Cohu, Inc. (COHU): 5 FORCES Analysis [Nov-2025 Updated]

You're looking for a clear-eyed view of Cohu, Inc.'s market position as we head into late 2025, so let's map out the five forces using their latest data to see where the leverage truly sits. Honestly, the picture is complex: while the company is showing recovery signs-like the Q2 2025 return to positive adjusted EBITDA and revenue hitting $107.7 million-it's still wrestling with the high-stakes dynamics of the semiconductor equipment world. We know their recurring revenue stream is a solid anchor, making up about 63% of total revenue as of Q2 2025, but you need to know how powerful their customers are, how close competitors like Teradyne are pressing, and whether new tech is about to make their core handlers obsolete. Below, I break down the leverage points across suppliers, customers, rivalry, substitutes, and new entrants, based on their recent performance, including that $84.8 million R&D spend in 2024, to give you the real picture.

Cohu, Inc. (COHU) - Porter's Five Forces: Bargaining power of suppliers

You're looking at Cohu, Inc.'s supplier landscape, and honestly, it's where a lot of the near-term operational risk lives. For a company like Cohu, Inc., which supplies critical equipment to the semiconductor manufacturing world, supplier leverage is a big deal because the components they need are often highly specialized.

We see clear evidence of reliance on sole-source or limited-source suppliers for certain key components. Cohu, Inc. has flagged this before; for example, at the beginning of fiscal 2022, they ran into supply constraints and delays getting specialty semiconductors needed for their Automated Test Equipment (ATE) products, which definitely hit their gross margin back then. While those specific constraints subsided by fiscal 2023, the risk remains, especially as the company pushes into advanced areas like AI data center markets with products like the Neon HBM inspection tool.

The loss of a single contract manufacturer could materially disrupt operations, which is why Cohu, Inc. is actively managing its footprint. You saw them approve a strategic restructuring program on February 19, 2025, the 2025 Restructuring Program, which involves consolidating operations from La Chaux-de-Fonds, Switzerland, and Kolbermoor, Germany, into other lower-cost locations. This move suggests they are trying to mitigate geographic concentration risk, but it also introduces short-term execution risk during the transition.

Component specialization definitely requires long qualification times for new suppliers; that's just the nature of high-precision semiconductor test gear. We don't have a specific number for Cohu, Inc.'s internal qualification cycle, but industry data from mid-2025 shows just how long lead times can be for specialized parts, which directly translates to supplier power. If a key supplier for a specialized component goes offline, qualifying a replacement isn't a two-week fix; it takes much longer.

Here's a quick look at general industry component lead times reported around Q2/Q3 2025, which gives you a sense of the baseline lead time pressure Cohu, Inc. faces:

The supply chain for Cohu, Inc. is also exposed to geopolitical instability in foreign manufacturing locations. Management has noted this risk, pointing out that they are not insured for certain losses stemming from geopolitical impacts or terrorism. This exposure is significant given the global nature of semiconductor production. The company's financial results for the first nine months of 2025-with net sales of $330.7 million and a GAAP loss of $51.8 million-show the volatility inherent in this cyclical industry, where supply chain hiccups can quickly erode margins.

Furthermore, specialized components tied to high-growth areas like AI are tightening again. For instance, by Q3 2025, lead times for MLCCs used in high-performance applications extended by 8-10 weeks, and constrained components like HBM saw lead times beyond 16 weeks in some cases. When Cohu, Inc. reported Q1 2025 net sales of just $96.8 million, you can see how easily a supplier issue could have exacerbated that quarter's $30.8 million GAAP loss. The bargaining power of suppliers is high because the specialized nature of the equipment demands specific, long-lead-time inputs, and the geopolitical environment adds an uninsurable layer of risk.

You should watch the backlog, which stood at $138.0 million at the end of 2024, to see if supplier delays start impacting the ability to convert that into revenue, especially as they manage the restructuring alongside ongoing production. Finance: draft a sensitivity analysis on a 10-week delay for a sole-source ATE component by next Tuesday.

