Q3 2024 Aehr Test Systems Earnings Call
Greetings and welcome to the Air Test systems third quarter fiscal 2024 financial results call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please.
Operator: Welcome to the Aehr Test System's third quarter fiscal 2024 financial results call. This time, all participants are in a listen-only mode.
Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero. Please note, this conference is. I now turn the conference over to your host, Jim Byers at MKR Investor Relations. You may begin.
Press Star Zero on your telephone keypad. Please note. This conference is being recorded.
I will now turn the conference over to your host Jim Byers at N. K R. Investor Relations you may begin.
Jim Byers: Thank you, operator. Good afternoon and welcome to Aehr Test Systems' third quarter fiscal 2024 financial results conference call. Me on today's call are Aehr Test Systems President and Chief Executive Officer Gayn Erickson and Chief Financial Officer Chris. Before I turn the call over to Gayn and Chris, I'd like to cover a few quick items. This afternoon, right after the market closed, Aehr Test issued a press release announcing its fiscal 2024 third quarter financial results. That release is available on the company's website at aehr.com.
Jim Byers: Thank you operator, good afternoon, and welcome to Air Test systems third quarter fiscal 2024 financial results Conference call.
Jim Byers: With me on today's call are Air Test Systems', President and Chief Executive Officer gain Ericsson and Chief Financial Officer Christine.
Jim Byers: Before I turn the call over to gain and Chris I'd like to cover a few quick items. This afternoon right. After the market closed their test issued a press release announcing its fiscal 'twenty 'twenty four third quarter financial results that release is available on the company's website at <unk> Dot com.
Jim Byers: This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. I'd like to remind everyone that on today's call, management will be making forward-looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors are discussed in the company's most recent, periodic, and current reports filed with the SEC.
Jim Byers: This call is being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company's website.
I'd like to remind everyone that on today's call management will be making forward looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements.
Jim Byers: These factors are discussed in the company's most recent periodic and current reports filed with the SEC. These forward looking statements, including guidance provided during today's call are only valid as of this date and are test systems undertakes no obligation to update the forward looking statements now I'd like to turn the conference call over to gain Erickson President and CEO.
Jim Byers: These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update these forward-looking statements. Now, I'd like to turn the conference call over to Gayn Erickson, President and CEO. Thanks, Jim. Good afternoon, everyone.
Gayn Erickson: Thanks, Jim and good afternoon, everyone and welcome to our third quarter fiscal 'twenty four earnings call. Thanks for joining us today I'll start with a quick summary of the quarter and spend some time to address what we're seeing across key markets areas addressing for semiconductor wafer level test and burn in systems. We've actually had a lot of questions are in the last couple of weeks and also a feeder.
Gayn Erickson: And welcome to our third quarter fiscal 24 earnings call. Thanks for joining us today. I'll start with a quick summary of the quarter and spend some time to address what we're seeing across key markets Aehr is targeting for our semiconductor wafer level test and burn-in systems. We've actually had a lot of questions in the last couple weeks and also feedback coming in. So our plan is to take some time to cover all of the markets that we're addressing, and then we'll open it up for questions. As we discussed in our second quarter earnings call, we had seen several pushouts of forecasted orders by current and new customers that impacted our fiscal year revenues. We believe that this was due to two key factors.
Gayn Erickson: That come in and so our plan is to take some time to cover.
Gayn Erickson: All of the markets that we're addressing and then we'll open it up for questions as we discussed in our second quarter earnings call. We had seen several push outs of forecasted orders by current and new customers that impacted our fiscal year revenues. We believe that this was due to two key factors, there's clearly softness in the overall semiconductor capital spending.
Gayn Erickson: There's clearly softness in overall semiconductor capital spending, particularly in automotive applications. It's related to a glut in inventory driving down near-term orders to these companies that has caused them to push out capital spending and drive cost reductions. Multiple companies, including the companies we had expected orders from, have publicly discussed inventory-related headwinds in their public earnings calls and press releases. In addition, we've seen specific shifts in order timing for our equipment used for wafer-level test and burn-in of silicon carbide power semiconductors used in electric vehicles. In just the last two weeks of the quarter, we saw delays in orders for silicon carbide systems with customer-requested ship dates within the quarter, as well as a last-minute pushout by a customer of a system in our backlog. The net effect of this was a significant shift in revenues out of the third and fourth quarters.
Gayn Erickson: And particularly in automotive applications as it related to a black inventory driving down near term orders to these companies that has caused them to push out capital spending and drive cost reductions multiple.
Gayn Erickson: It's included in the company's we had expected orders from have publicly discussed inventory related headwinds and their public earnings calls and press releases. In addition, we've seen specific shifts in order timing of our equipment used for wafer level test and burn in for Silicon carbide power semiconductors used in electric vehicles.
And just the last two weeks of the quarter, we saw delays in orders for Silicon carbide systems with customer requested ship dates within the quarter as well as the last minute push out by a customer of our system in our backlog.
Gayn Erickson: The net effect of this was a significant shift in revenues out of the third and fourth quarters until this time, we've been hearing from those customers that their silicon carbide based capital investments, we're not being impacted.
Gayn Erickson: Until this time, we'd been hearing from those customers that their silicon carbide-based capital investments were not being impacted. However, it is now clear that the recent overall softness in semiconductors and the impact of shifts in electric vehicle introductions and ramps are impacting our bookings and revenue core forecasts more than we understood only two months ago on our last earnings call. We now expect this to last for another quarter or two before the orders resume, excuse me, based on the latest roll-up of direct forecasts from over a dozen silicon carbide companies. Due to this, last month we revised our guidance for our fiscal 24-year end, ending May 31, 2024, to be greater than $65 million in total revenue and net income of at least $11 million, which we're reiterating today. We still expect to finish this year with annual revenues that are near or above our full-year record.
Gayn Erickson: It is now clear that the recent overall softness in semiconductors and the impact of shifts in electric vehicle introductions and ramps are impacting our bookings and revenue Corp forecast more than we understood only two months ago at our last earnings call. We now expect this to last for another quarter or two.
Gayn Erickson: Before the orders resume excuse me.
Gayn Erickson: Based on the latest rollout of direct forecast from over a dozen silicon carbide companies.
Gayn Erickson: Due to this last month, we revised our guidance for our fiscal 'twenty for year end, ending May 31, 2024 to be greater than $65 million in total revenue and net income of at least $11 million, which we're reiterating today we.
Gayn Erickson: We still expect to finish this year with annual revenues that are near or above our full year record.
Gayn Erickson: Our discussions with customers indicate that the key markets Aehr is addressing for semiconductor wafer-level tests in Vernon have significant growth opportunities that will expand this year and throughout this decade, and we're seeing increased customer engagement in each of these markets. We've also seen a recent strengthening in the silicon carbide market for electric vehicles outside the U.S. in what appears to be a shift in market share of electric vehicle suppliers. This clearly includes Asia, where we recently had an extensive and very productive visit with a significant number of silicon carbide suppliers and electric vehicle suppliers.
Gayn Erickson: Our discussions with customers indicate that the key markets areas addressing for semiconductor wafer level test and burn and have significant growth opportunities that will expand this year and throughout this decade, and we are seeing increased customer engagement and each of these markets.
Gayn Erickson: We've also seen a recent strengthening in the silicon carbide market for electric vehicles outside the U S and what appears to be a shift in market share of electric vehicle suppliers. This clearly includes Asia, where we recently had an extensive and very productive visit with a significant number of silicon carbide suppliers in electric vehicle suppliers.
Gayn Erickson: On today's call I'll discuss each of the major market segments areas addressing for wafer level burn in semiconductors, which includes silicon carbide gallium nitride silicon photonics and memory semiconductors as well as tee up an opportunity we hope to discuss in the coming months.
Gayn Erickson: On today's call, I discuss each of the major market segments Aehr is addressing for wafer-level burn-in of semiconductors, which include silicon carbide, gallium nitride, silicon photonics, and memory semiconductors, as well as tie up an opportunity we hope to discuss in the coming months. I'll also include the trends we're seeing in Asia EV suppliers and their impact on silicon carbide and Aehr's opportunity According to market forecasts, including the Semiconductor Industry Association, the semiconductor industry is expected to grow from $600 billion in 2022. And by the way, we apologize; someone noted that that was incorrectly noted as a million in our press release. So we'll get that corrected to over $1 trillion at or around 2030.
Gayn Erickson: I'll also include the trends, we're seeing in North Asia, EEV suppliers and impact on silicon carbide and errors opportunity to address this market.
Gayn Erickson: According to market forecasts, including the semiconductor industry Association, the semiconductor industry expected to grow from $600 billion in 2022 and by the way. We apologize someone noted that that was incorrectly noted is million and our press release, So we'll get that corrected to over one trillion dollars at or around 20.
Gayn Erickson: <unk> 30, this acceleration is coming from Mega market drivers, including artificial intelligence Green energy and de Carbonization and Iot based digital transformation increased reliability concerns about semiconductors, and a growing number of mission critical applications as well as more multi chip modules or heterogeneous.
Gayn Erickson: This acceleration is coming from megamarket drivers, including artificial intelligence, green energy and decarbonization, and IoT-based digital transformation. Additionally, increased reliability concerns about semiconductors in a growing number of mission-critical applications, as well as more multi-chip modules or heterogeneous integration, with multiple devices being assembled together in a single package, are driving the need for wafer-level burn-in. At semiconductor industry conferences around the world, we're seeing an increased focus on moving test and burn-in to the wafer level before these devices are put into multi-chip packages or modules. These favorable macro trends are driving the business that drives Aehr Test and include the following. Silicon carbide power devices going into high-density modules for power conversion in electric vehicles. Gallium nitride power semiconductors going into automotive, salt, solar, and other industrial applications where reliability and safety are critically important.
Gayn Erickson: Integration with multiple devices being assembled together in a single package are driving the need for wafer level burn in that.
Gayn Erickson: That semiconductor industry conferences around the world, we're seeing an increased focused on moving test and burn in to wafer level. Before these devices are put into multi chip packages or modules.
Gayn Erickson: These favorable macro trends are driving the business that drive their test and include the following.
Gayn Erickson: Silicon carbide power devices going into high density modules for power conversion and electric vehicles, gallium nitride power semiconductors going into automotive solve solar and other industrial applications, where reliability and safety are critically important silver.
Gayn Erickson: Silicon Photonics, where photonics-integrated circuits are being put into transceivers for data center infrastructure and optical chip-to-chip communication of CPU, GPU, and AI processors to address the insatiable data storage and bandwidth needs of these applications; and memory devices, whether stacked die for solid-state disk drives to use in enterprise and data storage or with AI processors, again, to address the ever-increasing need for memory Now, let me touch on each of these briefly, starting with silicon carbide marking. While we remain cautious looking ahead to the next quarter or two, we're seeing signs of improvement in the silicon carbide market. Last week, we announced an order from a new customer for our Fox NP solution for engineering qualifications and small production of their silicon carbide power devices.
Gayn Erickson: Silicon Photonics, where photonic integrated circuits or being put into Transceivers for data center infrastructure and optical chip to chip communication of CPU, GPU and AI processors to address to address the insatiable data storage and bandwidth needs of these applications and memory devices, whether stack die for solid state.
Gayn Erickson: Disk drives to use in enterprise and data storage or with AI processors again to address the ever increasing need for memory density and bandwidth to these applications.
Now let me touch on each of these briefly starting with silicon carbide market.
