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spk04: Good day ladies and gentlemen. Thank you for standing by and welcome to the ACM research fourth quarter and fiscal year 2020 earnings conference call. At this time all participants are in listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. As a reminder we are recording this call. If you have any objections you may disconnect at this time. Now I will turn the call over to Mr. Gary Delachok, Managing Director of the Blue Shirt Group. Mr. Delachok, please go ahead. Good morning, everyone. Thank you for joining us on today's call to discuss fourth quarter 2020 results. We released results after the U.S. market closed yesterday. The release is available on our website as well as from Newswire Services. There's also a supplemental slide deck posted to the investor portion of our website that we'll reference during our prepared remarks. On the call with me today are our CEO, Dr. David Long, our CFO, Mark McCagney, and Lisa Fung, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide two. Let me remind you that the remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results of different materials. Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place under reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revision to these forward-looking statements. Certain of the financial results we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation, a loss relating to the change in fair value of a financial liability, and an unrealized gain in trading securities. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website. With that, let me now turn the call over to David Wong, who will begin with slide three.
spk01: David?
spk04: Thanks, Gary. Good morning, and I welcome everyone to today's call. 2020 was a very productive year for ACM We faced several challenges, such as the COVID-19 pandemic and trade tensions. We overcame these challenges through hard work and good execution and positive tailwind in China's semiconductor industry. We focused on what we could control. We managed our supply chain. We executed our customer delivers. We expanded capacity. We introduced new products. and we made a great progress with new customers. We also moved forward with our long-term facility plan in Mingdao and completed the deposit for employee housing development. Before getting into detail, I would like to thank our employees for their hard work and dedication. I also want to thank our customers, partners, and shareholders for their continued support and confidence in ACM research. For the full year, we had a record revenue of $156.6 million, upper 46%, and a record shipments of $182 million, upper 58%. Non-GAAP operating margin was 17.3%, and we entered the year with $71.7 million in cash and additional $28.2 million from all holdings of SMSA stock market shares. Our success started with our customer, who's pinned to the slide here. We have five major front-end customers. Of course, 3D Man, Foundry, and D-Lens, as well as several back-end wafer packaging and assembly customers. Our new customer manufacturer, Power & Analog Devices, They choose ATM technology to optimize their own production capability. We help them achieve the operational excellence needed to compete in today's global semiconductor market. Let me discuss our key customers. I will start with the Shanghai Huali and Huagong Semiconductor, also known as the Huali-Huagong Group. They are leading in advance, founded in China, and our top customer in 2020 at 37% of the total sales. They are a great customer and neighbor with production near our Shanghai headquarters. Shanghai Huali is in the middle of a multi-year capacity expansion, making good progress in the 2018 number. Hualong Semiconductor is adding capacity that is a treating edge node for application. Their major product, a CRS, and power devices. And capacity will be more than 80K per month by end of this year, after from 30K per month at the end of last year. We participate in both projects. We have several first demo systems at Huali for some of our newer product offerings. Next, 1PC. 1PC is the second largest customer. contributing to 27% of the total sales in 2020. We are working closely to support 1TC's 3D mass production run in Wuhan. Public reports say that 1TC scaled its production capacity to 50,000 wafers per month in 2020, and they're expanding to add another 25 to 50K in 2021, and convert from 64 layers to 128 layers. We believe we are YMTC's largest single-vapor water community supplier. AECM tools are being deployed in a significant number of community cells, so we continue to expect strong demand from YMTC as it scares the production capacity in Wuhan and other major facilities in Wuhan. AECM's further largest customer was SMIC, the largest foundry in China. It is 12% of the sales in 2020, upper from single digits in 2019. While ASEAN Shanghai has the flexibility to deliver SMIC, our business level also depends on other U.S. suppliers to get their license to ship their own tool to SMIC. We are well positioned with a range of the tool SMIC, but are factoring in just a small from SMIC in our 2021 outlook. Now let's touch on our other significant customers. I will begin with SK Hynix, the number two global DRAM supplier. SK Hynix was ACM's first major customer, a strong testament to our truly fast cleaning technology and ability to improve production yields. We started with just a few production steps at SK Hynix. Now our tools are used in more than 20 steps as they progress to more advanced modes. SK Hynix was less than 10% of our sales in 2020, down from about 20% in 2019, as expected due to pause in the DLN cycle. SK Hynix implemented several technology upgrades in 2020, and we expect them to return as a 10% customer for 2021 and beyond through technology upgrades and capacity additions. Next, 6MT. A non-China-based entrant to the DRAM industry, we delivered our first SaaS 5 tool to them in the late 2019 and recommend revenue in Q4 of 2020 upon acceptance. They select us for compelling value population, proving ability to improve yields, and a solid technology roadmap. 