Q2 2022 Kulicke and Soffa Industries Inc Earnings Call
Hello, and welcome to the killer can solve our second quarter results conference call. At this time, all participants are in a listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
My pleasure to turn the call over to Joseph <unk> Senior director of Investor Relations materials software. Please go ahead.
Thank you welcome everyone to <unk> itself is the fiscal second quarter 2022 conference call joining.
Joining us on today's call, we have 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 <unk> Com.
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 or.
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 cool can solve 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 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 Joe we continue to make significant progress toward our long term target and the remaining well positioned to support significant and fundamental transition occurring within the automotive semiconductor and advanced discrete markets.
Bye bye.
<unk> update to each shortly.
Apparel industry growth through calendar year, 2022 is anticipated to be about maybe creating ongoing need for capacity expansion across our served markets.
We continue to be in.
Industry expanding puria.
Is it consistent with our market assumptions.
Our Investor Day last September .
Before discussing our business performance I would like to provide our perspective on the lawsuit Ukraine wall and the Covid related shutdowns.
And at this point in time, we do not anticipate this event.
Materially impact outlook, and we'd like to provide some additional context.
First I would like to address the humanitarian crisis and to express our concern and compassion for a prompt resolution of the Russia, Ukraine all we.
We do not expect <unk> will have any meaningful direct operational impact.
Impact due to this conflict.
What are the broader semiconductor industry material and commodity cost for items, such as no mortgages.
May increase although we do not anticipate this.
Major content to our business.
Secondly, we wanted to also provide an update related to Shanghai Kobe Lockdown.
Our customer more facility in Suzhou, China, when we produce capability and the upgrades continue to be fully operational now.
Sticks challenging increased temporarily but our production and our supply chain team proactively identified alternative.
Mitigating the impact.
To reiterate we do not anticipate either of these recent events to significantly impact our outlook.
And we remain focused to continue to proactively managing our own supply chain risks very closely.
As we have since fully amongst related.
The past two years.
Overall, the industrial business is very resilient.
And that has overcome many obstacles over the past two years.
We believe the prolonged state of <unk>.
Industry supply chain challenge is shifting production strategy from a just in time approach to a more prudent in the long term inventory management and the capital equipment planning approach.
Yes.
Moving on to our March quarter performance, we continue to make meaningful progress toward a specific opportunity.
Even in our Investor day.
Customer engagement are proceeding as anticipated and we remain well positioned to activities posed several mega trends impacting the automotive.
Conductor and advanced display market over the coming years.
Our near term ability to develop qualify and are recognizing revenue.
Our growing portfolio of solutions, we'll have.
Solidify our long term strategy and the pollution.
This key market.
Briefly explain each.
Plus we didn't automotive semiconductor capacity and the battery assembly need are anticipated to continue growing above average.
The transition to the electric vehicle and autonomous driving continued to accelerate.
We have a dominant leadership position within the automotive segment itself and.
And they continue to expand our offering and the increased customer engagement.
Currently we are aggressively prepay, our next generation data base of battery Assembly solution for qualification and anticipate acceptance over the coming quarters.
In addition to this new system.
Are also very engaged in driving acceptance and the broader in the base of our proven which mountain battery solution.
Through a variety of new customers.
Secondly, within the semiconductor space, we continue to broaden our portfolio and the further increase amendment to the market's a renewed focus on assembly.
The growing complexity of semiconductor assembly for most of the leading edge and the high volume market is creating a several new technology driven opportunity and enhancing our long term growth prospect.
While our primary focus is to develop a new capital equipment solution.
Assembly become more complex production challenged to increase driving the need for close loop feedback and the beta process and production control last month, we announced a partnership with a PDF solution to provide customers with our new analytics platform leverage <unk>.
Comprehensive compare it up a bit.
We didn't our leading.
Assembly system with artificial intelligence and the machine learning capability.
Ultimately we anticipate this partnership.
Direct lease at a value to customers by enabling efficiency and throughput enhancement for both high volume and the leading edge semiconductor production.
Additionally, more complex assemblies, we present.
