BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to BE Semiconductor Industries quarterly conference call and audio webcast to discuss the company's 2024 second quarter results. You can register for the conference call or log in to the audio webcast via BASE's website, www.basee.com. Joining us today are Mr. Richard Blickman, CEO, and Mr. Leon Vervaeen, Senior Vice President Finance. Currently, all participants are in listen-only mode. Later, we will conduct a question and answer session and instruction will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I would like to remind everyone that on Thursday's call, management will be making forward-looking statements All statements other than statements of historical fact might be forward-looking statements. Forward-looking statements reflect basis current views and assumptions regarding future events, many of which are by nature inherently uncertain and beyond basis control. Actual results might differ materially from those in the forward-looking statements due to various risks and uncertainties, including but not limited two factors that are discussed in the company's most recent periodic and current report field with the AFM. Such forward-looking statements, including guidance provided during Toddy's call, speak only as of this date, and BASIS doesn't intend to update them in light of new information or future developments, nor does BASIS undertake any obligation to update the forward-looking statements. I would like now to turn the call over to Mr. Richard Blickman. Thank you.

Thank you. For today's call, we'd like to review the key highlights of our second quarter and six months ended June 30, 2024, and update you on the market, our strategy, and outlook. First, some overall thoughts on the second quarter and first half year 24. BATI reported second quarter revenue, gross margin, and operating profit at the high end of guidance, with significant order growth realized for hybrid bonding and other AI-related applications. For the quarter, revenue of euros 151.2 million and net income of 41.9 million euros increased by 3.3% and 23.2% respectively versus the first quarter. of 2024. The revenue increase was due primarily to higher shipments for photonics and two and a half D assembly applications. Order trends this first half year highlighted increased demand for basic systems used in AI and other advanced packaging applications. Bookings of 185.2 million euros in the second quarter of this year and 313 million euros in the first half 2024 represented increases of 64.5% and 22.9% respectively versus prior year periods. Moreover, we estimate that approximately 50% of our orders over the past 12 months were AI related. Sequential and year-over-year comparisons highlight contrasting growth trends for AI and mainstream assembly equipment markets in recent quarters. Since second half 2023, we have seen significant order growth for high-performance computing applications, including 2.5D, 3D, and photonics assembly solutions in support of a broad-based expansion of generative AI demand. Such growth has been partially offset by a slower recovery as expected in mainstream assembly markets and in China, particularly for high-end smartphones, automotive, and industrial applications. In general, post-pandemic inventory levels at semiconductor producers still remain elevated despite gradually increasing utilization rates. BASIC continues to navigate an extended assembly downturn at high levels of profitability as a result of increased 2.5D and 3D order momentum with gross and net margins realized of 65% and 27.7% respectively in the second quarter of 24. For the first half year 2024, gross margins improved to 66.1% versus 65% in the first half of 2023. The reduction in our net margin to 25.5% this first half year primarily reflected a 24% increase in development spending and increased share-based compensation versus the first half of 2023. Our financial position is healthy with net cash of 74.4 million euros at quarter end, equal to 13% of the latest 12-month revenue. both the capital allocation of 186.3 million euros in the form of dividends and share repurchases during the quarter and the conversion of 89.9 million euros of convertible notes into ordinary shares. On July 17, 2024, we successfully completed an offering of 350 million of 4.5% senior notes due to 2031. to further solidify our capital base and help fund anticipated growth over the next decade at attractive terms. Next, I'd like to speak a little bit about the current market environment and our strategy. It appears that the recovery of the assembly equipment market in 2024 is progressing slowly due to pockets of excess capacity still remaining in certain consumer markets including automotive, industrial and smartphones. As such, the mainstream assembly downturn, including the Chinese market, has extended to 8 to 10 quarters. As a result, Tech Insights has reduced its assembly market growth estimates for 2024 to 9% from 16% in March and 31% at the start of this year. it also increased its gross estimates for 2025 and 26, and expects a next market peak in 26 at 7.4 billion US dollars, up 80% from 2023 levels. However, it also forecasts that Bayes' addressable market, and in particular the advanced dike placement market, will grow at rates significantly above the overall assembly equipment market over the next five years due to increasing AI adoption in all end markets. We are encouraged about Basie's progress given expanded hybrid bonding adoption for both logic and HPM applications. Traction gained in the marketplace by our next generation TCB system and continued demand growth for our flip chip and multi-module die attach for 2.5D applications. During the quarter, we received orders for 29 hybrid bonding systems from two customers for estimated delivery in Q4-24 and Q1-2025, further highlighting increased market adoption of this new process technology. Substantially, all such orders were for our latest generation 100 nanometer accuracy systems to be used in 3D logic applications. We anticipate additional orders in the second half of this year as customers ramp capacity for high-volume manufacturing in 2025. In addition, we received an important second order this quarter for our TCnext system. To support our product strategy, BASIC continues to increase R&D spending for the next-generation hybrid bonding development, targeting sub-100 nanometer placement accuracy the ongoing build-out of hybrid bonding and TCV capabilities in anticipation of expanded logic and memory adoption and enhancements to our current product portfolio for the next sub-cycle. We anticipate additional share gains in the next market upturn as node sizes shrink further and placement accuracy increases. All of these trends play to the strength of Bayley's core competencies. Now a few words about our guidance. For the third quarter 24, we forecast that revenue will be flat, plus or minus 5% versus the second quarter of this year, with gross margins ranging between 64 and 66% based on our projected current product mix. The projected third quarter 24 revenue increase reflects atypical seasonal growth due primarily to a weaker smartphone capacity built this year. Due 3-24 aggregate operating expenses are forecasted to decrease by 0-5% versus the second quarter of this year. This concludes my prepared remarks. Before we begin Q&A, I would like to remind everyone to limit your questions to two at a time so all participants have an opportunity to ask questions.

Operator.

Sure. Thank you very much, ladies and gentlemen. As a reminder, if you would like to ask a question, please press star 1 now on your telephone keypad. And to redraw your question, please press star 2. The first question comes from the line of Madeleine Jenkins calling from UBS. Please go ahead.

Hi. Thank you for taking my question. I was just wondering on the traction of your kind of TCB tools. Was the order this quarter from a memory or a logic customer? And also, are you still seeing contractions for kind of the Korean memory players for HBM? Thank you.

Well, two separate questions. First of all, this order is for the development in logic. And number two, in Korea, we see, and also outside Korea, continuous development side by side of TC and also hybrid bonding for stacked HBM devices.

Okay, thank you. And we've also had some supply chain feedback that TSMC might change the dielectric material used in bonding for their SOIC from silicon dioxide to silicon carbon nitride, I think. I was just wondering if this is something that you guys had also heard of, and if that's the case, do you need a new configuration of hybrid bonding tool, or is the current install base there still okay? Thank you.

Well, that's a very general question. There's a constant development of new, let's say, hopefully better materials on the way, also in our systems. There are different processes. So far, the mainstream, and that's evidenced by ongoing orders, is using our current technology. So, there is, to our knowledge, no imminent change.

Okay. Thank you.

The next question comes from the line of . Calling from Bank of America. Please go ahead, sir.

Good afternoon. Good to hear from you, Richard. A couple of questions. As always, quite basic for me. If you could give us an update on how many hybrid bonding systems you shipped actually in Q2? And also on the fourth quarter, assuming you don't want to give us a guidance, but I think you mentioned that half of your Q2 order intake from hybrid bonding will be delivered, or broadly speaking, in Q4, the other half in Q1. Should we expect a material increase sequentially in Q4 on the back of that? Or is it still early to say, given the uncertainty on the clip chip business?

Well, also, thank you very much. Good questions. We do not disclose the exact number we shipped, but if you look at the revenue guidance and what we accomplished, then we shipped what we were scheduled to ship in Q2. With the orders received in early January, may or end of of april it was already clear that that would come our way um there's a typical lead time of about nine months to build these systems especially testing is highly critical so as you pointed out whether it's exactly 50 or or around that number will be shipped in q4 and and q1 um As we also mentioned, we expect further orders to be received in the second half of this year. And they are also, because of the lead time, typically then for Q1 shipment. Maybe some are ready for Q2. But in general, the numbers are increasing. So, that is, as we said, clear evidence of further adoption.