Gayn Erickson: While we remain cautious looking ahead to the next quarter or two we're seeing signs of improvement in the silicon carbide market last week, we announced an order from a new customer for our Fox NP solution for engineering qualifications fallout production, although silicon carbide power devices. This customer is a multibillion dollar per year global semiconductor company with locations across.
Gayn Erickson: This customer is a multi-billion dollar per year global semiconductor company with locations across Europe, Asia, and the Americas, and has a wide range of automotive products and is entering the silicon carbide market to address several applications that include automotive, industrial, and electrification infrastructure. This customer sees the enormous opportunity for silicon carbide power devices and has told us they plan to transition to our FOX XP multi-wafer test and burning systems as they ramp up to high volume production. This is the third straight customer in a row for silicon carbide for us that is primarily focused on applications other than EVs. These additional applications expand our market opportunity beyond the 4.5 million 6-inch equivalent silicon carbide wafers that William Blair forecast will be needed per year by 2030 just for electric vehicles.
Gayn Erickson: Europe Asia, and Americas, and has a wide range of automotive products and is entering the silicon carbide markets to address several applications that include automotive industrial and electrification infrastructure.
Gayn Erickson: This customer sees enormous opportunity for silicon carbide power devices and has told US they plan to transition to our Fox XP multi wafer test and burn in systems as they ramp to high volume production.
Gayn Erickson: This is the third straight customer in a row for silicon carbide for us that is primarily focused on applications other than EPS. These additional applications expand our market opportunity beyond the $4 5 million six inch equivalent silicon carbide wafers that William Blair forecast will be needed per year by 2030, Jeff for electric vehicles. These new applications.
Gayn Erickson: These new applications are driving an additional 2.8 million 6-inch equivalent wafers annually by 2030 to address industrial, solar, electric trains, energy conversion, and other applications. Interestingly, this is also the third customer row that did not need to see their wafers tested on our system before they moved forward to purchase from us. I've mentioned this before, but the need for testing before purchase was essentially a requirement in our early customer engagements, and it's clear that many of our potential new customers have become much more comfortable moving forward with Aehr simply on our assurances that our solution will perform as committed. This allows customers to accelerate their time to market.
Gayn Erickson: Our driving an additional $2 8 million six inch equivalent wafer is annually by 2030 to address industrial solar electric trains energy conversion and other applications.
Gayn Erickson: Interestingly. This is also the third customer road that did not need to see their wafers tested on our system before they move forward to purchase from US I've mentioned this before but the need for testing before purchase was essentially requirement with our early customer engagements and is clear that many of our potential new customers have become much more comfortable moving forward with <unk>.
Gayn Erickson: Simply on our assurances that our solution will performance committed this allows the customers to accelerate their time to market.
Gayn Erickson: Of course, we're still happy to engage with customers if they want to see their wafers tested first.
Gayn Erickson: They'll have yet to lose a prescribed a prospective customer after demonstrating our test and burn in capabilities on their wafer and have never lost a head to head evaluation to a competitive product since introducing our Fox NP NXP configured with the silicon carbide and gallium nitride test resources.
Gayn Erickson: Of course, we're still happy to engage with customers if they want to see their wafers tested first. We still have yet to lose a prospective customer after demonstrating our test-in-burning capabilities on their wafer and have never lost a head-to-head evaluation to a competitive product since introducing our FOX NP and XP configured with a silicon carbide and aluminum nitride test resource. While we are seeing the impact of a slower adoption of battery electric vehicles than most imagined a year ago, our initial wins and ongoing qualifications at multiple device manufacturers drive our optimism from a longer-term perspective. So far, we have secured a total of seven silicon carbide customers that have ordered our FOXP family of systems and proprietary wafer-packed full wafer contactors.
Gayn Erickson: While we are seeing the impact of the slower adoption of battery electric vehicles than most imagined a year ago, our initial wins and ongoing qualifications at multiple device manufacturers drive are optimists optimism from a longer term perspective.
Gayn Erickson: So far we have secured a total of 700 silicon carbide customers that have ordered our Fox P family of systems and proprietary wafer pack full wafer contactor is.
Gayn Erickson: We're engaged with well over a dozen additional silicon carbide players and evaluations of our systems and our wafer benchmarks, where we build a fox wafer contactor for them.
Gayn Erickson: And test their devices that are tests to demonstrate the feasibility and correlation of results to meet their reliability requirements. We're focused on the qualification process with as many new customers as possible as again once we've demonstrated our fox wafer level test and burn in solution using their own wafers, we have not lost a potential customer yet.
Gayn Erickson: We're engaged with well over a dozen additional silicon carbide players in evaluations of our systems and our wafer benchmarks, where we build a FOX wafer contactor for them and test their devices at Aehr Test to demonstrate the feasibility and correlation of results to meet their reliability requirements. We're focused on the qualification process with as many new customers as possible, as again, once we've demonstrated our FOX wafer level test and burning solution using their own wafers, we've not lost a potential customer yet. Our benchmarks with multiple silicon carbide suppliers continue to progress this quarter. This includes an on-wafer benchmark that we've been working on for multiple years. We believe and understand now that some of the market share shifts in both the total market and specific end customers had an impact on and delayed the new customer decision timeline.
Gayn Erickson: Our benchmarks with multiple silicon carbide suppliers continued to progress. This quarter. This includes on wafer benchmark that we've been working on for multiple years, we believe and understand now that some of the market share shifts in both total market and specific end customers had an impact on and delayed new customer decision timelines, we still believe.
Gayn Erickson: <unk> that their silicon carbide module in di sales plans will drive the need for known good die and wafer level burn in and that we will win more than our fair share of these opportunities.
Gayn Erickson: In addition to our customer related travel to Europe and across the U S. We most recently had extensive visits with our cost a significant number of Asia silicon carbide suppliers and electric vehicle suppliers themselves.
Tone and demand for Evs is much stronger outside the U S, particularly in China, and South Korea clear.
Gayn Erickson: We still believe that their silicon carbide module and dye sales plans will drive the need for known good dye and wafer-level burn-in, and that we will win more than our fair share of these opportunities. In addition to our customer-related travel to Europe and across the US, we have recently had extensive visits with a significant number of Asian silicon carbide suppliers and the electric vehicle suppliers themselves. The tone and demand for EVs are much stronger outside the U.S., particularly in China and South Korea.
Gayn Erickson: Clearly we also heard that there is a real need for quality low cost high volume automated solution for wafer level burn in of Silicon carbide devices, particularly in the automotive segment.
Gayn Erickson: Based on what we saw the electric vehicle suppliers in China have a very strong focus on silicon carbide to the point of actively marketing silicon carbide power conversion as a differentiating feature.
We personally visited several EV supplier sales stores, which were basically all in malls, our retail shopping areas like we see Tesla here in the U S and three of them basically position their silicon carbide based Evs is superior almost apologizing that this particular version is only at GBT, but next year's <unk>.
Gayn Erickson: Clearly, we also heard that there is a real need for quality, low-cost, high-volume, automated solutions for wafer-level burning of silicon carbide devices, particularly in the automotive segment. Based on what we saw, the electric vehicle suppliers in China have a very strong focus on silicon carbide to the point of actively marketing silicon carbide power conversion as a differentiating feature. We personally visited several EV supplier sales stores, which were basically all in malls or retail shopping areas like we see Tesla here in the U.S., and three of them basically positioned their silicon carbide-based EVs as superior, almost apologizing that this particular version is only IGBT, but next year's model is silicon carbide-based. They had no idea who we were or that we had any skin in the game for silicon carbide
Gayn Erickson: Model is silicon carbide base. They had no idea, who we were or that we have any skin in the game for silicon carbide.
Gayn Erickson: Another notable was that we heard across the board from both the <unk> suppliers and also the power semiconductor suppliers is that all of the Asia electric vehicle suppliers appear to be driving to build module based silicon carbide for their power inverters in the cars rather than the discrete devices like what Tesla has done and they also have.
Gayn Erickson: A very high expectation for delivering quality wave.
Gayn Erickson: We even heard from multiple companies that they are driving to supply silicon carbide and wafer level burn in to local suppliers because they believe they can get higher quality known good die then they can from suppliers outside of Asia.
Gayn Erickson: Driving wafer level burn in of devices before they're put into modules is critically important to them to remove infant mortality, which bodes well for our solutions.
Gayn Erickson: Per our report last year UBS forecasted that in 'twenty, 391% of the batteries sold and electric vehicles would be 400 volt and only 9% would be 800 volt, but.
Gayn Erickson: Another notable thing that we heard across the board from both the EV suppliers themselves and also the power semi suppliers is that all the Asia Electric Vehicle suppliers appear to be driving to build module-based silicon carbide for their power inverters in their cars rather than the discrete devices like what Tesla has done. And they also have a very high expectation for delivering quality. We even heard from multiple companies that they're driving to supply silicon carbide and wafer-level burn-in to local suppliers because they believe they can get higher quality known good dye than they can from suppliers outside of Asia. Driving wafer-level burn-in of devices before they're put into modules is critically important to them to remove infant mortality, which bodes well for our solution. Per a report last year, UBS forecasted that in 23, 91% of the batteries sold in electric vehicles would be 400 volts, and only 9% would be 800.
Gayn Erickson: By 2026, UBS expects a percentage of 800 volt batteries to be above 30%.
Gayn Erickson: Paul report also focused on the progression of electric vehicle batteries from 400, 800 volt, which is generally recognized by the industry, where the silicon carbide is mandatory to get the range and recharging speed consumers are demanding this.
Gayn Erickson: This is why it appears so make silicon carbide suppliers are timing their major ramps to be in 2025 and 2026 timeframe.
Gayn Erickson: So in the next couple of years, we expect <unk> to benefit from both an increased number of electric vehicles being sold as well as the significant increase in silicon carbide <unk> our solution for those electric vehicles.
Gayn Erickson: The electric vehicle market in Asia, particularly China, and South Korea is very robust supported by public and consumer sentiment and they have some really incredible cars that are being built for electric vehicles.
Gayn Erickson: Now fully understand why Tesla has stated that their <unk>. Their key competition is from Asia, and while both U S and European auto suppliers in particular are so worried.
Gayn Erickson: But by 2026, UBS expects the percentage of 800 volt batteries to be above 30%. The report also focused on the progression of electric vehicle batteries from 400 to 800 volts, which is generally recognized by the industry as where silicon carbide is mandatory to get the range and recharging speed consumers are demanding. This is why it appears so many silicon carbide suppliers are timing their major ramps to be in 2025 and 2026. So in the next couple of years, we expect Aehr to benefit from both an increased number of electric vehicles being sold, as well as a significant increase in silicon carbide neaner solutions for those electric vehicles. The electric vehicle market in Asia, particularly China and South Korea, is very robust, supported by public and consumer sentiment, and they have some really incredible cars that are being built for electric vehicles.
Gayn Erickson: From the feedback we received from a significant number of potential customers in Asia, We believe that arris proprietary wafer level burn in systems based upon our patented proprietary wafer pack contractors appear to have a key value proposition and we see high degree of interest in our solutions.
Gayn Erickson: We already have people in infrastructure across Asia, including China, we have shipped in support of our packaged part burn in systems into China for many years and have also already shipped our Fox wafer level test and burn in systems into China, a few years ago base.
Gayn Erickson: Based on customer commitments were discussing expanding our presence in China in terms of support infrastructure and resources. We have also put additional measures in place to ensure the protection of our IP and patents that we feel will help to secure our proprietary capabilities and allow us to grow and maintain market share over time, we will look forward to providing updates on.
