Aixtron Se Unsp/Adr

The conference is now being recorded. Ladies and gentlemen, welcome to Extron's H1 2020 results conference call. Please note that today's call is being recorded. Let me now hand you over to Mr. Guido Pickard, VP of IR and Corporate Communications at Extron, for opening remarks and introductions.

Thank you, Operator. Let me start by welcoming you all to EXTRAN's presentation of our half-year and Q2 2020 results. Today, I'd like to welcome our Executive Board, represented by Dr. Felix Graward and Dr. Bernd Schulte, as well as our VP of Finance and Administration, Charles Russell. As the operator indicated, this call is being recorded by EXTRAN and is considered copyright material. As such, it cannot be re-recorded or rebroadcast without permission. Your participation in this call implies your consent to this recording. As the previous results conference calls, I trust that all participants have our results presentation slide deck, page two of which contains the usual safe harbor statement. I would like to point out that this applies throughout the conference call. You may also wish to have a look at our latest IR Master presentation with additional information on Exxon's markets and its technology. It's also available on our website. This call is not being immediately presented via webcast or any other medium. However, we will place an audio file of the recording or transcript on our website at some point after the call. I would now like to hand you over to Ben Schulte for opening remarks. Ben?

Many thanks, Guido. Let me all welcome you to our results presentation of the first half of 2020. And I will start, as usual, with an overview of the key developments in the second quarter on slide three, before handing over to Charles and Felix. With orders of nearly 70 million euros, we had a continued solid quarter for order intake. In Q2, revenues came in at 56 million euros, which was higher than the previous quarter revenues, but as expected, still not at the level of last year's quarter. However, this is the result of the corresponding order intake during the relevant period of last year. As a consequence, revenues in the second half of the year are expected to grow significantly compared to the first half in order to achieve our full year guidance. During Q2, upon request of our customers, we experienced a few delays of commissioning of tools caused by the pandemic. For the second half of the year, we see local lockdown measures ending and an overall relaxation of travel bans. Therefore, we expect no significant influence related to COVID-19 on our entire fiscal year 2020. However, we will continue to watch the development of the global pandemic very carefully and will remain to be ready to take measures as necessary. In the second quarter, our other key financials were largely in line with our plan. With a gross margin of 41%, we are back to the usual levels. We finished the quarter with an order backlog of 157 million euros, which is 42% over the same period last year, and given us confidence that we can meet our 2020 full year guidance, which we communicated to you in our last call, and which Felix will reiterate to you later in more detail. The renewal of our entire MOCVD product portfolio has been continued, is making good progress, and is an advanced stage. We remain confident about our prospects in our addressable markets with our new products as we believe that this will open new market opportunities for our equipment and get our business in an even better position in the future. At this point, Let me hand you now over to Charles for a more detailed overview on the Q2 2020 numbers. Charles?

Thanks, Bernd, and hello to everyone. Starting on slide four, our income statement, total revenue for the quarter at 56 million euros was higher than the 41 million euros of the previous quarter, reflecting the phasing of orders for 2019. The abnormal underutilization of production and service, which we reported in Q1 2020, has now been eliminated. The resulting 5% improvement in gross margin is largely attributable to the increased volumes. Operating expenses in the quarter of 20 million euros were higher than the 16 million euros in Q1 2020. The difference being between the two quarters operating expenses is down to two factors. Firstly, selling expenses in Q2 include a half million euro external commission. And secondly, the Q1 OPEX included a one-off credit in other income of 2.9 million euros from the reversal of an impairment charge. EBIT was 3.3 million euros compared with a loss of one million euros in Q1. The tax rate is low in both the quarter and the half year because the €2.9 million gain on reversal impairment is not a taxable transaction. Therefore, net profit was also slightly above the €3 million in the quarter. Turning to the balance sheet on the next slide, inventories of €91 million are higher than previous quarters in preparation for the scheduled high level of shipments in the second half of the year. the level of prototypes in inventory fell from €12 million to €9 million in the quarter. On an actual basis, receipts of €24 million represent 30 DSO, and the same as at the end of Q1. Other assets have increased slightly in the quarter to €13 million from €5 million at the end of Q1. This is mainly because of some routine tax paid ahead and VAT and grants which had not been received at the end of June. Customer deposits remain stable at 61 million euros in Q2, compared with 50 million euros at the end of Q1, reflecting our growing backlog. This is a 5-6 cash flow statement. We had a negative free cash flow of 11 million euros in the quarter, which was mainly due to the increased working capital I just mentioned. Our overall cash balance at the end of the quarter was 289 million euros. And with that, let me now hand you over to Felix.

