Q3 2023 Photronics Inc Earnings Call
[music].
Good day, and thank you for standing by while countries.
Tronic third quarter fiscal year 'twenty two 'twenty three earnings call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
To ask a question. During this session you will need to press star one one on your outlook.
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Please be advised that today's conference is being recorded on Wednesday September 620, 23, I would now like to turn the conference over to Rachelle Burke Chief administrative officer, Sir. Please go ahead.
Thank you Michele good morning, everyone. Welcome to our review of Photonics fiscal 2023 third quarter results. Joining me. This morning are frankly, our Chief Executive Officer, John Jordan, Our Chief Financial Officer, Chris Kreidler, Our Chief Technology Officer, and Eric are there, our chief accounting officer and corporate controller.
The press release, we issued earlier this morning together with the presentation material that accompanies our remarks are available on the Investor Relations section of our webpage comments made by any participants on today's call may include forward looking statements that include such words as anticipate believe estimate.
That forecast and in our view. These forward looking statements are based upon a number of risks uncertainties and other factors that are difficult to predict actual results may differ materially from those expressed or implied and we assume no obligation to update any forward looking information.
During the course of our discussion we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts investors and management to evaluate ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials at this time.
I will turn the call over to Frank and can reach you Anne and good morning, everyone.
Our teams did a great job.
Uh huh.
And in margin.
Being faithful even while we experienced.
I think he spoke to it than that.
Revenue during the quarter was 200 countries will meet in.
I see.
Uh huh.
Sequentially, 2%, though right.
Oh 229 meeting thought as said in our previous quarter.
Looking at our full it yesterday.
My name is Oh.
8% compared to last year.
And the main point of that revenue range in our Q4 guidance.
We are on track to achieve our six concept if you Oh great grandmother.
Yeah.
We continue to deliver consistent financial performance.
Against the backdrop of an.
Extended semiconductor downtime.
Profitability has improved and you have to pay.
With gross margin up 3% from last year.
And operation market as well.
Okay.
Okay.
Coming into the IC business.
High end IC revenue was up.
In Q2.
As demand increased from foundry customer in Asia.
At the same time.
Reduced administered Dominion Asia.
Of course, our overall IC revenue to fall slightly.
We'd be deep.
We have maintained market share.
I'll, let you graphic presence and a broad technologies have positioned the company well to continue to grow as market demand improves.
MTV saw continued growth in high end and Verde masterful mobile Ids right.
This was offset by declines in footwear My sports E pinpoint five Prost and L. T. P. S E spreads.
And what are the usage.
But getting into larger format heightened tablet.
Desktop and automotive sectors, while increasing penetration into some muscle.
We also see emerging panel makers.
Turning to gain market share in new MRI.
Yeah.
It usually is.
Another positive trend whether it be at a pedestrian a M.
And also G airports fixed size grass.
Is it product whenever you acquire a new level of high quality issue period.
Photo mask.
They have I mean for Chinese technology leadership position.
We are congregating.
We'll continue to win business with these advanced technologies.
The strong demand and continue a midstream business.
Our M. P is that operation at high utilization levels in Q3.
And we expect to maintain that trend into Q4.
Well you always can although all my mother's day lowered revenue by controlling cost and obviously by our product mix.
That enabled us to maintain growth and operation margin.
In line with the rate cut.
In Q2.
In addition.
Our customer long term agreement.
S T and fat.
They should wait.
As a result.
<unk> 44 cents per share on a GAAP.
And 51 cents per share.
And I'm guessing.
And I'm guessing.
Because I really have no global semiconductor industry.
Seems to be slower than previously anticipated.
To compete you make real economic uncertainty.
And we use it.
Consumer good man.
Oh yeah.
On a positive side I think these are intensive industry trend should be a positive driver for closing remarks.
Technologies, such as AI.
Okay.
In Austria.
We're continuing to drive chip makers to reduce their guidance or many varieties of new Ics.
