Q3 2023 Axcelis Technologies Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Excel is technologies call to discuss the company's results for the third quarter. My name is Corey and I'll be your coordinator today at this time, all participants are gonna listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session.
We'll need to press star one one on your phone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again, please be advised that today's conference call is being recorded.
Like the hand, the conference call over to your host for today's call, Doug losses, Executive Vice President of corporate marketing and strategy.
Thank you operator, this is Douglas executive Vice President of corporate marketing and strategy and with me today is Russell low President and CEO and Jamie Coogan Executive Vice President M. C F L.
If you have not seen a copy of our press release issued yesterday. It is available on our website.
Way back service will also be available on our website as described in our press release. Please.
Please note the comments made today about our expectations for future revenues profits and other results of forward looking statements under the F. C C Safe Harbor provision.
These forward looking statements are based on management current expectations.
Subject to the risks inherent in our business.
<unk> described in detail in our Form 10-K annual report and other S. A SEC filings, which we urge you to review.
Our actual results may differ materially from our current expectations, we do not assume any obligation to update these forward looking statements.
Now I'll turn the call over to President and CEO special well.
Good morning, I, usually joining a scratch third quarter of 2023 earnings cool.
So does continue to X G. A high level in a circle that driven by strengthening the power market <unk>.
Revenue in E. S. D. P S exceeded kinds of $292.3 million with earnings per share of $1.99.
Guarding fourth quarter revenue approximately $295 million with gross margin of approximately 45% operating profit approximately $73 million in earnings per share of approximately $2.
2023 annual revenue.
Right at $1.1 billion, representing year over year revenue growth around 20 per cent in a year in which olive O. W. S. E is expected to decrease by 20% to 30%.
Backdrop remain strong at $1.2 billion with courtly systems bookings increases slightly to $198 million. The book to Bill ratio has no 0.83 primary due to increased shipments in the cold water.
The power market continues to be an area of strange <unk>, representing more than 60 per cent of our system shipments so sir consecutive quarter.
The overall mature process technology market generated 99% a quota system shipments with just one per cent going to memory customers composed entirely of DRAM.
<unk> makes a vast system shipments in the third quarter was much more balanced with a combined U as in Europe, representing 38% Shiner 75 per cent Korea, 12%, Taiwan, 4%, Japan three per cent and the rest of the world at 8%.
The town is last segment and in particular Silicon carbide has driven at growth. During this downturn, we continue to win business for new customers.
Spend at product footprint with existing customers.
<unk> <unk> 60 per cent of our ships system revenue in 2023, two come from power was around 35 per cent of total system revenue coming from.
Applications <unk>.
<unk> palace serious.
Is important for our customers <unk>.
Continued to see increased adoption should H 207, <unk> I'm sure <unk> systems.
Two three we shipped at 200 <unk> sure, yes, see certain caught my system to a leading Japanese power device manufacturer.
We also have three pure H 200, so you can cut by system evaluations on the wild customers in multiple geographies.
These systems are 150 millimeters and one of the 200 millimeters system.
These are valuation use give our customers a historic qualifying productivity limited <unk> as a ramp at the higher volumes.
It also enables the customer to conduct optimization, where can I devices, you twice in the high energy and dose capabilities of the pure H 200, so they can call by system.
Input the three inputted slices silicon carbide is highlighted by the relatively even revenue split across the full pure and palace serious product family in 2023.
The only other implantation company that can deliver complete rescue coverage for how to slice applications.
Consider the technology later in the supply of choice provide the best product family.
Capabilities.
This means that using excel is toes provide the lowest risk path to high volume manufacturing bitcoin.
Aggressive five Grand plans.
So those places significance value on enabling our customers succeed in this exciting lucky by providing differential performance at a high level of customer satisfaction.
So this is a large number of customers and the power market, which is currently expected to remain healthy in 2024.
This would provide good support <unk>, even if the industry down some continues and now includes increased toughness in the general mature markets.
One of our customers are emerging through this down Sir <unk> remains close the supporting their installed base and working with them on the future technology manufacturing needs.
Recently, we shipped to <unk> Dragon to a leading research Institute <unk> process development.
<unk> and the associated collaboration will be critical transfer customers development for next generation technology.
