Q1 2022 Kulicke and Soffa Industries Inc Earnings Call

Hello and welcome to the Kula-Kinsapa 2022 First Fiscal Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Hello, and welcome to the killer can solve a 2022 first fiscal quarter results conference call. At this time, all participants are in a listen only mode.

And answer session will follow the formal presentation.

If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Joe Logindi, Senior Director, VESA Relations. Please go ahead.

If anyone should require operator assistance. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded its now my pleasure to turn the call over to Joe Organdy Senior director of Investor Relations. Please go ahead.

Welcome everyone to Kilkins office fiscal first quarter 2022 conference call.

Welcome everyone to <unk> fiscal first quarter 2022 conference call.

Joining us on today's call is Susan Chen, President and Chief Executive Officer, and Lester Wong, Chief Financial Officer.

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 today's results, the release as well as our supplemental earnings presentation are both available in the investor relations section of our website at investor.kns.com.

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.

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 complete discussion of the risks associated with kyolkin software that could affect our future results and financial condition, please refer to our recent SEC filings specifically the 10k for the year ended October 2nd 2021. And the 8k filed

For complete discussion of the risks associated with Joel 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 <unk> 2021, and the 8-K filed this morning.

With that said, I would now like to turn the call over to Fuzhen Chen for the business overview. Please go ahead, Fuzhen.

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.

It continues to be a very exciting and transformative time for the company.

He has continued to be a very exciting and transformative for the company.

Our co-business is being fundamentally enhanced as the importance of semiconductor assembly increase in both high volume and leading edge semiconductor.

Our core business, it's been fundamentally enhanced.

Importantly, our semiconductor assembly increase in both high volume and the leading edge semiconductors.

Additionally, we continue to make significant progress expanding our market reach as interest and adoption of our advanced packaging.

Additionally, we continue to make significant progress expanding our market reach and the interest and adoption of our advanced packaging.

automotive, and advanced display offerings are accelerating. All Aim v2.

Automotive and the bus display offering.

A a rating.

Our confidence in this high potential new initiatives is.

is improving as our market engagement are tracking better than expected during our investor bid in September .

He is improving.

Our market engagement are tracking better than expected during our investor day in September .

I will spend a few minutes to cover each.

We need to authenticate the bus ticketing business, we continue to gain access into logic near walking in the mobility market.

Within our dedicated advanced packaging business, we continue to gain access into the logic, networking and mobility model.

This portfolio including all the photography, thermal compression...

This portfolio, including all of the subtlety similar competition.

High accuracy free chips and system in package free chip solutions are extremely competitive and address the broad and growing semiconductor assembly model.

I am curious you free chip and system in package free chip solution.

It shouldn't get competitive and.

The breadth and the growing semiconductor assembly market.

We continue to try adoption across this growing portfolio. And at PAMA, our sample compression platform is making significant progress.

We continue to drive adoption of course, it is a growing portfolio and Oh.

Oh someone competition peripheral is making significant progress.

heterogeneous integration or triplet integration is one of the long-term opportunities that we are pursuing aggressively. serve as a leading organization to take the time and help make semiconductor beings real. Until tomorrow, until maysuccessfully,

Had the genius of integration <unk> integration.

One of the long term opportunities we are pursuing aggressively.

Hello, This is not the only market.

In addition to you had the genius integration. We are also extending access within mobile default both high volume logic and the next generation <unk> sensing applications.

In addition to hydrogenous integration, we are also extending access within mobility for both high volume logic and the next generation 3D sensing applications.

and also for co-package projects, necessary for ultra-high speed network communications, such as…

And also a full package upticks in Asia said before Ultra high speed network communications, such as Hyatt thing with Tresiba.

The key benefit for the thermal compression or TCB process include an efficient solution for higher bandwidth in the connect assembly.

The key benefit for the similar competition or GCB process.

Cool.

So looking for higher bandwidth interconnect assemblies.

With him my computer's.

which is way beyond the current interconnect pitch for most leading large

Which is way beyond the current interconnect pitch for most leading logic application.

Additionally, TCB enables stacking for emerging 2.5 and 3D architecture.

Additionally, GCB enabled sticking for emerging to a point in the CD architectures.

This shift to emerging multi-chip structures is increasing the value of packaging technology and is increasingly necessary to support here at the leading edge.

This shift to emerging multi chip starches is increasing the value of it.

Packaging technology and is increasingly nature of Saudi.

To support.

The leading edge.

In addition to this fundamental benefit within leading edge logic, TCB also enables assembly for components which areLaplacian.

In addition to this fundamental benefit we didn't leading edge logic.

It will be also enable assembly, a full component, which chip sensitive ingredient substrate in the optical component used for communication and the finjan.

including thin substrate and the optical components used for communication and...

We recently received acceptance and recognized revenue for a high potential CD-CON4 time mix application supporting the optical transceiver market.

We recently received acceptance and the recognized revenue.

Hi, potential silicon photonics applications supporting the optical transceiver market with.

with increasing cellular bandwidth need. Network-to-network communication is expected to grow through medical.

With the Englishman safety all of them with neat network to network communication is expected to grow dramatically.

With high bandwidth optical transceivers expected to grow at 50% kg through calendar 2025.

With Hyatt with optical transceiver expected to grow at a 50% CAGR through calendar 2025.

We are very early in this transition and we are positioned to help enable this growth.

We are very early in this transition and that we're positioned to help enable this growth.

The next update is related to our automotive opportunities.

The next update is related to our automotive opportunity.

The transition to electrification and the autonomous are accelerating semiconductor growth in the automotive market at the rate of over twice the industry.

The transition to electrification and autonomous.

Zero rating semiconductor growth in the automotive market.

Oh over twice the industry average.

Over the coming year, our high performance, high reliability system mesh well with this.

Over the coming year.

The high performance high reliability system mesh well with this end market.

in addition to our historic leadership position within the automotive semiconductor.

In addition to all historic.

Leadership position within the automotive semiconductor applications. We have also been developing new battery Assembly systems.

We have also been developing new battery assemblies.

Over the past several years, we had one core battery solution that was adopted and globally deployed by one customer.

Over the past several years, we had the one coke battery solution.

Got it and a globally deployed by customers.

Why this solution was very successful? The market was limited.

While it is a solution what's the basis of a sense for the market wasn't limited.

Today, many more customers are entering this space, and we are working to bring new innovative solutions, supporting both cylindrical and prismatic battery opportunities.

Today, many more customers that are entering this space and we are working to bring new innovative solution supporting most here in Chicago and the prismatic battery opportunities to market.

Recently, our engagement and market interest with our current and new battery offerings have expanded dramatically.

Recently.

Engagement in the market interest with our current and the new battery offering.

<unk> expanded dramatically.

At this pace, we are tracking better than the expectations set during the recent investor day. We are currently engaged with over five high potential customers.

At this pace, we are tracking better than the expectation set given the recent investor day.

We are currently engaged with over five.

High potential customers eager to battery production for the commercial and the consumer vehicle market.

We are also experiencing growing interest within emerging industrial applications, such as battery backup and agriculture.

We are also experiencing growing interest we didnt emerging industrial application such as battery picked up in the agriculture.

Finally.

The third key growth focus area is Advanced Display.

The third key focus area is the ballast display.

We continue to deliver our market-leading PSOLOC system and are ramping production of several Luminex qualifications.

We continue to deliver market, leading piece of luck system and are ramping production of several looming next quantification towards.

Over the coming quarters, we anticipate within several new RUMI next qualifications and gaining more visibility on a broader industry ramp.

Over the coming quarters, we anticipate we didn't several new looming next qualifications and gain more visibility on our brother industries ramp.

