Fusen Chen
KULICKE & SOFFA INDUSTRIESAbout Fusen Chen
Dr. Fusen E. Chen (age 65) has served as President & Chief Executive Officer of Kulicke & Soffa (K&S) since October 31, 2016 and as a director since October 3, 2016 . He holds a Ph.D. in Materials Science and Engineering from the State University of New York and a B.S. in Materials Science and Engineering from Tsing Hua University (Hsinchu, Taiwan) . Under his tenure, K&S has tied executive pay to Net Income (NI), Operating Margin (OM), and three‑year relative Total Shareholder Return (rTSR); recent PSU cycles paid 95% (FY22–FY24), 166% (FY21–FY23), and 138% (FY20–FY22), signaling pay outcomes aligned with multi‑year TSR performance . On October 28, 2025, K&S announced Dr. Chen will retire as CEO and director effective December 1, 2025 due to health reasons, and then serve as Board advisor for 12 months .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| Mattson Technology | President & CEO | 2013–2016 | Led semiconductor equipment supplier; CEO experience prior to K&S |
| Novellus Systems | EVP, Semiconductor System Products | 2009–2012 | Senior P&L leadership in semi equipment |
| Novellus Systems | EVP & Chief Technology Officer | 2005–2009 | Drove technology strategy and R&D |
| Novellus Systems | SVP, Asia Pacific Operations | 2004–2005 | Regional operations leadership |
| Applied Materials | Various management roles | 1994–2004 | Broad operating leadership at leading semi equipment vendor |
Fixed Compensation
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | 813,750 | 881,250 | 900,000 |
| Actual Annual Bonus (ICP) ($) | 1,242,724 | 381,240 | 216,000 |
Notes:
- FY24 ICP metrics and outcomes: NI target $114.8M and OM target 11.8% (50% weight each). After excluding extraordinary items (notably a March 2024 project cancellation with $104.7M pre‑tax charges), adjusted NI was $38.6M and OM 3.6%. Final ICP payout set at 20% of target to preserve threshold economics, consistent with Dr. Chen’s $216,000 payout (24% of $900k salary x 120% target) .
Performance Compensation
Long‑term equity design and outcomes
- Mix (grants in FY2024): CEO/CFO equity 60% PSUs (rTSR), 40% RSUs; other execs 50/50 .
- PSU metric change: Organic Revenue Growth metric eliminated for grants beginning FY2024; PSUs now 100% rTSR vs GICS Semiconductor Index; maximum payout curve reduced to 85th percentile; payout capped at target if absolute TSR is negative over the period .
- Recent PSU performance cycles and payouts:
| Performance Cycle | K&S 3‑Year TSR | rTSR Percentile vs GICS Index | PSU Payout (% of Target) |
|---|---|---|---|
| FY2020–FY2022 | 112% | 69% | 138% |
| FY2021–FY2023 | 134% | 83% | 166% |
| FY2022–FY2024 | (26)% | 47% | 95% |
FY2024 incentive structure and targets (selected)
| Plan/Grant | Metric | Weight | Target | Actual/Status | Payout/Vesting |
|---|---|---|---|---|---|
| ICP (cash) | Net Income (NI) | 50% | $114.8M | $38.6M excl. one‑time items | Contributed to 20% overall payout |
| ICP (cash) | Operating Margin (OM) | 50% | 11.8% | 3.6% excl. one‑time items | Contributed to 20% overall payout |
| FY2024 PSUs | rTSR vs GICS Semi | 100% | Payout curve up to 200% at 85th percentile; capped at target if absolute TSR < 0 | In‑flight (performance period ends Oct 2026) | Cliff vest at 3 years based on rTSR |
FY2024 equity grants to Dr. Chen
| Grant Date | Instrument | Shares/Units | Grant Date Fair Value ($) | Vesting |
|---|---|---|---|---|
| 10/11/2023 | PSUs (rTSR) | 65,135 | 4,147,797 | Cliff at 3 years (0–200% earned) |
| 10/11/2023 | RSUs | 43,423 | 2,059,987 | 1/3 each year over 3 years |
Equity Ownership & Alignment
Beneficial ownership (as of Dec 9, 2024)
| Holder | Shares | % of Class |
|---|---|---|
| Fusen E. Chen | 1,100,765 | 2.1% |
- Stock ownership guidelines: CEO 3x base salary (5 years to comply; 50% net‑holding until compliant). Hedging and pledging prohibited for directors and executive officers .
- No outstanding stock options for NEOs; K&S has not used stock options in recent years .
Outstanding unvested/unearthed equity (as of Sep 28, 2024; price $44.77)
| Type | Units | Reference Grants | Market/Payout Value ($) |
|---|---|---|---|
| RSUs (time‑based, unvested) | 71,532 | 10/11/2023: 43,423; 10/14/2022: 21,334; 10/15/2021: 6,775 | 3,202,488 |
| PSUs (target, unearned) | 222,110 | 10/11/2023: 65,135; 10/14/2022: 72,000 & 24,000; 10/15/2021: 45,731 & 15,244 | 9,943,865 (assumes 100% target) |
Employment Terms
Current/Legacy agreements
- Initial CEO letter (Oct 3, 2016): Base salary (then $635,000), target bonus 100% (max 200%); sign‑on RSUs $1.5M (vested at 6 months) and PSUs $700k (integrated with cycle); relocation/housing allowances; tax prep assistance .
