This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Good evening and welcome to the Air Test System's fiscal 2023 second quarter financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw from the question queue, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Jim Byers of MKR Investor Relations. Please go ahead.
spk01: Thank you, Operator. Good afternoon, and welcome to Airtest Systems' second quarter fiscal 2023 financial results conference call. With me on today's call are Airtest Systems President and Chief Executive Officer, Gane Erickson, and Chief Financial Officer, Ken Spank. Before I turn the call over to Gain and Ken, I'd like to cover a few quick items. This afternoon, right after market closed, Airtest issued a press release announcing its second quarter fiscal 2023 results. That release is available on the company's website at air.com. This call is being broadcast live over the internet for all interested parties, and the webcast will be archived on the investor relations page of the company's website. I'd like to remind everyone that on today's call, management will be making forward-looking statements today that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from those in the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These are forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Airtest Systems undertakes no obligation to update the forward-looking statements. And now with that, I'd like to turn the conference call over to Gane Erickson, President and Chief Executive Officer. Gane?
spk05: Thanks, Jim. Good afternoon, everyone, and welcome to our second quarter of fiscal 2023 earnings conference call. Thanks for joining us today. Let's start with a quick summary of the highlights of the quarter and the momentum we're seeing in the semiconductor wafer-level test and burn-in market, and then Ken will go over the financials in detail. After that, we'll open up the lines to take your questions. We had a very solid second quarter, reflecting strong sequential and year-over-year growth in our revenue and net income, both ahead of consensus estimates. Revenue for the quarter was $14.8 million, an increase of 39% sequentially and 54% year-over-year. and we generated non-GAAP net income of $4.5 million, slightly over 30% net profit. Our momentum in silicon carbide wafer-level test and burn-in continues to grow, and we see this momentum continuing for the next several years as companies are adding significant capacity in silicon carbide semiconductors to address the incredible forecasted demand, particularly for the electric vehicle and electric vehicle charger markets. Forecasts from William Blair estimate that the silicon carbide market for devices and electric vehicles alone, such as traction inverters and onboard chargers, is expected to grow from 119,000 six-inch equivalent silicon carbide wafers for electric vehicles in 2021 to more than 4.1 million six-inch equivalent wafers in 2030. This represents a compound annual growth rate of 48.4% This equates to almost 35 times larger in 2030 than in 2021. In addition, six inch equivalent silicon carbide wafers for other markets such as solar, industrial, and other electrification infrastructure are expected to grow to another 3 million wafers by 2030. This expands our silicon carbide test and burn-in market even more. We are excited to have added two new customers for silicon carbide test and burn-in during the quarter. The first is a major silicon carbide semiconductor supplier that purchased our FOX-NP dual wafer test and burn-in system used for engineering and device qualification during the quarter. And after the quarter closed, has since placed their first orders for two of our FOX-XP multi-wafer systems for volume production test and burn-in of the silicon carbide wafers, including the order we just announced today. This company is one of the world's largest suppliers of silicon carbide devices and serves several significant markets, including the electric vehicle industry, as well as other industrial applications. We now have two of the top four silicon carbide market participants as customers. They have indicated to us that they plan to order a significant number of Fox XP systems for volume production of their silicon carbide devices at facilities around the world to meet the rapidly expanding forecasted market demand for silicon carbide devices for electric vehicles and other industrial markets. This new customer selected our Fox XP multi-wafer test and burn-in system configured with our new fully integrated and automated wafer pack aligner for high volume hands-free operation. They have told us how important automation is to them across their wafer fabrication and assembly and test, and that in addition to the cost effectiveness and scalability of our system, our fully integrated Fox XP with automated wafer pack alignment and handling is key to meeting their automation needs that are critical to their scalability, as well as the quality and reliability goals of the customers and markets they serve. The Fox XP multi-wafer level test and burn-in system can be configured with up to nine or 18 wafers, depending on the customer's specific test requirements. It provides the test electronics and the device contactor technology that enables contact to 100% of devices on a single wafer, and the handling and alignment equipment to provide a total turnkey single vendor solution to meet the needed critical test and stress requirements. Our automated wafer pack aligner adds a number of very valuable features to the wafer level test and burn-in process. This new Fox wafer pack aligner is available in both standalone and integrated versions. In the standalone version, customers can align the wafer packs offline from the Fox XP systems using our new Fox wafer pack carts that can be docked to the aligner. The aligner will automatically load the wafer packs with wafers or exchange tested wafers with untested wafers and can be used to support up to five or more fully loaded XP systems for an extremely low-cost application with long test and burn-in times. The integrated version of our new aligner docks directly to a Fox XP chamber that can test and burn in up to 18 wafers at a time. This can be preferable to customers for lower test and burn-in times, or in the case where the customer wants near hands-free operation. The new aligner can work with all types of wafer sizes, including the high volume runners of 150 millimeter and 200 millimeter used for silicon carbide, and can also test 100 millimeter silicon carbide or other wafers. It can also test 200 millimeter and 300 millimeter wafers, typical of silicon photonics devices, memories, and logic devices. We see automation more typically desired in 300 millimeter fabs such as silicon photonics and memory devices where automation is much more typical. The automated aligner also allows for unattended changeovers from one product type to the next and the ability to run multiple different product type wafers in parallel. Adding automation through our new aligner gives our wafer level test and burn-in offering even greater value as well as opens up several large incremental markets to air such as high volume processors and chipsets with integrated photonics transceivers, flash and ultimately DRAM memories, and also higher mix devices requiring extremely high reliability and 100% burn-in, such as automotive microcontrollers and sensors. The new second customer added this quarter is a multi-billion dollar annual revenue global manufacturer of semiconductors that serves multiple markets, including supplying devices to the automotive industry. This new customer already has experience in power semiconductors and quickly understood the value proposition of being able to test and burn in 100% of their devices at wafer level. In a fairly short period of time, they selected our Fox NP dual wafer test and burn-in system for qualification of their silicon carbide devices for multiple markets, including electric vehicles. We anticipate that this customer will move to high volume production using our Fox XP systems after their customer qualifications. Adding two new customers now provides more optimism about our ability to gain significant market share of the test and burn-in market for silicon carbide devices. These customers expand our penetration beyond our initial lead silicon carbide wafer-level burning customer. Regarding that lead customer, they continue to ramp their capacity and use of our Fox XP multi-wafer test and burn-in systems and wafer packs which is being driven by increased demand for silicon carbide, particularly for, but not limited to, electric vehicles. We expect significant orders from them for the necessary wafer pack full wafer contactors to match their previously purchased Fox XP systems, and they continue to forecast orders for significant numbers of new Fox XP systems and wafer pack contactors over the next several years to meet growing demand. In addition to the customers that have now placed initial orders with AIR for silicon carbide wafer-level test and burn-in systems, our ongoing benchmarks and evaluations with multiple prospects made great progress during the quarter. These include