Turning to our results this quarter.

We achieved $460.9 million of revenue and a non-GAAP EPS of $2.97.

We achieved $469 million of revenue and non-GAAP EPS of $2 and the 19th.

We generated $408.6 million within capital equipment, and that meant-

We generated $408 $6 million.

We didnt kept the equipment.

And the demand remains strong across all end markets.

Clean load semiconductor remains very strong, supporting by 16% spiritually as anticipated.

Do you know semiconductor remain very strong company by 16% sequentially as anticipated we.

We in general, the more capacity driven, more bounding business decline by Apple.

We didnt general semiconductor the more capacity <unk> ball bonding business declined by 8%.

The larger sequential reduction stems from very strong September quarters.

The largest sequential reduction stem from very strong September quarters demand for wafer level logic and the pulp Assembly solution.

for our wafer label, logic, and the power assembly solution.

Iteration rate remains shown across this block instal base.

Utilization rates remain strong across this broad installed base.

As a reminder, general semiconductor revenue in the recent December quarter is currently over 50%, higher than the same period last year.

But as a reminder, general semiconductor revenue in the recent December quarter is currently almost 50% higher than the same period last year.

Within the LOD market, we continue to support rapid growth within advanced displays.

When you look at the market, we continue to support Ricky gross we Didnt advanced display.

Advanced display increased by 28% in the December quarter, representing 56% of our total LED revenue, up from 40% in the September quarter.

But the balance despite increased by 28% in the December quarter, representing 56% of our total revenue up from 40% in the September quarter.

We continue to aggressively work toward expanding our presence in this new exciting area and the anti-spec, the BUNS display will grow dramatically over the long-

We continue to aggressively work towards expanding our presence in this new exciting area and anticipate the bulk display it will grow dramatically over the long term.

Next automotive and industrial remains a long-term growth opportunity for us.

Next on automotive and the industrial remains a long term growth opportunity for us.

In September , automotive demand increased by 92% sequentially and was driven by improvement in our battery assembly, port distribution and the safety of the system.

You need September automotive demand, increasing by 92% sequentially and that was driven by improvement in our battery Assembly.

Power distribution and the sensing solutions.

We are very eager to continue participating in the long-term transformation of the automotive space.

We are very eager to continue participating in the long term transformation of the automotive space.

Finally, demand for our memory solution increased by 17% sequentially from the very storm September 14th.

Demand for our memory solutions increased by 17% sequentially from the very strong September quarter.

Overall, current market conditions and our long-term outlook are tracking better than expected, and we remain very positive overcoming it.

Although current market conditions and the old long term outlook are tracking better than expected and we remain very positive over the coming years.

Newton, we are very focused to drive new customer engagement and win new qualifications across advanced pegs.

Near term, we are very focused to drive new customer engagements in the win new qualifications across our advanced packaging automotive and the bus disparate portfolio.

automotive and advanced display portfolio.

Over the prior years.

Our focus development ever have better deny our business with long-term technology to even market opportunities.

Our focused development efforts have made a nice business with a long term technology, III, but market opportunities, which we are executing on.

While broader industry supply chain and the global logistic challenges are part of the current

While broader industry supply chain and a global logistic challenges.

Part of the current operating environment.

We believe they are very short term and the anticipate where to implement through physical points.

We believe they are very short term and anticipate gradual improvements through physical 2022.

Over the coming years, the future is very bright and we look forward to sharing our progress over the coming quarters.

Over the coming years, the future is very bright, and we look forward to sharing our progress over the coming years.

With that said, I will now turn the call to Lester, who will discuss our financial performance.

With that said I will now turn the call to Leicester pool, what discuss all financial performance Leicester.

Thank you, Pusan. My remarks today will refer to gap results unless no.

Thank you <unk> my remarks today will refer to GAAP results unless noted during.

During the December quarter, we continued to perform in a very dynamic supply chain environment and were able to recognize revenue of $460.9 million.

During the December quarter, we continued to perform in a very dynamic supply chain environment, and we're able to recognize revenue of $469 million considering above average <unk> related revenue during the September quarter underlying demand in other end markets remain robust.

Considering our above average LED related revenue during the September quarter, underlying demand in other end markets remain robust.

Growth margins came in strong at 48.4%, which stemmed from sequential improvements in both capital equipment and aftermarket product and services, and particularly related to a lower amount of expediting and logistic expenses in the December .

Margins came in strong at 48, 4%, which stem from sequential improvements in both capital equipment, and aftermarket products and services and particularly related to a lower amount of expediting and logistic expenses in the December quarter.

Non-gas operating expenses came in below our expectation at $65.4 million during the December .

non-GAAP operating expenses came in below our expectations at $65 $4 million during the December quarter. This.

This is primarily due to a delayed start in a few internal projects, which favorably benefited SG&A and R&D related

This was primarily due to a delayed start in a few internal projects, which favorably benefited SG&A and R&D related expenses.

Tax expense for the quarter came in at $17.9 million, and we anticipate an effective tax rate of approximately 15% for the full fiscal year.

Tax expense for the quarter came in at $17 $9 million and we anticipate an effective tax rate of approximately 15% for the full fiscal year.

Non-GAP net income came in at $138.8 million, generating $2.19 of non-GAP EPS during the December .

non-GAAP net income came in at $138 $8 million generating $2 and 19% of non-GAAP EPS during the December quarter.

Turning to the balance sheet, working capital has remained efficient. Days of accounts receivable increased from 78 to 84 days.

Turning to the balance sheet.

Working capital has remained efficient days of accounts receivable increased from 78 to 84 days.

Days of inventory increase from 59 to 75 days and days of accounts payable increase from 55 to 50 days.

Days of inventory increase of 59% to 75 days and days of accounts payable increased from 55% to 56 days.

During the December quarter, we generated free cash flow of $92.7 million.

During the December quarter, we generated free cash flow of $92 $7 million.

our net cash balance totaled $464.7 million at the end of December .

Our net cash balance totaled $464 $7 million at the end of December .

From a capital allocation standpoint, we continue to deliver value in several areas.

We continue to deliver value in several areas. For the dividend, which was just increased by 21% for the January payout, we intend to continue increasing in a consistent and long-term manner while maintaining a competitive yield relative to our pure quality.

But the dividend, which was just increased by 21% for the January payout, we intend to continue increasing in a consistent and long term manner, while maintaining a competitive yield relative to our peer group.

Separately, we have and are continuing to accelerate the cadence of our open market transactions under the existing repurchase program.

Separately, we have and are continuing to accelerate the cadence of our open market transactions under the existing repurchase program.

During this December quarter, we repurchased over four times as many shares relative to the September .

During the December quarter, we repurchased over four times as many shares relative to the September quarter.

Our total share repurchases in the December quarter were 50% higher than our entire fiscal 2021 repurchase.

Our total share repurchases in the December quarter were 50% higher than our entire fiscal 2021 repurchase activity.

We continue to take a long-term view on the repurchase program and expect to gradually increase our repurchase cadence throughout the current fiscal year.

We continue to take a long term view on the repurchase program and expect to gradually increase our repurchase cadence throughout the current fiscal year.

As outline 9th quarter, we continue to expect industry will expand aggressively through fiscal 2022, although at a slightly lower rate than fiscal 2020.

As outlined last quarter, we continue to expect the industry will expand aggressively through fiscal 2022 although at a slightly lower rate than fiscal 2021.

Aligned with our investor data assumptions, we continue to anticipate above average semiconductor growth will continue through fiscal 20.

Aligned with Investor day assumptions, we continue to anticipate above average semiconductor growth will continue through fiscal 2023.

