Q4 2021 Kulicke and Soffa Industries Inc Earnings Call
Hello, and welcome to the killer can solve a 2021 fourth fiscal quarter results conference call and webcast. At this time all participants are in a listen only mode.
Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded its now my pleasure to turn the call over to Joe <unk> Senior Director Investor Relations. Please go ahead Joe.
Thank you welcome.
Welcome everyone to cure itself its fiscal fourth quarter 2021 conference call.
Joining us on today's call is Susan Chen President and Chief Executive Officer, and Lester Wong Chief Financial Officer.
For those of you who have not received a copy of todays results the release as well as our supplemental earnings presentation are both available in the Investor Relations section of our website at Investor Dotcom Dotcom.
In addition to historical statements today's remarks will contain statements relating to future events and our future results. These statements are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, our actual results and financial condition may differ materially from what is indicated in those forward looking statements.
For a complete discussion of the risks associated with fuel can solve for that could affect our future results and financial condition. Please refer to our recent SEC filings specifically the 10-K for the year ended October three 2020, any 8-K filed yesterday.
With that said I would now like to turn the call over to Susan Chen for the business overview. Please go ahead Susan.
Thank you Joel.
As many of you are aware, we recently provided a detailed.
GTO business review and outlook.
Our Investor day.
On September 27.
During this presentation, we highlighted how several key long term trends such as E Assembly complexity.
Next week vehicles.
The most disappointing after IV and structural improvement to our business, enabling greater long term visibility.
More consistent stable sustainable cash flow generation.
Future.
Throughout today's discussion I will highlight several specific milestones which demonstrate.
Progress towards these fundamental enhancement.
Yeah.
Firstly I would like to express our view of the supply challenges effecting the industries today, which we have been navigating.
Recently, they have been disruption to global supply chain, including power outage in China Colby.
Colby Challenge in Southeast Asia, and the flip chart challenge globally.
Specifically, we didn't our industry additional constraint recently related to substrate and the wafer capacity shortfalls, which are constraining the rate of industry growth.
We ultimately expect this near term bottleneck will gradually improve specifically, we anticipate improvement in wafer start towards the end of fiscal 2022, which is consistent with our expectation.
Industry expansion period.
It's also critically important to understand that this bottleneck ultimately stamp roll short term.
For industry capacity to meet end market demand as we transition into the new data.
Semiconductor demand.
In addition to it is a new area of end market demand.
Favorable technology transition, which we are directly involved in.
We have established an offset to our survey over the long term.
These structural dynamic in a higher level of capital intensity for the assembly process.
Thanks, Ed.
That's the best annuity market.
<unk> adoption, the electric vehicle transition and the more silicon Beach consumer devices.
This long term trend, hence all disability and the gross potential.
Looking ahead this outlook is.
The long term target, we should our recent investor day.
We continue to anticipate that fiscal 2022 will be another very strong year and we also anticipate wafer capacity to improve at a faster rate beginning in the second half of 2022.
With that said I will not discuss our September quarters performance.
We again exceeded our revenue guidance, which Andy spent $465 million viewpoint.
We were able to generate just over $485 million of revenue.
The September quarters.
Which was a significant effort.
Manufacturing.
Supply chain.
And the engineering team.
This effort has allowed us to temper already stretched our capacity in support of our customers do union reputation of industry growth.
We ended the September quarters, our capital equipment revenue increased by almost 16% sequentially.
$431 million.
This was due to ongoing strength in the general semiconductor market.
Enrolment in neighboring and ongoing traction in the execution of our advanced programs.
We generally semiconductor.
We are pleased to report several new win.
Our dedicated advanced packaging tool specifically.
Our thermo compression system.
Catalyst.
I can assure you for each of the system and also like Tech financial Destock office paper.
This <unk>, we highlight our direct connection to this evolving landscape and the growing need for more complex higher value of semiconductor assembly processes.
This win also highlights our competitiveness and the potential for share gains in several specific leading edge assembly application, including <unk>.
Mobile processing.
Image sensing and Silicon photonics.
During the September quarter, we also recognized revenue of our initial latex fight.
<unk> enable the start of a solution.
This is obviously being well received due to wafer handling.
Performance stability in the east of operations.
The need for a diversity of the system.
And processes will accelerate.
Assembly convexity in the futures this.
This system represents an additional market leading edge solution.
Which addresses the growing complexity of assembly.
Physical <unk> revenue related to the <unk> platform increased by over 200% for fiscal 'twenty.
This system are highly competitive and we anticipate demand to grow at a similar rate through fiscal 'twenty two.
We didn't have very focused in driving new engagement and qualifications.
