FormFactor, Inc. (FORM, $39.24): “R&D is Key”
By: Grace
Flynn, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
- FormFactor, Inc. (NYSE:FORM) provides test and measurement solutions for semiconductors along the full integrated circuits life cycle. They provide a range of high-performance probe cards, analytical probes, probe stations, metrology systems, thermal systems, and cryogenic systems to semiconductor companies and scientific institutions.
- In June 2021, FormFactor collaborated with Northrop Grumman Corporation to announce the availability of cryogenic wafer probe cards. This initiative was made to accelerate the development of superconducting compute allocations.
- FormFactor’s 2nd quarter 2021 revenue increased 19% YTD, with a decrease in Foundry & Logic probe card market.
- FormFactor is continuing their R&D investments to keep up with complex chip structures, and their new facility is expecting shipments in 4Q21.
Key
points: FormFactor has been volatile in the past year, as their sales
revenue highly depends on three major customers, Intel, Samsung, and Taiwan
Semiconductor Manufacturing Company. Their advanced packing play remains
ongoing and their unique probe cards allow cost savings which is used to stabilize
the shifts in the seductor industry.
On June 24, 2021, FormFactor,
Inc. announced a fully automated cryogenic wafer probe system to accelerate the
development of superconducting compute applications. The firm collaborated with
Northrop Grumman Corporation, a company focused on global security and human
discovery. Northrop Grumman is currently developing superconducting
technologies which will deliver improvements in computing power and a reduction
in energy consumption. This collaboration allows FormFactor to continue developing
test and measurement solutions for complex and unique chip structures.
FormFactor’s 2Q21 revenue
increased 19% YTD, which was largely driven by their DRAM and Flash products.
Their Foundry & Logic probe cards revenue decreased 5% due to lower demand
from a major customer, Intel. The low demand led to a slight decrease in gross
margin and FormFactor will have to focus on expanding their customer base to
overcome volatility in the market.
FormFactor is continuing their
R&D investments to keep up with new and complex semiconductor chips as well
as lower the cost of their probe cards. Their new 100,000 sq. ft manufacturing
center in Livermore, CA is expecting shipments in the fourth quarter of 2021.
What
has the stock done lately?
FormFactor is currently $39.24
and has seen positive returns in the last three months. In June, the firm’s
priced dropped to $33.19, which was the lowest of the last three months. Since
then, it has been steadily increasing to reach the highest recent price of $40.02
in September. FormFactor has had a 11.66% three-month return and a 11.70% one-month
return. The firm’s 52-week range ranges from $22.73- $52.39.
Past
Year Performance: FormFactor has had a -9.21% return YTD and a
-13.32% return over last six months. FormFactor is highly volatile due to the
semiconductor chip shortage and their customer concentration. The recent gains are
due to their new initiatives for complex chip structures through their R&D
spend and collaborations. FormFactor will need to continue their investments
and work on their customer base to control the volatility in the semiconductor
industry in the future.
My
Takeaway
FormFactor
has struggled this year due to the volatility of the semiconductor industry
concerning chip shortages. But they have had a better sales mix within their
Systems segment and are focused on new designs and utilizations. With their new
initiatives to support different complex chips, like their new cryogenic probe
system, FormFactor is in the position to still grow especially after their 2nd
quarter results and positive return in the past three months. Therefore, I recommended
the AIM Small Cap fund to hold FormFactor, inc. I believe they are still a stock to watch, as
they did have a negative return for six months.
