DISCO CORPORATION

Business Details

DISCO leverages its core "Kiru・Kezuru・Migaku" (cut, grind, polish) technologies to manufacture and sell Precision Processing Equipment such as dicing saws and grinders, along with Precision Processing Tools, which are consumables. Its customers are mainly semiconductor and electronic component manufacturers, and it provides total solutions combining equipment, consumables, and application technology. Backed by free test cuts that solve customer challenges and a resulting high market share, the company's accumulated know-how of over 60 years forms a high barrier to entry. In FY2026 (ending March 2026), both net sales and shipment value renewed record highs for the sixth consecutive fiscal period.

Recent Overview

Both net sales and shipment value renewed record highs for the sixth consecutive fiscal period, achieving increased revenue and profit

In FY2026 (ending March 2026), the company achieved net sales of ¥436,889 million (up 11.1% year on year) and operating profit of ¥184,989 million (up 10.9% year on year). Continued data center-related investment amid expanding generative AI demand kept demand for advanced logic and HBM at a high level. Sales to Taiwan increased significantly to ¥117,378 million (from ¥74,404 million in the prior period), with sales to TSMC reaching ¥48,240 million. Meanwhile, despite a slight decline in gross profit margin due to changes in product and application mix and increases in personnel and R&D expenses, profit growth was secured through the earnings contribution of high-value-added products. In investing activities, the company actively pursued capital expenditures, including a ¥100,000 million placement in time deposits, resulting in negative free cash flow of ¥22,250 million. For the first quarter of FY2027 (ending March 2027), the company forecasts net sales of ¥106,100 million (up 18.0% year on year) and operating profit of ¥42,000 million (up 21.8% year on year), assuming an exchange rate of ¥157 to the US dollar.

Key Products

Growth Drivers

• Continued expansion of data center-related investment amid growing generative AI demand
• Sustained high-level demand for high-performance semiconductors for advanced logic and HBM (High Bandwidth Memory)
• Significant increase in sales to Taiwan (from ¥74,404 million in the prior period to ¥117,378 million in the current period) and expanded sales to TSMC (¥48,240 million)
• Gradual recovery in demand for PCs and smartphones
• Increased revenue and profit driven by earnings contribution from high-value-added products
• Maintenance of a highly profitable structure, achieving a 4-year cumulative ordinary profit margin of 20% or higher for 10 consecutive fiscal periods
• Expansion of production capacity through active capital investment in manufacturing land, buildings, and other facilities (construction in progress rose from ¥16,946 million in the prior period to ¥33,885 million in the current period)

Risks

• Risk of sharp demand fluctuations due to the silicon cycle in the semiconductor industry (given the risk of sudden shifts in customer investment appetite over short periods, earnings guidance is disclosed only one quarter ahead)
• Sluggish demand for power semiconductors amid slowing EV demand
• Risk of gross profit margin decline due to changes in product and application mix
• Pressure on profit margins from continued increases in personnel and R&D expenses
• Foreign exchange risk (the company recorded a foreign exchange loss of ¥1,212 million in the current period; assumed exchange rate of ¥157 to the US dollar)
• Risk of concentration of sales to China (¥134,975 million in the current period, approximately 30.9% of total sales)
• Declining trend in ROE, down from 27.6% in the prior period to 25.1% in the current period, indicating a risk of reduced capital efficiency as asset scale expands
• Free cash flow turning negative due to large-scale investments, including a ¥100,000 million placement in time deposits