retention, which is a key priority for the Chairlady of GlobalWafers, given the competitive nature around human capital within this industry.
© owned by each of the corporate entities named in the respective logos. Companies selected for illustrative purposes only to demonstrate Aberdeen Standard Investments’ investment management style and not as an indication of performance.
In which year did we first invest?
Where is their head office?
Holding at year end: