Aehr Test Systems, a leading provider of semiconductor test and burn-in solutions, has emerged as a critical player in the fast-paced world of advanced electronics. With a rich history spanning over four decades, this California-based company has evolved to meet the ever-changing demands of the semiconductor industry, establishing itself as a pioneer in cutting-edge reliability testing technologies.
Company Background
Aehr Test Systems was incorporated in California in May 1977 and has been developing and manufacturing test and burn-in equipment used in the semiconductor industry for over 45 years. The company's principal products include the FOX-XP, FOX-NP, and FOX-CP wafer contact and singulated die-module parallel test and burn-in systems, the Sonoma, Tahoe and Echo packaged parts burn-in products, the WaferPak full wafer contactor, the DiePak carrier, the WaferPak aligner, the DiePak autoloader, and test fixtures.
In the early years, Aehr Test Systems focused on providing burn-in and test solutions for the memory semiconductor market. The company faced challenges as the memory market went through industry downturns and consolidation. To diversify its business, Aehr Test expanded into testing solutions for power semiconductors used in electric vehicles and other industrial applications in the late 2000s. This strategy proved successful as the company saw strong demand for its silicon carbide power semiconductor test and burn-in systems.
Key Success Factors
One of the key factors driving Aehr's success is its ability to adapt to the rapidly changing landscape of the semiconductor industry. As semiconductor geometries have shrunk and device complexities have increased, the demand for comprehensive reliability testing has skyrocketed. Aehr's solutions, such as the FOX-P family of test and burn-in systems and the WaferPak contactor technology, have become integral to the manufacturing process of a wide range of semiconductor devices, ensuring that critical components meet the stringent reliability standards required by today's advanced applications.
The company's recent acquisition of Incal Technology, a specialist in packaged part reliability and burn-in solutions, has further strengthened its position in the market. The integration of Incal's product lines, including the Sonoma, Tahoe, and Echo series, has enabled Aehr to offer a comprehensive suite of test and burn-in solutions that cater to the rapidly growing artificial intelligence (AI) and high-performance computing (HPC) markets.
Financials
Aehr's financial performance has shown both growth and recent challenges. In the fiscal year ended May 31, 2024, Aehr posted revenue of $66.22 million and a net income of $33.16 million, reflecting the strong demand for its products and the company's ability to effectively manage its operations. The company also reported annual operating cash flow of $1.76 million and annual free cash flow of $1.01 million for the same period.
However, the most recent quarter (Q2 2025) ending November 29, 2024, showed a decline in performance. Revenue for the quarter was $13.45 million, a 37% decrease compared to the same period in the prior year. This decrease was primarily due to a decline in shipments of systems and reduced delivery of services, mainly attributed to softness in the power semiconductor demand for electric vehicles. The company reported a net loss of $1.03 million for the quarter.
Product revenue for Q2 2025 was $11.98 million, down 40% year-over-year, while services revenue was $1.47 million, down 8%. Gross profit for the quarter was $5.40 million, with a gross margin of 40.1%, compared to $10.96 million and 51.1% in the prior year period. The decrease in gross margin was attributed to the amortization of acquired intangible assets, the fair value adjustment to acquired inventory, lower manufacturing efficiencies from reduced system shipments, and a shift in product mix.
Research and development expenses increased 15% to $2.28 million, while selling, general, and administrative expenses increased 32% to $4.64 million, primarily due to the addition of the Incal business and higher stock-based compensation.
Geographic Performance
Aehr's products are sold globally, with a significant portion of revenue coming from Asia. In Q2 2025, 73% of revenue was generated from Asia, 25.7% from the United States, and 1.3% from Europe.
Liquidity
As of November 29, 2024, Aehr had cash and cash equivalents of $32.22 million, compared to $50.66 million at the same time last year. The decrease was mainly due to the $10.62 million paid for the Incal acquisition, partially offset by cash provided by operating activities. The company's debt-to-equity ratio stands at 0.04, indicating a low level of debt. The current ratio of 7.55 and quick ratio of 3.82 suggest a strong short-term liquidity position. No available credit line has been disclosed by the company.
