Singapore Semiconductor Stocks Set to Shine on AI, 5G, and EQDP Tailwinds

• Driven by AI, cloud computing, 5G, and other transformative technologies, Singapore’s semiconductor sector remains a key growth area for investors.
• Singapore contributes 5% of global wafer fabrication, 20% of semiconductor equipment production, and 10% of total semiconductor output, supported by initiatives like NSTIC-GaN.
• UMS Integration is well-positioned to benefit from AI-driven semiconductor demand and record wafer fabrication investments through 2028. Its expanded Penang facilities, coupled with strong demand visibility from key customers Applied Materials and Lam Research, support continued earnings growth and operational resilience.
• Frencken Group is expected to maintain stable semiconductor performance in 2H25, underpinned by its diversified business segments and expanded production capacity in the US and Singapore. The upcoming Mechatronics site in Singapore will further strengthen its capabilities, enabling it to capture long-term growth opportunities across semiconductors, analytical life sciences, and aerospace.
• While tariff-related volatility and global uncertainties exist, Singapore’s semiconductor and precision engineering firms are well-positioned to capture growth from rising global demand.

Driven by the accelerating adoption of AI, cloud computing, 5G, and other transformative technologies, we remain bullish on semiconductors, a sector at the heart of this digital transformation. As a result, we have consistently recommended investors build semiconductor exposure as a core part of their portfolios.

While our core recommendation has been the VanEck Semiconductor ETF (NASDAQ: SMH), which offers broad exposure to leading global names, it is also important to recognise Singapore’s increasingly strategic role in the global semiconductor supply chain. The city-state currently accounts for 5% of global wafer fabrication capacity, 20% of semiconductor equipment production, and 10% of total semiconductor output.

Coupled with MAS’ EQDP which encourages investments beyond large-cap companies, our screening focused on Singapore-listed companies with market capitalisation between SGD 500 million and SGD 5 billion, deriving at least half of their revenue from semiconductors and projected to deliver an earnings CAGR of at least 10% over the next three years. Through our screening, two names stood out: UMS Integration (SGX: 558) and Frencken Group (SGX: E28).

Notably, both UMS and Frencken have reported stronger earnings and issued positive guidance on the back of tailwinds. These stocks have also generated a year-to-date total return of 38% and 30% respectively as of 31 August 2025. In this article, we bring the spotlight to these domestic names, which we believe offer compelling opportunities for investors.

Related Article: 8 Potential EQDP Winners to Watch

Related Article: Singapore Market 2H25: Riding Structural Tailwinds Toward Stronger Long-Term Highs

Singapore’s Role in the Semiconductor Supply Chain

The semiconductor supply chain spans three segments: upstream (IC design), midstream (manufacturing and wafer fabrication), and downstream (packaging and testing). Singapore’s semiconductor industry is concentrated in the downstream, where Outsourced Semiconductor Assembly and Test (OSAT) and Automated Test Equipment (ATE) companies play a key role.

OSAT firms handle assembly, packaging, and testing of semiconductor devices, while ATE systems automate wafer-level and device-level testing, ensuring quality and reliability. Together, these segments underpin Singapore’s strategic importance in Asia’s semiconductor landscape.

The recent launch of the National Semiconductor Translation and Innovation Centre for Gallium Nitride (NSTIC-GaN) further strengthens this positioning by localising GaN production—a critical enabler for next-generation technologies.

Complementing these efforts, policy initiatives such as MAS’ Equity Market Development Programme (EQDP) and the enhanced GEMS research scheme are expected to boost research coverage and market liquidity in small- and mid-cap stocks, unlocking greater investor interest.

UMS Integration (SGX: 558) – ATE company

Headquartered in Singapore, UMS Integration is a one-stop strategic integration partner providing equipment manufacturing and engineering services to Original Equipment Manufacturers (OEM) of semiconductors and related products. The company is in the business of front-end semiconductor equipment contract manufacturing and is also involved in complex electromechanical assembly and final testing of devices.

In 1H25, the company posted revenue growth of 14% YoY, increasing from SGD 109.9 million a year ago to SGD 125 million (86% are semiconductor revenues), as more parts are being qualified, leading to more new customers. The company continued to boost its bottom line as gross material margins increased to 55.1% in 1H25 from 53.3% in 1H24 on a favourable product mix. Its net profit rose 6% in 1H25 to SGD 20.6 million.  

UMS has demonstrated resilience amid tariff-related uncertainties and geopolitical tensions, with steady quarter-on-quarter improvements driven by strong customer demand and capacity expansion in Malaysia (new facilities in Penang, Malaysia).

Looking ahead, the company is well-positioned to benefit from the global semiconductor industry’s robust rebound, underpinned by AI-fueled demand for advanced chipmaking and record investments in wafer fabrication equipment (2nm and below) projected through 2028 (USD 19 billion in 2024 to USD 43 billion in 2028).

New Penang facilities also position UMS as a key beneficiary of the ongoing shift of global supply chains towards Malaysia and Singapore, where its two major customers, Applied Materials and Lam Research, are committing significant expansion. UMS has also secured a new product order from Applied Materials, which is slated to start production in 4Q25.

Beyond semiconductors, the company is also set to ride the ongoing aviation boom, supported by strong air travel and cargo forecasts.

While UMS currently trades at a P/E of 20.6X, which is above its historical P/E during market upcycles, we think that it is justifiable considering our bullish outlook for the semiconductor industry. We expect global semiconductor sales to continue its upward trajectory on the back of AI and 5G, which could translate to greater earnings for UMS (Figure 1). Overall, UMS’ earnings are likely to grow strongly on the back of Singapore’s semiconductor upcycle, additional production capacity and higher demand coming from both key customers.