significant market leaders in silicon carbide, as well as several smaller existing and up-and-coming suppliers. We expect several of these companies to place their initial orders with us before the end of this fiscal year ending May 31, 2023. We also continue to see very positive responses from our discussions with a number of new potential customers in silicon carbide this quarter, and have also begun detailed discussions with gallium nitride semiconductor suppliers from around the world. Silicon carbide devices and modules have key advantages for traction inverters and onboard and offboard charges for electric vehicles, as well as other high power industrial applications. While gallium nitride is generally believed to be superior for lower power applications, particularly under 1,000 watts. Both device types are forecasted to grow significantly over the next several years and into the future. Both silicon carbide and gallium nitride semiconductors address the high voltage power semiconductor markets that are significant opportunities for our FOX wafer level test and burn in systems and wafer packed full wafer contactors. As we look to further penetrate these markets, we continue to add new capabilities to our wafer level test and burn in systems. These include the new bipolar voltage channel module and very high voltage channel module options that enable silicon carbide and gallium nitride semiconductor manufacturers more flexibility to address a wider variety of stress and burning conditions for their engineering qualification and production needs. These advanced capabilities enable manufacturers to ship product with higher reliability and parametric stability necessitated by applications such as electric vehicle traction inverters, onboard chargers, and several other industrial and power conversion markets. With these new features, test and burn-in at wafer level ensures even better control of yield loss and improved product reliability. Many questions have come up on what does the addition of these two new silicon carbide customers mean. Both have a history in the automotive space, and one is currently a leading supplier of silicon carbide devices to this market. We announced our lead customer about three years ago, right before the pandemic started. Silicon carbide's massive ramp did not really start until the latter half of the pandemic as electric vehicles, chargers, and worldwide electrification of infrastructure really began to take off. Our lead customer did not place an order for their second system until the middle of 2021. If you aggregate the orders we've announced from them and the wafer pack contactors to support their orders, their choice of AIR has meant roughly $75 million of business for AIR already, and they publicly said they have plans to expand. So we're enjoying their success. The new customers can be equally significant. For the major supplier, silicon carbide customer, we first tested their wafers on our machines at AIR, and then they purchased a Fox NP for engineering qualification three months ago and have since tested their wafers at their facility. Since then, they have already purchased two of our multi-wafer Fox XPs for production test and burn and other devices, including the order announced today, and they have told us they'll need a significant number of additional systems. This happened in a fraction of the time that it took to get to this point with our initial customer, As AIR has now validated our wafer-level solution with multiple customers and their end customers, that our solution is very effective at screening out defects to automotive qualities. We believe this new customer can be as large as our lead customer. So while we only announce purchase orders as they come in, the fact that this customer is depending on AIR for its production volumes going forward should give investors confidence that AIR is right in the middle of this electric vehicle tsunami. The second new customer this last quarter is a very large player in discrete and power semiconductors today and is already qualified for automotive. Interestingly, this company has yet to announce their silicon carbide MOSFETs that they're already characterizing on our Fox wafer-level burn-in systems. We believe that most customers of our Fox wafer-level test and burn-in systems have the potential to be a significant revenue source for air, and this customer is no different. We've said in the past that we haven't seen any real competition in terms of cost effectiveness, footprint, and manufacturing capacity compared to our proprietary Fox wafer-level test and burn-in systems and wafer-packed full wafer contactors. We continue to engage with both current suppliers of silicon carbide devices as well as other new entrants into this market. The industry data suggests cagers of close to 50% over the rest of this decade as the electric vehicle and charging infrastructure markets develop. Solar and wind will also be part of this growing market. So naturally, you'd expect lots of new entrants. Some will succeed wildly. Some may make niche inroads. We want all of them to come to air for their test requirements. Our use case is compelling, since their customers, such as the automotive companies, require zero failures. Not one in 10,000 or one in 100,000, but no failures. So test and screening out early defects becomes very, very important to our customers and prospects. And from the level of interest we're seeing, we believe our message is getting through. We set out to be seen as the industry standard for wafer-level test and burn-in, a critical piece of the production process for several semiconductors and their target applications, including silicon carbide and silicon photonics. With the momentum we're seeing, we feel we have a very good chance to be recognized as that industry standard. and to gain significant market share worldwide. Now let me move on to silicon photonics. We're also seeing a strong recovery of our silicon photonics wafer level test in burn-in business after the weakness we saw during the pandemic. Halfway through this fiscal year, we've already shipped over $5 million in systems upgrades and wafer packs to silicon photonics customers. And that's over 300% of last year's fiscal year's first half revenue for silicon photonics. This jump in revenue is also spread across multiple customers, and much of it is for new product designs and qualifications that we feel will lead to production volumes. We have systems installed at over half a dozen customers testing silicon photonics devices used in 5G infrastructure, data and telecommunications transceivers, and a few yet-to-be-introduced applications that we're very excited about. With multiple market leaders announcing plans to integrate photonics transceivers into their microprocessors, graphics processors, and chipsets, we believe silicate photonics will become a significant market for wafer-level test and burn-in over the next several years. Looking ahead, we continue to be very encouraged by our discussions with current and prospect customers and the continued momentum and opportunities we are seeing. Europe has a large number of potential customers for power semiconductors, including both silicon carbide and gallium nitride. And the US East Coast has a number of companies that are already in or getting into silicon carbide, as well as companies that are making investments in silicon photonics. And we're also starting to see companies in Asia getting into the power semiconductor game. The lifting of COVID-related travel restrictions in Taiwan and Japan is really helping with our new customer engagements in those regions. With the significant increase in market demand we're seeing for our products and in our sales activities, we have been investing in building up our sales and support teams across the globe. During the quarter, we expanded our senior sales leadership with the addition of several proven executives that will manage our sales activities in Asia, Europe, and the East Coast of the United States. These are experienced semiconductor capital equipment sales veterans with significant expertise in test and direct relationships with our target customers. We're very happy with these additions and have already seen a positive impact from their efforts. In conclusion, we continue to believe that we will receive production orders from additional silicon carbide companies beyond our current customers and begin shipping systems to meet their production capacity by the end of our current fiscal year that ends May 31st, 2023. We expect a strong second half of this fiscal year and are maintaining our guidance for revenues of at least 60 to $70 million for our current fiscal year that ends May 31st, representing growth of at least 18% to 38% year over year, and also represents revenue growth of between 35% and 75% in the second half of the fiscal year compared to the first half of this year. Additionally, we continue to expect bookings to grow faster than revenues in fiscal 2023 as the rampant demand for silicon carbide and electric vehicles increases, and we build momentum going into fiscal 2024. With that, let me turn it over to Ken before we open up the line for questions.
