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

You want to know if Cohu, Inc. (COHU) is positioned to ride the next semiconductor wave or if it's stuck in the cycle's undertow. The quick answer: COHU is sitting on an estimated $200 million in cash and has a defintely stable, high-margin service business, but its core strength is being tested by the need to hit a challenging estimated FY2025 revenue target of $675 million. The real opportunity lies in capturing the explosive demand from Artificial Intelligence (AI) and Electric Vehicle (EV) testing, but geopolitical risks and CapEx volatility are real threats. Let's dig into the Strengths, Weaknesses, Opportunities, and Threats (SWOT) to see exactly where the leverage points are.

Cohu, Inc. (COHU) - SWOT Analysis: Strengths

Diversified Product Portfolio Across Handlers, Automated Test Equipment (ATE), and Inspection

Cohu, Inc. has built a powerful defense against the cyclical nature of the semiconductor industry through a broad and differentiated product portfolio. You are not betting on a single technology; you are investing in a comprehensive suite of solutions for the entire backend of the semiconductor manufacturing process. This includes test handlers, thermal subsystems, test contactors, vision inspection and metrology systems, and Automated Test Equipment (ATE).

The strategic acquisition of Tignis, Inc. in January 2025 significantly expanded this portfolio into high-growth software, specifically Artificial Intelligence (AI) process control and analytics. This move is defintely smart, creating new revenue streams beyond traditional hardware sales and positioning the company to capitalize on the industry's push for optimized yield and productivity, especially in complex areas like AI-based computing.

Strong Cash Position, Estimated Around $200 Million in Cash and Equivalents for FY2025

A strong balance sheet is your best friend in a volatile market, and Cohu, Inc. maintains a highly liquid position. As of the end of the third quarter of 2025, the company reported total cash and cash equivalents of $198.1 million. This figure is right on target with the estimated $200 million, giving management significant financial flexibility.

Here's the quick math: This cash reserve, combined with a relatively low total debt of approximately $9 million at the end of Q4 2024, means the company can weather industry downturns, fund internal Research and Development (R&D), and pursue strategic, accretive acquisitions without relying on costly debt financing. That level of liquidity offers a real competitive advantage.

High-Margin Recurring Revenue from Services and Spares, Providing a Stable Base

The shift toward a higher percentage of recurring revenue is a key strength that stabilizes Cohu, Inc.'s financial model. This revenue stream comes from services, spares, device dedication kits, interface products, and the subscription-based DI-Core software.

This stability is quantifiable: approximately 63% of the company's net sales in both the first and second quarters of fiscal year 2025 were recurring. This high percentage acts as a critical buffer against the cyclical capital equipment spending of semiconductor manufacturers. Furthermore, the acquisition of Tignis is expected to grow software revenue at an annual rate of 50% or more over the next three years, further cementing this stable, high-margin base.

The breakdown of this stable revenue base includes:

• Interface Products: Consumable parts like test contactors.
• Spares and Kits: Essential items for equipment maintenance and sustaining performance.
• DI-Core Software: Data analytics and process monitoring subscriptions.
• Services: Maintenance, support, and training contracts.

Market Leadership in High-Speed Thermal Handler Technology for Final Test

Cohu, Inc. is a leading supplier of test handlers and contactors, particularly in the high-speed thermal handler segment, which is crucial for testing high-performance logic and memory chips. The company's technology is essential for final test operations, especially for devices that require precise temperature control to manage heat dissipation during testing.

Their product line, including the Delta Design Summit ATC handler with Active Thermal Control Technology and the new Eclipse handler model introduced in 2025, showcases continuous innovation in this core area. This leadership is vital because as chips get faster and more complex (like those for AI and high-end computing), the demand for their high-throughput, high-accuracy thermal handlers only grows.

Significant Intellectual Property (IP) Portfolio Protecting Core Test and Handling Solutions

The company's core technology is protected by a substantial Intellectual Property portfolio, encompassing patents, licenses, trademarks, and trade secrets. This IP is the moat protecting their market leadership in test and handling. The value of this portfolio is reflected in the company's consistent investment in innovation and the balance sheet's intangible assets.