6MT is in the early stage of its multi-year production plan. We are positioned to participate with Cephs, Cargo, Semi-Critical Cleaning Tools, ECT, and other tools when they scale up in 2021 and beyond. Finally, we have two new Emerald Power IC customers. we delivered multiple first tools in the third quarter, third and fourth quarter of 2020, and recognizing some revenues into it. The first tool, including our semi-critical tools, scrubber, thin wiper, backside cleaning tool, and auto wet bench, a step-through cleaning tool, and ultra-FM furnace tool for airway cleaning process. With this, we have penetrated two of the five key trading edge nodes and the CIS manufacturing chain. I'm happy to see we are very active with all of the remaining three players and expect to receive orders from them this year. We believe these customers alone represent a significant opportunity for HGM. Many of them are still in early or middle stage of multi-year capacity. expansion and are buying just a friction of our product. We think our current customer base alone can support solid growth for years to come as this customer add capacity, use our tool in additional production steps, and buy more ACM products. Innovation will enable us to capture more and more of a large market opportunity. Please turn to slide five. As emerging suppliers, we're focused on delivering advanced technology at competitive cost. We have a strong R&D team in Shanghai and Korea, and one of the largest service teams for SemiCap, including the employees in China. This puts a critical mass of cadence near some of the newest and largest semiconductor projects on the planet. We consider this a great opportunity. It is another stretch to call the next few years and land grab period to expand our product line and scale our business as new major semiconductor products build their, a producer build their business in China. We intend to gain market share by expanding our product line and winning new customer votes in China and around the world. We estimate our current product portfolio address about 5 billion US dollar of the global wafer equipment market. This includes DRAM, 3DNet, foundry, power devices, and analog applications. All community tools address about 2.5 billion, or 80% of a 3 billion plus total wafer community market. It started with our flagships, Slack, Keyboard, and Topo tools. Topo is our semi-critical community tools. Our new product adds another $2.5 billion, including $1.7 billion by our firmers, $20 million by our ECT, and more than $30 million by our stress-free polishing products, vapor manufacturing, and other advanced packaging process equipment, including coder, developer, wet etch, scrubber, and wet PR sweeper. In 2020, we spent 12% of sales, or about $18 million in R&D, after 55% from Tucson Managing Level. That spending enabled us to expand our offering beyond staff and people into the town hall, sending critical tools, ECT, and most recently, furnace products. Our ECT tools are off to a very good start. In 2020, we delivered a handful of our first tools to front-end and back-end packaging customers and had a greater revenue contribution for the year. Our key products, including ECP-AP for advanced packaging and ECD-MAP for balancing copper interconnections, ECP-TSV for through-sitting media for front-end, our secret force is the ability to provide uniform plating and ultra-thin failure for advanced packaging. We have developed a proprietary high-speed copper plating technology with the patent pending to significantly improve copper-pillar plating uniformity. To plate metal film in deep media or through depth larger than 20 microns at high speed and better uniformity, is a major challenge in the long 3D plating application today. Historically, copper plating for PILA at high plating rates yielded a mass transfer limitation that reduced separation rate and generated uneven top profile of the PILA. Our new high speed plating technology solved the mass transfer challenge while achieving a better PILA top profile and delivering the best height uniformity less than 3%, as well as the high throughput. This ECG IEP with high speed plating rate, together with our SAP copper polishing tool, will become major winning products in coming 3D advanced packages. We are also excited about our further opportunities in 2020. We've delivered two poster tools to two customers. and we plan to deliver several more in the first quarter this year. Furnace has been jointly developed by our Korean and Shanghai team. Both teams have worked seamlessly to solve their alpha and beta tool issues, and tuning process to meet customer requirements. We have made significant progress in the LPSAVD process, including HDL, sitting in I-train, and the high-vaccine alley of the process. Our teams continue to develop non-dosed and dozed oil and high-temperature oxidation process. Our next step is to develop batch atomic layer separation, ALD, process, which is the most challenging and promising product for advanced manufacturing nodes. We have successfully implemented our multiple product strategy and expanding our product portfolio from web products as LifeClinic, ECP, and SFP to try products as vertical