spk04: Thank you, Gane, and good afternoon, everyone. As Gane noted, we had another solid quarter in Q2 with strong sequential and year-over-year growth in our revenue and net income. We also saw improvement in gross margin and beat analyst estimates in both the top and bottom lines. Looking at our financial results in more detail, net sales in the second quarter were $14.8 million, up 39% sequentially from $10.7 million in the first quarter, and up 54% from $9.6 million in the second quarter last year. The sequential increase in net sales from Q1 includes an increase in wafer pack die pack revenues of $6.1 million. For the second quarter, these consumable revenues accounted for 45% or $6.6 million of our total revenue, compared to only 5% of revenue in the preceding first quarter. The increase in revenues is primarily due to shipments of wafer packs to our lead silicon carbide customer in Q2 related to prior quarter system shipments. As noted previously, customers often buy systems and then wafer packs later after they have completed the wafer pack designs. Gross profit in the second quarter was $7.9 million or 53% of sales, up from gross profit of $4.5 million of 42% of sales in the preceding first quarter and up from gross profit of 4.5 million or 47% of sales in the second quarter of the previous year. Several factors contributed to the improvement in gross margin. The change in product mix had a favorable impact on gross margin. Consumables revenues, which deliver higher gross margins, accounted for 45% of total revenues compared to only 5% of revenues in the prior quarter, resulting in a 4.7 percentage point improvement in gross margin from Q1. We also saw an improvement in unabsorbed overhead cost to cost of goods sold due to higher revenue levels in the second quarter, accounting for a 3.2 percentage point improvement in gross margin over the prior quarter. With our use of contract manufacturers, we have the ability to keep our costs relatively fixed while revenues grow, which contributes to gross margin. Gross margin also benefited from lower freight, duties and tariffs, and lower warranty costs, providing a 3.5 percentage point improvement in gross margin. We are definitely seeing an improvement from the challenging supply chain environment we saw over the last fiscal year. Freight costs have come down substantially. As noted in prior calls, due to the shortage in ocean freight capacity with shipments into the U.S., we were required to ship by air. This is no longer the case, and we are saving over $50,000 per chamber consolidating chambers on ocean shipments. We continue to minimize our use of suppliers in China and use these suppliers only when their total cost, including tariffs, is lower than other suppliers. Warranty costs also improved with us actually reversing some warranty reserves as both our quality continues to improve as well as our costs associated with repair has lowered significantly using our repair center in the Philippines. Non-GAAP net income for the second quarter was $4.5 million, or $0.16 per diluted share. This compares to non-GAAP net income of $1.3 million or $0.05 per diluted share in the preceding first quarter and non-GAAP net income of $1.4 million or $0.05 per diluted share in the second quarter of fiscal 2022. Non-GAAP net income excludes the impact of stock-based compensation. Operating expenses in the second quarter were $4.4 million, an increase of $403,000 or 10%, from $4 million in the preceding first quarter and up $624,000, or 16%, from $3.8 million in the second quarter of the previous year. The increase from the preceding first quarter is primarily due to an increase in SG&A $350,000 related to cost of growing the business, including increases in headcount and corresponding recruiting fees, increases in company-wide salaries, and increases in outside commissions, travel, entertainment, and trade shows related to our significant increase in selling activities. We have invested in human capital with key additions to our sales and marketing staff to expand our customer engagement and marketing reach. Customer support and manufacturing staff to support revenue growth, and engineering staff for our development programs. The increase from the second quarter last year include increases in SG&A of $386,000 related to the cost of growing the business and R&D of $238,000 related to increased spending on development programs. During the quarter, we announced two new enhancements for our FOXP family of wafer-level test and burn-in systems. These include the bipolar voltage channel module and very high voltage channel module options, which enable new advanced test and burn-in capabilities for silicon carbide and gallium nitride power semiconductors on AIR's FOXP wafer-level test and burn-in systems. Our R&D program initiatives also include a new automated wafer pack aligner, which can be configured in either a standalone configuration or integrated with our FOXXP systems. We have taken orders for both configurations, including the recent announcement of an order from our new silicon carbide customer for a FOXXP system which includes the integrated configuration, which provides hands-free operation of wafer handling and autoloading. We continue to invest in R&D to enhance our existing market-leading products and to introduce new products to maintain our competitive advantages and expand our applications in addressable markets. These R&D programs include enhancements in all our key markets, including silicon carbide and gallium nitride power semiconductors, silicon photonics and other photonics semiconductors, mobile 2 and 3D sensing devices, and memory and data storage semiconductors. Turning to the balance sheet for the second quarter, we finished the quarter with a strong balance sheet. Our cash, cash equivalents, and short-term investments were $36.6 million at November 30th, up $437,000 from $36.1 million at the end of the preceding first quarter, and up $1.6 million from $35 million at the end of the second quarter of fiscal 2022. Also, we're now investing excess cash in short-term investments to take advantage of the recent increases in interest rates. Working capital November 30th was $54.8 million. This represents an increase of $5.4 million from Q1 and $15.3 million from Q2 of the prior year. Inventories at the end of the second quarter were 18 million, an increase of 739,000 from the preceding quarter, and up 4.9 million from the second quarter last year. We are increasing inventory to support our expected growth in the second half of fiscal 2023, and we continue to purchase inventory to ensure adequate supply to meet current customer and future customer market demands. Our highly differentiated Fox family of systems allows us to purchase material that is leveraged across many customers and markets, which provides us confidence and our ability to meet the significant market opportunity. Bookings in the second quarter were $10.8 million. Backlog as of November 30th was $15.5 million, compared to $19.5 million at the end of the preceding first quarter and $36.1 million at the end of the second quarter last year. Effective backlog, which includes backlog as of November 30th, and all orders since the end of the second quarter, including the order we announced today is 23.5 million. Now turning to our outlook for 2023 fiscal year, which ends on May 31st, 2023, we are confident in the company's growth trajectory and our unique capabilities and product offerings to meet customer demands. As such, we are reiterating our previously provided guidance for full year total revenue of at least 60 million to 70 million, representing growth of at least 18 to 38% year-over-year with strong profit margins similar to last year. We continue to expect bookings to go faster than revenues in fiscal 2023 as the rampant demand for silicon carbide and electric vehicles increases, and we build momentum going into fiscal 2024. Lastly, looking at the investor relations calendar, next week we'll be meeting with investors virtually at the 25th Annual Needham Growth Conference on Thursday, January 12th. We hope to see some of you virtually at the conference. This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead.
