Asmpt Ltd

Hi, good morning. Ladies and gentlemen, this is Ben Po, the head of investor relations at ASMPT. And today I'll be moderating the call for the first time. On behalf of ASMPT Limited, welcome to our third quarter 2025 investor conference call. Thank you all for your interest and continued support. Please note that all participants will be in listen-only mode during the presentation by the management. We will start the Q&A session after the presentation. During the Q&A session, priority will be given to the covering analysts. Before we start, let me go through disclaimer. Please note that there may be forward-looking statements about the company's business and finances during this call. Such forward-looking statements could involve known and unknown uncertainties and risks that could cause actual results performance, and events to differ materially from those expressed or implied during this conference call. On the call, unless stated otherwise, all references to gross profit or margin, operating profit, segment profit, and net profit are on adjusted basis as described in our MD&A. For your reference, the investor relations presentation on our recent results is available on our website. On today's call, we have the Group Chief Executive Officer, Mr Robin Ng, and the Group Chief Financial Officer, Ms Katie Hsu. Robin will cover the Group's key highlights for the third quarter, guidance and outlook for the next quarter. Katie will provide details on the financial performance for the third quarter. Now, I will hand it over to our Group Chief Executive Officer, Robin. Thank you, Benjamin.

Good morning and good evening to everyone today. It is a pleasure to have you all on our earnings conference call for the third quarter of 2025. Now, let's start with the key highlights of the third quarter. This quarter, we continue to experience strong momentum driven by AI. The group's advanced packaging and mainstream businesses continue to benefit from sustained AI adoption. The group's strong advanced packaging momentum has been driven by thermal compression bondings, or TCP. We remain dominant in advanced logic, have made rapid inroads into high bandwidth memory, or HPM, and more recently have first mover advantage in HBM4. At the same time, AI infrastructure comprising data centers, data transmission, and power management contributed to demand in mainstream business. In China, Demand was also driven by EV and high factory utilization across all sets. Now, let me talk about our technology leadership in TCB. We have further solidified our leadership in HBM. The group's HBM-TCB solution have achieved better years versus the competition. And as I said above, we are leading in the transition to HBM4. In addition, our proprietary fluxless active oxide removal technology provides superior scalability for hbm 16 high and above with the lowest cost of transition in logic the loops ultra fine pitch tcb for chip to wafer with plasma aor solution has successfully passed final qualifications for quality and reliability at the leading boundary and it's ready for high volume manufacturing notably Plasma-based technology has been endorsed by this leading foundry, underscoring its technological advantage over other processors. Turning to TCB orders, encouragingly, the group achieved recurring orders from both memory and logic customers in the third quarter, in memory of TCB solutions for HBM-412 hype became the first to secure orders from multiple HBM players. We expect to remain as a primary supplier, demonstrating our technology leadership in the rapid transition to HBM4. In logic, the group continues to win orders as a processor record for chip-to-substrate applications of key customers. As the market transitions to a larger compound dice, we are well positioned to secure sizeable orders in Q4 2025 and beyond from the OSEC partners of a leading foundry. As a business, we remain confident in the outlook for TCV demand. As to the other updates in hybrid bonding, the group continues to ship hybrid bonding tools in Q3 2025. Our second-generation hybrid bonding solutions are competitive in alignment, precision, bonding accuracy, footprint efficiency, and units per hour. In photonics, we continue to dominate the optical transceiver market, reinforcing our leadership as a key supplier of 800G transceivers, while also actively engaging industry players on next generation 1.6T photonics solutions. Moving to SMT, bookings were better than expected in the third quarter. demonstrating signs of recovery in the business. SMT's AP solutions achieved strong bookings year-on-year growth in the third quarter and won sizable system-in-package orders from IDMs and OSACs for RF modules for base station to support AI growth. SMT also continued to win orders for the next-generation SHIB assembly tool in advanced logic smartphone applications from a leading foundry and OSAC players. In our mainstream SMT business, the demand came mainly from EVs, where we remain the leading player in China. Before I conclude this section, I want to highlight that we have delivered a profitable quarter, excluding the strategic restructuring costs from the voluntary liquidation of the Shenzhen AEC Plan as announced in August. The decision was made to optimize the Group's global supply chain to better align it with the evolving market dynamics and customer needs. As said in the announcement, this move is expected to improve the core competitiveness, agility and resilience of the Group's global manufacturing operations for its key products and solutions. With those highlights, let me now pass over the time to Katie, who will talk about our group and segment performance.

Thank you, Robin. Good morning and good evening, everyone. Let me take you through the group financials. This slide covers the group's key financial metrics for the third quarter of 2025. The group delivered revenue of $468.0 million, representing an increase of 7.6% quarter-on-quarter and 9.5% year-on-year. largely driven by growth in SMT. In the third quarter, the group recorded bookings of $462.5 million driven by AI momentum. We recorded recurring TCP orders in memory and logic. And SMT bookings were also better than expected. This marks the sixth consecutive quarter that we have achieved year-on-year growth. The group had an isolated bookings cancellation in the third quarter for its panel deposition tools from a leading high-density substrate manufacturer in response to a slower-than-expected digestion of existing capacity. This is a one-off occurrence. And excluding this cancellation, the group's bookings in the third quarter would have been $486.6 million 1.5% higher quarter-on-quarter and 20.1% higher year-on-year. The group achieved a book-to-bill ratio of 1.04 for the quarter, maintaining a ratio above 1 since Q1 2025. SMT posted a robust ratio of 1.12 while CEMI's ratio was at 0.96. The group closed the quarter with a backlog of $867.7 million U.S. dollars. Adjusted growth margin for third quarter was 37.7%, which is lower than our typical level. It was impacted by a larger contribution from SMT and the lower semi-growth margin, which I will explain in the next slide. I would like to note that the group's year-to-date adjusted growth margin remained healthy at approximately 40%. The group's operating expenses were up 6.2% QMQ and 5.3% year-on-year. As expected, high OPEX was largely due to strategic R&D and infrastructure investments and foreign exchange impact. They were partially offset by prudent spending control and some benefits from restructuring. The group's adjusted operating profit was HK$124.4 million, down 26.6% quarter-on-quarter and 30.3% year-on-year, due to lower gross margin and higher operating expenses. adjusted net profit was 101.9 million Hong Kong dollars, down 24.4% quote-on-quote, but up 245.2% year-on-year. The quote-on-quote adjusted net profit, which included fee collected from the order cancellation mentioned above, was offset by the absence of tax credits recorded in the previous quarter. The year-on-year increase in adjusted net profit was driven by the fee collected from the order cancellation and the lesser negative impact from foreign exchange. The adjusted earnings per share was HK$0.24. Now moving on to the Semi-Conductor Solutions segment for the third quarter of 2025. Semi's revenue was US$240.5 million, down 6.5% quarter-on-quarter, but up 5.0% year-on-year. The year-on-year revenue increase was driven by stronger demand for wide-benders and dive-benders due to the increased needs for power management across multiple applications. Quarter-on-quarter revenue decline was due to the timing of key customers' AI technology roadmaps, which impacted AP demand this quarter. There was also some shipment disruption caused by a typhoon in September in China. Semi's bookings of $207.8 million were down by 1.7% quarter-on-quarter and 12.4% year-on-year. Excluding the booking cancellation explained above, Semi's Q3 2025 bookings would have been $231.9 million, 9.6% higher quote-on-quarter and a slightly lower year-on-year. Semi recorded quote-on-quarter and year-on-year growth in Y-bonders and Y-bonders. TCB orders were up quote-on-quarter but remained at a lower level due to the impact of IEP demand as mentioned above. As I said earlier, Semi's adjusted gross margin was lower than normal at 41.3% for Q3 2025. Q-on-Q decline was due to a higher contribution from Y-bonders, lower TCB revenue, and a relatively lower manufacturing utilization in Q3 2025. Year-on-year decline was due to high base effect from TCB manufacturing ramp in Q3 2024, and a high contribution from Y-bonders this quarter. Encouragingly, year-to-date semi-adjusted gross margin has stayed in the mid-40s, and AP margins have remained stable. Semi-adjusted segment profit was 82.6 million Hong Kong dollars in Q3 2025, down 52.8% quarter-on-quarter and 41.5% year-on-year, mainly due to lower gross margin and higher operating expenses as mentioned in the previous slide. Next, the SMT solution segment of our business. SMT delivered strong revenue of 227.5 million US dollars, up 28%. quote-on-quote, and 14.6% year-on-year. This was due to a robust performance in Asian markets, driven by AI servers, EVs in China, and the delivery of a smartphone bulk order booked in the previous quarter. However, contributions from automotive outside China and industrial remained soft. SMT registered Q3 2025 bookings of $254.7 million, down 5% quote-on-quote, but up 51.8% year-on-year. Marginally lower quote-unquote bookings were due to a high base effect from the Q2 smartphone bulk order, while the year-on-year increase was driven by strong momentum across both AP and China mainstream markets. AP bookings were supported by demand from IDMs and OSETs for telecom-based stations and AI servers. China's mainstream business recorded strong year-on-year growth due to demand from EVs. SMT delivered a gross margin of 33.9% this quarter, up 136 basis points quarter on quarter and 163 basis points year on year. And the segment profit was 163.0 million Hong Kong dollars, up 205% quarter on quarter and 65.6% year on year. Both were driven by higher volume effects. With that, let me now pass the time back to Robin for Q4 revenue guidance.

