Q2 2025 Kulicke and Soffa Industries Inc Earnings Call
Operator: Greetings and welcome to the Kulicke and Soffa 2025 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the killer can fall about 2025 second quarter earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Joe: As a reminder, this conference is being recorded it is now my pleasure to introduce your host Joe <unk> Senior director of Investor Relations. Thank you Sir you may begin.
Joe Elgindy: It is now my pleasure to introduce your host, Joe Elgindy, Senior Director, Investor Relations. Thank you, sir. You may begin. Thank you.
Joe Elgindy: Welcome everyone to Kulicke and Soffa's fiscal second quarter 2025 conference call. Fusen Chen, President and Chief Executive Officer, and Lester Wong, Chief Financial Officer, are also joining us on today's call.
Joe: Thank you welcome everyone at Gilligan's office fiscal second quarter 2025 conference call Susan.
Susan Chen: Susan Chen President and Chief Executive Officer, and Lester Wong Chief Financial Officer are also joining on today's call.
Joe Elgindy: Non-GAAP financial measures referenced today should be considered in addition to, not as a substitute for, or in isolation from our GAAP financial Gaps and non-gap reconciliation tables are included within our latest earnings release and earnings presentation. Both are available at investor.kns.com, along with prepared remarks for today's call.
Susan Chen: non-GAAP financial measures referenced today should be considered in addition to not as a substitute for or in isolation from our GAAP financial information.
Susan Chen: GAAP to non-GAAP reconciliation tables are included within our latest earnings release and earnings presentation. Both are available on Investor Doc can ask dot com along with the prepared remarks for today's call.
Joe Elgindy: In addition to historical statements, today's remarks will contain statements relating to future events and or future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. and are subject to risks and uncertainties that may cause our actual results and financial condition to differ materially from the statements made today.
Susan Chen: In addition to historical statements today's remarks will contain statements relating to future events or future results. These statements are forward looking statements within the meaning of the private Securities Litigation Reform Act with 1995.
Susan Chen: And are subject to risks and uncertainties that may cause our actual results and financial condition to differ materially from the statements made today.
Joe Elgindy: For a complete discussion of the risks associated with Kulicke and Soffa that could affect our future results and financial condition, please refer to our recent and upcoming SEC filings, specifically our latest form, 10-K, as well as the 8-K file last night.
Susan Chen: For a complete discussion of the risks associated with Coke and sulfur that could affect our future results and financial condition. Please refer to our recent and upcoming SEC filings, specifically, our latest Form 10-K as well as the 8-K filed last night.
Joe Elgindy: With that said, I would now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen. Good morning, everyone.
Speaker Change: With that said I would now like to turn the call over to Susan Chen for the business overview. Please go ahead Susan.
Susan Chen: Good morning, everyone.
Fusen Chen: Last month, we announced the intent to discontinue the electronics assembly or EA equipment business subject to local regulatory approval. We acquired this business in 2015, and it is currently a component within the all other categories. We intend to fully support and serve our customers with equipment purchase requirements over the coming quarters. We will also continue to retain EA equipment technology as well as the related aftermarket parts and the service business. to support the existing install base and our customers' operational needs. We believe this decision is not difficult. was critically essential to ensure our underlying business are competitive and are properly aligned with beneficial long-term technology trends.
Speaker Change: Last month, we announced the intent to discontinue our electronics assembly or you couldn't do.
Business subject to local regulatory approval.
Susan Chen: We acquired this business in <unk>.
Susan Chen: And it is currently a component within the all other category.
Susan Chen: We intend to fully support and serve our customers with equivalent puts us a requirement over the coming quarters.
Susan Chen: We will also continue to retain you can then technology as well.
Susan Chen: After market parts and the service business.
Susan Chen: So Paul the existing installed base and our customers operational need.
Susan Chen: We'd be the ever just specie low difficult.
Susan Chen: <unk> Creek Cody.
Susan Chen: Essential to ensure our underlying business uncompetitive.
Speaker Change: Well I'll tell you a night.
Susan Chen: You show a long term technology trends.
Fusen Chen: Looking ahead, we intend to prioritize development and further leverage our dominant bulk, weight, and thermal conversion position, where we have demonstrated clear technology leadership to address fundamental assembly transition within high volume, leading edge, and a power semiconductor market. Additionally, our APS business, which provides revenue consistency, as well as our emerging advanced dispense portfolio, extends our technology leadership and provides additional growth paths throughout this evolving core market opportunity. This restructuring effort is also intended to enhance our long-term financial with anticipated improvement in both margin and through-cycle improvement. at Omega Label.
Susan Chen: Looking ahead, we intend to prioritize the men and the further leverage our dominate both wage and a similar conversion provisions well we have demonstrated technology leadership to address fundamental assembly transition, we didnt high volume.
Susan Chen: H and the Polish semiconductor market.
Susan Chen: Additionally, our Aps business, which pulled by revenue consistency as well as our emerging advanced expense portfolio and extend our technology leadership and provide additional goes past. So all of this evolving coal market opportunity.
Susan Chen: This restructuring and Eva is also intended to enhance our long term financial with the anticipated improvement in both margin and the suicide implement.
Susan Chen: And our Mako label.
Fusen Chen: The ongoing trade situation has increased levels of uncertainty throughout global market and the supply chain. This level of macro and industry uncertainty has created hesitation and a more defensive capacity plan approach. through all our supermarkets. Sequentially, this hesitation was most evident in the Southeast Asia automotive and industrial market, which had the effect of limiting the seasonal momentum previously anticipated for the June quarter. Interestingly, over the centuries, we saw inheritance improvement in other Asia regions. While we are not immune from this macro-near-term dynamic, semiconductor unit growth, as well as the increased complexity of semiconductor packaging, are expected to expand our self-market.
Susan Chen: The ongoing trade to Aegean has increased level of uncertainty.
Susan Chen: Global market and the supply chain.
Susan Chen: Yes, the table of Mako and the industrial I'm Cynthia <unk>.
Susan Chen: <unk> station and that are more defensive capacity plan approach.
Susan Chen: Our silicon market.
Susan Chen: Sequentially, yes.
Susan Chen: Most everything in the southeast Asia, automotive and the industrial market.
Susan Chen: And then the effect of limiting the season no momentum previously anticipated for the June quarter.
Susan Chen: Interestingly overdose and we saw some improvement in other Asia regions.
Susan Chen: While we are not immune from this may cause near term dynamic.
Susan Chen: I think a lot of unit growth as well.
Susan Chen: The increased complexity of semiconductor packaging.
Susan Chen: Thank you you too.
Susan Chen: And our served market.
Fusen Chen: We remain confident in the industry's resilience, and also remain confident that our global business, supply chain, and the development paths are best optimized as we look ahead.
Susan Chen: We remain confident in the industry's resilience and also remain confident that our global business supply chain and the development paths.
Susan Chen: Optimize.
Go ahead.
Fusen Chen: Over the near term, we intend to further strengthen our growth prospect with a focus on vertical wire, power semiconductor, advanced dispense, and thermal compression, which I will discuss in more detail shortly. During the March quarter, the general semiconductor and market, supported by improving ball bounding dilation rate, experienced a 38% sequential increase due to improved demand for from ball, wedge and the TCB stemming from US and China.
Susan Chen: Although the near term, we intend to further strengthen our growth prospect with a focus on political while power semiconductor.
Susan Chen: Best Defense, and some more competition, which I will discuss in more detail shortly.
Speaker Change: Do you think of the March quarter, the general semiconductor and market supported by improving ball bonding.
Speaker Change: It's a 38% sequential increase due to improved demand for <unk>.
Speaker Change: Bowl, which in the PCB stemming from U S and China.
Fusen Chen: In view of the changes surrounding the EA equipment business, we decided it was appropriate to simplify our end market disclosure and consolidate LOD within automotive and industrial, starting in the current quarter as well as within comparable periods. This change is aligned with the external semiconductor marketing forecast, where LED is generally subcomponent of the industry market. With that said, automotive and industrial was sequentially down in the March quarter over the December quarter, largely due to the final Project W related LED sales, which were recognized in the December quarters. Automotive and industrial, excluding LED, was down approximately 7% sequentially, but was still up nearly 14% from the same period last year due to ongoing demand improvement of our exterior and the policy solutions.