Thank you, Charles, and welcome to you all. I will give you a short overview of development within our portfolio, of our approach to handling the pandemic, and of our outlook. Let me first speak about our OLED business at Apiva. We are going through the qualification process with our Korean customer and continue to make good technical progress. We have achieved a number of technical specifications, and work towards achieving additional ones. Furthermore, we are now starting discussions with our customer on the next steps of our joint OLED project. In our MOCVD business, we are seeing solid interest around our Datacom laser solutions, driven by the ever-growing need of fast data communications. Our equipment for the production of LEDs for fine pitch or mini-LED displays and mini-LED backlighting units continues to see healthy demand. In addition, we have sold a good number of upgrade kits for the production of UVC LEDs. UVC light can be used for disinfection of air, water, and surfaces. This does not represent a large portion of our revenues, but gives a good contribution to profit and helps to further strengthen our position in the market. In power electronics, we see strong demand in particular from our existing silicon carbide customer and a growing demand for tools to produce gallium nitride-based power devices. These devices are used, for example, in highly efficient power supplies and in compact, fast-charging devices for consumer electronics, such as mobile phones, or laptops. Let me now give you some background information on how we handle the COVID-19 challenge. Our production remains to be up and running without interruption or delays. As you know, we had implemented a number of measures early on in the crisis, and our supply chain has proven to be very stable without major shipment delays. Since early June, all our employees are back in the office working in an increased distance to each other and wearing masks wherever proximity to others cannot be avoided. Since the return to the office, we did not have any additional cases of COVID-19 infections in the company. As a result of the above described market demand and our stable operations, we can again confirm and reiterate our guidance for the year 2020 as illustrated on slide seven. You may have noted on our guidance slide that we are now showing order and backlog figures which are to be converted into revenues during 2020 rather than just looking at the timing of shipment. We've made some changes to the way we put together our guidance slide. We have now based our assumptions of what we previously called shippable order intake and backlog on more exact data. mainly on what we believe will be converted into revenues this year. This means that we are not assuming 100% revenue generation on shipment of a tool anymore, but rather 90%. Generally, this is what we are actually booking on shipment, which makes the figure now more accurate. And that is the reason why we have introduced this change. With this, we continue to expect revenues to be in a range between 260 million and 300 million euros, a gross margin of approximately 40%, and an EBIT margin between 10 and 15% of revenues for the full year 2020. This expectation is based on our solid order book at the end of this quarter, at a healthy level of customer inquiry, particularly around next generation power electronics, lasers for optical data communication, and specialty LEDs for display applications. Our forecasted US dollar denominated orders and revenues for the remainder of the year are, as always, based on an exchange rate of US dollar 120 per euro. With that, I will pass back to Guido before we take questions.

Thank you very much, Felix, Bernd, and Charles. Operator will now take questions, please.

Yes, thank you very much. Ladies and gentlemen, if you would like to ask a question, please press 9 and the star key on your telephone keypad. In case you wish to withdraw your question, please press 9 and star again. The first question comes from Andrew Gardiner from Barclays. Over to you.

