Silicon Producers Signal a Better 2024 Despite Reporting Declines

We maintain our fair value estimates for Globalwafers, Sino-American Silicon, or SAS, Sumco, and National Silicon Industry Group, or NSIG, at TWD 590, TWD 227, JPY 1,940, and CNY 4.10, respectively, after the common message of a sluggish fourth quarter to be followed by a mild recovery in 2024. SAS is our top pick in the sector as they are best positioned to benefit from incremental semiconductor factories in the U.S. and profitability has been resilient despite the current downturn. NSIG is extremely overvalued in our view as its market capitalization is on par with its larger peers despite being only 25% of the size in terms of revenue, and it is unlikely to generate free cash flow before 2027.