We have assumed global logistic challenges improve and industry supply chain constraints begin to ease as wafer production improves in the second calendar half.

We have assumed global logistic challenges improve and industry supply chain constraints begin to ease as wafer production improves in the second calendar half.

Under these general assumptions, we currently anticipate revenue to be approximately $1.58 billion in fiscal 2020.

Under these general assumptions, we currently anticipate revenue to be approximately 158 billion in fiscal 2022.

For the March quarter, we expect demand to remain strong, and we anticipate approximately 380 million of revenue plus or minus 20 million.

For the March quarter, we expect demand to remain strong and we anticipate approximately $380 million of revenue plus or minus $20 million.

We anticipate gross margins to be 48% in the March quarter, plus or minus 50 basis.

We anticipate gross margins to be 48% in the March quarter, plus or minus 50 basis points non-GAAP operating expense to be approximately $75 million.

Non-GAP operating expense to be approximately 75 million plus or minus 2% Non-GAP EPS to be $1.45 plus or minus 10.

A minus 2% and non-GAAP EPS to be $1.45, plus or minus 10%.

We are very focused on supporting this period of aggressive industry expansion and are also extremely focused on driving new engagements, qualifications and ramping production within the advanced packaging, automotive and advanced display portfolios.

We are very focused on supporting this period of aggressive industry expansion and also extremely focused on driving new engagements qualifications and ramping production within the advanced packaging automotive and advanced display portfolio.

Our engagement and new qualification execution throughout fiscal 2022 can potentially drive meaningful upside to the fiscal 2024 targets we share during our annual.

Our engagement in new quantification execution throughout fiscal 2022 can potentially drive meaningful upside to the fiscal 2024 targets, we shared during our analyst day.

This continues to be a very exciting period in the company history, and we see a direct path to dramatically and sustainably extending our business as we continue to execute on this multifaceted growth that.

This continues to be a very exciting period in the company history, and we see a direct path to dramatically and sustainably extending 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 quarter.

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.

This concludes our prepared comments operator, please open the call for questions.

Certainly, when I'll be conducting a question and answer session, if you'd like to be placed in the question queue, please press star one under telephone keypad. Once again, that star one to be placed in the question queue. One moment please.

Certainly, we'll now be conducting a question and answer session.

That can be placed in the question queue. Please press star one on your telephone keypad once again Thats star one to be placed into question Q1 moment. Please while we poll for questions. Our first question today is coming from Charles <unk> from Needham <unk> Company. Your line is now live.

Our first question today is coming from Charles Hsieh from the Edomind Company.

Okay.

Thank you for taking my question. I just want to go back to some of the comments on OPACs. This is a multi-part question. So first off, I want to ask you, given your guidance for fiscal 22, which seems to imply a flat two slightly up in terms of revenue growth, is the non-GAAP OPACs going to follow the same trend?

Hi.

Thank you for taking my question.

I just wanted to go back to.

Opex comments are all packs business a multipart question.

So.

First off I wanted to ask you given your guidance for fiscal 'twenty two.

Which seems to imply flat to slightly up in terms of revenue growth is the non-GAAP opex is going to follow the same trend.

And second is you commented something about the OPEX upside in fiscal first quarter. Some of that you attributed to a delayed start of some of the R&D activities, some projects, if I listened correctly. Why was that? And can you please provide some color on that? Thank you.

And second as you commented something about that Opex upset in the fiscal first quarter.

Some of that you attributed to a delayed start up some of the R&D activity some projects.

Listen the correctly.

Why was that.

And can you. Please provide some color on that thank you.

Sure, Charles. As far as the effects of FY 2022, I think as we are guiding 75 million non-GAAP , I think that will continue through the rest of the fiscal year.

Sure Charles as far as Opex for FY 'twenty to 'twenty two I think as we are guiding 75 million non-GAAP I think that will continue through the rest of the fiscal year as to why Q1 was a little bit lower.

As to why Q1 was a little bit lower, there was some push-out, some R&D projects as well as some S-GNA spend. The part of it was because December is the holiday season for a lot of our R&D sites. It took time off this year as well as a certain recruitment that we budgeted it for in terms of our projects. That got delayed a little bit. It'll be kicking in this quarter as well as in the falling quarter. So the...'

There was some push out on some R&D projects as far as some SG&A spend part of it was because.

<unk> is the holiday season for a lot of our R&D sites I think people actually took time off this year as well as <unk>.

Certain recruitment that we budgeted for in terms of our projects.

<unk> got delayed a little bit it'll be kicking in this quarter as well as in the following quarters. So a D.

The reduction in optics had no effect on our schedule in terms of our R&D projects. It's still basically tracking where we want it.

The reduction in Opex had no basically effect on our share.

Schedule in terms of our R&D projects, it's still basically tracking where we want it to be.

Thank you, Lester. So the second question I want to ask you, more on the details of your physical cognitive guidance.

Thank you Lasse.

The second question I wanted to ask you one more on the details of your fiscal 'twenty two guidance.

I want to run some quick math here if you can follow me. So say your fiscal 22, your revenue is $1.58 billion. The fiscal first quarter revenue was $416 million. And that means you will need to deliver roughly about $1.1 billion over the next three quarters for the fiscal year.

I wanted to run some quick math here.

You can follow me, so say physical plants to.

Revenue is 1.58 billion.

Fiscal first quarter revenue was $416 million.

That means you will need to deliver roughly about $1 1 billion over the next three quarters for the fiscal year.

But I noticed your first quarter backlog was already close to 700 million. So basically, you only need to book another 400 million orders and deliver them over the next three quarters to really just meet the 1.58.

I noticed your fiscal first quarter backlog.

It's already close to sell about 100 million. So basically you only need to book, another 400 million orders and deliver them over the next three quarters really doesn't meet that 158.

billion dollar revenue target. It kind of feels a little bit light in terms of the assumption of your booking over the next three quarters because you've been running.

A billion dollar revenue target.

It kind of feels a little bit light in terms of the assumption youre booking over the next three quarters, because you've been running.

roughly like over 400 million a quarter in fiscal 2021.

Roughly like over $400 million a quarter in fiscal 'twenty one.

on average, but that assumption is kind of like you are assuming a booking kind of lasts that 200 million per quarter seems to look a little bit low to me. Are you?

On average, but that assumption is kind of like you are assuming a booking kind of less than 200 million per quarter seems a little bit low to me are you.

Kind of thinking that 1.58 billion revenue guidance is just a worst case scenario rather than really a base case scenario here What's your thought here? If there are more upside to 1.58 billion guidance, thank you

Kind of thinking about the $1 5 billion revenue guidance is just the worst case scenario rather than really a base case scenario here.

What's your thought here is there more upside to one right.

Thank you.

Well I think 158 is what we consider is the base case right. As you went through the math right are we did about 840 well between <unk> 60, and then the guidance today, it's about $8 40.

Well, I think 1.58 is what we consider the base case, right? As you went through the math, right, we did about 840, well, between 460 and then the guidance today, it's about 840 for the first half.

For the first half and to get the 158 I think it's just a gain revenue now is a little bit more linear.

And to get the 1.58, I think it's just, again, revenue now is a little bit more linear than we had originally anticipated. There has been, you know, because of supply chain issues in the first half, as particularly wafer shortages, we think that, you know, revenue will be a little bit linear, as I said. As far as, is there upside to the 1.58? Well, I mean, I think right now that's our view. There's always possibility for upside, but there's also a lot of supply chain constraints out there right now, so I think we feel comfortable with the 1.58.

Then we had originally anticipated there has been.

