Q3 2021 MKS Instruments Inc Earnings Call
Yeah.
Thank you for standing by and welcome to the MKS instruments third quarter 2021 to earnings conference call. At this time, all participants are in a listen only mode.
The speaker presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone. Please be advised that today's conference may be recorded she would you require any further assistance. Please press star zero.
Now I'd like to hand, the conference over to your host David Ryzik.
Good morning, everyone I am David Richard and I'm joined this morning by John Lee, President and Chief Executive Officer, and Seth Bagshaw, Senior Vice President and Chief Financial Officer.
Yesterday after market close we released our financial results for the third quarter of 2021.
Which are posted to our website.
Yes.
S T dot com.
As a reminder, various remarks today about future expectations plans and prospects for MKS comprise forward looking statements and actual results may differ materially as a result of various important factors, including those discussed in yesterday's press release and in the most recent annual report on Form 10-K and.
Any subsequent quarterly reports on Form 10-Q.
These statements represent the companys expectations only as of today and should not be relied upon as representing the company's estimates or views as of any date subsequent to today and the company disclaims any obligation to update these statements.
During the call we will be discussing various financial measures.
All forward looking financial measures exclude any contribution from <unk> limited the acquisition of which we expect to close by the end of the year.
Also unless otherwise noted all income statement related financial measures will be non-GAAP other than revenue. Please refer to our press release for information regarding our non-GAAP financial results and a reconciliation to our GAAP measures now I will turn the call over to John.
Thanks, David Good morning, everyone and thank you for joining us today.
<unk> delivered strong third quarter results with revenue of $742 million and net earnings per diluted share of $2 79.
I'm very pleased with the strong execution of the entire <unk> team.
We worked tirelessly to address supply chain constraints, while remaining focused on technology innovation and design win opportunities with our customers.
Sales to our semiconductor market grew 36% year over year, and 13% sequentially to another record.
And was led by broad based strength across our differentiated vacuum and photonics portfolios.
We delivered another record quarter in our RF power solutions business, which benefited from robust demand from leading edge three D NAND applications.
As memory manufacturers scale, three D NAND to higher layer counts and greater density.
We anticipate a continuing need for higher power and more precise RF generators for high aspect ratio edging.
We are the market leader for the solutions and remain well positioned to continue solving these challenges for our customers.
In fact, following an outstanding 2020, we delivered triple digit growth and significant market share gains revenue from our RF power solutions has grown more than 50% year to date translating to another year of meaningful market share gains.
We also saw continued momentum in our plasma and reactive gas solutions with strength in our dissolved ozone products for wet cleaning applications.
The increased need for water efficiency and semiconductor fabrication, we have designed a solution that recycles unused eliminated water.
And I'm pleased to say in the third quarter, we installed our first system in a leading edge semiconductor fab and they're seeing growing interest interest from other customers.
Sales of our photonics solutions to the semiconductor market grew notably in the third quarter, partly due to our acquisition of photon control early in the quarter as well as continued growth in our optical solutions for lithography metrology and inspection applications.
Our high performance optical assemblies enable our customers to increase throughput, while moving to shorter wavelengths and finer features.
As we look out into the fourth quarter demand in our semiconductor market remains strong and.
And we anticipate revenue to remain consistent to slightly up relative to third quarter levels.
And this does factor in the continued industry wide supply chain constraints that we're all facing.
We continue to make good progress in our advanced markets, which grew 10% year over year, but declined 20% sequentially, primarily due to the seasonality in our flex PCB drilling business, which we mentioned in our second quarter call.
Cause iron when activity remains strong we secured picosecond laser design wins for solar in PCB cutting applications and won a meaningful world class optics design for a defense application.
We added another beta customer for HDI via drilling solution I'm also very proud to announce that we received the laser focus world magazines Innovators Award for excellent innovation for our capstone flexible PCB via drilling solution.