Gayn Erickson: Our plans over the next few months.
Gayn Erickson: Now, let me discuss our progress with testing and burning gallium nitride power semiconductors, we continue to be encouraged by this market and believe it will be significant in terms of market size for semiconductors. In addition to its wide adoption and consumer devices, such as cell phones tablets and laptops computers gallium nitride is being targeted for use in solar.
Gayn Erickson: And I now fully understand why Tesla stated that their key competition is from Asia and why both US and European auto suppliers, in particular, are so worried. From the feedback we received from a significant number of potential customers in Asia, we believe that Aehr is a proprietary wafer-level burning system. Based upon our patented proprietary wafer pack contactors, they appear to have a key value proposition, and we see a high degree of interest in our solution. We already have people and infrastructure across Asia, including China.
Gayn Erickson: Data centers and automobiles, whether electric or traditional gasoline automobiles. The critical reliability. So these reliability needs of these target markets.
Gayn Erickson: Appear to be increasingly driving production burn in requirements and Arris Fox multi wafer system can deliver both the power and high voltage required to do massive parallel per die and multiple wafer test of gallium nitride devices for a very cost effective solution.
Gayn Erickson: During the quarter, we announced our first order for our Fox wafer level test and burn in system to be used for gallium nitride devices, and we have a second potential Fox system customer that has been purchasing our wafer pack contractors for their onsite evaluation that we believe is progressing very well.
Gayn Erickson: We have shipped and supported our package burning systems into China for many years, and we have also already shipped our FOX wafer-level tested burning systems into China a few years ago. Based on customer commitments, we're discussing expanding our presence in China in terms of support infrastructure and resources. We have also put additional measures in place to ensure the protection of our IP and patents that we feel will help to secure our proprietary capabilities and allow us to grow and maintain market share over time. We look forward to providing updates on our plans over the next few months. Now, let me discuss our progress with testing and burning gallium nitride power semiconductors. We continue to be encouraged by this market and believe it will be significant in terms of market size for semiconductors. In addition to its wide adoption in consumer devices such as cell phones, tablets, and laptop computers, gallium nitride is being targeted for use in solar data centers and automobiles, whether electric or traditional gasoline automobiles.
Gayn Erickson: As I've noted before we are working with several again suppliers, including the two market leaders, which possess positions us front and center in this market that we believe is another potential significant growth driver for our wafer level solutions. The test requirements for Gan for full wafer actually quite different than silicon carbide in terms of technical implementation. However, our box platform.
Gayn Erickson: <unk> has been capable has been capable of testing these devices with the functionality and flexibility of our unique Fox blade architecture, which allows us to configure the test blade for specific applications with the same infrastructure.
Gayn Erickson: This has proven to be very impressive to these customers as in fact that even they did not understand the implications of testing an entire wafer at very high voltage and the resulting impact on the test schematic do just leakages of their devices, we were able to address this with our channel modules. Some proprietary custom wafer packs to address the test challenge and <unk>.
Gayn Erickson: Both air and our customers were very happy with the flexibility of our systems to do this.
Gayn Erickson: The critical reliability needs of these target markets appear to be increasingly driving production burn-in requirements, and Aehr's FOXP multi-wafer system can deliver both the power and high voltage required to do massive parallel per die and multiple wafer tests of gallium nitride devices for a very cost-effective solution. During the quarter, we announced our first order for a FOX wafer-level test and burn-in system to be used for gallium nitride devices. And we have a second potential FOX system customer that has been purchasing our wafer pack contactors for their on-site evaluation, which we believe is progressing very well. As I've noted before, we're working with several of the GAN suppliers, including the two market leaders, which positions us front and center in this market that we believe is another potential significant growth driver for our wafer level solutions.
We've been told now that Brennan will be required for Gan going into mission critical applications, such as automotive solar and in some industrial applications and the amount of burn in time is still being worked on still this is good news for us and we feel we're well positioned to capitalize on this opportunity with our solutions in these lead customers. We're also seeing some additional news.
Gayn Erickson: Small and large players engage with us for Gan.
Gayn Erickson: We've been seeing comp consolidation within the industry of smaller key gallium nitride players.
Being acquired by the larger suppliers. So all potential customers are believed to have real potential in the future.
Gayn Erickson: Turning to Silicon Photonics, which are silicon based semiconductors with integrated photon or light based transmission of signals within and into and out of the silicon.
Gayn Erickson: Laser photonic emitters and photonic receivers, we're very excited to have shipped during the quarter and ahead of schedule. The first order from a major silicon photonics customer for our new high power configuration of our Fox XP system for volume production in wafer level burn in and stabilization of next generation Silicon Photonics integrated systems circuit sorry.
Gayn Erickson: The test requirements for GAN for full wafer are actually quite different from silicon carbide in terms of technical implementation. However, our FOX platform has been capable of testing these devices with the functionality and flexibility of our unique FOX blade architecture, which allows us to configure the test blade for specific applications with the same infrastructure. This has proven to be very impressive to these customers, as in fact, even they did not understand the implications of testing an entire wafer at very high voltage and the resulting impact on the test schematic due to leakage of their devices. We were able to address this with our channel modules and proprietary custom wafer packs to address the test challenge, and honestly, both Aehr and our customers were very happy with the flexibility of our systems to do that. We've been told now that burn-in will be required for GANs going into mission-critical applications, such as automotive, solar, and some industrial applications, and the amount of burn-in time is still being worked on.
Gayn Erickson: This new high power configuration expands the market opportunities of the Fox XP system is configured to enable cost effective volume production test of wafers of next generation photonic integrated circuits, which are targeted for use in the new optical io or co packaged optics market for chip to chip communication.
Gayn Erickson: As we discussed before companies such as AMD, Nvidia Intel TSMC and Globalfoundries have all announced plans for silicon photonic integrated circuits and integration of these fees and packages with other devices, such as Cpus Gpus and AI processors, our Fox wafer level test and burn in solution with our proprietary.
Gayn Erickson: Area wafer pack full wafer contactor are a great fit for the Silicon Photonics market. These next generation Silicon Photonics based integrated circuits can require up to two to four times as much power for full wafer test burn in and stabilization, our new Fox production system configuration, which can be used to test and burn in these new optical Io devices expands the market opportunity is.
Gayn Erickson: Still, this is good news for us, and we feel we're well-positioned to capitalize on this opportunity with our solutions in these lead customers. We're also seeing some additional new small and large players engage with us for GAAP. We've been seeing consolidation within the industry of smaller key gallium nitride players being acquired by the larger suppliers. So all potential customers are believed to have real potential in the Turning silicon photonics, which are silicon based semiconductors with integrated photon or light based transmission of signals within and into and out of the silicon, the laser photonic emitters and photonic receivers. We're very excited to have shipped during the quarter and ahead of schedule, the first order from a major silicon photonics customer for a new high-power configuration of our FOXXB system for volume production wafer-level burning and stabilization of next-generation silicon photonics integrated systems, circuits. This new high-power configuration expands the market opportunities of the FOXXB system and is configured to enable cost-effective volume production tests of wafers of next-generation photonics, which are targeted for use in the new optical I-O or co-packaged optics market for chip-to-chip communication.
Fox XP system, even further.
In addition, the power and functionality of lasers used to transmit data are critically important to the performance of the communication channel and air solutions not only readout early life failures, but also improve the performance of the device through what the photonics industry refers to a stabilization.
Gayn Erickson: During the first day or two of normal operation in the laser output characteristics change in an exponentially duquesne manner and must be stabilized until the Duquesne stops before the final product can be tuned to meet its performance specifications are can do this across an entire wafer a fully integrated photonic integrated circuits with embedded or attacks laser emitters.
Gayn Erickson: Are currently has six customers using our systems for production test of that.
Gayn Erickson: Silicon Photonics devices five years in our MP and XP systems for wafer level test and burn in one using both systems for engineering and production burn in of individual simulated die and modules using our proprietary <unk>, while the timing of these devices and volume ramps are not publicly clear we remain very enthusiastic.
Gayn Erickson: <unk> about the silicon photonics market and are watching this market very closely we continue to work with some of the leaders in silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application.
Gayn Erickson: As we discussed before, companies such as AMD, NVIDIA, Intel, TSMC, and Global Foundries have all announced plans for silicon photonics integrated circuits and integration of these in packages with other devices such as CPUs, GPUs, and AI processors. Our FOX wafer-level test and burn-in solution, with our proprietary wafer-packed full wafer contactors, are a great fit for the silicon photonics market. These next-generation silicon photonics-based integrated circuits can require up to two to four times as much power for full wafer test burn-in and stabilization. Our new FOX production system configuration, which can be used to test and burn in these new optical I-O devices, expands the market opportunity of the FOX XP system even further. In addition, the power and functionality of the lasers used to transmit data are critically important to the performance of the communication channel.
Gayn Erickson: Now under memory.
According to the average of multiple market forecasters in 'twenty four memory semiconductors will make up over 50% of the total semiconductor wafer shipped and the whole world. This is approximately half NAND flash memory and half DRAM.
Gayn Erickson: We are making continued progress in our ongoing discussions with multiple memory suppliers. We see the memory market is a significant opportunity for us to deliver wafer level burn in solutions to help memory suppliers meet the reliability and quality needs, particularly with stacked die applications.
Gayn Erickson: During the next year, we're driving for our first on wafer benchmark in partnership with a leading NAND supplier using our proprietary wafer pack and Fox wafer level test and burn in system with our new fully automated wafer pack aligner we.
Gayn Erickson: We see an initial opportunity for test in NAND for solid state disk drives used in enterprise and data storage, where can deliver compelling cost effectiveness and also readout infant mortality issues before multiple dire put in a single package.
Gayn Erickson: And Aehr solutions not only weed out early-life failures but also improve the performance of the device through what the photonics industry refers to as stabilization. During the first day or two of normal operation, the laser output characteristics change in an exponentially decaying manner and must be stabilized until the decaying stops before the final product can be tuned to meet its performance specifications.
Gayn Erickson: Longer term, we believe DRAM will be a critical target market for our systems, particularly as a percentage of DRAM going into multi chip modules, such as Gpus, Cpus and AI processors increases.
Gayn Erickson: Now I want to spend a minute on the overall artificial intelligence semiconductor market.
Gayn Erickson: Aehr can do this across an entire wafer of fully integrated photonic integrated circuits with embedded or attached laser emitters. Aehr currently has six customers using our systems for production tests of their silicon photonics devices, five using our NP and XP systems for wafer-level test and burn-in, and one using both systems for engineering and production burn-in of individual simulated die and modules using our proprietary die pack. While the timing of these devices and volume ramps is not publicly clear, we remain very enthusiastic about the silicon photonics market and are watching this market very closely. We continue to work with some of the leaders in silicon photonics to ensure that we have the products and solutions available to meet their needs for this potentially significant market application. Now on to memory. According to the average of multiple market forecasters, in 24, memory semiconductors will make up over 50% of the total semiconductor wafer shipped in the whole world. This is approximately half NAND flash memory and half DRAM.
Gayn Erickson: I've already discussed how we're working with silicon photonics suppliers for their plans at integrated Silicon Photonics as optical communication Transceivers and devices, including AI processors. We also see co packaged memory and AI processors as a key driver for wafer level burn in of DRAM for these devices.