Speaker Change: In view of the changes surrounding the.
Speaker Change: Equipment business, we decided it was appropriate to simplify our end market exposure and to consolidate within automotive and the industrial starting in the current quarter as well as leading comparable period.
Speaker Change: Yes.
Speaker Change: With our extended extended holiday marketing forecast, where it's at now.
Speaker Change: Alrighty sub component of the industrial market.
Speaker Change: We as I said automotive and industrial it was sequentially down in the March quarter over the December quarter, largely due to the final project W related.
Speaker Change: Yes.
Speaker Change: Or are recognized in the December quarter as well.
The motive and the industrial is where the <unk>.
Speaker Change: <unk> was a point you made three 7% sequentially, but was up nearly 14% same period last year due to ongoing demand enrolment of our Estonian.
Speaker Change: And our policy solutions.
Fusen Chen: Within memory, software NAND system demand was the primary driver for our sequential reduction in the March quarters. Today, our current memory exposure is centered on NAND, but we remain focused to diversify into dynamic memory through the fundamental advanced packaging transition, effecting HBM for leading-edge memory, and also driving momentum for our emerging vertical wire solution for high-volume memory. Finally, within APS, we continue to enjoy a relatively stable base of part, service, and support revenue through this dynamic market environment. While there may be some fluctuation over the coming months, we anticipate overall install base and the iteration trend will continue to improve, supporting a relatively stable level of APS revenue.
Speaker Change: Within memory cell phone system demand wasn't a primary driver for our sequential reduction in the March quarter is that all kind of memory exposure.
Speaker Change: Oh, and then but we you can then focus too once you buy into a timing being memory pseudo fundamental or the best packaging transition.
Speaker Change: <unk> edge memory.
Speaker Change: And also driving momentum for our emerging vertical wise solution for high volume memory.
Speaker Change: What do you and Aps, we continue to enjoy it.
Speaker Change: It can be a stable base of parts service and support revenue soon.
Speaker Change: So all this dynamic market environment, while they may be some fluctuation over the coming months.
Speaker Change: This way overall installed base and that trend will continue to improve so both in a relatively stable level of Ags <unk>.
Speaker Change: Yeah.
Fusen Chen: At this point, we anticipate the majority of our business has gone through a long-term period of capacity digestion and remains very well positioned for the next set of bulk wage advance dispense and the summer completion opportunities. Within Bobangdin, our ongoing test of customer engagement as well as a new product development remain on track with our vertical wire solution, which continues to gain momentum.
Speaker Change: And at this point.
Speaker Change: They spent the majority of our business has gone through a long period of capacity digestion and they'll remain very well positioned for the next set of both defense.
Speaker Change: Defense and a similar compression opportunities.
Speaker Change: We didn't bother again, all ongoing pace of customer engagement as well as a new product development and remain on track with our vertical one solution, which continues to gain momentum.
Fusen Chen: Last month, we officially announced the launch of our latest wafer-label packaging solution, AT Premium NAND+, which is a specially optimized for stack DRAM opportunity. This high-potential new memory packaging approach is driving significant interest with the leading customers, some of which are accelerating their transition and may initiate new stack-driven production by 2026. Additionally, this vertical wire capability is also compatible with non-memory burnout devices, which support high-volume general semiconductor applications. as explained on higher course. Similar to leading-edge applications, cost-sensitive wire-bounded applications are also aggressively demanding new transistor-based packaging solutions. And our vertical wire technology is very well-positioned to effectively address both high-volume logic and memory transistors.
Speaker Change: Two months, we officially announced the launch of our latest wafer level packaging solution.
Speaker Change: Pre meal, <unk>, plus which is especially optimized for stacked DRAM opportunity.
Speaker Change: This high potential new memory packaging approach.
Speaker Change: Driving significant interest with our leading customers some of wage.
Speaker Change: And that transition and then making initial new stack DRAM production.
Speaker Change: By 2026.
Speaker Change: Additionally, this a political wireless capability is also compatible with no memory devices, which is simple Hyatt bought in general it's didn't conduct applications.
Speaker Change: As explained on prior calls.
Speaker Change: Excuse me got to leading edge application content cost sensitive wire bonding application also aggressively demanding new transit packaging solution.
But to go while technology is very aware position to effectively address both high volume logic and the memory sensation.
Fusen Chen: In addition to Vertical Wire, the rest of our low-volume development initiatives remain on track.
Speaker Change: In addition to a vertical while the pace of our led bulb I'm doing development initiatives on track, we continue to prepare them for new solutions to these high volume market over the coming quarters.
Fusen Chen: We continue to prepare for new solutions to this highly volatile market over the coming quarters. Next. Waiting for responding.
Speaker Change: Next.
Speaker Change: When you always found in the power semiconductor opportunity continues to demand high a coolant.
Fusen Chen: The power semiconductor opportunity continues to demand higher current, higher reliability and a higher efficiency device. A few years ago, these power semiconductor applications were some of the most cost-sensitive and competitive semiconductor assembly markets. The growth in electric vehicles and sustainable energy has caused these basic power control applications to become increasingly complex, requiring better materials, more robust interconnects, and more advanced equipment. in April.
Speaker Change: Reliability and the high efficiency devices.
Speaker Change: Oh, yes ago. This power semi conductor application or some of the most cost sensitive and the competitive semiconductor assembly market.
Speaker Change: The growth in electric vehicle and a sustainable energy has caused the DSO basic power control applications, who have become increasingly complex.
Speaker Change: My name is data materials more robust interconnect in the mall, but the bonds.
Speaker Change: Equipment.
Speaker Change: In April.
Fusen Chen: We proudly announce the launch of our newest sonotrope-enabled pin welding system for power semiconductor applications. This new system, which leverages our leading Australian platform, extends our market reach while enhancing alignment with the growing and evolving global demand for electric vehicles and sustainable energy. The use of a pin within this market is rapidly growing, which supports better inductance and better flexibility as they improve power monitoring and sensing to support higher efficiency applications. Additionally, within this emerging high-performance power module market, there is an increase in new semiconductor materials, such as silicon carbide, but also an increase in the use of copper materials and interconnects.
Speaker Change: We proudly announced the launch of our newly stuff solid short enabled welding system full power semiconductor applications.
Speaker Change: It's a new system once the language of our leading CRM praful extend our market reach while enhancing amendment with our growing and evolving global demand for electric vehicle and that's sustainable energy.
Speaker Change: They use or a pen we didn't get to market is rapidly growing.
Speaker Change: Once you support beta in patents and the beta effects of BV as they improve pulmonic hunting and the same thing to support high efficiency applications.
Speaker Change: Additionally, we didn't this emerging high performance power module market.
Speaker Change: There is a increase in silicon materials, such as silicon carbide, but also an increase in the use of copper materials.
Speaker Change: In the context.
Fusen Chen: Covering the Connect are a core competency for KNX which we intend to fully leverage as this long-term market evolution continues.
Speaker Change: Coupling that kind of that.
Speaker Change: A core competency for <unk>, which we intend to fully leverage as it is a long term market.
Speaker Change: <unk> continues.
Fusen Chen: Next, we in the advanced dispense business, we continue to build out our portfolio of solutions, as well as our customer facing engagement. We continue to grow our customer base, and recently received an order from a high-volume US-based integrated devices manufacturer. Additionally, our recently qualified solid-state battery opportunity has been performing well and we anticipate a potential production run to begin over the coming quarters. Over the coming years, we are also focused to expand our advanced dispense market presence. This effort will combine our unique dispense capability with our existing market leading core system technology. Thanks to some cooperation, our Advanced Solutions team continues to actively support logic and memory customers in production and development.
Speaker Change: Next we ended up as defense business, we continue to.