For the fourth quarter, we expect revenue from our advanced markets to be consistent to slightly up driven by steady demand across our end markets.
I also wanted to provide an update on our pending acquisition of Alphatec.
We're progressing as planned and continue to expect the transaction to close by the end of this year.
Auto Tech transaction is all about accelerating the next frontier in mineralization and complexity for advanced electronics manufacturing.
And we're looking forward to combining our highly complementary expertise and capabilities to optimize the interconnect.
High performance Interconnects other highways to carry the massive quantities of data between semiconductors sensors and other components and advanced electronic devices.
We believe that optimizing the interconnect requires a cross collaboration of laser based processing and advanced chemistry applications to meet rapidly evolving customer requirements.
Here's an example of how our high density interconnect Pcbs in a mobile device has evolved in a short period of time.
Since 2007, the number of ideas on in HDI PCB panel have increased more than four times from 250000 to more than $1 million.
This has resulted in a more than 60% decrease in the size of the lines of spaces as well as the diameters of the visas.
These smaller geometries and greater density has been vital to enabling more functionality and our phones such as more cameras microphones facial recognition lidar front cameras <unk> tenants and more.
These changes have also made it possible for smartphone makers to building larger batteries, while delivering thinner form factors.
Enabling this rapid scaling of Pcbs, as what we and Alphatec too weak.
We believe these trends will only continue over time and we were excited to harness our combined capabilities to accelerate new designs and roadmaps for our customers.
We're also excited about architects general metal, finishing business or Gms this as well, which is well positioned for a number of attractive secular trends such as automobile premium amortization.
Electrification and light weighting as well as the industry transitioned to chrome six alternatives.
This business also provides palladium, new plastics for <unk> antennas and chemistry for renewable energy applications, such as solar and wind turbines.
Needless to say, we are eager to close the transaction given our excitement about the opportunities that lie ahead for the combined company.
With that I'd like to turn the call over to Seth.
Thank you John I'll cover our third quarter results and provide additional detailed guidance for the fourth quarter.
Sales for the third quarter with $742 million up 26% year over year and down 1% sequentially.
While sales were negatively impacted by industry wide supply chain constraints in the third quarter.
Our team continues to execute well respond to our customer needs to allowed us to exceed the midpoint of our guidance.
Even supply chain constraints sales to semiconductor market set another record at $488 million.
Up 36% year over year, and up 13% sequentially, reflecting broad based demand for semiconductor capital equipment customers.
In particular, we delivered record revenue from our RF power pressure in plasma and reactive gas solutions.
We also delivered strong growth in photonics revenue from semiconductor customers.
This include a continued momentum uncle solutions business as well as a $15 million contribution from the acquisition of Photonics control the market leader in temperature measurement for the semiconductor market.
This acquisition represents another seamless extension of our surround the chamber portfolio.
Integration is already well ahead of schedule.
MKS is broad vacuum and photonics portfolio allows us to address the widest array of critical semiconductor manufacturing steps.
<unk> deposition etch wet clean lithography metrology and inspection, which we believe is unique to the industry.
Sales to advanced markets grew 10% year over year to $254 million in the third quarter.
And declined 20% sequentially, primarily due to seasonality demand for flexible PCB via drilling solutions, which.
Which we discussed on our second quarter earnings call. In addition sales of industrial applications soft in the third quarter due to supply chain constraints and parenting a vacuum portfolio.
However demand trends in these applications also remain healthy.
For example, synthetic diamond manufacturing, we've seen growing demand for our microwave pressure inflow products that are critical to the chemical vapor deposition process using the manufacturers synthetic diamonds.
For the third quarter, the revenue split between our semiconductor and advanced markets with 66% and 34% respectively.
Third quarter gross margin was 47%.
A decrease of 40 basis points sequentially due to marginally higher input costs, but up 190 basis points year over year.
Yeah.
Third quarter operating expenses were $148 million up less than $1 million sequentially.
It was in our expectations for the quarter.