Additionally, we have multiple evaluation systems and many customer engagements is I'd like to increase foot.
Across all segments.
The Street exit this down Sir.
Richard healthy growth in these markets. This combined with continued strength and the power <unk> would drive excel is so at 1.3 billion dollar model and beyond.
Now I'd like to turn it over to Jamie.
Thank you Russell and good morning, everyone.
Before turning to the results for the quarter I Wanna say that I'm excited to be joining the <unk> team over the past few years. This team has worked diligently developing cutting edge ion implant products, establishing a strong product physician into power device market and creating a rare opportunity to grow revenue and profitability during a significant industry down.
Turn through strong execution.
I look forward to adding my experience of this team meeting many of you at our future investor events.
Turning to the quarter.
We are pleased with our financial results for the period and that'd be looked at a full year. We are reiterating our full year revenue expectations of greater than $1.1 billion, which represents year over year growth of approximately 20 per cent.
Looking at our third quarter revenue and earnings per share finished well above guidance due to salad execution and continued strong demand for period, especially in the silicon carbide power market.
Q3 revenue was $292.3 million with system revenue at $231.5 million and C. As in I revenue at $60.9 million.
Q3.
Earnings per share of one dollar and 99 cents was well above guidance due to higher than expected revenues and gross margin as well as lower overall operating expenses.
Despite some of the softness in the general mature market bookings and quoting activity for systems and the power segment remain solid and continue to support our expectation that greater than 60% of shipped systems' revenue will come from this market in 2023.
Yes, and I revenue will fluctuate quarter to quarter, which should be model that approximately $245 million for 2023 and $300 million for a 1.3 billion dollar revenue model.
Two three gross margin finished is at 444% above guidance, driven by lower costs and deferrals and benefiting from a slightly improved mix.
We expect from your sport margin to come in higher.
Proximately 45 per cent full.
Full year 2000, twenty-three gross margin will be approximately 43.6 per cent.
We remain laser focused on margin improvement and have a number of initiatives underway to lower cost of goods sold and drive higher sales aperient product expansions execution on these initiatives allows us to model gross margin at approximately 45% in our 1.3 billion dollar revenue model.
Turning to operating expenses.
The third quarter ended at 19.8% of revenue better than our guidance, we expect opex in the fourth quarter to remain flat as we continue to tightly managed spending.
Investments will continue to be an area of focus for us to insure.
We are supporting business growth solidifying our technology advantage in the specialty markets and increasing our footprint in the memory, an advanced logic markets <unk>.
Most importantly, we will continue to invest in our employees and infrastructure to ensure we have the necessary skills and equipment required to achieve our financial models.
We recently completed one of our more significant infrastructure investments are new state of the art Logistics Center in Beverly mass the New Logistics Center located just a short walk from our headquarters will be fully functional during the fourth quarter.
This facility will provide significant efficiency, improving our material handling and flow to our operations.
The fourth quarter.
Also marks the two year anniversary of the opening of the <unk> Asia operations Center in South Korea.
This facility has been critical to our revenue growth and is expected to have shipped over $300 million of systems by year end.
We plan to further ramp both are Beverly in Korean operations is capacity needs grow and are comfortable that we have initiatives in place that support our 1.3 billion dollar revenue model.
Moving to our balance sheet and cash flow, we end Q3 with $461 million of cash cash equivalents and short term investments and regenerated $24 million of cash from operations in the period we.
We saw a higher volume of shipments later in the quarter, which increased our outstanding receivables.
We continue to execute against our previously announced share repurchase program buying back $12.5 million of stock in the quarter.
Total we've returned over $170 million of cash to shareholders since 2019 through our share repurchase programs.
And my first few weeks with <unk> I've been impressed with the team and their dedication to innovation and they're dry for improving efficiency and operational performance.
Qualities were essential in allowing <unk> to reach the level of performance we see today.
Once again I would like to reiterate my excitement enjoining acts Ellis and look forward to helping the team take the company to new heights in the future.
I will now turn the call back to Russell for his closing comments.
Thank you Jamie.
<unk> expects to achieve revenue credit and $1.1 billion in 2023, and it's touching revenue of $1.3 billion in 2025.
Growth is achievable choose the following factors.
First the implant 10 is more than double in the last few years.