Thank you, Katie. Now to Q4 revenue guidance, the group expects Q4 2025 revenue to be between US dollar 470 million and US dollar 530 million. This is up by 6.8% quarter on quarter and 14.3% year on year at the midpoint, which is above market consensus. This growth will be supported by momentum in both SEMI and SMT. Looking ahead, the Group's TCB 10 projection has the potential to go beyond US$1 billion in 2027, supported by recent news about investments in the AI ecosystem. AI data centres will continue to drive demand for AP, particularly TCP for HBM4 and Advanced Logic, where the Group has technology leadership. The Group's mainstream business will be supported by global investment in AI infrastructure and stable demand from China. while visibility for automotive and industrial end markets recovery remains low. While the group has not experienced any material impact from tariff policies, it acknowledges that uncertainties remain. The group's global presence will provide flexibility to navigate any potential impact, and it will continue to monitor the situation closely and adapt as needed. This concludes our third quarter 2025 presentation. Thank you. And we're now ready for Q&A. Let me pass the time back to Ben to facilitate.

Thank you, Robin. Ladies and gentlemen, we will now begin the Q&A session. To ask a question, please raise hand on Zoom and I'll request you to unmute. Please limit yourself to two questions each time. With that, may I request Goku to unmute?

Yeah, hi. Good morning, Robin, Katie, and team. Thanks for the opportunity to ask questions. First question I had is on the HBM4 commentary from you, Robin. You mentioned that you are leading this transition to HBM4. Could you explain a little bit more what exactly that is indicating? Do you think that you would have higher market share in HBM4-based PCB? compared to the incumbent Korean vendor. And also, your updated view on when does the fluxless TCB insertion happen for HPM? Is it happening for HPM4 or we are waiting for HPM4E for this migration to happen? Thanks, Goku.

Yeah, I think the first question is on the HPM4. I think, Goku, as you mentioned in our MD&A, we believe we have established ourselves as a primary supplier for the HPM4 market. We have the conviction because we are probably the first to have won the HPM4 orders, but not just one, but two major HPM players. Now, I think the second question is on Fluxless. Yeah, we believe at some point, the industry continues to stack higher and higher and move from HPM 4 to 4.8 to 5, in our opinion, it's quite inevitable that they have to move to a fluxless solution because the number of IOs will continue to increase, The pitch will probably narrow down. The chip gap will get smaller. So all this means that FluxOS will be a better solution compared to a Flux-based TCP solution.

So just to clarify, when you talk about two HPM vendors, does it include the biggest market share player? Because I thought they are still using the incumbent vendor, right?

Yes, of course. As I said, we have one order from HPM. two of the three. So definitely talking to the leading one.

Got it. Understood. Maybe next question is, I think you observed some pause in AP and TCB in Q3. What is the reason for that? And given your guidance for 7% Q1Q growth for Q4, Could you talk a little bit about how Semi's overall and ETCB within that will be growing? That'd be outgrowing that 7% or it'll be growing slower than that 7%? Thank you.

