Investor Serenity Labels XFAB as Undervalued Due to Growth Potential in SiC, GaN, and Silicon Photonics

ME News report, June 1 (UTC+8): "Stock God" Serenity posted insights on the investment thesis for Belgian wafer foundry XFAB. He believes that as demand grows for 800V power architectures, AI data centers, and power semiconductors, the SiC (silicon carbide) and GaN (gallium nitride) supply chains are poised to benefit continuously. As the only high-capacity pure-play SiC foundry in the West, XFAB holds a critical position in the restructuring of Western semiconductor supply chains. Serenity noted that XFAB has already achieved mass production of advanced 6-inch SiC processes and is expanding its 8-inch GaN capacity, with future plans to potentially enter 8-inch SiC production under support from the U.S. CHIPS Act. The company’s SiC revenue grew 152% year-over-year; however, due to sluggish conditions in the automotive industry, this growth potential has not yet been fully reflected in market valuations. Additionally, power semiconductor firms such as Navitas (NVTS) and Power Integrations (POWI) maintain partnerships with XFAB, positioning it as a key beneficiary in the AI power and 800V architecture supply chains. He further highlighted that the U.S. Department of Commerce has recognized XFAB as the sole high-capacity SiC foundry in the United States, granting it approximately $50 million in government support. Meanwhile, the European Union has provided around €128 million under the European Chips Act to support MEMS and AI-related capacity expansion, along with an additional €47.6 million to advance silicon photonics supply chains. Serenity believes these subsidies and official recognitions from both U.S. and EU governments underscore XFAB’s strategic importance within critical supply chains. On valuation, Serenity pointed out that XFAB’s current price-to-book ratio is only about 1.28x. Based on his calculations of the wafer fab’s replacement cost, the company’s actual market price may even fall below its replacement value. He argues that investors are essentially acquiring the existing business at a low valuation while gaining free call options on future growth in SiC, GaN, and silicon photonics businesses. Overall, Serenity believes XFAB’s downside risk is limited, and with catalysts including supply chain restructuring in the U.S. and Europe, ongoing chip subsidies, and the commercialization of silicon photonics, the company could see a valuation re-rating of approximately 2.5x to 4x in the future. (Source: BlockBeats)