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spk05: Hello, and welcome to the Kulik and Safa 2021 Fourth Fiscal Quarter Results Conference Call and Webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Joe Algindi, Senior Director, Investor Relations. Please go ahead, Joe.
spk01: Thank you. Welcome, everyone, to Kulik and Safa's Fiscal Fourth Quarter 2021 Conference Call. Joining us on today's call is Fuzin Chen, President and Chief Executive Officer, and Lester Wong, Chief Financial Officer. For those of you who have not received a copy of today's results, the release as well as our supplemental earnings presentation are both available in the investor relations section of our website at investor.kns.com. In addition to historical statements, today's remarks will contain statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For complete discussion of the risks associated with Kewell-Gonzalva that could affect our future results and financial condition, please refer to our recent SEC filings, specifically the 10-K for the year ended October 3, 2020, and the 8-K filed yesterday. With that said, I would now like to turn the call over to Fuzhen Chen for the business overview. Please go ahead, Fuzhen.
spk07: Thank you, Joe. As many of you are aware, we recently provided a detailed business review and outlook during our investor day, held on September 23rd. During this presentation, we highlighted how several key long-term trends, such as 5G, assembly complexity, electric vehicles, and advanced display are driving structural improvement to our business, enabling greater long-term visibility and a more consistent level of sustainable cash flow generation in the future. Throughout today's discussion, I will highlight several specific milestones which demonstrate our ongoing progress toward this fundamental enhancement. First, I would like to explain our view of the supply challenges affecting the industry today, which we have been navigating. Recently, there have been disruptions to global supply chain, including power outage in China, COVID challenge in Southeast Asia, and the freight challenge globally. Specifically, within our industry, additional constraints were recently related to substrate and the wafer capacity shortfall, which are constraining the rate of industry growth. We ultimately expect this near-term bottleneck will gradually improve. Specifically, we anticipate improvement in wafer stock toward the end of fiscal 2022, which is consistent with our expectation of a multi-year industry expansion period. It's also critically important to understand that this bottleneck ultimately stems from a short-term inability for industry capacity to meet end-market demand as we transition into the new data era of semiconductor demand. In addition to this new layer of end-market demand, favorable technology transition which we are directly involved in, are well established and are set to accelerate over the long term. This structural dynamic includes a higher level of capital intensity for the assembly process, access to the emerging advanced LED market, 5G adoption, the electric vehicle transition, and the more semiconductor bridge consumer devices. This longer-term trend, hence, our visibility and growth potential. Looking ahead, this outlook is aligned with the long-term target we shared during our recent investor day. We continue to anticipate that fiscal 2022 will be another very strong year, and we also anticipate waiver capacity to improve at a faster rate beginning in the second half of 2022. With that said, I will not discuss our September quarter's performance. We again exceeded our revenue guidance, which anticipated a $465 million midpoint. We were able to generate just over $485 million of revenue during the September quarters, which was a significant effort for our manufacturing, supply chain, and the engineering team. This effort has allowed us to temporarily stretch our capacity in support of our customers during this rapid phase of industry growth. Within the September quarters, our capital equipment revenue increased by over 16% sequentially to $431 million. This was due to ongoing strength in the general semiconductor market, improvement in memory, and the ongoing traction and execution of our advanced LED program. We in General Semiconductor, we are pleased to report several new wins for our dedicated advanced packaging tool, specifically APALMA, our thermal compression system, Catalyst, our high-acuity free-track system, and also LIGHTTECH 500, our design office taper. This specific win highlights our direct connection to this evolving landscape and the growing need for more complex higher-value semiconductor assembly processes. This win also highlights our competitiveness and the potential for share gain in several specific medium-edge assembly applications, including mobile processing, image sensing, and silicon photonics. During the September quarter, we also recognized revenue of our initial LIHTC 500 laser-enabled desktop office solution. This system has been well received due to its good wafer handling, performance, stability, and ease of operations. The need for advanced discography system for back-end processes will accelerate with assembly complexity in the future. This system represents an additional market-ready KMS solution, which addresses the growing complexity of assembly. Physical 2021 revenue related to this three platform increased by over 200% from physical 2020. These systems are highly competitive and we anticipate demand to grow at a similar rate through physical 2022. We