Geopolitical Tensions Will Cripple Advanced Packaging Prospects

Key Takeaways

• Geopolitical risks, volatile supply chains, and market concentration threaten ASMPT's revenue stability and magnify exposure to demand shifts in key customer segments.
  
• Intensifying competition, commoditization, and rising operating costs are eroding margins and constrain earnings growth despite ongoing AI-related demand.
  
• Leadership in advanced packaging and technology, diversified growth, and strong customer momentum position ASMPT for resilient revenues, margin expansion, and long-term earnings stability.

Catalysts

An investment holding company, engages in the design, manufacture, and marketing of machines, tools, and materials used in the semiconductor and electronics assembly industries internationally.

• Despite ASMPT's current bookings growth-driven largely by AI-related demand-the company faces the risk that geopolitical tensions and further trade restrictions could curtail long-term access to key markets such as China, leading to a structurally smaller revenue base and ongoing supply chain volatility.
  
• The recent surge in orders attributed to supply chain localization and diversification may prove transitory, with overcapacity risk emerging if customers pull forward capex or global semiconductor manufacturers' aggressive expansions outpace actual end demand; this could result in falling future equipment sales and a sharp reduction in backlog.
  
• ASMPT's market for advanced packaging, particularly Thermo-Compression Bonding (TCB) tools, is highly concentrated, so any disruption or contraction in orders from a handful of major AI and HBM customers could result in outsized topline and margin declines given the company's significant fixed cost base.
  
• The commoditization of mainstream and advanced semiconductor assembly equipment is accelerating as new competitors ramp up and customers increasingly view ASMPT's mainstream products as capacity buys rather than technology differentiators, likely leading to sustained margin pressure and weaker pricing power over the long term.
  
• Persistent increases in operating expenses for R&D, IT infrastructure, and regulatory ESG compliance, combined with only gradual and uncertain margin uplift from advanced packaging mix, threaten to compress net margins and limit earnings growth-even if headline revenues continue to reflect AI tailwinds in the near-term.

ASMPT Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on ASMPT compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming ASMPT's revenue will grow by 8.9% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 1.8% today to 9.7% in 3 years time.
• The bearish analysts expect earnings to reach HK$1.7 billion (and earnings per share of HK$4.01) by about July 2028, up from HK$245.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 18.1x on those 2028 earnings, down from 107.4x today. This future PE is lower than the current PE for the HK Semiconductor industry at 25.3x.
• Analysts expect the number of shares outstanding to decline by 1.08% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.85%, as per the Simply Wall St company report.

ASMPT Future Earnings Per Share Growth

Risks

• Continued strong AI-driven demand across advanced packaging and mainstream segments, including repeat orders and expanding customer base, suggests resilient and growing revenues and order backlogs that could offset cyclical downturns and support top-line growth in the long term.
  
• ASMPT's leadership in Thermo-Compression Bonding technology and active oxide removal for next-generation HBM and logic applications, as well as first-mover advantage in HBM4, positions the company for margin expansion and sustained earnings growth as industry complexity increases.
  
• Ongoing growth in China driven by localization and the rise of electric vehicles, along with diversification across computers, automotive, communications, and consumer electronics, reduces reliance on any single market or end customer, which supports more stable revenue streams over time.
  
• Increasing contribution from Advanced Packaging (39% of revenue in first half of 2025) and consistent gross margins above 40% demonstrate operational leverage, with management indicating potential for further improvement in profitability as product mix continues to shift toward higher-margin technologies.
  
• Robust order momentum, above-consensus revenue and booking guidance, and strong book-to-bill ratios reflect entrenched customer relationships and a growing installed base, indicating recurring equipment sales, service revenues, and better visibility for future earnings.

Valuation

• The assumed bearish price target for ASMPT is HK$56.6, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of ASMPT's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of HK$100.0, and the most bearish reporting a price target of just HK$56.6.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be HK$17.2 billion, earnings will come to HK$1.7 billion, and it would be trading on a PE ratio of 18.1x, assuming you use a discount rate of 9.8%.
  
• Given the current share price of HK$63.2, the bearish analyst price target of HK$56.6 is 11.7% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.