Third quarter operating margin was over 27% a decrease of 60 basis points sequentially, but up 400 basis points year over year, which reflects the strong operating leverage in our financial model.
Adjusted EBITDA for the third quarter was $222 million, resulting in adjusted EBITDA margin of 30%.
Net interest expense of third quarter was $6 million and.
And our non-GAAP tax rate was approximately 20%.
Reflecting the geographical mix of our taxable income.
Net earnings for the third quarter were $155 million or $2 79.
Per diluted share.
In terms of working capital days sales outstanding was 54 days at the end of the third quarter.
Compared to 52 days at the end of the second quarter.
Inventory turns were two nine times in the third quarter compared to three times in the second quarter.
We remain focused on improving our cash conversion cycle in third quarter operating cash flow was $153 million.
Free cash flow was $133 million.
We had increased our dividend in the second quarter by 10%. He made a dividend payment in the third quarter of $12 million or 22 per share.
Exiting the third quarter maintain a strong balance sheet and liquidity position with cash and short term investments of $880 million.
Our term loan principal balance was $827 million at the end of the third quarter.
We exited the quarter with a $53 million net cash balance.
It included a net payment for the photo and control acquisition of $268 million.
As John mentioned, our pending acquisition of AMETEK is proceeding as planned.
Integration that integration planning activities are progressing very well, we're also pleased to announce.
If successfully syndicated our debt financing on October 22nd.
Our term loan financing was two times oversubscribed comprised of two tranches.
A U S $4 $7 billion loan at 225 basis points over LIBOR with a 50 basis point floor.
And a euro tranche of 500 million euros at twin and 75 basis points above Euro board with a zero basis point floor.
Both tranches were priced at 99.
75.
The funding of the financing will coincide with the close of the acquisition of AMETEK is subject to customary ticking fees.
We believe it's overwhelmingly strong interest from the lender community is a testament to strategic rationale of the acquisition as well as our strong combined financial model and a track record of successful acquisition integrations and deleveraging.
We look forward to closing the acquisition and excited to welcome a talented AMETEK team to MKS.
I'll now turn to our fourth quarter outlook excludes any contribution from AMETEK.
We estimate fourth quarter revenue of $760 million, plus or minus $30 million.
This forecast includes the headwinds from industry wide supply chain constraints, which we expect to persist through the fourth quarter.
However, overall business levels expected remains strong.
Based on anticipated product mix revenue levels and the elevated input costs, we estimate fourth quarter gross margin of 46%.
Plus or minus one percentage point.
Operating expenses of $151 million, plus or minus $4 million.
For the fourth quarter net interest expense expected to be approximately $6 million.
And our tax rate expected to be 18%.
Given these assumptions, we expect fourth quarter net earnings of $2 85 per diluted share plus or minus 26 cents.
I'd like to now turn the call back to the operator for Q&A.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key again Thats star one on your Touchtone telephone to ask a question.
Please limit yourself to one question and one follow up please standby, while we compile the Q&A roster.
Our first question comes from the line of Jim Ricchiuti of Needham Your line is open.
Hi, good morning.
Couple of questions on the advanced markets business I'm wondering if you can give us.
Any sense as to.
How you see the equipment portion of that business in the current quarter.
Is there.
Any kind of disruption as it relates to some of the supply chain issues that we're seeing throughout the consumer electronics market.
Hey, Jim Thanks for the questions John.
Yes, I think when we look at the advanced markets and the contributions from the various divisions.
The expectations for light and motion and equipment solutions.
Or are consistent with what we expected.
And the constrained supply chain constraints manifested mostly in the VNA side of the business as you know we have supply chain constraints on the P&A side, and we've talked about the semi equipment side of it but obviously those constraints also affect the portion of the advanced market business for DNA as well.
And John.
Are you are you sure.
Slide with with the progress Youre seeing in HDI or.
You added another another customer there, but I'm just wondering the existing customers that you're working with are you seeing the kind of scale up that you anticipated or is this just because it's a new product.