The need for more complex assembly, either only limited to our E. Commerce solution, but is also a coatings to the high volume semiconductor market.
To shed more light on this volume value proposition.
Most of the bus ball Bonder prevalent the ready series offer a key features such as it real time process monitoring.
Defect detection.
Looping that enhance productivity for complex assembly.
There may be shifts represent only 39% of our total bonder sales in the fiscal first quarter of 2021, and it has grown to represent 74% of our ball bonder business during the fiscal fourth quarter of 2021.
This market leading tool at unique and the enhanced corporate level gross margin.
Finally for the General Semiconductor review, we also continue to focus on new development opportunity within the electronic Assembly market.
As we explained during the Investor day, the electronics Assembly market represent a very sizable and the largely untapped opportunity for Gannett.
I look forward to sharing additional detail as we prepare to bring this new solution to market over the coming quarters.
I am pleased to report that we have recognized revenue of just over $80 million in advanced LCD solution throughout fiscal 2021 represented nearly half of our total Iot revenue.
Give me a September cordless, we recommend an additional portion of system and services revenue related to our customers' needs and the audience scheduling.
This is another key milestone for the company, which serves as a testament to our leadership in most of the bus big Viking and the barrel emissive display technologies.
<unk> highlights our execution and progress toward our long term financial targets established during the Investor day.
Additionally, we issue a press release in September 22nd that highlight our initial looming next shipment and a broadening market adoption.
<unk> is our next generation media and micro Leds solution, which target the emerging at the back.
Display opportunity.
<unk> has increased our market excess assets provide additional process steps such as pitch adjust sodium and opinion.
But also increasing our customer engagements.
The first room next system was Didi Burke with an initiative to reduce throughput in September and October we provide a software update that enable 10 solid first showed a scan function.
In fact this relates to.
10 solid placement per second.
As it is Pete let me next provide unique production advantage that will help accelerate and broaden the bus adoption and our automatic market reach.
Over the coming quarters, we grew fourth for shedding new milestone and the additional customer engagement with this high potential system.
Net automotive and the industrial demand continued to remain strong and above our long term average.
We remain very positive on long term transition, which are increasing semiconductor content per vehicle.
Over the coming years semiconductor growth with automotive is expected to be significantly above the historical growth rate of general semiconductor.
In March of 'twenty to 'twenty, one we enhanced our portfolio of <unk>.
Automotive focused solution with all of our XI system Bds.
<unk>, specifically targets the growing need for advanced power semiconductor Assembly.
A critical obligations required for the electric vehicle transition.
During a critical time to one.
We shipped nearly 400 policy system generating over $45 million of revenue.
In addition to these structural growth driving higher semiconductor content per vehicle, we have recently expanded our market access through our new battery Assembly solution.
We continue to work closely with several customers.
Pursuing battery assembly solution for the surgical market utilizing both our ultrasonic and the desk.
Battery Assembly solution.
We have also recently <unk>, our newly introduced prismatic battery Assembly solution.
Electric vehicle battery production is anticipated.
<unk> grown at a 30% CAGR through fiscal 2025, providing ongoing in the long term equipment opportunities.
Lastly, we can memory revenue grew by over 90% sequentially to $76 nine minutes for the September quarters.
This sequential growth was supported with a strong demand for our leading net ascent resubmission and the stems from several memory focused customers.
Finally, before turning the discussion to Lester.
I wanted to reiterate our optimism as we look beyond fiscal 2022.
Over the past four years, we have worked closely with our customers to solve challenges within the discrete automotive and the semiconductor assembly market.
This closer relationship with the industry leader and allow us to take a Q&A at the at risk.
Pursue multiple development initiatives in apparel.
So that this passive investments are beginning to generate returns.
Overlap over the last years, we have introduced in the German market adoption of several high potential system that support high growth opportunities within the automotive semiconductor and advanced discrete market.
This system.
Different stage of maturity, providing ongoing opportunity to create value for investors.
We haven't met many organization refinance which have enhanced decent value creation process.
We continue to have a funnel of new opportunities that provide additional upside to our long term target.
I look forward to providing additional details on the status of our recent product videos and the new development initiatives over the coming quarters.
With that said I will now turn the call traditional wall, who will discuss all financial covenants.
Thank you for my remarks today will refer to GAAP results unless noted.
As Susan mentioned, our global operations manufacturing and engineering teams have overcome many supply chain related challenges. This quarter, we were able to stretch our capacity during the September quarter and continue to anticipate ongoing supply chain challenges over the near term.
For the fiscal year, we were very pleased to have recognized revenue of 1.5 dollars 2 billion generating non-GAAP net income of $390 million and free cash flow of over $275 million.