We expect you to continue to grow with mature market segments, representing Gretton 60 per cent of the total tab.
<unk> <unk> devices, especially silicon cop I devices are highly implant intensive and a general mature notes have increasing in intensity, peaking at 28 nanometers.
Hi Valley, appearing product extensions were designed to optimize powered image sensor device manufacturing, making excel is the only company the potline capable of covering all in <unk> in these T markets.
This unique he positions accelerated benefit from Highgrove mature process technology markets.
And finally, it sounds has strong longterm customer relationships and a fundamental cultural desire to win by making our customers successful.
I went to the same time, please suppliers customers and investors for your continued support.
With that I'd like to open it up for questions.
Thank you ladies and gentlemen at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please stand by while we compile the Q and a roster.
Okay.
Our first question comes from Charles She of Needham and company Charles Your line is open.
Hi, Good morning, Russell and nice to meet you at Jamie welcome aboard.
I'm just worried about right.
Right.
Really wanted to stop my first question around backlog.
Well I mean, the backlog is only good if you can get with that but how count again is managed Madison white to ship those backlog on time and how much risk do you see it there in time to stop I appreciate potential push out.
Given the fact that the walk bleeding. So you can call back <unk>.
I'm facing that <unk> in.
In the west seems to suggest that they are <unk> or maybe a captain intensity is trending lower than previously expected.
Alright.
Hey, Charles Thanks for the question. This is Doug let me start it sort of on the back end of your question relative to.
The Silicon carbide question, our our business in Silicon Carbide is is global with a very large and diverse our customer base.
So you know we see we continue to see good bookings.
You know solid quote activity in in that area globally, and so you know I think looking.
Looking at just one customer within that is not the right way to look at <unk> backlog within within silicon carbide or in general.
As far as backlog goes you know it's it continues to be strong let Russell comment on on the front end of your question, Yeah, Hey, Charles So the Bachelor the Saint currently sits at $1.2 billion Uhm as we've kind of notice there there are some weaknesses in the business and around memory and it makes sense says.
I'm a little bit about.
Softening of January at Shaw.
<unk>. So when it comes to kind of that comes to comes to backlog bookings and close yeah requests for clothes. The <unk> is too strong for us, which is kind of what I've been up to say you have reached <unk> point 1 billion dollar revenue for 2023, and we expect this.
The strength and power to continue into 2024, and so a lot of the.
<unk> the backlog as in <unk>.
Thanks for the color maybe the second question about the China exposure things like at least the prompt shipment is that point that you're trying to expose <unk>. It seems to be down sequentially from Q2 level it seems to be the reverse.
<unk>.
<unk> peers that who are so actually saw a big massive pick up off the China revenue into Q3, and a potential you into a queue for just really wonder is relative.
I mean lower exposure of China, you saw at <unk> dot temporary or or you see this is probably going to be more dominated by by the rest of the world comes up we.
Shipment for the next few quarters <unk>.
Right. So I think it was typically said is between 30 to 50 per cent in any given <unk> as you know it's kind of a neat in the 30 S. For this quarter I think China is still always gonna be I I I I'm, a growing area for us, but I think we benefit <unk> Oh, sorry from other areas color lines, so like dog.
Said power is definitely a global for November and we saw good progress in Europe, and U S and <unk> and other reasons around the world. So, let's say that we continue to see strength in China will continue to find that is a very good opportunity for us given that.
Focus on mature markets, but we are also seeing a lot of strength globally, particularly in power.
Thanks.
Thank you one moment for next question.
Our next question comes from David <unk> of Steelhead Securities. David Your line is open.
Yeah. Thanks for taking my question Uhm Russell you mentioned that you're seeing some weakness in the second tier found your logic.
Does this could you just talk about what <unk> geographic.
To your graphic regions, that's coming from or applications.
So I guess, what my second tier founded Legit, you kind of talk about the the mature foundry.
Foundry to kind of a typically the the non finfet stuff right yes.
Yes.
So I think yeah <unk>. So the foundries that are more related to consumer spending happiness, a soft little well, we're now seeing a little bit of suffering in industry and I think you probably saw the note by one.
Saturday this morning about suffering in power that actually doesn't we don't seem to see the suffering in power across the board, but I think.
Industrial has started to soften along with consumer which was already there.
