Test consumables may see price hikes; Overweight reiterated on MPI and WinWay

Overview

This report focuses on the test consumables segment within Greater China technology semiconductors. Its core view is that rising precious metal prices and tight test pin capacity will drive price increases for probe cards and test sockets, allowing costs to be passed through to customers. Morgan Stanley reiterates Overweight ratings on MPI Corporation and WinWay Technology Co Ltd, and maintains an Attractive Asia Pacific industry view.

Core views

The report's core logic has three points: first, severe shortages in test pin supply and the long ramp-up cycle for new capacity give probe card and test socket suppliers strong pricing power; second, AI/HPC volume growth, incremental DDIC demand, and customer testing needs support strong June results; third, MPI's share price has lagged due to weak CPO sentiment, but the report believes insertion testing demand is unchanged, while WinWay will more fully ramp new capacity from June to meet strong backlog demand.

Analysis framework

The analysis is mainly based on supply chain checks, cost pass-through judgment, capacity constraints, tracking of AI/HPC and DDIC demand, and residual income model valuation. The rating framework uses Morgan Stanley's relative rating system, in which Overweight means expected risk-adjusted total return over the next 12-18 months is above the average of the covered industry.

Methodology notes

• valuation methodResidual income model

  long-term value capture

  The report uses the residual income model to derive target prices for both companies, arguing that this method better reflects the long-term value and earnings growth of test consumables makers.

• rating systemMorgan Stanley relative rating

  Overweight and Attractive

  Overweight means a stock's expected risk-adjusted total return over the next 12-18 months is above the average of the industries covered by the analyst; Attractive means the industry is attractive over the next 12-18 months relative to the relevant broad benchmark.

• fundamental validationsupply chain checks

  price increases and capacity shortages

  The report cites supply chain checks indicating that rising precious metal prices and severe shortages in test pin capacity will drive probe card and test socket makers to raise prices and pass costs on to customers.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MPI Corporation (6223.TWO)

  A beneficiary of probe cards and insertion testing demand; reiterated Overweight.

  Strengths

  The report believes weaker CPO sentiment has caused the stock to lag, but optical engines still require testing and insertion testing demand has not changed; valuation is about 43x 2027e EPS, corresponding to 2025-2028e earnings CAGR of 105%.

  Weaknesses

  The share price has been pressured by CPO-related sentiment, and the investment case depends on continued delivery in AI demand, market share gains, and CPO development.

  Comparison

  Compared with WinWay, MPI is more geared to probe cards and insertion testing demand, and the report highlights the attractiveness of its valuation entry point and earnings CAGR.

  Risks

  AI demand weaker than expected, market share gains weaker than expected, and CPO development slower than expected.

• WinWay Technology Co Ltd (6515.TW)

  A beneficiary of test sockets and new capacity ramp-up; reiterated Overweight.

  Strengths

  The report believes WinWay should begin fully releasing new capacity from June to meet strong backlog orders; valuation is about 39x 2027e EPS, corresponding to a forecast 2025-2028e EPS CAGR of 111%.

  Weaknesses

  The investment case depends on new capacity ramp-up, adoption of hypersockets and MEMS probe cards, rollout of SLT and burn-in socket, and delivery of edge AI demand.

  Comparison

  Compared with MPI, WinWay is more affected by the release of new test socket capacity and the digestion of backlog orders, with greater implied upside in the target price.

  Risks

  Slower-than-expected adoption of hypersockets and MEMS probe cards, slower-than-expected rollout of SLT and burn-in socket, and lack of edge AI demand in the coming years.

Key data

• industry viewAttractiveThe Asia Pacific industry view for Greater China Technology Semiconductors is Attractive.
• MPI valuation43x 2027e EPS; 2025-2028e earnings CAGR 105%The report believes this valuation is an attractive entry point to capture high earnings growth.
• WinWay valuation39x 2027e EPS; 2025-2028e EPS CAGR 111%The report expects WinWay to more fully release new capacity starting in June to meet strong backlog orders.
• MPI target price historyNT$7,500Target price history shows 7,500 on 2026-05-18; the table shows a 06/30/2026 price of NT$6,090.00.
• WinWay target price historyNT$15,000Target price history shows 15,000 on 2026-05-27; the table shows a 06/30/2026 price of NT$8,085.00.
• MPI valuation assumptionscost of equity 9.78%; risk-free rate 2.0%; risk premium 6.0%; payout ratio 75%; mid-term growth 16.0%; terminal growth 4.0%The target price corresponds to 52x/27x 2027e/2028e P/E.
• WinWay valuation assumptionscost of equity 9.14%; risk-free rate 2.0%; risk premium 5.5%; payout ratio 80%; mid-term growth 16.4%; terminal growth 4.5%Used to derive the target price under the residual income model.

Impact & implications

If price hikes are implemented smoothly, test consumables makers may maintain or expand margins during a rising-cost cycle while also benefiting from growth in AI/HPC, DDIC, and advanced testing demand. For investors, the report views MPI and WinWay as core beneficiaries in the test consumables segment, with pricing power and high earnings growth leverage.

Risks

• AI/HPC demand weaker than expected could weaken demand for probe cards and test sockets.
• If the shortage in test pin capacity eases too quickly, suppliers' ability to raise prices may be lower than the report expects.
• If customers cannot accept price increases or cost pass-through is insufficient, margin improvement may be limited.
• If MPI's market share gains or CPO development are weaker than expected, earnings growth and valuation rerating may come under pressure.
• If WinWay's new capacity ramp-up, adoption of hypersockets and MEMS probe cards, or rollout of SLT and burn-in socket are slower than expected, order delivery will be affected.
• Morgan Stanley discloses that it has or seeks business relationships with some covered companies, and investors should use this research as only one factor in making investment decisions.

What to watch

• Whether MPI and WinWay's June results validate the strong demand described in the report.
• Whether probe card and test socket makers formally raise prices, as well as customer acceptance and the extent of cost pass-through.
• Trends in precious metal prices and the progress of test pin capacity expansion.
• The pace of AI/HPC volume growth, incremental DDIC momentum, and changes in edge AI demand.
• The speed of WinWay's new capacity ramp-up and the digestion of backlog orders.
• Whether MPI's insertion testing demand in CPO-related applications remains stable.
• Whether subsequent target prices, rating history, and industry views change.