All right. I appreciate that. It's a hard question to answer, but, you know, the stock, what is the consensus in the market is for about 80 hybrid warning system shipments in calendar 25, and we can see why, you know, those numbers are justifiable, perhaps, given the you know, the backlog that you have. I estimate you've got 57 units in your backlog at the end of Q2. So it'll be interesting to see if you validate that number. But are you prepared to endorse that 80-unit shipment next year, even if that includes maybe TCB and flavors, you know, of advanced packaging? Because that's clearly what's underpinning the stock price. And I think it'd be good if we could have your opinion as to whether you know, HBM developments are warranting those sort of volumes increasing in 25, whether you see a pull-in of, you know, smartphone adoption or, in fact, on the logic side, you've got, obviously, multiple server CPU customers, you know, that have worked on hybrid bonding, whether those orders would justify you would be comfortable with 80 units next year.

Well, those are precise numbers, and as we clearly always indicate, there are many factors which cause variation, and certainly on a year outlook term. But if you, and that is a common confirmation to the adoption which is gradually increasing in logic ever more broadly. New families introduced and also on the roadmaps for 25, 26 over logic. There are very clear roadmaps on the adoption in HBM. We all know that that is still in a very critical development phase. The outcome is hard to forecast. But more specifically, how much will be DC-bombed and how much will be hybrid-bombed? Where will the change go? Will there be 16 or will there be still 20? Nobody has a clear decision about that. Sometimes at conferences, certain technologies are explained. So, to come to clear numbers is difficult. But again, the adoption is definitely continuing. This quarter was very important, this last quarter, with not only the major order for 26, but also the additional two and then more in the forecast. You also refer to the adoption in high-end smartphones. We all know that there's a lot of development going on in creating the major advantages using a chip-led architecture, also for the application in high-end smartphones. We're very much engaged in that. That's also why R&D costs go up. When exactly that will be introduced in a next-generation device? is hard to forecast. But the, yeah, the major message is that the effort the industry is investing in demonstrating the superiority of hybrid bombing technology to other interconnect technologies is increasing gradually.

Oh, yeah, I completely understand. My question is a bit hard to answer, but maybe on something you've got a better grasp on is, you know, your confidence on H2 order intake for hybrid bonding. Should we expect an order intake for hybrid bonding that is consistent with the level we've seen in Q2 or is it going to sort of come back to a, let's say, a more normalized level?

That's also so hard to forecast. It looks, otherwise we wouldn't make the statement. For Q3, we know already that certain orders are to be expected. How much the total will be is also hard to forecast. But again, the adoption at the ones who are the first movers with this technology is increasing gradually, continuously. So that would then lead to more orders. But time will tell. So a positive development. Okay. Thank you so much, Richard. Thanks, Didier.

The next question comes from the line of Robert Sanders calling from Dutch Pint. Please go ahead.

Yeah, hi, Richard. Good afternoon. Thanks for taking my question. I guess my first one is just on the statement about 50% of the last 12-month orders being AI-related. I get that hybrid bonding is roughly half of that, 24%. I'd love to just break down the remaining other half. I get that you're in the OS step and you've got business with ASC on co-op. It'd be great just to sort of, if you could just try and pass it out. Obviously, you've done some calculations to get to that 50%, so I'd be interested to sort of understand a bit more, thanks.

Yeah, part is coals, and especially the OS part, and also to some extent the COW, and then photonics, so an ongoing trend in preparing that technology introduced in those two and a half D modules. So if you add that up, then you're at 50%.

Great.

You know, it's a great number. And then just on this SOIC-X, so the hybrid bonding version of SOIC at Apple, I mean, that customer seems to be introducing it for a very low-volume part, the server part. How quickly after that server part do you think they would be in a position to move it into a notebook-type part, if that was to be the plan? Thanks.

Well, it's in the roadmap, as explained also publicly, for 2025. So we should see that then, yeah, with orders first half and second half 2025, maybe 26, but there's a lot of development effort, as I answered earlier, ongoing, which points towards anticipated adoption either next year or the year after.

Got it. Thanks, Rob.

Thanks, Rob. The next question comes from Simon , coming from Barclays.

Please go ahead. Simon, please go ahead. Hi, Richard. Thanks for taking the question.

TSMC last week talked about for N2, they think increasingly customers will have to adopt chiplets. I was just wondering how you think about that for your hybrid bonding adoption and if they've given you more color on that ramp as well.

Well, that ties also to the earlier asked question. it simply confirms that this technology is on, you could say, the brink of being used in the interconnect of this next generation. So that, yeah, makes the case more clear. clear that that could happen in 25 and as I mentioned earlier, if not in 26. Okay, great. Thank you. For us to add one comment, it's not always possible to understand for which interpretation a machine is used. So we have in the meantime quite significant number of hydrogeners installed in Taiwan and we know for certain devices in AMD for a long time, which was a start, but then there's ongoing development going on for other customers with other applications. We are not informed in detail, which is understandable because if we would know, we would not be able to disclose that information. But what we share is what we hear at conferences. Those are typically public events. So I can't answer many of those questions in detail. I understand.

That's helpful. Thank you.

Another reminder, if you'd like to ask a question, please press star 1 now on your telephone keypad. And to redraw your question, please press star 2. Also, please ensure your line remains unmuted locally. The next question comes from the line of Andrew Gardiner calling from the city. Please go ahead.

Thank you. Good afternoon, Richard. Another one on hybrid bonding, if I may. You took in 29 tool orders in the quarter. That was right in the middle of the range that you told us about back in April of 25 to 35. And again, from the two customers. But in early May, you announced 26 of those orders with one customer. So clearly very skewed towards one customer with high volume aspirations and another one, at least in the quarter, with much lower lower volume. Was that what you had anticipated? You know, was it sort of one HVM and one perhaps more development? Or have there been some orders that perhaps slipped into 3Q and that's giving you that better visibility in the second half of the year?

Well, the latter. So it's part... Again, it's very hard to forecast when orders will be placed. So you know programs, you know bigger plans. So as we have said, since hybrid bonding started, the model used in Taiwan was 50 machines. The infrastructure in place to add that number of machines. Well, we're getting close. closer to that, but the orders have always been in increments of five or eight. And I think one's also 12. It depends very much on fine tuning in the meantime, the investment at the customer in Taiwan, but also the other major volume customers started kicked off with 26, they already hit. a certain number of machines so that is a larger installed base once it's all delivered. There will be a next round which may be ordered towards the end of this year or the beginning of next year. That depends on the success of those first devices introduced to the end markets. Those are all factors which cause let's say, not a fixed time frame, but for the rest of the business, that's also always the case. These are capital goods. Customers have programs. Whether they execute that in full at once is very rare. Usually it is increments. So one can't be too precise.

Thanks very much.

That's why, by the way, production planning at Basie, we adjust our pipeline planning every Monday, Wednesday, and Friday. And the reason we do that is because there's no certainty for any of the products until they are ordered. So we make the best assessments. That's also why there's always a range. But that's the nature of the business.

That's good. Thank you, Richard.

The next question comes from the line of Martin Morandon calling from OdoBHF. Please go ahead.

Hi. Thanks for taking my question. Could you maybe make a quick update on the new system coming with for the end of 2025? and help us understand what kind of application could use this tool. And also since today, most of the hybrid burning demand seems to be driven by the large generation of tools with 100 nanometer accuracy. Do you think it would be the same when you release 50 nanometer accuracy tools and that it will capture most of hybrid burning demand?

Well, that's an excellent question. Number one, the 50 nano is full in development and we should deliver first prototype, you can call it, by the end of 25. That has not changed. And the reason for that is clearly the design geometry moving into the two nanometer space. And for that, the expected on-pad pitch for logic devices requires them an accuracy and placement below 100 nanometer. So that has then been defined as 50. And your next question is also a very good one. The 100 nanometer, supposedly the two major customers today describing the adoption of hybrid bonding, feel that the 100 nanometer is more fitted to this current generation and the next. So that is in three nanometer design geometry for logic devices is what is the most, yeah, let's say highest yield, let's say possibility. But that's also not an exact answer. Maybe generation one would suffice, so 150 to 200 nanometer. But that also is part of the whole development in, it could very well be that for certain families, the generation one is best cost of ownership for those applications. because there's a price difference. There's a 500,000 cost increase for the 100 nanometer. The 50 will be more. We don't know yet the precise number, but there are, yeah, more precise cameras, motors, all kinds of developments which are not yet completed, of course, which lead to a higher cost of that platform.

Okay, very clear. Thank you. And just a last question on the TCB side. When do you expect the industry to start mass adoption of TCB systems with bump sizes below 25 or 30 microns like the TC-NEXT Flueless? And is there a difference there of timing for adoption between logic and memory?

