SEOUL, September 12 (AJP) - South Korean foundry DB HiTek is emerging as a beneficiary of tightening supplies of mature semiconductors, as booming demand from China's artificial intelligence data centers and robotics industry strains global 8-inch chip production capacity.
Customer demand for DB HiTek's foundry services has risen to roughly twice its available production capacity, according to DS Investment & Securities, adding to its order backlog and strengthening expectations for further price increases.
The surge underscores how the global AI boom is spreading beyond cutting-edge processors and high-bandwidth memory to mature chips used for power management and other applications.
Unlike advanced chips typically manufactured on 12-inch wafers, many mature semiconductors continue to rely on 8-inch production lines.
Supply has become increasingly constrained as leading foundries including Taiwan's TSMC and Samsung Electronics concentrate investment on more advanced 12-inch production, while demand for power semiconductors used in AI data centers and robots grows, particularly in China.
DB HiTek's factories are operating at full capacity, according to KB Securities, which expects higher utilization and previous foundry price increases to bolster the company's earnings.
DB HiTek raised prices by around 5 percent in the first half of the year and implemented an additional 10 percent increase for Chinese customers for orders entering production from July 1, according to estimates from DS Investment & Securities.
The July increase is expected to begin feeding into revenue from October and gradually lift the company's average selling price in the second half.
Further increases could follow. KB Securities expects DB HiTek to implement a third price hike before the end of this year and two more increases next year as the imbalance between 8-inch foundry supply and demand deepens.
DS Investment & Securities said DB HiTek has already secured price increases of at least 15 percent this year and sees the possibility of another increase around December.
"Supply and demand for 8-inch capacity are tightening rapidly across product categories, and DB HiTek's excess orders are greater than those of its competitors," DS Investment & Securities analyst Lee Soo-rim said.
Lee said customers have also become less resistant to higher prices as rivals raise their own rates, citing capacity constraints at China's SMIC and price increases by Texas Instruments.
The tightening market is also raising expectations for stronger earnings.
DB HiTek is projected to post third-quarter revenue of 418 billion won ($302 million) and operating profit of 117 billion won, up 11.6 percent and 45.2 percent from a year earlier, respectively, according to consensus estimates compiled by FnGuide.
For the full year, KB Securities projects revenue of 1.60 trillion won and operating profit of 424.2 billion won, representing increases of 15 percent and 53 percent, respectively.
The improving outlook has already been reflected in DB HiTek's shares. The stock climbed 21 percent between Sept. 1 and Sept. 10, rising from 95,000 won to 115,200 won.
DB HiTek is also scheduled to cancel 592,000 treasury shares, equivalent to about 1.3 percent of its outstanding shares, in the second half of this year, adding to expectations for shareholder returns.
- Demand for DB HiTek's 8-inch foundry capacity has reached roughly twice its available production capacity as AI data centers and robotics fuel demand for mature and power semiconductors, according to DS Investment & Securities.
- Tightening supply has strengthened DB HiTek's pricing power, with analysts expecting additional price increases after hikes implemented earlier this year.
- DB HiTek shares climbed 21 percent in the first 10 days of September, while analysts expect full factory utilization and higher foundry prices to drive sharp earnings growth.
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