farmers, which make our first entry to try products and more to come in the near future. For 2021, to prepare for new opportunities ahead, we plan to accelerate our R&D to about 14% of our sales. Our goal is to double the total market address by our products from $5 billion today to more than $10 billion. Where it is too early to offer details, I can see that our team has begun work on several new major products that can get us close to the $10 billion addressable market goal in the next couple of years. Next, I will comment on our efforts to win major first tier of new customers. Our investments in our global sales team are making steady progress. We hired a US VP of sales in April of 2020, as well as several other key hires. During the year, we delivered our very first tool in the U.S. to the lab of the equipment player that needed battery cleaning for its own process. Thanks to the great execution of the service team, the customer formally accepted the tool and rebooked the revenue in Q4. The team is actively building a sales pipeline line with regular engagements such as advanced technology discussions in the U.S. and Taiwan players. We are confident that with CESS, Kibo, Tahoe, and high-speed carbon-plating UCB-AP, as well as SRT, we can secure one or more major first-tier customers in 2021. To fulfill our growth ambitions, where we will need a capacity. Let me upgrade our progress. Please turn to slide six. Our original facility in Shanghai remains the headquarter in Shanghai. It includes our R&D, SG&A, and prototyping and production of new products. We started production at our second factory in China during September of 2018. and added a second floor for production in Q3 2020. We now have a $303 million of annual revenue capacity as it turns out. If needed, we can further expand to more than $5 million of revenue capacity by leasing additional space. Our new minimum facility will include production and R&D with a planned 1 million square feet of floor space. we will have the ability to increase our production capacity to 1.5 billion. During 2020, we purchased 50-year land rights in Lingdong. We expect additional architectural and design work in the first half of 2021, with initial production expected in later 2022. Centuries of Lingdong operations in low-cost employee offices were not common in the U.S. It is a standard of practice for large companies in China, particularly in Shanghai. We offer housing to attract and retain key and experienced employees. We train many of our key engineers and managers for more than a decade. We need to keep in these key employees to secure our future growth and technology development. During 2020, we deposited $40 million towards the purchasing of the 162 housing units. We paid for these over half of the month from ACM Shanghai's cash balance. We financed the other half with a 10-year loan facility. Before I provide our 2021 outlook, let's discuss the status of the stock market IPO of ACM Shanghai. Progress is steady, but slow than expected. soon after ACM Shanghai application was approved by the Shanghai Stock Exchange Commission or at the VC on September 30, 2020, event in the US caused a delay in IPO. It is stated that the short-term report issued on October 8, 2020, followed by a cross-action lawsuit filed on December 21, 2020. We have previously described our disagreement with the short seller report, and we therefore believe there's no substance to the lawsuit, which is largely based on the short seller report. The SSE team, which is not familiar with this kind of a report and a lawsuit, want to better understand the U.S. legal process. As we have also previously described, we responded with a point-by-point verification report to the short seller report. and that of the report was accepted by SEC on December 11, 2020, and released publicly in both China and the US. Before our registration application could be filed with the China Security Regulatory Commission or CFRC, however, the civil suit was filed and we learned that SEC would again require additional information. Our team is now in the process of providing a secondary response report to SSEC to explain the cross-action lawsuit. We are confident that we will go over this hurdle and complete our ideal. But SSEC does not provide us with a timetable for its review and will enable us to predict the precise timing. Now let's move to our 2021 outlook on slide seven. Our guidance reflects optimism about our growth prospects for 2021. We call that we offer preliminary guidance in early January, which is unchanged. We expect the revenue to be in the range of $205 million, $203 million. We present 39% annual growth at middle point. 2021 is based on several key assumptions. First, the global COVID-19 situation improves in the coming months. Second, U.S.-China trade policy is stabilized. Third, a range of spending scenarios for the production and vending of key customers. Fourth, variance in the trajectory of demand recovery. And finally, a range of outcomes for the timing of customer acceptance of the first tool. Our results and our look demonstrate a successful execution of our strategy. Our strong growth is providing the capability to accelerate our R&D spending in new products. We are building our global sales and marketing resource to penetrate new customers in new regions. And we are scaling production capacity to support our long-term growth plan. We are increasing operation spending to take advantage of the growth opportunity ahead. Our mission remains to become a major instrument supplier to the global semiconductor industry. I will now send a call over to Mark to discuss the financial results in more detail.