Well, yes. Many of you know that RTCnext, we call it TCnext, was developed for a major customer for exactly the application below 2520 Micron BOMPAD pitch, and also with a fluxless process. The current generation of devices can, let's say, use 35... micron non-PET pitch, so our system is today not yet required, but the next generation is very clearly on the horizon, and we have seen in this quarter a significant increase in activity to make this system ready for exactly those devices below 20 nanometers. That starts or 20, Michael, that starts with logic devices. And at the same time, the memory, we also shared that we shipped the first system for memory to a US memory manufacturer. And they are already stacking 12, even 16, even higher numbers in the development lab. So to technologies can be used for this HBM stacking, whether it's a TC process and at the same time, side by side, it is being developed using the hybrid technology. Our system is running constantly demos, multiple devices, different architectures, different sizes, different processes. So once technology moves to this below 20 micron bump at pitch, it is ready to be used in mainstream applications.

Does that answer your question? Yes, perfect. Thank you. Thank you.

The next question comes from the line of Martin Jungflesch calling from BNP Paribas. Please go ahead.

Yeah, good afternoon. Thanks for taking my question. Really, I jumped the call late, so apologies if this has been asked, but in the press release this morning, you mentioned that prospects remain encouraging also for hybrid bonding adoption, HVM. Does that mean that your systems are not qualified already and being used in upcoming HVM production? That's the first question.

Well, as I answered to the question before, There's constant development already for I would say now three years in developing a hybrid bonded stack of memory devices and side by side with using a reflow process, a mass reflow process in case of INIX. And at some point, there will be a mix. So if you follow closely the three big ones in memory, their roadmaps simply forecast that they will be using both technology for different device applications. So that's also why the statement of ongoing, let's say, further development and increased development is pointing towards, at some point, the adoption of hybrid bonding in stacked memories in HBM applications.

Okay. Thank you. Maybe to go back to the mainstream markets, I think in Q3, all the excluding the AI-related stuff has been flat. And you mentioned that the assembly market remains relatively soft for smartphone auto in industry. If you look at data points from the smartphone segment, they've been somewhat more positive lately. Would you say that this positive development comes to you with a delay? So you would expect orders from the smartphone side to improve in Q3 or Q4, or is that not the case?

Well, everyone is looking at for positive signs in the mainstream. But as we stated in Q2, the situation in smartphones, automotive and industrial simply remained main soft. That doesn't mean that there are no orders, but there's no increase. There are new devices always developed, also in the Engine 1, as we call it, environment. But also, to be more specific, on the high-end smartphones, there's an ongoing development in new upgrades. One of them is the processors, of course, but also the camera modules. Also other... devices inside those and there's a lot of publicity about announcements both in the iOS and in the Android camp and also the expectation that HAI at some point, that was also an earlier question, would have a major impact on the chiplet architecture in the processor, but also the memory side of those devices. But clearly in our statement, we don't see hard orders for major volume ramps so far. When they are expected to come is hard to forecast, but there's a lot of development which is always prior to to market adoption. So it will be very important to see what happens in Q3 and Q4. Will there be new modules adopted for generation high end smartphone to be launched in Q3 next year? Then we should see more visibility.

Okay, that's good, thank you.

The next question comes from the line of joins. Rice, going from APIS Capital, please go ahead.

Yes, good afternoon, Richard. Maybe two short questions. First, regarding the throughput of the 100-millimeter machine, is it the same like the 150-millimeter machine, or is there any reason that it's lower?

I can barely hear you. Can you speak up a little bit?

Yeah, can you hear me now better?

Ah, this is much better.

Okay, sorry, I repeat the question. The throughput of the 100 nanometer machine, is it the same like the 150 or is it for any reason lower? It will stay lower than the third generation first.

Accuracy and speed are enemies.

Yeah, that was the question.

The tighter the accuracy, the slower the machine bumps. In the past four years, we have made a lot of progress in aligning this accuracy and speed in generation one. So the throughput is increasing from, yeah, around 1,000 and even below that four years ago to well over 1,500 for generation one, close to 2,000, depends on the size of the dike. and also the pattern on the dye. And for Generation 1+, we are not that far off from Generation 1. But again, that also depends on which dyes to handle. Easy to imagine, the better you can recognize the to be placed dye, the faster you can place that dye. But at the same time, you have these dynamic factors. So moving a die from one place to the next creates vibration in the boulder. And the way to handle that is also a science. But anyway, the step today between generation one and one plus is not that large. What is very important to understand once we go down to 50, the dynamic forces are becoming a greater impact. So then you can expect a somewhat slower throughput, which in the end with similar volume would result in more machine.

