BE Semiconductor Industries

Good morning, good afternoon, ladies and gentlemen, and welcome to BASIC quarterly conference call and audio webcast to discuss the company's 2025 fourth quarter results. You can register for the conference call or log into the audio webcast via BASIC's website, www.basic.com. Joining us today are Mr. Richard Blakeman, Chief Executive Officer, and Mrs. Andrea Kopp, Senior Vice President Finance. Currently, all participants are in listen-only mute. 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 will now turn the call over to Mr. Richard Blickman. Please go ahead, sir.

Thank you. Thank you for joining us today. We will begin by making a few comments in connection with the press release issued earlier today, and then take your questions. I'd like to remind everyone that on today's call, management will be making forward-looking statements. All statements other than statements of historical facts may be forward-looking statements. Forward-looking statements reflect Basie's current view and assumptions regarding future events. many of which are by nature inherently uncertain and beyond basis control. Actual results may differ materially from those in the forward-looking statements due to various risks and uncertainties, including but not limited to factors that are discussed in the company's most recent periodic and current reports filed with the AFM. Such forward-looking statements, including guidance provided during today's call speak only as of this date, and Basie does not intend to update them in light of new information or future developments, nor does Basie undertake any obligation to update the forward-looking statements. For today's call, we'd like to review the key highlights of our first quarter ended March 31st of this year and update you on the market, our strategy, and the outlook. First, some overall thoughts on the first quarter. Basie reported solid first quarter results, important new advanced packaging orders in a challenging market environment. Revenue of 144.1 million euros was down 1.5% versus the first quarter last year due to the ongoing weakness in mobile and automotive end-user markets, partially offset by strong revenue growth from hybrid funding and other AI-related computing applications. In contrast, orders increased 3.3% versus the first quarter last year and 8.2% versus the fourth quarter last year due primarily to increased bookings by Asian subcontractors and AI-related data center applications. Basics profitability in the first quarter of this year remained at attractive levels despite ongoing weakness in mobile, automotive, and Chinese end-user markets, and expanded R&D investment in next-generation assembly solutions. Net income of €31.5 million decreased 7.4% versus the first quarter of last year, primarily due to lower revenue and gross margins realized partially offset by an 8.9% decrease in operating expenses. Basics gross margin has trended towards the lower end of our target range over the past three quarters due to primarily a less favorable product mix, particularly with respect to high-end smartphones and net Forex headwinds beginning in the second half of 2024. from adverse movements in some of our principal transaction currencies versus the euro. On a sequential basis, Q1-25, operating expense growth of 10.3% versus the fourth quarter of last year was due to higher consulting costs. It was at the lower end of guidance as we continue to control overhead development despite increased R&D investment. In addition, cash flow generation remains positive with net cash increasing by 10.8% versus the fourth quarter last year to reach 159.4 million euros, which represented 26.3% of our latest 12-month revenue. As such, we continue our highly attractive capital allocation policy. In Q1 2025, we repurchased 22.1 million euros of our shares bringing total cumulative purchase to 51.4 million euros under the current 100 million euros program. Further, at our AGM today, shareholders approved the proposed dividend for 2024, which will distribute 172.5 million euros in cash to shareholders, which equals 2.18 euros per share. Next, I'd like to speak a little bit about the current market environment and our strategy. Tech Insights currently forecast a 13% assembly market upturn in 2025, followed by a 26% increase in 2026. Most analysts continue to expect significant growth in advanced packaging for AI applications in 2025, and a second half turn in mainstream assembly markets. However, the slope of the current trajectory anticipated for mainstream markets this year is subject to many variables, including the potential impact of tariffs on a global trade. Despite near-term uncertainty, we believe that the long-term fundamentals of our market remain strong due to the ongoing AI build-out. on-shoring of advanced packaging fabs in the US and Europe, and increased adoption of hybrid bonding and other next-generation assembly systems for new AI, logic, memory, and consumer use cases. Of note, significant progress was made on Bayes' wafer-level assembly agenda this quarter, as we received hybrid bonding orders for two leading from two leading memory producers for HBM4 applications, as well as follow-on orders from a leading Asian foundry for logic applications. Further important announcements were made by two leading semiconductor producers with respect to future hybrid bonding applications, such as ASICs and co-packaged optics. In addition, a leading U.S. logic manufacturer successfully began production of AI-related logic devices utilizing BASIC's hybrid bonders in integrated production lines. Finally, Applied Materials announced on April 14 a 9% ownership position in BASIC. BASIC and Applied Materials have been successfully collaborating since 2020 to develop the industry's first integrated equipment solution for dye-based hybrid bonding. The collaboration brings together applied expertise in front-end wafer and chip processing with base leadership position in bonding accuracy and speed. We welcome their shareholding as a strategic long-term investment and view it as further validation of our wafer-level assembly technology and strategy. Now a few words about the guidance. BASIS business development this year reflects the contrasting growth trends seen in the assembly equipment market between AI and mainstream applications. The timing and trajectory of a mainstream assembly upturn is more difficult to predict now given new tariff uncertainties. However, demand for advanced packaging for AI applications remain strong given upcoming new device introductions and use cases planned in 26 to 28 time periods. We continue to assess the potential impact of tariffs on basics customers, right chain and end user markets. For the second quarter 25, we forecast that revenue will be flat plus or minus 10% versus the first quarter of 25, with gross margins in the range between 62% and 64%. In addition, aggregate operating expenses are forecast to decrease 0% to 10% versus the first quarter this year, primarily due to a reduction in consulting costs. That ends my prepared remarks. I'd like to open the call for questions. Operator.