spk01: Thank you, David. Good day, everyone. Q4 was another strong quarter, capping off a tremendous year for ACM. For the full year, we grew our business significantly with increased market share, good customer exposure, and expanded production at our second factory. We launched several major product lines, including the furnace, semi-critical cleaning, introduced a number of extensions for SAPs, ECP, and advanced packaging. We closed the year with a solid balance sheet, including $72 million in cash and an additional $28.2 million in trading securities of our SMIC stockholders. Now I'll put some detail around our full year 2020 results. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation, change in fair value of financial liability, and unrealized gain in trading securities. The reconciliation of these non-GAAP measures to comparable GAAP measures is including in our earnings release. First, highlights of the results for the full year 2020 shown on slide eight. Revenue was $156.6 million, up 46%. We break out 10% customers annually and provide occasional color on our quarterly calls. As David noted on slide four, we had three 10% revenue customers for 2020. First, the Wally Huahong Group together accounted for 37% of revenue versus 26.5% in 2019. They grew by 103%, a big contributor in growth as we expanded penetration from Wally's Shanghai fabs to additional factories of Hua Hong and Wuxi. YMPC was our second largest customer at 27% of revenue versus 27.5% in 2019. Our revenue from YMPC increased by 42% year-over-year. The healthy spend by YMPC to expand their wafer starts to $50,000 per month and some share gain into additional cleaning steps drove the growth. SMIC was 12% of revenue versus single digits in 2019. Participation with SMIC improved nicely in 2020, due in part to successful sales effort and SMIC's recognition of our ability to scale. SK Hynix was a little less than 10% of revenue versus 19.8% in 2019. This was as expected due to a pause in ERAM spending. Revenue from wet cleaning and other front-end processing was 87% of 2020 sales versus 84.6% in 2019. Revenue from advanced packaging, other back-end processing, tool services, and spares was 13% of sales in 2020 and 15.4% in 2019. Total shipments were $182 million versus $115 million in 2019. Cost margin for the year was 44.5% compared to 47.3%. This was within our normal expectation of 40% to 45%. We expect gross margin to continue to vary on a quarterly basis due to product mix and manufacturing utilization. Operating expenses were $42.7 million compared to $29.5 million. The increase was due to higher R&D spending on new products, increased sales in North America, China IPO-related costs. Operating income was $27.1 million compared to $21.4 million. operating margin was 17.3% versus 19.9% a year ago. Non-GAAP results exclude stock-based compensation and two additional line items below the operating line. The first was a change in fair value of financial liability. It was a non-operating, non-cash book loss of $12 million. As described in previous calls, this was related to investments in ACM prior to a 2017 IPO and restructured in Q3 of 2020 in connection with the Star Market IPO. The liability was terminated upon our issuance of an equity warrant after which it became a balance sheet item and no longer impacted our income statement in Q4 and beyond. Second is an unrealized gain of traded securities of $12.6 million from our investment in SMIC prior to the Star Market IPO. The investment was marked to market at year-end, and the gain reflects the increase in value from the original IPO price. We will exclude this item from non-GAAP results until the gain is realized if and when we sell the shares. Net income attributable to ACM research was $23.8 million versus $22.5 million. Net income for diluted share was $1.12 compared to $1.17 in 2019. Tax items and the effects of foreign exchange fluctuation on operating results provided a net benefit of $0.9 million and $4.7 million in 2020 and 2019, respectively, with $0.04 per share and $0.25 per share, respectively. Now for the fourth quarter, as shown on slide nine, revenue is $45.6 million, up 85.2%. Total shipments were $67 million versus $25 million in the fourth quarter of 2019 and $59 million in the third quarter of 2020. Post-margin was 43.3% versus 50.7%. Operating expenses were $13 million versus $8 million. Operating income was $6.7 million, up 49.6% from $4.5 million. Operating margin was 14.8% versus 18.3%. Unrealized gain on trading securities excluded in non-GAAP for reasons mentioned above was 3.6 million in the fourth quarter of 2020. Net income attributable to ACM Research was 6.2 million versus 4.6 million in 2019. Net income for diluted share was 29 cents versus 23 in 2019. Tax items and effective foreign exchange fluctuation Our operating results provided a net benefit of $0.9 million, or $0.04 per share, in the fourth quarter of 2020 versus a net benefit of $1.1 million, or $0.05 per share, in the fourth quarter of 2019. Now I will review the balance sheet. Cash balance was $71.8 million at the end of 2020. Short-term borrowings at year-end were $27.7 million versus $13.8 million in 2019, and long-term borrowings were $19.7 million. Total inventory was 88.6 million at year end versus 44.8 million in 2019. The increase in inventory was driven by a couple of factors. First, finished goods inventory. For ACM, that represents first tools delivered to our customers for evaluation and awaiting for acceptance. Finished goods grew to 32.4 million at year end, up from 19.3 million at the end of 2019. Inventory growth was mainly due to work in process and raw materials to support our sales growth in 2021. Cash flow used by operations was $13.5 million for the year. Cash was used to fund our growth in 2021 and to deploy first tools and new products to key customers. Capital expenditures for the year were $5.5 million versus $2 million in 2019. In 2020, we spent a total of $50 million on Lingdong-related investments. This includes the $9.7 million for the 50-year land rights, $40.2 million in deposits for employee housing. For 2021, our base case for capital spending is $10 to $15 million. Our 2021 investments will be balanced between capacity increases at our second factory in Chuancha, investments to support our R&D programs, as well as planning and some initial spending on Lingdao. We expect to adjust our capital spending upwards after our China IPO. To conclude, we continue to execute on our strategy. We're anticipating the growth of major new IC fabs. We're ramping production and continue to develop and deliver innovative products. We're positive on our opportunities in China and our expansion outside of China. Let's now open the call for any questions that you may have. Operator, please go ahead.