It's H design requires a unique set of months to launch its IC product.
This weird.
High demand for both high end administrative abilities.
Additionally, I'm sure a trend.
Support it it's been good you resume your global semiconductor manufacturing capacity.
Multiple node.
About your wafer fab projects under construction or planned in Asia, North America and Europe .
To have each range it manage it as semiconductor supply chain.
Consequently, we also expect this issue and our capacity.
To drive more global demand for both of us.
Our financial discipline.
And location strategy.
Careful krish.
Balance sheet management support our long term growth initiative to take advantage of these trends.
The priority of what's wrong in this capital allocation strategy has been to invest in profitable organic growth.
We believe.
Our ability to outgrow the IC market.
We will go Marsha, resulting from the pocket kept all your basement.
All of the above factors.
Give us comfort that that photo mask demand will continue to grow over the long term.
And for Chinese is uniquely positioned to benefit from this growth opportunity.
Turning to under history is on track to beat our not a great year for photronics.
And the company is performing.
And where you are.
A difficult industry environment.
I have full confidence in all of his ability.
And I am optimistic that we will be able to grow revenues.
He spent module.
And deploy capital to continue creating shareholder value.
With that I went to turn that call over to John .
Thank you Frank good morning, everyone.
Our guidance for third quarter anticipated revenue was essentially flat.
With Q2.
Revenue for the quarter of $324 million was at the low end of that guidance, an increase of 2% over last year's Q3.
2%.
For Q2.
The record $229 million.
Oh I see enough P. D. We're off the Q2 results by that same percentage.
And anticipated orders was the primary cause of the lower revenue.
We anticipate the Q4 order rates to be somewhat better as reflected in our Q4 guidance we will discuss later.
Consistent with the counter cyclical nature of the photo mask industry, we've discussed in the past.
<unk> revenue has remained relatively strong in the face of the sustained industry downturn.
I see revenue of $163 $1 million was down 2% sequentially.
Revenue increased sequentially, despite weakness in memory unstrung foundry logic demand in Asia.
Mainstream IC demand was more tempered.
Overall supply demand dynamic and the long term purchase agreement structure continue to support favorable pricing.
And together with our understanding of the industry outlook supplemented by a close collaboration with our customers strategies.
For where our investments are targeted.
The expansion of our Taiwan, and China IC facilities.
Provide the added capacity to continue fueling growth in our IC business in that region.
S. P. D revenue was also down 2% from the record setting second quarter level.
Although able that business to supply the whole debate to destroy them.
And overall declined as they ever let girls was upset by fewer L. T. P S and G 10, five plus masses.
We can see we continue to see strong demand from the leading producers of mobile displays as well as emerging competitors that are revisiting their designs to gain market share.
As we have each quarter in the past, we toggled that production capacity to mainstream to upset the slight high end.
Softness.
We anticipate continued probably demanded SPD as panel makers are these new designs for mobile and other applications.
I think mentioned with a relentless focus on cost management, we maintain gross and operating margins in line with our records achieved in the second quarter, despite 2% lower revenue.
Over the trailing 12 month period I think it was Q3, we've achieved gross margin of 38% and operating margin of 28%.
Since our margins are both already into the margin ranges in our physical 2024 target level, we will update that model and reissue it at a future time.
Nonetheless, we will continue to drive to expand margins as revenue grows based on operating leverage pricing power and disciplined cost management.
Net income in the quarter was $27 million on a GAAP basis or 44 cents per diluted share.
non-GAAP basis, adjusting for the unrealized non operating loss due to foreign currency movements. We achieved net income of $31 $6 billion or 51 cents per share at the midpoint of our Q3 guidance.
The solid result, based upon our revenues in the quarter.
Yeah.
Operating cash flow was strong again this quarter at $85 $9 million based on strong net income and a good job managing working capital.
We invested $21 1 billion and capex for the quarter, bringing year to date, Capex was $78 million and year to date free cash flow to nearly 117 million.
