Asian investors remain highly focused on Japanese electronic materials, with AI-related supply-demand dynamics and stock-specific catalysts as the core themes

Overview

This report summarizes feedback from Goldman Sachs' investor visits in Asia during the third to fourth weeks of July. Although the stock market was highly volatile at the time due to concerns over AI demand prospects and the competitive landscape, most investors remained constructive on semiconductor and AI-related demand fundamentals, especially maintaining strong interest in Japanese electronic materials companies. The discussion focused on whether capacity expansion would be timely, pricing power under tightening supply-demand conditions, and whether each company could translate product advantages into medium- to long-term earnings growth.

Core views

The core view of the report is that electronic materials remain the direction of greatest investor focus within the Japanese chemicals sector, and that the market may be overly pessimistic in the short term about competition and supply-demand concerns for some names. Nitto Boseki's T-glass competitive advantage is believed likely to hold in the short term, with new capacity and price revisions potentially serving as catalysts; concerns over Mitsui Kinzoku's VSP are seen as excessive, while the market has insufficiently discussed the profit potential of MicroThinTM; if JX Advanced Metals can clarify long-term agreements and its earnings growth path for InP substrates, they could become a second pillar alongside semiconductor sputtering targets; Goldman remains constructive on SUMCO given tighter 300mm wafer supply-demand in 2027 and expected LTA price increases in 2028; Resonac's positioning in key materials for AI semiconductor back-end processes gives it core holding appeal.

Analysis framework

The report mainly combines investor interview feedback, company fundamental judgments, product supply-demand analysis, competitive landscape assessment, and target price valuation frameworks. The analysis starts from market sentiment and stock-specific controversies, and then discusses for each company its key products, investor concerns, potential catalysts, and the basis for its 12-month target price.

Methodology notes

• Valuation methodologyEV/GCI and CROCI/WACC correlation

  Materials sector valuation framework

  Multiple target prices are based on the correlation between materials sector EV/GCI and forecast future-year CROCI/WACC, combined with cash return multiples and premiums versus the industry average.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentile

  Goldman Sachs compares stocks versus the market and industry peers based on growth, financial returns, valuation multiples, and composite percentile characteristics.

• Event frameworkM&A Rank

  Potential acquisition probability score

  Goldman Sachs assigns covered companies a score from 1 to 3 based on potential acquisition probability, where 1 represents a higher probability and 3 indicates the impact is not significant.

• Data platformQuantum

  Proprietary financial database

  Quantum provides historical financial statements, forecasts, and ratio data for single-company deep dives and cross-company comparisons.

Asset mapping & comparison

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

• Nitto Boseki (3110.T)

  A specialty glass and PCB-related electronic materials name

  Strengths

  T-glass competitive advantages are expected to remain intact in the short term, while strong performance in NER glass cloth for PCBs and price revisions could become catalysts.

  Weaknesses

  Over the past three months, some investors have been short or underweight due to concerns over deteriorating T-glass supply-demand, high valuation, and new entrants.

  Comparison

  Compared with new entrants, the report believes actual product qualification by competitors is significantly delayed, and the company's advantages have not yet been eroded quickly.

  Risks

  Semiconductor demand volatility, foreign exchange volatility, and changes in the specialty glass competitive landscape.

• JX Advanced Metals Corp. (5016.T)

  An InP substrates and semiconductor sputtering targets name

  Strengths

  InP substrates have announced roughly 10x capacity expansion; if management clarifies its long-term profit strategy and long-term agreements, this could become a second growth pillar.

  Weaknesses

  Pricing strategy remains unclear, and some investors are concerned about capacity expansion by Chinese competitors.

  Comparison

  Current profit drivers are still mainly semiconductor sputtering targets, while InP substrates are expected to form a parallel pillar.

  Risks

  A slowdown in semiconductor demand, a slowdown in AI server demand, delays in structural reform, yen appreciation, and volatility in copper and other metal prices.

• Mitsui Kinzoku Co. (5706.T)

  A VSP and MicroThinTM copper foil-related materials name

  Strengths

  MicroThinTM plays a core role in copper foil business profits, has a high market share, and offers strong profit growth potential.

