The AI-driven demand for high-speed chips is surging, and with it, the manufacturing costs are on the rise. The advanced packaging sector, which has become a critical focus within the semiconductor supply chain, is expected to benefit companies like DISCO, a leading manufacturer of wafer cutting machines.

Advanced packaging is a process that involves the close stacking and encapsulation of various chips to improve data transmission speeds and reduce energy consumption, with a primary application in the memory chip domain. Morgan Stanley has indicated that while advanced packaging accounted for about 9% of global semiconductor revenue in 2023, this figure is expected to grow to 13% by 2027, equating to approximately $116 billion.

DISCO, engaged in the manufacturing and sales of semiconductor production equipment and precision processing tools, including cutting machines and grinding machines tailored to diverse packaging needs, estimates that 40% of its revenue comes from packaging. The company forecasts a significant increase in its financial performance for the first quarter of 2024 (April-June), with consolidated revenue expected to jump by 39.5% year-over-year to 75.3 billion yen, operating profit projected to surge by 59.7% to 27.1 billion yen, and net profit anticipated to spike by 49.0% to 18.9 billion yen.

This substantial growth is attributed to the expanding demand for power semiconductors used in electric vehicles and the generative AI sector, coupled with an increase in sales of precision processing equipment. As the advanced packaging demand continues to heat up, DISCO stands out as a potential beneficiary in the semiconductor equipment market.