Our 2023 Capex forecast remains approximately $130 million, primarily for the increased IC capacity I discussed.
On the balance sheet cash was 148 9 billion at the end of the quarter and short term investments were $27 $3 million.
We have $26 7 million of debt, which consists of low cost equipment leases.
The strong financial position provides ample liquidity for our growth investments and resilience against the uncertainties, we could face in the future.
Before I provide guidance I will remind you that our visibility is always limited as our.
Backlog is typically only 11 in three weeks and demand for some of our products is inherently uneven and difficult to predict.
Additionally.
S P. Israel mask sets are high.
And as this segment of the business grows a relatively low number of high end orders can have a significant impact on that.
Quarterly revenue and earnings.
Given those caveats, we expect fourth quarter revenue to be in the range of $222 million to $232 million.
Unknown Executive: Good day and thank you for standing by.
Unknown Executive: Welcome to the Photronics third quarter of fiscal year 2023 earnings call. At this time, all participants are in the list and only mode. After the speakers presentation, there will be a question and answer session to ask a question during the session. You will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11.
We believe Florida Best Group continued to do well in this current semiconductor and display environment and we will continue to strive to increase our market leading positions.
Based on those revenue expectations and our current operating model, we estimate non-GAAP earnings per share for the fourth quarter to be in the range of 51 to 59 cents per diluted share.
Unknown Executive: Again, please be advised that today's conference is being recorded on Wednesday, September 6, 2023.
We are performing well in 2023.
Well go long term demand trends from photo masks, a broad suite of technologies to delivering products our customers need.
Richelle Burr: I would now like to turn the conference over to Richelle Burr chief administrative officer. Please go ahead. Thank you, Michelle. Good morning, everyone.
And matched global presence to a level that customers footprints and a great team that consistently exceeds expectations give us confidence that we can achieve our long term targets and continue creating shareholder value.
Richelle Burr: Welcome to our review of Photronics fiscal 2023 third quarter results. Joining me this morning are, frankly, our chief executive officer, John Jordan, our chief financial officer, Chris Progler, our chief technology officer, and Eric Rivera, our chief accounting officer and corporate controller. The press release we issued earlier this morning together with the presentation material that accompanies our remarks are available on the investor relations section of our web page. Conduct made by any participants on today's call may include forward looking statements that include such words as anticipate, believe, estimate, expect, forecast and in our view.
I will now turn the call over to the operator for your questions.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be.
To withdraw your question. Please press star one one again please.
Richelle Burr: These forward looking statements are based upon a number of risk uncertainties and other factors that are difficult to predict. Actual results may differ materially from those expressed or implied and we assume no obligation to update any forward looking information. During the course of our discussion, we will refer to certain non-GAAP financial metrics. These numbers are useful for analysts, investors, and management to evaluate ongoing performance. A reconciliation of these metrics to GAAP financial results is provided in our presentation materials.
Please standby, while we compile the Q&A roster.
The first question.
Comes from Tom <unk> with D. A Davidson your line is open.
Hi, This is Linda on behalf of Tom. Thank you for letting us ask questions. So.
So I guess my first question. It seems like you had pretty good margin gross margin for the quarter. Despite the demand slowdown could.
Could you give us a bit more color on that driving factors. There I know you mentioned some cost management and then.
The pricing is still favorable.
To tell on that would be helpful. Thank you.
Okay.
Okay. Thank you.
Frankly: At this time, I will turn the call over to Frank. Thank you, Richard, and good morning, everyone. Our team did a great job in the third quarter, maintaining margin and improving cash flow, even while we experienced society softer demand. Remaniel during the quarter was 224 million, 2% better than RCA's third quarter, as sequentially 2% lower than the record of 229 million dollars set in our previous quarter. Looking at the full year today, Remaniel is up 8% compared to last year.
Our price.
Contact Oh, AR Goldman cost agreement with a major customer.
And also the product mix a spin.