spk04: Certainly. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, Please press star one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press found with hash key. We have the first question from the line of Patrick J. Hill from . Please go ahead.
spk06: Excuse me. Thank you very much, Eric. That's a nice finish to the year. Maybe David or Mark, looking ahead, At local Chinese domestic spending, we're looking at potentially another strong, robust year. Can you just give a little bit of color of the breakdown between your thoughts on memory spending versus the trailing edge foundry logic spending, and whether you see potential growth in both areas, or is it going to be weighted more on one segment or the other?
spk04: Okay, thanks, Paddy. Actually, we have very good visibility in our basic 3D maps and also and also . And so we see that they're quickly expanding their FAB, both in their advanced 3D map, also their memory side, also in their logic-fungible side for . And plus, they're also quite So this is a five, what we call the second tier customer. And there we got two already. And this year, we have companies that will get the rest of the three additional second tier, I call them tree edge, nodes, customers too. So there's a building fiber, you know, and I still say probably majority, you know, more than 50, 60% they come from our top, you know, three customers. And we're seeing that there are five additional new customers expanding quickly. We cannot give you the precise number of the next years, but obviously they're going to expand their size. Mark, anything on that?
spk01: Yeah, no, thanks Patrick. I mean, I think you asked about the relative growth versus memory and trailing edge. As you know, YMCC is a 3D man, big customer, so we're expecting to grow with their capacity ads. David mentioned Paul Lee, Paul Holm. SK Hynix, David, in the prepare remarks, we're anticipating a DRAM recovery from them, and so they were less than 10% in 2020. and so we'd expect them to kind of show some decent growth here in 2021. Great.
spk06: That's helpful. And maybe as my follow-up question for you, Mark, as you get the new facility and factory ramped up for production, how do you look at gross margins, given that there are typically startup costs, some underutilization, to begin with, how quickly do you get that within to your normal, I guess, corporate ranges as that facility ramps?
spk01: Yeah, you bet. So, Patrick, we're not going to modify our gross margin outlook kind of the 40% to 45% range, right? There's a lot, obviously, dependent on the product mix, and that's really the biggest driver. Relative to production capacity, We've said a bit here. Chuancha, you know, we're adding capacity pretty quickly. We've got really pretty good demand throughout the year. The Lingdong facility, that, you know, we're looking at that for the end of 2022 is when that would start kicking up. So we don't really anticipate any impact to our gross margin from that Lingdong. That would be out there in 2023 and beyond.
spk06: Great. Thank you very much.
spk01: Thanks, Patrick.
spk06: Thanks, Patrick.
spk04: Thank you. We have the next question from the line of .
spk03: Hi, David. Hi, Mark. Congratulations on a strong end to the year. Quick question on the star listing. Can you just give us a sense qualitatively the level of detail the SSEC requested in this additional review versus the original report you filed? Just give us sort of some sense of magnitude here of how much more you're looking for. Okay.
spk04: I guess I'll say that, right, this short-term report came out and we spent almost like two months to finish the decision report. And then we got accepted and almost we were starting to require even the recorded registration for CFRC But then there's the lawsuits that come out, right? And anyway, now we're taking care of this lawsuit. We hired a very experienced lawyer in the U.S., and our lawyer told us, you know, pretty much, you know, no substance in this lawsuit right now. And so we're going with their, again, responsible report to SSVC to give them the detail of what is going on, what is legal process in the U.S. I think probably we're going to file this report very soon, and then we're waiting for their response, how they, you know, think about this. If they pass the report, then we can start to continue their registration process in the CSRC. So that's the timing right now, but again, we don't know how long they have there for there to review our second report, and that's why we couldn't give a precise timing of the IGL. But I think we're confident. You know, we get over 95% down already, and there'll be 95%, and we're pretty confident. And we should be successful, ideal, finished in China.
spk03: Okay. And then perhaps on the financials, the tools you have placed at customers entering 21, maybe you have, I'm curious, do you have a higher percent of visibility from those tools into your guidance? for 21 versus, say, a year ago, given that you have more customers and more products?
