Wafer demand recovery is emerging, but price improvement in 2H26 may struggle to exceed expectations

Overview

The report assesses demand, pricing, long-term agreements, and capex trends in the global wafer industry by interpreting Siltronic’s second-quarter earnings call held on July 30, 2026. Demand recovery is mainly driven by 300mm memory and logic wafers, servers, and AI applications, but price pass-through is clearly lagging shipment improvement. The report believes wafer pricing performance in 2H26 is broadly in line with JPMorgan’s expectations, but may fall short of the market bulls’ expectations for sharp near-term price increases.

Core views

The core view is that the industry is in a phase of “tightening supply-demand but not yet shortage.” Most 300mm wafers are covered by long-term agreements, and unchanged long-term agreement prices will restrain average selling price upside; non-long-term-agreement prices have improved, but transaction volumes are low and spot prices remain below reinvestment levels. 200mm demand is expected to strengthen in the second half, while prices are mainly expected to stop declining and stabilize. If prices cannot improve significantly, capital may flow back first to AI core beneficiaries with stronger fundamentals, and market attention on the wafer sector will also shift toward the impact of supply tightening in 2027 on spot and long-term agreement prices.

Analysis framework

The report uses earnings call interpretation, changes in management guidance, QoQ and YoY financial comparisons, product-size breakdowns, long-term agreement versus spot pricing comparisons, and analysis of the linkage between supply-demand and capex. The research also incorporates investor communication feedback to assess the gap between actual pricing signals and market bulls’ expectations, using GlobalWafers’ subsequent results as an industry cross-check point.

Methodology notes

• Event-driven researchEarnings call interpretation

  Extract industry signals from management’s latest comments

  Use Siltronic’s comments on demand, pricing, long-term agreements, and capex during its second-quarter earnings call to infer short- and medium-term changes in the global wafer industry.

• Industry supply-demand analysisSupply-demand and pricing transmission framework

  Distinguish demand recovery, supply tightening, spot prices, and long-term agreement prices

  By comparing wafer shipment area, spot and long-term agreement prices, inventory conditions, and capacity additions, assess whether demand growth can translate into average selling price and earnings improvement.

• Capital cycle analysisReinvestment level constraint

  Whether prices are sufficient to cover the economic return requirements for new capacity

  Compare market prices with reinvestment levels; when prices do not exceed this level, manufacturers tend to control new capex, thereby affecting future supply elasticity.

• Financial analysisQuarterly and semiannual trend comparison

  Observe operating inflection points through revenue, gross margin, EBITDA, and cash flow

  Compare data from the second quarter, first quarter, and the same period last year to identify differences among volume growth, earnings recovery, and cash consumption.

Asset mapping & comparison

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

• Siltronic AG (WAF GY)

  Core source of industry signals and global wafer supplier

  Strengths

  Strong 300mm memory and logic demand, increased shipment area, slightly raised sales guidance, and QoQ improvement in second-quarter gross margin.

  Weaknesses

  Long-term agreement prices are unchanged, spot prices are below reinvestment levels, 200mm demand and prices were weak in the first half, and earnings and cash flow remain negative.

  Comparison

  Demand recovery is faster than pricing and earnings recovery, and the magnitude of near-term improvement may fall short of some bullish investors’ expectations.

  Risks

  Slower demand recovery, persistently weak prices, elevated customer inventories, rising costs, and insufficient utilization of new FabNext capacity.

• GlobalWafers Co., Ltd (6488 TT)

  Peer cross-check target

  Strengths

  Its second-quarter gross margin and second-half gross margin outlook can be used to verify industry demand and pricing trends.

  Weaknesses

  Management previously expected gross margins in subsequent quarters may be flat or fluctuate around first-quarter levels, limiting visibility into near-term margin expansion.

  Comparison

  Its results will be used to test whether the demand recovery reflected by Siltronic can translate into profit improvement among other major wafer manufacturers.

  Risks

  If the gross margin outlook is weaker than expected, it may further reduce market expectations for wafer prices and industry earnings in 2H26.

