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spk01: Good day, and thank you for standing by. Welcome to the ACM Research Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Stephen Correo, Managing Director of the Blue Shirt Group. Please go ahead.
spk04: Great, thank you. Good day, everyone. Thank you for joining us to discuss Fourth Quarter and Fiscal Year 2023 results, which we released before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the investor section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wong, our CFO, Mark McKechnie, and Lisa Feng, our 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 to differ materially. Those risks are described under risk factors and elsewhere, and ACM is filing with the CFO. Please do not place undue 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 revisions to these forward-looking statements. Certain of the financial results that we provide on the call will be on a non-GAP basis, which excludes stock-based compensation and an unrealized gain and loss on short-term investments. For our GAP results and reconciliations between GAP and non-GAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and also on slides 13 and 14. With that, let me now turn the call over to David Wong, who will begin with slide three. David?
spk07: Thanks, Steven. Hello, everyone, and welcome to ACM Research, fourth quarter and the fiscal year 2023 earning conference call. Please turn to slide three. I'm pleased with our fourth quarter results, which conclude a strong year. For the fourth quarter 2023, we delivered 170 million US dollar in revenue, up 57%. For the year, we delivered 558 million in revenue, up 43%. Profitability was good for both the fourth quarter and the full year with operating margin of 21% and 22% respectively. We ended the year with just over 300 million cash and time deposit. For shimmons, the shimmons for the fourth quarter were 140 million down 29% year to year. Shimmons for the full year were 59.7 million, up 11%. Our third quarter call, we know the delay of shimmons to several customers due in part to adjustment in their fab build-out. While we don't normally share our expectation for shimmons, I will provide more color in this case. We view the low shimmons for the fourth quarter to be a one quarter event. We expect to deliver nearly all of the delayed tool during year 2024. We expect the first quarter shimmons to be much higher than the fourth quarter levels, even with a normal Chinese New Year shutdown. And we expect the total shimmons to grow faster than revenue for the full year 2024. Now I will discuss the key growth drivers, both for the market and specifically for the ACM. According to a third party estimate, the overall mainland China WFE market grow around 15%. If we exclude itsography tool, which more than double in China in 2023, we believe the rest of the market grow for China WFE was close to 5%. In any case, we attribute ACM higher growth rate of 43%. Two, one, a leading product portfolio for the China market, including AutoBench Clean and our ECB tool for the front end and packaging. Two, continue spending and market share gain at our current customer. Three, broader participation with new customer in China. And four, good execution by our production and the service team. I will now provide detail on product. Please turn to slide four. Revenue from single wafer cleaning, Tahoe, and semi-critical cleaning product grew 48% in 2023 and represent 72% of total revenue. ACM offers what we believe in the industry's most comprehensive cleaning portfolio. We support nearly 90% of our all cleaning process staff for memory and logic devices. This coverage positions us as a key partner for both China's mature nodes development and international markets. At the high end, we believe our flagship staffs, Tahoe, and people single wafer cleaning products deliver technical feature not available from any of our competition. We enter into the 30 millimeter AutoBench cleaning market several years ago is proving to be a significant winner for their mature node spending. We have delivered more than 70 AutoBench tools today and note a very strong contribution in 2023 with good profitability. By our estimate, ACM become the largest China-based supplier for AutoBench in 2023. For Tahoe, we made a good progress during the year. Our engineering team modified technical feature to meet production requirements for the key customer. I'm pleased to report ACM has been qualified for mass production as several customers and we expect a strong ramp with a good orders for delivery in the first half of 2024. This is good for our customer and good for their environment as our proprietary Tahoe design significantly reduce the consumption of the sulfuric acid. We continue to innovate in our cleaning and look forward to additional market share gain in 2024. We ramp up several key new product including a bio-ature cleaning tool, high temperature SPM single wafer cleaning tool and the supercritical CO2 dry cleaning tool. Revenue from ECP, furnace and other technology grow 33% in 2023 and representing 19% of total revenue. We hit an important milestone for this category in 2023 with more than $100 million in revenue. ECP demonstrated strong performance. I want to note that our first two achievements grow even higher than 33%. We are taking a good share for overall plating with a particular strong growth in front end process in 2023. For furnace, 2023 was a customer development year with many evaluations underway. We expect an even broader customer footprint and good revenue contribution in 2024. We also made a great progress with our furnace ALD product development. In summary, we expect another year of a strong growth in this