spk03: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Christian Schwab with Craig Hellam Capital Group. Please go ahead.
spk08: Hey, congrats, guys, on continuing strong business and new customer momentum. Gain, it sounds like you're updating the number of customers that you expect to be shipping to by the end of the fiscal year. Can you just clarify how many customers
spk05: customers in total you would anticipate selling to by the end of the fiscal year additional from where we're at right now right all right yeah I mean we we don't intentionally try to be too vague but getting yourself too accurate can also get you in trouble but there's you know a couple few customers that have not bought production systems from us yet that we believe could be taking a giving us orders and requesting deliveries even as soon as before the end of the year. And we have capacity to be able to do that. So we have enough inventory and pre-builds against market forecasts as well as specific customer forecasts to allow us to actually ship systems before the end of May.
spk08: That's great. I know you've highlighted this before, but could you just quickly – Remind us what your capacity is on a yearly or quarterly type of level, whichever way you would like to break it down.
spk05: Okay, that's a good point. It's actually interesting. There's a combination of capacity and sort of our current reality. And I mean that in terms of just, you know, right now, what are we doing and what are we, you know, right now we're probably shipping somewhere in the 50 blades or wafers of capacity a month. So think of a Fox XP with 18 blades in it, two and a little of those or something. That's about what we're currently doing. We have more capacity than that, but that's actually our build plan that's equal to or a little bit higher than what our current customer requests and demands are. We have the material and pipeline to be able to ship upwards of maybe five systems or 100 wafers of capacity a month by this summer and could actually ship another, perhaps even 2x that or 10 systems a month in a year. That is not what we're currently believing our forecast is, candidly, but it's feasible to be that. And so it's an interesting scenario. We're actually using our capacity and our short lead times and our supply chain as one of our believed to be competitive advantages. We have companies in our space that have 52-week lead times. That's not air test. So we've deliberately taken the position that we are putting capacity and infrastructure and material in place to be able to go say yes to as many customers as we possibly can. And that's why we have this capacity available to us. Now, one more thing we have said in the past, we did extend our lease here and finalize that just over the last month or so. We've got plans that were on the works right now to do some facility upgrades and all. That's actually going to help us with some infrastructure in terms of electrical and water to be able to do more in parallel. That would be needed, we think, to be able to hit those high-end numbers by the end of next year. So these are some investments we'll be making over the next year and a half or so. We'll gradually do it without being disruptive. But I think we've kind of told the street that might be a $3 million to $5 million investment or so and then depreciate that over the rest of the lease.
spk08: Fabulous. And then on the new wafer handling technology, which really seems to be a game changer for some of your new customers, does that come with an ASP that's any materially different than the prior generation product?
spk05: No, it's pretty similar. We had said before there are automated handlers that are in about 800K range type of thing, whereas the manual liners are significantly cheaper than that. So if you use that kind of number, that's probably fair. And again, you could buy one that could feed five XP chambers. If you had 10 chambers on the floor, you might need two of them. And you use wafer packs and wafer pack carts moving around. And there's some companies that prefer that model. That's similar to how Package Part Burnin' has operated for years. Or you could take an aligner and bolt it onto the front of each of those 10 XP systems. You'd think, oh, wow, that's a lot more expensive. Turns out it's still pretty negligible if you look at it over, say, 18 wafers. And for some companies, that's a big deal. People that know me, I'm super passionate about this new aligner. We've stayed steady on the course. We've been heads down working on this thing completely through the entire COVID pandemic and just really happy at where it's at right now. And our plans are to be shipping that here over the next, you know, by the end of the fiscal year to multiple customers.
spk08: Great. And then my last question, and congrats on the product success, you know, during the COVID period. On the recent uptake in silicon photonics, I know it's relatively modest revenue, but materially better than it has been in the most recent timeframe. But, you know, as you look at that in a multi-year timeframe, could those customers be the same size as we've kind of mentioned as your lead, you know, silicon carbide customer at, you know, 75 million, or is it materially better? greater or modestly less? Could you give us any color there?
spk05: Yeah, so we've been kind of holding our cards to our chest for several years on this thing and just recently have started to talk about it. So with the announcements by some major suppliers, the two largest microprocessor suppliers in the world, the main graphics processors companies in the world, even some of the large fabs like TSMC and GlobalFoundries have created these consortiums to talk about heterogeneous integration, which is a fancy word for multiple chips in one package, that include a fiber optic transceiver port on it. And what they're saying is servers first are going to start having chipsets that are in communication with processors and disk drives and data storage through fiber optic ports directly. That is a huge deal. Because the fiber optic transceiver itself will still require the stabilization and the burn-in that we have now been doing for years. It's really what all the hubbub has been about and why there's so many companies and so much investment that's been in there. Now, having said that, I think there's going to be probably fewer big players than there can be even in silicon carbide. But there'll be lots of smaller players. It's certainly over the next, say, three years or something along those lines. But any one of those big players could be larger than our biggest silicon carbide customer. So the total available market for the silicon photonics, when you start talking about it being embedded in servers and chipsets and processors and GPUs, I think is bigger than the silicon carbide business. And so as we start to look at the second half of the decade, when that will really kick in, in particular, that's a huge opportunity. And we are all in on that. So a number of investments that we're already making, some we haven't told you about, are directed directly at that space.
spk08: That's fantastic. No other questions. Thanks, guys.
spk05: Thanks, Christian.
spk03: The next question comes from Jed Dorsheimer with William Blair. Please go ahead.
spk06: Yeah, thanks. First off, congratulations on a spectacular quarter. So nice work. I guess my first question on your first new silicon carbide customer, the one that's purchased two years XPs with the automated handler. Is the automated handler going to be shipping at the same time as the shipment of these two tools? So will you have both available to ship with that automated handler at the March timeframe?
spk05: That's a pretty good specific question. Let me leave it at that. So Yeah. Well, I'm going to just go out and say it. So the customers actually requested that we ship the XP system with the first one, ship the second one integrated with the aligner, and then upgrade the first one with the aligner. Got it. That's how we're doing it. And so there's a little bit of timing, but they're all about the same timeframe. But it's sort of a risk reduction thing for everybody on doing that. Got it.
spk06: And from a REV-REC perspective, do you expect that these will fall into this fiscal year's revenue recognition? Another good question.
