Leong, who celebrates her first anniversary of leadership at the company this month, says that having Asian faces like Huang and Su drive the industry similarly inspires her to be a role model for future generations.
She recalls working at a US company for many years where all the board of directors were white men before there was a first female board member. “Suddenly, it was like, Oh! Women can be board members, too. It was a lightbulb moment, so I think it’s important to set an example,” says Leong in an interview with The Edge Singapore.
Born and raised in China, she migrated to the US during high school. In 1998, she graduated from the University of California, Berkeley, with a degree in chemical engineering after not knowing which industry to build her career. With her degree, she figured she could have joined Clorox and helped produce cleaning products worldwide.
As it happened, things ended up differently. “Another choice was the adhesives industry with 3M, but then my friends all went to Silicon Valley with IBM, so I said to myself, I’ll join them,” says Leong, who took a Master of Science in materials science and engineering from Stanford University.
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Nearly 30 years later, Leong remains deeply enthused with the semiconductor industry’s fast-moving and innovative nature — traits that will be more critical than ever as she steers AEM on the recovery path that corresponds closely with key customer Intel, whom AEM provides testing services, and also new customers, whom it has been cultivating a working relationship.
Year of progress
By most measures, AEM’s turnaround is a work in progress, especially if its share price is benchmarked against its December 2021 peak of more than $5 and its FY2022 earnings of $158.7 million. However, when Intel’s performance weakened after the pandemic-induced demand spike eased and other semiconductor players stormed ahead with chips needed for faster applications, AEM suffered from weaker results in tandem. On June 5, AEM shares closed at $1.22, down nearly 16% since the start of the year.
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With recovery not visible, some AEM shareholders have reduced their investment in the company. For example, Malaysia’s Employee Provident Fund Board has regularly sold down its stake. The most recent sale was on May 13, when it sold nearly 1.8 million shares at just over $1.2 each, leaving it with 24.37 million shares, equivalent to 7.782% of the company.
Elsewhere, Temasek Holdings, AEM’s largest shareholder, which first invested over 26 million new shares at around $3.80 each back in August 2021, has steadily increased its stake to just over 39 million shares, or 12.46%.
Meanwhile, AEM’s financial results remain on a downtrend. In 1QFY2025 ended March, it reported earnings of $3.8 million, down 71.3% q-o-q, while revenue fell 35.1% q-o-q to $86.03 million.
The company attributed the fall in revenue to a sharp slowdown in its test cell (TS) solutions segment, as its key customer, Intel, accelerated orders going into 4QFY2024, prompting a 46.9% q-o-q decline to $51.2 million.
“It was pretty significant. This all happened in the last couple of weeks of the year,” says Leong, stressing that the drop was expected because of the timing.
Despite this, Intel’s current purchase order programme with AEM, which is set to run through 2HFY2027 and comprises 75% equipment and 25% consumables, continues to offer some baseline revenue even when its factory shows underutilised capacity.
However, Leong is not worried, explaining that the presently unused floor space results from the company’s efforts to ramp up capacity during a surge in orders a few years ago.
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She says: “Unlike a wafer fab where you have lots of tools that undergo depreciation, for us, floor space is simply about whether or not you have the area to assemble equipment. The labour involved is more direct. We have a flexible model, a fixed headcount, and temporary workers for when demand peaks.”
To wean itself from being entirely dependent on the whim and fancy of Intel’s inventory decisions, AEM has signed on a new fabless artificial intelligence (AI) and high-performance compute (HPC) customer, which is starting to drive high volumes of AEM’s modular parallel system, burn-in (AMPS-BI) production and a corresponding rise in its TC solutions segment. With the new customer contribution, consumables sales within the TC segment soared 173% q-o-q to $30.8 million.
Leong says the diversification results from engaging potential new customers over the past few years. If the move goes well, AEM is on track to surpass $100 million in non-key customer revenue for the whole of FY2025.
Although Leong remains bullish, in the most recent 1QFY2025, AEM could only eke out a slim net margin of 3.9%, which she explains takes time to progress. “At this stage, your customer acquisition cost is high, so you need to spend on sales and support. We could see incremental improvement over the next few years because our new product is more differentiated. It will be a gradual improvement,” she adds.
Still, despite actively focusing on diversifying its revenue, Leong says AEM’s long-standing relationship with Intel remains healthy and steady.
On May 20, AEM announced a collaboration with Intel Foundry, Intel’s manufacturing arm, which produces semiconductor chips on behalf of other companies, to offer previously exclusive system-level test (SLT) and burn-in testing capabilities to the latter’s customers.
Leong says that this updated arrangement is timely, as Intel raises its competitiveness against other semiconductor players and expands its ecosystem within the semiconductor space. This arrangement also adapts to Intel’s own changing business model.
For years, Intel used to design and manufacture for itself. In contrast, other smaller semiconductor firms focus on developing the chips and then outsourcing the actual production to specialised firms such as Taiwan Semiconductor Manufacturing Co. Intel Foundry is the US chip giant’s way of offering manufacturing services to other semiconductor companies.
