Singapore Semiconductor Stocks Grapple With Challenging H1 2023: Here’s What You Need to Know

August 16, 2023

semiconductor chip

Singapore’s listed semiconductor companies are confronting a challenging business environment, as underscored by their recent financial results.

Firms such as UMS Holdings Limited (SGX: 558), Frencken Group Limited (SGX: E28), and AEM Holdings Limited (SGX: AWX) have all reported their earnings in the past few weeks.

UMS’ earnings fall despite strong performance in aerospace division

UMS Holdings reported lower earnings of S$29.0 million for H1 2023, representing a decline of 27% from the same period a year ago.

This was in line with the 29% year-on-year (yoy) decline in revenue to S$155.1 million in H1 2023, as sales were down by 9% during the same period.

This comes after the semiconductor segment experienced a 14% drop in revenue, with global semiconductor demand softening.

However, a silver lining for UMS was its aerospace division, which saw sales jump by a significant 48% owing to the global aerospace industry’s robust recovery.

Another positive indicator was the group’s operational cash flow, which reached a record first-half-year high of S$45.1 million.

Frencken Group saw 53.8% decline in earnings

Next, Frencken Group too faced a tough period, with its earnings dropping a substantial 53.8% y-o-y to hit S$12.1 million for H1 FY2023.

The company saw its revenues shrink by 9.7% yoy, closing at S$351.0 million.

This decline in revenue was witnessed across both its mechatronics and integrated manufacturing services (IMS) divisions, with the former observing a reduction in sales from its Asia operations.

In line with the weaker financial performance, no dividend was declared for the period.

AEM’s earnings collapsed as revenue down by almost 50%

Lastly, AEM Holdings reported a sharp decline in earnings, falling 76.2% yoy to S$19.7 million.

Their revenue, too, saw a nearly 50% reduction, resulting from persisting semiconductor down cycles and industry-wide excess inventory.

AEM has readjusted its revenue guidance for FY2023, with it now forecasting between S$460 million and S$490 million.

Short-term drag but future growth remains exciting with AI boom

Despite the current downturn, industry players remain optimistic.

AEM Holdings, for instance, pointed out that the slowdown has offered testing development groups an opportunity to reassess and strategise.

They anticipate an AI-driven boom that could propel the industry towards a trillion-dollar valuation.

In light of these results, the broader semiconductor market seems to be in a phase of recalibration.

Amid certain challenges, these companies are adapting and preparing for future growth, bolstered by the hopes of emerging technological revolutions.

As the dynamics of supply and demand ebb and flow, it remains to be seen how these Singapore semiconductor firms (and the industry at large) will pivot to leverage upcoming opportunities.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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