Speaker Change: Oh portfolio solution, whereas the old customer patient engagement, we continue to grow our customer base and the recently received an order from a higher volume of user base integrate debentures for manufacturers.
Speaker Change: Additionally, our recently qualified solid state battery opportunity has been performing well and we anticipate a potential production to begin over the coming quarters.
Speaker Change: Although the company. Yes, we are also focused to expand our domestic expense market presence.
Speaker Change: If it ever will come by our unique dispense capability with our existing market, leading cold system technology.
Speaker Change: Turning to similar competition, our advanced solutions and continue to actively support logic and the memory customers in production and the table on that.
Fusen Chen: We remain well positioned and are continuing to take a shift in advanced logic applications as the market transitions to the next generation chip-on-wafer and also wafer-on-substrate applications. Larger and more complex multi-chip processors for data centers and AI applications are expected to drive the next wave of leading-edge customer capacity. We have worked very closely with many customers over the recent years and remain well-positioned for leading edge but also higher volume opportunities as mobility devices begin transitioning to cheaper and heterogeneous applications. Finally, for TCB in memory, we continue to anticipate our unique flux-less solution, which provides better copper, yield that gap and the ultra-fine pitch capability will be a key contender for future HBM opportunities.
Speaker Change: We've been that way a policeman and are continuing to take the shifts in advanced logic application as the market transition to next generation chip on waiver and also wafer substrate applications.
Speaker Change: Larger and more complex multi chip processes for.
Speaker Change: Both data center and AI application I expect it to drive the next wave or leading edge customer capacity.
Speaker Change: We have worked very closely with many customers over in recent year and there'll be nowhere pollution for leading edge, but also higher volume opportunities as mobility devices begin transitioning to chip and the heterogeneous obligations.
Speaker Change: Yes.
Speaker Change: Finally for.
Speaker Change: What seems to be in memory, we continue to anticipate our unique Fox a solution, which provides that recover.
Speaker Change: Yields that get in the ultra fine pitch capability.
Speaker Change: Will be a key contender for future SPM opportunities.
Fusen Chen: Based on traction from the prior quarters, we expect to ship additional tools to our leading memory customers toward the end of the fiscal year. As a reminder, our innovation in thermal compression and vertical wire have unlocked new market access to logic and memory opportunities, which our company was previously excluded from. Today, as a world, take the next step to transition single-die semiconductor package to multi-die and heterogeneous chip-dead packaging format. Thermal compression is rapidly becoming the incumbent technology for high-performance applications. Wire, our vertical wire solution, are increasing the wire pollution to address a wide portion of the high volume market over the long term.
Speaker Change: Neither one touch on the from the prior quarters, we expect to ship additional tool to a leading memory customers towards the end of the fiscal year.
Speaker Change: As a reminder, our innovation and some more competition in the vertical while have unlocked new market access to the logic and the memory within India, which our company. It was previously excluded from.
Speaker Change: Today is a walk next steps to transition.
Speaker Change: Semiconductor package for multi die and the heterogeneous packaging format.
Speaker Change: Similar competition is rapidly become the incumbent technology for high performance application.
Speaker Change: While our political why our solution.
Speaker Change: Increasingly we are positioned to address a wider portion of the high volume market over the long term.
Speaker Change: Yes.
Fusen Chen: As a reminder, we remain the only flux-less TCB supplier who has been qualified for higher-volume manufacturing with some of the world's most advanced semiconductor companies, and we are nearly fully booked for fiscal 2025. More broadly, we have nearly 120 system install base across 10 different highly engaged customers. This helped to demonstrate our track record for winning, as this install base captured a wider portion of the market than any of our competitors have been able to address.
Speaker Change: And so they can either we remain the only a fraction of the supplier who has been qualified for high volume manufacturing.
Speaker Change: Some of that was most of the Buzz semiconductor company and we are nearly fully booked for physical Tanya.
Speaker Change: <unk> hundred 95.
Okay.
Speaker Change: More broadly we have nearly 120 system install base.
Speaker Change: Across 10 different highly engaged customers.
Speaker Change: This helped to demonstrate ultra very careful when you as this installed base capture a wider portion of the market.
Speaker Change: Our company have been able to address.
Fusen Chen: In closing, we have worked hard to ensure our business is best aligned with critical technology change, such as a vertical wire in memory, TCB in design logic, and our increasingly capable assembly solution in power semiconductors. Additionally, our growing advanced dispensing portfolio of solutions increases our potential across all of these long-term technology transitions. While recent cold market iterations are promising, we remain in an unprecedented state of micro-uncertainty, although we remain confident in our technology and market positions, and are prepared to overcome near-term challenges.
Speaker Change: In closing.
Speaker Change: We have worked hard to ensure our business is the best with critical technology trends such as a political while in memory PCB in leading edge logic, and our increasingly capable assemblies dosing in policy and conductor.
Speaker Change: Additionally, our growing at the bus the extensive portfolio of solution increased our potential.
All of these are long term technology transitions.
Speaker Change: While the recent coal market utilization rate are promising we met.
Speaker Change: I'm pleased and this uncertainty.
Speaker Change: Uncertainty, although remain confident in our technology and our market positions and are prepared to overcome near term challenges.
Fusen Chen: At this point, all costs are... Existing product portfolio and the through cycle performance are optimized and we will continue to enable fundamental technology change throughout our self-market. As we have done for seven decades, we will continue to closely support our customers and emerge a stronger, more profitable, and more growth-centric company.
Speaker Change: At this point our cost structures exist.
Speaker Change: Existing product portfolio and the through cycle performance optimized and that we will continue to enable fundamental technology change.
Speaker Change: Our served market.
Speaker Change: As we have done for seven decade, we will continue to closely to support our customers and you much stronger.
Speaker Change: More profitable and more growth centric company.
Lester Wong: I will now turn the call over to Lester to cover the financial overview. Lester? Thank you, Fusen. My remarks today will refer to GAP results unless noted.
Speaker Change: I will now turn the call over to Larry to cover the financial overview.
Speaker Change: Sure.
Speaker Change: Thank you to my remarks today will refer to GAAP results unless noted.
Lester Wong: I would first like to provide some additional details regarding our intent to discontinue the EA equipment business. As Fusen explained, this was a difficult but necessary step to ensure our overall business remained competitive, aligned with long-term technology trends, and it is optimized for through-cycle performance. We remain closely engaged with all key stakeholders as we plan for this intended window. We are currently seeking feedback regarding customers' orders and remain in close discussions with local stakeholders. During the March quarter, we accounted for the majority of wind-down-related expenses, which represented total EA-related charges of $86.6 million. These charges were primarily related to inventory write-down, supply chain, Asset impairment and restructuring related charges.
Speaker Change: I would first like to provide some additional details regarding our intent to discontinue the AA equipment business.
Speaker Change: As <unk> explained this was a difficult but necessary step to ensure our overall business remain competitive.
Speaker Change: With long term technology trends and it is optimized for through cycle performance.
Speaker Change: We remain closely engaged with all key stakeholders as we plan for this intended wind down.
Speaker Change: We are currently seeking feedback regarding customers orders and remain in close discussions with local stakeholders.
Speaker Change: During the March quarter, we accounted for the majority of wind down related expenses, which represent total E. A related charges of $86 6 million.
Speaker Change: These charges were primarily related to inventory write down supply chain.
Speaker Change: Asset impairment and restructuring related charges.
Lester Wong: Dependent on local stakeholder feedback and in alignment with our March 31st disclosure, we anticipate residual non-GAAP expenses to be below $15 million dollars and be approved for in the first fiscal half of 2020. Turning to the March quarter financial results, we booked revenue of $162 million and gross margins of 24.9%, which included EA-related inventory and supply chain charges of $38.6 million. Total operating expenses came in at $125.1 million, which included restructuring charges of $8.8 million and impairment charges of $39.8 million. Excluding these charges, operating expenses would have been $76.5 million. Tax expense came in at $5.4 million, related to our mix of profit and loss across entities during the quarter.