Because the supply chain issues in the first half.

As particularly wafer shortages, we think that you know.

Revenue will be a little bit linear as I said as far as is there upside to the $1 five eight well I mean, I think right now that's our view, there's always possibility for upside, but there's also a lot of supply chain constraints out there right now so I think we feel comfortable at the $1 five eight.

Got it. So maybe my last question, I know this may come in your FCC filings in a queue.

Got it got it so maybe my last question.

I know this may come in your SEC filings.

Queues.

Can you provide some color on the puts and takes of China and non-China part of the revenue for the fiscal first quarter as China is like over 50% of your overall revenue in the past few quarters? Thank you.

Can you provide some color on the puts and takes of the China and non China part of the revenue for the fiscal first quarter as China is like over 50% of your overall revenue in the past few quarters. Thank you.

China is much higher than 50%. I think this quarter is about 70% of revenue. I think it will continue to be a strong contributor. Taiwan and China are always our two strongest markets. Taiwan went down a little bit in Q1, but we expect the rebound in the second half. So I think, again, China and Taiwan will always be our two biggest markets and has been for a while.

Yes, China, China actually is much is much higher than 50% I think this quarter is about let me let me take a look at about 70% of revenue.

And I think it will continue to be a strong contributor Taiwan and China always our two strongest market.

Well I went down a little bit in Q1, but we expect the rebound in the second half. So I think again, China in time will always be our two biggest market and has been for a while.

Thank you that's all from me thank.

Thank you.

Thank you. Thank you. Today is coming from Chris Sankar from Cowling.

Thank you. Our next question today is coming from Krish Shankar from Cowen <unk> Company. Your line is now live.

Yeah, I think my question I have to go to first one. Pusano Lester last quarter you kind of specifically called out supply constraints, especially vapor and substrate shortages at your OSAT customers this time you did not. Is it fair to view at the margin it's constraint for easing relative to three months ago or how to think about it.

Yeah, Hi, Thanks for taking my question I have three of them first one please.

It was a little less to last quarter, you kind of specifically called out supply constraints, especially they certain substrates shortages, but you'll also have customers. This time you did not is it fair to assume at the margin. It's constraints are easing those two to three months ago or how to think about it.

Well, uh, so, quick, let me answer this way. You're talking about all that customer, right? So...

Well.

So Chris let me answer this way are you talking about all set customer right. So.

Actually, we have a very diversified customer in both OSA and IDM. Each customer can have a very different and unique investment schedule.

Sure.

Have a very diversified customer in both <unk> and the idea.

And each customer they can have a very different unique investment schedule.

Follow also yes, we did so also very strong much stronger in 21

Also yes, we did so also very strong a.

Much stronger in 'twenty one.

But at this moment, I think we are seeing, you know, strengths more in IDM in the first half of 2022, you know, help by at this moment, additional revenue from dedicated AP, advanced display and auto. But we mentioned last time about the shortage of the waiver, not enough coming out from FAB. We also expect stronger offset investment, you know.

But at this moment I think we are seeing strength.

IBM.

In the first half or 'twenty two.

By at least one additional revenue from dedicated AP advanced display and auto.

We mentioned last time about the shortage of the waiver.

Not enough coming out from us at all.

We also expect stronger offset investment.

Uh huh.

will help by improvement of the wave of the shooting in the second half of 2022. I don't know if this is helpful.

Well helped by improvement of the wafer shortly in the second half 'twenty two.

I don't know if it is a help or not.

Got it. Got it. All right. And then I just had a couple of quick follow ups. One is, you know, on the thermal compression bonders, how should we think about the revenue opportunity? Is it roughly 40 million this year? 80 million next year is a way to think about it? Any color that would be helpful?

Got it got it alright, and then I just had a couple of quick follow ups. One is you know on the thermo compression Bonder, how should we think about the revenue opportunity is at roughly $40 million. This year $80 million next year is the way to think about it.

Any color there would be helpful.

OK, so I think our view on TCB, we are quite positive. And we feel like TCB is in a stage to grow rapidly. And we see the driver are from a few areas. One is networking. I mentioned about silicon photonics, optical transceiver. Optical transceiver is the high end of a high beam with a transceiver. And also one driver is the networking.

Okay. So.

I think oh beyond GCB, we are quite positive and we feel like our GCB is in a stage to grow rapidly.

And we see it.

The driver from a few areas one is networking I've mentioned about silicon photonics optical transceiver optical transceiver is the high end of our <unk>.

I've been with Tresiba.

And.

So one driver is the networking.

second one is sensing a CMOS imaging sensor and the heterogeneous integration or triplet integration everybody talking about it

Second Windsor sensing.

Imaging sensor.

And the heterogeneous integration or AAA integration, everybody talking about it.

We also see mobility logic will use TCB more and more.

We also see mobility logic will use <unk> more and more.

And we are very bullish on our approach, we call Fluxless.

We're very bullish on.

Our approach we call Frac place.

the pitch down to 30 micron, any flux, or cause a contamination or cause a short. We have a very proprietary process and we believe it will make a big impact in this TCB market.

The pitch down to certainly Michael any flux or cause of contamination or cause a short.

We have a very.

Really proprietary process and we believe will make a.

Impacting the soft tissue b market.

So if you remember.

You know, in our NSCore four months ago, we mentioned, we indicate...

You know in all and as a cohort four months ago, we met.

Mentioned we.

We indicate.

FY24 revenue compared to 2021, there will be some upside in three areas, right? One is dedicated AP, one is battery EV, one is display. So you ask about dedicated AP. We actually give a guidance, we might have put additional 18 million. So we indicate maybe 24, we will reach $100 million. Majority will be TCB. But at this moment, I think we will check.

FY 'twenty four revenue compared to 21, there will be some upset yesterday areola wines with dedicated AP.

<unk> is a battery EV wines at these spreads so you ask about dedicated AP.

We actually we gave that guidance we my.

Put additional 80 million so we indicate may.

Maybe 24, we will reach $100 million.

Majority will be <unk>, but at this moment I think we will.

Check much.

much better than that. We probably give you some color in the next one.

Much better than that we probably will give you some color in the next one or two quarters.

Got it. Got super helpful food. And maybe, you know, I just wanted to follow up on that. You know.

Got it got it Super helpful Food and maybe you know I just wanted to follow up on that you know one of the things. It seems like you know if you look at hybrid bonding, which some of your peers.

One of the things that seems like, you know, if you look at hybrid bonding, which some of your peers in Europe are doing

In Europe are doing are what are the current issue seems to be likely for good metrology.

One of the current issues seems to be lack of a good metrology like the scanning acoustic microscopy. Do you think that is what is limiting hybrid bonding upside in the near term and that kind of helping TCB or do you think they're like two separate in a mutually exclusive issues and just are the curiosity. If you think you can hit TCB revenues.

Scanning acoustic microscopy do you think that is what is limiting hybrid bonding upside in the near term and that's kind of helping PCB or do you think that like two separate.

In a mutually exclusive issues and just out of curiosity. If you think you can see the TCE revenues.

100 million in FY24, what do you think the hybrid market could be?

100 million in FY 'twenty, Paul what do you think that market could be there.

Okay, so, hybrid rebounding, you know, people talking about it. Maybe for

Okay, so hybrid bonding.

People are talking about it.

Maybe four.

pitch below 10 micron. But at this moment, I think I think, ah, 20 clue actually is really very stretch. Why

Pitch below 10, micron, but there is a woman I think.

Tim had to actually is really biggest stretch puddle.

Maybe people have a problem, have a contamination issue for the T.

Maybe people have a problem.

Condemnation issue for TCP.

