Sustainable Growth Advisers, LP - Global Growth Composite on DISCO Corporation
Thesis
SGA initiated DISCO because of its dominant position in semiconductor cutting, grinding, and thinning equipment, where it estimates market share of roughly 70% to 80%. A meaningful recurring revenue stream comes from consumables, maintenance parts, and services tied to a large installed equipment base. Advanced packaging for AI, high-bandwidth memory, hybrid bonding, silicon photonics, and increasingly complex semiconductor architectures should increase processing steps and equipment intensity per wafer. SGA believes this combination of market leadership, recurring revenue, exceptional margins, and structural semiconductor demand can support low-20% revenue growth and high-20% earnings growth over the next three years.
“With dominant market share, highly recurring revenues, industry-leading profitability, and exposure to some of the most important secular growth trends in semiconductors, we believe Disco is well positioned to deliver low-20% revenue growth and high-20% earnings growth over the next three years.”
Key risks
- Cyclicality in semiconductor capital spending
- Delays in adoption of hybrid bonding and co-packaged optics
- China exposure and efforts to develop domestic semiconductor equipment alternatives