Meridian Contrarian Fund on PDF Solutions Inc.
Thesis
PDF Solutions provides semiconductor manufacturing analytics through software, hardware and services that help customers improve yields and reduce development costs. Meridian believes the company's transformation toward scalable recurring software materially improved its long-term economics, while a cyclical semiconductor downturn and spending on a new inspection product created an attractive entry point. As semiconductor complexity and development costs rise, the fund expects PDFS's yield-improvement tools to become increasingly valuable. The position was trimmed following strong performance, but Meridian remains invested because it views the structural growth opportunity as being in its early stages.
“We invested based on our view that PDFS's yield improvement tools will become increasingly valuable as semiconductor complexity and development costs continue to rise.”
Key risks
- A cyclical semiconductor end-market downturn previously reduced earnings.
- Investment spending on a new inspection product contributed to the earnings decline.