Speaker Change: Dependent on local stakeholder feedback and in alignment with our March 31st disclosure, we anticipate residual non-GAAP expenses to be below $15 million and be accrued for in the first fiscal half of 2026.
Speaker Change: Turning to the March quarter financial results, we booked revenue of $162 million and gross margins of 24, 9%, which included E related inventory and supply chain charges of $38 6 million.
Speaker Change: Total operating expenses came in at $125 1 million, which included restructuring charges of $8 8 million and impairment charges of $39 $8 million.
Speaker Change: Excluding these charges.
Speaker Change: <unk> expenses would have been $76 $5 million.
Speaker Change: Tax expense came in at $5 4 million related to a mix of profit and loss across entities during the quarter.
Lester Wong: We continue to anticipate our effective tax rate will remain above 20% over the coming year.
Speaker Change: We continue to anticipate our effective tax rate will remain above 20% over the coming year.
Lester Wong: We completed our previous and also initiated our latest repurchase program with a $300 million authorization during our first fiscal quarter of 2025. During the second fiscal quarter, we repurchased over 500,000 shares for $21.3 million. While we do not anticipate current tariff announcements to have a direct impact on our ability to manufacture and sell our products and services to our global base of customers, unique geopolitical and trade dynamics have created near-term order hesitation in certain capital equipment markets. Looking into the June quarter, sequential order activity decreased in Southeast Asia, while order activity increased in China and Taiwan, which was aligned with our utilization data.
Speaker Change: We completed our previous and also initiated our latest repurchase program with a $300 million authorization during our first fiscal quarter of 2025.
During the second fiscal quarter, we repurchased over 500000 shares for $21 $3 million.
Speaker Change: While we do not anticipate current tariff announcements to have a direct impact on our ability to manufacture and sell our products and services to our global base of customers unique geopolitical and trade dynamics have created near term order hesitation in search and capital equipment markets.
Speaker Change: Looking into the June quarter sequential order activity decrease in southeast Asia, or the activity increase in China, and Taiwan, which was aligned with our utilization data.
Lester Wong: We have also begun to see global customers begin reallocating equipment across manufacturing sites, which highlights our industry's ability to flex around trade dynamics. With that said, we anticipate semiconductor unit growth will continue to improve through fiscal 2025. While some customers may delay capital expenditures until critically necessary, we expect continued capacity digestion supported by improving utilization rates with ball and wedge bonder to continue over the near term. Looking into the June quarter, we announced a revenue outlook of $145 million, plus or minus $10 million, with gross margins of $46.5 billion. We anticipate non-GAAP operating expenses to be $68 million, plus or minus 2%, a GAAP EPS loss of $0.09, and a non-GAAP EPS gain of $0.05 per share.
Speaker Change: We have also begun to see global customers begin reallocating equipment across our manufacturing sites, which highlights our industry's ability to flex around trade dynamics.
Speaker Change: With that said, we anticipate semiconductor unit growth will continue to improve through fiscal 2025.
Some customers may delay capital expenditures until critically necessary. We expect continued capacity digestion supported by improving utilization rates went ball and wedge bonder to continue over the near term.
Speaker Change: Looking into the June quarter, we announced our revenue outlook of $145 million, plus or minus $10 million with gross margins of 46, 5%.
Speaker Change: We anticipate non-GAAP operating expenses to be $68 million, plus or minus 2%.
GAAP EPS loss of <unk> and.
Speaker Change: On a non-GAAP EPS gain of five cents per share.
Lester Wong: Although the near-term market dynamics are challenging, we continue to anticipate an eventual return to incremental capacity growth in core ball and wedge bonding markets and continue to see ongoing capacity digestion and field utilization expansion.
Speaker Change: Although the near term market dynamics are challenging we continue to anticipate an eventual return to incremental capacity growth in core ball and wedge bonding markets and continue to see ongoing capacity digestion and field utilization improvements.
Lester Wong: Thank you. Incremental opportunities in words, Cavalier, advanced defense and thermal compression are in addition to this anticipated improvement. As we remain focused on these strategic opportunities, we are well prepared to navigate near-term macro level uncertainty.
Speaker Change: Incremental opportunities and where it's come via advanced defense and Thermo compression. In addition to this anticipated improvement.
Speaker Change: As we remain focused on the strategic opportunities, we are well prepared to navigate near term macro level uncertainty.
Lester Wong: This concludes our prepared comments.
Speaker Change: This concludes our prepared comments operator, please open the call for questions.
Operator: Operator, please open the call for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question and answer session. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd 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. You May press star two if he would like to remove your question from the queue.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start One moment while we pull for questions.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment.
Speaker Change: While we pull for questions.
Krish Sankar: Our first question comes from Krish Sankar with TVCALENDAR. Please proceed with your question. Yeah, hi, I have three questions. First one, Fusen, just kind of curious, can you give some color on June? What are the dynamics? Is it predominantly general, semi and auto, industrial? That's going to be down quite a bit. And how do you think about it beyond June? I understand a lot of moving parts, but any color you can give beyond June would also be helpful.
Speaker Change: Our first question comes from Chris Shankar with TD Cowen. Please proceed with your question.
Chris Shankar: Yeah, Hi, I have three questions first one Susan.
Chris Shankar: Just kind of curious can you give some color on June what are the dynamics is it predominantly agenda in semi and auto industrial is going to be down quite a bit and how to think about it beyond June.
Chris Shankar: A lot of moving parts, but any color you can give beyond June would also be helpful.
Fusen Chen: Okay, so Krish, we have a Q3 slowdown and this slowdown is the most pronounced and the evidence in our Southeast Asia region. I'll give you an example. The Q3 Southeast Asia slowdown account for the majority of our total Q2 to Q3 weakness. So give me your number. Our Q2 revenue is 162 and the Q3 guidance is 143. The difference over this two number majority actually is a weakness from Southeast Asia. So therefore, it is really our belief, this near-term slowdown was due to a concern regarding the potential and unknown telehealth impact for auto and industrial, you know, industry from our customers.
Okay.
Chris Shankar: So Chris we have a Q3 slowdown.
Chris Shankar: And this.
Chris Shankar: This is a store that is most pronounced in the evidence.
Chris Shankar: In our South East Asia region, I'll give you an example.
Chris Shankar: Q3 itself.
Chris Shankar: Southeast Asia slow down.
Chris Shankar: Accounting for the majority of our total Q2 to Q3 weakness so giving you a number our Q2 revenues of $1 62.
Chris Shankar: And accused Veeco identity is at 145, the difference of at least two lumber majority equity. So we can use for myself that essential.
Chris Shankar: So therefore, it usually isn't really our belief a decent near term slowdown was due to our concerns regarding the potential and the unknown.
Chris Shankar: Tell us the impact for auto and industrial.
Chris Shankar: Our industry from our customers.
Fusen Chen: So I think in the script, we mentioned why we see the weaker outlook for Southeast Asia. In the meantime, we also see the utilization rate improve in Taiwan, China, and other regions. And with the utilization rate, actually is at or close to triggering broader capacity addition. So we see positive, but we also have actually a very big actually slowdown in Southeast Asia. We believe it's auto industry related, and it's because of unknown type of impact. People hesitate to build a capacity just for the industry. So yes, the number is a little bit bigger. And the reason, I think, is because we have a bigger, larger presence, auto exposure.
Chris Shankar: So I.
Chris Shankar: I think in the script, we mentioned.
Chris Shankar: Why are we see.
Chris Shankar: The weaker outlook for the Associates Asia.
Chris Shankar: In the.
Chris Shankar: Meantime, we also see the utilization rates improve in Taiwan, China, and other regions and we said utilization rate actually is at or close to a triggering.
Chris Shankar: For other capacity addition, so.
Chris Shankar: We see positive and about we also have a actually.
Speaker Change: Really big actually Souladakis associated say sure we believe each.
Speaker Change: Auto industry or delayed it and is it because of unknown tells the impact.
Speaker Change: People hesitate to build our capacity just for the industry.