The investment in maintaining this technological edge is significant: Cohu, Inc.'s total Research and Development (R&D) expense was $84.8 million in fiscal year 2024. Additionally, the amortization of purchased intangible assets, which represents the expensing of acquired IP and technology, was approximately $9.852 million in the first quarter of 2025 alone, demonstrating the recognized value of this acquired intellectual property.

Cohu, Inc. (COHU) - SWOT Analysis: Weaknesses

You're looking for the clear risks in Cohu, Inc.'s model, and the primary weakness is a structural one: being a smaller player in a cyclical, capital-intensive industry dominated by two giants. Cohu is highly exposed to the boom-bust cycle of semiconductor manufacturing, and its profitability metrics lag behind its main competitors, limiting its financial flexibility when the market inevitably turns down.

High dependence on the cyclical capital expenditure (CapEx) of major semiconductor manufacturers.

Cohu's revenue remains tied to the capital expenditure (CapEx) cycle of its major customers, which is inherently volatile. When semiconductor manufacturers pull back on spending, Cohu feels the impact immediately, as seen by the full-year 2024 net sales of $401.8 million, a sharp decline from $636.3 million in 2023.

While the company has successfully grown its recurring revenue-which includes services, spares, and consumables-to approximately 63% of net sales in Q1 and Q2 2025, this still leaves around 37% of revenue directly exposed to lumpy, high-CapEx system sales.

Here's the quick math on the CapEx exposure based on Q3 2025 results:

• Q3 2025 Net Sales: $126.2 million
• Estimated Non-Recurring (CapEx-driven) Sales: Approximately $46.7 million (37% of $126.2 million)
• This non-recurring portion is the first to be cut when the industry enters a digestion phase.

The semiconductor industry is cyclical, and Cohu is not immune. You need to watch the test cell utilization rate for a leading indicator of a potential downturn.

Lower gross margin (estimated 43% for FY2025) compared to some pure-play ATE peers.

Cohu's gross margin profile is structurally lower than its larger, pure-play Automated Test Equipment (ATE) competitors, which signals a difference in product mix and market pricing power. For the third quarter of 2025, Cohu's GAAP gross margin was 43.8%, a decline from 46.8% in Q3 2024.

This margin compression is a key weakness because it leaves less room to absorb fixed costs and R&D expenses during a downturn. To be fair, Cohu's Q1 2025 non-GAAP gross margin was slightly higher at 44.2%, but it still trails the market leaders.

The gap is significant when compared to the largest ATE players who dominate the high-end System-on-a-Chip (SoC) test market:

This margin difference means Cohu must generate substantially more revenue to achieve the same level of operating profit as its peers. That's a tough headwind in a slow-growth environment.

Slower-than-expected adoption of newer inspection and metrology tools outside of core handler business.

While Cohu is a market leader in semiconductor test handlers, its strategic push into the higher-margin inspection and metrology space has yet to fully offset the cyclicality of its core business. The company is actively trying to diversify, securing a multi-unit order for High Bandwidth Memory (HBM) inspection systems in Q1 2025 and acquiring Tignis, Inc. in January 2025 to boost its analytics software.

The weakness here is the pace of market penetration. The Q2 2025 recovery in system sales was noted as being 'concentrated in the mobile market segment' rather than a 'broad-based recovery,' suggesting that the newer, diversified products are not yet driving widespread adoption across all end-markets. The company is making the right moves, but the revenue contribution from the new Krypton inspection platform and the Tignis AI software is still relatively small compared to the established handler and contactor segments.

Geographic revenue concentration, making it vulnerable to regional trade policies and market shifts.

The company's revenue base is heavily concentrated in the Asia-Pacific region, which is the global hub for Outsourced Semiconductor Assembly and Test (OSAT) and Integrated Device Manufacturers (IDMs). Cohu's 2025 Form 10-K explicitly states that the 'majority of our sales are made to destinations in Asia.'

This concentration creates high vulnerability to geopolitical risks and regional trade policies, particularly involving the US and China. The operational risk is also high, as 72% of Cohu's employees are located in Asia Pacific, with manufacturing facilities in Malaysia, the Philippines, and Japan.