Significant paradigm shift for industries like historically relied heavily on Nordstrom, Inc.
This shifting paradigm is increasing the technology driven growth rate within both high volume and the leading edge semiconductor applications growing demand for multi die package, new shouldn't be comment and the new memory opportunity expanding our core market prospect and creating the need for additional features and capabilities.
Advanced wire bonding.
In parallel we are also gaining share in leading edge in the optical market. During the March quarter. We recognized revenue of seven PCB system supporting next generation Interconnects for mobile applications processor and high performance computing.
The order book continues to increase.
As we already last quarter.
<unk> of similar compression is occurring we didnt, both offset and the idms and that we continue to pursue both customer groups with a major focus of morbidity sensing silicon photonics and heterogeneous applications.
Yeah.
We also remain very focused on all fronts less some more compression solution and recently received a purchase order for several systems.
Which will ship later this year.
Our capabilities of flux the PCB.
Very unique in the product and efficient and capable solution for high performance chip integration.
This recent purchase order inquiries amendment with a low cost spending and <unk> China.
Finally in addition to the evolving semiconductor assembly market.
Our opportunity in advanced display continues to expand.
We remain extremely committed and we are.
Actively enhancing our leadership in both mini and micro Iot applications.
Our advanced display engagement and the efforts continue to evolve our luxury area.
Near term capacity expansion for piece of that.
New engagement and the qualification for our recently introduced Lumi next system and a long term ongoing development for next generation display Assembly solution.
Do any of the March quarter, we shipped to bring an X system for qualification two separate customers and recently also received two purchase order for initial doomy next system.
This system address different process steps at a different customer site and represent a significant milestone in our advanced display business.
We are optimistic on the best opportunities and look forward to providing an update to our long term target over the coming quarters.
In addition to our growing market access we continue to improve margins and address strong operational cash flow at the current level of business.
During the March quarter.
$384 $3 million of revenue and non-GAAP EPS of $1 95.
Within capital equipment, we generated $333 9 million of revenue.
And market conditions come in largely as expected.
The sequential change driven by general semiconductor was largely related to our ability to surge of production, which would be in support of customers expansion plant in September and December quarters.
Additionally, we continue to see supply chain constraints and a global logistic challenges limiting the pace of growth throughout the year.
Chronic space.
As a reminder, we.
We still anticipate semiconductor growth to remain above average into fiscal 2023.
<unk> is also a bill.
Sure by major third party forecast.
Despite <unk> being extremely strong semiconductor growth year is will be relatively lower than the dramatic growth experience last year.
Yeah.
Excess industry capacity in early 'twenty, one terabyte headroom to enable last year's aggressive growth. However at the start of 2022. This excess capacity was no longer available, which create a shortlist and additional supply chain headwind.
And there is now extending the global chip shortage.
To highlight this relationship.
The majority of high volume system with ship in March quarters.
Related to new fab capacity.
Has only recently.
Alright.
This reinforced our view that broad industry supply chain challenges should begin to resolve as wafer capacity growth improve later this year.
We our business product mix is evolving which is reducing our reliance on industry capacity expansion and the better our business with the technology and the secular growth opportunity in many of our end markets.
This was clearly all night.
Our Investor day, and I will provide a few example that highlights this transition.
We Didnt general semiconductor our similar completion sales.
Have doubled and wafer level burn in system has tripled in revenue sequentially.
Within the wire bonding market.
Are experiencing.
The increase in demand for complex multi die wire bonded package in high volume consumer market.
<unk> also seen an ongoing ramp in wire bonding to improve certain requirements for <unk> applications.
Later this year, we anticipate customers to start wire bonding assembly application at a six nanometer technology node.
Again, these trends are increasing the rig of the future capacity and also technologies across our semiconductor ofer.
We already have.
But the bulk display system have remained consistent and that represents 88% of sales in the March quarter.
And at this point, we are already approaching our physical year revenue target of $80 million and the <unk>.
Expect to reach the target ahead of schedule.
We automotive demand has increased dramatically and is expected to be above average over the coming years due to the growing demand.
<unk> electric and autonomous vehicles.