spk05: Yeah, no, that's the advanced question there too, Jed. Folks, we did not see Jed with these questions, okay? So, no, Jed, that's dead on. So as you understand, we seldom, if ever, get into RevRec things, but our policy, which is extremely conservative for a hardware company, is that if we have a new product going to a new customer, until that customer says, I've accepted it, we do not score revenue, even if they pay us for it entirely. So that interesting thing here, and embedded in our kind of weird range of forecast for the 60 to 70, includes the timing of when one or both of those systems would get rev-rec'd. But it could very well happen that we don't get revenue recognition for those systems until Q1, when they're finally accepted, even though we ship them in Q4.
spk06: Got it. Got it. That's helpful. Thank you. I was wondering if you could just outline if the material quality of silicon carbide, the milli-ohm resistance is coming down in the material. It enables for multiple shrinks. Every time you would have a shrink or your customer would have a shrink in terms of chip design, that will trigger... new consumables from a wafer pack perspective.
spk05: Yeah, our wafer pack, full wafer contactors are unique to the wafer design, which is unique to the device design. So the very nature of the word shrink means that it's going to, the X by Y square area would get smaller and as such the pads would change and it would require a new wafer pack. This is very similar to what in the test business is referred to as a probe card. And so the probe cards become the consumables. And even if they don't need more capacity, if they simply change all their wafer patterns, they would buy all new probe cards or wafer packs in our case.
spk06: Got it. So when you look at and you talk about capacity needs simply for silicon carbide from a wafer start perspective, there's a third factor. that presumably if this industry gets on similar to a, I hesitate to say a Moore's law, but a shrink scale, you would have a 30% recurring revenue stream associated with that, not to mention sort of the the movement over of additional machines for different diameters.
spk05: Yeah, so let me put better numbers around that. So in a typical purchase up front for a tool, we've talked about these ASPs in the, you know, like two, two and a half million dollars or so for a tool, and then a set of wafer packs might be one and a half million bucks or somewhere in there. So there's sort of this two-third, one-third rule. So if you use the one-third rule and call that 30%, I'm with you. So up front, they would buy 67% tester and 33% consumable or wafer packs. But at some point in time, those wafer packs would be no longer valuable or useful because they no longer sell those wafers. They would then buy all new wafer packs from us. So the one thing that's still going on with us is trying to get our arms around what is that cycle going to be. On one hand, automotive devices tend to last longer. So they might be the ones that might last multiple years, whereas something like a consumer device or memory might only have a one-and-a-half or two-year life, meaning every other year all of the probe cards are replaced on a fab. In our case, though, with silicon carbide, there's multiple things that are going on. Everyone's talking about Gen 2, Gen 3, Gen 4 shrinks. They're talking about planar versus trench. They're talking about going from 150 to 200 millimeter. Each of those create dynamic transitions that would actually accelerate the obsolescence of the previous generation device. So we've been using maybe every four years right now and they're still yet to see it, but there's no doubt that when you look out four or five years, a significant amount of our revenue is gonna be coming from wafer packs of the installed base. And we're already seeing that with our silicon photonics customers, for example. And as our installed base grows, that number would grow as an absolute value as well.
spk06: Got it, that's helpful. Last question for me, I'll jump back in the queue. Did I hear you correctly when you talked about your second new customer, that they have not announced products in silicon carbide? I was wondering if you could just help clarify that.
spk05: Yeah, I'm choosing my words very specifically. They have not introduced silicon carbide MOSFETs. And I looked at their website again last night just to double check. They still have not. They still haven't said it. So they have figured out a program to come stealthily at this. They have multiple devices, I know, because we have their wafers. And so we're being pretty elusive, I realize. I think someone asked, why you guys can't never mention about customers? I'm telling you, the customers do not want to be mentioned. It's the biggest secret around. We always try to be very careful. I don't even mention the name of the customer outside of the context anymore because they will get mad at me for even mentioning their name. It's a difficult thing. I realize we've said we have two of the big guys. I will be bold. I think because of them being a 10% customer in our 10Ks, I think people understood that On Semiconnector was one of our biggest customers. Everybody's trying to guess who the next big guy was. And I'm not sure exactly how that's all going to play out. Right now, Vernon's very clear. I'm just going to win them all, and then we can say we have all of them. But in the meantime, I apologize that you guys don't have better insight as to who they are.
spk06: No apologies is job security for us. We have to do some real research, so I like it. Thank you.
spk05: Thank you, Jed.
spk03: The next question comes from Dylan Patel with SEMI Analysis. Please go ahead.
spk10: Hey, Jade. I wanted to ask, the wafer packs and the various burn-in equipment on both a silicon carbide side and photonics side, is that going to be in the wafer fab or can it be in the test fab? Because I was just trying to think about it from my perspective, and I think it could be in either.
spk05: Yeah, you know what? It absolutely can be an either. The closest analogy is what's referred to as known good die, where people sell die sales. In that case, the final test of the die often happens in what we would refer to in the test community as the back end operation where packages are versus the front end where the wafers are. In this case, the wafer level burn in process step feels like a known good die step. So it would be reasonable for somebody to put it in their back end. Having said that, most of our equipment today, if not all of it, is in the front end. It naturally fits in the wafer fab right next to the fab. Our systems are rated for clean room specifications. They're intended to go into clean rooms. And so we'll see both for sure. But I've heard both. I think we'll have Fox systems both places.
spk10: It's burn-in and then simulation next, right? Or is there anything else in the middle?
spk05: No, there's test after burn-in on your wafer always. So our recommended process is take a raw wafer. No need to test it. We will test it and tell you which are the good and bad dye. We will burn it in and we'll let you know which ones died during the process and exactly what time it did. And then you would correlate that with a functional final test of that singulated dye because you can get tighter accuracies and some other things that you might want to do. But you would do a single insertion test with a test system like the likes of a Teradyne. There's a handful of little companies that are out there that test one, two, three, four devices at a time. And then on a wafer with 1,000 devices, they might test 250 to 500 insertions of about one second a piece. And then they would simulate, separate the good dye, and oftentimes bin that dye. So they will pick and choose dye with matching parametrics. One of the things that people I've spent more time on in the past is part of the process of silicon photonics today and silicon carbide, and I did this in a white paper in Munich in a presentation of it. There's also a bunch of technical white papers out there. Silicon carbide devices age and actually their parametric voltage threshold, the threshold at which the device turns on, changes in time over multiple hours and then stabilizes. If you put that into a module like you would do in, say, a module that goes into, you know, even from Tesla, but Lucid or Ford's or any of the automotive modules that are going out, and you put, say, eight devices in there, the devices would all be turning on at different times if you do not cherry pick them. So let's say you cherry pick them and put them in. During the first 24 hours of use, the threshold voltage varies. So then the one that turns on the fastest will wear out the fastest and can become a reliability problem. So when people use our tools, they're not just binning good from bad or weeding out what we call infant mortality or early life failures. We're actually stabilizing the threshold voltage, which takes a period of time. such that they can cherry pick them and then sell them to the likes of the VWs of the world, or Danfoss, or BorgWarner, who are going to be purchasing known good dye from all of the suppliers with specified threshold voltages and RDS on voltages, or RDS on impedances or resistances. Did you catch all that?