Key vulnerabilities include:

• Trade Restrictions: Any new US export controls or tariffs targeting China's semiconductor industry could immediately impact a significant portion of Cohu's sales.
• Geopolitical Instability: The high concentration in Asia-Pacific exposes the supply chain to risks like natural disasters, as well as political and economic instability in the region.
• Customer Concentration: For fiscal year 2024, net revenue from the ten largest customers represented 57% of total net revenue, magnifying the risk of regional market shifts.

You're essentially betting heavily on a single, politically sensitive geography for the bulk of your sales.

Cohu, Inc. (COHU) - SWOT Analysis: Opportunities

Explosive demand for test solutions driven by Artificial Intelligence (AI) and High-Performance Computing (HPC) chips.

The surge in Artificial Intelligence (AI) and High-Performance Computing (HPC) is a massive tailwind for Cohu, Inc., driving demand for advanced testing and inspection metrology systems. The complexity of new chips, especially High Bandwidth Memory (HBM) devices used in generative AI accelerators, requires Cohu's high-precision equipment. We've seen this directly in the company's guidance: Cohu is raising its HBM revenue estimate for fiscal year 2025 to between $10 million and $11 million.

This is just the start. The global HBM market itself is expected to reach approximately $23 billion in 2025, and it's projected to grow at a Compound Annual Growth Rate (CAGR) of 28% through 2030. Cohu's Neon platform, which handles the inspection and metrology for these critical components, positions the company to capture a piece of this market, which is a potential opportunity of more than $100 million in revenue for this class of inspection metrology systems. Plus, the Eclipse platform was recently selected for production testing of next-generation AI processors like CPUs and GPUs, which is defintely a big win.

Expansion into the electric vehicle (EV) and power semiconductor testing market, a high-growth area.

The shift to electric vehicles (EVs) is generating a massive, non-cyclical demand for power semiconductors, such as Silicon Carbide (SiC) and Gallium Nitride (GaN), which Cohu is well-positioned to test. The EV semiconductor devices market is a high-growth area, predicted to be valued at $25.250 billion in 2025 and is expected to expand at a CAGR of 14.95% through 2030.

Cohu is actively capitalizing on this. For instance, the company secured a significant $28 million design-win order for its Eclipse handler platform for a customer serving the mobile and automotive end-markets, with shipments scheduled through the fourth quarter of 2025. More specifically, Cohu has already secured its first system order in India for silicon carbide testing, which is a key component for high-efficiency EV inverters. This is a clear, actionable opportunity for Cohu to diversify its revenue away from traditional consumer electronics cycles and into the more resilient automotive sector. The automotive segment is, in fact, expected to exhibit the highest growth rate in the semiconductor testing market.

Potential for strategic acquisitions to broaden inspection and metrology capabilities.

Cohu has a clear strategy of using acquisitions to quickly add high-margin technology and expand its capabilities beyond traditional testing. The January 2025 acquisition of Tignis is a perfect example, immediately bolstering the company's capabilities in AI-driven data analytics software for process monitoring. This acquisition involved a cash outflow of approximately $34.9 million in Q1 2025, demonstrating management's willingness to spend on strategic growth.

The company is in a strong financial position to pursue further bolt-on acquisitions in the inspection and metrology space, which are critical for advanced packaging. As of the end of Q2 2025, Cohu had total cash and investments of $209.4 million. This financial flexibility, coupled with the need for more sophisticated inspection tools for complex chips, means Cohu can continue to acquire technologies that accelerate its roadmap and improve its overall product mix.

Increased utilization rates leading to higher service and spare parts revenue growth.

Higher utilization rates-how often customers' test equipment is running-directly translate into increased demand for Cohu's recurring revenue streams: service contracts, software subscriptions, and spare parts. This recurring revenue is a stable, high-margin anchor for the business.

Test cell utilization across Cohu's customer base rose by 3 percentage points quarter-over-quarter in Q2 2025, reaching 75%. This utilization rate was consistent across key segments, with Industrial at 76% and Automotive at 74%. This rising activity means more wear and tear on Cohu's systems.

The result is a strong, stable revenue base:

• Recurring revenue, largely consumables and services, represented 63% of total revenue in Q2 2025.
• With Q2 2025 net sales at $107.7 million, this recurring revenue stream was approximately $67.85 million.
• The recurring revenue segment showed robust growth of 28% quarter-over-quarter in Q1 2025, signaling resilience in a cyclical market.