In addition to high growth markets like Battery Assembly. We also provides high visibility in the power semiconductor solution, which are essential to this technology.
Change and then the broader automotive industry.
Finally within memory, we are experiencing ongoing demand for our high performance market DBM.
<unk> system.
We are also working to.
Develop a new cost effective solution for drams, leveraging our wafer level packaging capabilities.
From an end market standpoint, we anticipate memory automotive and the Iot to remain strong.
Additionally, the five year transition and a need for more complex assembly continue to provide long term tailwind to our core business.
We continue to anticipate wafer capacity growth will improve in the second calendar half through 2024, which is industry supply chain challenge and that will provide additional visibility to our outlook.
In summary, our progress on new growth initiatives and the customer engagement remains on track.
We are expanding policing across several new markets. While also actively participating in a fundamental transition within our core market.
With growth.
Long term development engagement with industry leader, we have developed several high competitive system and are positioned to win new qualification across advanced packaging automotive and bulk is great portfolio over coming quarters.
Our ability to succeed near term can provide significant upside to our long term outlook and the target.
We look forward to demonstrating this progress over the coming quarters.
With that I will now turn the call over to Lester who will discuss our financial performance Leicester.
Thank you for my remarks today will refer to GAAP results unless noted.
As Suzanne mentioned during the March quarter, we continued to enhance our fundamentals and growth prospects by executing on internal development goal driving external partnerships and returning value directly to shareholders through our increased dividend and aggressive repurchase activity.
We believe our business and cash generation potential have improve in a consistent and sustainable way due to our ongoing strategic execution and participation in long term technology transitions to <unk> outlined.
In addition, we continue to make progress to achieve our long term financial targets.
During the March quarter, we generated revenue of $384 $3 million and very strong gross margins of 52, 5% up over 400 basis points sequentially.
This strong gross margin performance highlights, our consistent operational efficiency and improving product mix.
Which includes an accounting true up related to a long term and ongoing customer project.
Without this true up gross margin would have been just about 51% in line with our long term targets.
non-GAAP operating expenses came in at $66 8 million during the March quarter as some of our SG&A plants, where we prioritize delaying spending to the June quarter.
Tax expense for the quarter came in at $13 $7 million and we anticipate an effective tax rate of around 13% for the full fiscal year.
non-GAAP net income came in $121 5 million.
Driving $1 95 of non-GAAP EPS during the March quarter.
Significantly above expectations due to stronger gross margins and lower expenses.
Turning to the balance sheet days of accounts receivable increased slightly from 84 to 86 days days of inventory increased from 75 to 148 and.
And days of accounts payable decreased from 56% to 49 days.
During the March quarter, we generated free cash flow of $69 8 million.
And ended the quarter with a net cash balance of $415 6 million.
In early March we expanded the share repurchase authorization by $400 million and extended the timing through August 2025.
Shortly after this announcement, we entered into a $150 million accelerated share repurchase program, which allow us to immediately reduce share count by an initial $2 5 million shares equivalent to nearly 4% of shares outstanding.
This accelerate program has completed in late April .
At this point, we have $340 million remaining on our repurchase authorization and we intend to resume open market purchasing opportunistically.
This remaining balance equates to over 10% of the company's current market value.
Our competitive dividend yield and ongoing opportunistic repurchase activity continue to provide additional path beyond our fundamental growth prospects to create and deliver value to shareholders.
For the June quarter, we expect demand to remain stable and anticipate approximately $365 million of revenue plus or minus $20 million, which includes a risk adjustment that considered our current view on COVID-19 related closures ongoing global logistic difficulties and industry supply chain challenge.
Yes.
For the June quarter, we anticipate gross margins remained strong at 49% plus or minus 50 basis points due to product mix and absence of the onetime true up.
non-GAAP operating expenses is anticipated to be approximately $74 million, plus or minus 2% and non-GAAP EPS to be $1 53, plus or minus 10%.
We are very focused on supporting the ongoing period of industry expansion and are extremely focused to drive new engagements qualification and ultimately ramp production of our new advanced packaging automotive and advanced display solutions.