During the September quarter, we recognized revenue of $485 $3 million up nearly 15% from our most recent record revenue in the June quarter.
We were able to meet this level by managing external supply chain challenges very closely and stretching our own capacity and support of customers aggressive expansion plans.
In addition to stretching capacity. We also recognized an additional portion of advanced displays revenue based on our customer shipment and delivery schedules.
In addition to the significant top line achievement, we're also able to deliver strong gross margins of 47, 7%.
The strong margin performance was due to a higher mix of event split systems, which deliver a higher value proposition for our customers.
This gross margin strength combined with greater operating leverage allow us to deliver non-GAAP operating margin of 33% in the September quarter.
We continue to maintain our quarterly operating expense model, which represents roughly $48 million of fixed expenses, plus 5% to 7% of variable expenses tied to revenue.
Tax expense for the quarter came in at $21 6 million driving our effective tax rate to 13, 9% in the September quarter.
As expected our full year effective tax rate came in below our long term target largely due to the release of valuation allowances related to the successful introduction and market adoption of our <unk> system.
Over the long term, we continue to maintain the 18% effective tax rate target.
Non-GAAP net income came in at $138 $3 million, representing $2 17 of non-GAAP EPS during the September quarter, which again reflects the inherent leverage in our model and long term cash generation potential.
Turning to the balance sheet working capital has remained very efficient days of accounts receivable stayed consistent at 78 days days of inventory improved slightly from 60 to 59 days and days of accounts payable decreased from 57% to 55 days.
During the September quarter, we generated free cash flow of $118 million, our total cash and investment balance increased by over 16% to $738 9 million.
On October 18th we announced a 21% increase for our upcoming dividend, which is payable on January 10.
As a reminder, we initiate the dividend program, while our first payment of <unk> 12 per share in July 2018.
We then raised the quarterly payment by 16, 7% or two ahead of our January 2021 payable date, and we will pay a <unk> 17 per share during January 2022.
As explained during the Investor day, the dividend allows us to provide a consistent return which are long term shareholders Ken platform.
While consistency is one of our guiding principles. We also want to keep our dividend competitive relative to our closed semiconductor equipment peers.
Additionally, we continue to believe our market validation remains undervalued and have prioritized our open market repurchase program by increasing recent activity.
During the September quarter, we repurchased just over 60000 shares for $3 8 million, which represents nearly 40% of our total repurchased in fiscal 2021.
As a comparison during the first six weeks of fiscal 2022, we repurchased 148000 shares for $7 $9 million, which is equivalent to over 75% of our fiscal 2021 activity.
We continue to have regional cash constraints in the near term, although expect by the second half of fiscal 2022, we will have better access to our global cash balance.
We intend to continue tactically taking advantage of market misperceptions through the use of our open market repurchase program.
For the December quarter, we expect the maintenance remains very strong and anticipate approximately $460 million of revenue plus or minus $20 million.
During our efforts stretched capacity and deliver additional advanced display solutions during the September quarter.
This December quarter outlook reflects fairly consistent linear demand for the majority of our products.
This continued strength support our view of a multi year industry expansion period, and keep us well on track to reach and potentially exceed our long term financial targets.
We expect gross margins to be 47% in the December quarter, plus or minus 50 basis points due largely to ongoing manufacturing efficiency and strength of higher margin products.
Non-GAAP operating expenses is expected to be approximately $77 million, plus or minus 2% and non-GAAP EPS to be $1 88, plus or minus 10%.
We continue to anticipate supply change challenges to contribute to overall industry growing pains.
Looking further out increased wafer starts should ease these constraints and continue to support above average semiconductor growth through fiscal 2023.
This is very aligned with our long term target established during the Investor day.
Over the coming quarters, we are very confident in driving new market adoption and customer wins, while emerging equipment portfolio specific luminet.
Vance display system supporting the mini and micro led transition and also our Palma and Katalyst advanced packaging system, which support high performance computing and mobile applications.
This continues to be a very exciting period in the company's long history, and we are seeing ongoing potential to dramatically and sustainably extend our business as we continue to execute on this multifaceted growth strategy.
We look forward to sharing additional information regarding these new opportunities over the coming quarters.
This concludes our prepared comments operator, please open the call for questions.
Thank you, we'll now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Hugh You May Press star two if you'd like to remove your question from the queue for participants using speaker equipment, it may be necessary to pick apprehensive before pricing.
Star one one moment please pull for questions.
Our first question today is coming from Craig Ellis from B Riley Securities. Your line is now live.
Yes, thanks for taking the questions team and congratulations on the very robust quarter and strong outlook.