Thank you. Good afternoon, gentlemen. If I could ask two. Firstly, just a quick one. Bernd, you referenced some slight delays in second quarter, primarily at the customer request. Can you give us a sense as to what markets that might have been in and whether it was significant in terms of revenue? And are you expecting to get that back in third and fourth quarters? And then also just around perhaps the reframing of guidance and the backlog that you've got to ship later this year. But actually, so my question was more into next year. I mean, what kind of longer-term visibility do you have at the moment as we look to the start of 2021 and some of the relative strength of the different end markets? Thank you.

Yeah, thank you, Andrew, for the questions. Yeah, with the delays, I mentioned in my presentation It is pretty much that in the first quarter, it was mainly in China. You could not travel to China, or even within China, our Chinese team could not travel, and that delayed some few shipments to China and installations, which in the meantime, for example, the shipments have been shipped in Q2. And in second quarter, it was more installation dedicated for US and Europe for the same reasons. It is not a huge number in terms of revenue because you remember we take 10% of the revenue of an order with achieving the final acceptance, which basically we get once we finish the installation and meet the final acceptance requirements. So the total number is not big, but it is important for us in terms of the profitability. So it is a small one-digit, say, million numbers which we talk here about. On the longer-term perspective, it's very difficult to say. We're certainly looking into market analysis. This is, of course, not based on bottom-up approaches, more on longer-term expectations for market development in specific sectors, and there we are very optimistic in the growth opportunities of the areas I think we mentioned by Felix. The difficulty is always when does it really come and when does it kick off. So is it next year, is it maybe somewhat later? It really depends what end application in the end drives the demand. We can speak more about the long term perspective, which is looking very positive, or the short term, which is also looking positive. Unfortunately in between it's quite difficult to say.

Understood. Just to follow up on that last point quickly, you mentioned greater interest in tools for mini and micro LED, moving towards fine pitch displays. Do you guys feel we're getting closer to an inflection point there? You know, there's obviously a lot of talk about it within the market. I'm just wondering in terms of whether you feel like we're still in the prototyping phase, or is there signs that you might start to see orders for more production volumes?

Andrew, you have to see this a little bit more complex. First of all, there are now products sold by our customers to end applications. So it's not like visibility. It's happening now. But you have to differentiate between the colors. Particularly for the blue and green color, the market or the customers are using installed equipment which they have for the general lighting demand. So there's enough capacity for blue and green for this application. However, for red it's different. For red you need additional capacity simply because red capacity is pretty fully utilized. You may remember you don't need red for solid-state lighting. So there is not such a big install base which has been acquired during the solid state lighting boom. And that drives basically our, when we speak about demand for fine pitch mini LED, it is red LED systems, what we talk really about. And we received orders and we're going to ship tools in the second half of this year in particular for this application. So it's ongoing now.

Thanks for the explanation, Bert.

Next up is Uwe Schupp from Deutsche Bank.

Yes, good afternoon, gentlemen. All the questions from my side, please. Firstly, on the gross margin and really related to LED as well. Sorry to follow up here. And secondly, on fast charging. So first on the gross margin, if my math is correct, you actually had roughly 50% from LED in the second quarter. And in the past, we have been told that LED orders are typically carrying a much lower gross margin. um yet the obviously the gross margin in q2 was much better than in q1 so much just my question is how to square this up with uh with what we are with what we are seeing and maybe that is related to the comment you already made that really led is no longer led ie more motorcycles are maybe more higher margin or any any color around that would be appreciated and secondly on fast charging and value nitrite that would be fun how much of the capex for this opportunity Do you think, have you seen, have your customers already been spending in terms of number of mobile phones for 5G that can be penetrated? Just some color on that would be appreciated. Thank you.

