PETALING JAYA: Despite the softness in UWC Bhd

’s back-end (BE) segment, Phillip Capital Research remains positive on its front-end (FE) business, which is expected to be the key earnings growth in financial year 2025 (FY25) .

Although UWC’s second quarter of FY25 (2Q25) recovery fell short of expectations weighed down by lower-than-expected production yields in the front-end segment, the company’s management is working to reduce defect levels, it noted.

Until then, the research house said 3Q25 performance would likely remain flat, with a more meaningful recovery anticipated by 4Q25.

“UWC is focusing on etching and wet deposition for its FE business, which is expected to be the primary earnings growth driver, accounting for 65% to70% of the FE order book.

“The dry etching legacy production is expected to sustain its current run rate,” the research house added. UWC’s order book stands at RM160mil, comprising semiconductor (76%), life sciences (19%), and remaining 5% from other sectors, with the FE business accounting for 35% of the total order book.

The BE segment outlook remains subdued amid uncertainty surrounding its primary BE customer and further delays in customer orders. It said the management highlighted a slowdown in test handlers orders, which declined from 12 units per week in Dec 2024 to eight units in January 2025.

The lower run-rate is expected to persist until new models launch, keeping BE utilisation rate below 50%. UWC’s capacity expansion remains on track with building six scheduled for completion by March this year, with the ground floor dedicated to chamber production. Building seven, which houses lithography painting, is set to be ready by April 2025.

Phillip Capital Research has maintained its “buy” call with a 12-month target price of RM2.60.