  Weaknesses

  Investors have turned pessimistic due to delays in VSP capacity expansion and competitors' expansion.

  Comparison

  The report believes the market is overly focused on VSP concerns and is overlooking MicroThinTM's earnings contribution and high-share advantage.

  Risks

  A slowdown in AI server demand, yen appreciation, and declines in zinc and other metal prices.

• SUMCO (3436.T)

  A 300mm silicon wafer supply-demand cycle name

  Strengths

  The report expects 300mm supply-demand to tighten significantly in 2027 and to create pricing opportunities in 2028 due to LTAs.

  Weaknesses

  Asian investor views are divided, with concerns over high inventories and past industry investment creating a supply-demand gap, making it difficult to achieve large near-term price increases.

  Comparison

  US investors are overall more positive, while Asian investors were more visibly affected by semiconductor sentiment at the time.

  Risks

  A slowdown in semiconductor demand, yen appreciation, and larger-than-expected increases in depreciation and other fixed costs.

• Resonac Holdings (4004.T)

  An AI semiconductor back-end process and advanced packaging materials name

  Strengths

  It covers key areas in AI semiconductor back-end processes and has potential in new packaging materials such as organic interposers; the report expects FY12/27 EPS to be more than about 20% above consensus.

  Weaknesses

  Some investors believe the valuation does not look cheap based on consensus estimates and have asked about the negative impact of glass cores on earnings.

  Comparison

  The report believes that based on its above-consensus earnings forecast, about 15x P/E indicates clear undervaluation.

  Risks

  A slowdown in semiconductor demand, yen appreciation, and declining graphite electrode earnings.

Key data

• Investor visit scaleAbout 55 investors, 8 days of meetingsVisit locations included Hong Kong and Singapore, during the third to fourth weeks of July.
• Nitto Boseki target price￥4,82012-month target price, rated Buy; key risks include semiconductor demand, foreign exchange rates, and the competitive landscape in specialty glass.
• JX Advanced Metals target price￥5,01012-month target price, rated Buy; the market is focused on InP substrates capacity expansion and pricing strategy.
• Mitsui Kinzoku target price￥62,60012-month target price, rated Buy; the market is concerned about VSP share, but the report sees these concerns as excessive.
• SUMCO target price￥6,14012-month target price, rated Buy; the constructive view is based on tighter 2027 supply-demand for 300mm wafers and expected 2028 LTA price increases.
• Resonac target price￥23,92012-month target price, rated Buy; the report expects FY12/27 EPS to be more than about 20% above consensus.

Impact & implications

The investment implication is that Japan's electronic materials chain may continue to benefit from AI servers, semiconductor capacity expansion, and advanced packaging trends. Near-term volatility stems more from market concerns over new competition, inventories, and valuation, but if companies disclose capacity expansion plans, price revisions, long-term agreements, or strong earnings, market expectations could be revised upward. For portfolios, the report leans more toward holding core names with product barriers, improving supply-demand dynamics, and exposure to AI semiconductor back-end materials.

Risks

• Semiconductor demand or AI server demand may come in below expectations.
• Yen appreciation may weaken earnings and valuation support.
• Capacity expansion by new entrants or changes in the competitive landscape may erode the advantages of products such as specialty glass, InP substrates, and VSP.
• High inventories and historical investment may cause supply-demand recovery to be slower than expected, limiting wafer price increases.
• Volatility in copper, zinc, and other metal prices may affect profits at related companies.
• Depreciation and fixed cost increases may exceed expectations.
• Resonac's graphite electrode earnings may decline.

What to watch

• Whether Nitto Boseki announces additional T-glass capacity and price revisions.
• The strength of Nitto Boseki's NER glass cloth for PCBs performance.
• Whether Mitsui Kinzoku announces a VSP capacity expansion plan.
• Management commentary from JX Advanced Metals at its earnings briefing on long-term agreements, pricing, and earnings growth strategy for InP substrates.
• Whether JX Advanced Metals delivers strong 1Q results.
• The pace of tightening in SUMCO's 300mm wafer supply-demand in 2027, and visibility on 2028 LTA price increases.
• Whether Resonac FY12/27 earnings continue to exceed market consensus, and commercialization progress for advanced packaging materials.