Taking longer to scale it.
Yeah, No we're really happy with the customers that we've previously announced that have placed volume orders. So those tools that had been running in production and 24, 7% for the past six to eight months.
And those tools have been performing well and we also have these other design wins with other large volume PCB manufacturers and when they ramp we certainly expect that the orders will pick up the interest on testing our tools remains very high. So we continue to do demos for various customers.
And our goal is to make sure that we continue to get these beta sites get the design wins and then when they ramp then we should see the volumes pick up.
I'll I'll jump back in the queue. Thank you.
Thank you. Our next question comes from Patrick Ho of Stifel. Your line is open.
Thank you very much and congrats on a really nice quarter, given the circumstances, John maybe following up.
Supply constraint issues as you mentioned continuing to persist, but you guys did a really good job in both the September and December quarter outlook on the semiconductor side of things can you just qualitatively.
A little more details or are they the same components are the same issues that you experienced.
In the September quarter.
Are things changing kind of on a dynamic basis, where one thing maybe resolved and something else Pops up can you just give a little bit of color.
The issue you're dealing with.
Yeah. Thanks for the question Patrick its the ladder.
So when.
Particular part becomes constrained we solve that issue and then another one with top up and so this has been true for the last couple of quarters. So these supply chain constraints are still largely about electronic components, but not the same electronic components. So as we solve each one then a new one pops up I'd say the difference.
In this particular cycle with supply chain constraints is that we are partnering with our customers much more closely and I'd like to.
Partnership has been great to see so working with them to resolve supply chain constraints working with them to design.
Substitute components, so that's actually been a silver lining silver lining in the can supply constraint issues.
Stronger relationship with with our partners and customers.
Great and my follow up question. It looks like you continue to gain share on the RF power side of things you talked about the three D NAND applications.
<unk> ratio is something that is also becoming a bigger application in DRAM do you.
You see I guess progress in gains continue on the power front, particularly as he.
As more and more of these high aspect ratio applications as well.
Yes, Patrick we are really excited about the.
Industry trend towards vertical structures in general.
Started by you know even earlier than three D. NAND was finfet <unk> NAND, certainly accelerated that and we think that as you pointed out DRAM has become very vertical as well and then of course when three D. DRAM.
It becomes a reality that's going to continue that trend towards vertical in the semiconductor industry and the experience that we've had over the last six or seven years and developing our power solutions for that.
That really puts us in a pole position to offer those solutions and develop new solutions as these new challenges come up.
Great. Thank you.
Thanks, Patrick.
Thank you. Our next question comes from Chris <unk> of Cowen and company. Please go ahead.
For taking my question I had two of them too John I don't think you said last quarter timber revenues would have been 750 million without supply constraints are as they move forward that got pushed into December. So if you look at it.
Without supply constrained it looked like September to December quarter, the revenues are flat.
Thinking about it right or is there something else going on and then that will fall off.
No I mean in.
Our semi business.
Certainly going up quarter to quarter.
Light constraints, we certainly wanted to highlight that if you think about our Q2 to Q3, a decrease in revenue remember that E&S.
Due to its natural cyclicality, you're going to go down about $50 million. So we actually did better than that with the rest of the business. So when you take that out we were actually up quarter over quarter.
And then Q4. It is also the cyclical downturn a down quarter for E&S and so our guidance for Q4 is actually also up quarter over quarter relative to Q3.
Got it got it that's super helpful.
No.
That's kind of mentioned about the higher input costs impacting gross margin.
It looks like that'd be one in the supply chain is increasing prices on them.
Todd for you to increase prices.
Semi customers, maybe the people shipping, but also product price increases, but are you doing any pricing people that both markets, where you have a longer tail of customers.
Yeah Christian Steph I'll take that question, yes, so we havent higher input cost in Q3, and obviously through Q4.
Have a view and that will kind of abate, but.
You might recall, we have a light.