So we believe our approach is right. The hybrid bonding in our opinion is very niche. It's really a niche market. And I do believe the future for TCB for next couple years will be much bigger than what people predict for hybrid bonding. And hybrid bonding, there are few approach I think at this moment is a little bit.

So we believe our approach is right the hybrid bonding in our opinion is very niche right.

Is really a niche market and I do believe the future for Otis should be for next couple of years will be much bigger than what people predict photo library to banking and have you built in a day of your approach I think there is a woman is a debit.

Complicate process right.

So we have actually both programs, one is the flux, one is the high-speed bonding, but we put much more effort in the disafrocks recipe.

So we have actually both program once <unk> hybrid bonding, but we put much more effort in the diesel trucks that srt's you'd be bonding.

So just to clarify do you think the metrology issue is what is making.

Just to clarify, do you think the metrology issue is what is making a niche market?

Funding a niche market.

Yeah, metrology is one, but the hybrid bonding, you really got to have a very complicated process. There are two approaches. One is really sequential one. And if you look at it, this is a really front end process, right? It's a little bit more complicated. So I agree that metrology and also it's inherent. It's not very easy process.

Yeah.

The charge is one is one but.

The hybrid rebounding you really got to have a very complicate positive. There are two approaches one is.

A sequential one if you look at it. This is a this is a really front end process that is a little bit more complicated. So I agree. It is a metrology and also is the inherent.

Not easy process.

Got it.

Really appreciate it thank you.

Okay.

Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from David Dooley from Steelhead Securities. Your line is now live.

Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from David Duley from Steelhead Securities. Your line is now live.

Yeah, thanks so much for taking my question. As far as your annual revenue target, you bumped it up like $80 million from 1.5 to 1.58 billion.

Yeah. Thanks, so much for taking my question as far as your annual revenue target I E bumped it up like $80 million from 1.5 to 1.58 billion.

Could you help me understand where that upside is coming? Is it coming from the core wire bonder business not going down as much as you thought? Or is it coming from a lot of these new opportunities growing faster than you initially anticipated?

Could you help me understand where that upside is coming is it coming from the core wire bonder business not going down as much as you thought or is it coming from a lot of these new opportunities growing faster than you initially anticipated.

So could you quickly repeat again? I'm sorry, I just missed a couple of seconds. I was just curious, is you've bumped your annual revenue target up from 1.5 billion to 1.58 billion, 80 million dollar increase there. Is that from the wire bond business going down less or the new stuff growing fast?

So could you quickly repeat again I'm, sorry, I just missed a couple of seconds.

I was just curious.

You bumped your revenue annual revenue target up from $1 5 billion to 1.50 awesome.

$80 million increase there is that from the wire bond, okay. He was going down less or the new stuff growing faster.

So actually, when we have a new forecast, it's based on a new information come out. We always make sure we can deliver it, right? So let me give you overall of the full year outlook.

So actually.

But when we.

Our new forecast is based on new information come out you know, we low you know.

We always make sure we can deliberately so let me give you over all of our full year outlook.

So I think if you look at it in the past two quarters.

So I think if you look at it in the past two quarters.

really in order to relieve our customers' capacity shortage. There's a very desperate need for a lot of bobangs.

Really in order to redo of our customers a capacity shortage right. There's a desperate need for a lot of ball bonder.

And we really purposely stretch our capacity. And our targeted maximum capacity was a 450.

And we really purposely stretched our capacity.

In a targeted mix them our capacity was a full 50, but we purposely actually.

But we purposely actually stretch out capacity, you know, believer one quarter is 490, one quarter is 460. So.

Stretch out capacity you know a deliberate one quarter is 491 quarter is a 460.

So and the.

Together, you know, with Q2, Chinese New Year, typically is a soft year, right?

Together with our Q2 Chinese new year.

Typically is a softer year right. So as a result, I think Oh, We guide you know the midpoint for Q3, 2018, and let's face. It. It is still very very strong compared to historical result, right. So.

So as a result, I think we got the midpoint for Q2, it's 380. And let's face it, 380 is still very, very strong compared to a historical result, right? So Turn moving on a scalp ofatalie So

What I try to say is I think the past two quarters really is the purpose we try to reduce the backlog and reduce the shortage for the whole industry.

Well, it's hard to say I think.

The past two quarter really is a purposely we try to reduce a bit of luck and a reduced.

Shortage for the whole industry and remain in I think a two quarter if.

and we made it, I think, two quarters.

if you look at it the end demand for the market still a bit very strong and we

If you look at it the end demand for the market still basically the strong.

We feel maybe we won't have additional upside.

maybe we will have additional upside if the wafer stock get more capacity, you know, come, you know, online. We might have a little bit more upside, I think, in the second quarter. So that's what we see right now. But when we have a more clear picture about wafer shortage improving, I think we will discuss maybe next.

Even though wafer stock get more capacity you know come online we might have a little bit more upside I think in the second quarter. So that's what we see right now but.

I don't have a more clear picture about wafer shortage improving.

We will discuss maybe in the next quarter.

OK, excuse me, could you just talk about you've had really strong gross margins. I think there are 48 percent recently through the balance.

Okay.

Excuse me could you just talk about you've had really strong gross margins I think there are 48%.

<unk> through the balance of this.

Our calendar year, how should gross margins trend up or down.

calendar year, how should the gross margin trend up or down?

Well, Dave I think gross margin is it's for now it's trending between 47% to 48% right. I think that is a realistic target I mean, obviously margin moves from quarter to quarter, depending on product mix as well as custom makes I think one thing that has an effect on the margin.

Dave, I think gross margin is for now is planning between 47 to 48%. I think that is a realistic target. Obviously, margin moves from quarter to quarter depending on product mix as well as custom mix. I think one thing that has an effect on the margin.

Last year as well this year is the fact that there's still real supply chains constraint.

Last year as well as this year is the fact that there are still real supply chain constraints and that we do actually have to spend additional dollars in terms of expediting a component as well as yeah. As you well know the shipping and freight is very very tight right. Now so that cost is also a little bit higher but I think 47 to 48.

and that we do actually spend additional dollars in terms of expediting a component as well as...

As you well know, the shipping and freight is very, very tight right now, so that cost is also a little bit higher. But I think 47 to 48%, maybe a little bit higher than that, is probably a realistic target for the rest of the system.

Percent, Oh, I look maybe a little bit higher and that is it's probably a realistic target for the rest of the fiscal year.

Okay, and final question from me is, I guess it's a two-parter, is could you just talk about what the utilization rates of the wire bonders are? I think you mentioned they're still high, but I didn't hear a number. And then, um,

Okay and final question from me is I guess, it's a two parter is could you just talk about what the utilization rates or the wire Bonder. Sara I think you mentioned that there is still high but I didn't hear a number and then I'm just.

highlight for us again what your targets are for revenue in the LED business in this fiscal year and next fiscal year or calendar however you're characterizing it. Thank you.

Highlight for US again, what your targets are for revenue in the led business in this fiscal year and next fiscal year or calendar year. However, you're characterizing it. Thank you.

So I'll answer the utilization rate. The utilization rate are in the high 80s. It came off a little bit, but it's still very, very robust from a historical basis. And so we think that will continue to drive demand throughout the fiscal 22. And then again, as Fusen mentioned, as the wafer shortages hopefully eases, we believe the utilization rate will go up again.

So I'll answer the utilization rate utilization rates are in the high 80, it came off a little bit, but it's still very very robust from a historical basis and.

And so we think that will continue to drive demand throughout the fiscal 'twenty two and then again as Suzanne mentioned, a as the wafer shortages hopefully eases, we believe utilization rate will go up again as far as Leds targets, we actually didn't provide how he sees how it gets going forward into 'twenty three I think.

