XALLOY Advanced Materials (7918 TT): Advanced Materials Ramp Accelerates; VAS Growth Supports Earnings Quality
Company Overview
XALLOY Advanced Materials Corporation (7918 TT) is a semiconductor advanced materials platform spun off from Solar Applied Materials in 2025. The company focuses on front-end advanced processes, advanced packaging, specialty process materials, and circular economy services, with products including CuP anode, NiPt target, Cu alloy sputtering targets, Ta coil, Ru target, and spent target recycling solutions. Supported by major foundry customer qualifications, XALLOY is positioning itself as a higher-value semiconductor materials and services platform.
Key Points
Revenue Scale-Up, Timing-Driven Margin Pressure: XALLOY reported 2Q26 revenue of NT$1.76bn, up 29% QoQ, driven mainly by advanced packaging-related precious metal materials. Precious metal materials revenue rose 41% QoQ, while non-precious metals and others revenue grew 12% QoQ, showing continued scale-up across both materials sales and processing-related activities. Reported gross margin declined to 18% from 29% in 1Q26, mainly due to IFRS 15 revenue recognition timing and an inventory valuation loss of approximately NT$141mn. Excluding this impact, adjusted gross margin would have been 26.4%. We view 2Q26 as a timing-driven transition quarter rather than structural margin deterioration.
H2 Shipments to Drive Recognition Normalization: For the new advanced packaging business, XALLOY adopted a customer prepayment model for precious-metal procurement, with gold prices locked in at purchase. Part of April–June invoiced revenue had not yet been physically delivered and was deferred under IFRS 15, but these orders remain valid and are expected to ship progressively in H2. The inventory valuation loss was also mainly related to priced or prepaid precious metal positions not yet shipped. We believe H2 shipment execution, workforce ramp-up and fading valuation impacts will be key to reported margin normalization.
VAS Provides a Cleaner Earnings Lens: XALLOY’s revenue structure should be analyzed beyond headline precious metal materials revenue, which is more sensitive to metal prices, shipment timing and transaction structures. The non-precious metals and others revenue bucket, including non-precious metal materials, materials processing VAS and other related revenue, provides a clearer read-through on processing capability, materials service value and advanced process penetration. We believe growth in non-precious metals and VAS revenue, VAS penetration and circular economy adoption will increasingly define XALLOY’s economics as a high-value semiconductor materials and services platform.
Qualifications and Capacity Support Medium-Term Growth: XALLOY has obtained qualifications from major foundry customers which collectively represent nearly 80% of the global foundry market. These qualifications are lengthy and closely tied to yield, reliability, contamination control and supply stability, creating meaningful customer stickiness. XALLOY plans to invest NT$0.7–1.5bn over the next three to five years to expand capabilities in ultra-clean melting, high-purity refining, recycled raw materials, forming, precision machining and high-purity cleaning. We believe medium-term growth will depend on qualified product ramp-up, VAS growth and capacity execution.
