In the Singapore market, there are two names you can look at to participate in the semiconductor sector: UMS Integration Limited (SGX: 558), or UMS, and AEM Holdings Limited (SGX: AWX), or AEM.
However, they differ in the customers they serve, their margins, and even their respective growth drivers.
Let’s take a closer look at UMS and AEM to see which name offers greater long-term growth potential.
Business Model Comparison
UMS focuses on front-end semiconductor equipment contract manufacturing.
A key customer of UMS is the semiconductor capital equipment supplier Applied Materials (NASDAQ: AMAT), whose business is dependent on the output/capital expenditure of semiconductor manufacturers.
This means that UMS’s revenue is also highly dependent on the same factor.
On the other hand, AEM focuses on testing and handling solutions for semiconductors.
The company has a strong relationship with major chip designer and manufacturer Intel (Nasdaq: INTC).
AEM’s revenue is mainly linked to the back-end testing demand of the semiconductor manufacturing process.
The increased complexity of chips is a beneficial trend for AEM.
Industry Context: Where Are We in the Semiconductor Cycle?
The semiconductor industry has historically been prone to booms and busts.
In the past, an oversupply in chips has led to a bust in the semiconductor cycle.
However, things might be a little different this time.
The strong demand for chips because of secular growth trends in AI and data centres, alongside a recovery in analog chip demand, means there could be some time before we hit peak demand.
Meanwhile, the semiconductor industry, especially for advanced chips, is in a sweet spot with demand exceeding supply.
Financial Snapshot
UMS’s revenue has grown at a steady compound annual growth rate (CAGR) of 8.7%, from S$104.2 million in 2016 to S$251.5 million as of the 12 months ended 30 September 2025.
Net profit, however, grew at a lower CAGR of 2.0% to S$41.6 million.
But in the first nine months of 2025 (9M2025), UMS’s net profit actually outgrew revenue, with year-on-year (YoY) growth of 7% compared to 5%.
UMS currently offers a trailing annualised dividend yield of 3%.
Its dividend payment history has been spotty, however, as there were no dividends from 2020 to 2023.
The company does have a fortress balance sheet, with zero borrowings and a cash position of S$38.2 million.
It is also a reliable cash machine, churning out an average annual free cash flow (FCF) of S$42.6 million over the past half-decade of completed financial years.
Revenue, since 2016, has grown at an impressive CAGR of 24.4%, with net income’s CAGR lagging at 10.7%.
AEM’s recent growth has been more tepid.
For 9M2025, AEM’s revenue was up 16% YoY, while net profit turned positive from a loss seen a year ago.
AEM does not currently pay a dividend – the company has not paid a dividend since 2023 – with management electing to reinvest profits into growing the business.
AEM is operating in a net debt position of S$13.1 million.
Its FCF generation is also more erratic compared to UMS: in AEM’s last five completed fiscal years, its annual FCF had averaged just S$19.7 million.
Growth Drivers
Looking ahead, UMS’s growth will be driven by the continued growth in semiconductor fabrication and any new long-term partnerships with semiconductor capital equipment providers.
Its steady dividend payment also provides some downside support in price.
AEM is riding the AI wave as chips get smaller and more complex, which makes advanced testing a necessity, not an option. It’s a direct play on the cloud and AI explosion.
Key Risks
Make no mistake, both UMS and AEM will suffer when the semiconductor market dips
Other common risks include customer concentration and margin compression during downturns, which can lead to volatile earnings.
Of course, execution risk has to be considered as well.
Valuation: Who Looks More Attractive Today?
Which company has a more attractive current valuation?
UMS’s share price has nearly doubled from a low of S$0.7280 to its current level of S$1.36 over the last year, with a current market capitalisation of S$1.21 billion.
AEM has also seen its share price nearly double from its low point over the last year to S$2.04 where it is currently trading.
The company has a current market capitalisation of S$638.7 million.
UMS currently trades at a lower trailing price-to-earnings (P/E) ratio of 29 compared to AEM’s 40.5, although AEM offers better growth.
Looking at possible income, UMS currently pays a dividend, while AEM does not offer any dividends.
Which Stock Fits Which Investor?
So, which stock should you buy?
For investors seeking income, UMS might be a suitable option given that it pays a dividend and has decent growth prospects.
For investors willing to stomach increased volatility while seeking growth and potentially higher upside, AEM might be the stock for you.
There is no absolute winner; what to own depends on what kind of investor you are.
Get Smart: Know What You’re Looking For
In all, both UMS and AEM offer exposure to the semiconductor industry, but their growth prospects depend on whether they can execute well.
If you’re an income-focused investor, UMS might be a better choice for you, while growth-focused investors can consider owning AEM.
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Disclosure: Wilson.H does not own shares in any of the companies mentioned.
