Asmpt Limited Unsp/Adr

Good morning and good evening, ladies and gentlemen. This is Justin Tan, and I will be moderating today's call. On behalf of ASMPT Limited, welcome to our first quarter 2025 investor conference call. Thank you 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, Proudly will be given to the covering analyst. Before we start, let me go through our 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. For your reference, the investor relations presentation for 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 Sheaf. Robin will cover the Group's highlights, outlook, and next quarter's guidance, while Katie will provide details on the financial performance. Now I'll hand over to our Group Chief Executive Officer, Robin. Robin.

Thank you, Justin. Good morning and good evening to everyone today. It is a pleasure to have you all on our earnings conference call for the first quarter of 2025. Now let's start with the key highlights of the first quarter. We achieved group revenue of US$401.5 million, which met the midpoint of revenue guidance. The group's advanced packaging solutions continue to be a major beneficiary of AI adoption. AP solutions continue to deliver strong performance led by our thermal compression, bonding, or TCP tools. The group completed the delivery of the bulk TCB order to the leading memory maker. And these solutions are mainly used for HBM 3E 12 high high volume manufacturing. This order, the group expanded its TCB HBM customer base. We want initial orders from another global HBM customer. which has been followed by further orders in April 2025. There were also continued bookings for chip-to-substrate tools serving the logic market, where our tool is a process of record. And lastly, within TCB, our chip-to-wafer TCB tools, enabled with active offset removal fluxless capability have progressed from qualification to pilot production and the leading country. This encouraging development demonstrates our technological advantage in fluxes tools. The strong progress made this quarter in TCB further solidifies our leadership in the market. And our focus for 2025 is on securing additional orders from both HVM and Logic customers. Moving on to Group Gross Margin. This quarter, we saw a rebound in Group Gross Margin, which exceeded 40% and was driven mainly by better product mix in both segments. To finish this overview, the group's mainstream business continue to be affected by soft demand from automotive and industrial end markets. While the growth trajectory of the mainstream business is difficult to forecast given the current environment, we are fully prepared to seize opportunities when the market recovers. With that, let me now pass the time over to Katie, who will talk about our group and segment performance. Tim.

Thank you, Robin. Good morning and good evening, everyone. This slide covers the group's key financial metrics for the first quarter of 2025. Group revenue met the midpoint of guidance, totaling $401.5 million. Group bookings delivered $431.2 million, which was better than expected, showing a 2.9% growth quarter-on-quarter and 4.8% growth year-on-year. The quarter-on-quarter increase was mainly due to higher SMT bookings, partially offset by lower semi bookings from a high base effect in Q4 2024. The year-on-year increase was driven by semi, which has shown year-on-year quarterly bookings growth over the past six quarters. In the first quarter, the group's gross margin was up 371 basis points quarter-on-quarter, but down 97 basis points year-on-year. The quarter-on-quarter improvement was due to both SEMI and SMT. Disciplined cost control measures and seasonality reduced the group's operating expenditure by 11.3% quarter-on-quarter. However, year-on-year operating expenses were up 4.1% due to the investments in strategic infrastructure and R&D to drive growth in our AP business. Thus, the adjusted net profit was HK$83.2 million, up 1.6% quarter-on-quarter, but down 53.1% year-on-year. The year-on-year decline was due to a combination of previously mentioned slight reduction gross margin and OPEX increase for strategic investments, as well as Forex effects. For the first quarter of 2025, Semi revenue grew to $255.6 million, up 0.6% quarter-on-quarter and 44.7% year-on-year. Semi contributed about 64% of the group's revenue. In Q1, semi-registered revenue for the bulk order of TCV2s delivered to a leading HBM customer. Semi-bookings were $222.9 million, down 19.5% quarter-on-quarter, but up 11.4% year-on-year. In Q1, there were new TCV bookings. which included initial orders from another global HBM customer, with further orders placed in April 2025. There were also continued bookings for chip-to-substrate tools serving the logic market, where the tool is the process of record. In addition, there were mainstream wins for high-end smartphones and automotive applications. The quarter-on-quarter bookings drop was mainly due to a high base effect from the bulk TCB order in Q4 2024, while year-on-year increase was mainly due to TCB orders. Semi's gross margin of 46.3% for Q1 2025 was up 368 basis points quarter-on-quarter, mainly driven by higher AP mix and benefit from one-off items that impacted Q4 margin. Gross margin was up by 167 basis points year-on-year. In addition, as mentioned earlier, OPEX reduced the quote-on-quarter due to disciplined cost control measures and seasonality. Lastly, CEMI's profit was HK$235.9 million in Q1 2025, an increase of 215.9% quarter-on-quarter. Moving on to the SMT business. SMT delivered revenue of $145.9 million in the first quarter of 2025, a decline of 20.3% quarter-on-quarter, and a 35.6% young year, in line with ongoing softness in its overall market. SMT bookings of $208.4 million were up strongly. 46.5% quarter-on-quarter, driven by strong seasonal system-in-package or SIP bookings. The automotive and industrial end markets appeared to have stabilized, but remained soft. S&T's gross margin of 31.5% was up 180 basis points quarter-on-quarter, but down 827 basis points year-on-year. Quote-unquote improvement was due to favorable product mix, while the year-on-year drop was mainly due to lower sales volume. Segment loss was HK$5.3 million in Q1 2025 due to lower sales volume. I will now pass the time back to Robin.

