Key insights
- The article highlights Photronics (PLAB) as a critical, often overlooked, enabler of the AI chip boom. PLAB and Toppan are the only two companies producing advanced photomasks (outlines) needed for chip manufacturing. As demand for custom AI chips increases, PLAB benefits from increased orders. The CHIPS Act and expansion of US-based fabs further boost PLAB's prospects. The author suggests PLAB is undervalued given its strategic position and financial health.
Imagine coloring books. Before any kid can color, someone has to draw the outlines first. No outlines, no coloring book. PLAB draws the outlines. TSMC does the coloring.
Only two companies in the world make these outlines at the advanced level — PLAB (USA) and Toppan (Japanese, not US listed). That’s it. The entire planet’s AI chip supply runs through two doors.
Every company wants their own custom AI chip now. NVIDIA, AMD, Amazon, Google, Microsoft, Apple — all of them. Every single one of those chips needs its own set of outlines before TSMC can color them in. More custom chips = more outlines needed = more work for PLAB.
And here’s the thing. It doesn’t matter who wins the AI chip race. TSMC colors all of their books. And PLAB draws the outlines for all of them. Every new chip design, every new version, every refresh — new set of outlines. Every time. TSMC’s real job is coloring. That’s where the big money is. Every minute they spend drawing outlines is a minute they’re not coloring books for NVIDIA.
So TSMC colors. Sends the outline work to PLAB. Now everyone and their mom wants AI coloring books. TSMC is slammed. Can’t keep up with coloring orders, definitely can’t stop to draw outlines too. More outline work goes to PLAB. Not because TSMC wants to share. Because they have no choice. The busier TSMC gets, the more PLAB wins. PLAB doesn’t compete with TSMC. PLAB is the guy making sure TSMC never runs out of coloring books to color.
2B company. Zero debt. Buying back shares. 17 p/e (below semi average of 20-25). The entire AI boom literally starts here and it’s priced like a grocery store stock since they don’t use the word AI.
Oh and the CHIPS Act? Billions pouring into new fabs across the US. Intel, TSMC, Samsung all building stateside. Every single one of those new fabs needs outlines before they print a single chip. That demand hasn’t even started flowing yet. More fabs = more coloring books = more outlines = more PLAB. And the market hasn’t priced in a single dollar of it.