Semicap sector: Logic applications and front-end processes are key points of evaluation

Research evidence excerpt

Semicap sector: Logic applications and front-end processes are key points of evaluation

Semicap sector UBS Research

UBS Research THESIS MAP MOSTSector ThesisFAVOREDMap LEAST FAVORED

Tokyo Electron, Advantest, Kokusai Electric, Disco, Screen Holdings, Lasertec, Tokyo

Tekscend Photomask Seimitsu, Ulvac

Pivotal Questions Q: Will AI demand drive ongoing strong growth of over 20% for the WFE market until

CY28?

Yes. The market is likely to maintain strong growth (of around 20% or higher) through CY28 as

elevated WFE investment is justified by structural changes backed by AI demand.

Q: Will new high-value processes emerge as the next growth driver in front-end segment?

Yes. The market currently anticipates that the next flagship processes will be in the back-end

segment, especially dicing, cutting, bonding, and testing. Over the medium to long term, however,

we believe that advanced technologies such as High-NA EUV and atomic-scale deposition and

etching will become key growth drivers for the front-end segment.

WHAT´S PRICED IN? With the average EV/EBITDA multiple for SPE stocks having ranged between 25-30x over the past

year, the market already seems to have largely priced in WFE growth for CY26 (+27% yoy) and CY27

(+35%). For logic applications, however, it does not appear to sufficiently reflect the prospects for

further acceleration in growth until CY28 (CY26 +12%, CY27 +28%, CY28 +41%). In our view, the

market also underappreciates the possibility that some front-end areas could be re-evaluated as

flagship processes, with related participants’ multiples likely to rise to around 5~10 multiple points.

UBS VIEW Strong demand visibility and the growing use of long-term agreements, supported by AI-related

demand, are reducing the volatility of capital expenditure.