As far as LED targets, we actually didn't provide LED targets going forward into 23. I think, again, we don't specifically break out what we have targets in terms of revenue for the different product lines per se.

Again, we don't specifically break out.

What we we have targets in terms of revenue for the different product lines per se.

But LED, we do believe it's going to recover a little bit in the second half. We've seen a little bit of that and Sushant discussed in his remarks, we have a very strong advanced display which is a part of our LED revenue.

But we do believe it's going to recover.

A little bit in the second half that we've seen a little bit that and Suzanne discussed in his remarks.

So very very strong advanced display, which is a part of our led revenue.

Thank you.

Thank you. Our next question is coming from Tom Difley from DA of Datason.

Thank you. Our next question is coming from Tom definitely from D. A Davidson your line is now live.

Yes, thank you for the questions. Lester, just to follow up on the utilization question, is there normal seasonality in utilization rates that they dip off in the holiday season post-Chinese or pre-Chinese New Year?

Yeah. Thank you for the questions lesser just a follow up on the utilization question is there a normal seasonality and utilization rates they get lost.

In the holiday season post, China or pre Chinese new year.

Yeah, Tom, there is a little bit of that. I mean, usually the March quarter, which Chinese New Year is in, the utilization does come down a little bit. I mean, China and also Taiwan, to some extent, shuts down for a period of time. So I think, yes, there is some seasonality into the utilization.

Yeah, Tom there there is a little bit of that Ah I mean, usually.

The March quarter, with Chinese new year's and the utilization does come down a little bit I mean, China and also Taiwan. Just makes that are shut down for a period of time. So I think yes, there is some seasonality into the utilization rate.

Okay, and Fusen, when you look at the wafer shortages that we've had across the industry now for the past year, how much do you think that's impacted your business or how much upside do you think was taken away by those wafer shortages that should recover should come back over the next year or two as we ramp up?

Okay.

And when you look at the wafer shortages that we've heard across the industry now for the past year. How much do you think that's impacted your business or how much upside do you think was taken away by those wafer shortages should recover should come back over the next year or two as we ramp up.

Okay.

Well, this wafer shortage actually

Yeah.

This wafer shortage actually.

I think first of all, I think people need to invest in a front end.

I think our.

First of all I can people will need to invest in the upfront.

And lovely will take about a year to two years come out.

And roughly what pick a ball.

Year to two years come off so what we are seeing right. Now is are there some legacy products.

So what we are seeing right now is there are some legacy products. A lot of investment is about 18 months to two years ago. Many I think in China areas. So we expect, you know, these.

A lot of investment is about <unk>.

18 months to two years ago.

Mainly I think in China areas. So we expect.

No.

Yes.

You know, front end finish probably will start to go to the back end and then start to increase the wear for the compass.

A friendly and finish probably will start to you. It goes up again, and then start to <unk>.

Increased.

Weird for capacity.

So we feel like it should go up, but there's a lot of industrial suppression issue. So.

So we we feel like it should go up but you know there's a lot of our industrial supply chain issue right.

So.

But.

Go up will be a gradual case. So we feel like maybe...

Go up will be gradual case, so we feel like a maybe.

It's how to pull a number, but maybe...

It is hard to put a number but maybe.

tens of millions dollars, you know, it's calendar year, right? So if it's calendar year, it only hit us fiscal year for three months.

Tens of million dollars.

Is calendar year right. So currently it's the only hit the us.

Fiscal year fourth Street months.

So.

tens of millions dollars, maybe we'll expect that. But we depend on many, many factors for the industry. Okay, yes.

Tens of million dollars, maybe we'll expect that but depending on what many manufacturer for the industry.

Okay, that's fair.

And then finally, you know, obviously, Les, you talked about how 70% of the business or so is in China, because that's just where the chips are packaged. Are you hearing more from your customers about plans to bring the back end, the packaging to the US and Europe to diversify geographically a bit?

And then finally, you know obviously last year you talked about house, you know, 70% of the business or so is in China, that's just where the wood chips or packaged items.

Harry most of your customers about plans to bring that back and the packaging to the U S and Europe to diversify geographically a bit.

Well I think you know diversification.

Well, I think diversification of the supply chain, I mean, is definitely a hot topic, both from a geopolitical basis, as well as COVID has shown that you do need a more robust supply chain. So we are seeing some initial discussions about investments in Europe . Again, NACI and the US, the US hasn't really had investment in the back end for a while, but we're seeing some interest, and then also in Southeast Asia as well as Taiwan.

On the supply chain I mean is definitely a hot topic right both from a geopolitical basis as well as Covid has shown that you do need a more robust supply chain. So we are seeing some initial discussions about investments in Europe .

Nathan N in the U S. U S. Hasnt really had no investment in the backend for a while but we're seeing some interest and then also in southeast Asia as well as Taiwan.

Okay, thank you for your time today.

Okay. Thank you for your time today.

Thank you.

Thank you. Our next question today is coming from Dylan Patel from Semi-Analysts. Your line is now live.

Thank you. Our next question today is coming from Joanne Patel from semi analysts. Your line is now live.

Thanks, Fusun. I wanted to ask about the timing of orders.

Thanks, Susan I wanted to ask about the timing of the orders are big big automotive and trailing edge semiconductor firms like S T micro and Texas instruments or doubling their capex year over year in TSMC, and UMC and Smith theyre spending more on trailing edge than ever before has this.

Big, big automotive and trailing edge semiconductor firms like ST Micro and Texas Instruments are doubling their CAPX year over year and TSMC and UMC and SMIC. They're spending more on trailing edge than ever before. Has this new front end capacity translated to back end? Fabs take years to build. So what's the timing for these back end assembly investments into wire bonders versus the front end investment that's been flooding in this?

New front end capacity translated to backend fabs take years to build so what's the timing for these backend Assembly <unk>.

Investments in the wire Bonder <unk> versus the front end investment that's been flooding in this year.

So, I think your question is similar to what Tom just asked. So, let me answer it this way. Semi-unit growth was around 20% in C-Y calendar year 21.

Yeah. So Steve I think your question is similar to Tom just asked so let me answer this way semi unit growth once it around 20% in US you walk in the 'twenty one so from an investment continue to float to a again yeah. That's true.

So front end investment continue to flow to the back end. Yeah, that's true. But normally, I think I use to take a year, sometimes two years depending on what kind of technology and investment scale to reach. For example, investment from two years ago in China are expected to support with a capacity growth in a second half, calendar year, right? So.

But normally I think like you sort of pick up.

Year, sometimes two years, depending on what kind of technology.

And the investment scale.

To reach for example investment from two years ago in China are expected to support wafer capacity grow.

Second Killen second half calendar year.

So oh.

I don't know if I answered your question. So normally I think it can take up to two years.

I don't know if I see your question. So normally I think I'll just pick up probably can.

Can take up to two years.

Okay, thank you. And then for a follow up, I wanted to ask a bit more about the battery business. I think yesterday you talked about a laser-based cylindrical bonder system, but we didn't really get much information about that. There's a lot of competition in the heavy wire bonder space for automotive, but what is this laser system, what is the advantage here? What's that do for competition?

Okay. Thank you and then for a follow up I wanted to ask a bit more about the.

Battery battery business at the Investor Day, you talked about a laser based cylindrical bonder system, but we didn't really get much information about that you know there's a lot of competition in the heavy wire bonder space for automotive, but what is this laser system. You know what is it what is the advantage here, what's what's that do for competition.

OK, so Kenneth, historically, I think we lead in the heavy wire weight space within automotive.

