If you're looking for pick-and-shovel stories in the semiconductor space, you may want to think about probe companies like FormFactor (NASDAQ:FORM) and Cascade Microtech (NASDAQ:CSCD). While the equipment made by the likes of Applied Materials (NASDAQ:AMAT) and ASML (NASDAQ:ASML)
is indeed critical to the manufacture of chips, semi conductor capex is
notoriously cyclical and the industry has become even more
unpredictable as clients increasingly look to re-use equipment. With
companies like FormFactor and Cascade, though, you're talking about a
model more similar to semiconductor consumables and businesses that are
leveraged to actual wafer starts for their revenue.
FormFactor has
work to do. The company is the largest supplier of probe cards to the
industry and has very strong share in SoCs, but the company hasn't been
able to generate the sort of margins that other semiconductor consumable
companies and more direct comps like Micronics Japan and Cascade
have delivered. The company seems to be on a better trajectory now and
there's upside if FormFactor can outperform, but the shares already seem
to price in a reasonable amount of self-improvement.
Read more here:
Can FormFactor Drive More Fitting Margins?
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