AEM acquires MEMS tester Afore Oy; executes succession plan

HOMEGROWN semiconductor test handler maker AEM Holdings is expanding into micro-electro mechanical system (MEMS) test solutions with the acquisition of Finnish firm Afore Oy for 7.58 million euros (S$12.3 million).

AEM plans to close the deal by the end of February. Afore made US$6.7 million in revenue over the last 12 months, and the deal values it at 10.6 times price to earnings.

It will take a few years before Afore scales up enough to contribute meaningfully to AEM's topline, but the acquisition takes AEM a step closer towards diversified growth, executive chairman Loke Wai San told The Business Times on Thursday.

"For years we've been trying to break out of this segment of just logic test handlers but it was quite hard for us to break out into the full solution because we didn't have have testing solution capability," he said.

AEM started as a customised automation house before specialising in logic chip test and inspection handlers. The logic segment includes processors and other electronic circuitry that carry out instructions based on signals represented by ones and zeroes, hence the term logic.

AEM is said to be the sole supplier for Intel's latest test handler, deriving more than 90 per cent of its revenue from the chipmaker. That profile is set to change.

Last September, AEM expanded into network infrastructure testing and measurement by acquiring InspiRain Technologies for S$3.6 million. The Afore acquisition adds MEMS test solutions to the suite, allowing AEM to sell "full solutions" in the semiconductor backend test market, Mr Loke said.

He is particularly optimistic about the MEMS device market, forecasted to reach US$22 billion in 2021. The gyroscopes in smartphones that enable motion-controlled gaming are MEMS-driven. So are airbags and car tyre pressure-monitoring sensors.

Afore's biggest customer is one of Japan's largest automotive sensor companies, a customer of 10 years now.

"The use of MEMS is increasing, prices are going to fall, so that means the need for affordable tests is going to go up," Mr Loke said.

"We hope to, over time, shift some of Afore's manufacturing to Asia to present a more price-competitive product.

"We liked the growth trajectory of MEMS because there were no key 800-pound gorillas in the handling space for MEMS," he added.

AEM estimates that it has a 6 per cent share of the worldwide MEMS test handler market. Xcerra leads with a 26 per cent share, followed by Cohu and Spea with 20 per cent each.

The Afore acquisition will be paid for with 4.97 million euros in cash. Another 2.61 million euros will be paid to Afore founder and managing director Vesa Henttonen via the issuance of new AEM shares at S$4.89 per share. The new shares will comprise 1.3 per cent of AEM's enlarged share capital.

Also on Thursday, AEM announced a planned leadership transition, with chief operating officer Chok Yean Hung replacing Charles Cher as CEO.

Mr Loke said: "I recruited Charles in 2014 out of retirement, and he was willing to give four years, three years. We've been looking for a successor for a year now. Chok was actually part of the original team that I brought in in 2011 ... Chok clearly had the respect from our (main) customer."

Mr Cher will retire by March 31 and remain as senior adviser to the board till the end of 2018.

Meanwhile, AEM said that sales orders in excess of S$115 million have been booked for delivery in the first half of 2018.

"We are a customised shop, we don't build to stock, we build to order," Mr Loke said. AEM is running at full capacity, he said, adding: "We're quite careful, we expand based on the run rate that we see. We work closely with our customer to make sure it's a sustainable run rate."

AEM shares last changed hands at S$4.97 on Wednesday, trading was halted on Thursday and resumes on Friday.