And I see areas.
We have more high end product mix.
Compared to previous quarter so the.
Our compounds and it's actually it's better so it is there's a on the S. P. A revenue side.
In terms of cost are all put up human team and operations team.
I want to go to to reduce water usage, all materials and to improve our operation efficiency to control cost.
Frankly: At the midpoint of the Remaniel range in our Q4 guidance, we are on track to achieve our sixth consecutive year of record Remaniel. We continue to deliver consistent financial performance against the backdrop of an extended semiconductor downturn. Our profitability has improved here today, with growth margins of 3% from last year, and our perishing margins are nearly slow. Tony Tula, IC Business, high-end IC Germany was up from Q2 as the main increase from factory customer in Asia.
John you have anything to add.
I think it's a really important Linda to remember those long term purchase agreements. We have provided a really good support not only for pricing.
But for the throughput at the volume that we're getting through our <unk>.
Our operations there.
May not be the same with our competitors.
So that plus the mix there trying to discuss.
Helps support all support a really good margins.
You might notice.
Imagine as this previous quarter was even better than.
And then the margin in the second quarter by about 10 basis points.
Frankly: At the same time, reduced measuring the main in Asia caused our overall IC revenue to fall slightly. We believe we have maintained market share. Our geographic presence and the growth technologies have positioned the company where to continue to grow as market demand improves. FPD saw continued growth in high-end AMERA, mass-for-movey display. This was offset by the price in photo mass for G10.5 plus and LTPS display. AMERA usage is spending into a larger form a high-end tablet, laptop and automotive sectors while increasing penetration into smartphone.
That's very helpful and I guess my follow up particularly in mainstream you mentioned softer demand in the business is it.
Certain segments or is it across the board maybe could you paint a picture of what the future demand in mainstream looks like and what the margins look like for that business.
Yes.
On a long term basis Linda.
The bed from mainstream is expected to stay very strong so the third quarter as the third quarter seemed.
Seem to be a little bit or renewable isn't data, but it seems to be kind of a low point that we expect to.
When do you expect to may seem to bid to strengthen again.
During the fourth quarter.
Frankly: We also see emerging panel makers attempt to get market share by releasing new AMERA designs. In future years, another positive trend will be the production of AMERA panels on G8.6 size glass. This product will require a new level of high quality and future photo mask, flavoring for Chinese technology leadership positions. We are confident in our ability to continue to win business with these relevant technologies. The strong AMERA demand and continued measuring business kept our FPDF operation at high utilization levels in Q3, and we expect to maintain the trend into Q4.
As the industry comes out of this but we hope comes out of that slope in 2024, and we think we'll see a strong demand across the board.
Additionally comment John .
Our backlog even is a said I'd heard elon.
Lower than previous quarter. However is the maintain regular.
Relative to a higher table so under situations all our cycle times actually is to go longer than all our competitors are because of the overall market is that they come in.
Especially administrative is solved now.
And previous quota so before all with drop downs we.
We are not taking as many all day. So we can manage trains are to be competitive in cycling that.
However, if the market turns around again in Q4 early next year.
Frankly: We overcame all of our market models, the lower revenue by further controlling costs and optimizing our product mix. That in order to maintain growth and operation margins, in line with the record level set in Q2. In addition, our customer-long-term agreement helped us preserve the ASP and track utilization rates. As a result, we end 44 cents per share on our gap basis, and 51 cents per share on our long gap basis. Recovery in a global semiconductor industry seems to be slower than previous anticipated, due to continued macroeconomic uncertainty and youth consumer demand.
I P. Dave I'll mention revenue.
In total will it be a back to higher table again.
Yeah.
Thank you for the color and then in terms of the continued geopolitical issues with China, and then demand environment.
The overall semiconductor market.
How would you characterize the health of the Chinese market for you guys of course, Sydney and SPT.
And may be.
Do you anticipate toward the end of this year.
Chris do you want to comment.