Okay. So Ken.

Historically, we live in a heavy way at which space, we didn't automotive right.

But right now actually we have three battery solutions. Two for cylindrical and one for prismatic.

But right now actually we have a battery solution.

Two for cylindrical and one for prismatic. So let me get into you know right point, you know why people, Singapore, Lisa compared to which I think laser has a much faster process. The swap rates are high and the cost of ownership is low but is haven demonstrate you know a high volume production.

So let me get into a right point, why people think about this.

compared to which, I think laser has a much faster process. The super is high, the coastal ownership is low, but it has a high-volume production capability yet. One of the biggest issues, I think the process window can to be narrow, and if a process window ship a little bit, it can lead to some real ability content, right? But some...

Capability, yet one of the biggest issue I think the process windows 10 to be narrow in the EBA process window ship, a little bit it can lead to some reliability concept right.

Some people actually, I don't know, you know, know the term, you know, pack assembly. So nobody has any reason, there's people used for a 10 to 20 use in a pack assembly.

Some people actually.

You can all attend.

Assembly, so nobody asking God is people use for.

Tend to try to using the assembly.

And it does provide an alternative process for some customers. But I think at this moment, if you look at

And it does provide an alternative process for some customer, but I think there is movement. If you look at the.

the best reliable products still come out from the wire bound. But actually, we have both solutions. And we have three-better solution, two-four cylindrical and one-four-prisma.

You know.

The best reliable products still come out for the wire bonder, but actually we have a boss solution, we have and we have a slightly better the pollution.

<unk> 240, <unk> and went through a prismatic.

Thank you.

Thank you. Our next question is coming from Craig Ellis from B. Reilly Securities. Your line is now live. Thanks for joining us.

Thank you. Our next question is coming from Craig Ellis from B Riley Securities. Your line is now live.

Yeah, thanks for taking the question and congratulations on the strong performance guys. I wanted to start with a follow up on some of the comments around the potential for

Yeah. Thanks for taking my question and congratulations on the strong performance you guys I wanted to start with.

I'll follow up on some of the comments around.

The potential for a second fiscal second half wafer improvement or hopes for.

second fiscal second half wait for improvement or hopes for

that to occur. Can you just talk about what you're hearing from your customers on what they see as their potential

That to occur can you just talk about what you're hearing from your customers on what they see as their potential.

WAPER output improvement, but then flow through to your volumes, you know, is it single digits, half on half, double digits, half on half, high double digits. What is it that you're hearing that lens confidence that we've got WAPER improvement and volume improvement coming in the second half of the year?

Wafer output improvement, but then flow through to your volumes you know, we said single digits half on half double digits half on half high double digits. What is it that youre hearing that one's confidence that we've got wait for improvement in volume improvement coming in the second half of the year.

So I think the reason we put 1.58 is the reason. You know, I think the signals, the early being.

So I think the reason we put at one five.

The reason you know I think the signals you ought to be mix.

Some people feel like this, okay, so suppression shortage to us, I think our suppression shortage is less problem for us. I think the industry-wide problem is really a trip shortage, and this is a wave of shortage.

Some people feel like these are.

Okay. So it's approaching shortage to us I think our president shortage is less problem for us I think the industry wide problem is really.

Chip shortage and this is a wafer shortage.

If you ask different people, as in a different people have a different degree of a sphere of suffering.

And if you ask a different people I think are different people.

We are still suffering on this so this is our best judgment, we feel like at one point, if I ate is right for us, but it's a tough goal I think we will get more information.

So this is our best judgment. We feel like 1.58 is right for us. But as the time goes on, I think we will get more information. You know, if you remember last year, you know, at the beginning of the year 21, we gradually got up because when we have more confidence, I think we are able to change our view. But at this moment, I think the suppression shortage, a lot of people feel like it's getting worse.

Remember last year.

At the beginning of the year 'twenty, one we gradually got up is it because when we have more confidence.

We are able to.

Change our view.

At this moment I think the president shortage a lot of people feel like it's getting worse.

and some people feel like it's getting easy. So we are talking about the whole integration of industrial shorties. That's why I think we still need a little bit time, but all the judgment really at least more is 1.5.

But some people feel like it'll get easier. So we are talking about the whole integration of industrial.

Shortage, that's why I think we still need to have a time, but our best judgment. There is more use at one point.

So we will be more color, you know, maybe next.

So we can provide you.

I'll give you more color.

Maybe next time.

That's helpful, Pucinin. And maybe to follow up on that. So the 1.58, assuming we have something that's relatively seasonal.

That's helpful and maybe to follow up on that so the 1.58.

Assuming we have something that's relatively seasonal in our fiscal third quarter, which would be up quarter on quarter would imply something that would be seasonal by the time, we look out to the fiscal first quarter of 'twenty three and so with the order dynamics that you're seeing in the backlog dynamics that you're seeing.

in the fiscal third quarter, which would be quarter on quarter, would imply something that would be seasonal by the time we look out to the fiscal first quarter of 23. And so with the order dynamics that you're seeing, the backlog dynamics that you're seeing.

Is the business strong but increasingly taking on a seasonal tone or does it seem to be so strong that it could overpower late calendar year seasonality as it seemed to do?

It is the business strong, but increasingly taking on a seasonal tone or does it seem to be so strong that it could overpower late calendar year seasonality is it seem to do in fiscal 2020, and and a little bit in fiscal 2020 early fiscal.

fiscal 2020 and a little bit in fiscal 2020, early fiscal 2022.

2022.

So if a wave for a shortage get better, we feel like at the beginning, we, the first sign, we only have three months to catch it. Right? Everybody, we live at this moment, will be a calendar year, second half, and our physical year ends in September . So I think we probably need it.

So Eva wafer shortage get better when you feel like are you.

No.

At the beginning we.

The first one side, we only have three months to catch it by everybody.

At this moment will be a calendar year second half and our fiscal year end.

September .

So I think what we probably need to have a one.

quarter to feel it and that if it really come in, I don't think it would be you know like Tom asked probably means tens of tens of million dollars for us and we got to see you know the magnitude you know then we probably can make a better job.

Quarter, two figured it and that it would really come in I don't think it will be you know like a thumb Oscar probably means tennis elbow tenths of a million dollar for us and we got to see you know.

The magnitude.

We probably can make a better judgment.

Sure, that's helpful. And then to follow up on the comments on the automotive business and, and the engagement expansion, I think it was to five OEMs. The question is, when will those engagements start to become more material?

Sure. That's helpful and then to follow up on the comments on the automotive business in and the engagement expansion I think it was to five Oems, but the question is when will those engagements starts to become.

More material to.

revenues and visible to investors is that sometime in fiscal 22 or is the work with that wider array of OEMs really something that becomes more material to the business that investors would see in fiscal 23 or sometime thereafter.

Revenues and visible to investors is that sometime in fiscal 'twenty, two or is the work with that wider array of Oems really something that becomes more material to the business that investors would see in fiscal 'twenty three or sometime thereafter.

So so.

So Craig, I think it's a nuanced answer. I think some of the five...

So Craig I think I think it's a nuanced answer I think some of the five.

engagement will bear fruit in fiscal 2022 some are further along and Some you know their specifications are More similar to what we've already done some we would have to do more work with them and there'll be a longer Qual period so they will come in into fiscal 23. So I would say It would

Engagement will bear fruit in fiscal 2022, some are further along and some of their specifications are more similar to what we've already done. Some we would have to do more work with them and there'll be a longer cooperate. So they will come in into fiscal 'twenty three so I would say.

start in fiscal 22 and maybe, you know, gain more traction in 23. But again, as we get more visibility, we will update the investors on our, you know, automotive. But we are tracking above, as Susan said, what we indicated during the investigation.