Okay, great answer, thanks. Second question, photonic, you mentioned it in one half answer. Can you give us a little bit more perspective you see in the next 12 to 18 months for your photonic business?

Well, since early part of last year, the photonics application has gained significant traction. There are multiple customers now, and that's especially for the high-end data center processors, where this photonic technology is used in driving that circuitry. And that is expected to continue. So depending upon the AI adoption and volume installation, you can expect ongoing business. And we have definitely currently an excellent product range fitting those applications, which I also explained in earlier calls. dates back to more than 10 years in the past. We've been engaged in this since early days. And that finally, I could say, is coming to major mainstream applications.

And do you see any competitor who's close to you in this area?

Well, it's all about, also here, accurate placement. And so many Diebohm companies, they are able to place something accurate. But again, it's the combination of accuracy and speed. So the cost of ownership determines finally who is the preferred supplier. And we have an excellent combination, and you can see that currently in the progress of our business. But we are not alone.

Final question regarding your partnership with Applied Materials. I have a feeling it's quite quiet. You didn't say anything about it at your Capital Markets Day, even no word today. Can you give us an update about your partnership and maybe the combined machines or systems when they come into market and so on?

Well, that's definitely a very important question to put right. We're working every single day. very closely with light materials in developing this technology. And their part is the preparation of the dioxide, the cleaning, also the preparation of the copper bomb pads. And we do that jointly in the Center of Excellence in Singapore, also in our own The key person has also joined Bayes' technology advisory board in February. So I should take this message very well that we have to explain more of what we are doing. So the health of applied is very important in the adoption of hybrid bonding, and it's working perfectly.

Okay. Maybe it's too good to mention it. Thanks a lot for the answer.

Thank you. Next question.

The next question comes from the line of Charles Shi calling from Needham & Company. Please go ahead.

Hey, Richard. Maybe I want to ask a couple of questions about PCB Next. Maybe I missed it, but can you Can you tell us what this new shipment, where is it going to? Because I recall the first system probably went to the U.S. Logic customer, second went to the U.S. Memory customer, but the third one, where is it going to?

Well, there's several developments. One has gone to Taiwan, another one to the U.S., and another one in Europe.

Okay. All right. Thank you. I want to ask a bit more about the overall TC Next strategy for HBM. I'm sure you probably at least get some briefing from your team about the earnings call of your peer a couple of nights ago. Yeah, and I think my takeaway is in HBM, thermal compression bonding is pretty close to market in Korea, meaning your Korean customers, when they do HBM bonding, they tend to want to use the local vendor there. I mean, up here, apparently, they get two tools qualified, but they were not able to ramp up production in volume with their customer. So I wonder what sort of strategy there in that part of the HBM market. Again, you said you shipped the one to one of the memory customer, which is not Korean, right? But the other two are pretty big players in HBM. Any thoughts on that?

Well, first of all, one side is the HBM. And the question will be in the future, how much will be TC driven and how much will be HBM driven? And again, side by side, these developments are currently with a lot of effort ongoing. And then we have the logic side. So there we move below, let's say 20 micron bond per pitch. And it's clear that the data we are producing is simply confirming that for that segment um you you have a major um yeah let's say open market for for the next generations and that is not only us but also taiwan and then for many customers who use taiwan And there also you have the picture of both technologies side by side. So you have the PC. In Korea, to complete the picture, there's one process which uses the mass reflow still as a technology. And then you have the TC. But again, it's not yet clear how much will be used using either of those technologies. It is certainly the case that so far Korea has been very much self-supporting, but there is of course the question whether those suppliers can follow that same roadmap. Time will tell. We are heavily involved in the development of course, with the HP hybrid bonding in the Center of Excellence in Singapore. Same for TC, but then currently that's done in Europe, in Raatveld, with many advantages over, yeah, what is currently available. So again, Q2 was a very important quarter to... understand that RTC Next has major advantages over other solutions available in the market.