Gayn Erickson: We also see a significant opportunity for the AI processors themselves.
Gayn Erickson: Our new high power Fox system that we discussed for optical Io semiconductor bernann the Fox XP multi wafer production system. We began shipping last month is the world's highest power per wafer system on the market and our handles up to nine wafers at a time also unprecedented in the industry.
Gayn Erickson: This system is capable of testing up to full 300 millimeter wafers of processors up to several thousand watts of power and over 2000 answered current on each of nine wafers in parallel.
Gayn Erickson: We're making continued progress in our ongoing discussions with multiple memory suppliers. We see the memory market as a significant opportunity for us to deliver wafer-level burning solutions to help memory suppliers meet their reliability and quality needs, particularly with stacked die applications. During the next year, we're driving for our first on-wafer benchmark in partnership with a leading NAND supplier using our proprietary wafer packs and FOX wafer-level test and burning system with our new fully automated wafer pack aligner. We see an initial opportunity for testing NAND for solid-state disk drives used in enterprise and data storage, where AIR can deliver compelling cost-effectiveness and also weed out infant mortality issues before multiple dies are put in a single package.
Gayn Erickson: By moving the burden from package module.
Final system for them. It has done today and move it to wafer level, our customers can achieve enormous savings related to yield loss of modules with up to one hundreds of other devices. Our shipments in the same module on the case to system level test the cost of the whip inventory and yield loss of infrastructure of the system surrounding these modules or chips.
Gayn Erickson: The wafer level burn in challenges. We are working on include putting extremely high currents onto the wafer without damaging the wafer the contactor thermal management of the high power devices with very high leakage currents associated with the hike burn in temperatures, we can apply and automation and handling of these very expensive.
Gayn Erickson: Wafers built on the most state of the art logic process geometries and the world.
Gayn Erickson: Longer term, we believe DRAM will be a critical target market for our systems, particularly as a percentage of DRAM going into multi-chip modules, such as GPUs, CPUs, and AI processors. Now, I want to spend a minute on the overall artificial intelligence semiconductor. I've already discussed how we're working with silicon photonics suppliers for their plans to integrate silicon photonics as optical communication transceivers and devices, including AI processors. We also see co-packaged quote memory in AI processors as a key driver for wafer-level burn-in of DRAM for these devices. We also see a significant opportunity for AI processors themselves. Our new high-power FOX system that we discussed for Optical IOs Semiconductor Burn-In, the FOX XP Multi-Wafer Production System we began shipping last month, is the world's highest power-per-wafer system on the market, and it handles up to nine wafers at a time, also unprecedented in the industry. This system is capable of testing up to full 300 millimeter wafers of processors, up to several thousand watts of power, and over 2000 amps of current on each of nine wafers in parallel.
None: Stay tuned to hear more about this exciting new application for our products over the next several months.
None: And lastly, I want to discuss our wafer packs, which are basically the consumable that accompanies and is required with all of our Fox wafer level test and burn in systems. We continue to be very pleased with the continued stream of new designs for wafer packs are new design volume has almost doubled this year compared to last year as we're seeing more and more designs spanning silicon <unk>.
None: <unk> Gan Silicon photonics in other applications as a result, our customers are buying additional wafer pack contractors for these new designs highlighting the recurring revenue part of our business as we've noted before our proprietary wafer pack contactor are needed with our Fox wafer level test and burn in systems to make contact with the individual die on the wafer and.
None: Our designed specifically for a given device as our customers win new designs from their customers are eventually secures orders for new wafer packs to fulfill these two wins with each new design, our customers will need enough new wafer packs to meet the volume production capacity and need for those new devices, our wafer packs will be greater than 50% of our total revenues.
None: This fiscal year, which is fantastic and underscores the business model that allows us to grow both from added capacity from our Fox systems, but also with wafer packs to serve an ever increasing installed base.
Gayn Erickson: By moving the burn-in from package module to our final system form and moving it to wafer level, our customers can achieve enormous savings related to yield loss of modules with up to hundreds of other devices or chiplets in the same module. In the case of the system level test, the cost of the WIP inventory and yield loss of the infrastructure of the system surrounding these modules or chips. The wafer-level burning challenges we're working on include putting extremely high currents onto the wafer without damaging the wafer or the contactor, thermal management of the high power devices with very high leakage currents associated with the high burning temperatures we can apply, and automation and handling of these very expensive wafers built on the most state-of-the-art logic process geometries in the world. Stay tuned to hear more about this exciting new application for And lastly, I want to discuss our wafer packs, which are basically the consumable that accompanies and is required for all of our FOX wafer-level tests and burns. We continue to be very pleased with the continued stream of new designs for wafer packs.
None: To conclude as we head towards the start of fiscal 'twenty five on June one, we're very encouraged and optimistic about our increase in engagements and the long term growth opportunities of all of these markets and are excited to continue on our path of becoming the world's standard for wafer level test and burn in for the semiconductor industry and with that let me turn it up.
None: Chris before we open up the line for questions.
Chris: Thank you Gary and good afternoon, everyone.
The company recognized solid bookings in the third quarter of fiscal 2024 bookings totaled $24 5 million compared to just $2 2 million in the second quarter of fiscal 2024.
Chris: Our backlog as of quarter end was $20 million.
Chris: We expect to recognize revenue from the majority of this orders for systems wafer packs of liners and services in the last quarter of fiscal 2024, which ends on May 31 2024.
Gayn Erickson: Our new design volume has almost doubled this year compared to last year as we're seeing more and more designs spanning silicon carbide, GaN, silicon photonics, and other applications. As a result, our customers are buying additional wafer pack contactors for these new designs, highlighting the recurring revenue part of our business. As we've noted before, our proprietary wafer pack contactors are needed with our FOX wafer-level test and burn-in systems to make contact with the individual die on the wafer and are designed specifically for a given device.
Looking at our financial results for the third quarter.
Total revenue was $7 6 million down 56% from $17 2 million in Q3 last year.
Chris: As we noted in our earnings pre announcement last month. The decrease in revenue was due to the timing on some significant customer orders.
Chris: And just the last two weeks of the third quarter.
Chris: We saw delays in a couple of customer orders that had planned shipments in the quarter as well as a last minute push out by a customer of our system in our backlog from the fiscal third quarter to the current fiscal fourth quarter.
Gayn Erickson: As our customers win new designs from their customers, Aehr eventually secures orders for new wafer packs to fulfill these new orders. With each new design, our customers will need enough new wafer packs to meet the volume production capacity need for those new devices. Our wafer packs will be greater than 50% of our total revenues this fiscal year, which is fantastic and underscores the business model that allows us to grow both from added capacity from our FOX systems but also with wafer packs to serve an ever-increasing installed base. To conclude, as we head toward the start of Fiscal 25 on June 1, we're very encouraged and optimistic about our increase in engagements and the long-term growth opportunities of all these markets and are excited to continue on our path of becoming the world standard for wafer-level testing burn-in for the semiconductor industry. With that, let me turn it over to Chris before we open up the line for questions. Thank you, Gayn. Good afternoon, everyone.
Chris: Wafer pack revenues were $4 8 million.
Chris: And accounted for 63% of our total revenue in the third quarter, which is higher than 37% of total revenue in the prior year's Q3.
Chris: Customers typically buy wafer packs for months subsequent to purchasing new Fox systems.
Chris: Additionally cut.
Chris: Customers also buy wafer packs for months as they change their chip design for smaller and more efficient devices for the OEM customers.
Chris: We are seeing continued momentum for new wafer pack designs from both our existing and new customers as they look to meet the end customer and market requirements.
Chris: GAAP gross margin for the third quarter came in at 41, 7% down from 51, 6% in Q3 last year.
Chris: The decrease in gross margin is primarily due to lower revenue, resulting in a higher over head absorption rate and lower manufacturing efficiencies.
Chris P. Siu: The company recognized solid bookings in the third quarter of fiscal 2024. Bookings totaled $24.5 million compared to just $2.2 million in the second quarter of fiscal 2024. Our backlog as of quarter end was 20 million. We expect to recognize revenue from the majority of these orders for systems, waiver packs, aligners, and services in the last quarter of fiscal 2024, which ends on May 31st, 2024. Looking at our financial results for the third quarter, total revenue was $7.6 million, down 56% from $17.2 million in Q3 last year. As we noted in our earnings pre-announcement last month, the decrease in revenue was due to the timing of some significant customer orders. In just the last two weeks of the third quarter, we saw delays in a couple of customer orders that had planned shipments in the quarter, as well as a last-minute pushout by a customer of a system in a backlog from the fiscal third quarter to the current fiscal fourth quarter. Waiver PAC revenues were $4.8 million and accounted for 63% of our total revenue in the third quarter, which is higher than 37% of total revenue in the prior year in Q3.
Chris: Operating expenses in the third quarter were $5 2 million up slightly from $5 1 million in Q3 last year.
Chris: The year over year increase is primarily due to higher R&D expenses, which were partially offset by lower SG&A expenses.
Chris: The increase in R&D in Q3 from the same period last year was primarily due to costs associated with our continuing efforts to augment the features and performance of our automated wafer pack aligner and higher personnel expenses.
Chris: We have hired R&D talent in both hardware and software and have invested in R&D programs to enhance our existing market, leading products and maintain our competitive advantages.
Chris: At the end of Q3, we announced we shipped our first order from a major silicon Photonics photonics customer for high powered configuration of our Fox XP system for volume production wafer level burn in and stabilization of next generation Silicon photonic integrated circuits.
Chris: non-GAAP net loss, which excludes the impact of stock based compensation was $900000 or <unk> <unk> per diluted share for the third quarter.
Chris: This is down from non-GAAP net income of $4 7 million or <unk> 16 per diluted share in the third quarter of fiscal 2023.
Chris P. Siu: Customers typically buy wafer packs for much subsequent to purchasing their new Fox system. Additionally... Customers also buy wafer packs from us as they change their chip design for smaller and more efficient devices for their OEM customers. We've seen continued momentum for new WaverPack designs from both our existing and new customers as they look to meet their end customer and market requirements. Gap gross margin for the third quarter came in at 41.7%, down from 51.6% in Q3 last year. The decrease in gross margin is primarily due to lower revenue resulting in a higher overhead absorption rate and lower manufacturing efficiency. Operating expenses in the third quarter were $5.2 million, up slightly from $5.1 million in Q3 last year.
Chris: We expect to return to profitability in our fourth quarter of fiscal 2024.
Chris: Moving to the balance sheet, we continue to maintain a healthy balance sheet.
Chris: Our cash and cash equivalents were $47 6 million at the end of Q3 down from $55 million at the end of Q2.
Chris: With a solid balance sheet.
Chris: Continue to invest in scaling our business and entering into new markets and supporting new opportunities.
Chris: We used $2 $8 million in operating cash flows during the quarter to procure inventory components, primarily to support our operations.
Chris: We have zero debt and continue investing our excess cash and money market funds.
Chris P. Siu: The year-over-year increase is primarily due to higher R&D expenses, which were partially offset by lower SG&A expenses. The increase in R&D in Q3 from the same period last year was primarily due to costs associated with our continuing efforts to augment the features and performance of our automated wafer pack aligner and higher personnel expenses. We have hired R&D talent in both hardware and software and have invested in R&D programs to enhance our existing market-leading products and meet our competitive advantages. At the end of Q3, we announced we shipped the first order from a major Seekon Photonics customer for a high-power configuration of our FOX XP system for volume production, wafer-level burning, and stabilization of next-generation Seekon Photonics integrated circuits. Non-GAAP net loss, which excludes the impact of stock-based compensation, was $900,000, or $0.03 per diluted share, for the third quarter.
