SEMICONDUCTOR equipment maker AEM Holdings : AWX 0%’ net profit fell 85 per cent to S$2.4 million for the first quarter of its 2024 fiscal year ended Mar 31, from S$15.6 million in the same period a year ago.

AEM said in a bourse filing on Wednesday (May 8) that the semiconductor industry is still undergoing a prolonged cyclical downturn.

Revenue in the quarter also fell, declining 38.3 per cent to S$94.2 million, from S$152.7 million over the same period last year.

The slower-than-expected recovery of the company’s key customer, as well as a buildup of inventory in the life science and industrial sectors, had adversely impacted AEM’s contract manufacturing revenue, it said.

Profit before tax came in at S$2.7 million, down 85.8 per cent from S$19 million. This includes a restructuring charge of S$2.1 million which came about due to the group’s reorganisation in Q1 2024.

Nevertheless, AEM noted that two of its recent contract wins would help grow its revenue in FY2025 to “triple-digit millions”, which is five times the levels in FY2023.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

One of the contract wins was for its automated burn-in test system, which was selected by a “major fabless provider” of high-performance compute and artificial intelligence (AI) semiconductor chips.

The second contract was for the company’s advanced thermal engine, also selected by a similar company as the first contract.

While the drop in net profit for Q1 is stark, it is an improvement from the net loss of S$20.9 million for the six months ended Dec 31.

AEM said the company is in transition between two waves of growth. While the industry is now in a slump, coming down from a historically high number of orders during the Covid-19 pandemic, the next wave of growth will be characterised by further expansion of cloud AI chips.

The semiconductor test industry is still experiencing the strain of overcapacity and end-market demand uncertainty, and that the recovery experienced thus far has been uneven across end markets.

“Given that the visibility into the second half of the year remains limited, we expect any uptick in growth to occur only in 2025. So while the pace of the rebound is expected to be gradual and measured, the future years look promising with the proliferation of AI capabilities at the edge,” said AEM.

Shares of AEM rose 0.4 per cent or S$0.01 to close at S$2.32 on Wednesday.