Execution on our development and qualification goes throughout fiscal 2022 can potentially drive upside to the long term targets shared during our Investor day.
This continues to be a very exciting period in our company's history over.
Over the past few years, our core business and growth prospect has fundamentally improved and we are aggressively executing on the multifaceted growth strategy outlined last September .
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 well 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 queue. You May press star two if you'd like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing star one one moment. Please while we poll for questions. Our first question today is coming from Craig Ellis from B Riley. Your line is now live.
Yes, thanks for taking the question and guys congratulations on the very strong.
Strategic initiative execution, our first two product related questions first on the aluminum side.
Can you give us some color on whether the orders you are receiving are for.
R&D related use or are those production tools and can you give us some indication on order size and then on the NAND side is it your sense that the demand Fernandez additional layer count work that customers are doing or is it capacity or both.
So.
Our first generation is looming that is a piece of locks and Roominess is a second system is a laser base and provide a much higher productivity. So I think.
This is really a huge market in the meantime customer need to have a higher productivity. That's why we in the due to the system. So to answer your first questions.
We actually ship.
<unk>.
We already in our sweet stifle quantification normally qualification will take about six to nine months.
To finish it or sometimes take a little longer really depend on complication.
<unk> site. So after that I think if we're successful will be a high volume order. So actually illuminates. The initial stage for qualification, we have Australia qualification side.
And.
The order actually.
Probably is also.
Actually it will be ship and also need to be quantified.
At this stage I think our many customer waiting for our system for qualification and hopefully after qualification, we will see higher growth of our revenue.
<unk>, probably second half of 'twenty, three sort of the overview.
If I Miss any other questions.
Yeah, So one following up and demand drivers for strength as that.
Layer account work for customers or capacity adds and then on the financial side. Lester can you just comment on two items, one what drove the upside to gross margin excluding that true up that you mentioned in the past I think the company identified potential for.
158 billion in revenues Fisher, what's the what's the company's view on revenue potential this year.
What would express three months ago. Thanks team.
So.
Regarding your question about NAND DRAM stagnant.
Yes.
Okay, So actually my.
Second name, we have absolutely dealership collision.
Our dominant position and we see actually grew.
Gross nicely.
You must script actually I mentioned about <unk>.
No.
The stacked DRAM actually in order process for connection between a sticky rent once use of TSB right. So in this case, we are working with a leading customer.
Tied to actually replace the TSB by vertical while provided by our.
Actually.
<unk> wafer level packaging stud bumping process.
So to reduce our costs and also for putting all the form factor of TSV. So that was my remark.
Got it okay.
Okay.
Hi, Craig so as far as the gross margin upside, yes. Besides the one time accounting true up I think the upside was.
Again, as we've talked about many times before it's a lot depending on product mix. So I think both are in the ball Bonder business unit, we saw less led bonder and more higher.
Power computing boundaries, which gave us better margins. That's also true in wedge Bonder. We also saw the higher margin products in wedge Bonder for power management.
And then also for this quarter the split between capital equipment at Aps Aps actually was a little bit higher percentage this quarter at Aps.
<unk> has a higher margin and finally, we are also the Fas product mix what affects the gross margin is customer mix the customer mix shifted a little bit more to the idms versus the old SaaS with generally also gave us a slightly higher margin. So all those factors together and.
In addition to the onetime accounting true up gave us a very strong over 52% gross margin.
Excellent and then finally on the full year revenue view Westar.
Yes.
So.
So Craig.
This movement actually low we still seeing some shortage some headwind.
Headwinds for the industry.
Like a shortage in the material, mainly as a component IC and the wafer capacity.
Also a COVID-19 related challenge caused some.
Logistics and the shutdown in the customer site.
But we also still seen a wafer capacity will increase in the second half of 'twenty two.
This year. So at this moment the end market demand remains strong. So is our view, we still think one it actually.
Actually it's.
Attainable.
This morning.
Thanks, guys.
Thank you. Our next question is coming from Tom definitely from D. A Davidson your line is now live.