Chris: Interest income earned during this higher interest rate environment was $584000 in the third quarter.
Chris: Compared to $374000 in the third quarter last year.
Chris: As of the end of the third fiscal quarter of 2024.
Chris: The amount available under the previously announced $25 million ATM offering was $17 7 million we.
Chris: We did not sell any shares during the last three fiscal quarters.
Chris: It remains our plan to only sell shares against this ATM offering at times in prices that are most advantageous to our shareholders and to the company.
Chris: Now turning to our outlook for the current fiscal year that ends on May 31 2024.
Chris: As we noted in our earnings pre announcement.
Chris: Our third quarter results reflect delays in wafer level burn in system orders for Silicon carbide semiconductor devices used in.
Chris: Electric vehicles.
Chris: Due to this we have revised our guidance for our fiscal full year, ending may 31, 2024 to be greater than $65 million in total revenue and net income of at least 11 million, which we are reaffirming today.
Chris P. Siu: This is down from non-GAAP net income of $4.7 million, or $0.16 per diluted share, in the third quarter of fiscal 2023. We expect to return to profitability in our fourth quarter of fiscal 2024. Moving to the balance sheet, we continue to maintain a healthy balance sheet. Our cash and cash equivalents were $47.6 million at the end of Q3, down from $50.5 million at the end of Q2. With a solid balance sheet, we can continue to invest in growing our business and entering new markets and supporting new opportunities. We used $2.8 million in operating cash flows during the quarter to procure inventory components primarily to support our operations. We have zero debt and continue investing our excess cash in money market funds. Interest income earned during this higher interest rate environment was $584,000 in the third quarter, compared to $374,000 in the third quarter last year. As of the end of the third fiscal quarter of 2024, the remaining amount available under the previously announced $25 million ATM offering was $17.7 million. We did not sell any shares during the last three fiscal quarters.
Chris: As I mentioned before we ended the third quarter with $20 million backlog and we expect to recognize the majority of that backlog as revenue in the fourth quarter.
Chris: Lastly, looking at the Investor Relations calendar and test will participate in three investor conferences over the next few months.
Chris: We will be meeting with investors at.
Chris: The Craig Hallum Institutional Investor Conference, taking place in Minneapolis on May 29.
Chris: And we will be presenting and meeting with investors at the William Blair 44th annual growth conference taking place in Chicago on June 5th.
Chris: We will also be meeting with investors at the CEO summit in San Francisco on July 10.
Chris: We hope to see some of you at this conferences.
Chris: This concludes our prepared remarks, we're now ready to take your questions. Operator. Please go ahead.
Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Chris: You May press star two to remove your question from the queue.
Chris: <unk> using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Chris P. Siu: It remains our plan to only sell shares against this ATM offering at times and prices that are most advantageous to our shareholders and to the company. Now, turning to our outlook for the current fiscal year that ends on May 31st, 2024. As we noted in our earnings pre-announcement, our third quarter results reflect delays in wafer-level burning system orders for Zircon carbide semiconductor devices used in electric vehicles. Due to this, we had revised our guidance for our fiscal full year ending May 31, 2024 to be greater than $65 million in total revenue and net income of at least $11 million, which we are reaffirming today. As I mentioned before, we ended the third quarter with $20 million in backlog, and we expect to recognize the majority of that backlog as revenue in the fourth quarter.
Chris: One moment, please while we poll for questions. Once again, please press star one if you have a question or comment.
Chris: Our first question comes from Christian Schwab with Craig Hallum. Please proceed.
Christian David Schwab: Hey, guys.
Christian David Schwab: <unk>.
Details gain on another.
Christian David Schwab: Another target market opportunities.
Christian David Schwab: I just had a few questions regarding the silicon carbide electric vehicle opportunity.
Christian David Schwab: As you as you're looking into calendar 'twenty, five or I guess next fiscal year 'twenty five I guess it wasn't necessarily clear to me.
Christian David Schwab: Who do you guys have any idea of you know.
Christian David Schwab: Are you expecting to see.
C.
Christian David Schwab: Material revenue again next year from you historically.
Chris P. Siu: Lastly, looking at the investor relations calendar, Aehr Test will participate in three investor conferences over the next few months. We will be meeting with investors at the Craig Hallam Institutional Investor Conference, taking place in Minneapolis on May 29, and we will be presenting and meeting with investors at the William Blair 44th Annual Growth Conference, taking place in Chicago on June 5th. We will also be meeting with investors at the CEO Summit in San Francisco on July 10.
Christian David Schwab: <unk> largest customer and how do you see.
Christian David Schwab: The different customers I know you kind of put it in the press release different timeframe. So I'm just wondering if you had if you can.
Christian David Schwab: Detour Lake that a little bit more clear.
None: I mean at this point normally we're not really talking about next year, we'll do that next call, but let me just still gave you some insights because we do we certainly have visibility a lot of it was candidly some of the same numbers just pushed out in time.
Chris P. Siu: We hope to see some of you at this conference. This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead. Thank you.
Operator: At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate that your line is in the question queue. You may press star 2 to remove your question from the queue.
None: So at the same time as I say well, they're familiar to me we need to at least put the caveat, yes, but they pushed them out before so I'm not I'm not for boating anything I'm just way more gun shy now, believing everything the customers tell me.
If you will but.
Operator: For participants using speaker equipment, it may be necessary to pick up your headset before pressing the start button. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from Christian Schwab with Craig Hallam. Hey guys, thank you for all the details gained on another target market. I just had a few questions, you know, regarding the silicon carbide electric vehicle operation.
None: Right now, yes, we do believe that next year, we'll be getting material revenues from our actually I believe all of our customers are expected to be taking revenue next year.
None: <unk>, our largest historical one.
None: We believe we will be adding.
None: Some of the key customers candidly some that we thought we were going to be closing by now.
None: That we still have optimism.
None: Just on upon our current assessment of their needs our competitiveness the lack of a competitor for that specific application. We think we can win them and obviously as you win them you can have more visibility as to really what's going on I think the other piece of this is that.
Christian David Schwab: As you're looking into calendar 25, or I guess next fiscal year 25, it wasn't necessarily clear. You know, do you guys have any idea of, you know, are you expecting to see material revenue again next year from your historically largest customer? And how do you view the different customers?
None: Candidly our trip across several countries in.
Gayn Erickson: I know you kind of put different timeframes in the press release, so I'm just wondering if you could just make that a little bit more clear. I mean, at this point, normally, we're not really talking about next year; we'll do that next call.
In Asia.
None: Probably the most notable would be in China was really.
None: <unk>.
None: I guess encouraging if you spent your whole life living in the United States listening to the news on electric vehicles, I mean candidly it's not.
None: Well I think we're all reading it.
Gayn Erickson: But let me still give you some insights, because we certainly have visibility. A lot of it was, candidly, some of the same numbers just pushed out in time. So at the same time as I say, well, they're familiar to me, we need to at least put the caveat, yeah, but they pushed them out before. So I'm not foreboding anything.
None: It's very different.
And I saw segment the other day CNBC reported was falling around yellen and.
None: And she was making comments about what she felt and saw with the <unk> and you look around Shanghai and it's like is there really more than 50% of these cars are evs and we were taking pictures of it and it's just a very different tone.
None: There and its just a much more positive thing everywhere and in the U S. It has sort of this wet blanket over it that.
Gayn Erickson: I'm just way more gun-shy now of believing everything the customers tell me, if you will. Right now, yes, we do believe that next year we'll be getting material revenues from our customers. Actually, I believe all of our customers are expected to be taking revenue next year, including our largest historical one. We believe we'll be adding some of the key customers, candidly, some that we thought we were going to be closing by now, that we still have optimism about, and based on our current assessment of their needs, our competitiveness, the lack of a competitor for that specific application, we think we can win them. And obviously, as you win them, you can have more visibility as to really what's going on.
None: Placed and more political but I don't want to get into that okay, but nevertheless.
None: As you look around its pretty encouraging and again, we talked about these other markets too, but you were talking specifically about silicon are evs I do believe they're.
None: There's a lot of fabs that are being built there's people that we believe have the inside scoop.
None: It's kind of odd we have some insight through the Oems themselves as to who their favorite vendors are obviously, we can't share what that is but that gives us a little bit more confidence in who we should be partnering with as well.
Gayn Erickson: I think the other piece of this is that, you know, candidly, our trip to several countries in Asia, and probably the most notable would be in China, was, you know, really an opportunity for us to have a conversation about, you know, what's going on in Asia. I guess, encouraging. If you spent your whole life living in the United States listening to the news on electric vehicles, I mean, candidly, it's not, you know, I think we're all reading it, it's very different. And, you know, I saw a segment the other day where a CNBC reporter was following around Yellen, and she was making comments about what she felt and saw with the EVs. And, you know, you look around Shanghai, and it's like, is there really more than 50% of these cars are EVs? And we were taking pictures of it. And it's just a very different tone there.
None: So I know I know that right now candidly nobody wants to hear about silicon carbide in evs, but it's still going to be a good business for us going forward, but certainly not going to be the only one for us okay.
And by the way when I was when I say 25, I actually mean fiscal so.
None: Ratcheting on me in June, but I think that.
None: A lot of that when we talk about the 'twenty five 'twenty six model years. Those are I don't even know exactly evs arent the same as they used to but theres clearly people ramping up for.
None: High volume production of a bunch of new cars by next summer.
None: Great.
None: And then on a follow up on China would you anticipate you know.
None: Seen you know.
Measurable revenue from that marketplace in the next fiscal year then.
None: I think there is a very real chance of that.
Gayn Erickson: And, and it's just a much more positive thing everywhere. And in the US, it has sort of this wet, you know, blanket over it that I think is placed in a more political context, but I don't want to get into that. Okay. But nevertheless, you know, as you look around, it's pretty encouraging. And again, we talked about these other markets too, but you're talking specifically about Silken Art EVs. I do believe that, you know, there are a lot of fabs that are being built. There are people that we believe have the inside scoop. It's kind of odd; we have some insight from the OEMs themselves as to who their favorite vendors are. Obviously, we can't share what that is.
None: That would be our hope if not expectation lawyers always telling me to be careful about expectations at this point, but.
None: Yes, I mean I.
None: We went there and personally sat down with almost a dozen companies.
None: And Cologuard at first hand feel and view in there.
None: We are very.
None: Sure.
None: They're very aware of silicon carbide of what the quality is what the issues with there are with respect to the manufacturing mature defects why unique burn and how long you need to do it for what are the burn in requirements I candidly found them to be quite.
None: Knowledgeable and.
Gayn Erickson: But that gives us a little bit more confidence in who we should be partnering with as well. So I know, I know that right now, candidly, nobody wants to hear about Silicon Carbide EVs, but it's still going to be a good business for us going forward, but certainly not going to be the only one for us. Okay. And by the way, when I say 25, I actually mean fiscal.
None: This may come across a little boisterous, but.
None: Candidly I think the smarter people are with silicon carbide, the better we look because they really understand what it is we're doing and that's what I felt when I was in Korea, Japan and China.
None: So to some extent they have learned enough and then theyre now being much more clear about why they need wafer level burn in and what they're looking for and that bodes well because.