Thank you, Katie. In Q2, the group expects revenue to be between US$410 million the US dollar $470 million, up 3% year-on-year and 9.6% quarter-on-quarter at midpoint. We remain confident of sustaining AP revenue and expect the mainstream business to improve due to both seasonality and better-than-expected Q1 bookings. Looking ahead, the mainstream growth trajectory is difficult to forecast, given uncertainties from the indirect impact of tariffs. However, the group remains confident in the demand for advanced packaging and our TCB solutions for AI and high-performance computing applications. In addition, our global manufacturing footprint provides flexibility to navigate the potential impact of the tariffs. The group will continue to monitor the situation closely and adapt as needed. This concludes our first quarter 2025 presentation. Thank you. And we are now ready for Q&A. Let me pass the time back to Justin to facilitate that.

Thank you, Robin. Let us now proceed with the Q&A session. For asking questions, please either use the raise hand function or type your questions in the chat to ASMPT Q&A. Please ask your questions one by one and limit them to two questions at each turn. Thank you. May I ask Donnie Ting of Numora to unmute yourself?

Good morning. Can you hear me?

Yes.

Hi, Robin and the management team. Thank you for taking my question. First question, as usual, housekeeping question. So, yeah, after some slight rebound in terms of the quarter-on-quarter booking momentum, would you be able to comment booking direction in the second quarter? And this time I would specifically like to check the advanced packaging booking momentum in second quarter. uh and wondering if there is any preliminary impact from the uh co-ops potential oversupply to drive some customers start to hold the orders and secondly is regarding to the smt business so You know, because of this terrorist drama, I think potentially some customs may want to seek some capacity expansion in different regions. For example, like Mexico or even in the future in the United States. For SMT, I think that's an important equipment. which could help customers to avoid sort of the uncertainty in terms of the tariff impact if they build the capacity in Mexico or US directly. So, would you be able to comment on some of the dynamics you are seeing particularly on SMT business after this tariff trauma?

Thank you. Hi Tony, I see that you have two questions. Let me start with your first question is, On the Q2 bookings, maybe you start with Robin. That's the first question, right? The second question is also the AP booking in particular on the preliminary impact on the Cold War's potential for supply that was mentioned. And maybe I'll start with Robin on the bookings question first.

Thanks, Tony, for your questions. Now, on the bookings, as you know, we don't guide bookings, actually, but we always try to provide as much color as possible you know to to you guys right so i think for q2 booking this time round um we remain confident that q2 bookings will be within a similar range compared to the last few quarters of course uh this assumes there is really no unexpected uh impact you know from the tariff landscape at this point in time uh you talk about a little bit about ap as well so maybe at the same time i can provide some additional color how we see the few two bookings may pan out um for semi um ap momentum we are confident that the ap momentum uh would be intact in the future in particular tcp we expect orders to continue to come in from both the memory and the logic side you know from a global customer base Semi-mainstream, the way we look at it at this point in time is that it remains stable despite the macro environment. However, relatively speaking compared to historical, it's still at the soft level for semi-mainstream. For SMT, as you can notice, we came back quite strongly in terms of booking on the bet of a very low quarter in Q4 2024. Similar kind of picture with Semi in terms of mainstream SMT is stabilized and in fact in the recent time we have seen opportunities in AI server and also automotive market in china so i think these are some kind of color you know we can give to q2 booking for both segments

I think Tony do have a follow-up question regarding he was focused on the tariff impact. The question is if the SMT side customers would see any capacity expansion. Maybe Robin, you want to add some commentaries on it? Yeah.