I think in terms when we talk about pause, actually it's really largely driven by the timing of key customers' technology roadmap, right? So, we're confident that when they launch the new architecture, we will get the order. So, it's a matter of timing, in our opinion. Now, the OTCB demand, whether it's in terms of booking or billing, actually aligns with this timing as far as we're concerned. So, it tends to be a bit lumpy.

Is it more about logic or is it more about HPM? And also, any indications on... Like segment-wise, how are we thinking?

Google, I would say both because the technology roadmap will drive both HBM as well as on the logic side. And Q4, any thoughts? If you're alluding to booking, maybe it's time for me to give you some color on booking for Q4, right? I'm sure the question will pop up during the conference call as well now. The way we look at Q4 booking color, group-wise in Q4, we expect bookings to be kind of flattish compared to Q3 reported number. Q3 reported US dollar about $462 million. So going forward in Q4, we expect to be kind of flattish on the group basis. We do expect that this Q4 booking for the group will be the seventh consecutive quarter of year-on-year booking growth since Q2 2024. So it's encouraging to note that we have been growing our bookings for seven consecutive quarters. And I think encouragingly, we see semi-bookings are expected to increase by meetings, Q&Q, mainly due to TCB. So when I say Q&Q meetings, I'm still comparing against the reported number. Right, that's for the semi-bookings, expected increase, meetings, Q&Q, mainly due to CCB. So we expect TCB booking to sort of increase on the Q&Q basis comparatively. For SMT, we expect SMT to decline Q&Q due to the high base effect in the prior quarter. Now going into the Q4 booking for Semi, being the POR for Chitwan substrate application. And as the market moves towards larger compound dive because of higher computing power requirement, or compute requirement, we are confident of achieving a sizable TCB order for OS application in Q4 from the leading foundry, OSAT partners. and these orders will be likely built in early part of 2026 which will be definitely gross margin accretive right so i think to sum it all in terms of q4 and certainly beyond q4 in terms of booking color uh we remain confident that the strong ai tier wins including the recent news regarding investment in the entire ecosystem for ai will continue to drive demand for ap In particular, our TCP technology leadership will position us strongly into 2026 and beyond. So this is a bit of Q4 color and slightly into Q1 as well.

Okay, that's very clear. Thank you.

Thank you, Goku. And next, I would like to request Donnie to unmute.

My first question is the housekeeping question. So considering we have disposed the AEC operation in China, wondering if Katie can give us some colors on how should we estimate the OPEX or OPEX ratio in the coming quarters as we have seen the OPEX ratio has been pretty high for the past few quarters. So I'm wondering if it will be coming down after the disposal of the AEC operation and also some calls... control management. And my second question is regarding to the TCB. So my understanding is that despite of we have some progress in fluxless TCB, but the real volume shipment remains small into maybe fourth quarter this year. So I'm just wondering if you can give us a timeline when exactly the fluxless TCP for memories and for leading foundries can ramp up more significantly in the future. And also some comment on the progress in China would be also appreciated. As you know, that China's been aggressively increasing their AI chip production capability, including HBMs as well. Thank you.

I'll take the first portion, Donny. So you asked a question about AEC liquidation. I just want to make a correction. For AEC liquidation, as we announced, the savings was going to be R&B of $150 million each year. Majority of that saving actually would be benefiting COGS, not OPEX. There would just be a little bit of factories, a GNA that would be part of OPEX. So AEC, let me just spend a quick minute. The announcement took place in August and the project's been progressing pretty well. And we do expect that the savings will benefit us going forward. And now on the OPEX ratio and specific on OPEX, there's actually no change. At the beginning of this year, we announced that we'll be investing incrementally 350 million Hong Kong dollars in R&D, especially AP and the infrastructure of the company. So every quarter, we are on the path of the investment. And because of that incremental investment, we've mentioned in prior quarters that this year's OPEX will be similar to prior year with some marginal increase. And that narrative has not changed and will not change for the year.

Okay, I'll take on the second question, Donny. In terms of TCP fluxes application, as mentioned in MD&A, we have made very good progress in terms of fluxes application TCP for a logic side chip on wafer. I think plasma technology has been endorsed by the leading foundry. And also, just to recap, Donny, we have been saying already in the past, but it's good for a recap, that G1 wafer demand this year, even if we have won the technology battle, the G1 wafer demand will not be significant this year. We are looking into 2026 for an inflection point in terms of G1 wafer application for logic TCP fluxless. In terms of fluxes, I answered the first question to Goku already. I think it all depends on when they will adopt the fluxless TCB for memory. As I said, in our opinion, as the industry continues to stack higher, the chips get smaller. more IOs in opinion at some points quite inevitable that they have to move towards a fluxless TCP solution or even for TCPM.