Cohu, Inc. (COHU) - Porter's Five Forces: Bargaining power of customers

You're looking at Cohu, Inc.'s customer power, and honestly, the numbers show a clear concentration risk you need to watch. When you have a small number of buyers driving a large chunk of your revenue, their ability to push on pricing or terms definitely goes up. It's a classic dynamic in the specialized equipment space.

For the three months ended March 30, 2024, Cohu, Inc. reported significant customer concentration, with two customers individually accounting for 24% of that period's net sales. To put that in context against the full-year picture, one of those major players, STMicroelectronics, represented 12.0% of Cohu, Inc.'s total consolidated net sales for the entire fiscal year 2024. This level of reliance means that any significant shift in purchasing strategy from even one of these top customers can immediately impact Cohu, Inc.'s top line. For instance, Cohu, Inc.'s net sales for Q1 2025 were $96.8 million, and Q2 2025 sales were $107.7 million, showing how a few large orders can swing quarterly results.

The bargaining power is amplified because these buyers-the major Integrated Device Manufacturers (IDMs) and the test subcontractors-are highly sophisticated. They aren't just buying off the shelf; they are making multi-million dollar capital allocation decisions. We see evidence of this sophistication in the market dynamics; for example, Cohu, Inc. secured a $28 million design-win order in Q2 2025 for Mobile and Automotive test, which will ship through Q4 '25, indicating large, strategic commitments are still happening. Still, these customers operate within a notoriously volatile cycle.

Here's a quick look at the concentration and scale:

The cyclical nature of customer capital expenditure (CapEx) is a major lever for buyer power. Revenue from Cohu, Inc.'s capital equipment products is directly tied to the CapEx budgets and spending patterns of its customers, who frequently delay or accelerate purchases based on market conditions. Historically, the semiconductor industry sees recurring periods of oversupply and excess capacity, which depresses demand for the very equipment Cohu, Inc. sells. This forces Cohu, Inc. to rely more heavily on its more stable recurring revenue stream, which was approximately 63% of net sales in Q2 2025. When the cycle is down, customers have more leverage to negotiate pricing on necessary equipment upgrades or maintenance contracts.

The sophistication of these buyers means they demand more than just hardware; they need optimized yield and productivity. You see this in Cohu, Inc.'s focus on integrating software like Tignis for AI process control, aiming to grow software revenue at an annual rate of 50% or more over the next three years. This move is partly a response to sophisticated buyers seeking advanced solutions. Furthermore, the customer base includes key players like test subcontractors, two of whom adopted Cohu, Inc.'s Diamondx tester in Q2 2025.

You can see the impact of this cyclicality when you look at utilization:

• Estimated test cell utilization improved to 75% in Q2 2025.
• This was a 3 point sequential increase from the March quarter (72% in Q1 2025).
• The CEO noted utilization improvements were encouraging, particularly in computing and mobile segments.

When utilization is low, customers have less urgency to buy new equipment, increasing their bargaining power. Finance: draft a sensitivity analysis on revenue impact if the top two customers reduce combined spend by 15% in H1 2026 by next Tuesday.

Cohu, Inc. (COHU) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive intensity Cohu, Inc. faces in the semiconductor equipment space, and honestly, it's a pressure cooker. The rivalry here is fierce, driven by the cyclical nature of the industry and the high cost of innovation required to stay relevant.

Cohu, Inc. definitely contends with major global leaders. The market includes two dominant suppliers, one headquartered in the U.S. and another in Japan, both of which are substantially larger than Cohu's test business. This means Cohu is constantly fighting for share against players with deeper pockets and broader product portfolios. Plus, the competition is only heating up from emerging, often cost-competitive, Asian manufacturers based in places like China and Taiwan. These regional players put constant downward pressure on pricing, especially in certain segments.

To manage this, Cohu, Inc. focuses on product differentiation in specific, high-value niches. They are actively accelerating their presence in AI data center markets using specialized equipment like the Neon HBM inspection systems and the Eclipse test handler. This strategy aims to avoid direct, head-to-head pricing battles in commoditized areas.

