Can you introduce Micro-Mechanics and its focus in terms of products, segments and clients?
We were founded in 1983 in Singapore, and today we have five factories globally: in Singapore, Malaysia, the Philippines, China, and the US. We serve both the front-end wafer fab equipment industries and the back-end packaging industries, including everything from assembly and tests to advanced packaging solutions.
We have over 600 customers worldwide, spanning various sectors such as memory, compute, industrial, automotive, PC, and mobile devices, essentially covering the entire supply chain. We serve customers in different regions, from low-cost areas like the Philippines and Malaysia for legacy transistor chips to high-end advanced packaging in Taiwan, Europe, and the US. About 15 years ago, we acquired a company in the US, which opened our entry to the wafer fab equipment (WFE) industry. We now serve major equipment makers globally, especially in the US, where most WFE is developed and partially manufactured.
In the third quarter, your wafer fab equipment sales surged by 95.7%. What is driving the increased demand?
The demand for wafer fab equipment is driven by three key factors: first, industry CapEx tied to new technologies and nodes coming online, such as TSMC’s transition from 3nm to 2nm. Second, there has been a significant push, especially with the US Chips Act, to localize semiconductor manufacturing, which has benefitted us. Having a factory in the US, particularly near Silicon Valley, has allowed us to serve WFE customers strategically. Finally, internal restructuring in the US about a year and a half ago has contributed to three consecutive quarters of profitability for us.
What are the broader tech trends driving demand for high-precision parts and tools?
The demand for our products is driven by high-performance computing, specifically in areas like AI and high-bandwidth memory.
The industry is focused on creating smaller, more energy-efficient chips with higher computation density. This allows for advancements such as running AI applications like ChatGPT on phones, powering self-driving cars, and supporting massive data centers. Ultimately, it is about achieving better compute, energy efficiency, and heat distribution as the technology evolves.
Can you explain the concept of the ‘Five-Star Factory’ and how it advances traditional chip manufacturing?
The ‘Five-Star Factory’ is our blueprint to drive excellence across five key areas: people, customer focus, operations, innovation, and workplace safety and efficiency. This approach allows us to transition from traditional packaging, which has been commoditized, to advanced packaging, a growing trend seen in companies like TSMC. This shift has enabled us to apply our expertise in packaging to the front-end wafer fab equipment, positioning us at the intersection of both, and providing flexibility and adaptability to meet evolving business needs.
What are the benefits of Micro-Mechanics' five different operating locations?
There are three key benefits: first, the fast-moving nature of the semiconductor industry requires quick responses, and our decentralized structure supports this need. The primary packaging hubs in Asia, where we have factories, allow us to stay agile. Second, due to our decentralized nature, we are largely unaffected by export restrictions, particularly between the US and China. Lastly, our global presence enables us to support customers worldwide efficiently.
Each of our factories supports its local market. For example, our factory in Malaysia supports only Malaysia, and similarly for the Philippines, China, and Singapore. This localization allows us to be flexible and adapt quickly to changing customer demands without being impacted by tariffs. For example, as our customers shift their demand, we are already set up to support them, making the transition smoother. This structure frees us to adapt rapidly to market changes.
How do you evaluate the availability of labor, energy, and policy frameworks in the US for Micro-Mechanics' scalability?
Doing business in the US, particularly manufacturing, is not the easiest, but we have viewed it as an opportunity to figure out how to do things better. Our US factory is highly automated, running 24/7 with a very lean team. This focus on automation and process improvement has helped us innovate and improve our operations, which we have been able to apply to our Asia business. This has made us more agile, cost-effective, and improved quality and efficiency—key factors for our customers worldwide.
Are there any innovations, investments, or policies that could disrupt or shape your market in the coming year?
Manufacturing is becoming increasingly science-based, focusing on the first principles of engineering. This shift is likely to disrupt many incumbent suppliers, but it's an area where we have made significant strides in the US by adopting a science and process-based approach to manufacturing. We need to keep investing in our people and equipment to stay competitive. The most significant disruption right now is uncertainty—many businesses are operating without a clear sense of direction. However, our decentralized structure allows us to adapt quickly to customer needs, whether that is in Asia or the US.
Is there potential for another region to grow a semiconductor industry comparable to that of Taiwan?
Taiwan is regarded as the best in the world for advanced semiconductor technology. The US is certainly trying to replicate Taiwan's success, with TSMC and other companies investing heavily in advanced wafer fab and packaging in the US, potentially exceeding $100 billion. While it is a challenge to transfer all the know-how, the US will make significant efforts to build this ecosystem. Companies like Micro-Mechanics can play a vital role in distributing that knowledge and providing the tools necessary for this industry’s growth and transition.