product category in 2024. Revenue for advanced packaging which exclude ECP but includes service and spell grow .5% in 2023 and represent 9% of total revenue. This category includes a range of packaging tools including Coulter, developer, scrubber, PR stripper and wet etchers and service and spare parts. Last year, we also introduced Outdoor CV vacuum cleaning tools and we continue to explore new products and technology to participate in the next generation of advanced packaging. We believe ACM is the only company in the world that offer a full set of wet tool, polishing and plating for advanced packaging. We expect the advanced packaging to become more important as the industrial looks for packaging innovation such as 2.5D and 3D in the proposal and the fan out. These are the critical for high performance computing application such as AI which is increasingly demand globally. Finishing up on product, we made a good progress with our new track and PECVD platform. We are engaged in active dialogue with our key customer and intend to release additional evaluation tools this year. As with our cleaning, plating and furnace product line our track and PECVD platform both the proprietary technology that position them as a successful choice for major customer globally including both in and outside China. We are making a good progress in the evaluation of our track tool. We are confident that the proprietary architecture of our track tool is well suited for the high throughput required in next generation of the photography tools. We are engaged with a multiple customer for PECVD tool. We're expecting significant progress for PECVD product development and evaluation in 2024. Turn to slide five for our product SEM. We estimate our product portfolio address a 16 billion market opportunity. Our business is now primarily driven by three major product groups, cleaning, plating and advanced packages. We anticipate continued growth in this category and look to incremental revenue contribution from our newer products starting with the furnace 2024 followed by track and PECVD in 2025. Present to slide six, we remain committed to our median term, one billion dollar revenue target. We believe we can achieve this with a range of market to share by product in the mainland China alone. We have achieved skill with a differential product that have been proven in China market and we have put the resource in place to address international markets. To be clear, long term, we see additional one billion dollar plus opportunity from international markets. Moving on to the customer, please turn to slide seven. In China, we are market leader in cleaning and a plating tool with sales to nearly every semiconductor manufacturers. Our sales and service team are now achieving deeper adoption of our products across this customer base. Beyond established the pair, market growth is being driven by a influx of where founded new entrance. For 2023, we had three 10% customers. SMIC was our top customer at 18% of the sale. Cyan was our second largest at 15% and 6MT was our third at 13%. We had a stronger contribution from second and third tier semiconductor manufacturers, including Power, Analog, CMOS, Image Sensor and current power semiconductors and other devices and some new customers. Total second and third tier player represent about 30% of our 2023 sales. On the international front, I'm pleased to report that a large US manufacturer qualified is the first steps cleaning tool for revenue in the first quarter. We also plan to deliver an ultra CD backside cleaning and a bevel edge tool to this customer in the second quarter of 2024. This demonstrates a deepening relationships which we are believe can lead to production orders. Furthermore, this enhanced ACM brand and position us to attract the new opportunities with other major global customers. Beyond the US, we install our first evaluation tool, ultra -SAPS-5 cleaning tool and a major U of R based global semiconductor manufacturers in the fourth quarter. To support the growth, we made a progress on our facility expansion in China and other region. Please turn to slider eight. In China, construction of our Linggang production and R&D center is nearly complete. We expect our initial production in middle 2024. In Korea, we are making progress with the key customer as noted in the prior call. We have increased our committed to support our objectives to address global market. We now have more than 150 employees in Korea with their facility including sales and administration, small scale production and the development lab with a clean room to support the internal R&D and the way for demos for the customer evaluation. And we are making initial plans to building a new factory on the land we purchased early last year. We believe a strong commitment to Korea will improve our relationship with our key Korean customer. Our resources in Korea are providing another basis to support international customers in the US, Europe and other part of Asia. In the US, we leased a facility in Oregon last year to add to our service support and demonstration capability for R&D and the customer activity in the US and Europe. I will now provide our outlook for the full year 2024. Please turn to slide nine. In early January, we introduced our 2024 revenue outlook in a range of 650 to 725 million US dollar. This implying 23% year over year growth at a bitter point. We are re-experimenting this outlook today. We believe the China equipment market will grow in 2024. We expect our full year revenue growth for 2024 to outpace both China growth and global growth rates. Now let me turn the call over to our CEO Mark who will reveal details of our first quarter and the full year results. Mark, please.