Our fusion I wanted to start just by digging into one of the disclosures in the release regarding the backlog at $787 million. What I was hoping to do is have you help us understand.
The composition of that backlog.
One.
How how distinct our orders in the backlog to what extent is it giving you visibility.
Beyond the fiscal first quarter into the second and third quarter or maybe beyond in then.
With regards to the breadth of products that are in backlog would it be similar to what we've been seeing whereas there are significantly different composition.
Our systems than what we've recently reported in the fiscal fourth quarter.
So Craig this is less let me take that I think the backlog is still very very strong as far as the composition of the backlog I think.
For capital equipment is will be similar.
The fourth quarter, obviously, the mix changes a little bit, but we still see very very strong sales of our higher margin rapid product as well as our.
I think that May increase a little bit. We also see strong sales of the advanced pack up sorry advanced display product going forward. So I think the mix is somewhat and of course not exactly the same but is somewhat similar and as far as visibility.
We've actually we're up to the lead time now.
Almost.
Down to about six to seven months, which is which is very good. It was before as close to eight month, which is double our historical average we've worked very hard we increased capacity manufacturing capacity to X since the beginning of fiscal 'twenty. One solo two I wanted to address our customers' demand. So I think we see FY 'twenty two.
Continued to be strong there, obviously will be some fluctuation.
Particularly because of the industry wide supply chain issues, particularly about wafer shortages, which a lot of people are experiencing now we think that will be at present that in his remarks more alleviated towards the second half of the year.
That's real helpful. Lester and then the follow up question is somewhat related to the color you provided.
We would typically expect the business to have a seasonal profile to it.
In the December quarter, and then in the March quarter.
Either flat or accelerating a little bit, but it seems like the December quarter's outlook is theres really backing that given that that the midpoint is only down 25 million or.
5% or so sequentially so to what extent do you think you are seeing seasonality in the business versus just seeing.
The continued strong demand for your products, including all the new products really power right through that seasonality.
Extra Craig I think.
The strong September and the December quarter, we believe because of our long lead time and that people actually book.
Head and we.
We don't have.
The <unk> capacity to deal with Thats why.
All regionally mixed smart target capacity is actually.
450 around for video.
Stretch the capacity.
<unk> a customer need right.
This label, we really beyond we probably don't expect every quarter.
Need to long beyond our target next mud capacity, so we might see some seasonality.
From this point.
That's really helpful guys, and then I'll just ask one more before hopping back in the queue.
I was interested in your comments regarding.
Products for battery EV Battery Assembly and I'm wondering if you can talk about.
The the engagements that you have with potentially.
Customers your customers' customers, whether whether the engagements are more with the battery makers themselves or with the Oems are boat.
Actually we engaged with sports and.
We believe.
Craig if you remember we engage.
We as a leader in the industry in this space early so our recently equity you can see a lot of prayer and.
Which actually.
Very happy to find us to be their partner, so actually we expand our portfolio of stuff from us here in Chicago and I know, we've got a prismatic and we also in order to be more competitive actually with Sigma Sigma our product to have a high end we have already built.
Our low end.
More cost effective solution and particularly in China to compete so overall I think this is maybe a sweet spot for us.
We continue.
We were recognized as a leader in this space and.
So I don't know if I answer your question yes.
I think I think you did.
<unk> I think the takeaway is you've got significant customer diversity with increased product diversity and an increased ability to hit kind of the high end of the market and the low end of the market across Olympic Rowan prismatic real hub.
Thanks, guys I'll hop back in the queue.
Okay. Thank you.
Thank you. Our next question is coming from Krish Shankar from Cowen <unk> Company. Your line is now live.
Hi, Thanks for taking my question and congrats on executing well in a tough environment I had three questions through the first one is is there a way to quantify how much the revenues in September and December quarter would have been if you are not supply constrained.
Well.
Understood Christian revenue use of the product we deliver right. So.
Can you please ask again.
Let me ask it another way.
December quarter, what would the December quarter revenue guidance have been if you had not supply constrained.
Yeah.
Well, Chris I think theres assemble quarter revenue.
The supply constraint is not as big a factor there I think the point, we're making is that we kind of stretched capacity in the September quarter to meet our customers' demand right. So I think demand is still strong.
But I don't think if there was infinite supply sorry capacity, it will not be 500 or $600 million a quarter and thats what youre asking.
Got it got it that's super helpful. Lester and then second question is I might have missed it but Susan did a Google FY 'twenty two revenue guide or should we assume is going to be similar to FY 'twenty one.
Well.
Actually.
We.
Positive.
The market demand of 122.
So we are feeling right now 22.
The revenue will be comparable to 'twenty, one doesn't what actually <unk>.
Yes.