For investors looking for both income and capital appreciation, UMS may be appealing considering its consistent dividend payout history of at least half of its earnings, except in 2022 when a larger share of profits was set aside for its Penang expansion (Figure 2).

Figure 1: UMS Forward P/E vs Global Semiconductor Sales

Figure 2: UMS Historical Dividends

Related Article: UMS Holdings: A hidden opportunity to ride on Singapore’s semiconductor upcycle

Frencken Group (SGX: E28) – mix of ATE and OSAT

Frencken Group is a diversified global engineering company that provides a wide spectrum of high-value manufacturing and engineering services to leading multinational clients. The company has two business segments with (i) Mechatronics making up 90% of its total revenue in 1H25 and (ii) Integrated Manufacturing Services (IMS) making up the remaining.

Mechatronics: Its core activities span precision engineering and technology solutions, including value engineering, prototyping, program and supply chain management, precision machining, sheet metal fabrication, and system integration.

IMS: The company also engages in the design and manufacturing of specialised products such as filters, moulds and dies, plastic components, and automotive micromechanical parts, complemented by advanced processes like vacuum coating and thermal treatment.

With its integrated capabilities across the value chain, Frencken serves key industries ranging from semiconductors and medical technology to automotive and industrial automation, positioning itself as a trusted partner in supporting customers’ innovation and global expansion.

In 1H25, its semiconductor revenue surged 38% YoY in 1H25, attributed mainly to stable sales growth to a key customer in Europe and a rebound in sales from the Asia operations. The company’s operations in Asia also benefited from a broader product portfolio and a recovery in demand in the semiconductor equipment sector. Notably, the semiconductor business segment made up 50% of Frencken’s total revenue, 20% from analytical life sciences, 15% from medical, 7% from automotive, with the remaining 8% from other segments. At its bottom line, net profit rose 9.9% YoY to SGD 19.9 million.

The company management expects 2H25 revenue to remain broadly stable, with semiconductor segment performance likely similar to 1H25, though subject to tariff-related volatility and possible reshoring trends. Despite the challenging backdrop, Frencken remains confident in its long-term prospects with customers and the continued growth of Singapore’s semiconductor and technology industries, which are also underpinned by its diversified business model, robust financials, and expansion initiatives.

Notably, Frencken is investing in larger facilities in the US and Singapore to bring additional production capacity. Its new Mechatronics site in Singapore, slated for completion in 1Q27, will enhance competitiveness, support next-generation manufacturing, and capture opportunities not only in semiconductors but also in analytical life sciences and aerospace.

While Frencken is currently trading at a P/E of 14.7x, slightly above its 14x P/E during previous market upcycles, we view this as justifiable given the company’s expanded production capacity, the upcoming Mechatronics facility in Singapore, and stronger demand driven by rising global semiconductor sales (Figure 3).

Figure 3: Frencken’s Forward P/E vs Global Semiconductor Sales

Key Investment Risks

Newly proposed US tariffs have been primarily targeted at chipmakers and advanced semiconductor manufacturing, rather than equipment suppliers.

This distinction is important for UMS, whose key customers, Applied Materials and Lam Research, are equipment makers, not chipmakers, and therefore not directly targeted by the measures. Similarly, for Frencken, some of its key customers include ASML Holdings (equipment maker) and Agilent Technologies (testing and process control company), which are not chipmakers.

While indirect impacts such as supply chain adjustments or weaker sentiment cannot be ruled out, the direct exposure of UMS and Frencken to tariff risk appears relatively contained. Overall, while sentiment swings may drive near-term volatility, the underlying fundamentals of UMS and Frencken remain intact.

Conclusion

Singapore’s small- and mid-cap semiconductor and precision engineering companies remain well-positioned to benefit from structural tailwinds in the technology sector. Initiatives such as MAS’ Equity Market Development Programme (EQDP) and the enhanced GEMS research schemes are expected to increase research coverage and market liquidity, shining a spotlight on these often-overlooked companies.

Given that Singapore is an export-driven economy, with electronics forming a significant portion of its trade, these firms play a critical role in supporting the country’s economy. Coupled with growing global demand for semiconductors and advanced manufacturing solutions, these companies, namely UMS Integration (SGX: 558) and Frencken Group (SGX: E28) offer exposure to both near-term opportunities and longer-term growth potential in Singapore’s semiconductor space.

Table 1: Key information about UMS Integration and Frencken Group

Company	Market Cap (SGD mil)	EPS CAGR (FY25-27)	Geographical Breakdown in terms of revenue	Industry Focus	Key Products/Services
UMS Integration (SGX: 558)	994	18%	Singapore: 63% Malaysia: 14% US: 12% Taiwan: 7% Others: 4%	Precision Engineering and Systems	Precision Components and Wafer Handling Systems with a focus on Industrial-related Chips
Frencken Group (SGX: E28)	611	10%	Malaysia: 38% Singapore: 22% US: 17% Vietnam: 5% China: 5% Others: 13%	Integrated Manufacturing Services	Provides end-to-end solutions spanning design, prototyping, precision machining, electronics manufacturing, and assembly, with a strong presence in the semiconductor, medical, and industrial automation sectors
Source: Bloomberg Finance L.P, SGX, Company Filings, iFAST Compilations. Market capitalisation data and EPS CAGR is as of 31 August 2025 while geographical breakdown in terms of revenue is as of the 6-month period ended 30 June 2025.

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities while the analyst who produced this report holds a position in UMS Integration (SGX: 558).