Robust Probe Card Demand, Capacity Expansion, and Technology Upgrades Support Medium- to Long-Term Resilience

Overview

This report summarizes Micronics Japan's F12/26 second-quarter earnings call. The company benefited from growing probe card demand, improved revenue-recognition timing, and earlier shipments of development products, resulting in significantly stronger second-quarter earnings. Management is accelerating capacity expansion while advancing next-generation vertical probe technologies for high-frequency, fine-pitch, and simultaneous-contact applications.

Core views

Morgan Stanley believes the company's growth thesis remains intact: demand from memory manufacturers, particularly for relevant high-end testing, remains strong; while capacity is expanding rapidly, demand is growing just as quickly, and lead times have not shortened. The non-memory business is also supported by demand from automotive and industrial equipment. In the near term, third-quarter revenue and margins may decline from the exceptionally strong second quarter, but gross margin is still expected to remain above 50%; the stock is expected to demonstrate resilience over the medium to long term.

Analysis framework

The report assesses the company's earnings outlook by combining the earnings call, orders and lead times, capacity-expansion plans, end-market demand, and technology roadmap, and determines the target price using a P/E-based valuation method.

Methodology notes

• Valuation methodsForward P/E Method

  The target price is determined by multiplying the F12/27 EPS forecast by a 25x P/E multiple.

  The 25x target P/E is above the FY27 average forward P/E of 23x for covered SPE and related companies, reflecting accelerating testing demand driven by generative AI and greater value added from higher technology barriers.

• Operational MonitoringCapacity-Demand-Lead Time Analysis

  Capacity expansion, order demand, and lead times are used to assess supply-demand tightness and growth sustainability.

  Lead times have remained at 5 to 6 months despite accelerated capacity expansion, indicating that demand growth continues to absorb incremental supply.

Asset mapping & comparison

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

• Micronics Japan (6871.T)

  A Japanese semiconductor test equipment stock that directly benefits from growing demand for memory and non-memory semiconductor testing.

  Strengths

  Strong probe card demand, continued capacity expansion, better-than-expected second-quarter profitability, and a next-generation vertical probe technology pipeline.

  Weaknesses

  Quarterly revenue is materially affected by customer delivery arrangements, production-line switching is difficult, and near-term capacity cannot be fully converted into sales upside.

  Comparison

  The target valuation uses a 25x F12/27 P/E, above the FY27 average forward P/E of 23x for SPE and related companies.

  Risks

  Slower memory bit demand, weakening technological advantages, intensifying price competition, industry oversupply, and deferred demand for non-memory probe cards.

Key data

• Second-Quarter Probe Card Business Operating Margin41%Driven by sales shifting from the first and third quarters, as well as earlier revenue recognition for development products originally scheduled for shipment after the third quarter.
• Expected Gross MarginAbove 50%Management expects third-quarter margins to be below the elevated second-quarter level, but gross margin to remain at a healthy level.
• Probe Card Lead Time5 to 6 monthsDemand from memory manufacturers is strong, and additional capacity has not yet shortened lead times.
• Fourth-Quarter Quarterly Capacity TargetApproximately ￥30bnManagement expects to reach this level in the fourth quarter and plans to continue expanding thereafter.
• Target Price￥19,000Based on a 25x F12/27 forward P/E.
• Closing Price￥14,750As of 2026-08-18.

Impact & implications

Near-term performance may exhibit quarterly volatility due to customer delivery timing, and third-quarter sales upside is also constrained by the difficulty of switching production lines; however, capacity expansion, strong memory-testing demand, and expansion into non-memory markets are expected to support sustained growth. If the company can maintain high gross margins and deliver on next-generation probe technologies, its valuation premium should remain supported.

Risks

• Slower growth in memory bit demand, or weaker-than-expected demand for HBM and other memory probe cards.
• Erosion of the company's technological lead, or shorter test times as testing processes mature.
• Intensifying price competition and potential industry oversupply that compress margins.
• Delayed realization of non-memory probe card demand, with automotive and industrial equipment demand weaker than expected.
• Weak performance in the TE business.
• Changes in customer delivery timing that could cause quarterly revenue and profit volatility.

What to watch

• Delivery against the approximately ￥30bn fourth-quarter quarterly capacity target and the pace of subsequent capacity expansion.
• Changes in probe card orders, lead times, and HBM-related demand from memory manufacturers.
• Whether third-quarter shipments deferred by customers to the fourth quarter are recognized smoothly.
• Whether gross margin can remain above 50%.
• Progress in volume growth of the non-memory business driven by automotive and industrial equipment.
• Confirmation of the Oita plant product mix and progress in next-generation vertical probe technology R&D.