Speaker Change: Yes, you know the number is a little bit bigger and the reason I think that you said because we.
Speaker Change: We have a bigger or larger <unk> auto exposure.
Fusen Chen: And also, our manufacturing concept is a flexible manufacturing cycle. And we're working with a customer in Upton and Dunton with a shorter cycle time.
Speaker Change: And also.
Speaker Change: All manufacturing concept is flexible in our manufacturing.
Speaker Change: Cycle, and we are working with our customer.
Speaker Change: Often in Duncan.
Fusen Chen: So I think these two together, I hope explain your question. All right, that's very helpful, Fusen. Just to follow up on that, just any view beyond June quarter? Is it too hard to say today? Yeah, yes. So June quarter, so it's really our belief. The Q4, June quarter is Q3 or Q4, we believe it will be better, it's a feedback from customer and also some of the weaknesses in Q3 will be renewed in Q4 and you know we hopefully this can be a short-term phenomenon and it's also supported by utilization rate. Actually, in some regions, the number can trigger capacity buy, so we think Q4 will be better, but how much better?
Speaker Change: Jordan cycle time, so as you got used to it to get a I hope I explained.
Speaker Change: Your questions.
Speaker Change: Got it that's very helpful and just two.
Speaker Change: Follow up on the just any view beyond June quarter or is it too hard to say today.
Speaker Change: Yes, so a June quarter, so it's really our belief.
Speaker Change: The Q4 June quarter, it seems to me like Q4.
Speaker Change: We believe it will be.
Speaker Change: Badger.
Speaker Change: Is there a feedback from.
Speaker Change: Customer and also some overlap we can use in Q3.
Speaker Change: Or have you already renewed in Q4 and you know we hopefully this can be a short term phenomenon.
Speaker Change: It's also supported by utilization rate.
Speaker Change: X rays.
Speaker Change: In some region actually the old already.
Speaker Change: And.
Speaker Change: The number can trigger.
Speaker Change: Our capacity by so.
Speaker Change: We think.
Speaker Change: Q4 will be better, but how much better actually.
Fusen Chen: Actually, it also depends on MECO and some clarity with tariff. If we have better clarity, I think we should have sequentially up.
Speaker Change: These are also dependent on Mako and some crazy.
Speaker Change: With a tariff.
Speaker Change: Better clarity I think you know.
Speaker Change: We should have a sequentially up.
Krish Sankar: from LACUSI. Got it. And then, just to follow up on TCB, your TCB exposure is predominantly logic, hardly anything in memory. Can you give a color on how it's progressing? I also noticed that your European competitor last week announced five new orders for TCB chipped wafers. I'm kind of curious, lay of the land, and maybe if you can talk about TCB, your TCB exposure today, and how do you see it evolving in memory, if you have a shot. Thank you. Okay, so, you know, practically, our first revenue for TCB was 2020. So, although, you know, we don't want to say it's quite large, but I think we make good progress with high growth rate.
Speaker Change: Yes.
Speaker Change: From a Q3.
Speaker Change: Got it and then.
Speaker Change: Just to follow up on D C D.
Speaker Change: Your P. C. The explosion is predominantly logic hardly anything in memory can you give us color on how it's progressing I also noted that you're going to be in competitor last week announced five new orders for PCB chip to wafer. So I'm kind of curious lay of the land and Liberty. If you can talk about D. C V youll see the exposure.
Speaker Change: Today, and how do you see it evolving in memory. If you have a shot thank you.
Speaker Change: Okay. So.
Speaker Change:
Speaker Change: Practically.
Speaker Change: Our force of revenue.
Speaker Change: For GCB was a 2020 so.
Speaker Change: Hello.
Speaker Change: We don't want to say is quite large.
Speaker Change: But I think we made good progress with our high gross rate.
Fusen Chen: And we actually focus with logic first. And we actually confident at this moment, we can grow in both the IDM and also OSET, also in the foundry side for our logic. And this year, we put a lot of effort in the memory. We expect to ship additional system by end of the month, end of the year. And we won't say this is easy, but I think we're confident on our technology, and I hope we can have some results in 2026. So, I think, to answer your question, sequentially, we got to focus in actually some segment.
Speaker Change: Uh huh.
Speaker Change: We actually are focus.
Speaker Change: With some logical first.
Speaker Change: And.
Speaker Change: We actually.
Speaker Change: And at this moment, we can grow in both the IDM.
Speaker Change: And also all set and also in the country's high for our logic and this year, we put a lot of effort.
Speaker Change: In memory, we expect that some ship additional system by a number of months.
Speaker Change: And over the year and we won't say, it's easy, but I think we commented on our technology and are hopeful we can have some results.
Speaker Change: In 2026, so I think.
Speaker Change: So your question is sequentially, we got to a focus.
Fusen Chen: And from now, I think it's a good time for us to focus on HBM.
Speaker Change: In actually has some segment and.
Speaker Change: So I think it's a good time for us to focus on H B.
Krish Sankar: Thank you for choosing. Take care.
Speaker Change: Got it. Thank you that's what I'm thinking.
Tom Tisoli: Our next question comes from Tom Tisoli with D.A. Davidson. Please proceed with your question. Yes, good morning. I was curious, what was the revenue run rate of the EA business that you're exiting or any kind of metrics around the size and profitability would be?
Speaker Change: Our next question comes from Tom <unk>.
Speaker Change: D. A Davidson. Please proceed with your question.
Speaker Change: Yes, good morning.
Speaker Change: I was curious what was the revenue run rate of the business that you exited or any kind of metrics around the size and profitability would be very helpful.
Lester Wong: Yeah, hi, Tom, it's Lester. So, based on the recent past, the EA revenue was about $25 to $30 million a year, gross profits on $7 to $11 million, and the operating expenses about $20 to $25 Great. No, thank you. It's very helpful. And Lester, did you say that there'd be a $15 million per quarter charge through the first half of 2016? No, no, no, Tom. What we said is also consistent with the disclosure on March 31st. I said that after this, all the way down this quarter, the $86 million, we think it'll be less than $15 for the rest of the shutdown.
Tom: Yeah, Hi, Tom it's last year or so.
Speaker Change: Based on the recent past.
Speaker Change: <unk> revenue was about $25 million to $30 million a year gross profit of seven to 11 million and other operating expenses about $20 million to $25 million.
Speaker Change: Great. Thank you that's very helpful and lesser did you say that there'd be a $15 million per quarter charged through the first half of 'twenty six.
Speaker Change: No no no.
Speaker Change: He said, it's also consistent with the disclosure on March 31st I said that after this all the write down this quarter the $86 million.
Speaker Change: It'll be less than 15 for the rest of the shutdown and that would probably be a little bit in the next two quarters and then more in the first half of FY 'twenty six subject to you know.
Lester Wong: And that will probably be a little bit in the next two quarters and then more in the first half of FY26.
Lester Wong: Subject to our discussions with local stakeholders, we believe that the business, other than to support existing customers and warranty and service, should be done by the first half of FY26. Great, thank you very much for that.
Speaker Change: Our discussions with local stakeholders, we believe that the business other than to support existing customers on warranty and service should be done by the first half of FY 'twenty six.
Speaker Change: Great. Thank you very much for that.
Fusen Chen: And then maybe just a quick question on the power semi side, what are the dynamics you're seeing on the power? Well, I think the power is going to grow rapidly, you know, in terms of volume. And, you know, there was a lot of European companies actually invest on it. But recently, I think China actually also gained some market shares. So we are very happy, we still have very high market shares in the power semi. And there's a transition, you know, to the power semi to be more effective, you know, with higher power, more cost effective.
And then maybe just a quick question on the power semi side, what are the dynamics youre seeing on the powers friends.
Speaker Change: Well I think the poll.
Speaker Change: E R.
Speaker Change: Going grow.
Speaker Change: Repeatedly in.
Speaker Change: In terms of volume.
Speaker Change: And.
Speaker Change: There wasn't a lot of European company actually in based on where yet, but recently I think in China actually.
