Photronics Eyes Advanced Mask Growth With Texas, Korea Capacity Push

Photronics is shifting toward higher-end photomasks, with advanced semiconductor products reaching a record 44% of its semiconductor business. More advanced nodes require more mask layers and can generate substantially higher revenue per mask set.

The company is expanding capacity in Texas and South Korea: Allen, Texas, is being upgraded for 65-nanometer production, while the Korean facility is being expanded to support 8-nanometer masks. The investments are designed to support U.S. semiconductor reshoring and free Boise capacity for more advanced work. Photronics remains in an elevated capital-spending cycle, while near-term conditions are improving as delayed chip designs resume. Management expects next-quarter revenue to be flat to slightly higher sequentially, with gross margin holding near 33%.

Photronics NASDAQ: PLAB is positioning its investment program around higher-end photomask production, U.S. semiconductor reshoring and expanding demand for advanced display technologies, Vice President of Investor Relations Ted Moreau said during a Midwest IDEAS Conference presentation. The company produces photomasks, glass plates etched with semiconductor or display designs that are used in lithography to transfer circuit patterns onto wafers or display panels. Moreau emphasized that Photronics’ business is driven primarily by semiconductor design releases rather than wafer starts or semiconductor-fabrication equipment demand.

“You absolutely have to have a set of photomasks” to manufacture a chip design, Moreau said. As chip geometries become more advanced, each design requires more mask layers, increasing both photomask unit volumes and average selling prices. Higher-End Mix and Pricing Opportunity Semiconductor photomasks account for roughly three-quarters of Photronics’ business, while display masks comprise the remaining quarter. The company divides each segment into high-end and mainstream categories, with its semiconductor high-end category spanning nodes from 28 nanometers down to 7 nanometers.

AI high-end semiconductor products represented 44% of Photronics’ semiconductor business in its most recent quarter, Moreau said, the company’s highest such percentage to date. He said a transition toward more advanced nodes can materially lift revenue per mask set. At 90 nanometers, a mask set can generate about $50,000 in revenue, according to a Morgan Stanley report Moreau cited. At 14 nanometers, a design may require 70 to 80 masks and generate about $1 million per set. At 5 nanometers, a mask set can represent roughly $10 million to $20 million in revenue.

Photronics currently produces masks down to 7 nanometers at its Boise, Idaho, facility. Moreau said the company is advancing capabilities at that site toward 4 nanometers, though it is not currently generating revenue from that capability. The company is also expanding its Korean semiconductor facility to support production down to 8 nanometers, with that upgrade expected to be completed in about a year. Moreau said much of the most advanced extreme ultraviolet, or EUV, photomask market remains captive, meaning it is produced internally by semiconductor manufacturers. He said Photronics has a multi-year plan to develop EUV capabilities selectively as outsourced opportunities emerge. A full EUV program could cost about $300 million, he said, prompting a cautious investment approach.

Capacity Expansions in Texas and Korea Photronics operates 11 c...