But if we can keep it.
Yeah Linda.
The Chinese our Chinese business is as strong as it's been.
And it's continued.
We don't see any change in the Chinese business so far.
As we've discussed in the past the effect on our business.
Frankly: However, on a positive side, IC design intensive industries trend should be a positive Technology such as AI, data center, ROT, automotive, industrial and machinery, we're continuing to try to make us to release design for many varieties of new ICs. Since each design requires a unique set of formats to launch this IC product, this will try demand for both high and administrative abilities. Additionally, I'm sure in trend, I'm supporting the investment in global semi-conductor manufacturing capacity across multiple nodes.
It is.
Restrictions imposed by the government thus far is considerable.
And I guess the other thing we've noticed is the fab capacity in China gets restricted for the leading edge a lot of that capacity is getting pivoted to midrange nodes and those are very healthy nodes for commercial mask, making so.
In some ways, there's a lift certain design activities at mid range goes it's actually supports our court.
Our core business.
As far as overall semiconductor.
We expect it to be down pretty sharply in 2023, and then gradually bounce back in 'twenty four.
Photo mask industry, a few companies that follow it.
It would be flat slightly down in 'twenty three so photronics as a whole is outperforming both of those kind of broad market indicators. So.
Frankly: But with a fair project, under construction or plan in Asia, North America and Europe, to help each region manage their semi-conductor supply chain. Hamsa Country, we also expect this additional capacity to drive more global demand for photo masks. Our financial discipline, capital education strategy, and care for cash, balance sheet management support our long-term growth initiative to take advantage of these trends. The priority of a Chinese capital education strategy has been to invest in profitable organic growth.
We were kind of tracking what's going on in semiconductor mask, but generally we're certainly not sitting still are outperforming the broader indices in both of those markets.
Thank you and then my last question is Bob capital expenses.
I believe John you mentioned.
I believe a $130 million this year.
Is it just for the expansion of the facilities in Taiwan, and China or is there any other capacity you're looking to expand it maybe talk about that please.
This year for it.
C.
So if we have a capital across the board Linda a lot of it is in other.
Taiwan and China.
We're putting tools and supplementing.
Lithography lives and all of the locations.
Frankly: We believe our ability to outgrow the IC market and the wind photo market result from the target capital investment. All of the above factors give us confidence that photo masks demand will continue to grow over the long term. And for Chinese, it's uniquely a position to benefit from this growth opportunity. 2020 is on track to be another great year for for Chinese.
Okay, great. Thank you for your time.
Thank you Liz and thank you very much.
Yeah.
Ladies and gentlemen, there are no further questions at this time I will now turn the call over to Frank Lee for closing remarks.
Thank you thank you Julian.
This morning I am.
All of our kids a bonus.
Delivering strong results in 2020 suite.
And we look forward to updating you as we make progress in achieving our long term targets.
Good day and thank you.
Ladies and gentlemen that concludes the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line. Thank you.
Okay.
Frankly: And the company is performing where, even under a difficult industry environment, I have full confidence in our ability and I am optimistic that we will be able to grow revenues, spend margin, and deploy capital to continue creating shareholder value.
Richelle Burr: With that, I will come to call over to the chat. Thank you Frank.
Christopher Progler: Good morning everyone. Our guidance for third quarter anticipated revenue essentially flat with Q2. Revenue for the quarter of 224 million was at the low end of that guidance and increased some 2% over last year's Q3 and 2% off the Q2 quarterly record of 229 billion dollars. Both IC and FPD were off the Q2 result by that same percentage. A leg and anticipated order is the primary cause of the lower revenue. We anticipate the Q4 order rate to be stuff like better as reflected in our Q4 guidance we'll discuss later.
Okay.
[music].
Uh huh.
Okay.
Okay.
[music].