remain very focused in driving new engagement and qualifications. The need for more complex assembly isn't only limited to our new equipment solution. but is also occurring throughout the high-volume semiconductor market. To shed more light on this evolving value proposition, our most advanced broadband platform, the Rapid Series, offers key features such as real-time process monitoring, defect detection, and advanced looping that enhance productivity for complex assembly. The Rapid Series represents only 39% of our total broadband sales, in the fiscal first quarter of 2021 and has grown to represent 74% of our broadband business during the fiscal fourth quarter of 2021. These market leading tools are unique and enhance corporate level growth margin. Finally, for the general semiconductor review, we also continue to focus on new development opportunity within the electronic assembly market As we explained during the investor day, the electronics assembly market represents a very sizable and largely untapped opportunity for KNS. I look forward to sharing additional details as we prepare to bring this new solution to market over the coming quarters. Turning to LED, I am pleased to report that we have recognized revenue of just over $80 million in advanced LED solutions throughout fiscal 2021. representing nearly half of our total LED revenue. During September quarters, we recommend an additional portion of system and services revenue related to our customers' needs and ordering scheduling. This is another key milestone for the company, which serves as a testament to our leadership in both advanced backlighting and direct emission display technologies. and highlights our execution and the progress toward a long-term financial target established during the investor day. Additionally, we issued a press release in September 22nd that highlighted our initial Luminex shipment and the broadening market adoption. Luminex is our next-generation mini and micro LED solution, which targets the emerging advanced display opportunity. Luminex has increased our market access as it provides additional process steps, such as pitch adjust, sorting, and binning, but also through increasing our customer engagements. The first Luminex system was delivered with an initially reduced throughput in September. And by October, we provide a software update that enables 10,000 hertz through the scan function. To clarify, this relates to 10,000 placement per second. At this speed, Luminex provides unique production advantage that will help accelerate and broaden advanced LED adoption and our ultimate market reach. Over the coming quarters, we look forward to sharing new milestones and additional customer engagement with this high-potential system. Next, automotive and industrial demand continue to remain strong and above our long-term average. We remain very positive on long-term transition, which are increasing semiconductor content per vehicle. Over the coming years, semiconductor growth with automotive is expected to be significantly above the historical growth rate of general semiconductor. In March of 2021, We enhanced our portfolio of automotive focus solutions with our PowerSheet system videos. PowerSheet specifically targets the growing need for advanced power semiconductor assembly, a critical application required for the electric vehicle transition. During the fiscal 2021, we shipped nearly 400 PowerSheet systems generating over $45 million of revenue. In addition to this structural growth, driving higher semiconductor content per vehicle, we have recently expanded our market access through our new battery assembly solution. We continue to work closely with several customers who are pursuing battery assembly solution for the cylindrical market utilizing both our ultrasonic and laser-based battery assembly solution. We have also recently developed our newly introduced prismatic battery assembly solution. Electric vehicle battery production is anticipated to grow at a 30% trigger through fiscal 2025, providing ongoing and long-term equipment opportunities. Lastly, within memory, revenue grew by over 90% sequentially to 36.9 million for the September quarters, This sequential growth was supported with a strong demand for our leading net assembly solution and a stamp from several memory-focused customers. Finally, before turning the discussion to Lester, I wanted to reiterate our optimism as we look beyond fiscal 2022. Over the past four years, we have worked closely with the customers to solve challenges within the display automotive and the semiconductor assembly market. This close relationship with the industry leader has allowed us to take a calculated risk and pursue multiple development initiatives in parallel. Today, these past investments are beginning to generate returns. Over the last years, we have introduced a driven market adoption of several high potential systems that directly support high growth opportunities within the automotive, semiconductor, and advanced display market. These systems are at a different stage of maturity, providing ongoing opportunity to create value for investors. We have met many organization refinements, which have enhanced this value creation process. We continue to have a funnel of new opportunities that provide additional upside to our long-term target. I look forward to providing additional details on the status of our recent product release and the new development initiative over the coming quarters. With that said, I will now turn the call to Lester Wang, who will discuss our financial performance. Lester?
