Photronics (NASDAQ:PLAB) is positioning its investment program around higher-end photomask production, U.S. semiconductor reshoring and expanding demand for advanced display technologies, Vice President of Investor Relations Ted Moreau said during a Midwest IDEAS Conference presentation.
The company produces photomasks, glass plates etched with semiconductor or display designs that are used in lithography to transfer circuit patterns onto wafers or display panels. Moreau emphasized that Photronics’ business is driven primarily by semiconductor design releases rather than wafer starts or semiconductor-fabrication equipment demand.
Higher-End Mix and Pricing Opportunity
Semiconductor photomasks account for roughly three-quarters of Photronics’ business, while display masks comprise the remaining quarter. The company divides each segment into high-end and mainstream categories, with its semiconductor high-end category spanning nodes from 28 nanometers down to 7 nanometers.
High-end semiconductor products represented 44% of Photronics’ semiconductor business in its most recent quarter, Moreau said, the company’s highest such percentage to date. He said a transition toward more advanced nodes can materially lift revenue per mask set.
- At 90 nanometers, a mask set can generate about $50,000 in revenue, according to a Morgan Stanley report Moreau cited.
- At 14 nanometers, a design may require 70 to 80 masks and generate about $1 million per set.
- At 5 nanometers, a mask set can represent roughly $10 million to $20 million in revenue.
Photronics currently produces masks down to 7 nanometers at its Boise, Idaho, facility. Moreau said the company is advancing capabilities at that site toward 4 nanometers, though it is not currently generating revenue from that capability. The company is also expanding its Korean semiconductor facility to support production down to 8 nanometers, with that upgrade expected to be completed in about a year.
Moreau said much of the most advanced extreme ultraviolet, or EUV, photomask market remains captive, meaning it is produced internally by semiconductor manufacturers. He said Photronics has a multi-year plan to develop EUV capabilities selectively as outsourced opportunities emerge. A full EUV program could cost about $300 million, he said, prompting a cautious investment approach.
Capacity Expansions in Texas and Korea
Photronics operates 11 clean-room facilities globally, including three in the United States. About 80% of revenue is generated in Asia, while the U.S. accounts for approximately 17% to 19% of total revenue.
The company is upgrading its Allen, Texas, facility to manufacture masks at 65 nanometers, compared with historical production at 180 and 130 nanometers. Moreau said the facility was expected to begin operating at the new capability within the next month or two. The expansion should enable Photronics to shift certain production from Boise to Texas and free Boise capacity for 7-, 10-, 14- and 22-nanometer work.
Photronics expects the U.S. to represent a somewhat higher portion of company revenue in fiscal 2027, which ends in October. Moreau tied the U.S. expansion to the broader regionalization of semiconductor production, citing manufacturing investments by Taiwan Semiconductor Manufacturing, GlobalFoundries and Samsung in the U.S.
“The more places that semiconductor chips are manufactured, the better it is for us,” Moreau said, noting that proximity to customers is important because photomask orders can be won or lost based on turnaround times.
Display Market Trends
In displays, Photronics said it was the first photomask supplier able to serve generation 8.6 AMOLED production. Moreau said the company is beginning to see improvement in that market and views the adoption of foldable phones as another potential source of demand because devices with multiple displays require additional photomasks.
He said Photronics is seeing strong demand in Korea for masks associated with high-end consumer electronics expected to be released in the fall, including products such as smartphones, watches and tablets. However, the company has seen some weakness in China, where lower-end consumer electronics producers have struggled to secure memory supplies. That has delayed product releases and associated photomask demand.
Photronics’ display market share has held near 28% over roughly the past five years, Moreau said. On the semiconductor side, the company estimates it holds about 10% of the total photomask market when both merchant suppliers and captive operations are included.
Capital Spending, Cash and Near-Term Conditions
The company is in an elevated capital-expenditure cycle as it replaces older equipment and funds the Texas and Korea upgrades. Historically, Photronics spent about 10% of revenue on capital expenditures annually, Moreau said, but spending increased beginning last fiscal year and is expected to remain elevated through at least the current and next fiscal years.
Photronics reported $673 million in cash, though approximately $504 million was held at two 50/50 semiconductor joint ventures in China and Taiwan. Moreau said cash at those ventures must generally be spent locally, and that the company would more likely use debt or a credit line rather than equity if additional funding were needed for U.S. or Korean investments.
Moreau said some semiconductor design releases were delayed earlier in the year due to memory shortages and capacity constraints at Asian fabs. During the most recent July quarter, however, the company began to see some delayed designs released, including migrations from 40-nanometer chips to 28- and 22-nanometer designs. He said the quarter was somewhat better than previously expected.
The company guided for revenue in the following quarter to be flat to slightly higher sequentially. Moreau said gross margin was about 33% in the most recent quarter and was expected to remain roughly flat in the next quarter.
About Photronics (NASDAQ:PLAB)
Photronics, Inc is a leading global supplier of photomask products used in the manufacture of integrated circuits, flat panel displays, microelectromechanical systems (MEMS), and advanced packaging applications. Photomasks, also known as reticles, are critical templates that carry the precise circuit patterns required for semiconductor lithography processes. The company offers a comprehensive range of mask solutions, including binary masks, attenuated phase-shift masks, reticles for micro-optics, and specialized products for high‐resolution applications.
Founded in 1969 and headquartered in Brookfield, Connecticut, Photronics has grown through organic expansion and strategic investments in high‐end lithography technology.
