Laser manufacturer DIT signs KRW 20.52 billion agreement

Recently, DIT, a well-known semiconductor and display equipment manufacturer in South Korea, announced that the company has signed an agreement worth 20.52 billion Korean won to supply wafer processing equipment to SK Hynix. After the announcement, DIT's stock price rose for five consecutive days, entering the 16000 Korean won range. Then on the 22nd, it rose 2580 Korean won from the previous day's closing price, reaching the 18000 Korean won range in one go.

DIT is a manufacturer of semiconductors, displays, secondary batteries, and laser application equipment. The company was founded in 2005 and went public on the KOSDAQ market in 2018. The company's main products include AOI solutions, laser solutions, and VISION AI solutions.

According to its financial report data, as of the third quarter of 2024, DIT's AOI solution sales accounted for 36.9% and laser solution sales accounted for 59.5%. It is not difficult to see that the traditional AOI equipment market is becoming saturated, while laser solutions have become a new growth pole due to their unique advantages in semiconductor manufacturing.

Since being listed as a first level partner of SK Hynix, DIT has been jointly developing laser annealing equipment with the company. The comprehensive supply contract has been signed in 2023. According to DIT's 2022 financial report, its sales share of laser solutions was only 5.9% in 2022, but it increased to 15.1% by 2023 and has accumulated over 50% in the past three quarters.

In January and July 2024, DIT signed semiconductor manufacturing equipment supply contracts worth KRW 14.9 billion and KRW 10.8 billion respectively with SK Hynix. In September, an additional contract worth KRW 12.9 billion was signed, originally scheduled to expire on January 14, 2025. However, due to changes in SK Hynix's equipment delivery plan, the contract was postponed by one month until January 20.

On January 13th, DIT announced the signing of its first supply contract for 2025, with a confirmed contract amount of approximately 20.5 billion Korean won, equivalent to 19.2% of DIT's sales in 2023. The contract to supply semiconductor manufacturing equipment to SK Hynix's Lichuan factory will expire on April 30th. Among them, 90% of the payment should be made within 30 days after the equipment is delivered, and the remaining payment should be made within 30 days after inspection. If the equipment is delivered as planned, DIT expects to recognize revenue of tens of billions of Korean won in the first half of this year.

The transformation of financial data confirms the qualitative change in business structure. Despite a year-on-year decrease of 5.9% in DIT sales to KRW 67.4 billion in the first three quarters of 2024, operating profit surged by 396.3% to KRW 13.4 billion. Behind this contrast is the strong driving force of laser equipment's gross profit margin of over 40% on performance, as well as the scale effect brought by SK Hynix's centralized order delivery.

With the recovery of investment in semiconductor giants, DIT will achieve strong performance this year. Previously, industry insiders predicted that DIT's operating profit in 2025 would reach 38.3 billion Korean won, the highest level in history.

It is expected that starting from 2025, DIT's main customers will carry out 3D NAND conversion investments, reaching 200 and 300 units. If NAND conversion investments are also carried out from 2025 to 2026, the company's profitability will be highlighted by the surge in demand for laser annealing equipment.

It seems that DIT is expected to successfully commercialize a new type of semiconductor equipment - laser cutting equipment - by 2025, which will benefit from the investment trend in advanced packaging of memory semiconductors. The differentiation of DIT lies in "binding top customers+card slot segmentation track", and its valuation logic has switched from traditional equipment suppliers to technology solution providers.

However, there are also hidden concerns. DIT's customer concentration is too high, and SK Hynix contributes over 70% of its revenue, which deeply links its performance with the investment cycle of storage chips. Once the industry enters a downturn cycle, its ability to resist risks will be tested.

Looking ahead, the fate of DIT is closely intertwined with two major trends. One is the intense competition for 3D NAND layers - the 300 layer mass production plan of SK Hynix and Samsung in 2025 will stimulate a surge in demand for laser annealing equipment; The second is the wave of localization of semiconductor equipment in South Korea, and the South Korean side plans to further increase self-sufficiency, which provides policy dividends for DIT's laser cutting equipment. However, the road to commercialization of technology is not smooth. 

Previously, DIT's R&D expense ratio was only 8%, lower than the industry average, and its IR department has been criticized for slow communication, which may affect long-term competitiveness.

The rise of DIT is not only a microcosm of the localization of semiconductor equipment in South Korea, but also reflects the opportunity of the "technology long tail market" in the global industrial chain reconstruction. When laser technology encounters the Moore's Law bottleneck of storage chips, this former small and medium-sized enterprise is trying to open up a new continent in the cracks of giants through "precise blasting". The frenzy of the capital market may just be the prelude to this technological revolution.

Source: Yangtze River Delta Laser Alliance