Skip to main content

Semiconductor Sell-off, Opportunity or Threat?

To those who hold AEM or UMS, the past few days must have really tested you as an investor. AEM has declined by 49% along with UMS which has declined 42% from the high a couple of months back. Here are the respective charts below, ouch!

Today, I loaded up on more shares of AEM at $1.05 and I am looking to add more to UMS. Why am I still bullish on semiconductor sales? Here are the main reasons why I am still bullish on semiconductors. 

Semiconductor 2018 Industry Trend 

The business of AEM and UMS is definitely linked to the Semiconductor industry. More specifically, they both provide equipment for Semiconductors ranging from testing, components manufacturing, and even precision machining services. Therefore, let's dig deeper into the semiconductor business.

According to the World Semiconductor Trade Statistics ("WSTS"), global semiconductor monthly revenues grew 20.2% yoy to USD 8.16bn for April 2018. This is pretty impressive, but more importantly, can the growth be sustained?

WSTS expects the world semiconductor market to grow in 2018 and 2019 to USD 463bn and USD 484bn respectively. For 2018, this represents growth of 12.4%. This reflects expected growth in all major categories, with an extraordinary growth from Memory at 26.5% followed by Analog ICs with 9.5%. In 2018, all geographical regions are expected to grow. For 2019, all major product categories and regions are forecasted to grow with the overall market up 4.4%, with Sensors contributing the highest growth followed by Optoelectronics and Analog ICs.  (Source)

Basically, growth has been above average, but going forward, is expected to taper off to a level which I personally find still pretty decent.

Attractive Yield

The dividend yield for AEM and UMS as of 19 June 2018 is 2.56% and 5.82% respectively (According to SGX), which I find to be decent. Both businesses are not highly leveraged. As of 31 March 2018, AEM had SGD 0.4mn of Debt which is 0.6% of Total Capital, while UMS has SGD 20.3mn of Debt which represents 8.2% of the Total Capital. Both companies are also in a positive financial position with an absence of Net Debt.

Cheap Valuation

Something is considered cheap or expensive only relative to what it is being compared to. I have used the universe of listed stocks which are classified as Semiconductor Equipment in their industry classification. I also removed those with negative net income in order to compare their PE (Price/ Earnings) ratio. I am using a basket of 418 stocks as my basis (UMS and AEM included).

The average PE is 25.9x with the median being 16.5x. Both UMS and AEM currently have PE ratios of 8.47x and 8.79x respectively. I like the margin of safety, the median is about twice the PE!


Both UMS and AEM are considered cheaper than it's global peers and has decent dividend yields. Put that together with an industry that is expected to see double-digit gains in 2018, I decided to add more into my AEM position (Will be looking to enter UMS as well). The margins of safety is there. Of course, if you are planning to hold this for a week/month, chances are it might not be worth the risk as the sentiments are pretty bearish. But in my eyes, I see opportunity. I will come back to review this post perhaps towards the end of the year for some rebalancing. 

Until then, happy investing.



  1. I admire this article for the well-researched content and excellent wording. I got so involved in this material that I couldn’t stop reading. I am impressed with your work and skill. Thank you so much.

  2. Article contains so many fruitful information which will be liked by the readers as in my opinion
    this is the best article in this category.

  3. Good content in this post and site. We need more fresh and good content like this. Thanks for posting great stuff, it’s very useful to me Please contact us for Oracle Fusion Cloud Financials Training details in our Erptree Training Institute

  4. This comment has been removed by the author.

  5. Its a great pleasure reading your post.
    will help you more:
    N26 to niemiecki bank dostępny w Polsce, czyli darmowe konto z kartą bonusem 15 eur. To jedyny bank ktory umozliwia otwarcie konta w Niemczech dla osób, które na codzien mieszkają w Polsce. Sprawdz rowniez opinie o n26.

  6. You may be supplying an inconceivable uncommon, productive and huge materials. best require expected for sharing! online weed store

  7. An item appears to be rather great. As well as post gives us quite a few being familiar with. come to be delighted, My spouse and i seriously found rather awesome and also unusal ideas. Which means this may be helpful to anyone. Cheers intended for providing. How to Play Slots

  8. As i imagined which was going to come to be quite a few boring previous write-up, but it definitely paid out intended for the occasion. Let me write-up a hyperlink for this website around my website. επικεφαλίδες σήμερα σπάνιες ειδήσεις

  9. As i undoubtedly enjoy your site and locate nearly all your own personal information being just what I am in search of. As i unquestionably taking pleasure in just about every chunk of which. This is a great website and also wonderful discuss. I'd like to a lot thanks. Helpful job! An individual people commence a great website, and now have some terrific product. Conserve the exceptional run. Rangehoods Buy Online

  10. Cheers intended for providing close to. Ones write-up could be developed inside of a serious fantastic way and also yes it will take quite a few effective facts to my opinion. pompano beach condos for rent

  11. Enthusiastic. Every one of us examining for most webpages and also the partner and also my spouse and i definitely found which using this. Beautiful item. I like and so content. Will be able to for sure tool passenger trucks this type of position is possible using this you may... work with a high quality being familiar with above all else each time trip through the use of him or her. polyurethane injected doors

  12. Fantastic and also enjoyable post. Excellent issues you've got usually distributed to all of us. Cheers. Just continue producing this type of write-up. CBD business Canada

  13. Great run! This is often the kind involving facts that needs to be spread around the world-wide-web. starting a cannabis business

  14. Hello there! I just now would like to present substantial thumbs further up towards the wonderful data you have under with this write-up. I am pleased anytime examining your own personal post combined with up to date facts! Cheers spend and also assume you will write-up a lot more web site which are related to this kind of website. CBD products business plan


Post a Comment