Product Segments and Overview
Aehr Test Systems' product portfolio is organized into two main segments: the FOX-P family of test and burn-in systems, and the Sonoma, Tahoe, and Echo packaged parts burn-in solutions.
The FOX-P family includes the FOX-XP, FOX-NP, and FOX-CP systems, which are full wafer contact and singulated die/module test and burn-in systems. These systems can test, burn-in, and stabilize a wide range of devices such as leading-edge silicon carbide-based and other power semiconductors, 2D and 3D sensors, memory semiconductors, processors, microcontrollers, systems-on-a-chip, and photonics and integrated optical devices.
The packaged parts burn-in solutions, acquired through Incal Technology, include the Sonoma, Tahoe, and Echo lines. The Sonoma line is designed for high-power devices such as AI accelerators, GPUs, and high-performance computing processors, with power levels up to 1,600W. The Tahoe and Echo lines target medium-power and low-power burn-in solutions for logic, SoC, and mixed-signal devices used in various applications.
Diversification Strategy
The company's diversification strategy has played a crucial role in its success. While Aehr has traditionally been a leader in the silicon carbide power semiconductor market, it has recently made significant strides in expanding into new verticals, such as AI processors, gallium nitride (GaN) power semiconductors, and optical integrated circuits for data communication.
In the AI processor market, Aehr has secured a major milestone by securing its first AI processor customer for wafer-level burn-in. This achievement underscores the company's technological capabilities and the growing demand for its solutions in this rapidly expanding market. Similarly, Aehr's recent production order for GaN power semiconductors from a leading automotive supplier highlights the company's ability to capitalize on the rising adoption of this high-performance compound semiconductor technology.
Customer Satisfaction and Market Position
Aehr's strong focus on innovation and customer-centric approach has not gone unnoticed. The company has consistently received positive feedback from its customers, who appreciate the reliability and performance of its test and burn-in solutions. This has translated into a growing customer base and a robust order book, with the company reporting a backlog of $12.4 million as of November 29, 2024.
Business Overview and Market Trends
Aehr operates in a rapidly evolving semiconductor industry with significant growth potential. The AI chip market is expected to grow from $60 billion in 2023 to over $600 billion by 2032, representing a compound annual growth rate (CAGR) of almost 30%. The gallium nitride power semiconductor market is also projected to surpass $2 billion in annual sales by 2029, growing at a CAGR exceeding 40%.
The company has successfully expanded into new markets beyond silicon carbide. AI processors are expected to comprise up to 40% of total revenue this fiscal year, up from effectively zero last year. Other growth areas include gallium nitride power semiconductors, hard disk drives, silicon photonics integrated circuits, and other semiconductor packaged parts.
However, Aehr faces challenges in its operations, including a lawsuit in China against a local supplier for alleged intellectual property infringement related to the company's wafer level burn-in products for silicon carbide devices. This represents a risk associated with the company's business in China.
Guidance and Future Outlook
Despite recent challenges, Aehr's future outlook remains positive. For the full fiscal year 2025, the company is reaffirming its previously provided guidance of total revenue of at least $70 million and non-GAAP net profit before taxes of no less than 10% of revenue.
Aehr expects AI processors, including wafer level and packaged parts, to comprise as much as 40% of their total revenue this fiscal year. GaN, hard disk drive, silicon photonics integrated circuits, and other semiconductor packaged part revenues are expected to account for about another 20% of revenue. Silicon carbide is projected to represent less than half of Aehr's total revenue this fiscal year, down from almost 90% in the prior year.
Looking ahead, Aehr's diverse product portfolio, coupled with its strong market position and continued investment in research and development, positions it well to capitalize on the growing demand for reliable semiconductor solutions across a wide range of industries, from electric vehicles and renewable energy to data centers and 5G infrastructure.
As the semiconductor industry navigates the challenges of shrinking geometries, increasing complexity, and the ever-evolving landscape of advanced technologies, Aehr Test Systems stands as a reliable partner, providing the critical reliability testing solutions that enable the next generation of electronic devices to thrive.