• AI core beneficiaries

  Potential competing direction for funds versus wafer stocks

  Strengths

  Fundamentals and earnings growth certainty may be stronger than in the wafer industry, which is still constrained by pricing.

  Weaknesses

  Related stocks also corrected in July, and valuation and crowded positioning may bring volatility.

  Comparison

  If wafer prices cannot significantly lift earnings, investors may prioritize buying AI core beneficiaries on dips rather than wafer stocks.

  Risks

  AI demand falling short of expectations, valuation compression, and declining market risk appetite.

Key data

• 2026 sales guidanceLow- to mid-single-digit YoY declinePrevious guidance was a mid-single-digit YoY decline; excluding FX and the impact of small-diameter production line closures, sales are expected to grow slightly YoY.
• Global wafer area demand outlookAbout 7% YoY growthThis forecast does not take inventory changes into account and is mainly driven by server and AI demand.
• 2Q26 salesEUR321.6 millionUp 5% QoQ, mainly driven by an increase in wafer area sold; the impacts of price, product mix, and FX were limited.
• 2Q26 gross margin-4.5%Improved from -8.5% in the first quarter, but still at a loss-making level.
• 2Q26 EBITDAEUR69.4 millionCorresponding to a margin of 21.6%, compared with 21.2% in the first quarter and 26.3% in the same period last year.
• 2Q26 earnings per share-EUR1.71Compared with EUR0.38 in the same period last year, indicating earnings remain under significant pressure.
• Long-term agreement coverage ratioAbout two-thirdsMost long-term agreements correspond to 300mm wafers, and management has not observed obvious risk of concentrated long-term agreement expirations.
• New equipment delivery lead time18 to 24 monthsAlthough expansion delivery lead times are long, the company still requires prices to first rise above reinvestment levels before initiating new capex.
• 2Q26 capital expenditureEUR38.5 millionBelow EUR125.5 million in the same period last year; at this stage, the company has no plans to initiate new capex projects.
• 1H26 net cash flow-EUR116.5 millionCash flow remains negative, but improved from -EUR157 million in the same period last year.

Impact & implications

In the near term, shipment growth may precede price and profit recovery, and wafer stocks lack a strong earnings catalyst driven by sharp price increases. If pricing remains muted in the second half, investors may prefer AI core beneficiaries with stronger fundamentals. In the medium term, as manufacturers limit new capex because prices are below reinvestment levels, combined with long equipment delivery lead times, supply elasticity in 2027 may be reduced; if demand continues then, both spot and long-term agreement prices may receive more visible support.

Risks

• Actual global wafer demand may fall short of the roughly 7% area growth forecast due to customer inventory adjustments.
• Long-term 300mm agreement prices remaining unchanged may prevent shipment growth from translating into average selling price and profit improvement.
• 200mm prices may continue to decline before stabilizing, and the company needs to adjust staffing to meet second-half demand.
• Current supply is slightly above demand, and tightening supply-demand may not necessarily evolve into a shortage; the timing of price increases may continue to be pushed back.
• FabNext expansion and continued equipment arrivals may increase depreciation and cost pressure before prices recover.
• Foreign exchange, product mix, and rising costs may weaken the financial improvement brought by volume growth.
• Management forecasts and research views are both subject to uncertainty, and actual results may deviate significantly due to changes in the macroeconomy, end demand, and customer purchasing.

What to watch

• GlobalWafers’ second-quarter gross margin and second-half gross margin outlook to be announced on August 4, 2026.
• Whether 300mm non-long-term-agreement price improvement can expand to higher transaction volumes and further transmit to long-term agreement prices.
• Whether 200mm wafer prices can stabilize as scheduled in 2H26.
• Memory customer restocking and progress on purchase volumes and long-term agreement negotiations over the next two to three years.
• When wafer spot prices rise above long-term agreement prices and reinvestment levels.
• Changes in terms for smaller-scale long-term agreement repricing in 2027 and 2028.
• Whether industry supply-demand shifts from slight oversupply to substantial tightening, and the impact on 2027 spot and long-term agreement prices.
• Whether Siltronic changes its new capex plans and the pace of subsequent incremental FabNext capacity additions.