‘Growing Nationalism’ Spurring Chip Capacity Expansion: Photronics CEO
The financial performance of "nearly every company" in the semiconductor and display sectors “continues to improve,” and that bodes well for long-term photomask demand, said Photronics CEO Peter Kirlin on an earnings call Wednesday for fiscal Q3 ended Aug. 1. Photronics supplies photomasks to panel makers in China, South Korea and Taiwan, and can be a bellwether of display industry health.
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Few can “ignore” the “growing nationalism that is spurring capacity buildup in multiple regions,” including the U.S. and Europe, said Kirlin. Leading business indicators “point to a boost in capital equipment spending by chip and panel makers that will require photomasks once installed,” he said. “All signs point to a prolonged period of market strength. This is truly a very positive period for the industry, for photomask demand and for Photronics.” Q3 was the second straight quarter of record revenue for Photronics, and “we expect another record quarter in Q4,” Kirlin said.
A “key element” of Photronics’ investment strategy is to align its operations with “the fastest-growing sectors in the markets we serve,” including “growth catalysts” like mobile displays and “ultra-large-screen TVs,” said Kirlin. “We continue to focus on high-value and high-growth segments of the market,” including AMOLED mobile displays, which are “expanding beyond smartphones into large form factors such as tablets and laptops,” he said. The “emergence” of premium TV technologies, such as white OLED and hybrid quantum dot OLED, “drives innovation and requires more complex photomasks,” he said.
Photronics is “encouraged by the macro trends driving robust design activity across the semiconductor industry,” said Chief Financial Officer John Gordon. “The outlook for wafer fab equipment continues improving, which means more tools and operations that will need photomasks to produce chips.” The company is optimistic that current trends “will continue into 2022 and potentially beyond,” he said.
Fiscal Q3 display revenue was 11% better than in Q2 and a 7% improvement from Q3 a year earlier, said Gordon. “Growth in AMOLED displays used in mobile applications was the largest contributing factor,” he said. Q3 Gen 10.5 demand also improved sequentially from Q2, as panel customers “are bringing on new capacity and introducing new designs for ultra-large-screen TVs,” he said.
Mobile demand “should continue to be the growth factor, as more smartphones, tablets and laptops adopt high-value AMOLED technology,” said Gordon. For TV, there are signs that price hikes over the past several quarters in the LCD segment are ending, “meaning the LCD boom is nearing an end,” he said. “That would be supportive of new design releases, as panel makers move to offer improved features and performance to maintain market share and revenue levels. Overall, we’re very optimistic in the demand outlook for display photomasks.”