Thank you. And any color on China's adoption of TCP or opportunities there?

Yeah, I think we have been saying we supply to the global customer base. I think in terms of volume, obviously, the rest of the world's volume in TCP is still higher than those of China. And unfortunately, China is the ambition to really step up in terms of weapons packaging.

Okay. Thank you, Tony. And next, I will request Kevin to unmute.

Thank you, management, for taking my question. My first question is on the TCP outlook. As mentioned, on the logic side, we're already passing the qualification, right? So I was wondering, how should we think about the potential business opportunity on the chip to wafer part as compared to a chip to substrate? As mentioned, most of the contribution will be coming from next year. And when is it likely the timing of this contribution will start? And also on the memory side, I think we just mentioned that HBM4, we are securing order from multiple customers, right? So just wondering for the customer, are these for simple tool or for production already? Thank you.

Yeah, I think answer your first question first, Kevin, in terms of Cheeto Wafer. Quite similar answers to Donnie. Cheeto Wafer, in terms of volume, we expect it to be still smaller compared to substrate. Because substrate, I think almost the whole industry has moved to a TCP solution. Whereas for chip-to-wave, at the moment, it's only the leading foundry, leading the way in terms of using a TCP for particular end customer. So if more end customers adopt TCP, then you will see chip-on-wafer TCP solution fluxes will increase. Otherwise, just one customer, I think the volume will still be smaller than the substrate volume. In terms of HPM4, I would say they are already into some kind of a small volume production using our tools for HPM4 production for the two customers that we talked about.

Thank you, Robin. My next question is on the hybrid bundler side. I was wondering how competitive are we in our Gen2 hybrid bundler, which according to our announcement, we are already shipping. And what kind of chip or process are these for? Or this is going to be for mainly on the logic side or for the memory side?

Kevin, I would say we are shipping HP hybrid bonding solution for both logic and memory. As we speak, we are actively collaborating with other key logic and memory players. And we're making good progress and all these projects are at different stages of evaluation. So we are hopeful that at some point when the hybrid bonding market takes off, we are there to compete with incumbent. Okay.

Are we securing order from these customers already? or this is just right now still in the evaluation process?

Yes, still in evaluation for some of these very key logic and memory barriers. We are engaging them very actively as we speak. Okay, thank you, Robin.

Okay, thank you, Gavin. And next, I would like to request Sunny to unmute.

Good morning. Thank you very much. So my first question is on a high level, directionally, how should we think about the recovery of mainstream semi-solution from here? I wonder, in the last few months, now given more manageable impact from tariff, do you think the overall client sentiment is improving? or not much change for 2026?

Thanks, Sandy. I think in terms of mainstream, I would say quite encouraging. AI also contributes to the mainstream demand. I think mainstream, as you're probably aware, China is a significant portion. So we see China volume has been picking up for the last few quarters. So that's supporting the mainstream quite a fair bit for both semi as well as SMT. Now, in terms of tariff, initial period of the year, the tariff situation definitely has some impact on the sentiment of our customers. Now, I think with the terrorist situation, they're a little bit more stable. I think customers are now a little bit more confident in terms of placing orders. That's why we have good orders coming from mainstream, Y-Bone, Dibone. and SMT are also seeing a mainstream application for putting chips on larger PCB boards for base stations and all that. So all these are also partly driven by the AI adoption. So in general, we see mainstream certainly coming up from the bottom, but going forward, we still that kind of stability for mainstream.

Got it. Thank you very much. And then I have questions on PCB. Maybe if you could remind us the lead time for you to make PCB tools nowadays. In terms of orders, should you expect the inflection point to potentially come maybe in first half or second half of 2026 for Logic and for HBMs?