Okay, Uwe, let me start with your first question about cross-margin, in particular Q2. Why is Q2 so good, having such a high LED content? That is, the reason is very simple. The LED content in Q2 was not for fine pitch or mini-LED. It's being a customer who ramping up, in China, ramping up its opportunity for micro-LEDs. And you know, micro-LED requires really a high-performance, high-end MOSDVD tool, which is fully automated. And with that, the micro-LED prices are more like prices we are used in power electronics, et cetera. So we mean in the entire margin. I'm afraid you may see in Q3 a slight drop in gross margin because there in Q3 we're going to ship quite a few systems for red LED to China for the names, for the mentions mentioned. mini-LED and fine-pitched. So that's the explanation.

And let me come to your question on the fast-charging gallium nitride. So gallium nitride-based power electronics have multiple boot cases. Fast-charging is now the first boot case that we see really going into volume. So we clearly have seen the inflection point, and we see that the market is in full ramp. And we see especially, and we can expect to see further, that right now and further in 2021, many smartphone models will be equipped with fast-charging modules, chargers based on gallium nitride power electronics. Interestingly, it was mostly Chinese customers taking the lead on this one. In this case, Chinese smartphone makers being the first ones in the adoption. So we talk here about the Huawei, the Zivo, the Xiaomi, the OPPO, and these guys. I think other global brands will follow later. However, I think we should not only reduce gallium nitride-based power electronics to fast charging. That would be too little. Fast charging is the first application adopting gallium nitride power electronics in volume. simply from the reason that gallium nitride has a good value proposition here, but also the reliability requirements of this consumer electronic market are relatively low, such that such a new innovative material finds fast adoption. I'm personally expecting the second wave of gallium nitride-based power electronics to be in highly energy-efficient data centers. We speak here about the power supplies for the data centers of Google, Facebook, Amazon and the like. And also part of the second wave, we can expect onboard chargers for electric vehicles or hybrid vehicles. And later on, we can expect the third wave of gallium nitrate-based power electronics to be integrated of smart power, as some customers are calling that, then exploiting the capability that on one die you can integrate multiple switches. In a nutshell, you can say we are seeing now the starting point, the inflection point of a multi-year growth opportunity, but I would not want to say there is X many units total market size, and we've now seen X percent of that, as your question was indicating.

That's very helpful indeed. Can I just one follow-up to each of you? First, Bernd, when you say, I actually remember you saying during various conference calls, there is no true micro-LED in China. Is that statement now still valid? Post the comment you made a minute ago. And then secondly, Felix, you said that the Chinese smartphone makers have actually leapfrogged the others with the fast charging. But is it true that your customer base is sitting more in Taiwan and they would be shipping those chips to the Chinese smartphone makers? Thank you.

About the common true LED micro LED in China, I'm afraid the statements still hold up. But you know there's quite some ambition in China to develop micro LED and basically even if you have a micro LED capable tool and you start producing with this tool what we would call a mini-LED, but wanting to develop, let's say, having a roadmap to reducing size of chips and going more towards micro-LED, I think this is the plan which the customer is going along. So it's true, there is no true micro-LED product out of China yet.

Into the second question, where our customer base is located, our customer base for gallium nitride, I would split it into two waves. The first wave of customer installations was in Europe, in the US, and in Taiwan, as your question is indicating. And in fact, one of our Taiwan-based customers is currently running in very high volume, producing chips, producing gallium nitride-based chips, and many of them are being used in China-based smartphone models. However, in the last one and a half years, we have also seen very strong demand for gallium nitride-based tools, our G5 Plus tools, from China mainland itself. And I think we have easily shipped one or two dozens of tools in the last one and a half years to China mainland, not only one customer, but a number of China-based startups, mid-sized players by now, some of them, not to forget that in China mainland, There is a very strong and deep knowledge of compound semiconductors, which has been grown over the last decade based on the blue LED industry, which was also based on the gallium nitride material system. And we are now seeing also local production of local China customers jumping on that bandwagon. So China is becoming a market for gallium nitride by itself.

That's very helpful indeed. Thank you very much.

Next up is Malte Schaumann from Warburg Research.