Okay and then.
Oh.
Follow up on gross margins.
I take your gross margin target for Q4 is essentially your target for the $1.3 billion model.
So you know maybe help us understand how gross margins might progress next year revenue grows or or how we should be thinking about gross larges going forward.
Yeah. So it would be thinking about margin, obviously mix. It is going to be an important part in that process is the mix between systems and C. As in <unk> revenue on a on a Ford basis, you know utilization fab utilization is gonna be the primary driver of the <unk> revenue on a forward looking basis. The teams are right now in the process of working.
Through our 2024 model, specifically, but we do expect to maintain strong gross margins going into next year.
Okay that'll work for me if.
You clearly outperforms this year.
W. A P being down.
You know 20 per cent you guys are up 20 per cent if the market's flat up next year do you think you'll continue to outperform.
Yeah, Dave This is Douglas at this point you know, we're not providing any guidance for 2024.
We see the 1.3 model coming in for 2025, you know we continue to see good bookings and and good code activity and so we're optimistic on on 2024, but we're not ready to give any specific guidance.
Thank you.
Thank you one moment for our next caller.
Our next question comes from Craig Ellis B Riley Securities Craig Your line is open.
Yeah. Thanks for taking the question and Uhm congratulations on the third quarter Alright.
Ah Jamie welcome aboard look forward to working with you.
The first name yeah.
Yeah. Thanks, the first thing I Wanna do is follow up on one of Charles inquiries I was hoping that you provided some color on <unk>.
Quoting activity broadly in order. So if you could just focus on what you've seen fourth quarter to date in and clarify if yeah fourth quarter to date or for the last month things have been <unk>.
Broadly steady properly strong with with limited signs of weakness.
Yeah. The we don't break out the code activity or the the bookings for a given quarter, but yeah. I think you know what we're seeing continued you know good strength in power in silicon carbide like everyone else in the industry, There's <unk> <unk>.
We're seeing some of the softening is Russell mentioned in some of the mature markets moving a little bit beyond just consumer so yeah, I think our our quote active in Europe at our bookings reflect the general market behavior.
Got it and and then just to follow up with the team on some of the longer term issues nice to get the finer point in time calendar twenty-five potential with with the target Battle I know, you're not providing guidance for calendar twenty-four, but I was hoping you could frame up some of the Gibson takes fit.
You see issue look at calendar twenty-four specifically for example would you expect the DRAM could get materially better same with C. I S. And then what if some of the Gibson takes within mature foundry broadly outside of C. I S.
Yeah. So you know I think the mature foundry market, which as we all know.
Never suffered a downturn because it didn't exist until a few years ago. So everyone's starting to try to figure out exactly how it cycles and.
It appears probably tied very much.
More economic factors and so forth. So I think as we go into 2024, a lot it's gonna depend on what the economy's doing and so forth relative to that which will drive consumer spending you know drive the industrial back and and drive you know generals automotive you know not just the the power fees and so you know that's that's.
How.
We think the market is gonna behave as far as the specific segments image sensors are very much driven by by phones and so we'll see how this this cycle of phones up for excel us and Fry an implant. The other factor there drives. It is is the next generation of technology, which drives.
You know of our products like R V <unk> Max.
Then you know the.
The other.
The other factor.
Relative to memory or the rest of your question.
Alright at this point.
We haven't really changed our position we see the second half of next year. The beginning of of DRAM coming back in 2025 to be a strong DRAM here <unk>, probably is still slow until till 2025, and and you know the drivers on DRAM near term.
You know, there's some China activity and then there is b H P M and and some other you know technology things those are going to utilize it was gonna use up capacity and improve utilization in fads that ultimately will lead to a capex focus on <unk>.
That's helpful. Thanks, Thanks, Scott.
Thank you is there a reminder to ask a question. Please press star one one on your phone.
Our next.
All comes from Mark Miller of the Benchmark company Mark your lines open it.
Alright, congratulation other strong quarter I was just wondering <unk> certainly has been a major driver but.
[noise] any momentum related to a I.
Yeah, No I think he is gonna drive a bunch of things Mark Yeah.
You know first and foremost is driving the bass large act right and that was really highlighted by what you know what a M. D. You said the other day and what and video has been saying second thing is that you know, it's it's driving the advanced packaging for the H B M technology ultimately you know.
