VAT Group: Riding the Semiconductor Wave to 2027 and Beyond

The semiconductor industry is undergoing a seismic shift, driven by AI, 5G, and the global push for technological self-sufficiency. Amid this transformation, VAT Group (VTGN) stands as the unsung hero of advanced manufacturing—a company whose precision vacuum valves are the unsung backbone of next-gen chips. While near-term headwinds like currency volatility and geopolitical tensions have kept shares muted, the long-term structural tailwinds for VAT are undeniable. Let’s break down why this is a buy now for investors with a 5+ year horizon.

1. Dominance in Vacuum Valves: The 70% Market Share Moat

VAT isn’t just a player—it’s the gatekeeper of vacuum valves for advanced semiconductors. With a 70% market share in this niche, its valves are mission-critical for cutting-edge processes like 2nm node manufacturing, gate-all-around (GAA) architectures, and atomic layer deposition (ALD). These technologies are the lifeblood of AI chips, 5G infrastructure, and high-performance computing.

The strategic brilliance here is VAT’s capacity expansion. Its Penang, Malaysia facility—now producing over CHF 1 billion annually—has doubled output, while its new Innovation Center in Switzerland (opening 2025) will supercharge R&D. Pair this with CHF 61M in annual R&D (6.5% of sales) and 132 new specifications secured in 2024 alone, and you’ve got a moat that’s widening, not shrinking.

2. Semiconductor Growth: A $150B Market by 2029—And VAT’s Positioning

The semiconductor industry is on fire. WFE spending is projected to hit $150 billion by 2029, up from $100B in 2024, fueled by:
- AI & Digitalization: Hyperscalers are racing to build AI data centers, requiring advanced chips that VAT’s customers (like ASML and Lam Research) produce.
- Chinese Self-Sufficiency: China’s WFE spending hit $41B in 2024 (33% of global total), and it’s only getting started. VAT supplies both domestic Chinese toolmakers and legacy suppliers, making it a must-have partner.
- Tech Transitions: The shift to 2nm nodes and HBM (High Bandwidth Memory) is valve-heavy, with deposition/etch tools—VAT’s core—representing 45% of all WFE spending.

VAT isn’t just riding this wave—it’s shaping it. Its valves are in every leading-edge fab, and its 70% market share in this segment gives it pricing power.

3. Overcoming Near-Term Challenges: Currency, Geopolitics, and More

Of course, no stock is without hurdles. VAT’s shares have been held back by:
- CHF Strength: A strong Swiss franc reduced sales growth by 3% in 2024. But VAT has hedging strategies in place, and its penetration into dollar-denominated markets (like the U.S.) is rising.
- Geopolitical Risks: Tariffs and trade restrictions could disrupt supply chains. However, VAT’s global footprint (Malaysia, Switzerland, China) and diversified customer base mitigate this.
- Inventory Management: Customers normalized inventories in 2024, but fab utilization rates hit 80%, driving retrofit demand that VAT’s Global Service segment will capitalize on.

The key? These are transient issues. The EBITDA margin remains resilient at 31.2% (target: 30-37%), and ROIC stays north of 45%—proof that VAT’s operational excellence can weather storms.

4. Financial Fortitude: EBITDA, ROIC, and Free Cash Flow

• Margin Resilience: Despite 2024’s headwinds, VAT’s EBITDA margin expanded to 31.2%, nearing its target range.
• ROIC >45%: A metric that screams “capital allocation mastery.”
• Free Cash Flow: CHF 183M in 2024, with plans to boost capex to CHF 90-100M in 2025—investing in growth without sacrificing liquidity.
• Dividend Stability: The CHF 6.25/share payout remains intact, signaling confidence in cash flow.

5. The Buy Case: Why Now?

VAT’s stock has lagged semiconductor peers due to short-term concerns. But this is precisely why it’s a buying opportunity. The company’s 2025 guidance (20% sales growth) and 2026 outlook (10% more) set the stage for 2027 sales to eclipse CHF 1.5B, with margins hitting the upper end of its target range.

The secular trends are unassailable:
- AI/5G demand: VAT’s valves are in every tool that builds these chips.
- Clean Energy: Nuclear fusion and silicon carbide (SiC) applications are adjacent markets with strong tailwinds.
- Service Business Growth: As fabs upgrade to 3nm nodes, VAT’s spares and retrofit services will soar.

Final Pitch: Buy VAT for the Next Decade

VAT isn’t a flash-in-the-pan semiconductor play. It’s a materials science powerhouse with a 70% market share in a $150B+ industry. The near-term noise—currency, inventory cycles, geopolitics—is temporary. The long-term story—dominance in advanced nodes, AI-driven demand, and clean energy—is forever.

Action: Buy VAT now. The stock is cheap relative to its growth trajectory, and with ROIC >45%, it’s a cash-generating machine for investors who can look past the noise.

This is a call to action for long-term investors. The semiconductor cycle is turning, and VAT Group is positioned to lead it.