spk09: Thank you, David. Good day, everyone. Please turn to slide 11. Unless I note otherwise, I will refer to non-GAAP financial measures which exclude stock-based compensation, unrealized gain loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the fourth quarter of 2023. Comparisons are with the fourth quarter of 2022. I'll now provide financial highlights for the fourth quarter and full year of 2023. Revenue was 170.3 million for the fourth quarter of 56.9%. Revenue for single-way for cleaning, Tahoe and semi-critical cleaning was 122.3 million of 63.9%. For the full year 2023, this category grew by 48.0%. Revenue for ECP, furnace, and other technologies was 32.1 million of 59.0%. For the full year 2023, this category grew by 33.4%. Revenue for advanced packaging, excluding ECP, services and spares was 15.9 million of 15.8%. The full year 2023, this category grew by 31.5%. Full year 2023, revenue was 557.7 million of 43.4%. Total shipments for 140 million for the fourth quarter, down 29%. For the full year 2023, shipments for 597 million up 11%. Gross margin was .8% for the fourth quarter versus 49.7%. For the full year 2023, gross margin was .8% versus .4% in 2022. This exceeded our normal expected range of 40 to 45%. We do expect gross margin to vary from period to period due to a variety of factors such as sales volume, product mix, currency impacts. Operating expenses were 43.6 million for the fourth quarter up from 34.8 million. R&D was 28.8 million versus 17.0 million as we invest in our new product initiatives. Sales and marketing was 7.2 million versus 11.8 million. The decline in sales and marketing was primarily due to a significant reduction of costs related to promotional tools. G&A was 7.6 million versus 6 million. For the full year 2023, operating expenses were 154.4 million up from 117.4 million. R&D was .1% of sales. Sales and marketing was .4% of sales and G&A was .2% of sales, all for 2023. For 2024, we are planning for R&D in the 16% range. Sales and marketing in the 7 to 8% range and G&A in the .5% range. Operating income was 36.0 million for the fourth quarter up from 19.2 million. Operating margin was .2% up from 17.7%. For the full year 2023, operating margin was .1% versus .2% in 2022. For the fourth quarter, we recorded a realized gain of 0.5 million from the sale of short-term investments. Recall that realized gains are included in the non-GAAP earnings. Income tax expense for the fourth quarter was 8.1 million versus 2.7 million. For the full year 2023, income tax was 19.4 million versus 16.8 million in 2022. Net income attributable to ACM research was 28.7 million for the fourth quarter up from 12.6 million. For the full year 2023, net income attributable to ACM research was 107.4 million versus 54.8 million in 2022. Net income for diluted share was 43 cents in the fourth quarter up from 19 cents. For the full year 2023, net income for diluted share was $1.63 versus 83 cents. Now in our review, selected balance sheet items. Cash, cash equivalents, restricted cash, and time deposits were 304.5 million at year end versus 326.5 million at the end of the third quarter. Total inventory at year end was 545.4 million versus 507.4 million at the end of the third quarter. The mix was split between raw materials, 235.1 million, work in process, 81.4 million, and finished goods inventory, 228.9 million. Inventory also included finished goods at our own facilities. As David said, nearly all of the finished goods at our own facility is expected to ship during the year 2024. Capital expenditures were 15 million in Q4 and 61.9 million for the full year. For 2024, we expect to spend about 80 million in capital expenditures. This will be primarily to complete our investment in Lingong and we'll also include remodeling the new headquarters for ACM Shanghai and investments in Korea and the US. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.
