Investment Insights: BE Semiconductor Industries (‘BESI’)

Investment Insights: BE Semiconductor Industries (‘BESI’)

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In the below note, we’ll discuss the reasons why we view BE Semiconductor Industries ‘BESI’, as an exceptional investment opportunity.

BESI was founded in 1995 by Richard Blickman, who remains CEO today. Since listing in December of 1995, the equity has delivered a compounded total annual return of 14% (dividends re-invested).


Semiconductors, also known as chips, microchips or integrated circuits, are the building blocks of the digital era.

They are essential components of electronic devices, and they can be found in thousands of products such as computers, smartphones, home appliances, gaming hardware, and medical equipment. Their use continues to grow as society continues to embrace digital innovation.

Source: BESI Annual Report 2023


BESI is a leading manufacturer and supplier of semiconductor assembly & packaging equipment.

The semiconductor fabrication process can be broken into two parts. The front-end fabrication of the wafer and the back-end assembly & testing.

According to TechInsights, the semiconductor manufacturing equipment market was $110b in size in 2023, with most value captured in the front-end.

Source: BESI Annual Report 2023

Within the $4.1b wafer packaging and assembly market, BESI focuses on Die Attach, which represents c.80% of group sales. Die Attach equipment is used to bond a chip to a circuit board or to another chip.

BESI leads with a 40% market share in Die Attach. It also leads the market in supplying cutting-edge assembly machines with a c.75% market share in Advanced Die Attach.


Critically, BESI is the #1 provider of hybrid bonding assembly equipment, the most advanced method in the Die Attach space. Hybrid bonding supports cost-effective growth within the semiconductor industry.

Source: BESI Annual Report 2023

As performance demands increase, hybrid bonding will be key, and accelerating adoption of hybrid bonding may strengthen BESI’s leadership position. BESI’s offering currently provides significantly better performance and accuracy versus the competition.


The assembly & packaging process is a core part of the semiconductor manufacturing process, and one which every chip must go through. BESI is well placed to benefit from the secular growth in semiconductors.

Moreover, BESI’s dominant position in Advanced Packaging could deliver growth outperformance in the coming years. TechInsights estimate that the Die Attach market could grow at a 28% compound annual growth rate from 2023 to 2026.


Moore’s Law has been the guiding principle for the semiconductor industry over the past 6 decades. Moore’s Law observed that roughly every two years the number of transistors on a chip would double.

The more transistors on a chip, the more processing power and efficiency that could be delivered. The compounding rate of technological shrink explained by Moore has been roughly correct for decades.

Source: Boston Consulting Group

However, as size has decreased, complexity has seen a corresponding increase, and so too has the cost.

Source: Boston Consulting Group

As a result, chip manufacturers are looking  for other areas to improve productivity and limit cost. A stage often referred to as “More than Moore”.

BESI’s area of expertise, Advanced Packaging, has been seen as a real opportunity in realizing significant value in the production process.

While the front-end process remains highly valuable, increasing complexity is leading to increasing value provided by the back-end packaging process.

Advanced packaging accounts for about 8% of the total semiconductor market today & is projected to double by 2030 to more than $96b, outpacing the rest of the chip industry.” – Boston Consulting Group


BESI operates with gross margins above 60% and free cash flow margins over 30%. Over the past ten years it has delivered a diluted earnings per share compound annual growth rate of 26%.

Management has a reputation for strong cost control and pricing discipline, resulting in industry leading profitability. Returns on average equity have averaged almost 40% over the past five years.

BESI has returned €1.9b to shareholders since 2011 in the form of dividends and repurchases, equivalent to c.30% of group revenue during the same period.


A backward-looking review of business performance indicates the existence of a competitive advantage that has led to outsized returns. There is good reason to believe that this can be sustained going forward.

Close customer relationships, along with product cycles that are developed & executed over decades, provides for a high level of predictability and stability once a technology is adopted. Customer & supplier cooperation tends to be a crucial part of product development. And a continuous feedback loop provides an expanding advantage for the dominant players – if you don’t know the problem, you can’t give the solution.

Scale begets scale. BESI can outspend the majority of its competition in absolute terms on R&D and stay ahead of the curve from a technological perspective.

The sector itself is highly consolidated. At the leading edge it is common to see companies with market shares consistently over 75%. New entrants in this space are rare, incumbents have a solid advantage.

Management thinks long-term. BESI has a history of exiting  product markets when its technology becomes commoditized and returns on investment become unattractive.


Investment for capital machinery tends to fluctuate subject to the peaks & troughs in demand for end-products and so cyclicality is often cited as one of the major risks to the BESI investment case. Indeed, since 2012 the equity has witnessed a drawdown greater than 50% three times (nearly four times).

Despite the cyclicality, BESI has been one of the best performing European stocks over the past 30 years.

The business model has continuously improved, reducing volatility in earnings compared to peers, and with the company achieving ever-higher margins and sales through each downturn.


BESI has delivered exceptional shareholder performance over three decades, supported by an exceptional management team, consistent product innovation and an improving business model.

Looking forward, the same drivers appear to be in place with additional support provided by a leading position in hybrid bonding and an industry that is quickly embracing advanced packaging.

The company has a dominant position in a niche but fast-growing market with strong secular tailwinds.

Management have made significant changes to reduce earnings volatility. That said, cyclicality will continue to exist as a risk but therein lies the opportunity for the long-term investor.

Written by Archie Tulloch, Senior Investment Analyst, Middleton Enterprises

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