Speaker Change: Actually also gain some market shares so.
Speaker Change: Very happy we still have a very high.
Speaker Change: Market shares in a P.
Speaker Change: Sammy and it is a transition.
Speaker Change: Toward a policy of me to be more effective.
Speaker Change: Higher power.
Speaker Change: More.
Fusen Chen: So we have two actually new products. One is a solar chart, I actually discussed in my script. And this is for the pin welder. The other one actually we call Everlife. So we actually announced these two new products, we believe it's going to be an important product, start to contribute revenue for us in 2026. Great, thank you Fusen.
Speaker Change: So we have to actually a new product one is a Soma chart.
Speaker Change: <unk> actually discussed.
Speaker Change: In my script and this is in the form of <unk>.
Speaker Change: The other one actually we call out every night is a pretty quick pitch. So we actually announced these two new products.
Speaker Change: We believe it can be important product start to contribute revenue for us in 2026.
Susan Chen: Great. Thank you Susan.
Speaker Change: Okay. Thank you.
Charles Chi: Our next question comes from Charles Chi with Needham & Co. Please proceed with your question. Hi. Thank you. Good evening, Fusen and Lester. Maybe Fusen, the first question is about the market dynamics. What if you can further unpack a little bit more? China ordering activities up, Southeast Asia is down. That's understandable, but it's a little bit interesting to hear that Taiwan is also up a little bit. In terms of ordering activity, you would assume Taiwan is subject to the same tariff dynamics as Southeast Asia. Why is there a little bit of bifurcation between those two regions?
Speaker Change: Our next question comes from Charles <unk> with Needham <unk> Co. Please proceed with your question.
Speaker Change: Okay.
Speaker Change: Thank you good evening Fusin Leicester.
Speaker Change: Great.
Speaker Change: Firstly on the first question is about the market dynamics.
Speaker Change: If you can further unpack a little bit more.
Speaker Change: China ordering activity up southeast Asia is down that that's understandable, but.
Speaker Change: But it's still a very interesting to hear that the Taiwan is all.
Speaker Change: So a little bit.
Speaker Change: In terms of ordering activity.
Speaker Change: You'd assume Taiwan is subject to the same tariff dynamics as the southeast Asia why the why is there a little bit about bifurcation between those two regions.
Charles Chi: Is it Southeast Asia more impact on auto industrial side, Taiwan more on the general economy side? Or what's the reason?
Speaker Change: Southeast Asia more impact on auto and industrial side of Taiwan more on the generous side or whats the whats the reason yeah.
Fusen Chen: OK, so let me explain South East Asia first. South East Asia, we believe, actually, euthylation rate still not high enough. I mentioned about Taiwan and China. Actually, euthylation rate is actually high enough, potentially can trigger capacity buy. But actually, we didn't see that yet. Maybe it's because of holdback. People, for the unknown period of time, they can run, actually, euthylation rate higher than, even slightly higher than 80. But South East Asia, I think, euthylation rate is below that. And as you know, the tariff impact to auto is a big deal. And South East Asia actually have a lot of, actually, European investment and also OSEC, and create a big base for auto capacity.
Speaker Change: Okay. So let me expand southeast your first.
Speaker Change: This is a sharp eye we believe.
Speaker Change: You've had recently.
Speaker Change: Steel still not high enough I mentioned about Taiwan, and China actually is that utilization rate.
Speaker Change: Yes, actually a high enough potentially can trigger capacity, but actually.
Speaker Change: You know given the XI that yet maybe it becomes a whole back.
Speaker Change: People.
No Peter and Tom they can one extra utilization rate higher than even slightly higher than <unk>, so, but southeast Asia I think utilization rate is below that and as.
Speaker Change: As you know the tariff impact to auto.
Speaker Change: Is a big deal and associate user Asia actually you have a lot of.
Speaker Change: Excellent European investment and also all set and create.
Speaker Change: Big base.
Speaker Change: For auto.
Speaker Change: Capacity.
Speaker Change: No.
Fusen Chen: And the South East Asia, the slowdown actually account for almost a majority of those slowdowns, sequentially, from Q2 to Q3. I hope I answered your question. Yeah yeah that's that's very very interesting color.
Speaker Change: And.
Speaker Change: The southeast shot.
Speaker Change: Slowdown actually accounting for almost a majority of those slow down sequentially from Q2 to Q3, I Hope I answer your questions.
Speaker Change: Yeah, Yeah that's.
Speaker Change: That's very very interesting color.
Charles Chi: Fusen, maybe another question about the fluxless TCB. I think in your prepared remarks there's some new languages there. You are saying fluxless TCB at least for Fiscal 25 is fully booked. I wonder if you can provide some color what that means, because I don't think your fluxless TCB revenue forecast was that aggressive. It was, I believe, you were guiding to like 40 to 50 percent young year growth. When you say it's fully bulk, do you mean it's, can we even read that, it's actually a little bit supply constrained at this point, or yeah, okay. Actually, I think it's really a limit in our capacity.
Susan Chen: Susan maybe another question about the flux list TCP I think in your prepared remarks, there are some new languages, there USA flock.
Speaker Change: <unk> TCP.
Speaker Change: For our fiscal quantify it's fully booked.
Speaker Change: Wonder if you can provide some color what that means.
Speaker Change: I don't think that your flex lists PCB revenue forecast. It was that aggressive. It was I believe you are guiding to like 40% to 50% year on year growth.
Speaker Change: When you say to fully bulk or do you mean.
Speaker Change:
Speaker Change: Even read that one.
Speaker Change: <unk> can be a little bit.
Speaker Change: Supply constrained at this point or.
Speaker Change: Yeah Okay.
Speaker Change: Actually I think is.
Speaker Change: Easily.
Speaker Change: In all of our capacity, we have some capacity in U S and Uh Huh right.
Fusen Chen: We have some capacity in US, and right now we move to Asia, and we intend to actually increase capacity. So I probably can say this a little bit better. I think right now we are capacity constrained right now, and we actually will create more capacity. It's undergoing. So it's the 40 to 50% young year growth, you think you can still reach that target for, yeah. So, for example, I think, you know, we actually. Right now, give you an example, maybe a capacity, we are actually, you know, we just start in 2020, right? 2020, we actually have a capacity, you know, a target to reach about 60 systems per year, right?
Speaker Change: Now we move to.
Speaker Change: Asia, and we intend to actually increase capacity so.
Speaker Change: I, probably Kansas City is a little bit better I think right now we are capacity constrained right now and.
Speaker Change: We actually are.
Speaker Change: Or create more capacity.
Speaker Change: I'm going to go up.
Speaker Change: So is the 40% to 50% year on year growth you think you can still reach that target for.
Speaker Change: Yeah.
Speaker Change: So for example, I think you know we actually.
Speaker Change: Right now.
Speaker Change: Give me an example, maybe a capacity.
Speaker Change: We are actually.
Speaker Change: We just thought in 2020 by 2020, we actually didn't have a capacity target.
Speaker Change: But to be sure about 60 system per year right. So this is the incremental capacity we are undergoing to increase.
Fusen Chen: So this is incremental capacity we are undergoing.
Charles Chi: Maybe last one. Any update on the leading foundry? I believe you should say dual head system already. Any expectation on repeat orders and the timing of it? Okay, so our system actually is a long-range, you know, high-volume production and also multiple system and also a new customer qualification. This year, our TCB, TCB only, we expect about $70 million. Next year, we actually expect probably 100 or above hundreds. So the difference of 26 and 25, part of that actually is the growth of foundry, right? But as we qualify more customers and more devices, I think we will have additional upside on top of it.
Speaker Change: Got it maybe last one any update on the leading foundry.
Speaker Change: I believe you shipped a dual had system already any expectation.
Speaker Change: Repeat orders and the timing of it.
Speaker Change: Okay. So.
Speaker Change: Sure our system actually is London.
Speaker Change: High volume production and also multiple system and also a new customer qualification.
Speaker Change: This year Oh GCB.