Yes, good afternoon. The first one is on your order pipeline. How is your confidence or what's the stability you see in your order pipeline for current future projects? Do you feel quite confident to reach potentially kind of a similar order level in the second half? Do order levels or does the pipeline change? So what is the certainty or uncertainty you see in your order pipeline for the water here towards the short term?

Yeah, thank you, Mr. Schauweiler. I mean, so far the inquiry and quotation activities sitting here now, they continue on a similar level like in the first half of the year. So it's, of course, difficult to say what what will happen in next quarters, but talking about now, we're seeing a similar level.

Okay, and is there a shift in applications? So, LED was pretty strong, especially in the first quarter, probably in the second as well. Is that shifting towards another application, or is it remaining kind of stable?

I think we see a similar mix in the second half as in the first half, judging on other inquiry levels, which is strong on the power electronic side, both GaN and silicon carbide. Secondly, lasers for optical data communication. And thirdly, micro and mini-LED, which we largely discussed in the last couple of minutes.

Yeah, good. Then on the OLED project, I still prepared to make a decision this year? If in the case in order will not follow up or do you see any kind of postponement in the project that might lead to a delay in decision taking?

So we are now about to complete the Gen2 project. As we wrote in our report, we have achieved a couple of specs. We are now working with the customer on achieving additional ones and closing the specification list and then later on closing the project. And with that, we are now starting discussions with our customer on a follow-on project, which once again will be, again, an R&D-type development project, however, scaling up to a larger display size. So, you know, in the first one on the Gen 2 project, we've generally proven the feasibility study of the OVPD technology. And the next stage, yeah, which is then to come in 2021, it's about proving that this can also work at large-scale substrates. That would be the next step. And we are now starting the discussion. They could conclude by the end of the year. They can move on early into next year, and I think that depends really on the technical discussion. Because, you know, with such a project, it's not only you sit together with a customer, like on an existing project, and you close a deal, you negotiate a price, you sign a PO, but it's a lot of technical discussions about the specifications, what you want to achieve, how it does fit into the customer line. And only when those technical details are sorted out, you can really make a closure of the project. But those discussions are now starting.

Okay, good. And then last one, quick one on the financials. Over the past kind of six quarters, you had an average R&D funding of 2 million per quarter. Is that the number you would also expect going forward, or is there kind of a change in one of the directions coming?

I think that we would expect a similar level of R&D funding into the rest of the year, really.

Any change going into next year or is it too early to turn?

I don't think there's much change expected at all into next year.

Okay, good. Thanks.

The next question comes from Janadar Manon from Liberum. Over to you.

Good afternoon. Thanks for taking my question. Just one question on the silicon carbide side. You said your orders are still coming from your existing customer. Can you give us an update on how the qualifications with the other customers are proceeding and when you might expect a decision on that to be made? Sure.

Yeah, thank you for that question. So as mentioned with one existing customer, we clearly see that this customer is in a ramp phase and is placing continually orders every quarter, one, two, three tools. So that is very nice and enjoyable. We are positive on concluding the qualification with the other customers. And I think it's just a question of the volume ramps and the production facility expansion at the other customers when an order is going to be placed. It's not a question whether an order will be placed, but it's a question rather is it going to be placed in Q4 or is it going to be placed in Q1, and that truly depends on the volume and capacity needs of our customers.

So would those new customers be having a sort of a dual – platform strategy you and your competitor or would they be moving entirely to you?

Well, I think the existing base is with our competitor and the existing base is already a number of tools. So I would expect the largest part of the ongoing expansion to be with our tools once we can convince the customer of our tools because our objective is very clearly to have a lower cost of ownership. So there should not be a reason to buy a competitor tool again.

And this is with one company or is it with multiple companies?

Multiple companies.

So can we assume, therefore, that if these new facilities start expanding sometime in the next 12 months or so, maybe first half of next year is when you will see an inflection of orders beyond your existing customer?

I think in the first half of 2021, we should clearly see demand from other customers, yes.