Yes. Good morning. Thanks for the question. So first one just following up on your last comment what is your expectation for industry unit growth and perhaps if you can quantify the wafer capacity growth you see for this year as well.
How it compares to a normal typical year.
This year.
Actually I think it is.
Less than last year.
So we actually already put into our forecast so is <unk> probably.
Wafer capacity will increase.
A little bit more because we only have we.
Our year actually finishing September right. So we probably only have an initial three months to probably enjoying even come up additional wafer capacity.
So actually our view of a unicorn.
No change from the beginning of the year.
What's a significantly business significantly lowered in the last year I think last year was.
Much higher than 10%.
Right. So this year is a more normal years.
Okay, and I think you made a comment earlier that you thought that the wafer growth you could see it going through 2024.
Does that potentially I guess, then for pretty strong unit growth over the next couple of years as well.
Yes.
So part B also I think.
The next few years the Unicorn.
I show no more for US probably is above six maybe 6% to 8%.
Okay, Great and then a lot of the equipment guys are seeing fairly.
Nick.
Business between the leading edge wafer growth capacity and the trailing edge.
So from your point of view is you're one of those.
But a driver I know historically, the trailing edge has been a bit of driver where Bobby but since you have 70 projects now.
The leading edge I was curious if that also is going to be a fairly nice driver for you for the next two years.
Yeah.
Well I think in my remark I mentioned this quarter the majority of Bonder actually go to the fab.
Finisher.
Our construction right. So I think both.
Leading edge and <unk>.
No more like an Iot.
Devices, most capacity will expand.
At this moment I think because of our front end capacity.
About the need to take a much longer time to prepare.
So I think probably investment earlier behavior by at least a woman.
<unk> began.
Frankly weaver.
The bonds and.
The normal wafer actually most capacity will increase in the second half.
Okay, Great and then finally can.
Can you talk a little bit about your partnership with PDF solutions and the creation of the closed loop Assembly solution.
How does that do you think impact revenue going forward are you going to be able to create some recurring revenue streams just from the data flow or how do you view that longer term.
Right. So I think at this moment the real time monitoring all the informations comber.
Become a closed loop is a very important because of the process everything gets and the more complex. So a partnership we do believe is ahead of value to our customers.
In terms of efficiencies throughput and the year on the NCS. So this.
I think the first one or two years later, although we get experience, we probably will help our Aps.
Revenue right that all of you.
Okay. Thank you for your time today.
Okay. Thank you.
The next question is coming from Krish Shankar from Cowen and company. Your line is now live.
Yeah, Hi, Thanks for taking my question I have a few of them first one can you guys still but the wire bonder lead times are today.
Yeah, So krish I think wire Bonder lead time is for.
For four five months.
Four and a half months got it got it okay.
And then I think if I remember right I think there was any kind of.
I understand there is a lot of capacity constraints et cetera, but.
You feel okay with the one 5 billion.
Number four this year and I'm just kind of curious.
You know at what point do you think some of these growth initiatives like the auto.
Advanced this makes sense.
Offsetting.
The legacy wide bodies.
Down the road.
Okay. So.
Yes.
So Chris maybe.
So maybe not from a number point of view.
As you know.
Bob on the actually.
Is a big business.
<unk> used to be very cyclical but.
In my view actually.
What we tried to do is make sure the ball Bonder, we have a leadership position and also ensure the growth on top of a new initiative, we have right. So actually the overall I am quite bullish about future available on the <unk>. So let me give you example, I think.
The whole wall the ball bonder represent about 65% of our market share of total IC packaging solution.
So whatever capacity increase.
Sure.
It can be high end can be and can be low end devices. The ball bonder actually represent 65% of market share to packaging.
Overall over all is IC.
So.
I think both on the demand will continue to grow.
Actually because of our.
In addition to yearly semiconductor unit growth.
Global bonds continue to find new applications to grow I'll give you. A few example, I think we've talked about the multi die by these multi die.
Actually.
<unk> actually in the connect not only between a tie to substrate, but also between our bank today. So because of this is also kind of.
Advanced packaging you put.
Difficult to maybe buy the Tibet, but actually.