We told already Investor.
So let me as we.
Fairly.
Comparable.
At this moment as you'll always see some maybe so I think the upside compared to 21 in our memory and also auto business, but.
As you know this industry. We also have a global supply chain challenge and.
Something we focus on and the many people focus on is a wafer shortage.
The current constraining.
Offer industry grow at this moment.
But we anticipate the new wafer capacity will come online in the second half right. So.
It's going to be given tech along the comparable revenue over 21.
But so we again, we are very positive about 'twenty, two and we will provide.
More information about 22 revenue expectation and over.
Over the coming quarters as we see more clearly about Howard is a wafer shortage goes.
Got it got it helpful and then final question.
Obviously very strong advanced display revenues in the September quarter.
For mini led deals anyone beginning to look at micro OLED and also along the same paths the Lester.
The December quarter gross margin is pretty strong too so it should be assumed.
That somebody is going to be another strong advantage with slick water.
Okay. So let me answer the first part of your question.
Chris.
La <unk> and Michael we did this as it relates to the size right. So a lot of people characterize.
As Michael but.
From my point of view I think the size is of course, there is a <unk>.
At this moment.
But of course, the engagement with another customer at this moment.
We are dealing with a very small size, but to answer your question I think.
My view I think <unk> is.
Maturity.
The revenue at this moment.
And then Chris for the margin, Yes, we are calling very strong margins for Q1 were 47% and there is a.
Quite a mix of the <unk>.
Vance display solution in into Q1 revenue as well.
Thank you very much thanks, a lot Susan thanks Lester.
Thanks Krish.
Thank you. Our next question is coming from David Duley from Steelhead Securities. Your line is now live.
Yes, Thanks for taking my question and congratulations on the great execution.
33% operating profits.
Right.
Treatment.
Just a couple of questions Lester as far as operating expenses go.
Do you think the.
The variable and fixed expenses that you just outlined are the right numbers going forward or should we be adjusting operating expenses Kevin.
Given the outlook.
No I think it's still the right number I mean at 48% to 5% to 7% and non-GAAP for this quarter at about 77, I mean, obviously Dave.
We don't push and pulls within Opex at any one time right, but I think it's in the right ballpark.
As we.
Ill move forward, some development programs and as things change, we'll update the model.
As warranted.
Okay and then my second question is I think annulled.
Analyst Day, you talked about a 500 basis point gross margin improvement over the next several years and I realize theres lots of things that are behind that improvement, but if you could help us understand where you are kind of as far as you know if this is a yes.
Yes.
Inning ballgame, how many innings are you in to that.
Gross margin optimization program.
And I realize that it might take a couple of quarters to see the gross margin improvements because you've got to work through the inventory. So with all that in mind could you just help us understand how far you are along in adjusting things to get to that too.
To achieve that 500 basis point gross margin.
Well gross margin improvement is always a work in progress for us and it's something we always strive towards right not just towards the 500 basis points, but we want to push it beyond but to answer your question specifically.
Thank you.
We're probably.
A third to halfway through that journey.
<unk>.
We've worked very very hard in terms of maximizing manufacturing efficiency through supply chain through operations through engineering redesign.
Redesign.
To maximize.
Cost to reduce cost to maximize cost savings right I think the other thing that makes a big difference and it will take some quarters to kick in is also product mix right. Susan indicated earlier, we have now in this year, we migrated a lot of ball bonder. Thus.
The more complex higher margin rapid theories.
We also have.
Increased.
The margin because again, we introduced a new tool. So I think that the key also going forward. We will also have.
More advanced display as well as advanced packaging tools, which also carry high margins. So I think you will see margin expansion.
Over the next couple of quarters and definitely towards the target that we set during investor day.
Okay final question for me is you mentioned I think some customer wins in the advanced packaging area, both within the thermal compression bonder and the flip chip could you just elaborate a little bit more on the potential for those wins and when you would expect the revenue from those particular wins, you're referring to to start to contribute.
Okay.
Our PCB based stuff from Allstate customers and.
But you can look at it at this moment.
From a base in the <unk>.
Cousin, we engage actually is really a lot from <unk> to our Cmos imaging sensor silicon photonics.
So we are very encouraging and.
The technology, we provide to the industry is a very well recognized and we do expect.
The PCB will grow strongly.
Into this year and of course, our almost.
We expect.
With double again in 2013.
Our tissue, we are very very positive.
And the flip chip.
We actually have a lot of internal program.
So free chip with developed very good tour.
But right now we're already in a few customer and this is a form of high productivity increase your free chip.
Probably.
Just want to make a more safer.
This moment I think it's the OLED and the many many customers.
