06 Oct Global Beta Advisors’ Company Profile of Kulicke & Soffa Industries, Inc. (KLIC)
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
APAC’s primary role is to manage and expand a mutual recognition arrangement (MRA) among accreditation bodies in the Asia Pacific region.
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
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.
Distributor: Compass Distributors, LLC
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.
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.
Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus or summary prospectus. A copy may be obtained by visiting www.globalbetaetfs.com or calling (833) 933-2083. Please read the prospectus or summary prospectus carefully before investing.
Investing involves risk including the possible loss of principal. There can be no guarantee that the Fund will achieve its investment objective. The Funds are subject to the principal investment risks noted below, any of which may adversely affect the Fund’s net asset value (“NAV”), trading price, yield, total return and ability to meet its investment objective.
Non-diversified risk. The Fund is considered “non-diversified” and may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers than a diversified fund.
Factor Risk. The fund’s underlying index, and thus the Fund, seeks to achieve specific factor exposures. There can be no assurance that targeting specific factors will enhance the Fund’s performance over time, and targeting exposure to those factors may detract from performance in some market environments.
Growth Securities Risk. The Fund invests in growth securities, which may be more volatile than other types of investments, may perform differently than the market as a whole and may underperform when compared to securities with different investment parameters. Under certain market conditions, growth securities have performed better during the later stages of economic recovery (although there is no guarantee that they will continue to do so). Therefore, growth securities may go in and out of favor over time.
Momentum Securities Risk. Stocks that previously exhibited high momentum characteristics may not experience positive momentum or may experience more volatility than the market as a whole.
Small- and Mid-Capitalization Securities Risk. The securities of small- and mid-capitalization companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole. Small- and mid-capitalization companies may be particularly sensitive to changes in interest rates, government regulation, borrowing costs, and earnings.