spk01: Thank you. As a reminder, to ask your question, you'll need to press star one one on your telephone. To withdraw your question, please press star one one again. Please wait for your name to be announced. Please stand by while we compile the Q&A roster. One moment for our first question, please. Our first question comes from the line of Suji De Silva with Roth MKM. Your line is now open.
spk03: Yeah, hi David, hi Mark. Congratulations on the progress. Great job there. Can you talk about the international customer? Sounds like you're making progress there. Just trying to gauge the pace of that. As you guided 24 full year, do you have some contribution from the international customer in that assumption or would that be upside and is it potential first half timing or is it most likely back-end loaded second half?
spk07: Okay, thanks Suji. Okay, I think this tool we shipped a year ago, right? Then there through our service, the process engineer, hardworking, and then we have our first tool, Gather Acceptance. So this what we got into the production, their mass production. And also I wanna see that this is specificer SAPS, Megasonic tool, real address the customer needs and we can see, get a good Canadian performance and also much less particle consumption. So that's really a customer-like tool. And we believe this definitely first through qualification will lead to their additional order for the same customer. So meanwhile, and as mentioned, also have a second there, different tool, which is the backside and also very clean. It was ordered by the same customer and we shipped them in the second quarter of this year. So I wanna see that is this a key customer in the US and we want this to be another example and also encouraging other big player in adapt our differential technology. So we're saying that's what would be their good outcome. And also there's of course, international, I call their revenue contribution to our year to 2024 forecast. We can see that too.
spk09: Yeah, Tsuji, I just add for 2024, I mean, a lot of things go into our forecast. We don't have a, 2024 will be a building year for us for the international and we'd expect some additional contribution. Whether we get an order that ships or for one or several tools that ships this year and next year will depend on how big it could be for us.
spk03: Okay. And my second question is, can you just explain again the shipments and what the delays, what the dynamic was there? Maybe didn't catch them to prepare for.
spk07: Yeah, I think in the Q3, we also mentioned about that, the delay. And it's because of our customer, they're building a plan and there's certain, I call the plan delay or the installation not enough, either resource or flow plan not fast enough. Anyway, there's continuing investment going on. So those portion of the delay, as I said, it will be definitely delivered in 2024. And that's also added to our shipment. Those two have been built already. It's going to also save the cash. We spent a lot of it already. So we'll see that happen. And I would say that also the total shipment there, we expecting 2024 and there will be quite an increase. We believe even while increase rate higher than their, call the revenue increase, right, in comparison to 2023. So that's another, I can say a great year for us in 2024.
spk03: Okay, that sounds like a good momentum. My last question is around the overall demand environment. I'm just trying to understand and trying to know whether the memory market is stabilized and capacity is increasing again across NAND and DRAM. And maybe is someone like CXMT actually progressing to DRAM production versus development effort?
spk07: Yeah, I mean, you can see that CXMT is still our third customer, year 2023, right? So we're expecting this memory business continue to grow. And again, it's all the memory in China is still multi-year expansion. And so we see that as good a market for us and also we see that continue to grow.
spk03: All right, thanks guys, congrats again.
spk07: Yeah, thanks,
spk03: Poojie. Thank you.
spk01: One moment for our next question, please. Our next question comes from the line of Charlie Chan with Morgan Stanley. Your line is now open.