Speaker Change: He should be only we expect about $70 million.
Speaker Change: Next year, we actually.
Speaker Change: Expect probably hangzhou or above hunters.
Speaker Change: Defense of 26, and 25 product that actually is a gross of foundry right, but as we qualify more customers and more.
Speaker Change: Yes, I think we will have additional upside on top of that.
Charles Chi: Thank you, Fusen.
Suzanne: Thank you Suzanne.
Speaker Change: Okay. Thank you.
Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Craig Ellis: Our next question comes from Craig Ellis with B. Riley Securities. Please proceed with your question. Yeah, thank you for taking the question and good evening, Fusen and Lester. I wanted to start going back to some of the utilization increases you're seeing in China and Taiwan and just try to understand them in a little bit more detail. We've seen pretty visible signs that certain supply chains, PCs, since February, March, have been tracking well above seasonal. Smartphones seem to be doing that early in 2Q.
Speaker Change: Our next question comes from Craig Ellis with B Riley Securities. Please proceed with your question.
Craig Ellis: Yes. Thank you for taking my question and good evening fusion and luster.
I wanted to just start going back to some of the utilization increases you are seeing in China, and Taiwan, and then and just try to understand them a little bit more detail.
Craig Ellis: Hmm.
Craig Ellis: We've seen pretty visible signs that.
Craig Ellis: Certain supply chains, Pts since February March have been tracking well above seasonal smartphone seem to be doing that early.
Craig Ellis: So the question is, if that is happening, and it seems like it's happening on build-aheads, given tariff impacts, is there potential that related demand in the second half of the fiscal fourth quarter or in the fiscal first quarter would be below seasonal because we've already had the utilization benefit early in the year as companies try to best operationalize to mitigate tariff impacts.
Craig Ellis: <unk>. So the question is yes.
Craig Ellis: If that is happening and it seems like it's happening on build that had given tariff impacts.
Is there potential that.
Craig Ellis: Is that related demand in the second half of the skull.
Craig Ellis: <unk>.
Craig Ellis: Fourth quarter or.
Craig Ellis: The fiscal first quarter would be.
Craig Ellis: Below seasonal because we've already had the utilization benefit early in the year.
Craig Ellis: Companies try to bear.
Craig Ellis: Best Operationalize two.
Craig Ellis: To mitigate tariff impacts.
Lester Wong: Hi, Craig, Lester. No, we don't think so. I mean, utilization rate, you're right, as Fusen said, is quite high in China and Taiwan, and also in general assembly. But what I think, as we indicated on the call, is in a normal cycle, at these utilization rates, people should start doing capacity buys. But we're not really seeing that. And I think the reason for that is, again, there's a lot of cautiousness among our customers. They want to see how this tariff thing kind of plays out. So we don't think that the utilization rate is going to start falling.
Lester: Hi, Craig It's Lester no. We don't think so I mean utilization rate you're right as we sunset is quite high.
Lester: In China, and Taiwan, and also in our general semi but what I think as we indicated on the call is al.
Lester: In a normal cycle.
Lester: These utilization rates.
Lester: People should start doing capacity buys, but we're not really seeing that and I think what we are the reason for that is again, there's a lot of cautiousness among our customers. They wanted to see how this tariff thing kind of plays out. So we don't think that there is that it's going to the utilization rate has been a soft start falling we think it already remaining at this level and I think.
Lester Wong: We think it's already remaining at this level. And I think, without the tariff uncertainty, we believe that China, Taiwan, North America, and Europe, I think the revenues would be much higher in Q3. And that's why, originally, we believed that the second half of the year, historically, has always been the first half. I think this has really been affected by the global trade dynamics, as well as the tariffs. I think, as we get more clarity on the tariffs, I think then people will start making purchases. I think, right now, people are doing it just if it's critical necessity.
Lester: Without the tariffs uncertainty, we believe that you know.
Lester: China, Taiwan.
Lester: In North America, and Europe, I think the revenues would be much higher in Q3, and and and that's why originally we believe that the second half of the year. Historically has always been the first time I think this is a you know.
Lester: <unk> really been affected by the global trade dynamics as well as the tariffs I think as we get much clarity on the tariffs I think then people will start making a part.
Lester: I think right now people are doing it just if its critical necessity. So I think also as Susan said thoroughly about five people running it at a much higher utilization than they normally would so we don't think actually it will fall off in Q4 and Q1.
Lester Wong: So I think, also, as Fusen said in his earlier reply, people are running it at a much higher utilization than they normally would. So we don't think, actually, it will fall off in Q4 and Q1.
Craig Ellis: That's really helpful, Collar, Lester. Thank you.
Speaker Change: That's really helpful color luster. Thank you and then second question is more of a longer term so.
Craig Ellis: And then the second question is more longer term. So, interesting ambition to move into the DRAM, HBM market and LPDDR market and Fiscal 26. The question is, as we think about the memory business now, which is very man-centric, how material could DRAM be in Fiscal 26 and 27 relative to the business that you currently have? And how broad would you expect your exposure to be across the memory supplier base? So I think at NEN, we have a very high market share. HBM, we actually put a lot of effort. In the meantime, there's also many, many competitors over there.
Lester: Interesting ambition too to.
Lester: To move into the DRAM, HBM Marquette and <unk>.
Lester: LP DDR Mark.
Lester: Fiscal 'twenty six.
Lester: Question is just thinking about the memory guys since now which is very again soundtrack commentary.
Lester: DRAM be in there.
<unk> 26, and 27 relative to the business that you currently have been and how broad would you expect your exposure to be across.
Lester: The memory supplier base.
Lester: So I think on and then we have a very high market shares HBM.
Lester: We actually put a lot of effort.
Lester: Meantime, there's also.
Lester: Many many competitor over there.
Fusen Chen: So we will see, you know, how well we will do. But I think, you know, we work closely, actually, with ONE, but also, you know, also with others. But ONE actually has a better focus. So in terms of DRAM, stack-and-die, we actually see this vertical wire is going to be very important for the industry, in both logic and memory. The first customer we see is going to go to production. This is for a stack DRAM, it's going to be in the first half of 2022. Right. So, and not only, almost every memory customer is working with us, and including IBM.
Lester: So we will see how where we went through but I think you know.
Lester: We will get closer to actually.
Lester: Listen one but also.
Lester: Also with us.
Lester: About one actually has a vessel focus so.
Lester: In terms of DRAM sticking by.
Lester: We actually.
Lester: See disability Hawaii.
Lester: It's going to be very important for the industry in both logic and memory.
Speaker Change: First of all our customer.
Lester: We see is going to go to production.
Lester: Do you support a stick DRAM is going to be in the first half of 'twenty 'twenty six.
Lester: So.
Lester: And not only almost a memory customer you said working with us and the including the idea so.
Fusen Chen: So, next year will be a transition year. And we probably can give you more update, you know, about all the maybe years ago, the production for the first half. And, you know, we will see, you know, the order, maybe our fiscal 2026, maybe Q1 or Q2. So, we believe the vertical wire will take off, and there will be many, you know, many customers is going to work on this for the first product. First product is going to be DDR. It's going to have a capability to reduce the form factor about 30%. And this is going to be on a mobile.
Lester: Next year will be a transition year and.
Lester: If I can give you more update.
Lester: About the order maybe you should go to production for the first half and.
Lester: We will see the order maybe.
Lester: Our fiscal 'twenty.
Lester: 26, maybe Q1 or Q2.
Lester: So we we believe.
Lester: The political while or to golf and they will be mainly.
Lester: Many.
Lester: Many customers is going to work on what is for the first product whose product is gonna be DDR.
Lester: Is going to.
Lester: Have a capability to reduce the form factor of 30% and this is going to be on mobile, but this only for application. We believe political wireless is going to find a home for many other applications in the future.
Fusen Chen: But this is only a first application. We believe vertical wire is going to find a home for many other applications in the future.
Craig Ellis: That's a significant form factor reduction, Fusen, and thanks for all the color, you too, Lester. Thanks.
