A Quick Take on Aehr Test System
Business overview
This business overview article will be followed by one containing recent developments and financials.
Aehr Test Systems (AEHR) specializes in manufacturing equipment for testing, burning in, and stabilizing semiconductor devices. It’s the leading provider and benefits from strong secular tailwinds as wafer-level testing is gaining traction in rapidly growing applications and end markets.
In short
The leading company for wafer-level testing equipment.
Wafer testing is gaining traction, expanding the company’s TAM.
It’s increasingly important for a host of growth sectors like EVs, EV charging stations, alternative energy, data centers, 5G, and the like
It’s opening new segments from Silicon Carbide, Silicon Photonics, to NAND memory, data storage, and possibly even DRAM memory.
The increasing installed base of systems produces a growing stream of recurring revenue (>50% of FY24 revenue) from consumables (WaferPaks and DiePaks).
The company’s business is in a dip from the reduced growth in the EV market which is affecting its largest customer (ON Semiconductor), but it’s broadening its customer base and venturing into new segments, and the EV market will come back.
Bookings and backlog have recovered in Q3/24 providing some stability today.
Products
Aehr Test Systems specializes in manufacturing equipment for testing, burning-in, and stabilizing semiconductor devices. Aehr Test Systems' main product lines are Full Wafer Contact Systems and Systems for Packaged Parts:
Full Wafer Contact Systems
Aehr's FOX-PTM Family of Products:
The FOX-XP system is designed for devices in wafer, singulated die, and module form that require test and burn-in times typically measured in hours to days. The FOX-XP system can test and burn-in up to 18 wafers at a time.
The FOX-NP system is a low-cost entry-level system that is 100% compatible with the FOX-XP system.
The FOX-CP system is a low-cost single-wafer compact test and reliability verification solution for logic, memory, power, and photonic devices.
The FOX WaferPakTM Aligner:
This Aligner performs alignment of the customer's wafer to the WaferPak Contactor so that the wafer can be tested and burned-in by the FOX-XP and FOX-NP systems.
The FOX WaferPak Contactor:
This Contactor contains a full-wafer single-touchdown probe card, which is easily removable from the system.
The FOX DiePak Carrier:
This Carrier allows testing, burn-in, and stabilization of singulated bare die and modules.
The FOX DiePak Loader:
This Loader performs automatic loading of the customer's modules to the DiePak Carrier so that the modules can be tested and burned-in by the FOX-XP and FOX-NP system.
Systems for Packaged Parts
The Advanced Burn-in and Test System (ABTS) family of products (the ABTS system is nearing the end of its lifecycle).
Additional info
Full Wafer Contact systems, which generated approximately 98% of the company's net sales in fiscal year 2023, are the main revenue drivers for Aehr Test Systems.
All of Aehr Test Systems' products are platform-based and can be customized with optional features to meet customer requirements.
Wafer-level burn-in is gaining traction
Rising complexity: Semiconductors are becoming increasingly complex, with shrinking geometries and the rise of multi-chip modules (MCMs). Testing at the wafer level ensures individual die quality before integration into complex packages, minimizing costly yield losses at later stages.
Increased reliability demands: Mission-critical applications like automotive, aerospace, and medical devices require extremely reliable semiconductors. Wafer-level burn-in effectively screens for early failures, ensuring long-term device reliability.
Wafer-level burn-in offers significant cost savings compared to package or module burn-in, especially for multi-die modules. If even 1% of the die fails during burn-in for a module containing 32 dies, there is a 32% yield loss for the entire module. All of the die inside a failed module are discarded, which represents a significant cost increase.
When multiple silicon carbide devices are packaged together in a module and one device fails during burn-in, the entire module must be discarded. This results in a significant yield loss, especially when dealing with modules containing a large number of devices. For instance, a 1% failure rate per die in a 32-die module translates to a 32% yield loss at the module level.
Before the individual chips are packaged together, testing at the wafer level allows manufacturers to identify and eliminate faulty devices early in the process. This prevents the cost of packaging and assembling modules with faulty components. The cost savings from this shift to wafer-level burn-in are substantial, particularly for electric vehicle manufacturers who rely heavily on these multi-die modules for power conversion systems.
