Buried deep within Screen Holdings' recent earnings call lies a revelation that seems to have eluded even the most astute analysts: the company is poised to become a dominant force in the rapidly expanding advanced packaging market. While most observers focus on the company's impressive semiconductor equipment performance, a closer look at the transcript <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a> reveals strategic moves that suggest a much grander ambition.

Screen Holdings, known primarily for its cleaning equipment prowess, has quietly been building a foundation in advanced packaging, a technology that's reshaping the semiconductor landscape. Advanced packaging allows chipmakers to achieve higher performance and lower power consumption by integrating multiple chips in innovative ways, bypassing the limitations of traditional scaling methods.

The company's strategic investment allocation of ¥80 billion is a clear signal of intent <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>. While Screen Holdings has remained tight-lipped about specific M&A targets, the transcript reveals a strong focus on advanced packaging and hydrogen-related technologies as "promising" areas for growth.

Screen Holdings already boasts a direct imaging system for panel-level packages in its portfolio, highlighting its existing foothold in advanced packaging. This existing technology, combined with the company's aggressive investment strategy, suggests a concerted effort to capture a significant share of this burgeoning market.

The transcript also reveals a deliberate effort to increase the "application of the direct patterning" technology beyond its current use in the "sort of the register." This implies a push towards direct patterning of circuit patterns, a critical enabler for advanced packaging processes.

The advanced packaging market is projected to grow at an astounding compound annual growth rate (CAGR) of 21% in the coming years <a href="#market-projection" alt="market-projection">^[2]</a>. This explosive growth is driven by the increasing demand for high-performance computing, artificial intelligence, and 5G applications, all of which rely heavily on advanced packaging techniques.

Screen Holdings' Ambitious Targets

Let's delve into the numbers: Screen Holdings aims to achieve ¥1.5 trillion in cumulative sales over the next three years with an average operating profit margin of 23%-25% for its semiconductor equipment business <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>. Considering the advanced packaging market's projected growth, capturing even a modest share could significantly contribute to these ambitious targets.

Screen Holdings' existing expertise in cleaning equipment positions it perfectly to capitalize on the advanced packaging trend. As packaging complexity increases, the need for advanced cleaning solutions becomes even more crucial, providing a natural synergy for the company's expansion efforts.

It's worth noting that Screen Holdings has a history of exceeding expectations. During the previous midterm plan, the semiconductor equipment division far surpassed its original targets, demonstrating the company's ability to capitalize on industry trends and deliver impressive results <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>.

China's Semiconductor Market: A Driving Force

The transcript highlights the significance of the Chinese semiconductor market for Screen Holdings. Sales to China have more than doubled year-on-year, driven by investments from both existing and emerging foundries, especially in mature applications <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>.

While analysts are busy dissecting the company's semiconductor equipment performance, Screen Holdings is silently laying the groundwork for a major move into advanced packaging. The company's strategic investments, technological advancements, and existing market presence indicate a well-calculated strategy to become a key player in this high-growth market. The sleeping giant is stirring, and the semiconductor industry should take notice.

Hypothesis

Based on the transcript and market projections, we hypothesize that Screen Holdings' advanced packaging revenue will grow at a rate exceeding the overall market CAGR of 21% in the coming years. This growth will be driven by:

Strategic acquisitions: The company's ¥80 billion investment allocation will likely fuel acquisitions targeting advanced packaging companies, bolstering its portfolio and market share.Technological advancements: The company's focus on direct patterning of circuit patterns will unlock new opportunities in advanced packaging, driving increased demand for its equipment.Synergy with existing business: Screen Holdings' cleaning equipment expertise will be a major asset in advanced packaging, leading to bundled sales and a competitive advantage.

Key Numbers

Advanced packaging market CAGR: 21% <a href="#market-projection" alt="market-projection">^[2]</a>Screen Holdings' strategic investment allocation: ¥80 billion <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>Targeted cumulative sales for semiconductor equipment: ¥1.5 trillion <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>Targeted operating profit margin for semiconductor equipment: 23%-25% <a href="https://www.screen.co.jp/ir/library/earnings.html" alt="transcript">^[1]</a>

This hypothesis suggests that Screen Holdings' advanced packaging business could generate significant revenue within the next three years, potentially reaching hundreds of billions of yen and contributing substantially to the company's overall growth.

"Fun Fact: Screen Holdings' name originates from its early focus on photoengraving screens for the printing industry. The company's evolution from screen-making to semiconductor equipment and now advanced packaging showcases its adaptability and commitment to innovation. This dedication to pushing technological boundaries is likely to propel Screen Holdings to the forefront of the advanced packaging revolution."