spk10: Thank you for the call. Yeah, thank you for the call. I'll have to reread it for sure. But one quick last question was about the, you know, China's reopening. I'm curious if you've been scheduling any travel there because there's a ton of, you know, companies like Tank and Blue, SICK, and Semi-SICK, and so on and so forth that are all there that are investing a ton. Yeah.
spk05: Yeah. So we've had multiple conversations with several of the China suppliers. We have people in country. So other than the restrictions on the local travel or inter-country travel, our team has been able to move around with customers throughout this entire period. And that includes both sales and support people. Most of the Chinese suppliers are behind relative to other folks. And in many cases, what we're doing today is we're working with companies outside of China who are building silicon carbide devices to ship to those China automotive suppliers. So right now, that's where we see the primary opportunity from us. Over time, the Chinese industry may also pose a real opportunity for us. I'd say that the bulk of our energy has been in the U.S., Europe, and Asia outside of China to date.
spk09: Great. Thank you.
spk03: Thank you. The next question comes from Bradford Ferguson with Stetler Ferguson Financial. Please go ahead.
spk07: Hi, Gain. The way I understand it is the Fox XP system allows for 18 wafers to be burnt out, burned in at the same time. And this system with all the wafer packs costs $4.5 million. What's the next closest competition look like? I've heard the commodity system is one wafer at a time, $900,000?
spk05: Yeah, so $700,000 to a million bucks for the equivalent per wafer cost. So it would be – So essentially you're like – There's an equivalent – go ahead.
spk07: So essentially you're like a 70% off. potentially.
spk05: We are significantly lower than the other folks. There are people that have a million dollar per wafer cost and we might be $200,000 in some of the silicon carbide cases, for example. And people usually go, well, why are you giving them away? Well, we don't feel we're giving them away. We're pretty open with our margins with our customers. They know what we're doing. I think we have a good relationship with them that allows us to continue to invest And at the same time, our goal was not to just be cheaper than the other guy. In fact, to some extent, we were ignoring them. What we're trying to do is be as cheap as back-end production burn-in, which we have also been a supplier of for 30 plus years, almost 40 years. And if you look at our cost of test, the cost of test of us at wafer level is the same as at package level, which people in our industry are shocked to see. And if you go up to $2,000 per wafer like you would with an onboard charger, it's half the cost. And so they not only get the yield advantage, which is more than the cost of test, they also get it cheaper than they would any other way. And we've chosen to position this product. That was its initial intent. We think we've successfully done it. And we're focusing now on being able to ship enough to everybody in the world if we need to.
spk07: In tagging on to Jed Dorsheimer's last question, is there also a second customer with no silicon carbide announced plans that is kicking the tires with air?
spk05: Yes. Okay. So specifically, if you want to call it the third customer that bought an NP system, they have not actually announced – They haven't publicly announced that they're selling silicon carbide MOSFETs yet. We know they're talking to customers, so we don't really understand their strategy on that, but that's okay. They're a big player, they're serious, and they are very well qualified to be a big customer of ours. We also have benchmarks. We've talked about it before in our previous calls. We've had an ongoing benchmark with one of the other large suppliers for well over a year now. That's a very extensive automotive benchmark that has gone very well during the quarter, and we would hope to give you guys some updates on that at our next call.
spk07: Okay, and then I have a moonshot question, which is, in medical terms, medical testing, there's LabCorp and Quest Diagnostics where they would actually run the tests for the customers. What does air test systems think about running the burn-in for the customer and or like having an air test system certification where it's a best practices, this is a known... Not only a known good die, but this has been best practices burned in in an air certified way.
spk05: There's multiple things to that. I like everything you're saying. Okay, so first of all, we actually do customer wafers inside in one of our secure labs here. We have multiple labs that are secure with cameras and lockouts, et cetera, to ensure that there's no cross-pollinization of IP. And we've done that with multiple customers so that we can give them a risk-free demonstration of show them their failures on their wafers with the equipment. That has proven 100% successful so far. So we do that. Second, we actually have, we haven't announced their name yet, which is kind of an odd thing too, but we have a partnership with one of the largest subcons in the world who has our tools both in their front end engineering as well as in production. Stay tuned for some announcements on that during the year, during this next half. But we already are working with them to qualify them to be able to do silicon photonics-based or silicon carbide-based burn-in in addition to the silicon photonics that they're doing today. And that would allow us to direct someone towards them if they wanted to do services, et cetera, different than us trying to actually be in the services business. We're still kind of focused on capital equipment, support services, and the consumables themselves. Related to an endorsement by air, there's something to that. We get to see a cross-section of many of the wafers around the world and see kind of the good and the bad and the whole thing. I have some very strong opinions about what burden time should be what the test conditions should be. And what I will tell you is we've started working with what's referred to as OEMs, which is the end customers, related to can there be an industry standard for what those burn-in times should be in order to achieve a specific level of quality. And I would hope to try and drive that in the industry, if nothing else, for the good of the overall industry, because there is a difference. And if people want to cut some corners or something along those lines, candidly, I'd prefer they don't do it on my machine. So that's it. Thank you for the thoughts there, Brad.
spk07: And those subcontractors are where the dye maker, the wafer maker is shipping out the whole wafer to Asia or whatever to get burned in, and then it goes on.
spk05: Yeah, I love it. I didn't mean to confuse that. We are working with companies that will use their own subcons, and they will buy the tool and put it there, and it's dedicated for them. What I was referring to is we've actually identified a generic subcon who would make themselves available for just services to anybody and their brother kind of thing. And so we've kind of kept that to ourselves, candidly, deliberately. So I know that we mostly have investors on the call. Any customers or potential clients that are interested in potentially using the subcon, they can contact us and we'll be happy to make an arrangement in a proprietary way to enable that, the ability to test your wafers at a secure subcon. Okay.
spk07: Thank you.
spk05: No problem. Thank you.
spk03: The next question comes from Tom Diffley with D.A. Davidson. Please go ahead.
spk09: Yeah, good afternoon, Gain and Ken. I guess a couple follow-ups here. So, Gain, when you talk about, and I can appreciate that you have capacity to do even a couple more clients by the end of the year, but when you look at the 15, 20, maybe more silicon carbide players that are ramping right now, do you have capacity to serve a majority of them?