Understood. Just on the OLED side, so can I understand from your comments that the customer is now convinced of the technical capabilities of the Gen 2 machine and therefore is keen to proceed on to the bigger machine, whether that is a Gen 6 or a Gen 8. I mean, that question mark is now no longer, is not there anymore. Now it's only a matter of finalizing the price and the technical qualifications or specifications of the larger machine.

I wish I could look into the head of my customer because then I had a clear advantage in a price negotiation. I cannot answer you that because only my customer knows.

Okay, but the very fact that he is willing to engage in this discussion should imply that he is interested, presumably.

Interested, I would definitely say so. Otherwise, he wouldn't bother to talk to us. Sure.

And the last question is, I mean, to hit the high end of your sales guidance for the year, you will probably have to be shipping in excess of 100 million euros worth of systems by Q4. Do you have the sort of capability in terms of supply chain deliveries and space, etc., to deliver that sort of – because you have not delivered that kind of revenues for almost a decade now. So is that possible at this stage?

Well, wait a second. We have Q3 and Q4 ahead of us, right? We have two quarters to come, yeah? So I'm clearly expecting not a zero in Q3. We're clearly expecting on a serious note an increase in shipment levels in Q3 compared to Q2. And we clearly expect an increase in shipment levels in Q4 over Q3, yeah? And given from the fact that we have now confirmed and reiterated our guidance, yeah, we are very confident that we will meet the 260 million euros in revenue this year. And that implies, I mean, it's just mathematics, 97 was in the first half, so in order to make that, we have to make at least 163 in the second half, and we are very confident to make that number. Otherwise, we wouldn't have reiterated and confirmed our guidance.

And of course, I mean, John, you're right, in order, if we look in the entire span, between our guidance of 260 to 300. This would imply 100 per quarter, each quarter. I think it's not so likely that we will get to the upper end of the guidance. I think as Felix indicated. But if we want to achieve, let's say, to the lower or midpoint of the guidance, I think one quarter should get into the 100 million range. And yes, this is the plan.

Got it. Thank you very much.

The next question comes from Charlotte Friedrich from Berenberg.

Hello, thank you. And we've covered actually most of my questions. Just one follow-up on any additional colors that you can share on the third quarter, aside from expecting perhaps a slightly softer gross margin because of LED shipment?

Yes, I mean, I mentioned this. We are going to ship in Q3 quite a number of red LED tools to China for mini and fine-pitched LEDs. And traditionally, our prices are a bit more, the average selling price is a bit lower than in other applications. So we expect a slight drop. a slight reduction in gross margin in third quarter due to the fact that we're shipping quite a few red-end vetoes.

Okay, thank you.

And the next question comes from Jurgen Wagner from MindFirst Bank.

Yeah, good afternoon. Thank you for taking my questions. First, to follow up, on your OLED answer. You mentioned that the Gen 2 is now about to conclude all the discussions, all the development. How much revenues will you book for that in the current year? And then you also mentioned that your portfolio will be upgraded or completed. The upgrade will be completed soon. What could be the impact on cross-margin and OPEX, leaving OLED aside in 21? Thank you.

So let me take your first question on the OLED topic. As we mentioned earlier, for the OLED, we are booking the revenues on a percentage of completion, in a percentage of completion mode. That is, we are continually booking and recognizing the revenue as we are completing the project. So that means an implication that by the moment we complete the project, it will not lead to a jump in revenue or a sudden one-time effect, but rather as we have been completing the project and have been doing that along the side, so there's not going to be a one-time effect out of this.

So you have been recognizing sales already this year? Yes. Is that right? Yes, we have. And how much was that?

The revenue from the system was booked in an earlier year. What we've been doing is a joint development program, which is a joint expense between us and our customer. So there is no revenue booked so far in 2020 for the Gen 2 system. So there is no revenue to book for the Gen 2 system and It's been taken in prior years when the system was physically shipped to the customer.

