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All right, everyone. Time to go back to our roots. That's right. Some chip stock investor, old school style, talk about supply chains and how money moves through the manufacturing supply chain and all that good stuff. And we've got some charts, lots of financial charts to go with it. So you can see how that money is moving right now.
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You can get an additional 15% off any paid plan fiscal AI slash csi. Thanks to fiscal, we have some awesome visualizations to talk about the chip, fab and contract manufacturers and wafer fab packaging and assembly equipment. we're gonna be focusing on three companies today. Two of them are gonna fit into that purple bubble chip fabs and contract manufacturers, and one of 'em in the blue bubble in the packaging and assembly equipment segment.
What are those three companies, Nick? We are going to start with Amkor and then we're gonna take a quick look at Taiwan Semi Manufacturing and then finish this off with one of many testing equipment companies, Aehr Test Systems, which has been a, perennially popular small cap stock over the last five years.
And the reason why we're talking about these three companies. Well, it's not just because they've been hot stocks over the last year. You can see from this chart, especially in the last few months, Amkor has absolutely ripped higher, more than doubling over the last 12 months, but not too shabby from the slower but steady TSMC, and then of course the small cap Aehr Test Systems.
All over the board there in third place. With all of the talk about, AI data center and accelerated computing and all of the manufacturing capacity that is expected to, continue to go online in 2026. There's a lot of optimism that this hot streak will continue for these companies, but we're going to explain why TSMC is still, despite Amkor's recent rise, probably the best set it and forget it business.
Amkor and Aehr Test Systems are going to require a bit more babysitting. And just for reference, here's a three year total return for Amkor, Aehr and TSMC. TSMC, far and away the leader 313, almost 314% over the last three years. And if you zoom out even further, five and 10 years, TSM, absolutely the winner here in between these three.
And things actually do get a little bit wonky on the five year just because Aehr Test Systems sort of skyrocketed out of obscurity, especially five years ago when electric vehicles and silicon carbide test and burn in became a really hot focus for investors. But really, like Kasey said, 10 years, 20 years, TSMC is actually the steady compounder of wealth.
Now, as a viewer, you may be wondering why in the world we're comparing these three companies, TSMC, the end all be all for chip fab, manufacturing, leading edge tech, Nvidia, and all of the other leading companies use TSMC to produce their wafers. Amkor more of a packaging specialist. And as Nick mentioned, Aehr Test Systems specializing in test and wafer burn in test equipment.
Well, we'll start with Amkor here, because the hope is that as advanced packaging becomes more important for these very complex accelerated computing systems, you got a sneak peek of what that looked like, with NVIDIA's Vera Rubin systems at CES last week. The hope is that Amkor is going to pick up by some estimates, billions in extra revenue in the coming years that TSMC doesn't want to bother with because it's just outside of their scope of what is considered more strictly wafer level development or front end development.
And you can see that here for Amkor over the last three to five years, especially. The blue bar here, their advanced packaging has become a larger percentage of their business overall, and some of the older packaging and test services have been in decline. And make sure you make a mental note of that yellow line there.
That's the operating margin for Amkor, currently between six to 7%. Keep that operating margin in mind as we go through the most recent revenue report from TSMC. Just a few days ago, TSMC released their monthly revenue report. Here is their total revenues in US dollars on a trailing 12 month basis through Q3, September, 2025 quarter.
In the last quarter, TSMC ended with over 119 billion in revenue. Let's take a look at what they released in the monthly revenue. So as is typical with TSMC, we got the early look at what the Q4 2025 revenue is going to be because they do these monthly revenue releases, this one for December, 2025. And so now we can actually calculate full year 2025 sales even before the actual quarterly earnings update drum roll.
When converting it from new Taiwanese dollars to USD 120.6 billion in 2025 compared to 88.1 billion in 2024, that represents a 37% increase U over year in US dollars, or just shy of a 32% increase year over year in Taiwanese dollars. So pretty epic year, but you will notice that there has been some sequential taper off in revenue growth, especially the last few quarters.
Some of that may simply have to do with the fact that TSMC is fully booked and so they are ramping up production to meet demand from, as we mentioned already, Nvidia, other accelerated computing customers as well as the other historic big customer Apple. We'll have to see what TSMC says regarding their revenue guidance for full year 2026 during the actual earnings call.
But our baseline assumption is it's going to be somewhere in the range of 20%, if not a bit more in the outlook that they provide. And just to drill down a little bit more on where that revenue is coming from, for TSMC, in red we have wafer revenue, which is obviously the bigger portion of the revenue segment.
But then there's that other product revenue which is in blue. And actually that's growing at a pretty steady clip, isn't it? It's actually outpacing the revenue growth from wafers. Yeah. And it does tend to be advanced packaging, especially t SMCs, wafer level, and wafer bonding, technology. Things like chips on wafer, on substrate packaging.