Our increased equity tranches twice the density, but so increased also.
The capital intensity, so we really see the growth of these multi die.
Second application and telling you is.
We are entering <unk> and <unk>.
Actually in our package between a title.
Different kind of them with different kinds of noise into each other.
So.
The industries start to use our ball bonder.
Actually to build a vertical wire.
Become a fence along with di and to prevent.
In the <unk> and also.
Reduce the noise between each other so we see this area also growing and bolt ons.
Yes.
Distributor application.
I think we just mentioned.
The TSB alloy, so very mature, but very high cost.
We're working with the industry leader in DRAM and tried to use our stud bumping solution the vertical while actually connect between a stagnant instead what appears to be so.
Later this year people started usable bundle for 16 nanometer. So what I tried to say is.
Our loss.
The ball Bonder is a cyclical and so.
Industry and what we believe is.
And that will continue to grow in a cycle high and low will become a higher for the next cycle.
In the meantime, we tried to speed up or new initiatives as soon as possible to push your Roomie next and also grow.
<unk> packaging and the Aps <unk>, So I think to answer your question bottom line.
We are seeing may be second half of 2000, and all is a new initiative will become much meaningful to offset the cyclical.
But in the meantime, I think we're bullish on the longer I assume a cycle what your longer right now particular industries and more mature and a ball bonder stopped you.
Continue other than the unit growth need additional capacity.
So have additional growth in the area like I mentioned.
Uh huh.
The multi die and also shared in requirement and also auto application.
Murray.
Got it got it very helpful to them.
<unk>.
In the past you've mentioned PCB thermal compression bonder revenues.
$400 million in FY.
Slide 22, an $80 million of FY 'twenty.
Number to you, yes, yes, yes, yes, yes, actually we are bullish on our PCB and tissue exit we have a full market. We focus on mobile we also focus on.
Heterogeneous integration.
And.
Also I think.
In the.
Cmos imaging center.
And also a heterogeneous integration and all the support application.
Nicely so.
I think we.
Our goal right now is higher than originally we sure.
During our Investor day I think.
Also for Atlas Mega mentioned, Libya above hurricanes.
We believe our TCE will continue gross Tony but one constant about GCB is flops costa contamination.
<unk> will not be able to extend two very fine pitch like below that.
Micron's, but all fracs less.
<unk> is a very unique process.
Ah.
Actually provide very clean cut with a couple of cities and we believe is extendable almost <unk> 15, micron spaces right. So we actually already have a customer in the mobile also in our Cmos image sensor.
Silicon photonics for opt.
Optical transceiver and also heterogeneous integration.
So.
I think <unk> should be next year.
We actually close.
Close to $100 million.
Yeah.
I think the numbers should be.
Sure to your Investor day, but we do believe our PCB provided significant growth opportunity for us for convenience.
Got it thank you very much.
Okay.
Thank you as a reminder, that star one to be placed in the question queue. Our next question is coming from Christian Schwab from Craig Hallum. Your line is now live.
Hey, good morning, guys.
Great quarter, just a couple of quick questions that haven't been asked.
Ramp eliminate should we expect that gross margins to be in line with corporate average or is it going to be slightly better.
Lately.
Of course.
Hi, Christian it's Lester.
Type luminaire again, as we said previously because is there a <unk>.
Despite one of our more advanced products, we believe that it will be higher then.
The in terms of a little bit higher than that at the corporate margin. We think it's going to be one of our higher margin products, because we believe it's going to be.
One of the leading product in in the space and also I think there is great demand for the product and many in our micro OLED.
Perfect.
And then can you remind us I know you guys talked about this being a substantial market opportunity.
Sure.
By your bonding business.
Evan.
The acceleration of adoption of mini and micro Leds.
Our dialogue.
I mean can you give us.
No.
Three to four year path about how big you think that business can be again.
So Chris you were talking about the Venezuela.
Okay.
If you remember I think 'twenty one is the first year.
These are high volume production in 'twenty, what we guide.
The 80.
$80 million, we attribute.
This year, we also guy about $80 million.
$80 million to $100 million, we believe this year, we will end.