The market itself is mature, which naturally leads to aggressive pricing when utilization dips. We saw this pressure reflected in Cohu, Inc.'s Q1 2025 results, where test cell utilization declined to 72%. However, Cohu is actively mitigating this cyclical risk by emphasizing its more stable revenue streams. The shift toward recurring revenue-which includes services and consumables-is a key defensive move. For example, in Q1 2025, this segment represented 63% of total revenue, supported by a 28% quarter-over-quarter increase in recurring orders. Still, this mix can fluctuate; by Q3 2025, recurring revenue settled at approximately 55% of total sales.

Here's a quick look at how the revenue profile shifted between the first and third quarters of 2025, showing the importance of that recurring base:

It's important to note customer concentration adds another layer to this rivalry risk. In Q1 2025, a single customer in the automotive and industrial market accounted for more than 10% of Cohu, Inc.'s total sales. Losing that customer, or seeing them shift volume due to competitive offerings, would immediately impact financial results.

The competitive environment forces tough operational choices. To address margin pressures, Cohu, Inc. implemented a restructuring program in Q1 2025 aimed at reducing operating expenses. This is the reality of competing when you are not the market behemoth; you must constantly optimize your cost structure.

• Rivalry intensity is high due to market maturity.
• Competition comes from larger U.S. and Japanese firms.
• Cost pressure exists from Asian manufacturers.
• Differentiation relies on products like Neon HBM inspection.
• Recurring revenue mitigates system sales volatility.

Finance: draft the Q4 2025 operating expense forecast, assuming recurring revenue holds above 55% by Friday.

Cohu, Inc. (COHU) - Porter's Five Forces: Threat of substitutes

You're looking at how external technologies or methods could replace the core testing services Cohu, Inc. (COHU) provides, specifically the final test of packaged parts. This threat is real because the industry is actively shifting test coverage earlier in the process.

Shifting Test Coverage: Wafer-Level vs. Packaged-Part Testing

The move toward more comprehensive testing before packaging directly reduces the volume and complexity handled by traditional final test equipment, which is a core part of Cohu, Inc.'s business. Wafer-Level Test and Burn-In (WLTBI) is growing fast, showing this substitution effect in action. The WLTBI market size was estimated at $2.257 Billion in 2025, and it's expected to grow at a Compound Annual Growth Rate (CAGR) of 10.38% through 2035. Also, wafer sort/probe held a substantial 42.3% share of the overall semiconductor test equipment market size in 2024. System-level test (SLT), which validates complete modules under mission-profile workloads, is forecasted to grow even faster, at a 7.9% CAGR through 2030, outpacing other applications. This shift means less reliance on handlers for packaged parts, which Cohu, Inc. supplies, as more functional validation happens at the wafer stage.

System-Level Test (SLT) as a Direct Alternative

System-Level Test (SLT) acts as a partial substitute for traditional ATE final test by validating integrated functionality earlier or differently. Cohu, Inc. is actively addressing this by deploying its own advanced systems, like the Eclipse platform, which was selected for next-generation AI processor testing, offering scalability and thermal control up to 3kW power dissipation. Still, the market trend shows SLT growing at a 7.9% CAGR through 2030, indicating that this substitute method is gaining traction across the industry.

Customer In-House Capabilities and Cost Pressure

The sheer expense of advanced testing equipment pushes some customers toward alternatives, including building their own solutions for specialized or lower-volume runs. The high initial investment for Automated Test Equipment (ATE) is a noted restraint in the market. To be fair, testing and quality assurance processes account for over 50% of semiconductor manufacturing costs. This cost pressure is a major driver for seeking lower-cost alternatives or optimizing in-house capabilities. Cohu, Inc.'s Q3 2025 net sales were $126.2 million, with recurring revenue at about 55%, suggesting that service and software revenue streams are critical to offset system sales volatility driven by these cost-sensitive decisions.