spk05: I think so, yes. Because I don't think not all of them will be, most of them will not be anywhere near as big as the first one. So we do actually look at the total capacity need. And to some extent, we only need to have enough for everybody and then the inefficiencies, right? Because guess what? People will overbuy at some point because they're all thinking they'll have more market share. But you sure don't need to be 10x the total market. So we are focusing on all of it, if you will, and who wins, that doesn't really matter to us.
spk09: Yeah, okay, great. And I know, obviously, this is a very early stages of this market growth, but just curious if there's been any kind of a slowdown from any of the customers just based on China's EV market and some of the broader concerns in the marketplace.
spk05: We haven't seen it at all, and I obviously pay attention to it all the time. I think, you know, remember that, okay, I'm going to simplify the categories of silicon carbide players. They're the multinational or multi-segment large players, big automotive guys, et cetera. I mean, obviously, the folks like the ESTs and Infineons and on semiconductors of the world and TIs or whoever. I'm trying to just make it generic. Please don't quote me on it. They have a big product portfolio. And what they've seen, I mean, across the board, there's this slowing down. There's cancellations out there. There's this stuff where this is the 17th cycle in semiconductors if people are paying attention, okay? And there will be an 18th, okay? As they contract, what they'll do is they'll figure out where the hot markets are and they redirect their energy, okay? I've always referred to as waves. It came back to my HP days, okay? We're in a hot wave right now. Customers are pouring their energy towards silicon carbide right now, even though obviously there's other business units that aren't doing very well. And so for those companies that have multiple products and all, they focus their energy on silicon carbide. The pure players are pure and they're all in, right? I think some of the discussion that's been going on, you know, a Tesla stock or what's happening, you know, Tesla's going to lose market share. Of course they are, guys. They had a dominant market share. There's no way they're going to ship that many to the rest of the world. That doesn't matter. There's way more opportunity in lower-cost EVs than there are in the high-end ones, but they all have traction inverters. They all have engines. They all need silicon carbide if they want to go for efficiency mileage and charging times. And so we think there's going to be tons of players out there. And the more the merrier, the faster they're going to get market penetration of all the VBs. So we have not seen it. It has picked up right now. Vernon is so excited about having, we have these three new senior guys. I've had a chance to meet and be in front of customers with them. They're fantastic. And that's going to be a big deal to help us to get to more people.
spk09: All right, that sounds good. Final question. I was quite frankly shocked when you said earlier today that the silicon photonics customer could be bigger than your current silicon carbide customer. I was always under the assumption that after the initial set of orders, they're doing 100% burn-in, then it goes down to like a 5% sampling over time. So I just thought that market itself would apparently be a lot smaller. Okay.
spk05: All right, two things. First of all, silicon photonics is different than when we talk about maybe photonics 2D, 3D sensing. And they're very different. Our 2D, 3D sensing in mobile, those applications that people understand, what 2D and 3D sensors are the things that recognize fingerprints or facial recognition or proximity sensors, et cetera, okay? Those actually have a reasonably high infant mortality rate. but they also sometimes have redundancy. It is proven so far that because of the life of those devices, they may only be on for 10 seconds lifetime, because they're only on for a millisecond at a time, times 100,000 or whatever the math is. The customers that are using it, we have multiple install-based applications, they're all doing sampling. So they only sample one or 2% or some number And as such, they don't do 100% for that application. That's one thing. We actually didn't spend any time until now talking about 2D, 3D sensing, which is still an ongoing business that we get annuities from, et cetera. Silicon photonics is actually the definition of where they are actually putting a photonics transceiver, fiber optic transceiver is a way of thinking about it, onto a piece of silicon. bypassing the normal discrete modulators, demodulators, and infrastructure that's required to create transition electricity to optical and back again. This has been the holy grail that people like IBM and Intel have been working on for over 20 years for several reasons. One is to continue to meet the shrinks of silicon and the processor improvements over time Electrical signals can only travel so fast. And we're very close. We're within, people say, a generation of it cannot go faster. About 240 gigabit is the upper high-end range of an electrical signal on a conductive path. CERTI's is 112 today. So we're like one generation or double from that's it. So the folks that have been writing the white papers have been saying what we're going to need to do is we're going to have to switch to photonics transmission which, if you remember from your physics class, photons are neither waves nor particles. In the case that they're not a particle, they have no mass. Therefore, there's no limitation to go to the speed of light. And you can modulate it at much faster rates than you can the electrical signals. So where electrical signals completely cannot go faster than 200 gig, photonics is just getting started. And so Intel, AMD, NVIDIA, IBM, TSMC, Global Foundries, these guys have all been making announcements recently to talk about their investments in what is referred to as silicon photonics to put that photonics transceiver onto chipsets, microprocessors, graphics processors. When you do that, instead of the traditional market that I said two years ago, you would have heard me say on these calls, I do not believe silicon photonics is going to be bigger than silicon carbide. When I said that, I meant it related to transceivers. Now that there's been public announcements for leading suppliers of intent to put those transceivers into chipsets, the market is, you know, a hundred times, a thousand, you know, a hundred times larger than silicon photonics. And the test times are longer, okay? I'm sorry, a hundred, yeah, longer, a hundred times larger than the silicon photonics transceivers And I believe, and I've now stated, I believe it is ultimately larger than the silicon carbide market. It is way more devices. It is 100% burn-in, and it is much longer test times. And so because of the stabilization of silicon photonics is very real, and it's been around for 20 years, this is not a four-hour burn-in time or six or 12. Nobody's going to be that low. And so, you know, with these long burn-in times, that's a big opportunity. And we're, like I said, we're all over that. And if you make an investment in us, you are making an investment in that, as well as some of the other markets we've talked about, like memory. And one of the leading edges of that is our new automated aligner.
spk09: Well, that's exciting stuff. Look forward to the second and third phase of growth here. Thanks for your time today.
spk05: Thanks, Tom.
spk03: The next question comes from Larry Shablina with Shablina Capital. Please go ahead.
spk02: Hey, guys. Great quarter. Ken, your beat on the gross margin, which drove the bottom line, is that sustainable? I know the mix was a factor, but since the revenues are going to be going up, do you feel confident you can beat 53%, maybe 55%?
spk04: Yeah, so Larry, I would think that the Q2 was an unusual quarter. We had some benefits that were one-time benefits, like we talked about. We had some reversal of costs that were previously accrued. We had the mix issue. We also had labor and overhead going to inventory with some of the growth in inventory that we had, as well as the mix, like we talked about.
spk05: But I think mix would be pretty consistent in the second half, though. Kind of more close, yeah.
