XGN

Market & Demand Trends

• Overall wafer industry demand is gaining traction, with an uneven recovery across end markets. AI-related server demand is particularly strong, driving a projected 46% year-over-year increase in server-related wafer area consumption (up from 44% in the prior outlook).
• Wafer area consumption is expected to grow ~7% full-year 2026 before inventory adjustments, matching prior guidance. End market outlooks: smartphone wafer consumption expected to decline 11% (downgraded from prior), PC consumption to decline 10%, automotive to grow 3%, and industrial (including data center infrastructure) to grow 13% (upgraded from prior).
• Inventory at memory and logic chipmakers has largely normalized, and memory players are beginning to rebuild safety stocks amid tightening wafer availability from AI-driven demand, which could add upside to industry demand. Power application inventories are improving but remain elevated.

Q2 2026 Financial Performance

• Q2 2026 sales grew 4.9% quarter-over-quarter to €322 million, driven by higher wafer area sold as demand recovery gained traction; pricing, product mix, and FX remained broadly stable quarter-over-quarter.
• EBITDA increased to €69 million from €65 million in Q1, with the EBITDA margin improving to 21.6% from 21.2%, driven by better fixed cost absorption from higher utilization and one-off Q1 cost timing. EBIT remained broadly stable at -€52 million, as higher depreciation offset the EBITDA improvement.
• Capital expenditure totaled €39 million, focused predominantly on 300 millimeter activities. Net cash flow remained negative at -€27 million, reflecting ongoing investment outflows.

Strategic & Operational Milestones

• Siltronic successfully completed an accelerated book-building capital increase in Q2 2026, raising gross proceeds of €273 million from the issuance of new shares equal to 10% of existing share capital. The offering was heavily oversubscribed, with strong demand from both existing and new long-term investors.
• The capital increase was a proactive opportunistic step to strengthen financial and strategic flexibility, not a response to an immediate near-term funding need. Proceeds will be used to capture future growth opportunities as market conditions develop.
• Following the capital increase and improved share price performance, Siltronic re-entered the German MDAX index at the end of June 2026. Liquidity increased to €650 million at quarter-end, supported by the capital raise proceeds, resulting in a solid balance sheet with an equity ratio of 45%.
• The ramp-up of the Singapore FabNext facility is progressing smoothly, with volume on track and customer qualifications complete. The facility now includes 200 millimeter EPI production for the first time for Siltronic.

• Management slightly raised full-year 2026 sales guidance, now expecting full-year 2026 revenue to come in low-to-mid single digit percentage below 2025 levels. On a like-for-like basis (excluding FX effects and the closure of the small diameter business), sales are expected to be at or slightly above 2025 levels.
• The full-year 2026 EBITDA margin guidance is maintained at 20% to 24%. While higher sales are expected relative to prior guidance, this positive impact is offset by higher than previously forecast freight and energy costs.
• Management expects wafer area sold in 2026 to increase year-over-year even after accounting for the small diameter business closure, but still anticipates an overall negative full-year price impact, a negative product mix impact from the still-subdued 200 millimeter power market, and a negative year-over-year FX impact.

The transcript does not break down financial performance into separate formal product segments with reported absolute revenue and contribution percentage. The business is split by wafer size as follows:

• 300 millimeter wafers: Driving the ongoing market recovery, with sequential volume growth in Q2 2026 supporting the firm's overall Q2 sales increase. Spot pricing is improving on low volume bases but remains below reinvestment levels and existing long-term agreement (LTA) pricing. Overall 300mm utilization is high (high 80s to low 90% range industry-wide), with remaining brownfield capacity available for expansion at the firm's new Singapore fab (FabNext).
• 200 millimeter wafers: Market conditions remained sluggish in H1 2026, but management expects clear volume improvement in H2 2026. Prices declined in H1 2026 and are expected to stabilize from this low base in H2. Utilization remains below 2022 levels, and the segment continues to face negative product mix, with high-margin product demand still subdued and customer inventories still elevated.

• Pricing remains below required reinvestment levels across most of the business, which delays justification for further capacity expansion investments that are needed to meet growing long-term AI-driven demand. This could lead to eventual industry-wide wafer supply shortages if pricing does not adjust quickly enough to incentivize new capacity.
• 200 millimeter segment performance continues to be dragged down by negative product mix, elevated customer inventories for high-margin products, and pricing that is recovering from very low H1 2026 levels, limiting near-term revenue and bottom-line contribution from the segment's volume recovery.
• Forward-looking statements about demand recovery, pricing improvements, and capacity expansion are inherently uncertain and depend on macroeconomic semiconductor trends, customer demand, and supplier equipment lead times, all of which may develop differently than currently expected.

Q: If new long-term agreements (LTAs) were signed today, would prices need to be above prior cycle peaks to cover higher costs, and will Siltronic hold off on new LTAs until that threshold is met? / A: Management confirms its longstanding policy that prices need to cross the reinvestment level before new LTAs are signed. Current spot pricing for 300mm wafers is improving on small volumes, but has not yet reached this threshold. The exact reinvestment level varies by LTA based on product specifications, as cost increases from inflation have been partially offset by manufacturing scale effects, so no fixed universal threshold relative to prior cycle peaks is given. Siltronic will wait for further pricing recovery before committing to new long-term agreements.

Q: Beyond being an opportunistic strengthening of the balance sheet, does the recent capital increase signal that management expects to accelerate capital expenditure faster than originally planned to meet faster-than-expected demand recovery in 2027 and 2028? / A: The capital increase was primarily done to capture a favorable market window and broaden financial flexibility for future opportunities. Management confirms the FabNext ramp in Singapore is back on track after a prior slowdown, and it is progressing smoothly with strong volume growth. While further capacity expansion will eventually be needed at FabNext, management will only commit to new brownfield capex once 300mm pricing has recovered sufficiently to justify additional investments, so no accelerated capex plan has been locked in.

Q: What is Siltronic's view on the long-term industry supply-demand balance, and could the wafer industry enter a shortage period in the next few years amid strong AI-driven chip capacity expansion? / A: Currently, there is still slightly more wafer supply than industry demand, but management notes this balance could shift quickly over the next few quarters. The key indicator of a tightening balance will be broad-based pricing increases. Until pricing rises enough to justify new capacity investments, wafer suppliers will hold back on new expansion, which will eventually rebalance the market by tightening supply. Management states that a meaningful broad price increase is necessary to rebalance value capture across the semiconductor supply chain after two years of difficult conditions for wafer manufacturers.

Q: What has driven the recent 200 millimeter recovery, and is this pickup sustainable? Are you seeing new customer interest including from Chinese customers? / A: The recovery is driven by rising demand for power chips for data center power management and infrastructure, which is now translating into higher wafer demand after customer inventory adjustments. Volume growth has picked up significantly and is expected to continue, making the recovery sustainable rather than a temporary one-quarter effect. Siltronic receives 200 millimeter inquiries from customers globally, including China, where even Chinese chipmakers seek out established western suppliers for advanced 200 millimeter specifications. Management cautions that the segment still faces low base pricing and negative product mix, so meaningful margin improvement will take time as pricing recovers.