So maybe I'll comment in general first because the situation is at the top of everybody's mind during this recent period. In terms of direct impact, we don't see any significant or material direct impact on our operations. From the perspective of our overall business landscape, we are confident that AP will continue to grow, benefiting from AI adoption and also our superior technology leadership in this particular space. I talked about Q2 mainstream as well. The mainstream business is stable. but probably on the softer side for both S&T and Semi as well. But we are confident that the market is still growing. However, the indirect impact of the tariff makes the growth trajectory difficult to forecast. Now, coming from the customer side, we see both positive and negative effects on customer decision making in light of the terrible environment. While we haven't seen any order cancellations, some customers are, of course, evaluating, taking some time, evaluating their investment timing and location going forward. However, on the positive side, there appear to be two kinds of effects playing out. Let me go one by one. First, some customers show a willingness to engage in spot buys or delivery pull-ins to take advantage of the tariff pauses. You recall we have, I mean, the U.S. has imposed a tariff pause since April 9th for 90 days. Second, potential opportunities coming from incremental investments as customers diversify their manufacturing location to take advantage of the difference in tariff rates in various countries. So I think that sort of answer your SMT tariff impact as well. Let me end by saying something on the tariff. Our global manufacturing footprint provides flexibility in our opinion to navigate the potential impact of the tariff. We will continue to monitor the situation closely and adapt as needed. But having said all this, I think it's still unclear how the tariff situation will unfold and what is the medium-term macroeconomic impact will be.

So I hope I answered your question, Sonny.

Sure.

Thank you, Robin. Just one quick follow-up is that you mentioned about the AP momentum may be still there into the second quarter. May I just simply ask whether it's mainly driven by memory, HBM, or logic? Thank you.

Donnie, I would say both, as I said. coming from both memory as well as on the logic side.

Yeah, I was just wondering which one would be stronger. Yeah, thank you. Cool.

I mean, trending-wise, I think lately with the HBM orders that we have warned, from the leading memory maker, and then in Q1 and Q2, we also want further orders from another memory maker. Yes. From the perspective, the HBM momentum, at least for SMPT, is picking up nicely.

Understood, understood. So there has been keeping seeing those repeat orders, right? Since false quarter last year. So I just want to make sure that so you are still seeing repeat orders since fourth quarter last year from the first HBM customer.

No, we are working on it because the first order as probably you understand is a sizable order. So it takes time for the customer to digest the capacity. But surely we are working. hard to continue to engage not just this memory maker but the other big ones as well to garner more orders as we progress. On that note, I must add that You know, we are doing well on the HBM side. We have proven ourselves, you know, that our tools in the first memory maker are already in high volume production for HBM3E125. And also, we have been saying that for HBM4, we believe that we are the first to package the very complicated architecture for HP and Fortune. So we have proven ourselves that we are able to do it. And in fact, the way we look at it is that the sooner HBM4, you know, comes into full, it plays an advantage because HBM4 packaging is a step higher compared, you know, requirements are a step higher compared to HBM3E. And that's where I think we could differentiate ourselves quite nicely, you know, from the rest of the pack because we believe our technology is able to handle the very complicated architecture of the HPM4 in terms of bonding accuracy, in terms of co-planality, you know, control, in terms of die handling, you know, ensuring no die crack, and so forth. So we are confident that, you know, we will continue to win more orders in the HPM space. Okay. Very clear. Thank you, Robin. Thank you.

Thank you, Donnie. May I ask Sunny to unmute herself?

Good morning. Could you hear me?

Yes. Yes, Sunny.

Thank you very much. So my first question, I also want to follow up on TCB. And so you mentioned that you are getting orders from the second HBM customer. Could you help us understand the magnitude of the orders that you are getting in Q2? And then for your first HBM customer, since the customer should start ramping HBM forward, soon, maybe in second half of the year. And so based on your current engagement, would you expect to get the second bulk orders, and then that will be for flux of TCBs, maybe into Q3 or Q4?