- Severance (no CIC): 24 months base (6 months if no release); benefits continuation; pro‑rata vesting treatment at Committee discretion; estimated maximum severance scenario as of Sep 28, 2024: $1.8M cash, $1.16M RSUs (pro‑rata), $9.94M PSUs at target (pro‑rata on actual performance) .
- Change‑in‑control: Double‑trigger; CEO eligible for 24 months base and target bonus; plan prohibits single‑trigger vesting and repricing; equity treatment subject to Committee discretion (e.g., substitution, acceleration, cash‑out) .
- Clawback: SEC/Nasdaq‑compliant policy effective Oct 2, 2023; recovery of erroneously awarded incentive pay upon covered restatements .
- Hedging/pledging: Prohibited .
- Perquisites: Minimal; in FY2024, medical coverage ($34,438) and CPF contributions ($9,632) totaling $44,070 .
Retirement transition (announced Oct 28, 2025)
- Effective date: December 1, 2025. Advisory role for 12 months at $75,000/month; if terminated without cause before term end, remaining advisory fees payable .
- Incentive/equity: Pro‑rated annual cash bonus at target opportunity for fiscal year of retirement; outstanding PSUs remain eligible to vest; unvested RSUs forfeited as of effective date .
- Benefits: Health insurance for 18 months post‑retirement .
Board Governance
- Role and tenure: Director since 2016; current term expires 2027; not Chair (non‑executive Chair is Peter T. Kong) .
- Independence: As CEO, not independent; the Board’s key committees (e.g., Management Development & Compensation Committee) are comprised of independent directors (Mui Sung Yeo – Chair; Peter T. Kong; Chin Hu Lim; D. Jeffrey Richardson) .
- Diversity/skills matrix: Board includes semi and capital equipment expertise; Dr. Chen contributes deep semiconductor and operations experience .
Performance & Track Record
- Multi‑year PSU payouts aligned with TSR performance (95%, 166%, 138% over the last three completed cycles) .
- Capital returns: Since initiating its repurchase program in Aug 2014, K&S repurchased $900M (30.9M shares) and announced a new $300M authorization in Nov 2024; consistent dividend raises including a fifth consecutive increase announced Nov 2024 .
- Strategic execution: Investments in vertical wire, Fluxless Thermo-Compression (APTURA), LUMINEX mass‑transfer display, high‑power interconnect (PowerFusionPS), and advanced dispense to position K&S for cyclic recovery across General Semi, Memory, Automotive & Industrial .
Compensation Structure Analysis
- Shift in equity risk profile: CEO/CFO performance‑based equity moved from 75% historically to 60% in FY2024, still above typical executive peers and paired with elimination of organic revenue growth metric to reduce cyclicality noise; PSUs now 100% rTSR .
- No stock options/repricing: Long‑term incentives delivered via RSUs/PSUs; plan forbids repricing and single‑trigger CIC vesting; strong governance features .
- Say‑on‑pay support: 98.2% approval at 2024 AGM (vs. 98.3% in 2023), indicating investor alignment with program design .
- Dilution/overhang: Proposed 2025 plan amendment adds 2.81M shares; expected fully‑diluted overhang about 9.1% as of Dec 9, 2024; expected reserve lasts 3–5 years .
Compensation Peer Group (benchmarking reference)
U.S. tech/semi peers used for FY2024 benchmarking include AEIS, ACLS, CRUS, COHU, DIOD, ENTG, FORM, MKSI, MPWR, ONTO, OSIS, PENG, POWI, SMTC, SLAB, SYNA, UCTT; plus Asia‑Pac peer framework for Singapore‑based roles (21 companies) to calibrate U.S./APAC differentials .
Say‑on‑Pay & Shareholder Feedback
| Year | Say‑on‑Pay Approval |
|---|---|
| 2023 | 98.3% |
| 2024 | 98.2% |
Management cites active engagement and pay‑for‑performance alignment as drivers of strong support .
Risk Indicators & Red Flags
- Positive: Double‑trigger CIC; no excise tax gross‑ups; robust clawback; no options/repricing; anti‑hedging/anti‑pledging; related‑party transactions policy (none in FY2024) .
- Watch: CEO transition risk due to health‑driven retirement effective Dec 1, 2025; RSUs forfeited at retirement but PSUs remain eligible (reduces near‑term selling pressure but maintains equity linkage during advisory period) .
- Overhang/dilution: Share reserve increase proposal implies ~9.1% overhang post‑approval .
Investment Implications
- Alignment and retention: High proportion of performance‑based equity tied to rTSR, stringent governance (no options/repricing, double‑trigger CIC, clawback), and meaningful personal stake (2.1% of shares) support alignment; however, CEO equity mix shifted to 60% PSUs in FY2024 and organic revenue growth metric removal may reduce sensitivity to company‑specific top‑line outcomes in downcycles .
- Near‑term trading/flow: Dr. Chen’s retirement terms forfeit unvested RSUs and leave PSUs eligible, reducing mechanical selling pressure at retirement while preserving performance‑tied exposure; advisory fees ($75k/month for 12 months) and pro‑rated bonus are non‑equity cash flows .
- Governance/dilution: Strong say‑on‑pay outcomes and committee independence are positives; investors should monitor equity burn and overhang as the 2025 share increase could lift fully‑diluted overhang to ~9.1% with an expected 3–5 year runway for awards .
- Execution risk: Leadership transition to an interim CEO poses execution risk during an expected cyclical recovery; nonetheless, the pipeline (APTURA, LUMINEX, power interconnect, advanced dispense) and sustained capital return posture underpin medium‑term confidence if operational continuity is maintained .
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