spk04: Yeah, I can see that this year, obviously, better than last year, right? And we're looking at our projection. And also, actually, we are very busy on the Q1, Q2. Even we're really stretching our kind of real-play scheme and very thin on the manufacturer capability. So we started to hire more people and also training more people and to... final task, and also to the service in the new year. So this moment, it's very easy, Q1, Q2, including Q3. So, you know, we're very, you know, I call it confidence in our protection this year.
spk01: Yeah, hey, Suji, you could obviously look at the level of the finished goods inventory right at the end of last year, the end of 2020. And so it grew from $19 million to about $32 million. And that's carried at cost. So assume our corporate gross margin for that to get an idea for how much revenue visibility would be there. Okay, good.
spk03: Sounds like good visibility. All right, guys, I'll step back in the queue. Thanks. Thank you.
spk04: Thank you. We have our next question from the line of Charlie from Margaret Stanley, please go ahead. Hi, David, hi. So my question is about your China contributions. You mentioned about one PC and a home, but how about SMIC? And because the company also now they want to expand around the whole point Do you think that is going to be a significant for you for this year? And what do you think about their, you know, capacity expansion progress given the issue? Thank you. Okay. I think we're pretty well positioned with FMIC and we have worked with them for the last three or five years. And we do have a product and sold them in the cleaning. And there is our, I call it key process and SAS. And also, we also have our, I call it the semi-critical process tool, also be sold into SMAC. We also do have our copper plating and also our TSV tool sold to them, right? And plus also future, we also provision our furnace tool in the SMAC too. So, I think we're very positioned for the market now. And you can hear announcement, they've been expanding 10,000 per month of their, I call it expansion for their probably, you know, 20 nanotechnology. So, we're positioned for that too. Again, if licensing can be sold in quickly, we can see, you know, quite a tremendous opportunity in front of us. However, at this moment, We're being very, you know, cautious watching this license stuff. And obviously, without their license going down and for them to be expended quickly, it's kind of difficult, right? So anyway, at this moment, we're just busy with health and working closely. And, you know, anyway, that's our customers. So we're making good supporting and service for the company.
spk01: Yes. Hey, Charlie, one thing I'd add, right? I mean, it's obviously a bit of a wild card, right? I mean, you know, we've got, David, really good visibility with, you know, a number of our top customers. But for SMIC, you know, we're not factoring a significant amount in our outlook. You know, it really depends on their ability to get tools from other U.S. manufacturers. So we've got demand in China pretty strong across the board. And we also think that depending on how much capacity they add, some of the other manufacturers may step up their spending. It's hard to tell, but for them, we're not going to factor too much into our outlook.
spk04: Next question operator, please. Charlie? Are you there, Charlie? Hello? Can we move to the next question, Tim? Yeah. Thank you. The next question comes from the line. The next question comes from the line from Newham and Company. Please go ahead.
spk01: Hey, guys. My congratulations to the strong finish and the nice outlook for 2021. David, I wanted to kind of follow up on Suji's question around the SSEC review. I understand you're about to file your response with more information about the class action lawsuit, and you don't know how long it will take the SSEC to review that. But once you receive that, you know, or once the SSEC has completed its review, Can you walk us through how long does it typically take to get through the CSRC registration process so folks can have a sense of time that once that SSEC review is complete, what the timeline to an IPO might look like?
spk04: Is it an order of weeks? Is it a couple of months? Any thoughts you could provide would be helpful. Okay. Craig, very good question. And actually, I just had a... When the SSTC finished the review for our second report, and then we're getting to the so-called registration for CSRC. And by their, I should say, so far the static data show averaging registration time in a CSRC about 45 days to 60 days. So that will be their registration time period. And after that, we'll probably spend the other decision down because another two weeks or three weeks will show that you can count about the two to three months, right, IPO time. That's after we finish the, you know, acceptance or approving by SSDC of a secondary report. Did I answer the question? Okay. Perfect. Thank you. Yeah, yeah. And the second question is, you know, very nice job on the shipments in the fourth quarter.
spk01: Mark, I believe I heard you say $67 million. Obviously, that gives you some pretty good visibility into 2021. I'm wondering if you might be able to break down for us how much of that $67 were your kind of traditional critical clean tools versus some of your newer semi-critical furnace ECPs. Is the majority still the critical clean or are you starting to see a much broader kind of composition of the shipments you're making?
spk04: Yeah, maybe I couldn't give you the detailed numbers. I can give you the general property communion tools. They occupy about 85%, I call it total communion. Our flagship also is semi-critical together. The rest of it, about 15%, 20% is our new product coming in, copper plating, and also we have a packaging application. So that's probably key to the ballpark, 80% to 20% dividing. Great. Thank you. I'll go back in the queue. Thanks. Thank you. Operator, next question please. Certainly. The next question comes from the line of Chai Tsai from Jefferies. Please go ahead. Chief Tsai, your line is open. You can ask your question now from Jefferies.