Speaker Change: That's a significant form factor reduction fusion and thanks for all the color you to Lester.
Lester: Thanks.
Dave Duley: Our next question comes from Dave Duley with Steelhead Securities. Please proceed with your question. Yes, thanks for taking my question. Just a couple of clarifications. You talked about the utilization rates in Taiwan and China being elevated. Could you just give us what those percentages are at this point?
Speaker Change: Our next question comes from Dave Daly.
Lester: <unk> had securities. Please proceed with your question.
Dave Daly: Yes, thanks for taking my question.
Speaker Change: Couple of clarifications, you talked about the utilization rates in Taiwan, and China being elevated could you just give us what those percentages are at this point and then also.
Lester Wong: And then also bit of a housekeeping question what is your IC unit volume assumption for calendar 2025 and 2026 if you have So hi, Dave.
Speaker Change: A bit of a housekeeping question what is your IC unit volume assumption for calendar 2025, and 2026, if you have them.
Dave Daly: Hi, Dave.
Lester Wong: Utilization, this is Lester. Utilization in China is over 80%. In fact, it's almost into the mid 80s. In Taiwan, it's just touching 80% or so. and uh okay you know semi-revenue growth is we still expect about 10 a little greater than 10 in calendar 25. Yes. Okay, and then, um...
Dave Daly: Illustration, just lesser utilization in China is over 80% in fact almost into the mid eighties, and Taiwan is just touching 80% ourself.
Dave Daly: Oh.
Dave Daly: And okay in our semi revenue growth, we still expect about 10%, although greater than 10%.
Dave Daly: In calendar 'twenty five.
Dave Daly: Yes, yes.
Dave Daly: Okay and then.
Dave Duley: As far as the HBM opportunity goes, you know, I think you've made it clear you're working with one specific customer here. And is that Is it fair to assume that HBM-4 or HBM-4E is the cut-in point or, you know, usually it's with a new product. Maybe just explain to us which new product, you know, you think you'll get cut in at. Well, you know, right now it's a high volume, it's a 3E, so we expect will be a future generation. Yeah, most specific I think are from HBM4. So HBM4 would be the target point to try to incorporate yourself into the market.
Dave Daly: As far as the H P M opportunity goes.
Dave Daly: Hum.
Speaker Change: I think you've made it clear youre working with one specific customer here.
Dave Daly: And is.
Dave Daly: Is that.
Dave Daly: Is it fair to assume that H b M for our H B M. Four he was the cut in point or we're usually it's with a new product.
Dave Daly: Maybe just explain to us what's new product because you know what you think.
Youll get cut in half.
Dave Daly: Well you know right now.
Dave Daly: High volume is a three three E. So we expect will be a future generation.
Dave Daly: Yeah.
Dave Daly: More specific I think for a lot.
Dave Daly: H B M for.
Dave Daly: Yeah.
Dave Daly: So H B M four would be the target point.
Dave Daly: To try to incorporate yourself into the market so to speak.
Dave Duley: Yeah, lots to go around.
Dave Daly: Yes, that's correct.
Lester Wong: Okay and final question from me is you've talked about I guess demand hesitation driven by trade policies and tariffs but could you just talk about any impacts that you might have? I assume that tariffs that you can ship from Asian facilities into China so there won't be a major tariff impact from doing that. And then maybe just talk about if there are any higher costs from, you know, input costs into your products from tariffs. Thanks. Yeah. So, Dave, you know, we manufacture our capital equipment here in Singapore, so shipping it into China will not trigger any tariffs.
Dave Daly: Okay and final question from me.
Speaker Change: Is you've talked about I guess demand hesitation, driven by trade policies and tariffs.
Speaker Change: But could you just talk about any impacts that you might have I assume that.
Speaker Change: Terrorists, but that you can ship from.
Speaker Change: Asian facilities into China, So there won't be a major.
Speaker Change: Tariff impact from doing that and then maybe just talk about if there are any higher costs from input costs into your products from tariffs. Thanks.
Speaker Change: Yeah. So Dave you know, we manufacture all capital equipment here in Singapore, So shipping into China will not trigger any task.
Lester Wong: Because the tariff right now from China is aimed towards the United States on a reciprocal basis, right? So we don't think there's any direct impact for us. As we indicated, the impact is more on an indirect basis as our customers and their customers are right now a little bit uncertain about how all this is going to play out. So therefore, they're much more conservative in their supply chain, right? So that's, I think, what we've been talking about earlier. As far as cost is concerned, I think there will be, again, there may not be a direct cost, but there's always going to be indirect cost.
Speaker Change: That's the task right now from China is aimed towards the United States and reciprocal basis right. So we don't think there's any direct impact for us.
Speaker Change: As we indicated the impact is more on an indirect basis as <unk>.
Speaker Change: Customers and their customers are right now a little bit uncertain about.
Speaker Change: You know how long this is going to play out. So therefore, they are much more conservative in their supply chain right. So that's I think what we've been talking about earlier.
Speaker Change: As far as cost is concerned you know I think there will be again this may not be as direct cost, but there's always going be indirect cost terrorists I'm kind of its costs everybody money right. So I think it's across the board.
Lester Wong: Tariffs are going to cost everybody money, right? So I think it's across the board.
Lester Wong: Okay, and one final clarification is you talked about the customer hesitation in Southeast Asia and I guess you're kind of you know. customers or the food chain that is in hesitation, so to speak. Well, David, I don't think Fusen said it was just these people who are in hesitation, right? I think all our customers are in hesitation, including those in Taiwan and China, which is why at that high utilization rate, they're not making the orders that they normally would make. I think what Fusen said about Southeast Asia in particular is we see Southeast Asia actually drop the most sequentially from Q2 to Q3.
Speaker Change: Okay, and one final clarification.
Speaker Change: Is you talked about the customer hesitation in South East Asia.
Speaker Change: And I guess, you're kind of.
Speaker Change: Do you know.
Speaker Change: Suggesting that that's an industrial automotive in market driven and then I think you even mentioned it was European customers is really way to think about it as a European auto and industrial customers.
Speaker Change: The mean.
Speaker Change: Customer sort of food chain that isn't in and hesitation so to speak.
Speaker Change: Well, Dave David I don't think fusin.
Speaker Change: These people who are in hesitation right I think all our customers aren't hesitation, including those in Taiwan, and China, which is like at that high utilization rate it they're not making the orders that they normally would make I think southeast Asia. In particular is we see southeast Asia actually dropped the most sequentially from Q2 to Q3 and part of.
Lester Wong: And part of that is because we have a large auto industrial client base in Southeast Asia. And most of them are, you're right, an audience from Europe. And they are very, so they are particularly, I guess, affected by concerns about the tariff. So we didn't say it's only them that are concerned about the tariff. I think it goes across the board. It's that they particularly have been affected in Q3 when you compare it to Q2.
Speaker Change: That is because we have you know we have a large auto industrial.
Speaker Change: Client base in Southeast Asia, and most of them are you're right our IBM from Europe and they are very so that they are particularly I guess affected by <unk>.
Speaker Change: Concerned about the tariffs. So we didn't say, it's only them their concerns about the tariffs I think it goes across the board is that they are particularly have been affected in Q3.
Speaker Change: When you compare with Q2.
Operator: Okay, thank you. There are no further questions at this time.
Speaker Change: Okay. Thank you.
Joe: There are no further questions at this time I would now like to turn the floor back over to you Joe.
Joe Elgindy: I would now like to turn the floor back over to Joe Elgindy for closing comments. Thank you, Maria, and thank you all for joining today's call. Over the coming quarter, we'll be presenting at several conferences and roadshows.
Speaker Change: For closing comments.
Speaker Change: Thank you Maria and thank you all for joining today's call over the coming quarter, we will be presenting at several conferences and roadshows as always please feel free to follow up directly with any additional questions. This concludes today's call have a great day everyone.
Joe Elgindy: As always, please feel free to follow up directly with any additional questions.
Joe Elgindy: This concludes today's call. Have a great day.
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