So we do believe that at this moment the TCP have a much more momentum, but the future is.
Is it picking up.
Thank you so yes, okay. Good thank you.
Thank you. Our next question is coming from Charles <unk> from Needham <unk> Company. Your line is now live.
Hey, Thank you for taking my question good evening.
Lester.
To start.
Going back to the question about fiscal 'twenty two outlook.
Obviously investors hear things.
From your largest wholesale customers.
Like.
The consensus view seems to be the offset spending on wire Bonder is may moderate a little bit next year. Yet you are seeing something like our comparable outlook for next year I wonder whether there is a little bit of a growth drive the shift away from <unk> going to like the Ibms.
Next year is that the case and if you can tell us a little bit more in terms of the wholesale contribution to our revenue in fiscal 'twenty, one and what are you expecting fiscal 'twenty two.
Okay.
So.
I think.
At this moment, we do see some also caused customers.
Delayed delivery schedule.
Due to wafer shortage.
A lot of people have mentioned about it but at the same time I think we also see some customer pull in.
Because we have actually a spectrum of customers with us not only author customer right. So a decent help.
So overall, we still see a very healthy both on the demand and the quality.
It will be another strong year for us.
Answer your question.
If we law.
The wafer shortage.
The demand for broadband will be even higher.
But at this moment I think we are.
<unk> may be comparable business.
Overall and compared to 21.
I think Krishna because while we do see actually.
Some scheduling.
Delay, but luckily we have a ton of our customers.
We also have some people wanted to schedule I wish just to help.
And Charles as far as your question for FY 'twenty, one FY 'twenty, one was a very strong year for <unk> as you know right and.
And so the <unk> mechanical almost close to 90% of our of the shipment, but historically <unk> accounted long term around 65%. So we think in FY 'twenty. Two we don't have a forecast that we believed that fits into that right.
A broad spectrum of customers that we know conserved.
If there is a.
Might slow down from the <unk>.
Charlie.
Liberty Lee from <unk>.
We do believe.
According to customer isn't linear wafer shortage.
Basically I think the industry demand is.
Really strong end market.
But the wafer start increasing related market.
And that catch up.
Compared to.
Compared to you.
Compared to you actually.
We do believe this is going to.
This payment will be is that everybody's expectation.
Thank you. So my next question and I really want to go to the electric vehicle.
Your growth driver.
I believe electrification not only means battery assembly for you guys, but also power devices.
You did highlight that power C.
Product adoption the momentum and also some of the pricing strength over there, obviously very strong pricing performance.
Wonder going into next year.
How can you how can we quantify that part of the growth.
In terms of the power devices side and battery Assembly side do you kind of see some of the investment potentially very strong all concentrated in China or business are more like you have more global exposure.
On both buy side and the battery Assembly side. Thank you.
It actually.
I think it is almost.
Europe was.
Quite weak I would say.
It was a China centric.
I would say, maybe a year ago, but year over year coming back so to answer your question I think.
We are working with almost.
In all our regions.
These are power devices and an AEP.
Got it so maybe my last question.
It's about the PCB.
Wins, maybe more importantly, I want to ask you about your potential opportunity at a leading logic IDM.
In the U S.
So obviously they.
That particular customer of yours seems to be ready to Ram major events packaging potentially Malaysia second half in 2022, I wonder whether that's a contributor to your PCB business.
Is is this more like.
Something you will see within fiscal 'twenty or 'twenty, two which ends in September next year or is it more like a fiscal 'twenty three event.
Thank you.
Sure.
It's difficult for us specific comment about single customers, but.
What I can tell you as a customer we engage at this moment I think we almost account.
Successful.
Equity qualification solo wind.
<unk> com.
It's come.
It's going to benefit to us.
Those are all I can say im sorry, we just cannot comment on specific customers, but as you know.
Engagement with our customers have been good clarification has been down many of them and we are very positive about <unk> prospect. So Charles I guess again, we don't comment as to.
The customers, but we do see advanced packaging revenue, particularly through PCB.
Coming in FY 'twenty to not just in 2020.
So the growth of.
Compared to 'twenty, one to 'twenty two.
<unk> actually grow a lot you mentioned.
You remember I mentioned about <unk> and we also expect out with double again traditionally versus our expectation.
Sure.
My comment is I think the.
And demand is very strong.
For the whole industry.
A lot of our technology driver, but a new wafer capacity as you cannot catch up with a strong demand.
That's why we have seen some of the industrial plan, but we do believe our new wafer start or come on new.
The new capacity.
In the second half so hopefully this will help everyone in the industry.
So maybe a.
A little bit at.
At this moment, the new wafer star right at this moment is above 4%.