Gayn Erickson: So, you know, ratcheting on me in June. But, you know, I think that they do a lot of that when we talk about the 25, 26 model years. Those are, you know, I don't even know exactly. EVs aren't the same as they used to be, but there's clearly people ramping up for, you know, high volume production of a bunch of new cars by next summer. Great. And then on a follow-up on China, would you anticipate seeing, you know, measurable revenue from that marketplace in the next fiscal year then? I think there's a very real chance of that.
None: Believe I truly believe we have the best solution on the market.
None: And then my last question the gain.
None: Just a follow up on the China market is that something that you would address with a direct sales force or would you would you partner with.
Somebody local for distribution.
None: Yes, a little both and we've already done that I mean, I think we have a dozen customers in China. Most people don't remember that but if you go back and look we had a bunch of ABTS systems that were sold all over China with us of Fox system. So we have local air employees, they're both sales applications and infrastructure.
Gayn Erickson: And that would be our hope, if not expectation. Lawyers always tell me to be careful about expectations at this point. But yes, I mean, I personally sat down with almost a dozen companies and kind of got a first-hand feel and view, and they are very. They're very aware of silicon carbide, of what the quality is, what the issues are with respect to the manufacturing material defects, why you need to burn it, and how long you need to do it for, what are the burning requirements. I candidly found them to be quite knowledgeable.
But in China, It's pretty typical that you also use reps that have close relationships with.
None: Different geographies and we have that as well so they would get.
None: Specific commission on a sale and Thats I think almost everything we've sold in China has had some of that not all of it but most of it.
None: It's a little of both but we're also looking at upping our presence.
None: Pretty significantly including dropping in.
None: Demo set centers, some local infrastructure and some other things too.
None: Give us more girth.
None: Specifically at the request of.
None: About a half a dozen companies.
None: Okay, great no other questions. Thank you.
Gayn Erickson: And this may come across a little boisterous, but candidly, I think the smarter people are with silicon carbide, the better we look, because they really understand what it is we're doing. And that's what I felt when I was in Korea, Japan, and China. So to some extent, they have learned this enough, and they are now much more clear about why they need wafer-level burn-in and what they're looking for. And that bodes well because I truly believe we have the best solution on the market. And then my last question, again, just to follow up on the Chinese market: is that something that you would address with the direct sales force, or would you partner with somebody local for distribution? Yeah, a little of both. And we've already done that. I mean, I think we have a dozen customers in China. Most people don't remember that.
None: Yes.
None: The next question comes from Jed.
Jed: <unk> with William Blair. Please proceed.
Jed: Hi, Thanks.
Hey, guys just a few questions I guess first one.
Jed: Fox NP new customer.
Jed: You described.
None: Ascribed as the semiconductor global semiconductor manufacturer is that also a tier one.
None: Automotive customer I'm, just wondering if by some categorize it as both.
None: So.
None: Im going to try throughout today in these call try and get more and more bag only because we've been getting feedback from customers to be particularly now this particular customer wasn't one of those but I'll answer that question, it's not a tier one.
None: Hey, there.
None: Their entire business is semiconductors.
None: And what would you expect the timing to be in terms of conversion from an MLP to NXP with that customer.
Gayn Erickson: But if you go back and look, we had a bunch of ABTS systems that were sold all over China with a Fox system. So we have local air employees there, both for sales, applications, and infrastructure. But in China, it's pretty typical that you also use reps that have close relationships with sort of different geographies. And we have that as well. So they would get, you know, a specific commission on a sale. And that's, I think, almost everything we've sold in China has had some of that, not all of it, but most of it. So it's a little of both.
None: Actually I want to hold back on that a little bit with respect to what their timing is because my understanding is thats part of their secret sauce et cetera, but.
None: If I told you over the next couple of years, it's pretty generic I realize that.
None: <unk>.
None: We know that they have made some.
None: Substantial purchases.
None: For front end equipment.
None: Other things as well and the ANP is just their engineering bring up tool.
Gayn Erickson: But we're also looking at upping our presence, you know, pretty significantly, including dropping in a demo set center, some local infrastructure, and some other things to give us more girth. Okay, great. No other questions. Thank you. This question comes from Jed Dorsheimer with William Blair.
None: And that.
Has no intention of being able to address their production so.
None: Whether it be next year. The following year you could leave it at that for now maybe I'll give you more visibility next time.
None: Okay.
None: And then.
None: It's helpful.
Jonathan Dorsheimer: All right, thanks. Hey guys, just a few questions. I guess the first one, the new Fox MP customer, which you described as a semiconductor, a global semiconductor manufacturer, is that also a Tier 1 automotive customer? I'm just wondering if there are any categories for that.
None: Your excitement over the China market.
None: I'm just curious are you going to outline how you're how you intend to address the dilemma, which.
None: He is.
Gayn Erickson: So I'm going to try, throughout today and in each call, to get more and more vague, only because we've been getting feedback from customers that they are particularly vague. Now, this particular customer wasn't one of those, but I'll answer that question. It's not a tier one.
None: He is kind of caught most tool companies off guard, where local subsidies require reengineering of tooling to a local supply chain.
Gayn Erickson: Their entire business is semi-connected. And what would you expect the timing to be in terms of conversion from an MP to an XP with that? Um...
None: Yes.
None: What I want to say is we're not.
None: We're not ignoring that and we're not.
Gayn Erickson: I actually, I want to hold back on that a little bit with respect to what their timing is because my understanding is that's part of their secret sauce, et cetera, but. You know, if I told you over the next couple of years, it's pretty generic. I realized that they did. We know that they have made some substantial purchases for front-end equipment and other things as well, and you know the end piece is just their engineering development tool and that that has no intention of being able to address their production, so you know whether it be next year or the following year, you can leave it at that for now. Maybe I'll give you more visibility the next time. Okay. And then, you know, it's helpful in your excitement over the Chinese market.
None: Believing that we have all the answers.
None: We have some specific legal.
IP.
None: Security.
None: And contract fuel.
None: Things that we're going to use I'd love to tell you something besides to slow it down but we've also have there is that.
None: We have reason to believe that it's not that easy to directly.
Knockoff, our system without actually violating our IP or to get close enough to do it.
We also have a lot of software and a lot of other things I don't think it's that easy to just simply do it and then if you did you'd have some other issues.
Jonathan Dorsheimer: I'm just curious, are you going to outline how you intend to address the dilemma which, You know, has kind of caught most tool companies off guard where local subsidies require re-engineering of tooling to a local supply chain? Yeah, I mean, I think what I wanna say is we're not ignoring that, and we're not believing that we have all the answers. We have some specific legal IP requirements for security and contractual things that we're going to use. I'd love to tell you something besides slow it down.
None: So we're conscious of it I don't want to be and we're specifically doing things and where not to publicly announce all of the things that we're doing as part of the reason to keep it secure.
None: Got it.
None: Okay and then.
None: Non silicon carbide gain.
None: For Silicon carbide.
None: Ed.
None: The inherent defect density of the material combined with a shift to modules kind of created this perfect opportunity for wafer level burn in as you look at the silicon market, where you have a homogeneous material structure and chipset.
Gayn Erickson: But we also have, you know, there's that we have reason to believe that it's not that easy to directly knock off our system without actually violating our IP or to get close enough to do it. We also have a lot of software and a lot of other things. I don't think it's that easy to just do it.
Gayn Erickson: And then if you did, you would have some other issues. So we're conscious of that. I don't want to be, and we're specifically doing things, and we're not going to publicly announce all the things that we're doing as part of the reason to keep it secure. About it.
None: Is it.
None: To open up memory and.
None: Some extent silicon photonics is this.
None: Largely memory in Silicon is this really just a function of moving two modules or chip.
Jonathan Dorsheimer: You know, for silicon carbide... The inherent defect density of the material, combined with a shift to modules, kind of created this perfect opportunity for wafer-level burn-in. If you look at the silicon market, where you have a homogeneous material structure, Chipset is to open up memory, to some extent, silicon photonics, or largely memory in silicon.
None: They kind of triggers that could you could you help articulate what will be the gating factor there.
None: So.
None: If you if you want to step back and just say, okay. What are the really big things driving their market first of all alright, the market's growing from $600 billion trillion.
Gayn Erickson: Is this really just a function of moving to modules or chiplets that kind of triggers that? Could you help articulate what you think will be the gating factor there? Okay, so when you want to step back and just say, Okay, what are the really big things driving our market? Okay, first of all, the market's growing from 600 billion to a trillion. Semiconductors, many of them, are not actually getting more reliable.
None: Semiconductors, many of them are not actually getting more reliable things like very low geometry processes. The processors that we're talking about AI processor Cpus there all of our intend today, Okay Thats nothing new there just burton and the package form than normal, but then people are actually putting them.
None: Into and by the way in some cases, they weren't burning them and they're not putting them into applications, where they work.
There are processor companies that ship devices to a consumer application that don't burn amend but always barnum and into automotive well theres more and more automotive and other things that matter to the reliability and then the last thing, which really drives wafer level would be.
Gayn Erickson: Things like very low geometry processes, the processors that we're talking about, AI processors, CPUs, they're all burnt in today. Okay, that's nothing new. They're just burnt in a package form in normal.
B you are putting in a multi chip modules.
None: So specifically on memory Youre like wait a minute.
None: Which ones that matter memory has long required a burn in process. Every DRAM is burned 10, and I'll have Dan devices that are going to end up going into a solid state disk drive have a cycling and burn in measured in.
Gayn Erickson: But then people are actually putting them in applications where they were, okay. There are processor companies that ship devices to a consumer application that don't burn them in, but they always burn them in for the automotive application. Well, there's more and more cars and other things that matter to reliability. And then the last thing which really drives wafer level is you're putting in a multi-chip module. Okay, so specifically on memory, you're like, wait a minute, which ones does it matter?
Fractions of days many hours alright, so that burn and if you are looking for opportunities you look for the devices that they are in themselves need Vernon.
None: Silicon Photonics every single devices burned and doesn't matter, where it needs to be burned 10, then you're looking for maybe discontinuity, where large volumes are going to a new application where it matters.
None: If you look back it's been 20 years now, but everything that drove the test business in the early two thousands was consumer.
Gayn Erickson: Memory has long required a burn-in process; every DRAM is burnt in, and all the NAND devices that are going to end up going into a solid state disk drive have a cycling and burn-in measured in, you know, fractions of days, you know, many hours, right? So that burn-in, if you're looking for opportunities, you look for the devices that then themselves need burn-in, right? Silicon photonics, every single device is burnt in, doesn't matter where it needs to be burnt in; then you're looking for maybe discontinuities where large volumes are going to a new application where it matters.
None: Consumer consumer consumer I remember that was all everything that mattered was always consumer and now consumer is not what's driving the test requirements consumers sort of left for dead all of the applications and data AI processing.
None: Automotive et cetera are driving all the test requirements and that definitely is the case for Berlin. So from memory, it's the data centers.
None: Memories are stacking together, and then theyre, putting them together I definitely remember and can talk to in great detail about how many dire being stacked into an SSD and where do you want to burn a minimum you should burn them in before you put them into that application and then now what we're seeing with the likes of.
Gayn Erickson: And, you know, if you look back, it's been 20 years now, but everything that drove the test business in the early 2000s was the consumer. Consumer, consumer, consumer. I remember that was all that mattered.
None: 100, <unk> hundred type things. These modules co op packaging that actually puts a processor a big old stack of DRAM.