spk06: Thanks for taking my questions. David Mark, Happy Chinese New Year and Gongqi Fa Cai and congrats for a very solid 2023 results. So my first question is actually on the four-year guidance because I had the impression that your ACM Shanghai entity, they have a pre-numerary 2024 outlook revenue to grow more than 30%. I remember you was like 37% -on-well growth. So I calculate your midpoint suggesting the ACM R is growing like 23% -on-well. So what's the discrepancy between your ACM Shanghai entity versus the parent company?
spk07: Yeah, well, there's a slight difference like a revenue recognition rule and we're using either Chinese gap versus US gap. So that's the primary reason show the difference of both, I got a forecast. Yeah, in general, see that is US gap will be your first tool, take a long time evaluation. And after that, you can recognize, repeat the order just on the shipment, right? But in China, no matter the new or is a repeat order, you have to really install and basically accept, kind of additional acceptance by the customer then you can reckon revenue. So that's a different show, I call the revenue difference. In other words, probably you can say, in China the forecast mean that is we have a lot of, probably new tool and the new customer, right? That would be the quickly can be recognized revenue versus the US recognition rule. So that's the difference that we see there.
spk06: I see, thanks David. So my next question is about the China KPEC sustainability. I mean, right now, as you said, right? It's for local sufficiency, but you also see that some of your major customer, their gross margin already dropped to like 10% gross margin. So I'm a little bit worried about the sustainability. So any kind of signs or reading indicator we should pay attention to, right? To check the China KPEC sustainability.
spk07: Yeah, well, I should say there, as we said, a couple of times before is China's fab is still in the multi-expansion, no matter the logic or memory, right? Also, a lot of, I call their mature nodes, it's very related to the EVI, GBT, is still in the, I call the product, in the building process. Also, I wanna say another thing is the consumption of the chip, especially mature nodes in China is way higher than capability can be produced in China. So you look at that gap, I'm still saying next few year, and China and WFE, this market will continue to grow.
spk06: Okay, gotcha. So yeah, one last question, I will bring you back to the queue. So a question to Mark, since you are ramping up the Linggang new campus, can you give us some updated gross margin and also OPEC assumption for 2024?
spk09: Yeah, hey, Charlie, thanks for asking. So yeah, I said in my prepared remarks, I gave some detail there, but I'll go ahead and repeat it. You know, we're anticipating our target model for gross margin is unchanged at 40 to 45%. Obviously, we've done better than that for the last several years, but that's kind of the margin level that's our target level. And then, you know, for the OPEC levels, and these are non-GAAP numbers, we expect R&D, continue to invest pretty strong in R&D, and you should always expect, you know, as we're a growing company, to spend at about a 16% level is our outlook for non-GAAP in 2024. Sales and marketing that we expect in the 7 to 8% range, and then G&A about 5.5%.
spk06: Okay, okay, thanks for, yeah, so yeah, thanks for the recap, those are guidance. You bet,
spk01: you bet. Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. One moment for our next question. Our next question comes from the line of Mark Miller with the Benchmark Company. Your line is now open.
spk08: I believe you, well, first of all, congratulations, another great quarter, but just wanted to get a little more into the OPEC in the December quarter. You did mention the SMM sales and marketing was down. You said it was because of demo systems? I'm confused by that fell so much.
spk09: Yeah, it was a significant decline in the sales and marketing promotion tools. So we took that out of the sales and marketing expense, and going forward, you won't see that expense level in the sales and marketing. And so we look at it kind of for the full year, sales and marketing was about .4% on a non-GAAP basis. And so we expect that sales and marketing level to be kind of in the seven to 8% in non-GAAP next year.
spk08: Can you give us a little bit, you say you had a lot of quals underway, can you give us a little more color of what's going with your quals and timing of quals in terms of when you expect revenue generation?
spk09: Oh, in terms of, yeah, David, he's asking about our evals at our customers. Maybe I'll let you address that, and then I can add to it. In
spk07: general,
spk09: right? Yeah, and so that's, I think Mark, our finished goods inventory is largely comprised of evaluation tools at our customers. And so I think, yeah, David.