I think this question is for Robin, yeah. Yes, for the second HBM customer, that's a question, Sunny, yes. The orders are relatively smaller compared to the first one, but meaningful, I would say. And we have received already two orders, one in Q1 and one in April 2025. Now, in terms of HPM4, as I mentioned earlier, we are confident of our capability in this space. We believe we have very good technology. Now, we are definitely planning for a market share, you know, for HPM4. I think the industry has probably recognized that ASMPT, you know, has successfully used our tools to package HPM4 already for a number of customers. So I think that put us in a good position. orders for HBM4. Now, in terms of timing, we do believe that HBM4 should start some kind of ordering in the second half. Now, whether is it in Q3, Q4, that's really not up to us. It's really up to our customer. So we don't have a lot of visibility at this point in time, but can happen in second half of 2025. Depending on the type of HBM4, we believe fluxless for HBM4 may be needed for MBUF application. For NCF, we cannot use fluxes. The flux 2 will still have to be used for NCF HPM. So it depends on the customer. So if they are going for NCF, it will not be fluxless. But if they are going for MES, chances are for HPM 4, it has to move towards fluxless solution.

Thank you very much. So a small follow-up on the technical details. Robin, would you mind sharing more thoughts on why NCF would not need fluxless PCBs?

Because of inherent difference in the dye between NCF structure and an ABUF. So in NCF, you don't need fluxless, basically. It's flux, plug-freeze is good enough.

Got it. Thank you very much. My second question is on the leading edge logic. And so for Jibang Wafer, which I think most people are paying attention to, you mentioned leading edge foundry has moved forward from qualifications to trial production for these tools. Yes. But I guess the question is, has this customer decided if they will use a chip-on-wafer for – to use flexible PCB for chip-on-wafer anytime soon, or they are still taking some time? And I wonder what are some of the key factors that hold them back from a faster migration to flexible PCBs?

I think for the last bit of your question, Sunny, you probably have to ask them what is really, in a way, holding them back, what you have described. But in any case, as far as we are concerned, I think we have made significant changes. you know, from qualification to now using our tool, you know, for pilot production. From my engagement with the leading foundry, we are in a good position, you know, we are in a good position. We have proven our capability to be able to handle you know, complex packaging requirement, but you do pay for application using our Fluxus tool. So we have recently shipped another tool to the Leading Foundry, you know, to, you know, for evaluation. We believe, you know, as I said, we made very good progress. So we believe to win you know the cheap wafer orders once uh the leading company make up their mind got it uh is there any timeline uh when this customer may be able to play some orders we hope uh second half of 2025 maybe yeah so but having said that i think i've been repeatedly telling you you know, that for chip-to-wafer, even if it happens, it's not going to be significant. Chip-to-wafer application, the demand, the high volume demand, will only come in 2026.

Got it. That's all I have. Thank you very much.

Okay. Thank you, Sunny. Now, may I ask Guko to unmute yourself?

Hi, good morning, and thanks for taking the questions. First of all, on HBM, could you talk a little bit about your experience with this leading HBM customer? There's been quite a bit of competitive noise about this customer, that ASMPT tools have had some issues with this customer. Could you talk a little bit about where you are in terms of mass production for 12i3e, which is what I think your tools were targeted for? And secondly, I think when you talk about ASMPT being in the pole position for HPM4, is it mainly for this customer, given that you mentioned that fluxless will be required for MUF application for sure? And yeah, maybe start there.

Thanks, Koko. Let me answer your question on the HPM. I sort of alluded, you know, earlier on the HPM question, how do we differentiate ourselves, you know, from a comparator? We differentiate ourselves by the quality of a bond, you know, in terms of accuracy, in terms of warpage control, in terms of coplanarity. Also not to mention, I think customers value, you know, the scalability of our solution. You know, we can move from a flux-based tool to a fluxless tool seamlessly, right, by adding a module, a VOR module, you know, active oxide removal module on site. So I think that's an important consideration. also for our customer and not forgetting also in terms of hdmi stacking i think the ability to able to be able to stack chip as close as possible in terms of height in terms of vertical stacking what we call the chip gap uh is also important right so you have to stay within a certain height level so i think all these uh added up together put us in a good position in terms of technology vis-a-vis the other players in the space.

Now, I think your second question is... Maybe, Robin, Kuko wanted to touch on the progress of HBM4, progress with the leading customer or even customers.