Thanks, Richard. Ladies and gentlemen, as a final reminder, if you'd like to ask a question, please press star 1. Now, the next question comes from the line of DJ Skimama again, calling from Bank of America. Please go ahead.

No, thank you. Sorry, Richard, just a follow-up. I think you mentioned earlier that Taiwan has reached or is close to reaching the 50-unit install base. I think that was a sort of similar target for the U.S. Logic customers. So maybe just if you could confirm that. And then related to that, maybe what's your – What's your best guess of what the install base for HBM for Korean or U.S. customer might be at sort of peak capacity?

The first is easy to confirm. That stands, and there even are numbers beyond that 50. Simply following the successful adoption. The second question, we've always said that in volume, theoretical assessment, you could say four times memory follows a logic. So that would mean a market significantly larger using hybrid plumbing for HBM than for single logic devices. However, with template architectures, you also, well, every needs to be placed. So, it's a rough calculation. There's something else which is important to realize. Logic has far more IOs, contacts, than memory. And also, the spacing is more, for that reason, more critical in logic. than it is in memory devices. So the question then also, but this is also very, let's say old, in logic, the opportunities, let's say historically, are much more than on the HBM side. The memory side has always been and less attractive segment of the market. But with this HPM, with this stacking, because that's another complexity, remember 12 years ago, we delivered the first TC solutions, which are still running for a major US memory manufacturer, very successfully, with through silicon via stacking those dice, even up to above 20. But to give you exact numbers, it's difficult. I would answer that potentially there's a larger number of machines for HBM hybrid bonding stacking required them for logic.

Yeah, that's helpful. And are you still, through your view, your current view, your best guess, is that the intersection of hybrid bonding and HBM is 60-layer stack in HBM4, or has that changed?

Well, that goes back and forth. Some are pulling it forward because of performance, because of heat, because of all the issues which supposedly, and also with tests confirmed, are better using hybrid bonding, but at a cost. So one of the key issues is, again, the speed, the throughput of the machine. And with slightly less accuracy, you can have these machines run faster, so the gap between using hybrid and TC is for that spec part less, but you don't need full cleanroom for a TC process, so the infrastructure cost is using TC lower than hybrid bonding. But these are all Information shared at conferences and there's often an ongoing debate in what is more important, the performance of the device or the cost. And the only conclusion every single day is be very much active in that whole development.

Absolutely. Well, good luck with everything and thank you for your answers, Richard.

Thank you very much, Olivier. And the last question comes from the line of Ruben Devos calling from the Kepler shovel. Please go ahead.

Yes, thank you. Good afternoon. Just a few questions, a follow-on basically on TC still. Just for clarification, I think so far you've mostly supplied the TC Next systems, right? So I think at the end of yesterday you also introduced the TC Fluxless system. Yeah. But did I hear it correctly that TC Next is already a Fluxless process?

Well, let's say The world today is still using flux. The disadvantage of flux is that you will have an additional cleaning step and you also need more space. On the other hand, the fluxless process is not simply done. So you need a different process altogether. There are different technologies used. I won't go into detail, but that's all not settled. So optimum would be to find a process which does not need flux. We have, yeah, let's say developed with customers a certain process, which is operating. And the direction is certainly to see whether we can accomplish that in high volume. So the direction, and you can hear that in general in the market, is to, yeah, let's say be successful in offering a flux source process.

Okay, and that's very much still in development? You have not yet delivered prototypes of the DC fluxless system?

Yes, yes, yes, yes, we have delivered prototypes of that. That's also developing very positively. That's also why we received an additional order and also ongoing development, especially in the U.S., both in logic and in memory application. So it looks promising, but we're in early stages.

Okay, and then just apart from, let's say, the logical candidates in memory, is it fair to say that also for logic you would have multiple customers interested for the DC Fluxless system?

Yes, yes, certainly. In the US, Taiwan, and Taiwan for many other customers. So the best way to look at it, if you can offer this access in a reliable, high-yield, let's say, process qualification, that is the ideal solution. You still have a fallback using flux, but again, the flux has disadvantages.

Okay. All right. Thank you very much.

Every way you look at that, you have a continuous development increasing in what is possible using PC. Where do we have to move to hybrid? and we are in the middle of this enormous development effort in the industry.

All right. Thank you, Richard. There are no further questions, so I will hand you back to your host to conclude today's conference. Thank you.

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