The semiconductor sector forms the backbone of our technological progress.
These components power everything from our smartphones and laptops to television sets and kitchen appliances.
The pandemic created a surge in demand for digitalisation, pushing global semiconductor sales to a record US$600.3 billion in 2022, according to the World Semiconductor Trade Statistics (WSTS).
However, WSTS reported that chip sales plunged 13.7% to US$518.1 billion in 2023 and are expected to recover back to its 2022 only by the end of this year.
If you are looking to ride the recovery wave, here are six semiconductor-related stocks that could be poised to surge once the rebound takes hold.
Frencken Group (SGX: E28)
Frencken is a global integrated solutions company that serves customers in semiconductor, life sciences, automotive, and medical and healthcare sectors.
For the first half of 2024 (1H 2024), Frencken saw revenue rise 6.2% year on year to S$372.7 million.
Gross profit surged 27.6% year on year to S$55.2 million while net profit soared 50.3% year on year to S$18.1 million.
The group also generated a positive free cash flow of S$2.2 million for the period.
Frencken will work on existing programmes and engage its key customers to introduce new products.
It expects its 2H 2024 revenue to be higher than 1H 2024, driven by its semiconductor segment which is expected to post higher revenue.
Micro-Mechanics (Holdings) Ltd (SGX: 5DD)
Micro-Mechanics (Holdings), or MMH, designs and manufactures high precision tools and parts used in the wafer fabrication and assembly processes of the semiconductor industry.
MMH reported a downbeat set of earnings for its fiscal 2024 (FY2024) ending 30 June 2024.
Revenue fell by 13.6% year on year to S$57.9 million with gross profit declining by 12.8% year on year to S$27.2 million.
Net profit tumbled 17.7% year on year to S$8 million.
Despite the fall in net profit, MMH still generated a positive free cash flow of S$12.1 million for FY2024.
The parts and consumables company also declared a final dividend of S$0.03, taking its FY2024 dividend to S$0.06.
MMH had laid down key initiatives for FY2025 – to achieve profitability for its US subsidiary and with cost reduction efforts and to implement its “five-star factory” initiative to improve operating efficiency.
Venture Corporation Limited (SGX: V03)
Venture is a blue-chip provider of technology products, services, and solutions.
The group serves diverse technology domains such as healthcare, advanced industrial, computing, and medical devices.
For 1H 2024, Venture announced that revenue fell 12.5% year on year to S$1.4 billion.
Net profit dipped by 11.7% year on year to S$123.7 million.
Venture generated a positive free cash flow of S$260.3 million for 1H 2024, 13.4% higher year on year.
The contract manufacturer declared an interim dividend of S$0.25.
The group is pursuing initiatives to improve its performance in 2H 2024 such as onboarding new customers, new product introductions, and supporting customers with risk mitigation strategies.
UMS Integration Ltd (SGX: 558)
UMS Integration provides equipment manufacturing and engineering services to original equipment manufacturers of semiconductor and related products.
UMS also reported a downbeat set of earnings for 1H 2024 because of the semiconductor downturn.
Revenue tumbled 29% year on year to S$109.9 million while net profit fell 34% year on year to S$19.1 million.
The group generated a slightly negative free cash flow of S$1.3 million.
The interim dividend declared was S$0.01, a slight drop from the S$0.012 paid out a year ago.
UMS Integration is optimistic about the future and has expanded its production capacity following the completion of its new Penang facilities.
Two key customers have also committed major expansion plans and the group is well-positioned to capitalise on the post-COVID aviation and travel boom.
AEM Holdings Ltd (SGX: AWX)
AEM provides comprehensive semiconductor and electronics test solutions and has manufacturing plants in Singapore, Malaysia, Indonesia, Vietnam, South Korea, the US, and Finland.
Revenue for 1H 2024 fell nearly 37% year on year to S$173.6 million because of weak demand from its key customer and prolonged inventory oversupply in the industrial sector.
Net profit plunged by 95.8% year on year to just S$822 million and was affected by a one-time restructuring cost and disposal of non-core assets.
AEM is accelerating efforts to commercialise more technologies through its research and development investments.
It recently announced a new AMPS-BL system that can enable high-voltage stress testing of artificial intelligence (AI) devices’ increasing demand for higher power dissipation.
The group also received an initial order of over S$20 million to support a customers’ early production ramp with delivery expected in the fourth quarter of this year.
Grand Venture Technology (SGX: JLB)
Grand Venture Technology, or GVT, is a solutions and service provider for the manufacture of complex precision machining, sheet metal components, and mechatronics modules.
The group reported a commendable set of earnings for 1H 2024 as revenue jumped 26.8% year on year to S$68.3 million.
Gross profit increased by 33.2% year on year to S$18 million as gross margin improved from 25.1% to 26.4%.
Net profit climbed 26.6% year on year to S$4.3 million.
Management displayed cautious optimism that there will be a gradual improvement in the semiconductor sector by the end of this year and strengthening into 2025.
Structural drivers such as AI and a shift towards increasing chip complexity should drive equipment demand moving forward.
GVT expects 2H 2024 revenue to be between S$80 million to S$86 million, registering a year-on-year growth of between 39.3% to 49.7%.
Dive into the future of technology with our newest FREE report, “The Rise of Titans.” Discover how the big 7 US tech stocks can be your ticket to huge long-term gains. Download your copy today and see how easy it is to supercharge your portfolio.
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclosure: Royston Yang owns shares of Micro-Mechanics.