In the words of management (Q4CC): “Increased reliability concerns about semiconductors in a growing number of mission-critical applications, as well as more multi-chip modules or heterogeneous integration, with multiple devices being assembled together in a single package are driving the need for wafer level burn-in.”
Competitive advantage
Full Wafer Contact and Parallel Testing: The FOX-XP system is designed for high-volume testing and burn-in of semiconductor devices at the wafer level, enabling testing of up to 18 wafers simultaneously, producing significant reductions in cost and space while greatly enhancing throughput.
Space: Aehr Test Systems' products take up only 5% of the test floor space compared to competitor products
WaferPak Contactor Technology: Aehr's patented WaferPak Contactors are a key component of the FOX-XP system's advantage. These contactors utilize a unique single-touchdown probe card that eliminates the need for multiple touchdowns, as required by traditional probe cards, to test an entire wafer. This single-touchdown capability, coupled with the elimination of dedicated wafer probers per wafer, results in reduced testing costs and optimized cleanroom space utilization.
DiePak Carrier Technology: In addition to wafer-level testing, the FOX-XP system, when used with Aehr's patented DiePak Carriers, offers efficient testing and burn-in of singulated die and modules. The DiePak Carriers feature multi-module sockets, enabling parallel testing of a larger number of devices compared to traditional burn-in systems that rely on single-device sockets. This high-capacity testing of singulated die and modules contributes to increased throughput and cost-effectiveness.
High-Power Testing Capabilities: The FOX-XP system is designed to meet the demanding power requirements of next-generation silicon photonics devices. With a new high-power configuration, the system can handle up to 3500 Watts of power per wafer, enabling cost-effective production testing of these high-power devices. This capability is especially important for applications like optical chip-to-chip communication, where high power testing and burn-in are essential.
Flexibility and Customization: The FOX-XP system is highly configurable and can be adapted to meet specific customer requirements. Its unique blade architecture allows for easy configuration of test blades to support different applications, such as silicon carbide, gallium nitride, and silicon photonics testing, all within the same system infrastructure. This adaptability extends to the WaferPak and DiePak Carriers, which are custom-designed for specific device types, ensuring optimal contact and testing performance.
From management (Q4CC): “The critical aspects are the low cost contactor, the full automation and alignment, high performance, high parallelism, very small footprint on wafer starts per month. So those are critical aspects that we have key differentiation on... By moving the burn-in from package module or final system form as is done today, to and move it to wafer level, our customers can achieve enormous savings related to yield loss of modules with up to hundreds of other devices or chip lets in the same module.”
Market growth
The chips market is set to grow significantly:
Aehr is involved in high-growth segments like EVs, EV charging stations, data centers, 5G, alternative energy, memory, and AI chips.
SiC; Silicon Carbide
Aehr Test Systems is a major player in the silicon carbide (SiC) market, providing wafer-level test and burn-in solutions, particularly for SiC devices used in electric vehicles (EVs) and other power electronics applications.
Market Focus:
Electric Vehicles: Aehr identifies the EV market as a significant growth driver for its SiC business. The company's solutions cater to the demand for high-quality and reliable SiC devices used in EV powertrains, particularly in applications like motor traction inverters and on-board battery chargers.
Expanding Beyond EVs: While EVs remain a primary focus, Aehr is also seeing increased demand for SiC testing solutions in other sectors, including EV charging stations, industrial applications, solar power, and electric trains.
Customer Base and Growth:
Dominant Customer: Most of Aehr's SiC business currently comes from a single large customer in the automotive industry (ON Semiconductor). However, management anticipates this customer's dominance to decrease as other clients scale up their SiC production, which is already underway.
Expanding Customer Base: Aehr has secured a total of seven customers for its SiC and GaN solutions and is actively engaging with over two dozen more companies in these markets. The company projects having over 12 customers purchasing its SiC/GaN wafer level test and burn-in solutions by the end of calendar year 2024.
Challenges and Outlook:
Slowdown in EV Market: Recent slowdowns in the EV market have impacted the timing of customer orders and capacity expansion plans, leading Aehr to adjust its revenue forecasts. However, the company maintains a positive long-term outlook for its SiC business.
SiC and GaN: Complementary Technologies in Power Management
SiC and GaN are both considered wide bandgap semiconductors, offering greater efficiency and higher voltage capabilities in power conversion applications compared to traditional silicon-based solutions. However, they differ in their application strengths, with SiC dominating in higher power ranges above 1000 watts and GaN emerging as the preferred choice for applications below that threshold.