In the provision of such services, AEM opens these test cells and the ecosystem to other players, such as those who need the space and capacity. “And as you can imagine, having SLT and burn-in within the US aligns with President Donald Trump’s intention to domesticate more capability, so this is a key enabling opportunity for us,” says Leong.
In its May 20 note, DBS Group Research calls this deal with Intel a “positive development” but warns it is more of a medium-term growth driver. While AEM is well-positioned to benefit from this collaboration given its extensive installed base at Intel, meaningful contributions will depend on Intel Foundry’s ability to attract and retain external customers, says DBS.
Since Intel Foundry is a relatively new business for Intel, most potential clients are still in their evaluation stages, so large-scale investment decisions have yet to be made. For DBS, Intel continues to pursue customer wins, but translating interest into firm orders with meaningful volume remains a hurdle.
In addition, Intel’s customers are not locked into using AEM exclusively for back-end testing and may choose alternative providers. “As such, we view this as more of a medium to long-term catalyst for AEM rather than an immediate growth driver. Ultimately, leveraging Intel Foundry is just one piece of AEM’s broader growth story,” says DBS, which is keeping its “buy” call and $1.50 target price.
What will 2025 bring?
Beyond the next few quarters, businesses worldwide will all have a bigger common worry: coping with the uncertainties thrown up by Trump’s mercurial policies.
For now, Leong is not too worried, as the company’s direct exposure to China and the US is limited, at least in the near future. “We have some shipments to the US, but overall, it’s less than 20%, so it’s pretty insignificant. In the long run, the big impact for our industry is how tariffs will impact the macro environment, the economy and demand, as well as how tech leaders like Apple are redesigning the electronic world, the whole ecosystem, and pricing. For that, we don’t know what will happen,” adds Leong.
Like many other semiconductor players, she says that AEM is adopting a “wait and see” approach, as the risk of shifting government policies across different jurisdictions leaves many strategies up in the air.
Although she remains confident that the company will achieve goals such as generating $100 million in revenue from customers other than Intel for FY2025, she warns that 2HFY2025 could be uncertain.
“Our typical equipment lead time is three months to six months, so given the uncertainty with geopolitical policies, there is unpredictability for the second half because it’s longer than our typical production cycle time,” says Leong.
Beyond these external forces, which remain stubbornly beyond control, she is excited about AEM’s growth prospects down the road, underpinned by cross-border R&D teams in the US, South Korea and Europe, which are built to handle different core competencies.
Leong says AEM now has three core competencies: automation, design and test electronics, plus thermal engineering capabilities, thanks to acquisitions and organic growth. “These successes are the reasons behind our winning of AI and HPC customers,” she adds.
This year, she has identified two goals for the company. The first is to expand the layers of chip testing with its new customer and break into the dynamic random access memory (DRAM) space. Testing of DRAMs, Leong says, is the “holy grail” of testing, as data centres require DRAMs and graphics processors for swathes of computing necessities.
The most significant industry problem right now is the system reliability of a data centre and many failures in data centres are related to the DRAM. “So, there is a big need in the industry for system-level verification for DRAM customers,” says Leong.
AEM’s differentiation, she adds, is its ability to tackle thermal challenges. “We’re leveraging the technology block for our existing automation fields and the thermal capabilities that we have developed for the processing side of things,” she says, adding that AEM is working with a leading DRAM manufacturer to develop the next-generation tool.
Solutions and composure
Analysts are mixed about AEM’s outlook despite taking on new customers and widening its range of testing offerings.
DBS’s $1.50 target price now compares with $1.69 before the 1QFY2025 updates. Although analysts Amanda Tan and Ling Lee Keng see delays in the turnaround, they like the broadening of the customer base. “These milestones mark a critical step toward eventual volume ramps and revenue contribution, positioning 2025 as a turning point in AEM’s customer expansion strategy,” write Tan and Ling in their May 15 note.
On the other hand, Maybank Securities’ Jarick Seet has a bearish take on the company, keeping his “sell” call at a reduced target price of $1.07 from $1.12.
Seet, who believes that AEM is “still too early” in its transition phase to justify a valuation, does not expect any revenue uplift until the 2HFY2025, seeing a flat 2QFY2025 from 1QFY2025.
Although Seet notes that the long-term outlook for the company stays attractive, the analyst is indifferent. “The company is adding new customers to replace the lost revenue from its key customer. We expect this to take years to complete and the global tariff situation is making the landscape even more challenging,” says Seet.
For industry veteran Leong, however, leaning on patience and a steady focus remains a timeless strategy. “We are at the right spot in solving a very relevant problem: thermal issues associated with chips during the advanced packaging manufacturing process. We’re excited about this and will continue focusing on what we’re good at. And well, we’ll try to figure out how the tariff situation will land. We focus on what we can control,” says Leong.