Again, I think it all boils down to those advantages that I have elaborated quite a few times already this morning in terms of our HBM capability. So I think that put us in a very good position to make progress, continue to make progress in the HBM space. the AI architecture is challenging compared to HBM3. So you need a certain capability to handle HBM4. Now, Goku, I think you may also mention there have been some talk that our tools may be facing issues with the leading player. Let's put it that way. stacking using TCV tools, I would say it's first of a kind, not just for ourselves, but also for the industry as a whole. Now, typically in our equipment space, when we roll first of a kind tools, bound to have issues on site because a lot of process requirements are needed to harden the tool. So I would say this is part and parcel of rolling out first-of-a-kind tool for HBM stacking. You know, so it's nothing unusual. The fact that we have, you know, our tools have now been in high-volume production, using high-volume production for HBM 3E, 12 high, And then we have demonstrated our capability to do HPM4. I think that put to bed, you know, whatever doubts, you know, the industry have, you know, of our capability for TCP stacking tools for HPM.

Got it. Just to follow up on that, Robin, what is your confidence on follow-on orders from this main customer? I think you had a pretty big bulk order that you have largely fulfilled in Q1. How is the follow-on order looking like? And maybe now that you have the second customer also, for HPM this year, who's going to be bigger? Is it going to be the second customer or the original lead customer in terms of revenue contribution?

To forecast right now, we are, you know, dimly engaging all HPM players. Including the third one, okay, we have also successfully bonded, you know, HBM stack also for the third memory maker. We are getting into deeper engagement with the third one as well in terms of joint development, you know, kind of, yeah. arrangement with the third memory maker. Now, I think that sort of put us in a composition to kind of, you know, more shares from the HPN space.

Okay. So, just to clarify, so we should expect follow-on orders from the lead customer pretty soon?

We are hoping for that for sure. And they're working hard to get it happen.

Okay. Got it. My second question, I think last earnings call, I think you had outlined your HPM at the full market growth and you'd also talked about 35 to 40% market share is your target for HPM. Given all the developments, especially on the HPM side you're seeing, what is the kind of rough market share you think you can secure? especially as we move to HPM4, which feels like where your tools seem to have an edge compared to competition. Do we get to that 35% to 40% market share for HPM4 or even higher? Any thoughts on that front?

Yeah, definitely we're working towards getting more market share constantly and relentlessly. Yeah, you're right. We came up with a time and we did share our ambition is really to kind of 35% to 40% market share. For the TCB space. It's not just for HPM, it's the TCB space overall.

So in HPM, do you think it is going to be higher or lower than the 35% to 40%?

Let's put it that way. I think there is definitely more competition in the HPM space compared to the logic space.

Just to clarify a little bit, I think when we put the $1 billion market attempt out there last quarter by 2027, we had a little bit more color to it. I think the logic side, you know, we actually started many years ago, right? We have a very strong foothold. HBM, really, we are we were basically the new player to the market. So Robin's driver aspired to get to that market share range. But we actually, you have to bear in mind that we actually came into this game at zero market share. So it's actually a really huge step up already.

Got it. Thanks. One more follow-up to Sunny's question on Substrate. Previously, I think the understanding was that ASMPT was kind of behind your competitor in terms of qualification for this large foundry for chip-on substrate. Do you think the position has changed now? You're largely on par with your competition or still slightly behind competition?

I think, Gokul, you're probably referring to chip-on substrate rather than chip-on substrate. For chip-on substrate, yeah. Correct. We are still the sole supplier. Now, because we really make significant progress from cultivation to now using a tool for pilot production, I think we are well positioned as considering the progress that we have made.

Thank you. Thank you. Thank you, Goko. Now, may I ask Le Ping to unmute herself?

Hello. I have two questions. The first question in your presentation, I think it's page eight. I see an 8% improvement on the segment margin this quarter, although the revenue does not change too much. So what are the major changes you did to improve the operating efficiency and how we should model the profitability of the semi-solution or the OBEX level in 2025. Thank you.

You're referring to semi?

No, not semi, the semiconductor solution segment.

Yeah, semiconductor solution, and you're talking about I'm not sure.

The segment margin improved quite a lot this quarter, right?

Correct. Q and Q.

Although the revenue does not change too much, right? Yeah, it's basically flat quality. So what are the major changes and how we should model this OPEX level in the semiconductor solution?

Okay, I'm just trying to understand. You're talking about, sorry, I'm a little bit confused here. Are you talking about OPEX?