And you can see that CAGR over the last decade plus, about 20, 21% compound annual growth rate versus 15 16% for the core wafer development, frontend wafer development revenue. And so as a result of that, a decade plus ago, TSMC only generated about seven, eight, 9% of its revenue from the blue bar.
And today, we're now pushing 14%, perhaps 15% of that in 2026. And if you follow TSMC closely, like we do over on Chip Stock Investor, semi insider, you know that they have actually been increasing their capital expenditures on that advanced packaging equipment segment for that line item of revenue.
Let's make the bridge here to Amkor. Kasey, you said everybody should keep in mind am core's six to 7% operating margin. Why is that important, Now, as we look at TSM C'S operating margin? You can see a huge difference in the operating margin at TSMC from a company like Amkor, TSMC, well into the mid 40% range for their operating margin.
And TSMC is known for keeping a very tight margin, which is why some of those orders get passed off to another company like Amkor. If the work doesn't fit TSMC's operating margin, then they're gonna pass on that work. They're gonna send it to somebody else. There's rightfully some optimism around Amkor because having a key partner like TSMC and picking up that extra work that doesn't meet their particular, profit margin profile.
It obviously can help Amkor grow their business and also perhaps over time increase their operating margins as well. But at this point in time, the company that's really accruing outsized amounts of profit from the accelerated compute movement, obviously is TSMC, both from a revenue growth standpoint as well as potential for profit margin growth.
At least right now in the here and the now. That could change as time goes on for Amkor. It's been a couple years since we've talked about Amkor publicly via a video, here on YouTube. So it was high time, I guess that we call it out again. Just so we kind of complete this little triad here, let's now move on to one of the suppliers, a very, very tiny supplier, a company that hopes to be a bigger supplier to this advanced packaging part of the accelerated compute market Aehr Test Systems.
We just got their Q2, fiscal 2026 earnings update also, just a few days ago. What is going on here, Kasey? Well, let's take a look at another fiscal chart. We have Aehr's revenue coming in at almost 10 million for the quarter, which you can see is sequentially down and year over year. Also on a struggle bus.
The good news is Aehr did say that they're going to reinstitute their yearly guidance. In The last few quarterly updates they have not done that. So they actually see some path forward, but it's still pretty soft. Yeah, that's right. They're forecasting 25 to 30 million at the high end for the second half of their fiscal year that ends in May, 2026.
So that is still going to represent, a pretty significant decline from their last revenue peak. However, the good news here, they did make that acquisition last year for those Sonoma test and burn in equipment, specifically targeting the accelerated compute market. What they're trying to do here is bridge the gap from the silicon carbide business that they had a few years ago that really kind of put Aehr Test Systems on everyone's radar in the first place, to now the next hot thing being accelerated compute and attacking this from both wafer level test and burn in for accelerators as well as packaged parts test and burnout.
They would like everybody to move to wafer level test in burn, but at the moment, given what the OSATS like Amkor are currently willing to shell out money for it. Well, sounds like it's still mostly packaged parts testing, and this is one of the big reasons why the revenue continues to, not put up much in the way of fireworks, but at the very least, the implication is here, 25 to 30 million for the second half of this fiscal year.
Air should be back in sequential growth mode over the course of the next quarter or two. We're putting this one back on our watch list again after we took yet another break from Aehr Test Systems, about two quarters ago now. Let's go back and take a quick look at the cash on balance for Aehr in our fiscal chart.
You can see that cash has been dwindling pretty significantly because of their poor cash flow. But in this most recent quarter, they had a little bit of a bump in their cash on balance. And the reason was they issued a little bit more stock to increase their cash cushion. Yeah. This is obviously not going to be a red flag.
This is not a company that's imminently running out of cash, but this is probably a pretty good hint to. Those of you that are watching Aehr Test Systems, that management might see the current valuation a little bit high. And so they took the opportunity to issue some new stock, sell it onto the market and raise that cash, add it to the balance so that they have, as you said, that cushion as they try to ramp up.
Their business in the accelerated compute market. This one continues to be a frustrating one. It's a very small business. It gets traded an awful lot. It's a day trader and swing trader favorite. And so as a result, the volatility for this, as tends to be the case with very small businesses like this one it's gonna be up and down a lot, but, stock price has been coming back down as of late and so, we're keeping an eye on it again.
So I guess in summary, if you want a set it and forget it stock, we would say that TSMC kind of fits that bill. Amkor and Aehr Test Systems need a lot more babysitting. Mm-hmm. And that's all right. If you like babysitting your businesses, if you have the time to do so, keep an eye on these two, Amkor.
Looking a little bit hot to us right at the moment, given the revenue being a bit sluggish. Let's see what happens after their Q4 update and guidance for calendar year 2026. Make sure you check out that updated pricing for fiscal and get the 15% off with our link fiscal.ai/csi. And if you want more access to us and all of our research, go over to chip stock investor.com where we have our research platform. Take care everybody. See you soon.
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