spk07: Yeah, let me see that is obviously, there's the finished goods in the customer side for evaluation, mostly the first tool. And those first tool can be the first of a new customer, especially their first time buyers. They wanna make sure those two are, and not just qualify for two itself, sometimes they've qualified the whole production line to look at the yield to come out. That takes some time, right? Also, there's also the first tool is a pretty new, brand new tool, and then we need a customer to real, we call the beta tool, right? We need a real evaluate app, and that is sometimes take a process, one year, even a year and a half, depends on how that other tool, first building the material, how mature it is. So those kinds of tool will be considered as our first tool.
spk08: Hey, just final question. You previously said you were doing more investment in Korea to, I guess, get more business from SK Hynix. Can you give us an update on what's going on there?
spk07: Okay, great. So Hynix actually is a real long-term customer, right? And we're fully engaged with the customer, I mean, Hynix right now, because we're real, emphasize our investment, also expansion, our -de-force, also manufacturing in Korea. We do have about 150 employee in Korea right now, as I mentioned, with Borderlands, and it will also to building factory there, at a future proper time. So key point I'm trying to see that is we have multiple tool, like cleaning, cover pretty, and including furnace, and then they're also a develop PCB and also track. So all this five tool, we're trying to engage with the customer in Hynix, and because of a relationship, and also because of our local -de-force, and also we offer customer with the differential product, and differential technology, and which is quite their interest, or get interest from the customer in Korea.
spk08: Thank you. Thanks,
spk01: Mark. Thank you. Thanks. Thank you. As a reminder, to ask a question, you'll need to press star one one. Please wait for your name to be announced. One moment for our next question, please. Our next question comes from the line of Christian Schwab, with Craig Hallam Capital. The line is now open.
spk10: Hey guys, fantastic year and great quarter. So I'm trying to better understand, the two or three reasons better, either from a product category standpoint, or a customer standpoint, your conviction and your ability to outgrow WFE, not only in China, but also globally, year over year.
spk07: Okay, great. I think, you know, the ACM, we're started beginning, you know, even from Bay Area, right? And ACM, our -de-philosophy is there, we call differentiation, right? And each product we're building, like cleaning, you already know that, steps, the table and towel is pretty our differential product. And same thing for the copper plating. So our goal is building differential product, and this moment widely has been accepted by the local customer in China. And with those differential product and the technology, I think we can penetrate or get into international, right? Example is that we already get into the panics, you know, and also we have one bigger manufacturing US, adaptive steps already. Also ever our European company, and also that the steps make us make us on Canadian too. Beyond that, the next one is our towel, our table, plus we have a super critical CO2 dry. With table too, it will be really exciting for their pattern way for Canadian too, right? And beyond that is also, as I said, we have also, you know, furnace, and for furnace ALD, including copper plating, and it was another very candidate product, and to be able to panish international market. So as I say, that is of course, we're in the divided P, CVD and the track, also has a proprietary differential design point. So ACM really develop their, you know, I call this the differential product, which is real offered differentiation, offer their different benefit than other competitors doing. That's our confidence and also our, you know, proven record, we can put the tool and sell international market.
spk10: Great, so congrats again on a very differentiated and better product than your competitors. Just in a quick last follow up then is on the international front, you know, how much of the year over year growth are you looking for from that, I guess? I know it was kind of asked earlier, but you mentioned it numerous times as what you thought you would outgrow the market. So I'm just wondering if you're willing to provide any clarity, more clarity there.
spk09: Yeah, hey, Christian, I'll hit that. So in terms of our outlook, I mean, the range, we have a pretty small contribution from international this year. It's still gonna be, you know, kind of development. So really substantially, you know, most of that growth that we're planning for in 2024 is from the China market, the mainland China market. New product cycles, customer, additional customer traction.
spk10: Okay, and then I guess my very last question then is, you know, the tamper your products outside of China, you know, globally is substantially larger. You know, how many years do you think is reasonable for us to assume it takes for broad-based success internationally? It sounds like this year was a great building year, initial shipments, you know, starting in 24. Is that a, you know, 26, 27 or 25 event or is it too early to go?
