KLIC Q2 Deep Dive: Core Market Improvement Offsets Automotive Weakness, Guidance Surprises to Upside

Semiconductor production equipment company Kulicke & Soffa (NASDAQ: KLIC) announced better-than-expected revenue in Q2 CY2025, but sales fell by 18.3% year on year to $148.4 million. On top of that, next quarter’s revenue guidance ($170 million at the midpoint) was surprisingly good and 7.4% above what analysts were expecting. Its non-GAAP profit of $0.07 per share was 27.3% above analysts’ consensus estimates.

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StockStory’s Take

Kulicke and Soffa’s second quarter was marked by a positive market reaction, as management attributed the outperformance to improvements in general semiconductor and memory demand, even as automotive and industrial end markets remained weak. CEO Fusen Chen pointed to “steady core market improvement” supported by technology transition initiatives, highlighting stronger utilization rates and product development in areas like advanced dispense and vertical wire. Management also cited ongoing cost control efforts and execution on customer engagement as key contributors to the quarter’s results.

Looking ahead, management’s guidance is shaped by anticipated recovery in general semiconductor and memory markets, as well as continued investment in new product introductions. CFO Lester Wong noted that demand improvement in key regions and customer order flow have increased confidence, though he cautioned that automotive and industrial softness is likely to persist in the near term. Chen emphasized upcoming technology launches and core market recovery as drivers for sequential growth, adding, “We remain focused on executing our strategic priorities and supporting customer technology transitions.”

Key Insights from Management’s Remarks

Management linked quarterly performance to improved utilization in general semiconductor and memory, while new product development and persistent automotive headwinds shaped near-term results.

• Automotive and industrial softness: Management highlighted that order hesitation from automotive and industrial customers persisted, primarily due to trade uncertainty impacting supply chains. This was especially pronounced with a Southeast Asian customer’s production facility, and softness is expected to continue in the coming months.
• Utilization rates improving: CFO Lester Wong reported utilization rates of 81% overall—83% in general semiconductors and 80% in memory—driving sequential revenue growth. Automotive utilization lagged, remaining below 70%.
• Advanced Dispense momentum: CEO Fusen Chen cited growing demand for advanced dispense solutions across key customers and end markets, supported by an “aggressive product development pipeline.” The company plans to unveil new capabilities at SEMICON Taiwan, aiming to broaden its portfolio and customer reach.
• Vertical Wire and HBM transition: Management is preparing for initial high-volume vertical wire production to begin in 2026, particularly in memory applications such as high bandwidth memory (HBM). Vertical wire technology is positioned to enable increased bandwidth and cost-effective production for emerging AI-driven devices.
• Thermo-Compression Bonding (TCB) leadership: Chen emphasized progress in Fluxless Thermo-Compression Bonding (FTC), noting successful adoption by multiple large customers and recent advances in integrating physical and chemical wafer preparation. The company expects to ship an initial FTC system for HBM by the end of 2025, viewing this as a key enabler for future memory market share gains.

Drivers of Future Performance

Kulicke and Soffa’s outlook is anchored by anticipated recovery in core semiconductor and memory markets, tempered by ongoing weakness in automotive and industrial demand.

• General semiconductor and memory recovery: Management expects continued improvements in general semiconductor and memory utilization rates, supported by pricing dynamics and greater customer adoption of advanced packaging technologies. These trends are seen as primary drivers for sequential revenue growth in the coming quarters.
• Automotive and industrial headwinds: Despite optimism in other markets, management cautioned that trade-related uncertainty and supply chain disruptions will likely keep demand from automotive and industrial customers subdued in the near term. This could limit the pace of overall revenue growth until these sectors recover.
• Product innovation and technology transitions: The company is banking on new product launches—including expanded advanced dispense capabilities, vertical wire solutions, and progress in Thermo-Compression Bonding—to capture emerging demand in memory and advanced packaging. Management believes these innovations will expand addressable markets and drive margin improvement over the next several quarters.

Catalysts in Upcoming Quarters

In the quarters ahead, the StockStory team will be watching (1) the pace of adoption for advanced dispense and vertical wire technologies, (2) sustained improvement in general semiconductor and memory utilization rates, and (3) any signs of recovery in automotive and industrial end markets. Execution on Thermo-Compression Bonding shipments and the impact of trade policy changes will also be closely monitored.

Kulicke and Soffa currently trades at $35.06, up from $32.08 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free).

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