Mopping Up
How much would you pay for a mop? What about a fancy mop? What about a fancy mop that promised pristine, immaculate floors without a trace of dust. What about a mop that actually delivered?
You'd pay more for that. That's the answer.
Like you — a discerning investor/mop shopper — companies pay for results. A fancy hotel will have a bigger mop budget than a less fancy variety. Guests expect shiny floors. A semiconductor fab churning out chips will have an even more pressing need for cleanliness. A single piece of dust can ruin an entire chip. Clean isn't just nice to have, it's the difference between sinking and swimming.
Mop in a box
Chip makers don't use mops. Mops don't work for things measured in nanometers. They use really, really expensive machines to ensure that their process is immaculate — a level of cleanliness that would make Marie Kondo blush. 30% of the steps in semiconductor manufacturing are cleaning ones.
ACM Research makes semiconductor cleaning machines. Their kit cost between $500,000 and $5 million. It's miracle mop business has expanded nearly 50% per year since 2017.
ACM operates from the US. China has been the fastest growing chip making market. That's where the company’s grown. Growth has come through a mix of its customers' success and new products. ACMR started with basic machines and has moved into cleaning increasingly more intricate steps.
So, how much do investors value its mops?
US investors don't think much of this cleaning business. US investors see a US company with a mostly Chinese customer base flashing nothing but risk. What do Chinese investors see? They love it. They think it's worth three times its US price.
How can you know that?
ACM also trades in Shanghai. Its Chinese operation is ACMR's biggest. ACMR owns 82% of it. The rest trades on its own. ACMR could sell what it owns in ACM China and then pay $81 to shareholders. Its shares are around $25 in June 2025 in the US. That would be a nice outcome.
It's not the most likely path. The company's founder and CEO, David Wang, owns 9% of the US company and hasn't given any indication of retiring or otherwise resolving this gap through corporate action. The gap highlights the difference of opinion on what the company is worth though.
Incompatible sets of expectations — like the ones for ACMR in the US and in Shanghai — always pique Lamplighter’s curiosity to look for investment opportunities. They should for you too.
But what if the US price is the right one?
Dusty corner
The company’s polished performance gives the shares some options to resolve the split. The company grew 40% last year. It expects slower, but still mid-teens growth this year. Semiconductor manufacturers are committing dollars to massive new projects as the supply chain reshuffles. Cash is coming in. Customers have been switching to ACMR rather than its competitors. Once the cleaning tools are in a production line, manufacturers don't switch them. The business is humming and on solid footing.
ACMR earned $2.60 per share in 2024. It’s likely to earn more than $3.00 per share in 2025 with a long tail of serving customers and only a few competitors. The market usually pays a premium for a business like this. Instead, for ACMR, it prices shares like they're hidden in some dusty corner. That gap opens up the chance for a nice investment opportunity.
Disclaimer: None of this is investment advice. It's meant to illustrate ways LCM thinks about investing. Things that LCM decides are good investments for LCM and its clients are based on many criteria, not all of which are covered here. Some or all of LCM's ideas may not be suitable for other investors. LCM does not recommend investing either long or short any position mentioned. LCM may own positions in some of the companies mentioned. Some of its ideas will lose money — investing entails risk. See full disclaimer here.