spk08: Thank you, Fusen. My remarks today will refer to GAAP results unless noted. As Fusen mentioned, our global operations, manufacturing, and engineering teams have overcome many supply chain related challenges this quarter. We were able to stretch our capacity during the September quarter and continue to anticipate ongoing supply chain challenges over the near term. For the fiscal year, we were very pleased to have recognized revenue of $1.52 billion, generating non-GAAP net income of $390 million and free cash flow of over $275 million. During the September quarter, We recognized revenue of $485.3 million, up nearly 15% from our most recent record revenue in the June quarter. We were able to meet this level by managing external supply chain challenges very closely and stretching our own capacity in support of customers' aggressive expansion plans. In addition to stretching capacity, we also recognized an additional portion of advanced display revenue based on our customers' shipment and delivery schedules. In addition to this significant top line achievement, we're also able to deliver strong gross margins of 47.7%. This strong margin performance was due to a higher mix of advanced systems which deliver a higher value proposition for our customers. This gross margin strength combined with greater operating leverage allow us to deliver non-GAAP operating margins of 33% in the September quarter. We continue to maintain our quarterly operating expense model, which represents roughly $48 million of fixed expenses plus 5% to 7% of variable expenses tied to revenue. Tax expense for the quarter came in at $21.6 million, driving our effective tax rate to 13.9% in the September quarter. As expected, our full-year effective tax rate came in below our long-term target, largely due to the release of valuation allowances related to the successful introduction and market adoption of our PixLux system. Over the long term, we continue to maintain the 18% effective tax rate target. Non-GAAP net income came in at $138.3 million, representing $2.17 of non-GAAP EPS during the September quarter, which again reflects the inherent leverage in our model and long-term cash generation potential. Turning to the balance sheet, working capital has remained very efficient. Days of accounts receivable stayed consistent at 78 days, days of inventory improved slightly from 60 to 59 days, and days of accounts payable decreased from 57 to 55 days. During the September quarter, we generated free cash flow of $118 million. Our total cash and investment balance increased by over 16% to $738.9 million. On October 18th, we announced a 21% increase for our upcoming dividend, which is payable on January 10th. As a reminder, we initiate the dividend program with our first payment of $0.12 per share in July 2018. We then raise the quarterly payment by 16.7% or $0.02 ahead of our January 2021 payable date, and we'll pay $0.17 per share during January 2022. As explained during the investor day, the dividend allows us to provide a consistent return which our long-term shareholders can plan for. While consistency is one of our guiding principles, we also want to keep our dividend competitive relative to our close semiconductor equipment peers. Additionally, we continue to believe our market valuation remains undervalued and have prioritized our open market repurchase program by increasing recent activity. During the September quarter, we repurchased just over 60,000 shares for $3.8 million, which represents nearly 40% of our total repurchase in fiscal 2021. As a comparison, during the first six weeks of fiscal 2022, we repurchased 148,000 shares for $7.9 million, which is equivalent to over 75% of our fiscal 2021 activity. We continue to have regional cash constraints in the near term, although expect by the second half of fiscal 2022, we will have better access to our global cash balance. We intend to continue tactically taking advantage of market misperceptions through the use of our open market repurchase program. For the December quarter, we expect demand to remain very strong and anticipate approximately $460 million of revenue, plus or minus $20 million. Considering our efforts to stretch capacity and deliver additional advanced display solutions during the September quarter, this December quarter outlook reflects fairly consistent linear demand for the majority of our products. These continued strengths support our view of a multi-year industry expansion period and keep us well on track to reach and potentially exceed our long-term financial targets. We expect gross margins to be 47% in the December quarter, plus or minus 50 basis points, due largely to ongoing manufacturing efficiency and strength of higher margin products. Non-GAAP operating expenses is expected to be approximately $77 million, plus or minus 2%, and non-GAAP EPS to be $1.88, plus or minus 10%. We continue to anticipate supply chain challenges to contribute to overall industry growing pains. Looking further out, increased wafer starts should ease these constraints and continue to support above-average semiconductor growth through fiscal 2023. This is very aligned with our long-term target established during the investor day. Over the coming quarters, we are very confident in driving new market adoption and customer wins while emerging equipment portfolio, specifically Luminex, our advanced display system supporting the mini and micro LED transition, and also our Apalma and Catalyst advanced packaging system, which support high-performance computing and mobile applications. This continues to be a very exciting period in the company's long history, and we are seeing ongoing potential to dramatically and sustainably extend our business as we continue to execute on this multifaceted growth strategy. We look forward to sharing additional information regarding these new opportunities over the coming quarters. This concludes our prepared comments. Operator, please open the call for questions.
spk05: Thank you. And now to conduct your question and answer session. If you'd like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is coming from Craig Ellis from B. Reilly Securities. Your line is now live.
spk03: Yeah, thanks for taking the questions, team, and congratulations on the very robust quarter and strong outlook. Houston, I wanted to start just by digging into one of the disclosures in the release regarding the backlog at 787 million. What I was hoping to do is have you help us understand the composition of that backlog. How distant are orders in the backlog? To what extent is it giving you visibility beyond the fiscal first quarter into the second and third quarter or maybe beyond? And then with regards to the breadth of products that are in backlog, would it be similar to what we've been seeing or is there a significantly different composition of orders? of systems than what we recently reported in the fiscal fourth quarter?
spk08: So, Corey, this is Lester. Let me take that. I think the backlog is still very, very strong. As far as the composition of the backlog, I think for capital equipment, it will be similar to the fourth quarter. Obviously, the mix changes a little bit, but we still see very, very strong sales of our higher margin rapid products as well as LED. I think that may increase a little bit. We also see, you know, strong sales of the advanced display product going forward. So I think the mix is somewhat similar. Of course, not exactly the same, but it's somewhat similar. And as far as, you know, visibility, you know, we've actually worked to, the lead time now is, you know, almost down to about, six to seven months, which is very good. It was before it was close to eight months, which is double our historical average. We've worked very hard. We increased manufacturing capacity 2x since the beginning of fiscal 21. So to order to address our customer's demand. So I think we see FY22 to continue to be strong. There obviously will be some fluctuation, particularly because of the industry-wide supply chain issues, particularly about wafer shortages, which a lot of people are experiencing now. We think that will be, as Pusan said in his remarks, more alleviated towards the second half of the year.
spk03: That's real helpful, Lester. And then the follow-up question is somewhat related to the color you provided. We would typically expect the business to have a seasonal profile to it in the December quarter and then in the March quarter, either flat or accelerating a little bit. But it seems like the December quarter's outlook is really bucking that, given that the midpoint is only down 25 million or 5% or so sequentially. So to what extent do you think you are seeing seasonality in the business versus just seeing the continued strong demand for your products, including all the new products, really power right through that seasonality?
spk07: Actually, Craig, I think the strong September and December quarter, we believe, was because of a long return and that people actually booked ahead and that we we don't have, you know, the maximum capacity to deal with that. That's why, you know, our original maximum target, you know, capacity is actually 450, around 450. Actually, we stretch the capacity, you know, to deliver what customers need, right? So I think at this level, we're really beyond. We probably don't expect every quarter we need to run beyond our target maximum capacity So we might see some seasonality from this point.
spk03: That's really helpful, guys. And then I'll just ask one more before hopping back in the queue. I was interested in your comments regarding products for EV battery assembly. And I'm wondering if you can talk about the engagements that you have with potentially customers or customers' customers, whether the engagements are more with the battery makers themselves or with the OEMs or both?
spk07: Actually, we engage with both. And we believe, Craig, if you remember, we engaged with a leader in the industry in this space very early. So recently, actually, you can see a lot of prayer and which actually, you know, they are very happy to find us to be their partner. So actually, we expand our portfolio, start from our cylindrical, and right now we go to prismatic. And we also, in order to be more competitive, actually, we segment, you know, our product to have a high end. We have a little bit, you know, a low end. you know, more cost-effective solution, and particularly in China to compete. So overall, I think this is very sweet spot for us, you know, and we continue to recognize as a leader in this space. And so I don't know if I answered your question.
spk03: Yeah, I think you did, Piyushin. I think the takeaway is you've got significant customer diversity with increased product diversity and an increased ability to hit kind of the high end of the market and the low end of the market across cylindrical and prismatic. You're real helpful. Thanks, guys. I'll hop back in the queue.
spk07: Okay, thank you.
spk05: Thank you. Our next question is coming from Chris Sankar from Coward & Company. Your line is now live.
spk04: Hi, thanks for taking my question. And congrats on executing well in a tough environment. I had three questions, too. The first one is, is there a way to quantify how much the revenues in September and December quarter would have been
spk07: if you're not supply constrained uh well a question i don't understand question the revenue is the product we deliver right so uh can you can you ask again uh let me ask you another day uh would the december quarter what would the december quarter revenues or guidance have been if you are not supply constrained
spk08: Well, Krish, I think the December quarter revenue, the supply constraint is not as big a factor there. I think the point we're making is that we kind of stretched capacity in the September quarter to meet our customers' demand, right? So I think demand is still strong, but I don't think if there was infinite supply, sorry, capacity, it would not be $500 or $600 million quarter, if that's what you're asking.
spk04: Got it, got it. That's super helpful, Lester. And then second question is, You know, I might have missed it, but Fushun, did you give a FY22 revenue guide or should we assume it's going to be similar to FY21?
spk07: Well, actually, we are quite positive on the end market demand of FY22. So, we are feeling right now FY22, the revenue will be comparable to FY21. That's what actually In investor day, we told all the investors. So that means we expect fairly comparable. At this moment, I think what we see is maybe slightly upside compared to 2021 in our memory and also auto business. But Chris, as you know, this industry, we also have a global supply chain challenge and something we focus on and many people focus on. is a wafer shortage. The current constraint of industry growth at this moment. But we anticipate new wafer capacity will come online in the second half. So it's going to be given tech along the comparable revenue of 21. But so we, again, we are very positive about 22, and we will provide more information about 22 revenue expectation, you know, over the coming quarter as we see more clearly about how this wafer shortage goes.
spk04: Got it, got it. Helpful. And then final question, obviously very strong advance display revenues in the September quarter. Are they all for mini-LED or is anyone beginning to look at micro-LED? And also along the same path for Leicester, the December quarter gross margin is pretty strong too, so should we assume this summer is going to be another strong advanced display quarter?
spk07: Okay, so let me answer the first part of your question. You know, the mini and the micro LED, this is related to the size, right? So a lot of people categorize, you know, mini LED as micro LED. But from my point of view, I think the size is, of course, it's a mini LED more at this moment. But, of course, engagement with a lot of customers at this moment, we are dealing with a very small size. But to answer your question, I think, from my view, I think a minority is a majority, you know, of the revenue at this moment.
spk08: And then, Krish, for the margin, yeah, we are calling very strong margins for Q1 at over 47%, and there is quite a mix of the advanced display solution in the Q1 revenue as well.
spk04: Thank you very much. Thanks a lot, Susan. Thanks, Lester.
spk05: Thank you, Chris. Thank you. Our next question is coming from David Dooley from Steelhead Securities. Your line is now live.
spk10: Yes, thanks for taking my question, and congratulations on the great execution, 33% operating profits, a great achievement. Just a couple questions. Lester, as far as operating expenses go, do you think it's the – the variable and fixed expenses that you just outlined are the right numbers going forward or should we be adjusting operating expenses given the outlook?
spk08: No, I think it's still the right number. I mean, it's 48 to 5 to 7% and, you know, non-gap for this quarter at about 77. I mean, obviously, Dave, there's, you know, push and pulls within OPEX at any one time, right? But I think it's in the right ballpark and, you know, I mean, as we, you know, move forward some development programs and as things change, we'll update the model as wanted.
spk04: Okay.
spk10: And then my second question is, I think at your analyst day, you talked about a 500 basis point gross margin improvement over the next several years. And I realize there's lots of things that are behind that improvement. But if you could help us understand where you are kind of as far as, you know, if this is a you know, a nine-inning ballgame. How many innings are you in to that gross margin optimization program? And, you know, I realize that it might take a couple quarters to see the gross margin improvements because you've got to work through the inventory. So with all that in mind, you know, could you just help us understand how far you are along in adjusting things to get to that, to achieve that 500 basis point gross margin?
spk08: Well, gross margin improvement is always a work in progress for us, and it's something we always strive towards, not just towards the 500 basis points, but we want to push it beyond. But to answer your question specifically, I think we're probably a third to halfway through that journey. I mean, I think we've worked very, very hard in terms of maximizing manufacturing efficiency through supply chain, through operations, through engineering, through redesign, to maximize our cost to reduce cost to maximize cost savings, right? I think the other thing that makes a big difference and will take some quarters to kick in is also product mix, right? I mean, as Susan indicated earlier, we have now, in this year, we migrated a lot of ball bonders to the more complex higher margin rapid series. In LED, we also have increased the margin because, again, we introduced a new tool. So I think that the key also going forward will also have, you know, more advanced display as well as advanced packaging tools, which also carry high margins. So I think you will see, you know, margin expansion, you know, over the next couple of quarters and definitely, you know, towards the target that we set during Investor Day.
spk02: Okay.
spk10: Final question for me is, Fusan, you mentioned, I think, some customer wins in the advanced packaging area, both within the thermal compression bonder and the flip chip. Could you just elaborate a little bit more on the potential for those wins, and when you would expect the revenue from those particular wins you're referring to to start to contribute.
spk07: You know, we establish our TCB base, start from OSEC customers. But if you look at it, at this moment, the customer base and the customer we engage actually is really a lot. From OSEC to a CMOS imaging sensor, you know, silicon photonics, AR, VR, So we are very encouraging. And the technology we provide to the industry is really well recognized. And we do expect the TCB will grow strongly into this year. And of course, we expect it will double again in 2023. So that's our TCB. We are very, very positive. And the free trip, we actually have a lot of internal programs. So free chip, we developed a very good tool. But right now, we're already in a few customers, and this is for high productivity, high accuracy free chip. We probably just want to make more effort, but at this moment, I think it's already in many, many customers. So we do believe at this moment, the TCB has much more momentum, but free chip is picking up.
spk05: Thank you. So...
spk07: Yeah, okay, good, thank you.
spk05: Thank you. Our next question is coming from Charles Shi from Needleman Company. Your line is now live.
spk06: Hey, thank you for taking my question. Good evening, Fusun and Lester. I want to start going back to the question about the fiscal 22 outlook. Obviously, investors hear things from your largest OSEC customers looks like That the consensus view seems to be the offset spending wire founders may moderate a little bit next year, yet you are seeing something like a comparable outlook for next year. I wonder whether there's a little bit of a growth driver shift away from OSEP going to like the IBMs next year. Is that the case? And if you can tell us a little bit more in terms of the OSEP contribution to the revenue in fiscal 21 and what you're expecting fiscal 22. Okay.
spk07: So, Charles, I think at this moment, we do see some OSEP customers you know, delay their delivery schedule due to wafer shortage. I mean, a lot of people have mentioned about it. But at the same time, I think we also see some customers pull in because we have actually a spectrum of customers with us, not only OSEC customers, right? So this helps. So overall, we still see very healthy move on the demand, and 2022, we believe, will be another strong year for us. To answer your question, I think if we allow the wafer shortage, the demand for the broadband will be even higher. But at this moment, I think we are seeing maybe comparable business overall and compared to, you know, 2021. I think your question is right. We do see actually some scheduling. you know, delay, but luckily we have a big spectrum of customers. You know, when it's delayed a little bit, we also have some people want to have an earlier schedule, right? I wish, you know, this would help.
spk08: And Charles, as far as your question for FY21, FY21 was a very strong year for OSATs, as you know, right? And so the OSATs accounted for almost close to 90% of of the shipment, but historically, OSATs have accounted long-term around 65%. So we think in FY22, we don't have a forecast, but we believe, as Fushun said, there's a broad spectrum of customers that we now can serve if there is a slight slowdown from the OSATs.
spk07: And a little bit delay from OSAT, we do believe, according to customers, there's really a waiver shortage. Basically, I think the industry... Demand is really strong in market, but the wafer start increasingly not catch up, you know, compared to, you know, compared to, you know, compared to actually. So we do believe this is going to, this plan will be easy. That's everybody's expectation.
spk06: Thank you. So my next question, I really want to go to the electric vehicle part of your growth driver. I believe electrification not only means battery assembly for you guys, but also power devices. You did highlight the Power C product adoption, the momentum, and also some of the pricing strength over there. Obviously, very strong pricing performance I wonder, going into next year, how can we quantify that part of the growth in terms of the power devices side and the battery assembly side? Do you kind of see some of the investment potentially very strong or concentrated in China, or this is more like you have more global exposure on both the power device side and the battery assembly side? Thank you.
spk07: Actually, I think it's almost quite... Europe was quite weak, I would say. It was China-centric, I would say, maybe a year ago. But you are really coming back. So to answer your question, I think we are working with almost all the region just on these power devices and the EV.
spk06: Got it. So maybe my last question is about the PCB wings. Maybe more importantly, I want to ask you about your potential opportunity at the leading logic IDM. uh in the us um so obviously they that particular customer of yours seems to be ready to ram uh major advanced packaging uh potentially in malaysia uh second half in 2022 i wonder whether that's a contributor uh to your tcb business uh if it is uh is this more like a something you will see within fiscal 22, which ends in September next year, or is that more like a fiscal 23 event?
spk07: Thank you. So, you know, it's difficult for us to speak about single customers, but what I can tell you is all the customers we engage, at this moment, I think we almost have a successful Actually, qualification. So when the RAM comes, if it comes, it's going to benefit us. That's all I can say. I'm sorry we just cannot comment specifically on customers. But I think engagement with all customers has been good. Qualification has been down, many of them. And we are very positive about TCP prospect.
spk08: So Charles, I guess again, we don't comment as to the customers, but we do see advanced factoring revenue, particularly through TCB, coming in FY22, not just in 23.
spk07: So the growth compared to 21 to 22, TCB actually grew a lot. You remember I mentioned about 2x, and we also expect it will double again to 23. That's our expectation. And Charles, my comment is this. I think the end demand is very strong for the whole industry with a lot of technology drivers. But a new wave of capacity actually cannot catch up with a strong demand. So that's why we are seeing some industrial pain. But we do believe a new wave of stuff will come online, a new capacity in the second half. So hopefully this will help everyone in the industry. So maybe I say a little bit. At this moment, the new waiver start rate at this moment is about 4%. And people really expect start from the end of 2022 and beyond, probably 6%. So when all this capacity come online, actually, I think our industry will become very, very busy.
spk06: Got it. That's all from me. Thank you.
spk05: Thank you. Our next question is coming from Tom Diffley from DA Davidson. Your line is now live.
spk02: Yeah, good morning, and thanks for the question. Fusen, you talk a lot about the industry wafer supply constraints. I think that's very well understood. But are you seeing the bigger impact at the leading edge or the trailing edge? And does it impact your core ball-bonder business more or advanced packaging business?
spk07: Of course, I think impact, actually, the capacity added, I think, at this moment is really not very concentrated on the 10 nanometer below. But our GoBounder, we also working with our customers and try to test the limit. So we are working with some customers to use their mobile devices. to test beyond 10 nanometers and below, and we see a positive result. So at this moment, Tom, actually, we also believe our broadband will support very advanced packaging, even at 10 nanometers. But to answer your question, I think the capacity at this moment in the industry, actually, I think it's not the most advanced products. It's not like a 10 nanometer.
spk02: Yeah, okay, that's helpful. And then moving over to the display business, when you look at the success that you've had with the Pixelux, and now you have the new Luminex coming out, how do you think the rollout of the Luminex is going to impact the Pixelux, or how do you see those two playing together over the next couple years? Are there certain applications where the Pixelux will take it and... So let me answer this.
spk07: I think at a certain point, they are complementary. I think at a certain point, it's also become a competitive. So let me answer a different way. The Pistolux, at this moment, actually serves just one application. It's a final placement. It's moved from one place to the other place. It's a final placement. And it's at about 50 hertz. That means it's the dual placement of a 50 die, roughly, per second. That's all products. The difference of Luminex compared to PhysioLux, actually there are a few things different. The Luminex is not limited just on the final placement. It also can do a lot of LED manufacture needs in the sorting, in the PAM, in the repitching. There are many, many application so the customer base will be wider and the speed will be also higher. So in the future, you know, assume like AKTV, you know, I think there will be potential we can use this Luminex to do a direct emissive, you know, application. You know, one panel probably need to move about 25 million die, right? So for us, there are a few difference. One is a customer base will be much wider and also the application, the processes soft, Luminex will be much, much wider. So, you know, Luminex start to go to customer side. So we do expect probably we should receive revenue, early revenue by end of fiscal quarter, let me know some summer time. Hopefully we start to see initial revenue. and finish qualification and position for the mass production when the customer see the result. This year, to answer your question, the expectation we have on Luminex is later part of the year we start to see revenue, and once it's qualified, it can start to ramp. Majority of the revenue we still see in 2022 is a piece of luck. But beyond 23, I think Luminex will run probably faster.
spk02: Okay, that makes sense. Thank you for the color there. And then finally, Lester, you mentioned that there's a little bit of constraints on the cash from their location right now. You said that might ease in a few quarters. What are you doing to bring the cash back to the U.S.? ?
spk08: Well, Tom, if I explain the whole thing, it would take probably an hour. It's very complex. We're obviously taxed. But we're trying to bring it back using the most tax-efficient way so that there's no leakage. But we expect to be able to access it by the second half of next year or this year.
spk02: Okay. So I guess just the bottom line on that, what do you think the cost will be to you to bring that back or to repatriate it?
spk08: It should not be significant.
spk02: Okay. Okay. Perfect. Thank you.
spk05: Thanks. Thank you. Next question today is coming from Christian Schwab from Craig Hallam. Your line is now live.
spk11: Hey, great quarter and great outlook, guys. I guess most of my questions have been answered, but just one last one. Fusin, as we look at, you know, the tight supply environment, wafers opening up, as you said, maybe in the second half of calendar 22. which will then drive increased demand for our advanced packaging solutions because there's more demand there as we try to get to a supply-demand equilibrium, if you will. So would you agree that this cycle appears different than others for you in particular will be stronger for much longer? You know, as the wafers come online next year, that probably takes us well into 23, you know, for advanced packaging strength to continue, at which point, you know, the Minion micro-LED adoption, you know, will be much more crystal clear. We're kind of probably on our path to the Luminix adoption maybe kicking in. And then, you know, we'll probably be much more well on our way tremendous growth in the silicon photonics and carbide market as everyone's racing to make electric vehicles faster than the next guy who makes cars. So would you agree with that? Is that why you're increasing the dividend and buying back stock up at these levels when we were buying back stock not all that long ago, materially lower? Am I thinking about that correct?
spk07: But actually, we... quite positive about company's prospect. We are no longer a single product company. And 21 actually, you know, is very strong. Part of the reason is also because of people working from home. And therefore, we have a lot of booking. I think at this moment, you know, the end market demand is so strong. But, you know, the weapon capacity just cannot catch up with strong end demand. But once the wafer starts, you know, I mentioned, you know, just before, to Charles' questions, you know, the wafer starts, actually, the annual growth rate is expected to be 6% rather than 4%, right? So this means a lot of end demand is going to be there. And this end demand, of course, will help our core products in the ball bounder, in the wedge bounder, And I think our company is well positioned in advance. We will do well in the free chip. We will do well in the TCB. And I think advance display offer us another area that we can go very fast. The compound annual growth rate of mini and micro LED, actually you can check a lot of market information. A lot of people say 50%, a lot of people say 40%, but it's going to grow very, very fast. And we believe the value in this industry is not mainly in the micro-AOD itself. It's really mass production, mass transfer, transfer a lot of data from one place to the other place. We do believe PZLOX, we demonstrate leadership, and the Luminex, we are confident. We are going to attempt again to be a leader in the industry.
spk11: Great. No other questions. Thanks, guys.
spk05: Thank you. Thank you. Our next question today is coming from Dylan Patel from Semi Analysis. Your line is now live.
spk09: Hello. Can you help me wrap my head around the thermal compression bonding opportunity? At Investor Day, you disclosed some information about the advantages of a fluxless TCB and even had someone from an IDM talk about advanced packaging. Okay, so... Could you... Go ahead. Understanding you can't discuss customers, but what is the potential of this technology?
spk07: Okay. Actually, I think industry... the future of packaging, you know, in a big way, people talking about heterogeneous integration, right? So to support the industry, you know, high density, fine pitch, heterogeneous integration, actually, we have two programs we look at it. So one program actually is a lot of people talking about hybrid bonding. So in our opinion, this is a very fine pitch application. This is very niche. very complicated and very costly. So internally, other than the hybrid bonding, we actually look at a project we call fluxless PCB. So the difference of these two programs is how to clean the interface. And we actually believe the flux PCB process covers a lot of product is needed for the heterogeneous integration. And we start to work with a few customers. Feedback is very, very good. And the customer interest actually is growing. So we do believe we expect this fluxless bonding will cover many acts in terms of revenue potential compared to hybrid bonding. High rebounding is very, very niche, probably particularly or concentrate probably in less than 10 micron, you know, copper pillar pitch. But beyond that, you know, from 50 to 10, still a lot of market is a big die application. So we start to engage with customer. Initial feedback has been good. I think we probably can give you more update in the next couple of quarters.
spk09: Can you re-clarify that? You believe that PCB will be a larger market than hybrid bonding as a whole in the industry?
spk07: Okay. I think, you know, the difference of these two is, you know, we haven't demonstrated, you know, the fluxless PCB below 10 microns. So one of the worries for, you know... the fluxless PCB is potentially for the fine pitch, you might damage your oxide during the PCB. But we always demonstrate for larger pitch, it's still fine pitch, but not necessarily 10 micron. And actually, it works quite well. So if industry doesn't need to use a hybrid bonding, which is a very, very complicated process, I think we believe we have a market-ready solution the size actually can be bigger than, of course, will be bigger, much bigger than the 10 micron 5 pitch. That's our opinion. It's just my opinion at this moment. And since we have quite good momentum in TCB, we engage with many customers. So we start to work with customer on this fluxless TCB bonding. I think initial feedback has been good.
spk09: And with this form of advanced packaging, you know, at least hybrid bonding is on a front-end basis, right? It's the foundries, it's the IDMs that are doing it. Is that going to continue to hold true, or do you think the OSAPs will also be customers for this technology?
spk07: In my opinion, it's going to be quite difficult. It's a lot of fine process, and it's a... Back-end actually cost is a very important line. So in my opinion, I think I had a generous integration to deal with a fine pitch. Fine pitch depends on how you define fine pitch. It can be 10 micron or between, say, 40 to 10 micron. And I think maybe I don't comment about the hybrid bonding, but I do believe this flux bonding is going to offer a very big market just for us.
spk09: Thank you.
spk05: Thanks, Dylan. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Joe for any further or closing comments.
spk01: Thank you, Kevin. Thank you all for joining today's call. We'll also be presenting at the CEO Summit in person in San Francisco on December 8th, DA Davidson's virtual Semicap Laser and Optical Conference on December 15th, and also the 24th Annual Needham Conference during the week of January 10th. As always, please feel free to follow up directly with any additional questions. Have a great day, everyone.
spk05: Thank you. That does conclude today's teleconference and webcast. And we disconnect your line at this time. And have a wonderful day. We thank you for your participation today.
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