The drive for cost efficiency encourages exploration of substitutes through these avenues:

• Seeking lower-cost test alternatives due to high ATE capital outlay.
• Developing custom test setups for unique or low-volume chip designs.
• Investing in advanced analytics software to maximize existing equipment yield.

Cohu, Inc. is countering this by pushing its analytics offering, Tignis software, with a potential annual growth rate of 50% or more over the next three years, aiming to make their solutions indispensable through data optimization rather than just hardware.

Market Context and Financial Scale

The overall semiconductor test equipment market size was valued at $15.11 billion in 2025. Cohu, Inc.'s own Q3 2025 net sales were $126.2 million, giving you a sense of scale against the larger market dynamics. The company's total cash and investments stood at $198.2 million at the end of Q3 2025.

Finance: draft 13-week cash view by Friday.

Cohu, Inc. (COHU) - Porter's Five Forces: Threat of new entrants

You're looking at Cohu, Inc.'s competitive landscape, and the barriers to entry for a new player in the semiconductor test and handling space are substantial. Honestly, setting up shop here requires deep pockets and a long-term view, which immediately weeds out most potential rivals.

High Capital Requirements and Significant R&D Investment

The sheer cost to compete is a massive deterrent. Developing the next generation of handlers and contactors demands continuous, heavy investment in research and development. For context, Cohu, Inc. spent $84.8 million on R&D in 2024, a figure that underscores the necessary commitment. Looking into the first half of 2025, R&D expenses hit $46.3 million for the six months ending June 28, 2025, representing 22.7% of that period's net sales, showing this investment intensity is not slowing down. New entrants face the challenge of matching this spend just to reach parity, let alone leapfrog existing technology. Furthermore, the broader semiconductor capital equipment market is known for its high capital intensity, with U.S. companies in the sector investing about 20% of revenue into R&D back in 2023. This environment, coupled with government incentives like the U.S. CHIPS Act driving domestic capacity, means new firms must secure significant funding to build out the necessary manufacturing and R&D infrastructure.

Here's a quick look at the financial commitment Cohu, Inc. demonstrated:

Established Customer Relationships and Long Qualification Cycles

Once a major semiconductor manufacturer adopts a Cohu, Inc. handler or contactor system, switching is not simple. You're not just swapping out a piece of hardware; you're dealing with deeply integrated processes. Cohu, Inc. works extensively with its customers on product development, meaning their equipment is fine-tuned to specific, complex manufacturing flows. This deep integration creates significant switching costs for the customer, as validating a new vendor's equipment involves complex, costly, and uncertain testing to ensure quality and yield are maintained. If onboarding takes 14+ days, churn risk rises.

Complex Intellectual Property (IP) and Proprietary Technology

The technology itself is protected by layers of patents and proprietary know-how, especially in their interface solutions. For example, the xWave Contactor uses patented hybrid contacting technology for high-frequency testing up to 100 GHz. Then you have the cCruiser Contactor, which boasts a proven lifespan of up to 5 million touchdowns, a metric that speaks directly to reliability and lower cost of test. The RF Scrub contactor is designed for up to 100,000 cycles between cleanings. These specific, measurable performance advantages, built on proprietary materials like HyperCore™ or patented designs, are not easily replicated by a startup. Also, Cohu, Inc. is bolstering its software side with AI-powered process control, adding another layer of complexity for any new entrant to match.

Trade and Export Regulations

Global operations introduce regulatory friction that new players must navigate. The ongoing U.S. export controls targeting China create significant hurdles for any new global equipment supplier. For instance, U.S. Semiconductor Manufacturing Equipment (SME) exports to China totaled $4.2 billion in 2024, an area now heavily scrutinized. While a U.S./China trade agreement in late 2025 extended a 10% baseline tariff, the regulatory environment remains fluid and complex, requiring specialized legal and compliance teams from day one. New entrants must factor in the risk of sudden restrictions, which can disrupt supply chains and market access, especially in key regions like Asia-Pacific, which captured 50.20% of global test equipment revenue in 2024.

The barriers to entry for Cohu, Inc.'s market are high due to capital needs, deep customer integration, proprietary IP, and geopolitical risk.