The Zacks Electronics – Manufacturing Machinery industry grapples with harsh macroeconomic conditions globally, while facing headwinds in the 3D NAND end-market. Despite these challenges, semiconductor manufacturers are increasing their capital spending on various technology segments, including high-performance computing, AI, mobility, augmented reality, virtual reality, advanced packaging, lithography, and wet processing solutions.
Two standout companies within the industry are Entegris (ENTG) and Veeco Instruments (VECO), capitalizing on the growing trends. These firms provide essential solutions to semiconductor manufacturers and original equipment manufacturers (OEMs).
The Electronics – Manufacturing Machinery Industry in Focus
The Zacks Electronics – Manufacturing Machinery industry caters to the requirements of wafer processing facilities, device packaging, and test facilities for semiconductor manufacturing processes. This encompasses an array of solutions, including thin-film processing systems, process-control tools, advanced packaging lithography, and more. Notably, the industry emphasizes the significance of contamination-free transportation, storage, and material handling.
Key Trends Shaping the Future
The transition in semiconductor manufacturing technology is fueling the demand for advanced packaging, thereby enabling the miniaturization of electronic products. Moreover, complex semiconductor manufacturing processes are gaining importance due to the need for faster, more powerful, and energy-efficient semiconductors, propelled by cloud computing, IoT, and AI. Additionally, the increasing demand for NAND, DRAM, and SSDs underscores a positive trajectory for the industry.
Industry Performance and Valuation
Despite the industry’s underperformance compared to the broader technology sector, it has outpaced the S&P 500 over the past year. From a valuation perspective, the industry is currently trading at a trailing 12-month EV/EBITDA ratio of 14.13X, edging below the sector’s ratio. The industry has historically traded between 7.69X and 14.13X over the last five years.
Stocks to Watch
Veeco Instruments – With a Zacks Rank #2 (Buy), this company, headquartered in Plainview, New York, specializes in advanced semiconductor process equipment. Veeco is set to benefit from its expanding portfolio and notable clientele, expected to drive top-line growth. A commercial and technological success story, Veeco’s progress has put it in a unique position in the industrial marketplace.
