Qualitest, a developer of specialized testing equipment for the semiconductor industry, is among the few Israeli companies that remained unaffected by the Gaza war. Since its operations are concentrated in a U.S.-based subsidiary, the war had no impact on the company’s business results.
However, Qualitest is not immune to the negative effects of another conflict — the ongoing trade war between the United States and China — which threatens to disrupt the impressive growth seen in both its financial statements and stock performance.
Founded in 1993 and first listed on the Tel Aviv Stock Exchange in January 2000, Qualitest saw a record-breaking year in 2024. Revenues rose by 12.5% to $46.2 million, and net income increased by 13.1% to $13.9 million. The strong results were driven by increased global orders due to the adoption of various advanced packaging technologies by leading semiconductor manufacturers, along with rising demand for other high-end solutions.
Qualitest develops, manufactures and markets specialized testing equipment for the semiconductor industry. Its products help clients identify and characterize specific physical phenomena that reduce the reliability of integrated circuits. These tests are critical for validating new production technologies and ensuring the ongoing quality and dependability of manufactured components.
By all measures, the Qualitest of 2024 is a vastly different company from its 2014 version. Its top-line revenue is 4.4 times higher than a decade ago, and it has moved from a $2.4 million loss to nearly $14 million in profit.
A record-breaking year for the order backlog
Qualitest’s banner year extended beyond its financial reports to its growing order backlog. The backlog rose from $19.2 million at the end of 2023 to $41.5 million by the end of 2024. By late March 2025, just ahead of the release of the annual report, it had already reached $57.6 million. Based on expected delivery dates, the company anticipates fulfilling $51.5 million worth of orders in 2025 — positioning it to surpass last year’s revenue record.
As of Dec. 31, 2024, Qualitest employed 72 people, just one more than the previous year. Company management claims it can support annual revenues of $70 million without needing to expand the workforce.
An analysis of the backlog by geographic region reveals that 78% of orders are destined for customers in the Far East. Europe and Israel account for 12%, while North America represents the remaining 10%.
China: Source of revenue and concern
China represents 38% of Qualitest’s current order backlog, down from its 55% share of the company’s total revenues. Though China remains dominant in sales, its influence has declined from 2023, when it accounted for 65% of revenues. This shift is due to increased sales in Japan and Taiwan.
The ongoing economic dispute between the U.S. and China has seen Washington issue a list of restricted companies. Qualitest explicitly states in its annual report that several past customers are now on that list. However, the company affirms that all orders scheduled for delivery in 2025 and 2026 from Chinese firms are from entities not currently subject to U.S. restrictions.
During an early April investor call, shortly after the 2024 annual report was released, Qualitest CEO Koby Hirshman addressed the situation in China. “The ongoing trade war has led to some of our Chinese clients being added to the list of companies barred from trading with U.S. firms,” he said. “This is a serious concern for us — any escalation could harm the company’s operations.”
Still, he noted a positive trend: “We’re seeing a significant uptick in purchases from other territories. The reliance on China is decreasing, but it remains a very important market for us. We will continue to invest in and develop our presence there. We’re not giving up on it.”
If not China, then India
While Qualitest has no intention of walking away from China — which still provides over half of its revenues — the company is not turning a blind eye either. Management recognizes China’s dual role as a key customer and a potential intellectual property threat.
“The Chinese government encourages domestic firms to copy Western technology to counteract the blacklists,” Hirshman said. “This is creating a parallel market and fostering companies based on imitation.” He acknowledged that attempts have been made to copy Qualitest’s technology, but said that, to date, no Chinese competitor has succeeded in selling to one of its customers. “We’re monitoring this closely,” he said. “If it happens, we won’t hesitate to take legal action. But as you know, the Chinese will do whatever it takes to secure their own tech solutions. It won’t be easy for them.”
The company believes the solution lies in India. In 2024, Qualitest completed its first sale to an Indian client and plans to expand in that market throughout 2025. According to Hirshman, government subsidies for domestic chip factories can reach up to 75%. “We’ve already sold to a strategic customer in India,” he said. “We expect to grow the market this year and hope it can help offset any drop in Chinese sales caused by blacklisted firms.”
'We’re in a time of tectonic shifts'
While Qualitest is shielded from the impact of the Iron Swords war in Israel, it remains vulnerable to global economic conflict. In its final days, the Biden administration introduced further restrictions on exporting AI chips to China and other countries. The measures include caps on the computing power each nation can possess and divide countries into three risk-based groups.
Just days before the 2024 report was published, the new U.S. administration imposed new tariffs on goods and raw materials imported from China and other nations. Qualitest stated in its report that while the new tariffs aren’t expected to significantly impact its 2025 backlog, they may increase its cost of goods sold.
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“Everyone’s trying to understand the implications,” Hirshman said in the investor call. “It’s too early to tell if there will be more negotiations or changes in tariffs. Trump’s plan, in my view, isn’t finalized yet.”
He added, “We’re living through tectonic shifts in global relations. There will likely be some effect on raw material costs. That said, we entered 2025 with a strong backlog and have stocked up significantly for the year — though not for all of it, since new orders are still coming in. Because of these steps, I don’t anticipate a dramatic impact on our financial results, but we’ll need to see how the new taxes unfold over the coming weeks and months.”
No longer a 'small corporation'
The company’s financial momentum, coupled with concerns about tariffs, is reflected in its stock price. Following a year of record performance and a surge in backlog, Qualitest’s stock soared 99% over the past 12 months and has jumped 1,543% over five years. Still, fears of an intensifying trade war helped trigger a 30% drop in market value in the last two months.
Qualitest has no controlling shareholder. Founder Gadi Krieger sold his 7% stake in 2021 for 38 shekels per share. Today, the stock trades at 203 shekels. Major shareholders include Yelin Provident Funds (15.1%), Alpha Investment Funds (10%), and Harel Insurance (5.4%).
More than 20 years ago, the board adopted a policy of paying an annual dividend equal to at least 25% of net income from the previous calendar year. In 2024, Qualitest distributed $6.2 million in dividends.
Qualitest is led by two longtime executives: Hirshman, who joined the company in 1998 and now serves as CEO and president, as well as president of its U.S. and Japanese subsidiaries; and Nava Ben-Yehuda, CFO since 2004 and CEO of the German subsidiary.
Until now, shareholders received Qualitest’s financial statements twice a year, thanks to its status as a “small corporation” — which came with reduced reporting requirements. But with the company’s market cap growth, it no longer meets the criteria for that status. Starting Jan. 1, 2025, Qualitest will transition to quarterly reporting.