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Description:

ams AG (Austriamicrosystems) is active in the design, development and manufacturing of high performance semiconductor products. The company is based in Graz, Austria and employs about 1,100 people. Their products are analog and analog-intensive mixed signal type items.  The company focuses on the development of applications that consume low amounts of power and offer the opportunity for high feature integration and programmability. Their product range comprises power and lightning management, optical sensors, audio front ends, mobile entertainment, sensors and automation, metering, remote car access solutions, etc. 

Their customers are from a range of different industry sectors:  from the Communications sector - Apple, Nokia, SanDisk, Nvidia, Samsung, LG, Philips etc.; from the Industry and Medical sector - Siemens, Philips, Thales, Honeywell, etc.; from the Automotive sector - Continental-Siemens, Delphi, etc. Their sales break down as follows: Communication 56%, Industry and Medical 25%, Automotive 10%, and Foundry 8%.

The new CEO is relatively new to ams, he joined the company through the acquisition of TAOS in 2011 (of which he was the ex-CEO); however, it’s expected he understands the technology business well, as TAOS was a spin-off of Texas Instruments. Through the optical sensor business ams has created a very strong link with Apple.Strengths and weaknesses analysis / Fundamental analysis: 

Strengths:

• ams is benefiting fully from demand for tablets and smartphones,
• ams has a high backlog of orders,
• ams has exposure to the most attractive semiconductor market (MEMS,UTAF, RFID, NFC and optical sensors),
• ams assumes that its business can grow by more than 10% annually for the years to come, 
• Revenues are well split across the company: TAOS 24%, Consumer communication systems 24%, Foundry 8%, Cars 10%, and Industry and Medical 25%. The regional split is EMA 48%, Americas 10%, and Europe, Middle East and Africa 42%,- Most of ams’ business growth is organic,
• EPS growth is in the region of 20%, and the long-term EBIT margin is in the region of 20%; this is only partially recognized by the market. 

Weaknesses:

• ams sells about 1bn microphone units (MEMS systems) and therefore controls about 80-90% of market demand. Any change in consumer sentiment has an significant impact on the capacity utilization ratio, which in turn will impact growth margins,
• A significant part of ams’ revenues stem from a small number customers, with Apple accounting for about 25% of ams’ sales, 
• There has been no product innovation in recent quarters; any development has depended on major clients such as Apple, Samsung, etc.
• Development costs keep increasing more than expected,
• NFC deployment has no clear winner yet. Eventually R&D cannot continue to be amortized in the ordinary manner.

Company profile, investment opportunity and asset management integration
Operational risks: Average
Expected growth: Well above average
Investment orientation: Group « Global Strategies and Best-in-Class »,
European Technologies 

Abbreviations used: 
UTAF: Ultra-Thin Autofocus
RFID: Radio-frequency identification
NFC: Near Field Communication