AEM holding (SGX:AWX) World class automated testing equipment supplier in Singapore. (English version)

 Today I will take you to learn about AEM holding (SGX:AWX), a Singapore exchange listed technology company. I believe investors in Singapore must be familiar with this company. The company used to be an unknown company (my own impression) [but AEM was known for their high dividends. Have you ever seen high dividends paid by technology stocks? ]  The turning point of everything happened in 2017. YoY FY2017 net profit grew 560%, YoY FY 2018 net profit grew 3%, FY2019 net profit grew 56%, and 9MFY2020 net profit grew 121%. This also confirms that company growth is the core of value investment. Likewise, unsustainable and explosive profit growth happened in glove companies is a value trap. After all, everyone does not want to live with assets that are not productive. Only companies that continue to grow are valuable , this is what I believe. The exponential growth of AEM holding is mainly attributed to its main customer (INTEL corporation) increasing production and increasing reliance on AEM. Now the main customer accounts for 9X% of its turnover as of 9MFY2020.

Now let’s take a look at the company’s products. The company's main products are ATE machines used in semiconductors. ATE machine can be divided into two parts, one is tester/probe and test handler. Probe is the sensor in the automatic test equipment. Its function is to detect wafer or packaged chips, mainly to screen out the problematic products. The test handler is an automatic device that performs tests. The company was only involved in the backend test handler before 2018, but the acquisition of Finland's Afore, the company has mastered the capabilities of tester on MEMS. The company's capabilities are only expanded at the bottom of the article, let's talk about the company's test handler first. The company's test handler has a special term high density and modular test (HDMT) handler. As the name implies, high density refers to high volume or fast processing and testing in a short time, and modular refers to modular design. This design greatly reduces the customer's future upgrade costs. (I don't know if ATE suppliers in Malaysia have the same design. Those who know the reader company may leave a message in the comment area to let me know.) HDMT can handle burn in, functional and system level testing. Burn in refers to testing whether the chip can operate normally under different voltage environments; functional test refers to the testing of chip function, just like RF chip testing whether it can transmit RF normally according to the design, logic chip and memory depends on He can calculate and store functions. Structural test mostly uses vision inspection to detect the defect of die assembly. System level testing is a technology that allows the chip to be connected to the operating system to completely simulate actual application scenarios. Currently this business contributes more than 90% of revenue. The 90% of the revenue includes the test handler itself and the test pan and kit used by the test handler. This test pan and kit is a consumable item. This comsumable item accounts for about half of the annual turnover, but the replacement cycle of this product is not clear. From the perspective of accounting for half of the turnover, I believe that the replacement cycle is quite fast, because compared to the test handler itself, the test pan and Kit is just a small object. Another test handler independently developed by the company-asynchronous modular parallel smart (AMPS) platform is an advanced version of HDMT. What are asynchronous and parallel? Asynchronous means that different test cells can operate at different stages at the same time. Parallelism refers to the simultaneous operation of all test cells to greatly reduce the standby time of test cells. Since system level testing is more time-consuming than other tests, the design of asynchronous and parallelism can greatly reduce the cost of testing. According to the company's report, the company's AMPS test cost is only 1/5 of the traditional ATE. The working temperature of this AMPS ranges from minus 40 degree Celsius to 160 degree Celsius. Such working temperature is extremely suitable for the testing of automotive chips. For your information, INTEL Mobileye autonomous car computer Chips has 70% market share. It seems likely that Intel will adopt this technology in the future. [My own opinion] Just now I said that Mu-test has just completed the acquisition in 2020; Mu-test’s main business is to provide low cost system level test cells. At present, the company is actively integrating Mu-test technology into its own AMPS. Before the acquisition, Mu-test's customers included CISCO and Thales. The company is currently cooperating with UTAC to develop testers for CMOS sensors. In the 2018 annual report, it is shown that the customer of this AMPS test handler is only an unnamed Memory manufacturer. Currently AMPS only contributes almost 1% of the annual revenue, but considering that the CAGR for the demand in  system level testing in the next five years can up to 21.6%, I believe that this segment has a huge room for growth. In the future, chip design will become more and more complex; such as the improvement of transistor size, 3D stacking, modular packaging, architecture, etc. In such a large environment, the coverage of backend structural and functional testing will become inadequate and system level testing is just a way to make up for the leaks.


In addition, the company also produces testers for testing fiber optic cables. The current main customer is HUAWEI. This business only started in 2017 (through acquisition of Insipirain), so soon there will be international big-name customers performing quite well; currently it only accounts for 0.5% of turnover. Afore (Finland), which the AEM acquired it in 2018,it is a test handler and tester supplier for MEMS chips. Examples of MEMS chips are accelerator, gyroscope, magnetic, temperature and so on. These chips are commonly used in mobile phones, automotive VSC systems, and IOT devices. According to the company's report, Afore is the world's only supplier MEMS Wafer level test handler. The backend test mentioned above is the test after the chip completes assembly and packaging. The advantage of wafer level test is that defects are found before packaging, which can save packaging cost then. In 2018, Afore occupied 6% of the global market. Afore also has the ability to test quantum computers' chips that operate at extremely low temperatures.


This is the company's technical article. Please look forward to the next issue of the financial article. Goodbye.


DisclaimerI have no intention of controlling the stock price; this is not a recommendation for buying or selling;  please make your own research on the company before make your trade.

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