NSIG management visit: Strong silicon photonics SOI demand, 300mm expansion underway, but rating remains Sell

Overview

This report is based on Goldman Sachs' visit with NSIG management in Shanghai, focusing on the outlook for silicon photonics demand, the advantages and challenges of SOI technology, and the company's 300mm wafer capacity expansion. Management is positive on improving customer demand for 300mm wafers in China, driven by capacity expansion, the generative AI trend, and domestic substitution trends. The company is also pushing ahead with 300mm SOI capacity expansion and emphasizing strong demand from silicon photonics applications.

Core views

The core view is: first, higher silicon photonics adoption is increasing SOI demand in high-speed transmission scenarios, and NSIG is expanding from RF applications into silicon photonics applications; second, SOI wafer manufacturing has a high barrier to entry, and the company has 200mm and 300mm SOI mass-production experience and an extended cooperation framework with Soitec; third, 300mm wafer capacity expansion and product-mix upgrades are being advanced in parallel, including additional heavily doped wafer capacity in Taiyuan, R&D on advanced-node wafers, and joint development of next-generation products with customers. Despite the positive fundamental discussion, Goldman Sachs still maintains a Sell rating.

Analysis framework

The report combines management-visit notes with the company's capacity-planning outlook, assessing demand-side drivers such as silicon photonics, high-speed transmission, generative AI, and domestic substitution trends, as well as supply-side factors including 300mm wafers, SOI mass-production capability, and the pace of capacity expansion. The valuation section uses a near-term P/E approach and references the relationship between global peers' P/E multiples and earnings growth to derive the target multiple.

Methodology notes

• Valuation methodNear-term P/E valuation

  2027E target P/E of 54x

  Based on the correlation between global peers' P/E multiples and earnings growth, Goldman Sachs derives a 2027E target P/E multiple of 54x for NSIG and uses it to arrive at the 12-month target price of Rmb15.0.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factor

  Goldman Sachs Factor Profile provides investment context by comparing a stock's growth, financial returns, and valuation multiples with covered stocks and industry peers. The composite factor is the average of the reverse percentile ranks of growth, financial returns, and valuation multiples.

• M&A frameworkM&A Rank

  M&A probability ranking

  In its global coverage, Goldman Sachs uses the M&A framework to assess the likelihood that a company becomes a takeover target. 1 indicates high probability, 2 medium probability, and 3 low probability; if the rank is 1 or 2, M&A factors are typically incorporated into the target price.

Asset mapping & comparison

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

• NSIG (688126.SS)

  Covered name

  Strengths

  Strong silicon photonics SOI demand, 200mm and 300mm SOI mass-production experience, a clear 300mm wafer expansion plan, and a long-term partnership with Soitec.

  Weaknesses

  Goldman Sachs' target price is significantly below the disclosed current share price, indicating considerable valuation pressure; expansion may bring depreciation and earnings ramp-up pressure.

  Comparison

  The report evaluates NSIG within Goldman Sachs' coverage universe relative to other technology and semiconductor-related companies.

  Risks

  If customer demand, yield improvement, depreciation levels, or product mix are better than expected, that could be an upside risk to Goldman Sachs' Sell view.

Key data

• Report date2026-05-21The report cover shows Equity Research 21May2026.
• RatingSellThe report states that Goldman Sachs rates NSIG Sell.
• 12-month target priceRmb15.0Based on near-term P/E valuation.
• Disclosed current priceRmb29.31NSIG is shown at Rmb29.31 in company-specific regulatory disclosure.
• Implied upside/downside-48.8%Estimated using the Rmb15.0 target price and Rmb29.31 current price.
• 300mm wafer target capacity1.05 million wafers/monthThe company plans to reach this capacity by the end of 2026.
• Shanghai 300mm capacity600k wafers/monthPart of the end-2026 target capacity.
• Taiyuan 300mm capacity405k wafers/monthPart of the end-2026 target capacity.
• 2025 year-end 300mm capacity baselineMore than 800k wafers/monthThe report says the 2026 year-end target is above the more-than-800k wafers/month level at the end of 2025.
• SOI cooperation frameworkExtended with Soitec by 10 yearsIn March 2026, NSIG and Soitec agreed to extend the SOI manufacturing and commercial licensing framework.

Impact & implications

The report shows that NSIG has clear industry catalysts in silicon photonics SOI and 300mm wafer capacity expansion, benefiting from AI computing, high-speed transmission, and domestic substitution demand. However, Goldman Sachs' Sell rating indicates that it believes the current share price remains high relative to the target price, and valuation or earnings realization pace is the main constraint. For investors, demand validation, capacity ramp-up, product-mix upgrades, and depreciation pressure will determine whether fundamental improvement can translate into earnings revisions.

Risks

• Stronger-than-expected customer demand could lift NSIG's ASP and revenue growth.
• Lower-than-expected depreciation could improve gross margin.
• Faster yield improvement or a better product mix could lead to a stronger-than-expected earnings ramp.
• If 300mm expansion progress, customer qualification, or product-mix upgrades fall short of expectations, revenue and earnings realization could be affected.
• The current share price being above the target price remains an important backdrop for Goldman Sachs' Sell rating.

What to watch

• Progress in silicon photonics customer validation and the pace of SiPh product ramp-up.
• 300mm SOI capacity expansion and mass-production ramp.
• Whether the 1.05 million wafers/month 300mm wafer target by end-2026 can be achieved.
• Capacity utilization, product mix, and yield improvement at the Shanghai and Taiyuan lines.
• Progress on heavily doped wafers, advanced-node wafers, and next-generation product partnerships.
• The impact of depreciation expense on gross margin and profit margins.