For logic, I think if we win that sizable orders for the chip on substrate for larger compound I, we will most likely realize the revenue in the early part of 2026. For HBM, it all depends again on the timing of our key customers' technology roadmap. So if they accelerate, we will see a premium earlier for HPM. If there's a further delay, our timing will also align accordingly. Now in terms of TCP lead time, actually internally we are efficient. We don't take a long time to assemble a TCP machine. It all boils down to material supply, right? So if customers give us more visibility, we can order materials earlier, then the lead time will be shorter. That's the dynamic of the TCP lead time at this point in time.

So for logic, so on chip-on-wafer, Any view on when the leading foundry may start to migrate to TCB? Will that be in second half of next year or early 2027? And therefore, assuming if your lead time is about like two quarters, should we see orders starting to come through maybe from first half of next year?

We are hoping orders become sooner. But again, it also depends on the timing of the roadmap. We are confident, chief to wafer, we will have delivery or shipment in 2026. I don't think it will delay to 2027.

Got it. Thank you very much.

Thank you, Sunny. I would like to request Daisy to unmute.

Hello, Robin and Katie. My first question is for Katie regarding the semi-solution gross margin. Katie, you previously mentioned that the closure of AEC will have a positive impact of the cost of goods sold going forward. Yeah, so how we should think about the near-term and the long-term gross margin for the semi-solution segment.

Daisy, assuming you're kind of talking about basically the gross margin going forward, right? Yes, yes. Okay, so... First on the AEC point, yes, correct. We would expect the savings to come in gradually in Q4 and then full-fledged in next year. Now, in terms of the Overall, semi-Q4 gross margin, we do not provide guidance, but just some kind of direction pointers. The guy did a Q4 revenue, probably could tell that the TCB revenue contribution will continue to be lower, but with some high photonics then, but wide bond momentum will be sustained. So therefore, we expect a slight margin accretion there. for SEMI's margin in Q4. And then to look at the group level, if SEMI and SMT mix stay similar and SMT experiences a stable margin, then we expect basically slight margin creation for the group in Q4. Now, of course, it's really depending on the mix going forward, especially in the midterm, in the kind of longer run, we are The technology leadership in HBM and advanced logic, with those leadership, we expect the TCV order in Q4 would actually provide support to Sammy's gross margin. And with this liquidation that you mentioned earlier, we do expect that the Semi gross margin will come back to the kind of the mid 40s level.

Thank you. It's clear. And the second question is for Robin on the hybrid bond. So you are in as our evaluation stage for the Foundry and HBM customers. So for the HBM user, Hyperbond, do you see that it will happen in 16 high or 20 high?

Since we are a dominant TCB player, we hope that they can continue to use TCB even up to 20 high. But nevertheless, we are prepared that if they have to switch to hybrid bonding, we will be there also to provide competitive solution for hybrid bonding for HPM 20 high and above.

Yeah, and also quick follow up for your leading foundry customer. Your European peer has been a dominant supplier for hybrid bond at that leading foundry customer. So how you see your hybrid bond opportunity at this leading foundry customer?

We will be relentlessly knocking on their doors for sure. But I think having said that we are not the leading player in hybrid bonding, I think the advantage is that we know there are existing pain points. So with that coming in from behind, we are relentlessly and diligently working with all these leading, launching and memory players, asking them what are the current pain points so that we can incorporate features, engineering innovations, to mitigate or totally eliminate those pain points using our tools. This is what we've been doing. So I think we are confident that our Gen 2 and future Gen 3 should be able to address all these pain points and give us an entry point in all this leading key logic and memory, please.

Thank you, Robin. And my final follow-up. So in the Goku's question, you said that you are the primary supplier of the HBM4 market and the first company won the HBM order at two key customers. So is it the fluxless TCB or the flux TCB?

uh it's still the uh flux td pcb at this point okay thank you that's all my question thank you daisy next i will request loving to a milk

Thank you for taking my question. I have another question about the TCV. So what are the current customer concentration level of your TCV equipment and what may it look like in the future? So is it mainly still concentrate on the top three memory maker and the leading foundry or you also see some broadening of your customer as an offset or other foundries in the market?

Definitely we have broadened our TCB found out to not just leading foundry, they're also HPE and also globally as well. So we're pretty, you know, pretty engaged with all top AI customers needing or requiring TCB solution.