Christopher Progler: Consistent with the counter-cyclical nature of the photo mask industry we've discussed in the past, Photronics revenue has remained relatively strong in the face of the sustained industry downturn. I see revenue of $163.1 million was down 2% sequentially. High-end revenue increased sequentially despite weakness in memory on strong family logic demand in Asia. Main stream I see demand was more temperate, but the overall supply demand dynamic and the long-term purchase agreement structure continued to support favorable pricing.
Christopher Progler: And together with our understanding of the industry outlook supplemented by close collaboration with our customer strategies, help inform where our investments are targeted. The expansion of our Taiwan and China IC facilities will provide the added capacity to continue feeling growth in our IC business in that region. FPD revenue was also down 2% from the record setting second quarter level. Although AMOLED business to supply all of the main continuous strong, high-end overall declined as the AMOLED growth was offset by fewer LTPS and G, 10.5 plus masks.
Christopher Progler: We continue to see strong AMOLED demand from the leading producers of mobile displays as well as emerging competitors that are releasing new designs to gain market share. As we have each quarter in the past, we toggle the production capacity to mainstream to offset the slight high-end softness. We anticipate continued growing demand in FPD as panel makers release new designs from mobile and other applications. As Frank mentioned with our relentless focus on cost management, we maintain gross and operating margins in line with the records achieved in second quarter despite 2% lower revenue.
Christopher Progler: Over the trailing 12 month period ending with Q3, we have achieved gross margin of 38% and operating margin of 28%. Since our margins are both already into the margin ranges in our fiscal 2022-24 target model, we will update that model and reissue it at a future time. Nonetheless, we will continue to drive to expand margins as revenue grows based on operating leverage pricing power and disciplined cost management. Net income in the quarter was $27 million on a gap basis of 44 cents per alluded share on a non-gap basis adjusting for the unrealized non-operating loss due to foreign currency movements, we achieved net income of $31.6 million or 51 cents per share at the midpoint of our Q3 guidance, a solid result based upon our revenues in the quarter.
Christopher Progler: Operating cash flow was stronger again this quarter at $85.9 million based on strong net income and a good job managing work in capital. We invested $21.1 million in cap-backs in the quarter, bringing year-to-day cap-backs to $78.8 million, and year-to-day free cash flow to nearly $117 million. Our 2023 cap-backs forecast remains approximately $130 million, primarily for the increased IC capacity I discussed. On the balance sheet, cash was $148.5 million at the end of the quarter in short-term investments for $27.3 million. We have $26.7 million of debt which consists of low-cost equipment leases. The strong financial position provides ample liquidity for our growth investments and resilience against uncertainties we could face in the future.
Christopher Progler: Before I provide guidance, I will remind you that our visibility is always limited as our backlog is typically only once in three weeks and demand for some of our products is inherently uneven and difficult to predict. Additionally, the ASPs for high-end masks sets are high and as the segment of the business grows, a relatively low number of high-end orders can have a significant impact on our quarterly revenue and earnings. Given those cap-backs, we expect fourth-quarter revenue to be in the range of $222 to $232 million.
Christopher Progler: We believe fourth-invested demand will continue to do well in the current semiconductor end display environment and we will continue to strive to increase our market-leading position. Based on those revenue expectations and our current operating model, we estimate non-gap earnings per share for the fourth quarter to be in the range of 51 to 59 cents per alluded share. We are performing well in 2023, favorable long-term demand trends for photo masks, a broad suite of technologies to deliver products our customers need, an unmatched global presence to align with our customers footprints, and a great team that consistently exceeds expectations. Give us confidence that we can achieve our long-term targets and continue creating shareholder value.
Operator: I will now turn the call over to the operator for your questions. As they reminder to ask a question, please press store 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press store 1-1 again. Please stand by while we compile the Q&A roster.
Linda Umwali: The first question comes from Tom Difflee with DA Davidson. Your line is open. Hi, this is Linda on behalf of Tom Difflee. Thank you for letting us ask questions. So I guess my first question seems like you had pretty good margins for the quarter despite the demand slowed down. Could you give us a bit more color on the driving factors there? I know you mentioned some cost management and then the pricing is still favorable.