Yeah. In other words, why the settlement margin improved so much in this quarter? Is it mainly due to the OBEX change or is it mainly due to the margin expansion as well?

I got you. I'm sorry. Yes. Actually, the answer is both. So if you look at the gross margin level, as we mentioned in the opening remarks, the Product mix for the segment definitely was a very help. You guys were just spending some time talking about the TCV side of the momentum, that's for sure. And also, we also mentioned that in Q4, there was a negative one-off margin hit, right? So, Q on Q, basically, the help was a relatively lower comp. So that's on the gross margin side. Now, on the OPAC side, as we mentioned in the opening remarks as well, there's continued cost control measures in this relatively low environment. If you recall, we did announce restructuring programs in Q4, so we're – We are benefiting from some of these savings from those measures. At the same time, Q1 usually, if you look at our historical numbers, there's a seasonality that Q1 relatively is lower for OPEX. That's because of the incentive share provision schedule only kicks in the last six days of the quarter, while all the other quarters we actually provide for the entire quarter. So there's a seasonality to it. So net-net, that's what really supported the semi-profit improvement. Now, I think you also have a question sort of looking out, right? Yeah. We don't, you know, we don't actually provide the outlook for the future profit and the margin. However, you know, just directly, I would say directionally, At the group level, right, you see that this quarter, I'm talking about a group level now, at this quarter, we rebounded back to 40%. And then also, as Robin mentioned, I think within the product mix, we do feel very confident with the momentum of AP. Therefore, we expect that the margin going forward, gross margin at group level going forward will be in the range of 40%. I hope that helps with some of the color to the future profitability.

Okay. So what will be the OPEX level you try to maintain in terms of revenue scale? It seems that your OPEX level is much higher than quite a lot of other semi-economic companies.

Okay. Yeah, so let me kind of – on the OPEX, so similar to what we communicate, we try to be quite consistent, actually. Every quarter, if you look at the OPEX level, is probably 1.1, 1.2 billion Hong Kong dollars a quarter. And at the beginning of the year, and very similar to last year, we did announce that With the growth opportunity we have, especially in AP, we have committed $350 million in Hong Kong dollars of incremental investment, especially, again, for those R&D programs in TCV, in Hyperbond, et cetera. Also, we do expect the OPEX number to be relatively steady with some marginal increase against the very, very surgical, very specific programs that we're running, especially for the R&D side.

Okay, it's very clear. So the second question is, I attended Semicon China this March, and I listened to your quite impressive presentation by your representative about the advanced packaging. So my question is, what's your view on the AP demand in China, and what are the major best-selling AP products in China? Yeah, thank you.

A little bit, Robin. We cannot come in too specifically, but in general, advanced packaging solutions serve a global customer base.

Okay. So what will be the percentage of your AP within your China business now?

Sorry, we don't break this down for competitive reasons.

Okay, got it.

Thank you.

All right. May I ask Kevin Seedy to unmute himself?

Hi. Thank you, Robin. Thank you, Katie, for taking my question. I would like to check on the mainstream side of our business. So I think last time we talked, you mentioned that we're expecting somewhat of a bottoming out or a recovery in the second half of this year. Given the recent impact, especially from tariff, do we still think that's the case? And how much confidence do we still have compared to a couple months ago? And especially, I think we saw that SMT booking, has shown quite a rebound in the past quarter. I think this is due to being part of the SIP system, seasonal recovery. But how do you think this is going to trend towards later part of this year?

Kevin, thanks for your question. I didn't mention earlier, but I can sort of repeat again. Now, in the way we see mainstream business in general for both SMEs and SMTs is that it has stabilized the mainstream business. And although it's still on the soft side, you know, because of the certain segments are still slow or sluggish, like, for example, the automotive and the industrial air market, especially on, you know, in the European and the American region, that's slow. So obviously that also impacted in particular our SMG business but in general the good sign is that the mainstream business has not stabilized and you know looking at the because of the tariff we are confident that the mainstream business will continue to grow but the indirect impact of the tariff makes the growth trajectory difficult to forecast so I can't give you a very definitive answer whether the growth will come in a second half or later because of the tariff situation

Right. Just a quick follow-up on the S&T part. Do you think the recovery in the first quarter is going to continue?

Looking at the colour that I've given you earlier, we expect to be in the same range in the last couple of quarters? Yes, I think the short answer is yes. We will probably not fall to the level in Q4 for SMT booking. Right, got it.