A I will drive you know big piece of the market.
It's dependent on data, which which it gets from Iot devices as well as you know every other feed that it can it can get uhm it'll drive big.
You know big amounts of DRAM, even beyond H B M.
The servers, and then lots and lots of storage in the form of <unk>. So you know it is a very important longterm driver you know over the next many years.
<unk>, you mentioned DRAM, possibly coming back before.
Man I just was wondering.
<unk> estimates are that Friday, I server, there six times more gay rabbits at one of the drivers or so I one of the factors in your thoughts about DRAM coming back so much sooner.
Yeah, I think that is definitely one.
H P M, which is you know.
And advanced packaging, you know use a DRAM, where it's where it's <unk> you know directly on the G. P. U you know that that will help and then in general the the general server DRAM. The other thing that will drive DRAM back will be consumer coming back T. C. <unk>.
[noise] cycles, if there's a good phone cycle all of those things will will help drive the DRAM market back.
Thank you.
Okay, I'm, sorry, one moment for our next question.
Our next question comes from Jed door Shimer of William Blair Jed Your lines open.
Hey, Thanks, and congratulations and Ah, Jamie and look forward to working with you too I guess.
First question on Silicon Carbide, you know what percentage of the quoting activity is on 200 millimeters verses 150, I'm assuming most is on 150, but just curious on that you know how that is picked up on 200.
So we don't break we don't break out the specifics our customers frown on us, giving those kind of details, but you know in general you know the market. You know is is pushing sort of production level that 150 with many lines.
Pilot lines. It at 200 with a plan to wrap those you know as the materials are available and you know.
Recent calls of materials suppliers, you know things are looking positive that that materials will start to become more available and that will drive you know drive our customers towards 200 millimeter for their their next fabs are expanding there. There are many fabs. So we were definitely seen plenty of 200 millimeter active.
So the bulk of production is probably on 150.
Got it <unk> My question is.
Is there anything within your tool designed it would cause your uptime on 200 millimeter to be lower than that of 150 and I'm asking is you know it has recently come up with.
About it you know uptime issues and I'm, just curious what the difference may be and whether or not that's a competitive advantages. We look at your tools vs. Some of your competitors.
Hey, Janice Russell so I.
<unk> I would say.
I don't think there's a significant difference between 150 and 200 or 203 hundred we do have significant competitive advantages in our product.
<unk> technology to the wife of handling as you know. These these are brittler wife is that transparent a bow very easily but I don't think there's any fundamental reason why are you 150, and 202 would be different in <unk> in reliability and that's not what we see what <unk>.
Got it. Thanks, that's all for one last question Jamie just.
You know last quarter, the commentary I think around book to Bill being under one was that it's an anomaly, but we have two quarters with a book to bill under one. So I'm. Just you know is there expectation that this bounces back above one is as we look into next quarter or do you think we're kind of at this level for a little bit how should we be thinking.
<unk> about that book the Bill.
Yeah, I think that's a great. Good good question I know in the third quarter. Yeah. We did have some shipments in the September timeframe here that just started help to drive that book to Bill a little bit below one from what we were otherwise expecting as we did overperform relative to expectations for the third quarter, you know given that I'm still coming on board I might pass us the.
Rest of the question off the dug here to respond.
So since you have I think you know that's that's one of the big reasons is is that extra shipments at at the end as was mentioned earlier you know CSI was is off a little bit as a result of February realisation. So yeah. So back that combination allowed us to keep the revenues where they are and.
And but it did affect the book to Bill I think the other thing that will be thinking about is affect the industry is still in a pretty big downturn and we've had we've got some <unk> that were unrealistic Lehigh probably you know in terms of you know a couple of <unk> a few quarters. So you know so I think it's it's kind of a.
A balance we are working and working out for a pretty big backlog as well and you know that's continued to stay relatively relatively flat so.
Great I'll jump back and cute thanks, guys.
Thank you as a reminder to ask a question. Please press star one one on your telephone.
Next question comes from Tom definitely of D. A Davidson accompany Tom Your line is open.
Yeah. Good morning, and thank you for that upgraded to ask a question here I would like to follow up a bit just question about the 150 200.
For you is it the same tool same tool same margin structure. When you look at the two different wait for sizes.