The higher the utilization, the more money Cohu makes on the back-end of the sale. This is a great business model.

Cohu, Inc. (COHU) - SWOT Analysis: Threats

The biggest threat facing Cohu, Inc. is not a single factor, but the combination of its niche market position with the enormous financial power of its primary competitors, plus a volatile, bifurcated semiconductor capital expenditure (CapEx) cycle. You are seeing a market where the AI-driven leaders are spending big, but the rest of the industry-where Cohu plays-is pulling back, which means delayed customer orders are a defintely risk.

Geopolitical tensions causing supply chain disruptions and trade restrictions, particularly with China

Cohu's global operations and sales model expose it directly to the escalating trade tensions between the U.S. and China. The company's own filings for 2025 explicitly call out geopolitical changes impacting its business with respect to both China and Taiwan as a key risk.

Trade regulations and export restrictions, specifically those targeting the semiconductor industry in China, pose a material threat to Cohu's ability to sell and manufacture. This is an industry-wide problem, so Cohu is not alone, but its smaller size means it has less leverage to diversify quickly. For the broader semiconductor equipment industry, sales to China are projected to drop sharply in 2025, falling from an estimated high-40% range of revenue in 2024 to the 20-30% range in 2025 due to sanctions. Cohu sells and services its entire product portfolio directly in this high-risk geography.

Aggressive pricing and technology competition from larger, well-capitalized ATE competitors

Cohu operates in a market segment dominated by a few giants, which makes it a small fish in a very large pond. The Automated Test Equipment (ATE) market is 'primarily driven by two larger companies with significantly more resources' than Cohu, which holds a relatively low market share. This massive financial disparity allows competitors to invest heavily in next-generation technology and engage in aggressive pricing to win large, strategic design-wins.

Here is the quick math on the financial muscle of Cohu's primary competitors compared to its own estimated 2025 revenue of approximately $448 million to $462 million:

Applied Materials alone spends over $3.5 billion on Research & Development in 2025, which is nearly eight times Cohu's entire projected annual revenue. This scale difference makes it incredibly difficult for Cohu to maintain a technological edge or compete on price for major contracts, especially in the advanced packaging and AI-driven segments.

A sharp, unexpected slowdown in global semiconductor CapEx, impacting the entire industry

While the overall global semiconductor CapEx (Capital Expenditure) is projected to be around $160 billion in 2025, marking a modest 3% increase, this headline number is misleading and hides a deeper threat. The growth is heavily concentrated in just two companies: TSMC and Micron Technology. Excluding the CapEx of these two companies, the total CapEx from the rest of the semiconductor industry is actually projected to decrease by 10% in 2025 compared to 2024.

This is the real risk: a significant portion of Cohu's customer base is pulling back on spending. You can see this in the cuts announced by other industry heavyweights:

• Intel plans CapEx cuts of 20% in 2025.
• Samsung plans CapEx cuts of 11% in 2025.
• Industry-wide low utilization rates, with even TSMC running at 60-70% capacity.

Low utilization means customers have no immediate need for new test and handling equipment, so they postpone orders. That's a direct headwind for Cohu's systems revenue.

Failure to meet the estimated FY2025 revenue target of $675 million due to delayed customer orders

The market faces a significant threat if Cohu fails to hit the aspirational revenue mark of $675 million for the full fiscal year 2025. The reality is that the current analyst consensus revenue estimate for FY2025 is far lower, sitting around $448.08 million. The gap between the aspirational figure and the current run rate signals a massive risk of delayed orders.

To put this in perspective, Cohu's first half of 2025 revenue was $204.5 million (Q1 at $96.8 million and Q2 at $107.7 million). With Q3 2025 guidance at approximately $125 million, the total revenue for the first three quarters is about $329.5 million. To reach the $675 million target, Cohu would need an unprecedented Q4 revenue of $345.5 million, which is simply not realistic given the current market conditions and the management's own warning of a 'potential mid-single-digit pullback anticipated in Q4.'

The inability to convert design-wins into firm, timely orders is the core issue. The risk of delayed customer orders is already baked into the conservative analyst consensus, and a miss on that consensus would severely damage investor confidence and stock valuation.