SINGAPORE’S non-oil domestic exports (NODX), a key gauge of the country’s manufactured exports, rose 68.4 per cent year on year in September, accelerating from 46.1 per cent in August. This marks the 13th straight month of growth.

The headline was flattered by lumpy shipments of ship and boat structures, but the artificial intelligence story remains intact. Electronic NODX more than doubled, rising 107.6 per cent, led by disk media products, integrated circuits and personal computers.

Exports to the US rose 73.2 per cent, while shipments to Taiwan and South Korea almost doubled, a sign of how closely Singapore is now woven into the regional semiconductor supply chain.

For the first nine months of 2026, NODX was up 27.6 per cent, well above Enterprise Singapore’s full-year forecast of 14 to 16 per cent. The Ministry of Trade and Industry has also lifted its 2026 gross domestic product growth forecast twice this year to 4.5 to 5.5 per cent, citing stronger-than-expected growth in electronics.

On the Singapore Exchange (SGX), three companies offer the most direct exposure to this cycle, each from a different angle. UMS Integration makes precision components and systems for the machines that deposit and etch layers onto silicon wafers.

AEM Holdings provides test and handling solutions for AI and high-performance computing (HPC) chips. Frencken Group is a more diversified mechatronics manufacturer, with about half of its revenue coming from semiconductors.

Broadening earnings, at different speeds

H1 2026 results confirmed that the recovery is spreading, although momentum differs considerably across the three.

AEM delivered the sharpest turnaround. Revenue rose 29.9 per cent year on year to S$247.2 million, and net profit jumped to S$30.8 million from S$3.2 million, driven by surging orders from its fabless AI/HPC customer.

Just as importantly, recurring revenue from configurable parts and test consumables now makes up close to 80 per cent of its test business, which should make earnings less lumpy than in past cycles. Management has raised its full-year revenue guidance twice this year.

UMS posted the highest margins of the three. Net profit for H1 2026 rose 66 per cent year on year to S$33.4 million on revenue growth of 25 per cent, with pre-tax profit margin reaching 24.3 per cent. A second major customer has now reached scale, reducing its reliance on a single equipment maker.

UMS also announced a share placement in Malaysia, raising about S$138.6 million to fund automation in Penang and a new factory in Vietnam.

Frencken’s results were more subdued. Revenue in H1 2026 fell slightly by 0.8 per cent year on year to S$427.8 million while its net profit fell 3.4 per cent to S$19.3 million, as weaker demand in its European life sciences business offset semiconductor growth in Asia. However, Q2 profit rose 40.5 per cent from Q1, suggesting the worst may be behind it.

Share prices moved faster than earnings

As at Oct 15, AEM has delivered a year-to-date total return of 414 per cent, followed by UMS at 109 per cent and Frencken at 61 per cent.

Their earnings growth trajectories differ. We expect AEM’s earnings per share (EPS) to grow 389 per cent in FY2026 from a low base, followed by 35 per cent in FY2027 and 24 per cent in FY2028.

UMS follows at 72 per cent, 29 per cent and 22 per cent, respectively, while Frencken’s EPS growth is expected to be more gradual at 11 per cent, 14 per cent and 18 per cent over the same period.

AEM’s stronger earnings growth outlook provides some fundamental support for its share price outperformance; Frencken’s more modest gains are consistent with its slower expected growth.

However, the scale of the share price gains across all three stocks suggests that investors are also pricing in higher growth expectations and greater optimism around the broader AI theme.

We view this as a broad rerating of SGX-listed semiconductor names on the back of the AI theme, rather than one fully explained by each company’s individual earnings outlook. Consequently, all three now trade at valuations more than 1.5 standard deviations above their respective historical valuations.

Last week, however, that rerating started to unwind. Singapore’s chip stocks fell for a third straight day on Oct 15 as a global sell-off deepened, with AEM and UMS each down about 10 per cent that day and Frencken 6.4 per cent.

The triggers were largely macro. US consumer prices rose at their fastest monthly pace in five months, lifting bets on further US Federal Reserve rate hikes, while concerns over AI funding resurfaced.

Fundamentals look intact: ASML’s quarterly net profit more than doubled and it raised its annual revenue forecast for a third time this year, while Singapore’s electronics exports continue to more than double.

None of this means the upcycle is ending. AEM has an order backlog of over S$400 million for its Amps test platform, now spread across two customers, and its memory business is expected to ramp up in 2027.

UMS’s new capacity should allow it to serve demand that its current footprint cannot, with industry body Semi expecting wafer fab equipment spending to grow more than 20 per cent in 2026 and 2027.

Frencken expects full-year revenue and profit to exceed last year’s. It is targeting S$1 billion in annual revenue by 2028.

All three are also iEdge Singapore Next 50 Index constituents and could draw greater institutional interest as the Monetary Authority of Singapore’s S$6.5 billion Equity Market Development Programme is rolled out.

Still, semiconductors remain a cyclical business, and the recent swing shows how quickly sentiment can turn when valuations are stretched. Semi expects equipment spending growth to slow to 14 per cent in 2028.

UMS’ experience between 2022 and 2024, when its EPS more than halved, shows how quickly a downturn can test a high multiple.

What this means for investors

The sector is in a stronger position than a year ago, with export growth at multi-decade highs, earnings recovering and order books building. Last week’s sell-off has compressed multiples, though all three still trade above their historical averages, so earnings delivery remains key.

Within the group, AEM stands out for its steeper earnings growth and rising share of recurring revenue. UMS offers the highest margins and a broadening customer base, but its earnings remain more exposed to higher fixed costs as it invests in new capacity.

Frencken offers a more defensive and diversified profile, although its earnings are expected to grow more slowly than AEM and UMS.

Singapore’s semiconductor names remain genuine beneficiaries of the AI boom. The pullback offers long-term investors a more reasonable entry point, but volatility is likely to persist while US rate expectations and AI funding concerns remain unsettled.

Returns will ultimately depend on whether earnings can keep pace with expectations.

The writer is a research analyst with the research and portfolio management team of FSM Global, the B2C division of iFast Financial, the Singapore subsidiary of iFast Corp