Pretty unique process MKS called the profit and cash recovery team. So we've had that in place for.
Probably six or seven years, so what I would say as we meet on a monthly basis at the executive level in the next couple of levels down in your organization is really global initiatives.
And that's all designed to exactly what you mentioned kind of drive profitability improvements and.
Is there any leverage there it's obviously we try to.
Drive down.
Our product development cost higher margins, they are low cost country migration and there's always some level of pricing ability in that.
And that mix as well so.
That's an ongoing cadence we meet again on a monthly basis.
Do offset inflation every year simple inflationary pressure.
And then also create opportunities to invest other areas in the business. So I would say you know not to get into details about pricing dynamics, but that is part of that overall equation. It's again.
Embedded processing, we have a number of years, it's been very successful and that's very.
Very much robust today.
Got it.
Yes.
Thank you. Our next question comes from <unk> Misra Baron Burke Your line is open.
Thanks, guys good morning.
So regarding after tech can you talk about the cyclicality and the PCB business does.
Does that industry needs more capacity similar to what youre seeing in the savings business or our supply versus demand.
You pair tesh.
Yes, there's different aspects to the PCB industry. So.
In terms of high density interconnect, it's less cyclical because that covers many many more types of end devices in terms of flexible PCB, that's a little more cyclical because the adoption today.
Strongly influenced by smartphones and those advanced devices. That's also spreading across different types of advanced devices as well so.
If that's a proxy for the electronics division of AMETEK, There's certainly less cyclicality.
Then the semi equipment type of business.
But it's also growing very fast.
Because the growth of semiconductors as well.
Got it.
Then.
Looking for their hat, what sort of opportunity do you think exists for after tax to increase their content per device.
I would think that that's devices get smaller they're probably likely to use more of these chemistries and materials. Thank you.
Yeah.
Yeah, No. We're excited about once we close.
Kind of opportunities for us to work together without attack with our.
Laser drilling group to provide solutions to our customers faster and I think theres, a greater amount of opportunity there to increase.
Share for both the <unk> side and the MKS side, we've talked about that in the past.
And to your point as features get smaller it requires the ability to deliver advanced processes and that requires investments in R&D.
AMETEK and invest more in R&D than any of their competitors.
And it's also part of the MKS DNA, we'd like.
Industries that continually evolve continually require more difficult challenges.
And require investments in R&D and I think that's really a formula for success for MKS and also a formula for success for AMETEK.
Great. Thanks, Sean.
Thanks Pat.
Thank you. Our next question comes from Tom definitely of D. A Davidson your question. Please.
One component shortage and it'll pop up kind of next day, so it's been kind of our.
You know our approach of last couple of quarters, and that's not too atypical in a big ramp environment, obviously were much higher in record volumes is much more.
You know magnified, but its really know is continued working through each of the suppliers working closely with them.
As one issue comes up we solve it never comes up we saw that once I was kind of a that type of process. At this point in time. So it's hard to say when it'll be alleviated, but everybody is working on a lot of smart people are kind of driving the right behavior.
Our team I said before is that I think a great job because we did beat the.
The midpoint of our guidance for the quarter and were working very hard to keep our customers obviously product in their hands as well.
Okay, and that 40% 40 basis point input cost hit in the quarter do you expect that to stay roughly at the same level for the next couple of quarters.
Yeah, it's probably get in so you're right in Q3, you're probably about 40 basis points is our estimate in the fourth quarter. The guidance is probably a little bit marginally higher.
And it's kind of hard to say when that will kind of abate going forward I did mentioned earlier answer to a question we get it at a profit and cash recovery process, which again is.
How we can mitigate any major increases on input cost inflationary pressure. So we're going to lean into that probably a little bit more obviously going forward, but it's probably a little bit north of 50 basis points in Q4.
At this point is our estimate.
Okay. Thanks for your time.
Thanks, Tom.
Thank you. Our next question comes from Joe trucking.