Start in fiscal 'twenty, two and then maybe you know gain more traction in 'twenty, three but again as we get more visibility we will update the investors on our automotive, but we are tracking above as Susan said, what we.

Indicated during the Investor day four months ago.

That's real helpful. Thanks Lester. And just to follow up with a question for you, but in a different part of the income statement on operating expense.

That's real helpful. Thanks cluster and and just to follow up with a question for you but.

But in a different part of the income statement on operating expense.

very strong performance in the just reported quarter and you were clear that you know some of that may have been hiring that Wasn't able to be realized and maybe it happens in Fiscal to cure beyond can you just give us some color for how you're thinking about OpEx as we go through fiscal 22

Very strong performance in the just reported quarter and you were clear that you know some of that may have been hiring that wasn't able to be realized and maybe it happens in fiscal two cure beyond could you just give us some color for how you're thinking about opex as we go through fiscal 'twenty two.

Well, I think I think all facts through fiscal 22 is, I mean, again, based on the guide for Q2, I think it's going to be non-gap about 75 to 77 million. I think that's the number that will probably be consistent through Q2, Q4 for the remainder of fiscal 22.

Well I think I think opex through fiscal 'twenty. Two is I mean again based on the guide for Q2, I think it's going to be non-GAAP of about 75 to about 77 million I think that's a number that would probably be consistent through Q3 Q4 for the remainder of fiscal 'twenty two.

Got it. And then lastly, for me, before I hop back in the queue, extremely robust cash generation in the quarter. So congratulations to the team. I'm converting those strong revenues to cash flow. The question is, you know, following the very nice dividend increase that we saw, how is the company prioritizing dividends versus buybacks versus potential in organic growth as we look through fiscal 22 and into 23?

Got it and then lastly for me before I hop back in the queue extremely robust cash generation in the quarter. So congratulations to the team on converting those strong revenues to cash flow. The question is you know following the very nice dividend increase that we saw how is the company prioritizing.

Dividends versus buybacks versus potential inorganic growth as we look through fiscal 'twenty, two and into 'twenty three.

I think for fiscal 22, I mean, as I said in my remarks, I think for the dividend, our position is that our philosophy is that we want to be consistent, we want the dividend to continue to grow and be competitive among our peers. I think for the share repurchase program, we have increased the cadence, we have purchased more shares and spent more money in...

I think for fiscal 'twenty, two I mean, as I said in my remarks, I think for the dividend. We will our position is that our philosophy is that we want to be consistent we want the dividend to continue to grow and be competitive among our peers I think for the share repurchase program. We have increased the cadence we have purchased more.

Shares and spent more money in first quarter than we did for all of FY 'twenty. One I think that cadence will continue as the as we go forward. So I think we will be deploying more capital on the share repurchase program as far as inorganic opportunities I think we said a few times.

We were always open to it but needs to be accretive it needs to be.

Provided for either new technologies on new products and in that adjacency I think that may probably more of a FY 'twenty three our initiatives, but again there may be some in FY 'twenty, two but there'll be more in terms of a similar to what we did with <unk>, which is very successful it helps us accelerate our alumina next.

technologies or new products in an adjacency, I think that may probably be more of an FY23 initiative. But again, there may be some in FY22, but there'll be more in terms of, similar to what we did with Unacada, which is very successful. It helped us accelerate our Luminex tool, so I think we would look for somewhat similar things, perhaps in FY22. Makes sense. Bhujan and Lester, thanks very much for the help. Thank you. Thank you. Our next question today is a follow-up from Chris Sankar from Cowan & Company. Your line is now live. Yeah, thanks for taking my follow-up. Bhujan, I just wanted to pick your brain on something. You know, when you look at the last six months, you know, your backlog has been coming down.

To also I think we would look for some somewhat similar things are perhaps in FY 'twenty two.

Makes sense. Thanks very much for the help.

It makes sense to Houston and luster, thanks, very much for the help.

Thank you.

Thank you. Our next question today is a follow-up from Chris Sankar from Cowan & Company. Your line is now live.

Thank you. Our next question today is a follow up from Krish Shankar from Cowen <unk> Company. Your line is now live.

I think we're gonna follow up. To the end, I just wanted to pick your brain on something. You know, when you look at the last six months, you know, your backlog has been coming down.

Yeah, Hi, thank for taking my follow up I just wanted to pick your brain on something you know when you look at the last six months you know your backlog has been coming down lead times are beginning to moderate I'm just kind of curious and investors are worried about double ordering so how do you handicap that given I understand fully and at one point.

lead terms of beginning to moderate. I'm just kind of curious and investors are worried about double ordering. So how do you handicap?

Given I understand full year 1.58 billion for FY22.

8 billion for FY, when they do make sense, but how do you look at beyond that and say you know as these supply constraints ease at some point, but do you think the steady state lead time for the wire bonding business and what gives you comfort that there's not a lot of double ordering or last minute cancellations. We showed that could have.

makes sense but how do you look at beyond that and say you know as the supply constraints ease at some point

Where do you think the steady state lead time for the wire bonding business? And what gives you comfort that there's not a lot of double ordering or

last minute cancellation of push-up that could happen six months down the road or nine months or 12 months down the road and these things ease.

Six months down the road or nine months or 12 months down the road when these things ease.

So.

Could you actually we.

probably don't feel like a double booking is a big issue for us. You know, I mentioned I think 21, OSAT actually is quite strong. you

Probably don't feel like a double booking.

The issue for US you know.

I mentioned in 'twenty one.

That actually is quite strong right and.

Uh huh.

And actually at this moment, I think the real strength is really IDM. So a lot of capacity, actually offset investment is for the whole industry. Right. So I think we believe the offset probably will come back a little bit stronger in our second half. So.

And actually there is movement I think that the real story is really the idea.

So a lot of our capacity actually all set in investment is for the whole industry.

So I think we'd.

We believe the all set properly.

We'll come back a little bit stronger in second half.

So.

That is more of a I.

We really do for you.

We don't feel big double booking.

Double booking.

tend to talk to customers a lot. Of course, double booking happens anywhere, any period of time, right? But at this moment, we don't think it's a...

Tend to with a customer a lot of course double booking happen anywhere any period of time right.

This woman we beat the only thing is.

Because the issue for the industry.

Got it, got it fair enough, fair enough. And then just curious on China, you said 70% of total revenues China, I understand a lot of LED is also China a little like commodity LED, but curious on the general 25, what is the China split between OSRA and non OSRA?

Got it got it fair enough fair enough and then.

Just curious on China, you said, 70% of total revenue is China.

I understand a lot of Leds also trying not to lose all the commodity OLED, but curious on the general semi side.

And what is the China split between all sat the non op side.

I think for China's side, I think it's both non-OSAT and OSATs, but there's quite a lot of OSAT business for us in China. China, OSAT.

I think for China side, I think it's it's if both not nano and also thoughts, but there's quite a lot of that business for us in China, China all of that.

Got it got it thanks Susan.

Okay. Thank you. Thank you we reached end of our question and answer session I'd like to turn the floor back over to management for any further or closing comments.

Thank you. We reached the end of our question and answer session. I'd like to turn the floor back over to management for any further closing comments.

Thank you, Kevin, and thank you all for joining today's call. As always, please feel free to follow up directly with any additional questions. Have a great day, everyone.

Thank you Kevin and thank you all for joining today's call as always please feel free to follow up directly with any additional questions have a great day everyone.

Thank you, that does include today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation.

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