People really expect stuff.
And over 22 and beyond but it will be 6%. So when Odessa capacity come on I actually I think our industrial will become a very very busy.
Got it that's helpful. Thank you.
Thank you. Our next question is coming from Tom definitely from D. A Davidson your line is now live.
Yes, good morning, and thanks for the question.
You talked a lot about the industry wafer supply constraints, I think thats very well understood.
Are you seeing the bigger impact at the leading edge or the trailing edge and it does it impact your core ball Bonder business more advanced packaging business.
Of course, I think impact.
The actually.
The capacity added at this moment is leading.
Very concentrated on the.
Sure.
10 nanometer or below right. So.
But I wonder.
We also working with our customers and tried to test is the limit. So we are working with some customers.
To use their mobile devices to test beyond 10 nanometer and below and we see a positive result.
So at this moment so Tom.
We also believe our ball Bonder support video advanced packaging, even though it dependent on either but to answer your question I think.
The capacity.
At this moment in PV industry actually I think is another most advanced products.
It's not like a 10 nanometer.
Yeah, Okay. That's helpful.
And then moving over to the.
Display business when you look at the success that you've had with the pixel works and that you have.
The new <unk> coming out how do you think the rollout of the aluminum is going to impact the pixel works or how do you see those two playing together over the next couple of years.
Okay certain applications.
We'll take it.
Right. So let me answer it is I think at a certain point they are complementary.
Endpoint is also become a competitive right. So let me just given where the peso luxe at this moment actually just one application is a final prisma.
His move from one place to Jordan is a final treatment and.
About <unk>, let me answer is the replacement of our 50 day roughly up a second let's all products.
<unk> of our <unk> compute GOP seasonal ups. Thanks.
Good evening.
Steven.
The room next not limited just on the final precedent is also.
Can do a lot of.
<unk>.
Manufacture need in the Philippines.
Sure.
Sure.
Our pan repeating.
There are many many applications sort of customer base will get wider and the speed will be also higher so in the future assuming that.
<unk> TV.
I think there will be potential we can use <unk> to delay the recognition of obligation.
<unk> panel, probably need to move about 100 million.
So for US there are a few different one is the customer base.
It will be much wider and also the application.
Process soft booming next will be much much wider.
No.
Let me start to go through customer side. So we do expect.
Probably.
Sure.
We should receive in revenue.
Early revenue buy in of.
Fiscal quarter, let me somewhat tongue, hopefully we start to see the initial revenue and finished qualification and pollution for the missed production when a customer is resolved.
So this year to answer your question the expectation we have on Illumina X is a later part of the year, we start to see revenue and once is quantify is can start to ramp.
So.
Majority of.
Sure.
Revenue, we still see in 'twenty, two is a piece of that but.
But beyond 'twenty three <unk>, we're long program faster.
Okay that makes sense. Thank you for the color there and then finally Lester.
You mentioned that there's a little bit of a.
Constraints on the cash from the location right now you said that might ease of a few quarters what are you doing to.
We'll bring the cash back to the U S.
Well Tom.
When the whole thing it will take probably an hour and very complex and obviously tax, but we're trying to bring it back to using the most tax efficient way so that.
There is no leakage, but we expect to be able to access it by the second half of next year or this year.
So I guess just the bottom line on that what do you think the cost will be two years to bring that back.
Repatriated.
What should not be significant.
Okay.
Perfect. Thank you.
Thanks.
Thank you. Our next question today is coming from Christian Schwab from Craig Hallum. Your line is now live.
Hey, great quarter, and a great outlook guys I guess most of my questions been answered, but just one last one.
As we look at you know.
The tight supply.
Environment wafer is opening up as you said, maybe in the second half of calendar 'twenty two.
Which will then drive.
<unk>.
Demand for our advanced packaging solutions because theirs.
More demand there as we try to get to a supply demand equilibrium. If you will so would you agree that this cycle appears different than others.
For you in particular.
We will be stronger for for much longer.
As the wafers come on line next year that probably takes us well into 'twenty three.
For advanced packaging straight that continue at which point.
The mini and micro led adoption will be much more crystal clear, we're kind of probably are.
The path to the alumina makes adoption maybe kicking in.
And then you know.
We'll probably be much more well on our way.
Tremendous growth in Silicon Photonics in carbide market is everyone's racing.
I'll make the electric vehicles faster than the next Guy who makes cars. So.
Would you or would you agree with that and is that why you're increasing the dividend.
Buying back stock up at these levels, where we were buying back stock not all that long ago materially lower when you're thinking about that correct.
But actually we are.
Are quite positive about company prospect, but we are no longer a single product company.
And 'twenty one actually.