Yeah. Okay. The second question is about this deposition equipment cancellation. So is it due to some

uh the roadmap change in the advanced packaging also i remember is it due to the you have a company subsidiary called next it is from that subsidiary it is from next um i think it's a case of um digestion of capacity there was a bit of a sizable capacity maybe about two years ago the customer take time to digest and these particular customers uh decided to give it up and pay us a cancellation fee

Thank you, Leping. Next, I will request Alex to unmute.

Thank you for taking my question. First question is about your margin SMT solution seems like quarterly revenue level already increased to the level similar to 4Q3 already 24. So I see the margin still like a low 30s. Is this the normalized margin going forward or you expect margin can return to high 30 level sometime in the future?

Yeah, Alexis, Katie, thanks for the question. So for you kind of comparing to a few years ago, where actually the SMTs and markets composition were quite different. The few years ago, actually automotive and industrial were running really, really strong. And their contributions to SMTs revenue were much larger. And this is where we actually could command relatively higher margin. So, currently, as we mentioned, the automotive and industrial end markets are relatively muted. That's why the margins are sitting in the, you call it low 30s. To me, unless the end market composition changes, this kind of level will be sustained. in terms of margin percentage.

Thank you. Another follow-up question on TCP. You mentioned the TAM would reach like $1 billion in 2027. Do you have probably a rough split between the logic versus memory and also the split between SC2W applications? Thank you.

Yeah, I think it's very dynamic. Again, all depends on customer roadmap and all that. But generally speaking, if you take, you know, really looking further into the future, it's just intuitive that the HBM, TCB demand or size or time will be larger than logic. because of the number of stacks and also as the industry migrate from one architecture to the next generation, they require more HBM stacks per chip. Naturally, I think, you know, HBM demand over time, not in a particular year, not in a particular quarter, but over time, HBM demand for TCP will be larger than logic.

Got it. So what is the company's target market share for each application?

Well, we don't go down to that kind of granular level, HBM market share logic. But overall, I think last year, when we put out the temp for TCB, our aspiration is to hit 35% to 40% market share in the entire TCB temp.

Thank you. Thank you, Alex. And next, I would like to request Arthur. Arthur to Amil, please.

Thanks, Robin, Katie. Take my question. The first one, Robin, can you share with us a high-level ballpark figure on the revenue contribution from the AI?

This is a difficult question. First, we don't share, but also this is a difficult question because we talk about AI benefiting both AP and mainstream. Well, we have better visibility on how AI benefit AP, but in terms of mainstream, it's a little bit tricky because wire-borne, die-borne, they are quite fungible. Today, customers may say, okay, I use it for AI-related packaging. Tomorrow, they use it for others. So it's a bit difficult to really meet our number. Sorry.

Yeah, no problem. Because you just mentioned that you saw some power application, they stopped to come back and the driver is from the AI. So that's why I want to get this high-level pop-up figure. Maybe we can discuss it next quarter when we have a visibility. The question number two is on the cancellation from the high-density substrate. And I think Le Ping already touched base a little bit. So my question is, is the key component of the equipment fungible? Can you give it to the other substrate customer?

Yes, the short answer is yes, there's no inventory related issue relating to this cancellation.

Yeah, thanks. Because if we look into the AI business of the REC and also the key component, actually, we heard more and more PCB HDI subject shortage at this moment. So I'm kind of wondering, Was the client is based in Japan or in Taiwan or China?

None of this, actually. None of this. I mean, this is a next business where I'm saying that there's a few key players, high-density substrate players. It just happened there was a big capacity ramble in the last two years, and this particular customer just said, okay, I'd rather not keep you holding on to these orders. I decided to cancel it. So I think that, in short, it's that kind of circumstances, yeah.

So in the future, when we look back, this could be an isolated event. So do we think this demand for the other customer will return?

I wouldn't say this is AI related. They are serving a particular IDM which use all this equipment, you know, for RDL and all that. So it's a particular application. I would say it's not related to AI. So please don't link this translation with AI that we have been talking about. De-link these two, please. It has nothing to do with AI. Thank you.

Thank you, Arthur. I think we have time for one last question. I think we have Goku here. So Goku, please unmute.