My second question is, I would like to get some update on the hybrid funding. I think, I guess, Right now, the industry consensus is still that the industry might need hybrid bonding when we move to 12 height. And I guess the timing is probably around like 27, 28 or possibly earlier. But just wondering how ready are we in terms of our second generation tool? And do we have any following subsequent orders coming in this year?

Yeah, Kevin, I believe it's probably you should be saying 20 high rather than 12. For 12 high, definitely we don't need hyperbonding, right? So TCB is a choice of two. Our strong belief is that even for 16 high, our true CCB is good enough for 16 high. Now, there has been a lot of talk about HP. Too early to tell. Of course, HP is maturing, as we speak. But we still believe that HP, because of the total cost of ownership, is higher than everyone that is known by now. the industry will continue to use more cost-effective tools than PCB for both logic and also HPM as far as possible.

Okay, got it. Thank you.

Thank you. I will have the last question from Google. Can you unmute yourself and answer the question?

Yeah, hi. Thanks. First question, given I think we've seen a pretty sharp share price decline, you're still sitting on pretty healthy cash balance. Just wanted to ask a question to Kay. Are we thinking about anything other than the regular cash dividend in terms of shareholder returns, any kind of share buyback policy or anything like that? that you've been thinking about with the board to kind of shore up the share price and help some of the investors?

First question. Thanks for the question. The company actually has some very solid cash performance in the recent years. However, due to the macro and the terror of uncertainties, we do not think this is the right time to launch a share buyback. We acknowledge our current share price level, and we're always evaluating different options to return capital to shareholders. So we'll continue to monitor the market situation, and we'll look into buybacks when it's appropriate.

Got it. And the second question I had, I think just following up on OpEx overall, I think if I look at the overall OPEX, I think last year was about 5 billion Hong Kong dollar. I think it used to be like 4 billion or so in the last up cycle. But the revenues are basically much smaller than what they were. So when you think about managing OPEX over the next maybe three, four years through the cycle, Do you feel this is the OpEx level that the company should maintain, or is there a point at which you think we should think about some meaningful OpEx control measures or something like that, given the OpEx ratio is quite high? I think some of your competitors have actually managed this OpEx a little bit more flexibly over this last long down cycle that we have had.

Thanks for the question, Alpax. As you probably recall, in this relatively long time cycle, we have conducted two or three restructuring programs already, and we'll continue to put cost measures on the various functions. So we are mindful of the cost level that we have. Having said that, though, we do want to emphasize that as a technology company, we want to create the future of the company, which is really on the R&D programs for future products. That's why the last two years we actually proactively came out and announced the incremental investments. So we'll continue to do that. So I think it's a – Really, it's a fine balance between the two, right, investment for future and sensible cost control in this, again, relatively prolonged down cycle. So we'll continue to make sure that we strike a good balance between the two.

Got it. One small follow-up on the chip on substrate side. How do we think about visibility of orders? I think this year, obviously, it will be a pretty strong year. Do we think that we should continue to grow next year for chip on substrate related orders for this large foundry and some of the other OSAP players who are kind of having a similar supply chain?

We do, we do, definitely. Not just in terms of the current architecture, but going forward, Google, you can expect the compound I or the compound I on the subject will get bigger and bigger you know, because more capacity needed, more capability needed for the AI chip. So that means, you know, customers will continue to buy new tools in order to support the program to build a larger diameter substrate. So this trend will continue, you know, in time to come for sure.

Thank you.

Okay, with this, this concludes our Q&A session. And let me request Robin to say a few words. Robin.

Thank you. Thank you for all your questions and allow me to quickly highlight some key takeaways for our call today. So the group delivered a solid performance and gross margin rebounded to above 40% in Q1 2025. We expanded our TCP customer base. want new orders, and our tools are being used in production for both logic and memory applications. This further solidifies our leadership in the TCB market. While the growth trajectory of the mainstream business is difficult to forecast, given the current environment, we are fully prepared to seize opportunities when the market recovers. The group remains confident in the demand for AP and its TCB solutions for AI and HPC applications. In addition, our global manufacturing footprint provides flexibility to navigate the potential impact of the tariff. As I said earlier, the group will continue to monitor the situation closely and adapt as needed. This concludes our call and I'll see you in the next quarter. Thank you very much.