A Company Weighed Down by Cyclicity and Currency Exchange Rates

Will the Tides Turn for this Semiconductor Testing Company?

The company I’m going to be talking about today has a market cap of $25 million, a share price of $5.94, a NAV of $7.58 per share, and operates within the semiconductor industry. This company sells what is known as “back-end” services and products. This just means that they engage in testing and selling testing equipment for semiconductors to ensure that they meet quality specifications before being shipped off to their end destinations. While the semiconductor industry is highly cyclical, this specific company has seen a lot of its demand drop off due to a strong U.S. dollar. While incorporated in California, this company is really run out of Singapore and therefore is subject to all of the risks that come along with fluctuations in currency exchange rates. A strengthening of the dollar relative to foreign currencies adversely affects the value of the company’s foreign currency-denominated sales and earnings. This usually leads to the company having to raise international pricing which reduces their competitiveness, this in turn can reduce the demand for the company’s products.