How much growth potential does the capacity expansion offer?

  • Combined 300 mm wafer capacity at NSIG’s Shanghai and Taiyuan facilities reached 1 million wafers per month in the first half of 2026, up from 800 thousand in 2025. The company targets 1.2 million wafers per month by the end of 2026.
  • In the first half of 2026, 300 mm wafer sales volume rose by more than 90% year over year, benefiting from new customers and product expansion into applications including logic, memory, image sensors and power devices. Goldman Sachs believes continued capacity expansion and a shift toward higher-quality wafers and high-end applications will support long-term revenue growth.
  • Based on the ramp-up of 300 mm capacity and shipments, Goldman Sachs raised its 2027 revenue forecast by 6% to 7.718 billion yuan and its 2028 forecast by 2% to 8.27 billion yuan.

Why is the profit outlook under pressure despite higher revenue forecasts?

  • The introduction of new capacity brings higher depreciation, while initial utilization is lower. Goldman Sachs believes these factors will outweigh the incremental profit from its higher 2027 revenue forecast. Continued pressure on the 200 mm wafer business will also weigh on near-term margins.
  • The bank widened its 2026 net loss forecast from 911 million yuan to 1.061 billion yuan and cut its 2027 net profit forecast by 1% to 930 million yuan. It lowered its gross margin forecasts for 2026 and 2027 by 2.8 and 1.4 percentage points, respectively, to 3.4% and 23.2%.
  • Goldman Sachs expects margin pressure to ease in 2028 as utilization of new capacity rises, and consequently raised its net profit forecast by 2% to 1.195 billion yuan.

When could photonic SOI contribute to growth?

  • NSIG invested early in 200 mm and 300 mm SOI wafers, with applications expanding from radio frequency to fields such as silicon photonics. Company management expects photonic SOI wafers to enter volume shipment in 2027.
  • Goldman Sachs is optimistic about demand for AI optical applications and sees photonic SOI as a medium-term growth opportunity for NSIG.

Why does Goldman Sachs maintain its sell rating?

  • Despite its positive view of growth from capacity expansion, Goldman Sachs believes NSIG has lower potential upside than the technology companies it covers in Greater China and that its forecast 2027 price-to-earnings ratio is substantially above peers. It therefore maintains its sell rating.
  • The bank lowered its 12-month target price from 16.9 yuan to 16.1 yuan, implying approximately 11% downside from the 18.08 yuan closing price on 28 October 2026. Stronger-than-expected demand, lower-than-expected depreciation, or faster improvements in yields and product mix could all present upside risks.