SINGAPORE: The semiconductor industry, in a slump since 2022, is now showing signs of recovery. After a period of decline, World Semiconductor Trade Statistics (WSTS) has forecast a 19 per cent year-on-year (YoY) rise in market growth for 2024, pushing the industry’s valuation to US$627 billion (S$850 billion).
This momentum is expected to continue in 2025, with a projected 11.2% year-over-year increase, pushing the market to US$697 billion (S$945 billion).
Singapore Manufacturing Federation (SMF) president Lennon Tan also recently stated that the advanced manufacturing industries, including semiconductor and electronics producers, will see the most substantial growth this year, driven by AI adoption and increased demand for personal computers.
According to The Smart Investor, here are four semiconductor stocks to consider as the industry rebounds.
1. Micro-Mechanics Holdings
Micro-Mechanics (MMH) provides high-precision tools and components for semiconductor wafer production and assembly. It operates in China, Malaysia, Singapore, the Philippines, and the US.
For the first quarter of fiscal 2025 (Q1 FY2025), revenue increased by 2.5 per cent YoY to S$16.2 million, while net profit rose 14 per cent YoY to S$3.1 million.
The gross margin improved slightly, from 48.8% in Q1 FY2024 to 50.7% in Q1 FY2025. MMH also generated S$3.2 million in positive cash flow and continues to improve operations at its US subsidiary, MMUS.
MMH plans to continue its “five-star factory” initiative for sustainable success, maintain its record of zero bank borrowings, and provide investors with steady dividends.
2. UMS Integration Ltd
Singapore-headquartered UMS Integration provides manufacturing and engineering services for semiconductor original equipment manufacturers (OEMs). It has facilities in Malaysia, Singapore, and the USA.
Despite a challenging 2024, when revenue fell 23% year over year to S$174.9 million and net profit declined 33% to S$29.5 million in the first nine months (9M 2024) due to weaker global chip demand, the company maintained a strong balance sheet with S$74.1 million in cash and only S$1.1 million in debt.
For the same period, the company generated a positive free cash flow of S$7.4 million and paid an interim dividend of S$0.01, slightly down from last year’s S$0.012.
UMS CEO Andy Luong remains optimistic, as the Semiconductor Industry Association (SIA) and Boston Consulting Group forecast an improvement in supply chain resilience for the semiconductor sector.
US fab capacity is also expected to triple by 2032, with DRAM memory, analogue, and advanced packaging growth.
A new key customer has asked UMS Integration to increase production in the coming months. The company also plans a secondary listing on Bursa Malaysia to access capital from other markets.
3. AEM Holdings
AEM Holdings provides semiconductor and electronic test solutions. Its manufacturing facilities are in Finland, Indonesia, Malaysia, Singapore, South Korea, the US, and Vietnam.
The company reported a net loss in the third quarter of 2024 (Q3 2024), though it improved from the previous quarter’s S$1.5 million loss. Revenue for Q3 2024 also declined 6.5 per cent compared with the previous quarter.
AEM focuses on market segment diversification and investment to drive the company’s revenue and retain its Test 2.0 leadership. AEM has ample growth opportunities, with the AI semiconductor market set to grow 22% annually to US$119.4 billion (S$161.9 billion) from 2023 to 2027.
4. Frencken Group
Frencken provides integrated technology solutions in the life sciences, automotive, healthcare, and semiconductor industries. It operates 19 sites globally and has over 3,700 staff.
For 9M 2024, revenue increased by 6.7% YoY to S$571.3 million, while gross margin rose from 12.4% to 14.5%. The group’s net profit also surged 42.5% to S$27.3 million. At the end of Q3 2024, it had S$40.8 million in net cash.
The management is optimistic about the semiconductor industry’s recovery and expects higher revenue in the second half of 2024 compared to the first half. /TISG
Read also: Singapore stocks to watch in 2025: 4 top picks for the new year
Featured image by Depositphotos (for illustration purposes only)