[Edaily Reporter Shin Ha-yeon ] On the 1st, SKSecurities assessed that SFA Semicon Co., Ltd(036540)is expected to benefit from the expansion of outsourced DDR5 back-end processing volumes as SamsungElectronics begins in earnest to reorganize its Onyang facility to secure a high-bandwidth memory (HBM) back-end processing line. The firm projected that operating profit will increase to 78.5 billion won next year, starting with a turnaround in the fourth quarter of this year. It did not provide an investment opinion or a target price.

Lee Dong-ju, an analyst at SKSecurities, stated, “As a major client has recently begun in earnest to reorganize its Onyang facility to secure HBM back-end production lines, we are beginning to see an expansion in outsourced DDR5 back-end volumes,” adding, “The company, which has secured sufficient space for everything from packaging to testing, is expected to benefit the most.”

SFA Semicon Co., Ltd is a major outsourced semiconductor assembly and test (OSAT) partner for SamsungElectronics. Its Plant 1 in Korea focuses on the packaging and final testing of general-purpose mobile memory, while Plant 2 handles wafer-level packaging, bumping, and testing for non-memory components such as audio codecs, power management integrated circuits (PMICs), and radio frequency integrated circuits (RF ICs).

The company’s Philippine plant, which generates the highest revenue, conducts final testing and module production for general-purpose memory used in servers and PCs. As of last year, server and PC products accounted for the largest share of revenue at 60%, followed by mobile ICs at 19%, mobile devices at 15%, and logic ICs at 6%.

SFA Semicon Co., Ltd has experienced a prolonged slump since posting record-high results in 2022, with revenue of 699.4 billion won and operating profit of 62.9 billion won. This downturn stems from delays in major customers’ entry into the DDR5 and HBM3 markets, which in turn delayed the outsourcing of general-purpose memory production.

However, forecasts suggest that a turnaround will begin in earnest following SamsungElectronics’ recent line realignment. In particular, packaging-dedicated equipment from the Onyang plant has begun to be transferred to Factory 1 in Korea.

The analyst explained, “While we expect losses to continue in the third quarter, following the trend from the previous quarter, we project an operating profit of 78.5 billion won in 2027 after a turnaround in the fourth quarter,” adding, “The transfer of dedicated packaging equipment from the Onyang site to Korea Plant 1 has begun.” He added, “Starting with mass production in the fourth quarter, next year’s incremental D5 revenue is estimated to exceed 120 billion won.”

Test production volumes at the Philippine subsidiary are also expected to increase significantly. Test equipment from the Onyang facility is being transferred to the Philippines in four phases. Starting with monthly sales of approximately 2 billion won last month, revenue is expected to rise to 17 billion won per month after the second-phase facility construction is completed in the second quarter of next year.

The analyst noted, “Test equipment for the Philippine subsidiary is also being transferred in four phases from the Onyang facility,” adding, “Starting at around 2 billion won in August, test revenue is expected to surge to 17 billion won beginning in the second quarter, once the second phase of facility construction is complete.”

The firm also rated the potential for securing additional outsourced orders highly. The Philippine subsidiary is simultaneously expanding its own test production capacity (CAPA). SKSecurities projected that test CAPA would expand to 20 billion won per month next year and 30 billion won per month by 2028.

The analyst noted, “The Philippine subsidiary is also in the process of expanding its test CAPA, which is expected to reach 20 billion won in 2027 and 30 billion won in 2028,” adding, “This is expected to maintain a favorable position for securing additional outsourcing orders from SamsungElectronics.”

Another positive factor is that the expansion of facilities does not entail a significant capital expenditure (CAPEX) burden. The equipment being transferred to South Korea and the Philippines consists of “consign” equipment, which is leased free of charge by the client companies.

The analyst noted, “This significantly reduces the burden of CAPEX and depreciation expenses,” and added, “Triggered by this, the Philippine subsidiary is expected to explore new business areas in CAPA expansion and advanced packaging.”