Global Beta Advisors’ Company Profile of Kulicke & Soffa Industries, Inc. (KLIC)

by Justin Lowry, President & CIO, Global Beta Advisors, LLC

Kulicke & Soffa (KLIC) is probably one of the lesser-known rising stars in technology. As of 08/31/21, the company had a market cap of just $4.3 billion. However, despite being a fringe mid cap stock, the company has been demonstrating prowess in the manufacturing of semiconductors. Semiconductor chips have become critical in supporting every day utilities such as smart phones, televisions, cars, and refrigerators. As technological advances continue throughout the world, chip technology is going to become more vital, and thus, the manufacturing of those chips become critical.

Global Compound Semiconducter Market (2021-2015)

Data from Technavio., assessment made in 2020
Chart from TechNavio
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Semiconducter Assembly Market Share (8-31-21)

semiconducter assembly market share 8-31-21

Source: FactSet Research Systems, 08/31/21

As you can see, the semiconductor market is expected to grow by $11.5 billion between 2021 and 2025, or over a 6% compounded annual growth rate (“CAGR”). Kulicke & Soffa has continued to climb the latter in semiconductor manufacturing, which aligns nicely with the expected growth in semiconductor demand over the next 4 years. The previous chart illustrates the top 10 semiconductor manufacturers by market share.

Kulicke & Soffa is now the 2nd largest player in the space with an over 11% market share. Kulicke & Soffa has crawled its way to become the 2nd largest company by market share in the space over the past year. As you’ll see next, Kulicke & Soffa has been incrementally chipping away at the semiconductor assembly market share.

KLIC Market Share Growth

KLIC market share growth

Source: FactSet Research Systems, 08/31/20 through 08/31/21

Kulicke & Soffa has grown its market share by nearly 50% from 7.63% to 11.24%. As mentioned in Technavio’s report above, the semiconductor market has become categorically fragmented, which makes Kulicke & Soffa’s growth in market share for semiconductor manufacturing even more impressive. The company has done a good job leveraging the increase in demand for chips over the past 18 months from pandemic related needs into more research and development. This has led to higher quality and more advanced chips.

Although Kulicke & Soffa has seen a dramatic run up in its stock price, we believe its growth prospects, particularly relative to its valuations, are still quite attractive given the expected growth in the industry coupled with its continued rise in market share growth in semiconductor manufacturing. With growth expected to continue to rise in semiconductors, Kulicke & Soffa will certainly benefit from the resulting revenue growth, but given how the company has parlayed the industry’s recent growth into becoming a leader in the space, we believe that management will continue to deliberately utilize its growth to become the largest manufacturer of semiconductors.

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References to expected revenue growth is an estimate for companies based on previous earnings. This and other growth metrics for companies do not represent or predict the performance of the fund. There is no guarantee that companies in the semiconductor industry will produce the desired results. Past performance is no guarantee of future results.

As of 10/5/21, Kulicke & Soffa Industries, Inc. represented 1.34% of assets in the Global Beta Rising Stars ETF (“GBGR“). To find out more about GBGR, please visit GBGR GlobalbetaETF.

Rising Stars: Rapidly emerging companies that indicate the next generation of growth stocks.

Factset Rising Stars Index is composed of stocks listed on the NYSE and Nasdaq that demonstrate market share expansion in the fastest growing technology industries.

FactSet Research Systems Inc. is a global provider of integrated financial information, analytical applications and services for the investment and corporate communities.

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