None: Chip set on their future will be in optical Io chipset or something along those lines those devices often need to be burnt in a unit bird a minute the module level. The answer is yes, why because it's the only place to do it well that's ridiculously expensive. So there are initiatives to say how do we burn those devices in.
Gayn Erickson: And now the consumer is not what's driving the test requirement. Consumers are sort of left for dead. All of the applications in data, AI, processing, automotive, et cetera, are driving all the test requirements, and that definitely is the case for burn-in.
At the di level and I can tell you sort of just front and centre my whole career at this thing when you start with I need to do it there are testability DFT and other things that you can do to implement it and we believe we have a solution that can partner with them to actually implement wafer level burn in so.
Gayn Erickson: So for memories, it's the data centers, OK? Memories are stacking together, and then they're putting them together. I definitely remember and can talk about in great detail about how many die are being stacked into an SSD. And where do you want to burn them?
None: The applications that will be driving our business today are very different than I think they will be in a couple of years I mean, I still think silicon carbide is going to be a really good business for us, but it won't be the only one.
Gayn Erickson: You should burn them in before you put them into that application. And then now what we're seeing with the likes of the A100, B200 type things, these modules, COOS packaging that actually puts a processor, a big old stack of DRAM, a chipset on there, the future will be an optical I-O chipset or something along those lines, those devices often need to be burnt in. Are you going to burn them in at the module level? The answer is yes. Why? Because it's the only place to do it.
None: So gain sorry that move to multi chip modules from an economic perspective is the driver then in terms of the catalyst that makes them re look at their test strategy and say I'm going to need to do more wafer level correct got it.
None: And the reason, they're not doing that with your system today is they're selling for a price where they can eat the yield loss or.
Gayn Erickson: Well, that's ridiculously expensive. So there are, you know, initiatives to say, "How do we burn those devices in at the dye level?" And I can tell you, sort of just front and center in my whole career at this thing, when you start with, I need to do it, there are testability, DFT, and other things that you can do to implement it. And we believe we have a solution that can partner with them to actually implement wafer-level burning. So, the applications that will be driving our business today are very different than I think they will be in a couple of years. I mean, I still think silicon carbide is going to be a really good business for us, but it won't be the only one.
None: Yes, it's a good question, but it's not crazy sorry, Dr Empire Crazy Jed.
None: But if you're if you are able to get.
None: If youre able to get 97% margin and 50.
None: <unk>, 50% yield loss through carriers I guess.
None: I am not implying I know that answer and if I did I'm not telling it is but that would be logical but as things become more important or you would go into capacity.
None: Money matters, Yes, you would drive it and so I think thats, what what makes sense why we're feeling these sort of top down initiatives.
Gayn Erickson: So, Gayn, sorry, the move to multi-chip modules from an economic perspective is the driver, then, in terms of- It's the catalyst that makes them re-look at their test strategy and say, I'm going to need to do more wafer load, correct? Got it. And the reason they're not doing that today is that they're selling for a price where they can eat the yield loss or, you know. That's a good question, but it's not crazy. Sorry, Dr. Impli, you're crazy, Jed.
None: Shifting things towards wafer level.
Got it that's helpful I'll jump back in the queue. Thank you okay. Thanks, Jay Thank you.
None: Once again, if you have a question or comment please indicate so by pressing star one on your Touchtone phone. Please press star one if you have a question or comment.
None: Next we have Larry <unk> with <unk> capital. Please proceed.
Jonathan Dorsheimer: But, you know, if you're able to get, you know, if you're able to get 97% margin and, you know, you eat, you know, 50% yield loss, who cares? I guess. I mean, I'm not implying I know that answer. And if I did, I'm not telling it, you know, it is, but that would be logical. But as things become more important, or you don't have capacity, or money matters, yes, you would drive it. And so I think that makes sense why we're feeling these sort of top-down initiatives for shifting things towards wafer levels. That's helpful. I'll jump back in the queue.
Larry: Hi gang.
Larry: Hey, Larry how are you doing.
Larry: Hey, good morning.
Larry: According CEO as last quarter earnings report.
Larry: It was really optimistic.
Larry: Cogs.
Larry: The second optical network, that's going to be deployed.
Larry: Hooking up Gpus and AI data centers.
Larry: And since we were pushed to ship your optical while production system.
Larry: They get it all as soon as possible.
None: Have a sense of when this may show up in the marketplace.
Jonathan Dorsheimer: Thank you. Once again, if you have a question or a comment, please indicate so by pressing star one on your touch tone. Press star 1 if you have a question or a comment.
None:
None: Yes ni.
None: Yes.
None: So it's one of the more I feel like it's one of the most tightly guarded secrets okay.
Operator: Next, we have Larry Chlebina with Chlebina Capital. Please proceed. Hi Gayn. Hey Larry. How are you doing?
Larry Edward Chlebina: Hey, Corning's CEO in his last quarterly earnings report was really optimistic about what he called the second optical network that's going to be deployed, hooking up GPUs in AI data centers. And since you were pushed to ship your optical I.O. production system, to get it out as soon as possible, do you have a sense of when this may show up in the marketplace? [inaudible] Yes. And I, I, okay.
None: And I don't believe that we're even being told everything correctly that sounds probably you don't want to hear that but I think we I know more than I can say and I know, it's still though we have everything.
None: I have mentioned I think you heard me in the past and where they have sort of struggled with is if you go out and you look at someone like a youll who's really smart understands this optical space very well.
None: And they look at the optical Io, they're like well I'm not sure how big that market is going to be et cetera et cetera, what is.
What does the Nvidia or AMD tell you, although they won't tell me anything.
Gayn Erickson: So I feel like it's one of the most tightly guarded secrets. And I don't believe that we're even being told everything correctly. That sounds probably, you probably don't want to hear that.
None: Got you.
None: Figure of course, they're not telling us the reality of my mind is what AMD Intel Nvidia pick your other AI processor does your what their what their plans are that's what's going to drive it and those are very closed environments, they're not they're not I don't believe for a minute that nvidia.
Gayn Erickson: But I think we, I know more than I can say, and I still don't have everything. What I have mentioned, I think you've heard me in the past, and what I sort of struggled with, is if you go out and you look at someone like a Yole, who's really smart and understands this optical space very well, OK? And they look at the optical IO, they're like, Well, I'm not sure how big that market's going to be, etc, etc. It's like, Oh, what is NVIDIA or AMD going to tell you? Oh, they will, they won't tell me anything. Like you go, you figure, right?
None: AMD are talking together about how they can get their processors to talk to each other.
None: So.
None: Youre going to have to watch on the edges, you watch where the investments are made you watch what's going on you see the technology you watch patents you watch.
None: But my my belief is.
None: I kind of shared this even about a year ago.
None: So that's where a couple of years out.
None: To volume production and the question is how big is it.
None: And could it be much sooner than that.
None: We're enabling that with our solutions and capabilities and there was a big pull for it and keep in mind. We also have the same capability on our NP systems installed at customers. So you don't have to see all of the front edge of this simply with.
Gayn Erickson: Of course, they're not telling them. The reality in my mind is what AMD, Intel, NVIDIA, pick your other processor, what their plans are; that's what's going to drive it. And those are very closed environments.
Gayn Erickson: I don't believe for a minute that NVIDIA and AMD are talking together about how they can get their processors to talk to each other, okay? So you kind of have to watch on the edges. You watch where the investments are made, you watch what's going on, you see the technology, you watch patents, you watch tech. But my belief is, and I kind of shared this even about a year ago, I feel like we're a couple years out from volume production. And the question is, how big is it?
None: New systems, but we would see it with wafer packs.
None: So there's a lot of design activities that are going on right now.
None: That seem pretty interesting to me, but I'm a believer.
None: It makes sense. It is a critical bandwidth it's going to be a pinch point I think it is going to be a differentiator with all the AI guys.
None: And it also may have the byproduct of that.
Spanning the need for more optical even within the data centers.
None: Are you seeing that you seem to think it was pretty imminent whether it was late this year next year.
Gayn Erickson: And could it be much sooner than that? We're enabling that with our solutions and capabilities, and there was a big poll for it. And keep in mind, we also have the same capability on our NP systems installed at customers. So you don't have to see all of the front edge of this simply with New Systems, but we would see it with WaferPak. So there are a lot of design activities that are going on right now that seem pretty interesting to me. But I'm a believer.
None: I don't know.
I hope and I hope I hope, he's right and we'll be ready for it.
None: Okay.
None: Over the last year.
None: Tens of billions of dollars worth of memory Fabs.
None: Yes.
None: By every memory manufacturer.
Gayn Erickson: It makes sense. It is critical bandwidth. It's going to be a pinch point.
None: The globe.
Larry Edward Chlebina: I think it's going to be a differentiator with all the AI guys, and it also may have the byproduct of then expanding the need for more optical even within the data center. He seemed to think it was pretty imminent, whether it was late this year or next year.
None: <unk> been engaged with them by now if they're going to realize the benefits of your own or manage the XP.
To reduce the size of their clean rooms and equipment costs.
Gayn Erickson: I hope he's right and we'll be ready for it. Hey, over the last year, there have been tens of billions of dollars, [inaudible] uh... by every memory manufacturer in the globe. Shouldn't you be engaged with them by now if they're going to realize the benefits of your automated xp to reduce the size of their clean rooms and equipment costs? I mean, I mean, yeah, but it's not with all of them. I'd love to be with all of them.
None: And then with time not with <unk>.
None: All of them I would love to be with all of them I do think there is a little bit of a spread between the.
None: The NAND and DRAM guys timing.
None: Just in terms of just where the DFT needs to be for DRAM to be able to actually do wafer level burn in but.
None: I think within.
None: Again, I'm, probably in our position as a CEO to be seeing this but personally I would believe that people will have implemented DFT and low pin count test modes in DRAM similar to what we did in 15 years ago before the end of the decade and when that does you want to be there and ready for it.
Larry Edward Chlebina: I do think there's a little bit of a spread between the NAND and the DRAM guys' timing just in terms of just where the DFT needs to be for DRAM to be able to actually do wafer-level burn in. But, you know, I think within. You know, again, I'm in opposition as a CEO to be saying this, but personally, I would believe that people will have implemented DFT and low pin count test modes in DRAM similar to what we did in NAND, you know, 15 years ago. And when that happens, you want to be there and ready for it.
None: So we've been doing things in the background to do that be ready for it.
None: It seems like you.
None: You should have some rebel tools. These guys. So they can.
Gayn Erickson: So we've been doing things in the background to prepare for it. It seems like, um... You know, you should have some evaluation tools at these guys so they can... Lay out their fabs and, uh... Realize the benefits of what you can bring to them, like I said with, significantly smaller clean rooms and, Less Equipment Costs so you can get to a record designation as soon as possible. Hey, of the seven current silicon carbide customers that you said you had, is that correct? That's a correct statement, right? You have seven, Gap seven that we officially called.
None: Lay out their fabs and.
None: Realize the benefits of what you can bring to them like I said with <unk>.
None: Significantly smaller clean rooms.
None: Less equipment calls so we can get.
None: Through a record designation as soon as possible.
Okay great.
Hey.
None: Seven current silicon carbide customers.
None: So you said you have is that that's a correct statement.
None: Seven.
None: We officially call.
Larry Edward Chlebina: Yes, that's correct. OK. How many of those have bought the X? The production system? Uh, wow, maybe half of them. I have to think real fast on that. Well, half is three and a half. Is that three or...
None: Yes, that's correct okay.
None: <unk> have bought DXP.