spk00: Thank you for taking my question.
spk04: So you reported to deliver 182 million shipments in 2020.
spk00: And I think that would indicate 31 million bailouts in 2020. I think as I'm getting right, I think we now have more than 60 million . And do you see this expanding into 2021 or you are expecting a similar range?
spk01: Yeah, let me just correct a few things. The way you would look at the value of our tools that are awaiting acceptance, you'd want to look at the finished goods inventory level, not the number that we shipped in the year, but that finished goods inventory was a little over $32 million. That's carried at cost, so you would assume the corporate gross margin to get an idea for the level of potential revenue that's in that. I think what you may be asking, you know, for 2021, we don't really give guidance on our overall shipment, but we would anticipate, you know, strong shipments again, you know, shipments, you know, additional delivery of demo tools this year.
spk04: Yeah. Well, obviously, this year, I can add there's a more new customer coming in, especially if we have a new product in ECP. and also our furthest product and also additional new customers coming in, we're expecting a more of a deferred revenue will come out this year too, which is we call the, not a recognized immediate upon shipment, but we recognize revenue upon acceptance. So where this year, I expect the end of this year, there will be much more first tool to be deferred to next year.
spk00: Thank you. My second question is that can you kind of break the outlook of 2021 revenue in first half and second half? Because I think a lot of capacity expansion plans, like additional expansion plans were made in the second half last year due to a capacity shortage. So I think more capacity will be delivered in second half. So I think can you give us an idea on how first half and second half will look in this year?
spk01: Yeah, I can address that. I mean, we typically just give a full year outlook. But Q1 is typically our seasonally weakest quarter. You've got Chinese New Year's in there. you get a nice, generally a good snapback in Q2. Q3 has traditionally been our biggest quarter, and then a slight decline in Q4. So that's how we're looking at it, and I think you're correct. A little bit more in the second half than the first half, kind of balanced that way, but nothing traditionally out of the ordinary from the seasonality you've seen in the last year or
spk00: Got it. Thank you very much.
spk01: Thank you. Thank you.
spk04: Next question, please. The next question comes from the line of Mark from Benchmark Company. Please go ahead.
spk02: Thank you for the question. You indicated you expect the return of Hynex to the 10% customer. Is that more of a second half or a first half type return?
spk04: Okay, I think we're probably in the second half of this year, and we do have some, you know, order coming in the Q1, and also look at the market, and the people project to be around to acquire the rubber compared to last year. So we're expecting some other order coming in the second half of this year.
spk02: So your sales and marketing expenses were up significantly. I'm sorry, your sales expenses were up significantly sequentially as well as R&D, despite somewhat lower sales in the fourth quarter. Do you expect this trend to continue into 2021?
spk04: Yeah, I think they're using a number where sales and marketing are about 9% to 10%, and down the range will keep continuing. However, this year, we do add additional revenue probably three points in the more for R&D. So it's talking about 14% and the plus R&D effort. Because we mentioned it's a very critical year, and it's a few years for ACM flow, and it's critical. We're positioned strongly in the Asian market, and that's why we're investing more to get that new product come out, and don't get more of a spending for R&D.
spk02: So you said sales will be about 10% roughly?
spk04: Yeah, it's just less than 10% sales marketing. And then we're funding more of the R&D. Then you can show the GNA. That's where I'll be there, you know, with GSR total spending, I call the plans.
spk01: Yeah, Mark, just to make sure you're aligned, this is the non-GAAP, right? So we're excluding the stock-based compensation, those percentages that David's giving you.
spk02: Yeah, you mentioned stock-based. What was stock-based comp last quarter?
spk04: Let me pull that up.
spk01: Q4 stock-based comp was $1.3 million. It's $5.6 million for the year.
spk02: Thank you.
spk04: Thank you. We have a follow-up question from Charlie Chen.
spk01: Charlie, I think we cut you off right now, or maybe we lost you. Hey, Charlie.
spk04: Welcome back.
spk03: Yeah. Hey, David. Sorry, I got disconnected from working from home.