Close to hiring.
Close to between 80 to 100 close to a high side.
And then next year I think.
We'll have most of the revenue from <unk> and <unk>.
Our goal is aluminum I think there should be much higher in the futures, but because of our.
We are still in qualification stage.
Qualification can take a long time, but we are quite bullish.
Qualification should do very well so second half of 'twenty three we should have some more.
Meaningful.
Revenue from <unk>, So we expect 100 animal.
I think it can grow much much faster right. So we will probably share more detail in the next few quarters.
When we have more detailed information.
Okay, great. Thank you for that clarity.
It relates to the aggressive buyback plan and then.
A slight follow up to that.
Partnership with PDF solutions do you think we're at a stage where.
There is limited.
Any opportunities to create greater scale.
Or where the business through M&A versus.
Repurchasing stock.
Or do you think the best way is doing what youre doing to invest aggressively in but you know what I understand.
That's undervalued as well as expand opportunities through partnerships.
<unk> solution versus.
Maybe more consolidation in the backend.
So the question I think we look at all three of the areas you talked about I mean as we've shown.
Our capital return, we have a very attractive dividend, which we increased every year right.
In addition to that on the share buyback.
We did a very on an opportunistic basis.
Repurchase, which we've also been pretty aggressive on and then obviously, we did do the ASR of $150 million. So we do believe that the stock is undervalued currently and definitely undervalued considering all the exciting growth vectors that fusin talked about as far as partnerships. We're always open to partnerships with PDF and other people.
In terms of providing better solutions to our customers and also monetizing.
These solutions and hopefully these will become more sustainable, but we don't actually think that M&A is not something we would look at we've always looked at it and.
Im not sure whether we look at it from a consolidation standpoint in the back end I think what we look at is to basically adjacency, particularly in things that again, we think there's a lot of opportunity in automotive and advanced display along the supply chain for mini and micro led I think we look we're looking at a lot of different things there as well as things that will enhance.
Our core technologies and basically accelerate our development and that was shown for example in the unit Carter acquisition right. So I think we consider both capital returned through share repurchase and dividend definitely partnerships with people like PDF, but also we definitely are not seeing that.
M&A is not something we would consider we think definitely there are opportunities in M&A.
Great. Thank you for that clarity no other questions. Congrats on the I don't know.
Great quarter, and a great outlook. Thank you.
Thank you Christian.
Thank you. Your next question is coming from David Duley from Steelhead. Your line is now live.
Yes. Thanks for taking my question I was wondering I think it was at your analyst day, you talked about having gross margins improved by about 500 basis points from I believe a 47% rate.
And we just saw that you achieve that gross margin target or rates in this current quarter, but it was mainly driven by mix as you mentioned, a one time true up.
When you were referring to the 500 basis points improvement of gross margin before it was going to be driven by lower cost new products, particularly I think a new wire bonder product I was wondering if you could give us an update where you are with the new product initiatives.
New products continue to come out in the future will gross margins, perhaps growth higher than the 50 or 52% range.
Well, Dave I think with a $51 52, and you are correct you have.
Memory, we did talk about the core business.
Houston is really driven cost reduction over the last couple of years, we're continuing to drive cost reduction down which will help our margins I think also we do have new products.
In our core business, both in our ball bonder as well as wire Bonder and these new generate product new generation product Ashley.
We will have very attractive asps, because with their <unk> as well as the accuracy the cost of ownership to our customers actually are falling. So therefore, we can maintain healthy.
Healthy Asps as we look at.
Cost reduction always we built that in right from the beginning now Susan has really instilled a culture of cost savings from engineering, all the way through the supply chain.
So I think going forward, we do believe we will reach our long term target of the gross margin in the 50, 152% range and that's both from our very strong core business through cost reduction and new products as well as the.
New vectors in automotive advanced display and advanced packaging.
Okay.
Vacation question, what should the share count be maybe you mentioned this but I might have missed it what's the share count going to be in Q2 and going forward.
Dave you should use 61.
Sorry.
Okay.
Oh excuse me.
As you mentioned.