So for us so we cannot the ship as a 150 or 200. We also have an upgrade kit that you can shipped to the field and you can do this upgrade in the field. It doesn't take very long to do that transfer that's that change.
Okay that ends up being like you know a good thing your time for us.
With you know sort of following on to one of our questions that you had asked relative to 150 <unk> 200 fab adoption. You know companies are our customers are wrapping their 150 as they began begin to put 200 millimeter capacity online at some point they'll go back and no upgrade there were 150 tools.
To 200 and that will generate significant CSI upgrade revenue for us.
<unk>.
Okay, but how do you look at that as far as you know the upgrades add a lot of capacity to the industry and obviously take away. Some of it is a new system demand as well Ah blood General would you consider that a net positive or negative.
Well it will it will end up I think it will end up being a positive actually you know the the upgrades. You know are are a good margin for a <unk> a great benefit for the customer allows them to get there 200 millimeter fab up and running and then go back and be able to take down there 150, fabs in and retro.
Fit you know with with tools at that they have by whatever else is needed to support the technology that might go in to the 200 millimeter version of that fab and so in general it will be a positive for itself.
Okay, maybe just a couple more quick questions on the southern carbide stuff. So where's the industry right now as far as the transition from Silicon. This looking car by power for <unk>.
Well.
Well, that's that's probably.
A better question for you know for some of the automakers, but the way way, we're seeing now in terms of of two buying behavior. You know, it's it's a mix of <unk>, we see this year.
60% of our revenue around 60 per cent of our our systems revenue is coming from power as a whole 35% of our total systems are the newest coming from silicon carbide. So so can carbide as you know as I was stripping silicon in terms of of implant tools by by quite a bit but there's a <unk>.
<unk> for both technologies and I think we'll see the auto makers settle in on you know where silicon carbide makes the most sense, where silicon makes the most sense and it's it's it's gonna come down you know a lot of cases to go up a cost and performance decision that there'll be making on their on their cars as the cost of silicon carbide materials.
I'm down the cost of processing come down the you know the deals and so forth come up then there's more incentive to move just looking car, but I didn't get that performance even on lower cost stars.
But today, probably some of the lower class cars and and plug in hybrids and so forth are more likely to be using silicon first cost reasons.
Okay, and then you know just taken it one step further when do you think we'll start to see the second and third generations looking curb my chips that a little bit more an implant intensive.
Well I think we're we're probably starting to see some of them and you know I think that's.
I think that's there's actually an I've ever pretty important tie between you two questions. You know, even if people perceive E V slowing a little bit based on some of the you know the.
The latest news and so forth.
You know our customers are continuing to work on getting the costs down on the performance up moving to that next generation that allows allows you know the automakers to be able to make the cars at a lower cost or higher performance you no longer a longer time between charges and so forth and so you know I think we'll continue to see.
See the technology growth relative to that same thing with the 200 millimeter migration, that's an important element to getting the costs down.
Yeah, So I'm just to kind of add to that so you know as we talked about there's a there's a transition from 150 to 200. There is also a transition going from <unk> to to trench and you'll <unk>, you'll see that this year as people have gone from kind of like pilot lines up as a high volume we're seeing the all of the <unk> put up for failure, that's being ordered.
In pretty much equal revenue. So you know, we got the pure and the pure <unk> 200, and they're basically <unk>. This year you are.
Clearly computer <unk> is very much needed for the trench applications would you be kind of more advanced devices.
Great well. Thank you for your time this morning.
Thanks, Sir.
Thank you very much one moment for our next color.
Our next question comes from Dukson J, a bank of America Securities. Your line is open.
Good morning, Thank you for taking the question.
So I want to go back to the Silicon carpet business Uhm I understand it's well diversified <unk> customer base.
Strong backlogs, but D V weaknesses have been pretty well known so I'm wondering if you're seeing any signs of stable by stabilizing demand here and how do we know if these backlogs are not part of a potential double ordering thank you.
Okay. So I think.
If if we look at you know our demands relative to silicon carbide, and and silicon and the powers inside like as I said before it continues to grow.
Our customer base needs to continue to innovate to enable the automakers to be able to do the V programs. They Wanna do you know well there's been some you know some delays, especially in the U S. It's well publicized uhm, that's not all that's not necessarily the case globally and so we should still quite a bit of activity.