And this means that you don't expect any revenues from that in the second draft, is that right? That's correct. That's correct. Okay, thank you.

Okay, sorry, Mr. Wagen, can you repeat your second question?

Yeah, you said that you are about to conclude the upgrade on your portfolio.

Sorry, I remember. Yeah, your question on the impact on margins, et cetera. So you have to see we are working to basically renew our entire MOCVD equipment portfolio, and that is not the thing which happens overnight. You know that we have launched the silicon carbide new equipment in fall last year, and we are still talking about getting the first repeat order probably early next year. So this gives you a feeling what is the period from introduction to the market until you're really seeing first sales. And with the other products, it's similar. So we are now in the process this year basically to bringing the first demonstration tools to customers for our next-generation gallium nitride tool, which is targeting for power and eventually also micro-LED, but we will start with power electronics. And similar for the red color for lasers and for micro-LEDs, here we will start due to customer demand with micro-LEDs. But these tools mostly will, first tools, they will ship them maybe the beginning of next year. So then you have to go through the qualification cycle and until you really see impact of volumes going to your P&L, this takes a while. So don't expect, I'm mentioning this more for you guys to understand why our R&D numbers are going up. So we're now spending the money to developing these tools And you see this in our P&L in the increased R&D. And when you see the increased R&D, it's not coming from OLED. Indeed, OLED is reducing. It's really coming from the efforts of developing new MOCVD platforms. And that is an investment for staying ahead of delivering first the increased market demand, the increased customer demand in terms of performance. but technically also to staying ahead of competition. That is basically what we're doing here. So don't expect an immediate impact this year, next year.

Okay, understood. Thank you.

The next question is coming from David O'Connor from XM ENP Paribas.

Great. Thanks for taking my questions. Two on my side, if I may. Firstly, on the OLED side, So the next stage of OLED on the R&D, the proving, as you talked about scaling the largest substrate, what's the timeframe for this next stage? That's my first question. And then secondly, on the 3D sensing opto side, Q2 orders, 9 million euros down quarter of quarter and year of year. What's your overall general expectation for 3D sensing from your discussion with Opto customers as you go into the second half and maybe further out into next year? Thanks.

So it's coming to the first question about the timeframe. So I think this is going to be a project which will run through the year 2021, roughly, yeah? And then to be seen what exactly the scope of that project is. Is it finishing towards the end of 21 or early 22? I think that depends on the mutually agreed scope with the customer.

David, on the 3D sensing, it is basically still in the situation that there is capacity for, let's say, the ongoing products which are in the market. The existing capacity is enough, and it requires really an uptick in additional capacity requirements coming from end applications, meaning more cell phones, more high volume cell phones are using on the face and world side 3D sensing applications because that's what's driving the short-term demand in 3D sensing. Nevertheless, we are very optimistic about the long-term demand in 3D sensing, looking in industrial looking in automotive applications, but this is more in the long term, but in the very short term, we're selling 3D sensing tools here and there, and it's basically mostly to customers in China or Taiwan. Basically, the established supplier into the supply chain of iPhones In the moment, they don't give us indication for a fast need of capacity. However, from the past, I remember well, it can change overnight. Because it doesn't require any development, nothing. You just place an order and ask S1 to deliver as fast as possible.

Understood. Thanks. Maybe one follow-up on the power side of things. Last quarter, I think he indicated the split in power orders about 50-50 between silicon carbide and gallium nitride. Could you give us any indication of what it was in Q2? Thanks.

I think it was a bit more on the gallium nitride side, but I don't have the exact numbers with me.

Okay, that's quite helpful. Thank you.

Yes, thank you very much, Brian, Felix, and Charles. And thank you for your sustained interest. This ends today's conference call. I wish all of you a nice summer. Stay safe. And hopefully see you again soon, maybe even in person. Thank you and bye-bye.

The conference is no longer being recorded.