Silicon Carbide (SiC):
High-Power Applications: SiC excels in high-power scenarios, particularly in electric vehicles (EVs) for components like traction inverters and onboard chargers.
Module-Level Adoption: The shift towards multi-die modules in EVs has fueled the demand for wafer-level burn-in solutions for SiC devices, a market Aehr Test Systems is actively targeting.
Gallium Nitride (GaN):
Lower Power, High-Efficiency: GaN is gaining traction in applications requiring lower power consumption and high efficiency, such as consumer electronics, solar inverters, and data centers.
Emerging in Automotive: While initially focused on consumer devices, GaN is now being explored for automotive applications, though its adoption in this sector remains in earlier stages compared to SiC.
Complementary Roles:
Power Threshold Differentiation: The 1000-watt power threshold serves as a dividing line, with SiC dominating above and GaN below, indicating a complementary relationship rather than direct competition.
Aehr Targeting Both Markets: Aehr Test Systems, while acknowledging the current dominance of SiC in its business, is actively developing solutions for both SiC and GaN testing, recognizing their distinct yet significant market opportunities.
SiPh; Silicon Photonics
Silicon photonics is used in the deployment of devices for data center infrastructure and 5G infrastructure to expand bandwidth. They are also used in optical chip-to-chip communication. Several companies have announced plans to use silicon photonics integrated circuits in CPUs, GPUs, and chipsets for computing, as well as in artificial intelligence applications. Silicon photonics devices are a smaller, lower-cost, and more reliable alternative to traditional fiber optic transceivers.
Aehr's solution is unique because it addresses the high power requirements of next-generation silicon photonics-based integrated circuits, which can require up to two to four times as much power for full wafer test, burn-in, and stabilization.
From the Q3CC: "These next generation silicon photonics based integrated circuits can require up to two to four times as much power for full wafer test, burn-in and stabilization. Our new FOX production system configuration, which can be used to test and burn in these new optical IO devices expands the market opportunity of the FOX-XP system even further."
In addition, Aehr's solutions improve the performance of silicon photonics devices through a process called "stabilization," which involves subjecting the devices to high temperatures and power to stabilize their output power. During the first one to two days of normal operation, the laser output characteristics of silicon photonics devices change in an exponentially decaying manner; this decay must be stabilized before the final product can be tuned to meet its performance specifications. Aehr's solution can stabilize an entire wafer of fully integrated photonic circuits with embedded or attached laser emitters.
Aehr currently has six customers using their systems for production tests of silicon photonics devices. Five customers use Aehr's NP and XP systems for wafer level test and burn-in, while one customer uses both systems for engineering production burn-in of individual simulated die and modules.
Other segments
Big opportunities are opening up in data storage (disk drives), NAND flash memory (which is increasingly stacked, increasing the need for wafer-level burn-in testing) as well as DRAM memory, all of which are massive opportunities and the company recently made inroads into the first two (see follow-up article) with DRAM further out.
AI-accelerator chips. Aehr has opened up opportunities in this fast-growing field as well, as it has secured an evaluation of its Fox XP system at one of the AI-chips producers (see subsequent article).
Finances and valuation
With a market cap of roughly $350M (at $12 per share) and an EV of $300M, and with p/e ratios of just over 20 for this fiscal year and the next, the shares aren't overly expensive and we think there is considerable upside possible to the consensus FY25 EPS estimate of $0.53.
Takeaways
The company is the leading provider of wafer-level testing equipment which is becoming increasingly important for several large technologies that are growing fast, like SiC, GaN, and SiPh, and emerging in additional segments like data storage, NAND, and DRAM memory, and AI chips.
These segments all serve large and fast-growing markets like EVs, EV charging stations, alternative energy, data centers, 5G, and AI.
Aehr has an attractive business model as its increasing installed base of systems generates an increasing stream of recurring consumables (WaferPaks and DiePaks) revenue.
While Aehr’s business has been in a considerable dip the last couple of quarters due to a slowdown in the EV market and hence fewer orders from its largest customer ON Semiconductor, there are signs of a recovery, which we will discuss in a subsequent article.
Who are the customers and competitors?