You know in China, even though some of the percentage growth rate may have slowed it's still it's still very high and the car companies. There are continuing to innovate even with a new better battery technology. So yeah. We we expect <unk> to see continued growth relative to you know that device.
Market Uhm is customers you know continue to innovate and get the costs down so.
So anyway, that's that's how we see it.
Got it and then a follow up to an earlier DRAM question.
A lot of your W. A few peers have had incremental shipments to China this quarter.
They've also seen kind of broader strength and DRAM overall.
So I just want to understand why there's a difference between their business and and <unk>.
Do not have any exposure to these customers at all.
Yeah. So so in the case of.
Of this quarter, that's very much tied to a specific customer.
That we do have less exposure to we do see.
Future opportunities for D Ram in China, and then we see growth in the more traditional DRAM base as we get into next year. So that is a difference.
Between some of our peers you know they they have less exposure to silicon carbide and that's you know that's pushed our exposure or or China business, you know up.
235% the mature markets, where we're all you know we we all participate you know those have been down a little bit for the general mature and that's brought our <unk> you know this quarter's exposure down from a high last year last quarter of 50 down to 35.
Thank you.
Okay, one moment for our next question.
Next question comes from David duly of Steelhead Securities David Your lines open.
Yeah, just a couple of follow up for me.
Can you update us on your progress and the Japanese market and.
<unk> found any logic business and then also just could you just talk a little bit about I think you've mentioned how the cost curve in silicon carbide is coming down that should drive adoption in other markets could you just perhaps give us some commentary about what other markets might be starting to adopt silicon carbides.
Yeah, Hi, Davis, Russell, So regarding Japan, where actually play please with the private should make me in Japan, So really for US it's about the power market in Japan and also the email sent to Mark in Japan, which we have very specialized toes that have huge value that.
You know.
It's a natural place for us to want to want to go with.
We're getting subtraction. So we've just recently I shifted <unk> into Japan, We've got most other powers series products going into Japan, and we were seeing a lot of demand for those particular power tools as I said, because they are highly differentiated.
And yeah, we are definitely seen as as the leader of certain caught by power.
And as far as the advanced logic market goes Dave you know that.
You know I guess, we would describe that is similar.
Similar to Japan, where where patiently.
Working on you know penetration you know in the case of advanced logic. The path is through R&D and so you know we have a pure and dragon evaluation and it as an evaluation system. That's at an advanced Lodge a customer that same customer has green H as in production.
<unk> and then recently, we announced shipment of purine Dragon revenue tool to an advanced Research Center, that's focused on advanced logic transistor definition and in process technology that feeds all of the all of the customers in this in this area. So the the path into advanced logic.
There's one of patience and and penetration through through R&D.
As far as your Silicon carbide question in other markets beyond automotive you know, there's lots of lots of opportunity so can carbide.
Represents some significant performance advantages over over silicon in terms of of switching speeds cleanliness or switching B O heat dissipation all of all of those kinds of things weight and so automotive is a is a volume application and that volume application will bring down.
On the overall cost of materials and ultimately the cost of the components beyond that market now there's several industrial markets. The data center market, you know, which ties directly to a I you know it could be a big beneficiary over time, okay, the clean energy and and smart grid, there's a lot of Apple.
<unk> <unk>.
As well as in some communications application. So you know the key is is getting the costs down and I think that's something that's really important to understand is that you know we've kind of we're kind of over over a little bit of a hill in terms of of people now have the capacity in place to make the.
Substrates get the <unk> get the costs down and that that will open up the other markets.
Thank you.
Thank you. This concludes the question and answer session I would not like to turn it back to Doug Lawson, who will make a few closing remarks.
Thank you for joining us today, we have a very busy investor calendar in the coming months will be at the D. A Davidson Tech summit on November 16th in New York City. The seventh annual Wells Fargo T. M. T Summit on November 20th in Los Angeles.
New York City Summit on December 12th and the seventh annual Needham T. M T stomach on January 17th in New York City.
We hope to see you at one of these events and for you to have the opportunity to meet Jamie in person. Thank you.
Thank you for your participation in today's conference. This concludes today's program you may now disconnect.
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