Linda Umwali: Any detail on that would be helpful. Thank you. Our price protects our long-term agreement with major customers and also the product makes especially in the sector. I see areas we have more high-end product makes compared to previous quarter. So the compound phase is actually better. So this is on the ASB and revenue side. In terms of course, our procurement team and operation team has worked together to reduce the usage of materials and to improve the operation efficiency to control the cost.
Linda Umwali: So John, you have anything to add? I think it's really important, Linda, to remember those long-term purchase agreements we have provide a really good support not only for pricing but for the throughput the volume that we're getting through our operations that may not be the same with our competitors. So that plus the mix that Frank discussed helps support really good margins. And you might note that the margin in this previous quarter was even better than the margin in second quarter by about 10 basis points.
Linda Umwali: That's very helpful. And I guess my follow-up particularly in mainstream you mentioned software demand in the business. Is it in certain segments or is it across the board? Maybe we could do paint a picture on what the future demand in mainstream looks like and what the margins look like for that business. Yes, on a long-term basis, Linda, the demand from mainstream is expected to stay very strong. So the third quarter and the third quarter seem to be a little later.
Linda Umwali: We hope it was a later but it seems to be kind of a low point that we expect to, you know, we expect to mainstream demand to strengthen again during fourth quarter. And then as the industry comes out of it, we hope it comes out of its slope in 2024. We think we'll see strong demand across the board. A additional comment to John. Our backlog even is slightly lower than previous quarter.
Linda Umwali: However, it's still maintained relatively high-dabel. So under the situation, our cycle time actually is longer than our competitors because the overall market is becoming especially mentioned in software than a previous quarter. So before our withdrawal, We are not taking as many orders as we can in a measuring to be competitive in cyclotaph. However, if the market turned around again in Q4 early next year, I believe our measuring in revenue in total will be back to high level again.
Unknown Executive: Thank you for the color. And then in terms of the continued geopolitical issues with China and then demand environment, being weak on the overall semiconductor market. How would you characterize the health of the Chinese market for you guys both for semi and FBB at the moment and maybe what you anticipate through the end of this year? The Chinese businesses as strong as it's been and it's continued, we don't see any change in the Chinese businesses so far.
Unknown Executive: And as we've discussed in the past, the effect on our business of, you know, any of the restrictions imposed by the government thus far has been visible. And I guess the other thing we've noticed is that FAB capacity in China gets restricted for the leading edge. A lot of the capacity is getting pivoted to mid-range nodes and those are very healthy nodes for commercial mass making. So in some ways there's a lift in certain design activities in mid-range nodes which actually supports our core business.
Unknown Executive: As far as overall semiconductors, you know, expected to be down pretty sharply in 2023 and gradually bounced back in 2024. The photo mask industry, the few companies that follow it, expected to be flat, slightly down in 2023. So for China, the whole is outperforming both of those kind of broad market indicators. So we are kind of tracking what's going on in semiconductor and mask but generally we're certainly not sitting still or outperforming the broader indices in both of those markets.
Unknown Executive: Thank you. And then my last question is about capital expenses. I believe John, you mentioned, I believe 130 million this year. Is it just for the expansion of the IC facilities in Taiwan and China? Or is there any other capacity you're looking to expand? Maybe talk about this year for SPD and IC. We have capital across the board and a lot of it is in Taiwan and China but we're putting tools and supplementing the photography lines in all our locations.
Linda Umwali: Great. Thank you for your time. Thank you, Linda. Thank you very much.
Operator: Ladies and gentlemen, there are no further questions at this time.
Frankly: I will now turn the call over to frankly for closing remarks. Thank you.
Frankly: Thank you for joining us this morning and proud of our kids' performance in delivery strong results in 2023 and the forward to updating you as we make progress in achieving our long-term targets. Have a good day and thank you.
Operator: Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Thank you.