Thank you for taking my question. So my question is more on the margins and operating leverage. I think we are having pretty good momentum both now in mainstream and in TCP. Margin still seems to be a little bit sluggish. I think, let's say, next two, three quarters, TCB revenues will come through, given all these orders, bookings into revenues. What does it do to gross margins? Like, is TCB still accretive to group gross margins right now, or is it kind of similar to group gross margins? Second part of the question, again, to Katie, is on operating leverage, because Now that we are back to some degree of revenue growth, we're still not yet seeing meaningful operating leverage come through. I'm asking because street expectations are for very big operating leverage to kick in for next year. I think revenue growth of 10% or 15% contributing to doubling of your operating profit is what a lot of the Bloomberg estimates are looking at. So just wanted to understand what is the extent of operating leverage that we can expect? I think we've seen operating margin go back to high teens to 20% at really, really peak kind of levels. back in 2021. But in the recent past, we've not really seen operating margin really get beyond the mid-single-digit levels. So just want to understand what is the extent of operating leverage we can expect as we start some of these ramp-ups for TCB and other products.

Appreciate the question. First thing, TCB, I just want to make it very clear that TCB margin is being stable and is accretive to TCB. semi-business. Now, overall, when you say operating leverage, volume has come back up, but not quite at the super cycle level. And within the volume, like we'll always say, there are a few mixes that actually impact margin. One is a segment mix. So far as you can tell, in Q3, for example, the SMT contribution to the group is at about 50%, right? SMT naturally has a lower gross margin. Therefore, the segment mix could be different based on the contribution from the two businesses. The other thing is on product mix. Within Semi, for example, It really depends on the product mix between TCB and wire bound in Q3. And as we guided for Q4, if you look at that product mix, when we have less TCB revenue, but more wire bound revenue, coming from mainstream applications, the gross margin side would be under certain pressure. But having said that, in the long run, as a few of you asked earlier, we do expect that our semi-business will continue to enjoy the creative margin contribution from applications like TCB. And with the AEC liquidation we mentioned, we should have savings from operation efficiency, etc. So that our conviction for semi-gross margin to stay in the mid 40s and then gradually going up has not changed. And then so at the group level, we've been talking about the 40%. I'm talking about in the long run, not a specific given quarter. I think we are comfortable that the group's gross margin will be at that level and gradually improve as we go.

Got it. So just on the OPEC side, Kaylee, because that's something that you can control, revenue order to control, especially on mainstream. Are we going to stay around this roughly 5 billion Hong Kong kind of level going into next year or we still see that OPEX will keep growing even we are investing in some of these newer technologies?

Yeah, so Gogo, I actually cannot answer your question very well right now. Maybe give us a quarter because the organization actually is going through the budget process. But directionally, as we have talked about before, the OPEC's been running at $4.7 billion in the last few years. And this year, with the R&D and infrastructure investment, we have communicated that it will be marginally higher. Though the investment is at 350 million, we are doing certain restructuring projects and cost saving projects that you probably have seen the last few years trying to bring it down. So this year, I think you guys can do the math, right? It's about 2.8 billion. So that's kind of where we are. I think going forward, we're not going to change our commitment in R&D investment. as you guys were talking about, TCP, hybrid bond, all that side of the commission has not changed. We'll continue to do the right investment. On the other front, for the overall efficiency and productivity of OPEX, we'll continue to look into any opportunities we can find and trying to contain that. So again, I cannot give you a specific number. We'll probably share with you more, but I think our strategy, our thinking on OPEX has not changed.

Got it. Thank you very much. Thank you, Goku. Yeah, that will be all for the last questions. And I will now pass the time back to Robin for his closing remarks.

Thank you. Thank you, Benjamin. A couple of pointers before we officially close the call. The group maintains strong business momentum this quarter. Our AP and mainstream business will continue to benefit from sustained AI adoption. TCB solution, we secure repeat orders in both memory and logic, reflecting ongoing technology leadership, particularly in HBM4 and advanced logic. Like what Kelly said, we're in the midst of really finalizing our budget for 2026, but certainly at this juncture, we can give you some direction or some color how we look at 2026. We expect a growth year in 2026, largely driven by AP because of AI, and underpinned by the sustained momentum of our mainstream business. And finally, we remain confident in a total addressable market for TCB, which we believe could go beyond US dollar 1 billion in 2027. So thank you. With that, I will close the call and see you next quarter.