Talked about this in the past or is there is a high.
Higher.
Capital, our wire bonder intensity with some of these heterogeneous packages and multi chip modules I'm wondering if you could.
Maybe update us on what you think.
Just a.
Standard die how much more capital intensive youre seeing some of these newer advanced packages ARPA and just standard parts.
Yeah.
Yeah.
Yeah.
Well I.
Actually we don't have this on hand, right now but lofty.
I think we continue to see this.
Marty dive the grossly exceed all of growth maturity focus on a new area I mentioned industry new area.
You need to like a multi die not only tied to substrate you also need to connect die to die. So.
Therefore increase.
The intensity and the <unk>.
As a new shoe environment.
You bond connect to a substrate.
Also need to be.
Thanks <unk>.
Wrong.
The dye to make sure. It is not in the field to next next time. This also increased capital intensity.
And the continual application.
So.
Yeah.
I think before.
The fifth towards three years ago, the our wire bonder, maybe dealing with like one solid wire and right now we're doing about two southern way right. So actually.
If your capital.
Capital intensity, we love productivity increase probably almost double.
Okay.
Yeah.
Could you just remind us of the.
Mix in the wire bonder business between <unk> and idms.
What would you expect that mix to look like in the back half of the calendar year.
Well David.
I mean that makes it in IDM and also it does shift.
The quarter itself I mean, it's been running for ball Bonder, So the core business.
I think in the core business.
In the last couple of quarters because of the huge ramp in capacity and as you know when things ramp.
Our capacity based on capacity the Osage tends to be.
More active because they are generally where customers go when they need immediate capacity right. So that was close to probably to I would say almost 90% of that 10% idms in the most recent quarter Q2. It has shifted a bit I think its closer now to about $75 25 in terms of <unk>.
The IBM now I have become much more active particularly again.
As the automotive business is very strong as you know and our automotive automotive business actually is quite focused on on the idms.
So David I.
I think we have a very diversified customers in both the <unk> and the IGN.
Sometimes I think some all set probably you have a enough capacity not necessarily all of the wholesale has.
For capacity right. So I think we have a pretty good relationship with all our customers and we work with our customers and.
Especially as you know a bolt on the in my opinion is a reach into another.
Cycle I think our next cycle, we believe it will be longer and.
Bonder on tablet unit growth I think will also grow with a special application I mentioned that good.
<unk>, the NIS common and potentially can be used for the memory not only for the NIM, which we have.
Very very high market shares I think DRAM, we still have.
Much room to go to get our market shares.
Okay final question from me.
You talked about.
Zinc IC unit volumes getting a bit better in the back half of the calendar year I was kind of curious how you might be looking at this is.
Yes. It was my understanding in the middle of this year, you kind of have the five nanometer transition.
The big foundry in Taiwan, and that's definitely going to drive higher units, but I was under the impression a lot of this trailing add capacity wasn't going to come online until early next year.
Your view of both.
Kind of the front end.
Yeah.
Funded advanced in capacity in the trailing capacity and when it will come online and I'm imagining that the trailing edge capacity is more relevant for you as far as our wire bonder opportunity, but maybe not so that's correct.
Okay.
You are right it.
<unk> tried to I think I'll give you example.
Mobile continues to be extent, but even at six six nanometer, let's say a new application is this is going to be big application.
Mobile space and.
So a lot of people believe ball Bonder actually is the video technology, but I can just tell you. This.
A lot of very sophisticated technology over there.
<unk> is.
<unk> continued to extent because of a ball bonder wire bonder is a most effectively for interconnect.
So we believe.
People believe about 20 nanometer.
But we'll be more free chip, but actually continue to extend and people.
Actively working on the six nanometer might not be high volume production by end of this year, but for sure.
Volume or will come quickly.
Thank you.
Thank you we reached end of our question and answer session I would like to turn the floor back over to Joe for any further or closing comments.
Thank you Kevin.
Thank you all for joining today's call over the coming months, we will.
We'll be presenting at several virtual and in person investor conferences in New York and San Francisco.
As always please feel free to follow up directly with any additional questions have a great day everyone.
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