Wells Fargo. Please go ahead.
Yeah. Thanks for taking the question just curious of your thoughts on the on the semi cycle typically you know MKS outperforms Wi Fi when things are and then when things slow.
Seeing a little bit more just from an inventory correction standpoint.
But clearly the supply chain dynamics are.
Having inventory levels be much leaner, so I know, it's hard to predict but.
What happens, but I guess, how do you think about that in terms of maybe a softer landing for MKS or maybe even to some extent.
A bit of an inventory restocking.
Yes, Joe those are <unk>.
Probable outcomes of the fact that we are in a supply constrained environment. So things are pushing to the right for our customers for us.
So logically that extends any kind of cycle for sure.
And then to your point.
If a downturn comes then people are going to need to replenish their inventories, it's not there's not a lot of inventory just sitting out there obviously.
And then when you think about how <unk> performs relative to the Wi Fi our model is 200 basis points above long term WMC.
And you know, we don't like to Cherry pick we'd like to look at the long term because if you take the last two years.
2020, and projected 2021, we will have outperformed <unk> by <unk>.
Basis points.
But if you take it back five years six years, that's the 200 basis points that we have models and we still subscribe that that's the model that we should you should expect from us.
Just wanted to add one point to that too is we've got about $1 billion run rate in our advanced markets business. So.
Just to emphasize the fact that we have worked really hard to be broad based revenue stream.
<unk> will add to that dynamic going forward as well so even though a majority of our sales now are seeing the semi market. We do have other areas and kind of balance that out throughout any cycle.
And in the service business also has grown substantially as well, it's pretty sticky business. So we worked pretty hard over the years to make that operating model pretty robust and pretty rock solid any type of cycles, we see.
Got it and then just on the advanced markets side, you talked about.
The industrial application softness just from supply chain dynamics.
Does your guide assume a similar level of impact in the fourth quarter orders things get maybe a little bit worse before they get better.
You know our guide is.
<unk> slightly up.
In both markets as we said so.
We're thinking that we could do a little better even with the supply constraints coming up so I don't think we're saying the spikes constraints are getting better in fact, they may be as bad or worse, either but I think our ability.
To deal with it is better and our ability to partner with customers is certainly a lot better as I mentioned earlier so.
That's why we're comfortable with our guide of flat to slightly up in both markets Joe.
Got it thanks.
Thank you Joe.
Thank you. Our next question comes from Sidney Ho of Deutsche Bank. Your line is open.
Thanks for taking my questions, maybe just a follow up to the supply constraint question.
Looking back third quarter with a total revenue being constrained.
Roughly what you expected and if you kind of look at Q4.
See if you can quantify the impact of the supply constraints on both the revenue and gross margin line and specifically related gross margin I understand you talk about higher input costs, but.
Being down quarter over quarter, excluding that impact what would be the reason behind that.
Oh yeah.
I think that impact is part of it and then there's probably a little product mix.
There's also a little bit of inefficiency in our factories because as supply comes in it's lumpy.
But I think that's kind of in the noise.
I wouldn't read too much we're not trying to say that gross margins are changing.
Except for these kinds of inefficiencies brought on by supply constraints and inefficiencies that they cause in our factories. So so there's nothing more to the gross margin guidance in that and then.
The question about how much of the supply constraints, we expect in Q3 materialize.
It was probably.
That order that we talked about.
$30 million, we talked about earlier, plus or minus that was a range and we did better.
We did better in Q3 than we guided in Q4, we maintain the range plus or minus 30.
Just as we talked about earlier, we don't see the supply chain constraints changing much the challenges is still going to be there our ability to deal with it as an industry and as MKS seems to be a little better.
And we'll see how we end up at the end of the quarter.
Okay.
Maybe my follow up question.
On the operating operating expenses.
<unk> done a pretty good jump in the past few quarters staying between $1 40, and $1 50 range.
