This week’s Stock of the Week gives manufacturers the tools to assemble complex electronic devices.

Chip by Chip

Kulicke & Soffa Industries, Inc. (KLIC) fills a crucial role in high-tech products. It makes it possible for companies to put semiconductor-based devices together. Once semiconductors are manufactured, it is necessary to assemble them in a way that allows communication within a device and gets the device to do what it is supposed to do. This is Kulicke & Soffa’s niche.

It sells equipment and expendable tools used to assemble semiconductors into usable, functional arrays. This is becoming increasingly important for two reasons. One is the expansion of chip technology content in many products ranging from the obvious, such as automobiles and televisions, to the less obvious such as LED lighting and refrigerators and washing machines. The other is the increasing limitation on what individual semiconductors can do as they become smaller and more demands are put on them—a situation making their proper assembly more important.

Kulicke & Soffa is based in Singapore, easing delivery of its products to the firms in Asia with which it does most of its business. Some ramp-up of expenses this fiscal year will reduce earnings slightly, but the company is financially strong, with more than $600 million in cash and debt of only $16 million. Revenue was $809 million in fiscal 2017. It will likely be $900 million in fiscal 2018 and $970 million in fiscal 2019.

Fiscal year: September. Earnings per share: 2019 est./$2.06…2018 est./$1.86…2017/$1.91.

Tim Kang is senior vice president and senior research analyst at Olstein Capital Management, Purchase, New York, where he chooses stocks for the $694 million Olstein All Cap Value Fund (OFALX) and $134 million Olstein Strategic Opportunities Fund (OFSAX). OlsteinFunds.com