Shareholders submitted questions ahead of the AGM today, and the management's responses have been uploaded to the SGX website. A selection of the Qs and As is published below: 

agm logoDate: 21 May 2020
Via Webcast

Q: The revenue concentration from the Group’s major customer is approximately 94%, or S$303.2 million out of S$323.1 million.

(i) Can the Board, especially the Audit and Risk Management Committee (“ARC”), help shareholders understand if it has identified the revenue concentration risk to its major customer as a key risk for the Group? On pages 58 to 59 of the annual report, the ARC has listed the following 5 key risks, namely compliance risk, operational risk, financial risk, investment risk and IT risk.

(ii) What are the addressable market sizes and the growth opportunities for the other core business segments of SLT-I (System Level Test & Inspection), MEMS (Micro Electro-Mechanical Systems) and TMS (Test and Measurement Solutions)?

A: 1. The Company recognises the risk of having its revenue that is highly dependent on a key customer and the potential risk and effect on its operations and financial performance.

AEM has more than 18 years of business relationship with its key customer which is the largest semiconductor company in the world and it is very well-established and diversified as its products are critical to many business segments.

2. In the last 3 years, the Company has acquired 4 companies to expand its technical capabilities as well as the products and solutions that it can offer to existing and potential customers.

Expand strategically

"The Group remains positive on the outlook of these business segments. The Company will continue to expand strategically through merger and acquisitions and in-house technology development as it solidifies its position as a global leader offering application specific intelligent system test and handling solutions for semiconductor and electronics companies serving advanced computing, 5G and AI markets."

-- AEM

The total addressable market (TAM) sizes of the newly formed business segments in the last 3 years of SLTi, MEMS and TMS are US$1.2 billion, US$50 million and US$500 million respectively.

As guided in the Company’s quarterly results and business update announcements, the Group has been working with various potential customers on its AMPS (Asynchronous Modular Parallel Smart) platform, MEMS Testing Solutions (Afore) and TMS services, to grow its customer base.

The TMS division has completed the development project on optical fibre cable-test equipment for 5G backhaul networks. It is currently working with several customers on initial orders.

The SLT-i division has successfully installed initial commercial systems for a memory manufacturer and gained traction on its collaboration efforts with some customers to develop AMPS platform for them.

Q: In AEM results briefing in Feb, it was mentioned that the TAM for semiconductor Testers is US$1200m.

(i) Who are the main competitors for low cost ATE and Intelligent Load Boards?

(ii) Is the market for these products fragmented with no dominant leaders?

(iii) What is the estimated cost savings in adopting AEM‘s solution versus traditional low cost ATE and Intelligent Load Boards?

A: (i) and (ii). Our main competitors in the business of test handlers and semiconductor testers are Teradyne Inc, Cohu Inc., Advantest Corp and Chroma ATE Inc. These companies are listed companies and therefore information about their size and products are readily available.

(iii). Our strategy for acquiring Mu-TEST which offers highly customizable and low-cost testing solutions is to complement our AMPS platform to deliver complete System Level Test (SLT) solutions that cater to the diverse needs of our customers. We believe our solutions offer cost savings to our customers and the amount of cost savings will vary based on the requirement of our customers.

Q: In the same briefing, it was mentioned that Cable Testers and Vector Network Analyzers has a TAM of US$500m.

(i) Who are the main competitors in these two field?

(ii) Are these two markets fragmented with no dominant leaders at the moment?

(iii) Is AEM‘s current solution self sufficient to capture these two markets or additional technical capabilities are required in order to do so?

A: (i) and (ii). Our main competitors in the business of TMS are Fluke Corporation, Keysight Technologies Incorporation, Rohde & Schwarz GmbH & Co KG and Anritsu Corporation.

These companies are established companies and therefore information about their size and products are readily available.

(iii). The TMS management and technical teams possess the required knowledge and expertise in the field of cable testing and network analysis.

The Management is confident of its high performance testers and solutions that TMS can offer and the result can be seen from the growth in revenue over the last 2 years since we acquired the TMS business unit and the significant customer wins include Huawei.

Q: Understandably with Covid-19 in place, Singapore and Malaysia has both implemented similar measures in terms of Circuit Breaker and Movement Control Order (MCO). In this case, how much of the workforce (in percentage terms) is working towards the fulfillment of sales orders in Q1, and what is your confidence level of the revenues in the subsequent quarters?

A: The MCO in Malaysia started in late March and the Circuit Breaker in Singapore started on 7 April 2020, therefore the impact on production workforce in 1Q2020 is minimal.

On 6 May 2020 the Company raised its sales guidance to S$430 million to S$445 million as a result of higher sales orders received.


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