spk07: Yeah, Christian, this is a very good question. I think the way we're doing right now, obviously, it's quite a quicker, fast growth in the mainland China market, right? A lot of product we qualify here now. So those are, I think, our goal. We're saying, you know, reaching $1 billion even by China market only, right? We think in the next few years, we should be reaching that goal. And at the same time, obviously, you know, in a couple years, two years ago, we started also global market expectation, I mean, penetration. So the key is really how we execution our international sales plan. Now we have, you know, hiring good people and the sales guy in Korea, actually also in the US, in Europe. And we're seeing that there are quite a bit of progress. And let's put it this way, you know, for their international market and as we talk to the customer, everybody looking for it back again, you know, differentiation, right? So with that in mind and as I mentioned, couple product we have right now, we do have confidence as their first, you know, I call their US customer adaptor tool. We see more of our customer may adapt additional or other tool too. So we see that happen. But then you ask you which year is how do we give you a precisely? But I think as I said, we have a bigger revenue with our strong financial supporting and from sales here with also differential product, you know, definitely will penetrate, you know, into the international market. You've asking, you know, the next few years is a very exciting, you know, we have to, you know, quickly execution of plan and to quickly reach that goal. And eventually as I mentioned a couple of times before, we're under half of from mainland China, half from outside mainland China, right? So like you said, the real revenue contribution actually more bigger outside of mainland China.
spk02: Thank you. That's great. No other questions. Thanks guys. Thank you. Yeah.
spk01: Our next question comes from Charlie Chan with Morgan Stanley, your line is now open.
spk06: Thanks for taking my question again. So it's a question that I've been asked a lot I think the new customer contribution cost our eye, so it wasn't in our radar screen. So I'm not sure why Shin-Nam becomes such a big customer. And if you can provide some more details, is that purely 12 inch equipment or also including some engine equipment? Thank you.
spk07: Yeah, I think the primary we sell to the Shin-Nam is a 12 inch tool, right? And also they're most expansion now is a mature nose. So we are actually sell a lot of our auto bench. They're probably the largest auto bench customer right now for us in China. So of course they also buy the waiver, right? So that's why primary driving that become the second largest customer in 2023. And looking forward, and then also we're very good relation and engage with them in a couple of operating, our foreigners and also online. So that's another individual can say from the Shin-Nam, right? And they're great customer. And we're happy with our, I said, our auto bench tool, the largely deploy and in the Shin-Nam production line.
spk06: Okay, so yeah, so it's a great business, right? So I'm assuming company consults your lawyer about the US S4 control before you ship in to other customers in Green Shin-Nam, right? Is that the right assumption?
spk07: Well, I mean, we're still to follow all the S4 control rule, right? And set here. And for those, whatever restrict the customer, we have to be real carefully, US part, right? And personally involved and also, now you say technology. Yeah, so we're pretty very carefully managing and control and then follow there strictly with the standard of the S4 control of the US.
spk06: Okay, okay, thanks David. And next question is about the advanced memory, HBM. So can company talk about your opportunity in Korea for the HBM production line? I think we asked that question last quarter as well. And also there's some recent news about China may also have their own HBM production. So can comment about your potential opportunity at Korea and also China customers?
spk07: Yeah, well, let's do it this way. Obviously, Hynix is the number one provider, right? They're also technology leader, HBM. And I think our current product definitely involved their process. And also we see HBM, this is a cover pleading tool, right? TSV, order the packaging, whatever they needed. So that's the next tool we're working with, closely with the Hynix. And I should say the rest of our other tool, furnace, and we're working with them too. So there's a lot of, including Konini, by the way, actual other Konini other than we're sold them, South Macathoni, also working with the Hynix too. So it's a very good opportunity. HBM is a greater, I call it demand, and a greater drilling. They need a lot of differential technology for the supporting and HBM development in the future. In China, really not much we can hear right now, really, right? It's just, not much we have right now. So in other words, we're real focused on the outside China for HBM expansion for the business opportunity.
