Edelteq leaves legacy contracts behind; betting on Halovision and Nixma

KUALA LUMPUR: Edelteq Holdings Bhd, an automated test equipment (ATE) manufacturer, has been seeing its revenue grow exponentially over the past five quarters, due to a large precision machining contract for parts used in microdevices testing machines.

However, the margins that came with the contract were so small that Edelteq's net profit margin fell to just 1.6 per cent in the quarter ended June 30, 2026. This is compared with 3.5 per cent a year ago.

Knowing that it cannot continue doing low margin contracts, Edelteq's chief executive officer Chin Yong Keong said the group is pivoting from a high volume, low margin business, to a high value technology testing machines development going forward.

This strategy is anchored by its two ventures – a joint venture with Halo Technologies Sdn Bhd called Halovision System Sdn Bhd, and a 51 per cent investment in Nixma Technology (M) Sdn Bhd, a Penang-based automation technology company.

"Our immediate plan is that we want to grow our technology capability and product portfolio that we developed through Halovision and Nixma. We want to diversify so that we have each engine move concurrently," said Chin.

Halovision started as an AI power inspection for semiconductor substrates division within MCT, an American automation company that specializes in substrate handle testing. A substrate is the foundational base material upon which microelectronics are built.

In 2023, MCT was sold to Cohu, a supplier of semiconductor test automation. However, Cohu did not want the business unit that became Halo Technologies, as it is not in line with its directions.

The owner of MCT and the top management bought out Halo Technologies and based it in Malaysia. Halo Technologies was initially one of Edelteq's customers, and this relationship led to them working together through Halovision.

"They needed a partner to support them in terms of other capabilities like mechanical design and software programming, as they only have the vision capability. So in making an automated optical inspection (AOI) equipment, you need all three.

"I think one of their technologies can help improve what we have in our AOI today," said Chin when met with Business Times recently. He added that Halo Technologies had also attracted a substrate maker based in Penang as a client for the AOI system.

Halovision has also developed an AOI system for high-density interconnect (HDI) printed circuit boards, said Chin, which is currently being evaluated by a customer. He expected the customer to make an order soon.

The market for AOI is significant, said Chin. The customer that Halovision is working with wanted to produce 50,000 sq ft of PCBs a month, which will require AOI testing and inspections. Halovision is currently assisting with the AOI of 5,000 sq ft of PCBs with the customer, he said.

"One AOI system can process up to 2,000 sq ft of PCBs. That means for the immediate need of the customer, they will have to buy three systems. If you are talking about 50,000 sq ft, they will need to buy 25 systems," said Chin.

An AOI system sells for between US$600,000 and US$800,000 in the market, said Chin. If the customer that Halovision is working with orders all the 25 systems they need, that could translate into up to US$20 million in revenue for the JV.

The margin in the AOI business is around 40 to 50 per cent, claimed Chin.

Kumpulan Modal Perdana Sdn Bhd (KMP), a tech-focused venture capital firm under the Ministry of Science, Technology and Innovation, invested RM3.2 million into Halovision in return for 18 per cent share, via redeemable convertible preference shares.

On the acquisition of 51 per cent stake in Nixma, Chin said the company will be a very good add-on to the group, in terms of technical capabilities, product portfolio, customer base and industries that it serves.

"There is no duplication with Edelteq, despite being in the same industry (ATE and AOI). So that creates a broader customer base to cross-sell.

"Our primary focus of technology is in AOI, theirs is in assembly equipment and test handler. So we put them together, we are the front-end, and they are the back-end. So we have a full spectrum of the product," he said.

The investment in Nixma also opens up Edelteq to big clients, said Chin. He revealed that Nixma had recently been engaged by a large US-based semiconductor company to automate their plant in Malaysia.

Besides that, Nixma is also producing assembly machines for artificial intelligence (AI) transceivers, as well as cooling integrated circuits (IC), which are in high demand these days as more AI-enabled devices are produced.

According to Chin, Nixma's involvement in the production of AI transceivers and cooling ICs were via a consignment strategy with an established outsourced semiconductor assembly and test (OSAT) company, which had contracts with the likes of Google, Cisco, and NVIDIA.

Through the consignment strategy, Nixma builds assembly and test machines which are required specifically by the OSAT's clients. These specialised machines might not have applications for other clients, hence the OSAT company consign the production to Nixma.

"So this customer knows – because we have been serving the OSAT – the OSAT tells them; my equipment comes from this supplier. They come and talk to us, they like it, then they give us the PO, we ship the machine to the OSAT, they run the product for the customer," he explained.

Nixma is also in the defense and communication sector, which Edelteq is not, said Chin. The company produces assembly and test handles for defense-grade walkie-talkies, which brings in good margins, he added.

Nixma also brings valuable talents into the group, as approximately 30 per cent of its workforce are engineers, said Chin.

As Edelteq winds down its contract manufacturing business by the end of this year, its revenue will decline next year. However, Chin assures that the group's profitability will continue to grow, despite doing smaller revenue starting 2027.

"I will not use revenue as the growth benchmark because it is not relevant anymore (for Edelteq). But in terms of the bottom line, we will grow significantly.

"I cannot give you a percentage how much we are going to grow, but it is safe to say that we are well positioned in the next two years to better what we have reported last year. Much, much better," he said.