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Zacks Industry Outlook Highlights Kulicke and Soffa Industries and Axcelis Technologies

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For Immediate Release

Chicago, IL – June 22, 2022 – Today, Zacks Equity Research discusses Kulicke and Soffa Industries (KLIC - Free Report) and Axcelis Technologies (ACLS - Free Report)

Industry: Electronics - Machinery


The Zacks Electronics - Manufacturing Machinery industry is benefiting from increased capital spending on high-performance computing, artificial intelligence, advanced packaging and memory by semiconductor manufacturers. The rising need for data center, notebooks (due to coronavirus-induced remote working and learning) and gaming (pandemic-induced demand) are driving memory demand.

Kulicke and Soffa Industries and Axcelis Technologies are gaining from the above-mentioned trends. These companies provide solutions to semiconductor manufacturers and OEMs. Although weak smartphone demand has been a concern, strength in cloud & data center, healthcare solutions and gaming has been a key catalyst.

Industry Description

The Zacks Electronics - Manufacturing Machinery industry comprises companies that provide a range of solutions to address the needs of wafer processing facilities as well as device packaging and test facilities of semiconductor manufacturing processes. The solutions offered by the industry participants include thin-film processing systems, photonics, process control tools (that perform macro defect inspections and metrology), metal organic chemical vapor deposition, advanced packaging lithography, wet etch and clean, laser annealing and 3D wafer inspection systems.

A few industry participants also offer microcontamination control products and advanced materials handling solutions. Notably, contamination-free transportation, storage and delivery of materials have gained immense significance in recent times.

3 Trends Shaping the Future of the Electronics Industry

Miniaturization Enhances Prospects: Industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. The demand for advanced packaging that enables the miniaturization of electronic products remains strong.

The consistent shift to smaller dimensions and the rapid adoption of new device architecture like FinFET transistors and 3D-NAND, along with increasing utilization of new manufacturing materials to increase transistor and bit density, are driving demand for solutions provided by the industry players. Moreover, the emergence of techniques like wafer level packaging is driving the need for a high-purity manufacturing environment free of contaminants. The rising demand for clean processing as well as wafer carrier cleaning and conditioning tools is a key catalyst for the industry participants.

Complex Process Driving Demand: The requirement of faster, more powerful and more energy-efficient semiconductors is expected to increase rapidly on the robust adoption of cloud computing, IoT and AI. Semiconductor manufacturers like Intel, Samsung, Taiwan Semiconductors are primarily looking to maximize manufacturing yields at lower costs.

This is actually making semiconductor manufacturing processes more complex and in turn driving demand for solutions offered by the industry participants. The rapid adoption of IoT-supported factory automation solutions is also a contributing factor. Further, increasing deployment of 5G and the growing demand for edge computing are the key catalysts.

Strong NAND, DRAM & SSD Demand: The improving demand for NAND and DRAM is a positive for the industry participants. Moreover, strong SSD demand driven by data center and cloud spending is a key catalyst. DRAM is also expected to benefit from strong demand in the data center, enterprise and cloud segments. Strong demand for chips and higher spending on semiconductor capital equipment is aiding industry participants.

Zacks Industry Rank Indicates Solid Prospects

The Zacks Electronics - Manufacturing Machinery industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #94, which places it in the top 37% of more than 250 Zacks industries.

The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates robust near-term prospects. Our research shows that the top 50% of Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.

The industry's position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group's earnings growth potential. Since Jun 30, 2021, the industry's earnings estimate for the current year has increased by 15.3%.

Before we present a couple of stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.

Industry Outperforms Sector, Lags S&P 500

The Zacks Electronics - Manufacturing Machinery industry has outperformed the broader Zacks Computer and Technology sector but has been lagging the S&P 500 composite over the past year.

The industry has declined 27.9% over this period compared with the S&P 500's fall of 14.1% and the broader sector's decrease of 28.7%.

Industry's Current Valuation

On the basis of the trailing 12-month EV/EBITDA ratio, which is a commonly used multiple for valuing Electronics - Manufacturing Machinery companies, we see that the industry is currently trading at 8.10X compared with the S&P 500's 11.74X. It is below the sector's trailing 12-month EV/EBITDA of 10.33X.

Over the last five years, the industry has traded as high as 16.86X, as low as 8.10X and at the median of 12.84X.

2 Electronics Stocks to Buy Right Now

Axcelis Technologies: This Zacks Rank #1 (Strong Buy) company is primarily a producer of ion implantation equipment used to fabricate semiconductor chips in the United States, Europe and Asia. You can see the complete list of today's Zacks #1 Rank stocks here.

Headquartered in Beverly, MA, Axcelis is riding on solid capital spending in the implant-intensive mature process technology markets. Strong adoption of the Purion product family has been a catalyst.

Axcelis has been benefiting from a strong China market, driven by robust investments from a large number of domestic customers that serve the mature process technology market. Order momentum is expected to boost Axcelis' top line in 2022.

The Zacks Consensus Estimate for Axcelis' 2022 earnings has been steady at $4.40 per share over the past 30 days.

Kulicke and Soffa Industries: Singapore-based Kulicke and Soffa designs, manufactures and sells capital equipment and tools used to assemble semiconductor devices, including integrated circuits, high- and low-powered discrete devices, light-emitting diodes, and power modules. Additionally, it offers tools used to assemble components onto electronic circuit boards.

Kulicke and Soffa is benefiting from strong adoption of its solutions in the automotive, semiconductor and the battery assembly space due to ongoing transition to electric vehicles and autonomous driving.

Kulicke and Soffa's expanding portfolio within the semiconductor space is a key catalyst. The company also sports a Zacks Rank #1.

The consensus mark for Kulicke and Soffa's current-year earnings has been unchanged at $7.22 per share over the past 30 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release.

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Kulicke and Soffa Industries, Inc. (KLIC) - free report >>