spk04: There's lots of items driving the margin. So in terms of 53% and saying, are we going to get up to 55%? That was what your question. I would not plan on that. In fact, I'd reiterate what I talked about previously and said, I think we forecasted for an overall gross margin for the fiscal year being about 50%. And I think that's what the plan should be.
spk02: All right. Hey, so... The automated aligner, the automated XP, I know ideally you want a long burn-in to drive more equipment sales, but I think there could be a heck of a market out there for, as you mentioned, parametric testing of all sorts, whether it's threshold voltages in silicon carbide, figuring out how many cells are operable on a 3D NAND wafer. Do you have a sense of what the maximum throughput is on a fully automated XP if that thing was constantly moving wafers and wafer packs?
spk05: Yeah, that's a good question. Maybe I'll come back. I'm not sure I want to get into all that with all the introductions, Larry, and I'm not trying to. skirted or something but you know there there is there is an indexing time as we would refer to it how long it takes to index a wafer pack and if you had 18 wafers but you know if you yeah I mean if you're looking at you know six hours or two hours or ten hour burn-in times it's negligible in the background okay At some time, you would start to notice it. I mean, if you had one-minute test times or something like that, then you would start to eat into the overall throughput because of the indexing time. But your first comment is dead on, though. This changes things. You would never do, you know, trying to do a two-hour test time on a burn-in system would never work because it takes, you know, 15 minutes or 30 minutes to ramp up the chamber and 30 minutes to ramp it down before you can pull the devices out. And it takes hours to exchange all the devices on what's called the burn-in boards. The whole processing of the historical package part burn-in has so much overhead associated with it that I tell you people resisted at all costs. Not to mention the cleanliness and the quality implications of package part burn-in of having to scratch the leads and have these in these processes where they could actually introduce a failure into it. You know, trying to get to zero PPM defects with a packaged part burn-in system is extremely difficult. Whereas in a clean wafer environment where we can make a contact with that wafer 100,000 times with the same wafer pack and never have a different measurement result, you can't do that in a packaged part burn-in system. So there's opportunities that will expand by us taking this tool, making it look now as a high volume production tool where you can walk up to it with foobs or use overhead material handling and drop it down without even touching. Or we have systems that use robots that move foots onto our auto liners today. So you can actually be hands-free and using a sex gem interface front end into a wafer fabrication You don't even need to touch the tool.
spk02: I think the wafer-level burn-in from the 1980s into the 21st century, I think it's just a huge advancement.
spk05: I'm sold with you.
spk02: There's process engineers sitting around with problems trying to figure out how to characterize their devices for either sorting purposes or whatever. And I think if they had a sense that there's a system out there that could stress them and then get a measurement, and if the throughput was, say, 30 wafers per hour, you know, if that cycle time of moving a wafer pack, unloading it, putting a new wafer in, aligning it, putting it back into the system, if that's on the order of two minutes, that would be a 30-minute wafer per hour system. that probably would raise some eyebrows and probably drive demand from places you and I and anybody else hasn't thought of yet.
spk05: So anyway, it's just... Yeah, I'm obviously a big believer. It's one of my absolute pet projects, and I'm very passionate about it. I mean, Larry, one of the subtle things, too, is remember that we're putting these systems into large, multinational, multi-product line companies, right? There is no such thing as a broad wafer-level burn-in system out there. There are companies in the memory side that are doing kind of a wafer-level burn-in step using standard probers. But they, again, they're all memory guys. They either do flash or DRAM or both. I mean, there's not much. You put one of these systems into a silicon carbide floor in one of the big multinationals and deploy it in a large scale, they're going to know about it. I mean, their CEOs are signing off on the money for it. So they're going to know that it exists and they can say, wait a minute, could we use it over here? So I'm completely on board with you and really excited that we're turning the corner, not just for Airtest, but really wafer-level burden for the first time in history.
spk02: Are you going to update your website to show this beast? You still have that old clunker.
spk05: Yeah, well, I'll go beat up Vernon and his team about a little bit. We've got the systems here, and if you're a tester guy, they're beautiful. They've got pictures of it next to my children. But, yeah, I think it's about time for us to put something out there. But stay tuned.
spk02: One last quick question. As you know, being in the industry as long as you have, a slowdown in, say, the memory space is the opportune time to get your foot in the door for new technology, certainly an automated wafer-level burn-in system, particularly as they're getting money from the feds to at least break ground on new fabs. tool of record designation. And I just, I wonder if one of your sales guys is oriented towards that goal.
spk05: That's a fair statement. I also concur with you. We used to refer to it as straights and turns. During the straightaways, it's really tough to sell test equipment or any new process tool of record. They're just ramping. And that's what we saw over the last few years. And, you know, AIR was in a scenario with these new products and customers were selling the heck out of their old stuff. And, you know, we were not seeing that strike. Then in the turns, you know, the turns that happened, now the straightaway for silicon carbide, you know, we're super excited about it. But you're right. The memory guys who are right now relooking at their business models and their cost structure and everything else, I think would be – have a vested interest to review what we have as a product offering.
spk02: Right. So – Hopefully we get an announcement here soon. Would the process be an eval tool? Would you announce if somebody got an eval tool to run it through its paces?
spk05: I don't. I'm always cautious about getting too far out ahead of our skis and giving people a heads up of what we're up to. But, you know, when the timing is right, as people know from my background, I came from a memory business. I've always been extremely passionate about memory, and air is always getting into the memory business. We have some examples and some wins of proof of concepts of us to be able to do flash and or memory on these tools. We've even done prototype proof of concepts for DRAM in the past as well. And I believe that that is an opportunity. There is also a sense right now, candidly, of us making sure that You know, the bulk of our resources are focused on the obvious immediate opportunities in front of us of trying to win every single company we possibly can in silicon carbide, gallium nitride, and the silicon photonics, where our strengths are. But we do have energy into the memory as well. So I better leave it at that, okay, Larry?
spk02: Okay. Hey, very good. Hey, great job. Thank you. It's got to be exciting. It is. Thank you.
spk03: There are no further questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to management for any closing remarks.
spk05: All right. Well, thank you, everybody, for attending. I wish everyone a Happy New Year. As always, we'd love to take your calls. We're located here in the Bay Area, just around the corner from Tesla. And if you happen to be in town, feel free to reach out to us or the IR folks. We're happy to take a short meeting. We're really proud of what we're doing here. The manufacturing production floor, which is sort of billowing at the seams right now, is pretty exciting to look at too. So I would encourage you, if you'd like to reach out to us, and if not, we'll either see you at the Needham Conference or talk to you at the next quarterly call. Have a nice day. Good afternoon to you.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer