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spk03: Good day and welcome to the VECO Instruments Inc. Corporate Hosted Q3 2021 Earnings Call. At this time, I'd like to turn the conference over to Mr. Anthony Bencivenga, Investor Relations. Please go ahead.
spk02: Thank you and good afternoon, everyone. Joining me on the call today are Bill Miller, VECO's Chief Executive Officer, and John Kiernan, our Chief Financial Officer. Today's earnings release is available on the VECO website. Please note that we have prepared a slide presentation to accompany today's webcast. We encourage you to follow along with the slides on VECO.com. This call is being recorded by VECO Instruments and is copyrighted material. It cannot be recorded or rebroadcast without VECO's express permission. Your participation implies consent to our recording. To the extent this call discusses expectations about market conditions, market acceptance, and future sales of the company's products, future disclosures, future earnings expectations, or otherwise make statements about the future, such statements are forward-looking and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made, including as a result of the COVID-19 pandemic. These factors are discussed in the business description, management's discussion and analysis, and risk factors sections of the company's reports on Form 10-K and annual report to shareholders, and in our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K, and press releases. VIGOR does not undertake any obligation to update any forward-looking statements, including those made on this call, to reflect future events or circumstances after the date of such statements. During this call, management may address non-GAAP financial measures. Information regarding such non-GAAP financial measures, including reconciliation to GAAP measures of performance, is available on our website. With that, I will turn the call over to our CEO, Bill Miller.
spk04: Thanks, Anthony. Good afternoon, everyone, and thank you for joining the call. The Beco United team did an outstanding job this quarter. We posted solid Q3 financial results, we're continuing to invest for growth, and we're making progress towards our long-term financial targets we shared at our analyst day on September 9th. All our Q3 guided metrics came in at or near the high end of our guidance, with revenue of $150 million driven by record semiconductor sales and strong data storage revenue. Our non-GAAP gross margin came in at 43%, and we achieved non-GAAP operating income of $24 million, leading to diluted non-GAAP EPS of $0.40. Our quarterly revenue is up 34% year-on-year. Looking at year-to-date revenue, compared to the same period last year, we achieved 37% revenue growth, driven by a 67% increase in semiconductor sales. And... We generated $30 million in cash flow from operations, which is the highest quarterly amount generated in almost seven years. We've been transforming the company to take advantage of lasting global megatrends. Part of the transformation includes making fundamental changes, such as developing and practicing a set of core values to improve our culture. This afternoon, we published our second sustainability report, Many of our transformational improvements over the last few years are reflected in this report, but it includes so much more. We greatly improved our environmental and social disclosures and continue to make progress in these areas, minimizing our environmental footprint, becoming more inclusive, and continuing our commitment to good governance, all aligned with VECO's core values. We know these actions will help us improve our operations to better serve our stakeholders while building a more sustainable and transparent company. Now, let's turn to an update on our specific market opportunities, beginning with our semiconductor market. It's been well publicized that wafer fab equipment spending is expected to be over $80 billion in 2021, and that 2022 is expected to grow further from there. The strength in equipment spending reflects both technological advancement and capacity additions. We address this market with three major product lines where our innovation has resulted in solutions that drive better performance for our customers. Enabling better performance allows us to win in targeted applications and expand our served market. In fact, we shared at our analyst day that over the long term, we expect our semiconductor market opportunity to grow at a CAGR of approximately 23%, much faster than forecasted long-term WFE growth. The three product lines are laser annealing, which is currently used in production at both advanced and trailing logic nodes, ion beam deposition systems for EUV mass blank production, and lithography for advanced packaging. Our laser annealing products are used by device manufacturers in their most critical process steps. Customers choose VECO's laser annealing solutions because of its superior capability. This enables annealing with the shortest dwell times for improved device performance. We're currently production tool of record at multiple customers. We expect growth in this product line to come from market expansion in a few ways. In the near term, we'll continue to work with our existing Logic customers on their next nodes, and we're making progress with a significant new Logic customer. In the longer term, we've engaged memory customers with evaluation systems and demos, and expect to penetrate this important market over time. We had another strong revenue quarter in laser annealing, driven by systems to existing Logic customers as they build out current nodes. Our next product serving the semiconductor market is our ion beam deposition system for EUV mass point production. EUV lithography is critical to the progression of Moore's Law. As device geometries in both logic and memories continue to shrink, we expect continued adoption of EUV lithography. We've seen public remarks from Intel, Samsung, TSMC, Hynix, and Micron confirming their commitment to EUV as they seek to advance their product roadmaps. In addition, ASML recently announced plans to double their EUV scanner output from 35 systems in 2020 to approximately 70 systems in 2025. Consequently, we expect demand to grow for our ion beam systems used for EUV mask line production. In fact, we recently increased our outlook for EUV mask line systems from two to four systems per year to three to five systems annually on average. Moving to advanced packaging. For a few quarters now, we've expressed increasing confidence in our advanced packaging opportunity. We had a strong equipment shipping order for our lithography systems, and we had a repeat multi-system order from a leading OSET to support production of GPUs and high-performance computing chips. All three of our products serving the semiconductor market are performing well and are expected to continue this momentum for the foreseeable future. As expressed in our analyst day, the semiconductor market is our biggest driver of growth over the next three to five years, and we're making progress towards that goal. We serve the compound semiconductor market primarily with two product lines, our wet processing equipment for our power amplifiers and filters, and MOCV equipment for power and photonics applications. Our wet processing equipment has broad appeal in material liftoff and solvent-based applications. In addition to the continued demand for our wet processing equipment across RF filter and amplifier applications, we're seeing demand in photonics applications as well. Our MOCVD systems enable fast charging and other power management solutions, as well as micro-LEDs. We ship single wafer systems for power and micro LED applications during the quarter and continue to work towards penetrating these growth markets. Our third market is data storage. In the near term, based on our order activity, we expect data storage revenue to decline. However, our customers continue to invest in their aerial density roadmaps and increase the heads they produce, both driving more ion beam system demand. With the amount of data stored forecasted to grow at 35% annually, we're confident about the long-term prospects of our data storage business. In summary, led by our traction in the semiconductor market, demonstrated by application wins, backlog position, and visibility, we are confident we will grow revenue in 2022. Now, for an update on our 2021 priorities. First, regarding our resilience, there are a couple of updates. With safety being a priority for the company and one of our core values, we've decided to delay our COVID-19 return to facilities plan. This keeps our manufacturing employees safer while ensuring continuity of our operations. Regarding the status of our supply chain, like many of our peers, we're experiencing the effects of global supply chain disruptions, such as longer lead times and cost increases. We've been buying in advance and resourcing components on a more frequent basis each quarter in order to proactively manage the impact to our business. I'd like to thank our supply chain team for minimizing disruptions to our customers. Next, we continue to focus on profitability and we're on track to meet our long-term financial targets. And from a growth perspective, we're solidly on track to deliver more than 25% revenue growth in 2021. Our investments in evaluation systems and service infrastructure are setting us up for success in 2022 and beyond. By keeping these priorities top of mind, the VECO United team is committed to making a material difference and building a stronger VECO. Now, I'll hand it over to John.
spk01: Thanks, Bill, and good afternoon, everyone. I will be discussing non-GAAP financial results and encourage you to refer to the reconciliation to GAAP results in our press release or at the end of the earnings presentation. Looking at our revenue, revenue for the quarter was $150 million, representing a 34% year-on-year increase and up 3% sequentially. Semiconductor had a record $76 million, made up 51% The investments we've made in evaluation systems, service, product development, and manufacturing capacity have enabled success in our semiconductor business. Data storage at $39 million made up 26% of revenue and reflected both capacity and technology additions by our customers. Revenue was up 6% from a year ago and, as expected, down 25% sequentially. Compound semiconductor was relatively flat sequentially at $23 million, which represented 15% of revenue driven by MOCBD and what processing systems sold for power, RF, and photonics applications. And scientific and other came in at $11 million and made up 8% of revenue. A few comments on Q3 revenue by region. Our Asia-Pacific region, excluding China, was 40% of the total, with sales of ion beam and laser annealing systems to semiconductor customers as the main contributor. The United States region made up 33% and was driven by ion beam systems shipped to data storage customers. China made up 18%, primarily from semiconductor systems shipped to a variety of customers. And finally, EMEA made up 9%. Now turning to our non-GAAP quarterly results. Gross margin came in at 42.6%, which was a percentage point higher than last quarter and toward the top end of our guidance. Operating expenses for the quarter were $39.6 million flat to last quarter and 26.4% of revenue, which was a reduction from last quarter. Operating income of $24.3 million for the quarter increased 14% sequentially and 72% from the same quarter last year. Tax expense for the quarter was approximately $500,000 with net income coming in at $20.5 million. Non-GAAP EPS was 40 cents on its diluted share count of 51.7 million shares. Now moving to the balance sheet and cash flow highlights. We ended the quarter with cash and short-term investments of $336 million, a sequential increase of $6 million. From a working capital perspective, our accounts receivable decreased to $87 million. This drove a decrease in DSOs to 52 days from 67 days in the prior quarter. Inventory increased approximately $7 million to $171 million to support increased shipment volume and procuring components earlier to address longer lead times and availability. Days of inventory increased to 173 from 167 in Q2. Accounts payable decreased to $49 million. As a result, DPOs decreased to 51 days from 58 in Q2. reduced our working capital by $7 million during Q3. This, along with our earnings in the quarter, resulted in $30 million of cash flow from operations. Long-term debt on the balance sheet was recorded at $332 million, representing the carrying value of $389 million in convertible notes. Our CapEx during the quarter was $22 million. This includes $18 million for the San Jose expansion project and approximately $4 million in other capital spending. Our San Jose facility is coming along well, and we expect to ship our first systems from this location in the coming weeks. Now turning to our guidance. For Q4, revenue is expected to be between $140 and $160 million, with non-GAAP gross margin between 41% and 43%. We expect Q4 non-GAAP OpEx to be between $41 million and $43 million, an increase from Q3 as we continue to invest for growth. We are on pace, however, for full-year OpEx as the percentage of revenue to decline as compared to 2020. GAAP EPS to Q4 is expected between $0.04 and $0.22 per diluted share. Non-GAAP EPS is expected between $0.27 and $0.45 per diluted share. Diluted non-GAAP EPS is based on approximately 52 million share counts. For reference, we've included a table in the backup section of the earnings presentation to provide detail on the effect of the convertible notes on diluted share count. At the midpoint of our Q4 guidance, full-year 2021 revenue is expected to be approximately $580 million with $1.35 in non-GAAP EPS. This raises our full-year 2021 guide once again with revenue up 28% year-on-year and non-GAAP EPS up more than 50%. Now for an update beyond Q4. In the first quarter of 2022, we will be adopting the accounting standard ASU 2020-06 for convertible debt accounting. Upon adoption, our convertible notes will be accounted wholly as debt. For model purposes, when calculating non-GAAP EPS starting in Q1 2022, Quarterly cash interest expense in the amount of $3.2 million should be added back to non-GAAP net income, and approximately 15.6 million diluted shares should be added to the weighted average basic shares outstanding to reflect if converted method of accounting, replacing the dilution assumed using the current Treasury stock method of accounting. We provided a table in the backup section of the earnings presentation with details both the GAAP and non-GAAP effect of the new if-converted method of accounting for our convertible notes. Please note, there is no cash flow impact resulting from this accounting change. Regarding our visibility into Q1 2022 business levels, we see revenue in a similar range to our Q4 guidance. Looking further into 2022, we expect full-year revenue to grow compared to 2021 as we continue to gain traction in our semiconductor business, as Bill highlighted earlier. We will also continue to make the necessary investments in people, material, and infrastructure to support our growth. And with that, Bill and I will be happy to take your questions.
spk03: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star 1 if you'd like to ask a question. And we'll take our first question from Tom O'Malley with Barclays. Please go ahead.
spk05: Hey, guys. Good afternoon, and congratulations on the really nice results. Bill, I think most earnings colleges do a really good job of walking us through some of the different tools that are in evaluation and give us an update on what's shipped and what's kind of on the come here. Could you please walk through some of the tools that you still have yet to ship this year and then talk about any kind of new wins you may have on the tool front? That would be really helpful.
spk04: Yeah, Tom, that's a timely question. We've been telling the street we plan to ship 10 tools this year. At this point, we've shipped nine of those. So of the plan 10, eight are in semi and two are in compound semi. In the semi space, the big driver is LSA. where we have five LSA tools shipping, our eval tools out in the field. The most interesting ones are to a third Advanced Logic customer. We've actually turned that tool over to the customer. They're running qualifications, and the news we're hearing is positive, I would say. And then similarly, in DRAM, we've shipped two eval systems to a DRAM customer, and Once again, their tools have been turned over to the customer. They're running device calls, and the news, I would say, is positive at this time. So that's pretty exciting. And in the compound semiconductor space, we have shipped two evaluation systems. One is our Lumina for red micro-LED applications, and we recently shipped an 8-inch Ganon silicon single-wafer propel tool to a large foundry for power electronics applications. So I would... I would characterize our progress at this time as pretty positive. I think we are really on track or maybe a little bit ahead of where we kind of laid out our plan this time last year. So we're pretty bullish about the progress we're making. Great.
spk05: It's really helpful. And then my follow-up is just about the upside in the quarter from the semiconductor business. Obviously, record highs there. Is that a function of timing for that business? Or are you seeing increased traction in different areas of the business where you're getting new tool orders that you hadn't had before. I understand lead times are long, but can you just describe kind of what happened in the quarter? And then it also sounds like with some new traction with new customers, that business is looking like it's going to be really strong for the next year. Can you talk about some of the different areas where you're seeing increased order activity in the semi-business right now and how that may impact next year? Thank you.
spk04: Yeah, I would say regarding the quarter, John, I would say we did reach record – revenues and really that's on the back of all three legs of our stool in semiconductor that's laser annealing uh we shipped an euv tool in the quarter and the tremendous uh progress for making an advanced package because i think uh the step up there was i would say on all three of our sub markets within semi is that would you agree with that yeah that's a an accurate statement bill yeah And so, you know, if I kind of look out a little farther over the horizon, we're really excited about the growth opportunities for us in Semi. This year, our Semi revenue through Q3 is up 67% compared to the same year last year. You know, we're... forecasting doubling our backlog in SEMI from the beginning of the year to the end of 2021. And I would say we're experiencing tremendous pull across the board from, as I said, laser annealing with our existing customers. Obviously, I just spoke about the opportunities with new logic and memory customers. EUV mask blank remains strong with, you know, both logic and memory customers adopting EUV. We've taken up our annual forecast from two to four systems to three to five systems based on ASML's remarks. And then also in the advanced packaging space, We've been getting increasingly more constructive on this opportunity, and we are seeing actually during the quarter multiple system orders from multiple customers, and that was for OSATs, IDMs, and foundries. So it's very much a broad growth in advanced packaging lithography. We are – What we're also seeing is that as customers are buying multiple tools, fleet matching is becoming more important, and our AP300 is really up to the task compared to the competition. And we believe we're gaining some market share in this growing market.
spk08: Great. Congrats again, guys.
spk04: Thanks, Tom.
spk03: Thank you. We'll take our next question from Patrick Coe with Stifel.
spk04: Thank you very much, and congrats as well on the nice quarter and outlook. Bill, maybe just to follow up on the advanced packaging comments you just provided, can you give a little bit of color whether you're seeing a broadening of applications, or is it primarily still for, quote, like fan-out applications for mobility, or are you seeing greater, quote, adoption in areas like heterogeneous integration and other types of processes? Can you just give a little bit of color on that? Absolutely, Patrick. We are clearly seeing a broadening of this market that, you know, not only are, you know, the typical markets for fan-out wafer-level packaging, copper pillar and bumping for, you know, mobile AI and high-performance computing, but, you know, what we're seeing is a uh more focus in the heterogeneous uh integration opportunities and uh it seems uh it that seems to be driving it so i would clearly say it's a broadening of the opportunity as opposed to very mobile focused a few years ago great that's helpful and maybe it's my follow-up question you guys did a really good job both in terms of the revenue line as well as on the margin front, given the supply constraints that are existing in the industry today. Can you just give a little qualitative color on some of the measures you took that allowed you to avoid some of the missteps that other companies have come across?
spk01: Sure, Patrick. This is John, and thanks for the question. So certainly we're not immune to the challenges that are well documented in people experiencing supply chain constraints. And I would say that Q3 was more challenging than Q2. But we've been successful mitigating these challenges and have met or exceeded our revenue targets by doing a few things. First of all, working closely with our suppliers to monitor upstream risks. I would say that making selected buys ahead of demand, and you see that to some extent in increased inventory, And when a supply chain issue has been identified, we move quickly to execute alternative supply. So I would say, you know, Patrick, despite the supply chain constraints, you know, we're really happy and expect, you know, revenue to grow to approximately $580 million this year, a 28% increase year on year, and have been able to meet our customers' important requirements. Great. Thank you very much.
spk04: Thanks, Patrick. Thanks, Patrick.
spk03: Thank you. We'll hear next from David Dewey with Steelhead.
spk08: Yeah, thanks for taking my questions. Just a couple. As far as the advanced packaging lithography market, I think I've asked this question in the past. Could you take a gander at what you think the size of that market is going to be in this year and next year? I imagine next year is going to show fairly significant growth. So that's really what I'm trying to dig at.
spk04: Sure. Yeah, I would say, you know, we've been, I would say we're historically sizing this market at, say, $100 million this year. We expect that to grow. you know, in excess of 20% plus in 2022. And I would think our market share is going to increase from kind of mid-40s to, you know, maybe over 60%.
spk06: And who owns the balance? Go ahead.
spk04: I'm sorry. It's just a combination of, you know, market expansion and some decent share gain.
spk08: Excellent. Now, as far as the balance of the market, if you own 40% to 60% share, who's number two in the marketplace at this point?
spk04: At this point, I would say the primary competitor for us is Canon. And we also see competition from SME, Those are probably the primary competitors.
spk08: Okay. And you mentioned that your semi-business, I think, is going to have a CAGR of 23% over the next few years. Could you just help us understand the three segments that you mentioned? How would we handicap the three versus that growth rate? What's going to be the fastest growing of the three?
spk04: From a market sizing standpoint? For you. I would – I'm sorry, say that again?
spk08: Yeah, I think you mentioned that your semi-business is going to go 23% over the next few years, and you have three segments. I'm just kind of trying to handicap the three segments.
spk04: Yep, yep, and kind of in that 20 to 25 kind of range. I would say the largest growth, when I look at our categories from 20 to 25 – I would say our laser annealing SAM is going to grow pretty significantly. Our existing semi-products are going to grow. We have litho grow a little less than 20%. Our litho SAM over that full period of time, we're forecasting at about 10%. And the one big impact is we announced activity in the ion beam deposition tool for low resistivity metals. And today, obviously, we don't have any business there at all. But if we are successful, that would add an additional $250 million of SAM in 2024 and 2025. So that's a big chunk, but that's really – out farther in time.
spk08: Okay. And then final question from me is you've been pretty clear about the data storage market being down, you know, sequentially, and I'm guessing it's down in 2022. You know, do you have a handle on now about how much it's going to be down? And if you don't, I understand. But if you could take a stab at also when you think the inflection point is, when do you think that business grows again sequentially?
spk04: Dave, I would say, you know, as you know, our data storage customers have been adding capacity over the last three years. And We have a lot of order visibility at this time last year, and we've actually hit all of our revenue objectives in data storage as planned for this year. What we're seeing from an order standpoint over the last three quarters is We expect customers to slow that pace of capacity addition in 2022. So we believe revenue for data storage will be lower in 22 than 21. I think it's important to note, though, that on a longer-term basis, we really see data proliferation driving this industry. You know, data stored is forecasted to grow at 35% per year. Head shipments are expected to grow at 8% to 10%. The complexity of these heads is continuing to grow at 8% to 10%. So long-term, we feel pretty good about the long-term prospects. But But, Dave, I want to make a pretty important point here that at the VECO level, I can tell you that even with significantly lower data storage revenue, we're seeing strong demand and order activity in the semiconductor market with laser annealing, advanced packaging, LITO, and EUV mask blanks that we're confident in revenue growth in 2022. Excellent. Thank you very much.
spk08: Thanks, Dave.
spk03: Thank you. We'll take our next question from Rick Schaefer with Oppenheimer.
spk07: Hi, good afternoon. This is Wei Mok on the call for Rick. I wanted to echo our congrats on the results. My first question is on LSA. So I was wondering if you can remind us the number of customers and the number of mailing steps you have. I believe you announced a PTOR, Customer Aggie Analyst Day. How does PTOR actually translate and convert into a mailing step when? And when needs to happen for that to occur?
spk04: So today we have – the business, we have leading-edge logic and we have trailing-edge customers. I would say, John, I would say about two-thirds is leading-edge. So if I'm just kind of focusing in on the leading-edge logic, we have two customers today – And we have one application step with one customer and three application steps with the second customer. And what we announced is that we've won process tool of record at their next advancing node. So what that means then as a node rolls out for an application step with a customer at their next node, that would be about a $25 to $35 million opportunity over, you know, one and a half to two and a half year period. That's about how we size that.
spk07: Great, thanks. That's very helpful. My second question is on eval tools. You guys are deploying 10 eval tools to customers this year. How should we think about eval tools in 2022? It seems like with semi-bookings being strong, based on your analyst-based slides, it was up 100%, half and half. Could you use any of those originally expected eval tools to fulfill those backlog orders? Or do you have capacity to support both?
spk04: We have capacity to support both. So we expect during next year to turn these eval tools into revenue. And so that number would decrease. But at the same time, we have a plan to ship some of our newer products out into the field as eval. So I would think from an ongoing business standpoint, We are building a business plan to meet our revenue growth plus ship new eval systems and keep the evals in the field at about 10 at a time as we kind of move forward. We'll be in this mode for, I would guess, the coming years as we continue to grow.
spk01: And we'll also be bringing on new capacity as we bring our San Jose new facility online. We mentioned that we expect to ship tools from that facility in the upcoming weeks and be fully transitioned into that new facility by Q3 of 2022. And this would effectively double the amount of output from our facility compared to our current facility there as well in support of requirements coming from the semiconductor industry.
spk07: Great. Thanks, guys.
spk04: Thanks, Wayne.
spk03: Thank you. Thank you. And once again, as a reminder, that is Star 1 if you would like to ask a question. We'll hear next from Mark Miller with Benchmark Company.
spk00: I'd like to also congratulate you on your results. As you've indicated, data storage has been very strong. There's now some cyclical slowing. But as the industry translates to hammer and aimer heads, are there new processes come in which will require increased usage for your tools, whether it's at your deposition?
spk04: Yes, Mark. That's a very true statement. I would say... That's really driving a lot of the complexity of the heads as they advance, and then moving from shingled magnetic recording to energy-assisted recording. That will continue, and a lot of that buying has not yet happened, actually. So we're being positive on the data storage market for the long term, and we're just expecting a down period in 22, frankly, just given our bookings activity and our lead time.
spk00: Would these new process steps require upgrades to existing equipment, whether it's at your deposition?
spk04: Yeah, we're working closely with our customers to meet their process requirements. And, yes, we are introducing some new technologies that hopefully can be upgradable.
spk00: Lastly, any COVID, you didn't mention any COVID impacts. How are you managing through that? Was that any cost addition that was significant during the quarter?
spk04: Well, John spoke about supply chain challenges. I would say from a factory labor standpoint, I think the company has performed very well. And I wouldn't say we've had any significant misses year to date, either from a supply chain or from a VECO labor standpoint.
spk01: I would add that we have seen some inflationary on material costs. I think the area that's impacting costs is increased logistic costs. I would say that for the third quarter mark and what we're forecasting for the fourth quarter, that combination had about a one-point impact on our gross margins.
spk07: Thank you.
spk01: Thanks, Mark.
spk03: Thank you. Thanks, Mark. Thank you. We'll take our next question from Gus Ritchie with Northland.
spk08: Yes, thanks for taking the question, and I'll offer my congratulations as well. You made a comment about your winning in packaging because you had better matching. Could you flesh that out a little bit?
spk04: Our architecture is much simpler than our competitors, and it's a very robust, rugged design. As I think you know, many applications require GH and I-line as opposed to some competitors are only I-line applications. That's one area we're differentiating. And then on fleet matching, we just have tighter specs, and I believe that's largely due to optical design.
spk08: Are you talking about, you know, overlay, resolution? Are you competing against the scanner? Is that what's going on?
spk04: No, this is our legacy AP300 product. Applications... typically we're seeing a lot of them that we're winning at say two micron and up got it okay i understand and then just have you shipped the iron beam deposition system for eval in um semi no we have not shipped that we're in the midst of uh demos with with customers and expecting to ship that uh hopefully this quarter and if not uh early in Q1. Got it. And then on the compound semi, I think you mentioned power RF and photonics. Now, I was just wondering if you could give a little bit of color on the MOCBD side. How much of your business these days is photonics, and how much of it is power, and how much of it is RF? Sure. Let me try to take that apart a little bit. I would say, Gus, our MOCBD business is really operating at historically low revenues today post-exit of a commoditized LED business. You know, we did a lot of work restructuring the business and pivoting towards new markets and new opportunities. And as you know, we go after the gallium nitride applications with our Propel single wafer reactor, and that can be used for both power electronics, RF devices, as well as disruptive silicon-based micro-LED applications. And we have a second product for arsenide phosphide called the Lumina for applications in photonics, such as in the phosphide lasers, pixels, as well as red micro LEDs. I would say we are starting to gain traction in MOCBD. I would say in the near term, we expect to see revenue growth in early stage micro LED. next year from a number of opportunities, including AR, VR, as well as other photonics applications. Also, as I mentioned, we did seed the 8-inch Ganon silicon power market with multiple customers and placed an eval for 8-inch power electronics at a large foundry. We also, as I mentioned, placed an eval tool for red micro LEDs. So to answer your question, I would say this year we did have a fair amount of power electronics available. business with our single wafer reactor at eight inch but i would say we're not seeing most of the production today is on six and so i would say we're in a bit of a seeding waiting game for that market to develop so as i look forward i would say um our business is largely more predominantly going to be in micro-LED applications, whether that's disruptive or traditional red micro-LED going forward. So I don't know, John, if you have any more color.
spk01: I think that's a good summary, Bill, that adds up. you know, the market transitions, which we believe are 8-inch for GAN power, that we're well-positioned with what we've seeded so far this year and with the evaluation that we've sent to a leading boundary.
spk04: I just want to make sure you – so we're seeding like planting, not seeding as in giving up on.
spk08: Right, right. I get it. And then just –
spk04: This probably isn't a fair question, but, you know, any color on who is ahead, you know, the arsenide phosphide on gallium nitride or the, you know, the micro-LED on silicon, the red on silicon, which program looks like it's advancing more quickly? Okay. I would say, Gus, that we're actually – it looks like at this time, it looks like both are proceeding. You know, we're seeing activity in the traditional approach of red, green, and blue pixels for luxury TV-type markets. It looks like that's starting to happen, and we're seeing – you know, AR, VR applications with nontraditional kind of GAN on silicon type solutions. So right now, I would say it's fairly hard to handicap where we are. But I would say it looks like they're both moving forward.
spk08: My last question. So it sounds like it's more application specific in terms of which approach is going to be used.
spk04: Today, I would say that seems to be the case. We'll have to see kind of how it all plays out overall.
spk08: Okay, awesome. All right, that was real helpful. Really appreciate it. Thanks so much.
spk04: Thanks, Gus.
spk03: Thank you. And that does conclude today's question and answer session. I'd like to turn the conference back over to management for any additional closing remarks.
spk04: Thank you, Operator, and thanks for joining our call today. I'd like to thank our customers and our VECO United team for their continued support. And to our shareholders, we look forward to seeing you at upcoming conferences and NDRs as we close out 2021 and execute toward our growth in 2022. Have a great evening.
spk03: Thank you. That does conclude today's conference. We thank you all for your participation.
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