And keeping incremental operating margin above your target of 40% for a number of quarters now how should we think about opex trajectory beyond Q4.
Excluding the auto Tech obviously do you think there'll be some catch up in spending maybe some expenses coming back maybe need to hire more people et cetera.
Yeah, I'll take that Sidney so what.
What I.
Think about it if you take the Q4.
Guidance on Opex and annualize that starting point and then probably add in roughly the inflationary.
<unk>.
Piece of on top of the three 4% that's probably a pretty good estimate for next year, we're still budgeting process right now in the planning process, but I think it gives you kind of a pretty good sense of where they can next year on opex, we are going to lean into a number of areas. We do a number of them.
Investments in R&D, but again I mentioned, we were able to offset that through other cost initiatives as well so it will be up sort of inflationary.
Amounts I believe next year, we're going to lean into other product development areas that we think are very compelling in the long term.
Okay. Thank you.
Youre welcome.
Thank you. Our next question comes from Mark Miller from the benchmark. Your line is open.
Thank you for the question and congrats on the quarter.
I'm wondering I mean any comments about what youre seeing in the bookings trend.
Yeah, Mark we usually don't discuss the bookings but.
I would comment that they remain very strong.
Obviously stronger than we can ship as we talked about all quarter.
So.
One of the things we look at Mark in terms of the semi side is.
Things delivery request are sliding to the right you know that might be indication of a downturn, we're seeing none of that it's all the other way. We're also seeing book.
Booking windows open up extend from our customers as they try to get in line further and further out.
Into the future.
So it remains very strong very robust and we really have no concerns about that we're really all focused on getting the supply. So we can deliver products at this point.
Okay.
As a follow up several new fabs.
<unk> discussed coming up starting next year when do you expect you'll start to be impacted your bookings will start to be impacted by the ramp in the.
Second half of next year.
If you think about some of the fabs that have been announced.
They're just literally digging holes right now kind of in Arizona also.
And Texas Hasnt, even started digging the hole that got Atlanta, though right. So.
He says we'll take it.
At least a year and a half two years to be ready to have equipment put in and of course those companies have to decide that.
Justifies that so I don't think it's a second half 2022 for those fabs.
But there are a lot of empty shelves fabs with capacity to add and so I think those new fabs, it's probably a two year.
Lead time and of course, I think you can ask the chip companies that they may say similar things are.
Or longer or shorter, but it's at least in that timeframe.
Thank you.
Thanks Mark.
Thank you again, ladies and gentlemen to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question.
We have a follow up question from Jim Ricchiuti of Needham Your line is open.
Yes.
On again going back to the.
The advanced markets the way you're characterizing the business in Q4, what I'm wondering is if we if we pull out look at the light motion business and perhaps pull out some of the the semi related portion of that business I'm curious what kind of trends youre seeing in that business just because it is some.
It is a proxy for the broader economy and there have been some pockets where there's been some slowing are you seeing any change in order patterns in that light and motion business, excluding the semi area.
Yeah.
It's a great question, Jim when you actually look at that very carefully we break out the semi part of light and motion and then we look at the rest the advanced markets.
Certainly the semi side is growing faster you would expect that given the build outs and Wi Fi, but the advanced markets are also growing.
You know kind of double digits.
So.
That's really a great sign.
As you know it's different markets on solar as display advanced manufacturing.
And defense, even so, but we're happy with the advanced markets growth of the light and motion Division, that's actually been double digits right now.
Okay, and youre seeing that across geographies.
It's a good question I think it's still strongly Asia focus, but that's because a lot of our business is Asia focused.
More of a GDP type businesses like research et cetera, that's probably.
Geographic it's everywhere.
Got it thanks a lot.
Thanks, Jim.
Thank you at this time I would like to turn the call back over to David <unk> for closing remarks.
Thank you everyone for joining us today and for your interest in MKS Operator, you may close the call. Please.
Thank you Sir This concludes today's conference call. Thank you for participating you may now disconnect.
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