The production system.
None: Wow.
None: Maybe half of them I have to thank ROE fast on that well have a three and a half.
None: <unk> three or <unk>.
Gayn Erickson: I'll tell you what, let me do the background real quick. We've announced them one at a time. I think it's three XPs and four NP-type customers. Okay. I hope I got that wrong. It might be a four until I have to go one more time.
Let me.
None: I will tell you what let me just the background quite we've announced them one at a time.
None:
Yeah.
I think it's three <unk> and four NP type customers.
None: Okay. So I hope I think it.
It might be a fourth pillar I have to go one more go ahead.
Larry Edward Chlebina: Go ahead. And all of the NP customers still have given us plans and paths to the, all the NP customers all plan to do XP. I don't know if they'll ever buy another NP, they'll only do XPs next. Right, that makes sense. So the long lead item, a customer that's been running around the block for a couple of years. What do you think is the holdup?
None: But that's all and all of the <unk> and all of the E&P customers still have given us plans in paths to the.
None: All of the NP customers are planning to do expertise.
None: I don't know if delever by another NPL only dxp's next.
That makes sense so the.
None: The long lead item customer that's been running around the block for a couple of years.
None: What do you think is the hold up.
None:
Gayn Erickson: What's... Is it because they don't have a large demand for modules yet? Full modules, just their big customers or the big businesses in the... [inaudible] I think we have a pretty good idea, and I may not be able to answer it directly. So I think if you, if you look at the, you know, if you look at sort of what happened just in the shift of the EV from, you know, every one of their brothers going to be driving an EV in four years to now, oh my gosh, is it going to deploy as fast or whatever? That shift over the last six months, I think, has really caught a lot of people off guard and made them sort of just look back and, you know, assess it and make sure this thing isn't going to go off a cliff. In reality, I think there are some things where the people that were strong will ultimately be stronger.
None: Yes.
None: Because they don't have a large demand for modules <unk> modules.
None: Just there are big customer or the big.
None: Businesses and.
None: So we're thrilled package, so I think I was pretty high.
None: I think we have a pretty good idea.
None: <unk> not being able to answer it directly so.
None: I think if.
None: If you look at the if you look at sort of what happened just in the shift of the EV from.
None: Every one of their brother is going to be driving our navy and for years to now.
Oh, My gosh is it kind of deploy as fast or whatever that shift over the last six months I think has really caught a lot of people off guard and made them sort of just look back end.
None: Assess it and make sure this thing isn't going to go off a cliff.
None: <unk> I think there are some things with the people that were strong we will ultimately be stronger my guess is some of the smaller players that thought this will be funded dabble in arent going to write.
Gayn Erickson: My guess is some of the smaller players that thought this would be fun to dabble in aren't going to, right? You know, I mean, like, you don't want to, it'll be more fortified. That gives the larger players, of which this customer would be one, more confidence in their plans going forward. I think there are things in the OEM space with respect to what kind of commitments need to be made in order to secure fab capacity that is being played out right now. And I think there have been some market shifts in the industry that, you know, can shift around seemingly with no particular impact but may have impacted us. I know they have. Go ahead. Do you think it might have anything to do with weighting for 200 millimeters and then..................................................................................................................
None: Yes, I mean like you don't want to it will be more fortified that gives us a larger players, which this customer would be one of them more confidence in their plans going forward I think there's been things in the OEM space with respect to what kind of commitments need to be made.
None: In order to secure fab capacity that is being played out right now.
None: And I think there have been some market shifts in the industry that.
None: Can shift around seemingly.
None: With no particular impact, but may have impacted us.
None: I know that we have.
None: So.
None: Do you feel like they might have.
Gayn Erickson: Going full throttle with your fully automated system. I mean, most of the customers we talk to want to ensure that we can do both 6-inch and 8-inch wafers or 200-millimeter. So, in that sense, maybe, but nobody is saying, oh, you know, your system only needs to do 200-millimeter. So they won't have to buy multiple wafers. Yeah, we've got some tricks around that as well
None: But do you think if I have anything to do with <unk>.
None: Waiting for 200 millimeter then.
None: Going forward Corrado.
None: Youre fully automated systems.
None: I mean, you also and also as we talk to want to ensure that we can do both six inch and eight inch 200 millimeter. So in that sense, maybe but nobody is saying no.
None: Your system only needs to do 200 millimeter.
Larry Edward Chlebina: But there may be some of that, Larry, and it may be that, okay, why don't we start the line on the 200 millimeter line instead of, you know, there's always, there's always process things. I think I can think of some customers where that's the case. But, like I said, it's actually interesting.
None: So they won't have to buy them.
None: Multiple wafer packs.
None: Yes, we've got some tricks around that as well.
None: <unk>.
None: There may be some of that Larry and then maybe that okay. Why don't we start the line on the 200 millimeter line instead of there's always there's always process things I think I think I can take in some customers, where that's the case, but like I said, it's actually interesting.
Gayn Erickson: You know, we're, I'm engaging with a customer right now, I want full automation, 200 millimeter, 200 millimeter, 200 millimeter. It's like, okay, we'll deliver 200 millimeter. Yeah, the first wafer is gonna be six inches. You're like, okay, well, it's an end effector on our automation. It's no big deal. But so, you know, I don't know, it's that clean.
None: We had it.
None: I'm engaged with customer right now I won't fully automation 200 millimeter and another 200 millimeter KK will deliver $200, yes, well the first wafers can be six okay.
None: Okay, Alright, well, it's an end effector on our automation, it's no big deal, but so I don't know it's that clean sorry.
Larry Edward Chlebina: Sorry. Well, I'm thinking, uh, so they don't have to buy a bunch of six-inch wafer packs. So just go with 8-inch and move forward.
None: Well I'm thinking so they don't have to buy a bunch of six inch wafer packs will just go with it.
None: When it ends and move forward.
Gayn Erickson: Anyway, getting back to memory, did you say, did you give a timeline on when you thought you were going to penetrate one of them in terms of a valve pool or not? In our prepared remarks, I said something to the effect of this year we are hoping to have a wafer benchmark process going. That's what we said. I mean, I'm assuming they would want to have an evaluation tool at their disposal. You know, you would have to supply a tech person. But isn't that the way that kind of a business would have to go? That's the way most of them also work. I don't want to share all of the ways we would have structured the conversations with the, you know, more than one memory customer, just for maybe obvious reasons. Because people have slightly different variations of what their expectations are.
None: Okay.
None: Getting back to memory did you say did you give a timeline on when you thought you were going to penetrate one of them in terms of <unk> or in our prepared remarks, I said something to the effect.
This year, we are hoping to have a.
None: On way for.
Benchmark process.
None: Okay.
None: We said.
None: I mean, I'm I'm, assuming they would want to have an evaluation tool out there.
None: The disposal.
None: You would have to supply took person.
None: Well this isn't that the way that kind of a business would have to go.
None: Yes.
None: Multiple multiple works I.
None: I don't want to share all of the way we have structured the conversations with the.
More than one memory customer just for maybe obvious reasons because people have slightly different variations of what their expectations are.
Gayn Erickson: But candidly, and publicly, we're in. I think it's a matter of partnering with those customers, working with them on their key testability and DFT modes, and how they go about their cycling burn-in test. EFT, BISS, Low Ping Contest Modes, all things that I spent my whole career at prior to this. Those key differentiations as a vendor you want to say yes to. How can I help? The critical aspects are the low cost contactor, full automation and alignment, high performance, high parallelism, and a very small footprint on, you know, wafer starts.
None: But candidly had publicly we're in.
None: I think it's a matter of partnering.
None: <unk> with those customers, taking working with them on their key Testability and DFT modes, and how they go about their cycling and burn in test <unk>.
None: The FTE best low pin count test modes.
None: All things that I spent my whole career at prior to this.
None: Those key differentiations as a vendor do you want to say, yes to how can I help.
None: The critical aspects are the low cost contactor to full automation and alignment high performance high parallelism very small footprint.
None: Wafer starts per month.
None: So those are critical aspects that we have key differentiation on.
Gayn Erickson: So those are critical aspects that we have key differentiation on, and then, you know, working with those customers on their specific and unique test requirements for their particular devices, it would be part of the process. Yeah, that's why you got to get in there before those fabs or fab designs are locked down, so that they can design the fab around your equipment with the smaller clean rooms and whatever.
None: And then working with those customers on their specific and unique test requirements for their are there particular devices. It would be part of the process.
None: Yes, that's why you gotta get under before OS Fabs or fab.
None: <unk> designs are locked down.
None: So.
None: And does the design the fab around your equipment with smaller.
None: Rooms and whatever.
None: Alright, yes.
Larry Edward Chlebina: Right? Yeah, I mean, yes and no. I mean, again, I don't get it.
Yes, and no I mean again I don't want give so traditionally burden and is considered a backend backend of test all of test is considered backend in semiconductors, but Vernon is often done. So you can you could ship your wafers to your backend facility before simulation.
Gayn Erickson: So traditionally, burn-in is considered a back-end, back-end of test. All of test is considered back-end, and semiconductors, but burn-in is often done. So you can, you could ship your wafers to your back-end facility before simulation as well. So again, I don't, if I see a fab being built and they haven't put my tool in there, I'm not saying, oh gosh, I've missed it. That's just not true. Okay, I was thinking this. The sorting on the, especially Flash. The sorting is still on the back, in the fabric. Most of the time, yes.
None: Well so again.
None: <unk> has built and they haven't put my tool in there I don't im not saying all gosh I missed it.
None: Dr <unk>.
None: I was thinking about.
None: The sorting on the especially flash.
None: The sorting of Sterling.
None: Fabric.
None: Most of the time, yes.
None: Yeah.
Larry Edward Chlebina: Yeah. Okay. All right. That's all I had.
None: Sure.
None: Alright, that's all I had thank you.
Gayn Erickson: Thank you. Thank you. Thank you. If there are any final questions, please indicate so by pressing star 1 on your touch-tone. Again, please press star 1 if you have a question or comment. No one further in queue, I'd like to turn it back to management for any closing remarks. Well then, we certainly covered enough topics and questions. Hopefully, it answered all the people that it sent in. As always, we appreciate your time here, and we'll look forward to either seeing you at one of the investor conferences or on our next call. That will be Q4 and fiscal year 24N, so it'll be somewhere in mid-July or so. At that point, we'll also be giving guidance for our fiscal 25.
Thank you.
None: If there are any final questions. Please indicate so by pressing star one on your Touchtone phone.
None: Once again, please press star one if you have a question or comment.
None: Okay.
None: No one further in queue I would like to turn it back to management for any closing remarks, Alright, then we certainly covered enough other topics in the questions hopefully it answered all of the people that incentive.
None: As always we appreciate your time on here and we will look forward to either seeing you at one of the investor conferences or on our next call that will be Q4 and fiscal year 2004, and so it'll be somewhere mid July or so at that point, we will also be giving guidance for our fiscal 'twenty five.
Gayn Erickson: As always, if you happen to be anywhere near the Bay Area and Silicon Valley, look us up. We'd be happy to do a meet and greet and give you a tour of our manufacturing floor. It's quite impressive. Thank you, everybody, and have a nice day. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
None: As always if you happen to be anywhere near the Bay area and Silicon Valley.
None: Lucas up we'd be happy to do a.
None: A meet and greet and give you a tour of our manufacturing floor, it's quite impressive.
None: Thank you everybody and have a nice day.
None: Thank you.
None: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.