spk06: Yeah, so based on your comments and also other global equipment vendors, I did talk about actually this year, the global FTE revenue comes from the memory. So why Hynix? Is that your kind of the top customer or do you think this year Hynix can contribute more than 10% of revenue given HBM opportunity and also the memory spending recovery?
spk07: Well, I mean, obviously, more than, other than Hynix, also looking for other player, right? This is key here. Then the memory market, HBM is really booming, right? That's key here. So we see that there demand there as I mentioned, right? This is a, for us, cleaning, cover pleading, it's really demand there. I don't know what's time we come back to 10% our customer is how to put together right now. So really, and I will see, right? Especially second half year or next year, it's really we want to see something recover from DRAM market.
spk06: Okay, got you, thanks, David.
spk07: Thank you.
spk01: Thank you. One moment for our next question, please. Our next question comes from the line of Edison Lee with Jeffries, your line is now open.
spk05: Thank you. Thank you for taking my question. So David and Martin, congratulations on a great quarter. Okay. I have just one question, which is the contribution of your three customers for 2023. Which amounted to almost 50% of the revenue. So can you give us some color as to whether you think that those top three customers will continue to be top three customers in 2024? And what is your expectation on the contribution for top three customers in 2024?
spk07: Yeah, actually, I look at it now, this year's order in the list, right? And the top three customer continue, I think, will grow, and they probably still are major customer. Also, we see their additional body of our home, they have also their expansion plan. And they're probably simultaneously building two fab this year, and also they're building probably next year, three fab simultaneously, right? So that's another bigger, I see their top customer will come back in our 2024 revenue contribution.
spk05: Maybe a related question is that, based on your revenue guidance at the midpoint, that implies 20% plus growth. And so that's significantly below the growth rate in 2023. So do you think the key driver there is just some digestion period or is matter of taking time for your evaluation tools to be recognized as revenue? So what are the key factors for the slowdown in terms of the growth rate?
spk07: Yeah, I think the key driving force is I wanna see that China, the market is continue, people say maybe, I mean, slightly increase, at least a flat, obviously that's number one important. But second, most importantly, we have our gain for our, I call it a higher growth rate is because we have continue our new customer coming, and also we have gain on market share from existing customer, and also do have like a furnace, what do the more contribution this year and for revenue. So that's all they're added together, that's our, give us the basis to forecast our growth rate the higher than their growth rate of the WFG market in China.
spk05: Okay, and maybe the last one is that for 2024, what do you think is the percentage of overseas revenue in your guidance?
spk09: Yeah, hey, Edison, we didn't break it out, but we did a couple of other questions about that. We mentioned it wouldn't be a very significant contribution to 2024, we expect that to build in the coming years, but it's not a very significant piece. It's, we think it'll be bigger than it was this year, and so you got the numbers in, you'll get the international numbers shortly, but it's not gonna become a huge, I wouldn't expect to be more than 10%. Yeah.
spk07: But I should say, growth rate is higher, right? I mean, obviously it's one number, so. So then the real absolute number, like you said, will still be a friction number of the total revenue.
spk05: Right, okay, got it, thank you very much. Thank you.
spk01: Thank you. I'm showing no further questions at this time. I'd like to hand the conference back over to Stephen Palao for closing remarks.
spk04: Okay, great, thanks Mark and David, and thank you all for participating on today's call. Before we conclude, I just wanna give everyone a quick reminder on our upcoming investor conferences. On March 18th, we will present at the 36th annual Roth Conference in Dana Point, California. Attendance at the conference is by invitation only. For any interested investors, please contact your respective sales representatives to register and schedule -on-one meetings with the management team. This concludes the call, and you may now disconnect. Thank you.
spk01: Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.
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