<unk> is a very strong part of the reason is also because of people working from home and therefore, we have a lot of booking.
Woman.
End market demand is so strong.
But the.
The wafer capacity just cannot catch up with strong end demand.
Once the wafer stock.
Mentioned.
Just before two charged questions.
On a wafer start actually.
The annual growth rate is expected to be 6% rather than 4%. So it isn't Ms. Below end demand is going to be layouts and this end demand of course, we will have our co products in the ball, Bonder, and which Bonder and I think our company is aware provision.
The bonds.
We we will do well in the free chip, we will do well in the PCB and I think at the banks.
Display offer us another area that we can grow very fast.
Annual gross rate of mini and micro Iot actually you can trigger.
A lot of our marketing information a lot of people say, a 50% a lot of people say, 40%, but it's going to grow very very fast and we believe.
The value.
In this industry is.
<unk> is not mainly in the micro <unk> itself is really missed production mass transfer transfer a lot of time from one place to Jarrod press, we do believe.
Please relax we demonstrate leadership in a room and we are confident we are going to attempt again will be a leader in the industry.
Great no other questions. Thanks, guys.
Okay. Thank you.
Thank you. Our next question today is coming from Donlin Patel from semi analysis. Your line is now live.
Hello can you help me wrap my head around the thermo compression bonding opportunity at Investor Day, you disclosed some information about the advantages of a flux with TCP and even had someone from an IBM talked about advanced packaging.
Okay.
Yeah go ahead, I understand that you can't discuss customers, but.
What is the what is the potential of this technology.
Okay actually I think.
Our industry.
The future of packaging.
In a big way of people talking about heterogeneous integration.
So to support the industry high density fine pitch heterogeneous integration.
Actually we have two programs we look at it.
One program actually is a lot of people are talking about hybrid bonding.
So in our opinion.
This is a very fine pitch application. This is a very niche very complicated.
Complicated and very costly.
So internally other than the hybrid bonding, we actually look at.
Our.
A project we call.
Trucks less PCB.
So a difference of these two program as a whole to cleaner interface.
<unk>.
We actually.
<unk> the Fracs.
<unk> process.
Cover a lot of our product is needed for the heterogeneous integration.
We start to what we saw few customer feedback is very very good and the customer interest is actually still growing.
So we do believe.
Yeah.
We expect this <unk>.
Trucks less bonding.
We'll cover many X in terms of revenue potential compared to hybrid bonding I rebounding is very very niche, probably particularly or concentrate probably in less than 10 micron.
Copper pillar pitch, but beyond that 450 to 10 and another market is a big data application. So.
We started to engage with customer initial feedback has been good I think we probably can give you more update.
In the next couple of quarters.
Okay.
Can you clarify that you believe that PCB will be a larger market than hybrid bonding as a whole in the industry.
Okay I think.
The difference of.
This too is.
You know we haven't demonstrated.
The <unk> <unk>.
Below 10, microns, so one ovolo Wally.
For.
No.
The flux less PCB is potentially for the fine pitch you might damage oxide unit GCB, but we always demonstrate for.
Larger pitch is still fine pitch, but not necessarily pin micron and actually is quite well.
So eva industry doesn't need to use a hybrid bonding and which is a very very complicated process I think we believe.
We have a market ready solution the size actually can be bigger in.
Of course, we'll be we'll be bigger much bigger than 10, micron five pitch lots of our peanut.
It's just in my opinion, there is moment and.
Since we have quite good momentum in PCB, we engaged with many customers.
So we start to work with customer in our owned leased <unk> TCP bonding is the initial feedback has been good.
And with this form of advanced packaging at least hybrid bonding is on a front end basis right. It's the foundries. It's the idms that are doing it is that is that going to continue to hold true or do you think the SaaS will also be customers for this technology.
Yes.
In my opinion is going to be quite.
Quite quite difficult is a lot of our filing process and.
Began actually cost is a very important so it might be.
Opinion heterogeneous integration.
To deal with a fine pitch.
<unk>, depending on how you define IP can be pay medical or between say 40 to 10 Micron and I think.
Maybe I don't comment about.
The hybrid bond in <unk>.
<unk> spending is going to over very big market for us.
Thank you.
Thanks Bill.
Thank you we reached end of our question and answer session I'd like to turn the floor back over to Joe <unk> for any further or closing comments.
Thank you Kevin. Thank you all for joining today's call. We will also be presenting at the CEO summit in person in San Francisco on December 8th Gay Davidson's virtual semi cap laser and optical conference on December 15th and also the 24th annual Needham Conference.
During the week of January 10th as always please feel free to follow up directly with any additional questions have a great day everyone.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.