spk04: Maybe another follow-up is really about your, you know, international customer progress. I know Hynix probably was debated this year, but how about other, you know, major designers from, you know, for example, PSNC or other, you know, U.S. customers? Any progress here? Great. And Charlie. So let me maybe elaborate more, Charlie, on the next field plan, right, coming to this first year customer. And we're always looking, you know, three or five years ahead. What's the technology trend today in the industry? And people talk about all the gate, all around. And also the 3D probably comes with a real limitation, you know, two nano, one nano. It's really hard and also very expensive, too. So people want the 3D. Now you can say 3D land is one of the structures people are taking. And people talk about 3D land and about 3D packaging. So I'm looking at a trend ahead. ACM is a real good policy for this future technology. I just started using a cleaning tool called SAP Keyboard. It's really good for cleaning small particles. Keyboard is the only technology today in the world that can re-adjust a tiny filter or tiny particle inside a deep trench or in the media. That's only available, actually, in the market. And you can clean. a deep or tiny corner particle. And by other technology, like Jet 3, you never can get out. And also, the megasonica, they don't make this kind of a cavitation, making the particle graduate out of their structure. So that's one way we're provisioning for that. The second one, I can see that 3D major applications down the road, a lot of multi-layer interconnection, and also 2.5D, 3D connectors, including PSV for the 3D D-RAM. So all copper plating technology is a rare provision for that. Recently, we are making progress on the high speed copper plating. And I think our key point is we can reach about 3% in 4D, you know, right at the top tier profile. And that will attract the attention from the top tier customers. And also, another one is SIP stress repolishing. We are talking about we can polish copper much less. consumer costs, we're saving 80% compared to the traditional CMT. That's another creation tool for the 3D tagging site. And more than that, as you said, is the furnace, right? They're very good at getting to their, you know, traditional, I call them, you know, silicon nitride and ARP-CVD oxidation and all the other, I call them, process. But the real aim for this product is ARD. We think Furnace ARD can create a very bigger role because of the efficiency and for their future ARD process. So looking ahead, I mean, our R&D is pretty target in the next few years, semiconductor manufacturing trend. Further, we'll also try to develop a new product right now, which is going to be announced very soon. Anyway, the point is to see that ACM is a technology differentiation is our core point. At this moment, we are heavily engaged with the U.S. and Taiwan customers. And we're in the portion of even, you know, doing demo for the key customers right now. I think, you know, the same take time, but we are confident this year that we should penetrate one or more of the top tier customers. and buy our advanced community site, and also our advanced corporate, high-speed corporate community site, and that's our goal this year. So, Mark, anything you want to add on this?
spk01: Yeah, the only thing I'd add, Charlie, is that this year, we didn't factor any revenue from these big customers, from these new customers into this year's Outlook.
spk04: Okay, sure, thanks for the updates. And this question is for Mark. I guess a very brief two questions. First of all, the postponement of the IPO funding, will that impact your funding for the new business or new plans, et cetera, any impact to the operation? And how soon do you think that funding needs to be ready before that impacts your business plan? And second quick question to Mark is really about the OPEC ratio guidance or your OPEC margin guidance for this year or for the coming three years. Thank you.
spk01: Great. Great. Yeah, I'll hit that. So, you know, on the China IPO timing, as David said, you know, the progress is not under our control. So we're doing what we can to support. We're confident we'll complete it. Hopefully it'll be soon. But our business plan doesn't require an immediate IPO. And we talked about our CapEx plan 10 to 15 for this year. We would adjust it upwards after the IPO to spend more on Lingdong. And what we're doing, right, we feel like we've got plenty of room to add capacity in Chuancha. We're looking at other options there. But we feel quite well funded and our plan doesn't require the immediate funds here. In terms of the OpEx levels for 2021, David talked about the R&D. You know, you got to think about our model, 40% to 45% on the gross margin. It kind of gets you to about a 14% op margin on the non-GAAP basis for the year.
spk04: Okay, so that means the OPEX ratio is around that 30%.
spk01: That would be right. Yeah.
spk04: Maybe around that.
spk01: Yeah. Okay.
spk04: In this moment, I'd rather spend a few points higher for R&D, and then we feel a little bit, you know, a profit or a loss. That would be really good for grabbing the market and also lead strength in our pollution. And that, I think, is our philosophy behind it. Sure, sure. Thanks for the explanation. Thank you.
spk01: Thank you. I think we have time for one more question. Operator, please.
spk04: Yes, sir. We have the next question from the line. A question from Craig Helm Kettle. Please go ahead.
spk05: Hey, great. Thank you, guys. Actually, the last few questions were the questions I had, so congratulations on a great outlook. I don't have any further questions to ask at this time.
spk04: OK. Thank you. Great. Thank you. Seeing there are no more questions on the queue, I would like to hand the call back to our presenters for the closing remarks. Thank you, operator, and thank you all for participating on today's call and for your support. This concludes the call, and you may now disconnect it. Okay.
spk01: Thanks, everybody.
spk04: Thank you. Ladies and gentlemen, that does conclude the conference for today. Thank you for participating.
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