AEM Holdings, a key player in semiconductor testing equipment, recently went on a non-deal roadshow in Kuala Lumpur, meeting 12 funds, according to a DBS Research report. The report provides a comprehensive investment analysis of AEM, highlighting the company’s technological advantages, particularly its high-parallel and thermal management capabilities essential for AI and high-power chip testing.Authored by analyst Amanda Tan, it shares insights into a new strategic partnership and provides reassuring updates on ongoing litigation. AEM stock has gained a massive ~140% year-to-date (from $1.74 to $4.16). |
The Big Catalyst: The AEM and ASE Partnership
AEM has teamed up with ASE, which DBS is calling a strategic "win-win" partnership.
To understand why this is such a big deal, look at OSATs (Outsourced Semiconductor Assembly and Test).
OSATs are massive third-party facilities that chip designers hire to assemble and test their chips before they hit the market.
By partnering with ASE—a giant in the OSAT space—AEM is tapping into a massive network.
As the DBS report notes, "Partnering with ASE allows AEM to tap into a large outsourced testing network serving multiple chipmakers and hyperscalers, significantly widening its addressable market beyond its direct customers".
Why did ASE approach AEM? The world is facing urgent AI testing capacity constraints.
Traditional testing is slow and takes up too much factory floor space.
AEM, however, specializes in high-parallel systems. This means their advanced machines can test dozens of individual devices simultaneously.
According to DBS, "AEM’s high-parallel systems enable testing of dozens of devices simultaneously, improving throughput and increasing productivity per square foot, a key constraint in high-density manufacturing hubs like Taiwan".
Furthermore, "ASE approached AEM to deliver differentiated testing capabilities after limited progress with incumbents, reflecting strong demand for more efficient test solutions in AI-driven workloads".
Financially, this creates excellent operating leverage, meaning that as AEM sells more equipment and volumes increase, their fixed costs are absorbed better.
The research note explains: "OSAT customers typically scale capacity alongside customer ramps, which can drive repeat orders and higher utilisation for AEM’s installed base. As volumes increase, fixed cost absorption improves, supporting margin expansion".
What About the Patent Dispute?
If you heard the news about AEM's patent dispute announced in October 2025, relax. This situation is very different from their earlier 2022/2023 legal issues.
The current dispute focuses heavily on wafer-level testing. In chipmaking, a "wafer" is the large, pizza-like silicon disc containing hundreds of chips before they are sliced apart.
DBS points out: "Latest issue relates to wafer-level testing outside AEM’s core focus. AEM primarily operates in packaged testing rather than wafer-level testing, limiting direct exposure to the disputed technology area".
| The takeaway here? "Financial impact expected to be limited. Legal and professional costs were incurred but are not expected to materially affect profitability or operational performance". -- DBS Research |
Moreover, "customer demand remains unaffected. Customers continue to prioritise product performance and testing capability, with no evidence of programme delays or order cancellations linked to the case".
In the tech world, disputes like this are common and do not alter a company's competitive edge.
DBS sees multiple tailwinds pushing AEM forward.
The report states: "Overall, with multiple tailwinds including constrained CPU-driven demand from its long-standing HPC customer, growing contributions from new customers, and the emerging ASE partnership catalyst, we see increasing confidence that AEM can meet or potentially exceed FY26 guidance, particularly as current guidance does not explicitly factor in contributions from the ASE–AEM partnership". Because of this, DBS has increasing confidence in AEM's future profitability. |
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→ See DBS report here
→ See also: Why the World’s Top OSAT is Buying Into AEM’s Test Tech
