What does the company do?
GlobalWafers is a Taiwanese technology company specialising in silicon wafer manufacturing. The business was spun off from SAS Semiconductors in 2014 and, after the acquisition of SunEdison in 2016, it became one of the top five silicon wafer vendors worldwide.
Why do we like the investment?
The company controls the process from start to finish with their own research and development and production line capabilities. Given semiconductors are a key input to almost everything that contains electronic components, the end markets and themes that will drive wafer demand are both diverse and attractive. These include automation, consumer electronics, telecommunications, transportation, power generation and transmission, health care equipment and renewable energy.
Whilst there will be periods of volatility around the supply and demand nature of the industry, the Manager is attracted by the longer term structural demand drivers behind it. There are high barriers to entry, particularly as the size and complexity of the wafer increases. The business enjoys strong net cash position on its balance sheets, delivers attractive margins and returns capital to shareholders via its attractive dividend pay-out which it covers from the impressive free cash flow it generates.
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