Thank you. If you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. We kindly request you to limit the number of questions to two questions per person. You will be advised when to ask your question. We will take our first question from Nigel Van Putten. Morgan Stanley, your line is open. Please go ahead.

Hi. Yeah, thank you. Good afternoon. I've got a question on the hybrid bonding orders you've received for HBM. If my understanding is correct, both customers already received two a couple of years ago, and we're also working with you in Singapore and Austria. So now they put in new orders. Can you provide some context what you think that means, what stage of development they are, and if you have any clarity on their intent and have a follow-up? Thanks.

Well, as we all know, the preferred technology to stack memory is a reflow process. TC, thermal compression, is used by all three major memory manufacturers today because the cost is simply more advantageous than using a hybrid bonding process. Hybrid is better because It has less metal in between the contacts because a reflow process is reflowing a soft metal. And driving current through a circuit, you need simply more current. And that means that the performance of a hybrid bonded device is better, theoretically, than a reflow bonded device. Cost is also important. a factor of four, some people say six, higher using a hybrid process compared to a reflow process. So nothing new. In the past year, exactly a year ago, JADEC released their standards to allow 16 stacking of devices using this reflow process. It resulted in a height above the standard. So the industry has been developing which is very, very understandable, this technology, which is proven in a next generation. And at the same time, they are developing the hybrid bonding process as an alternative, number one, for a better performance, less energy consumption, less heat dissipation required. And so all of them are testing this hybrid bonding as a next generation. preferred solution and you can see in this quarter continued testing and also taking a latest machine so we're talking about single machines not the whole production facility but these are testing machines which should provide the answer in the second part of this year is for hbm4 a certain part using hybrid bonding, and another part using the conventional process, a TC process. So it's important to understand what this means. It means simply continuing development, testing the benefits, understanding better how we can impact the cost, and in preparation of a next step in stacking 20 dyes where it is likely that a reflow process has hit certain limits. And then hybrid bonding is the only way to go. So that's in a nutshell where we are.

Understood. That was actually very helpful. I do have a quick clarification, I guess. You just repeated customers are still looking at sort of a dual parallel track for 4 or 4E, 16 high. I think you're involved at least in one customer on both sides, also TCB. So maybe can you provide any color on your TCB developments within memory and also where you think sort of both tracks stand? I think you sort of implied that there may be some testing going on already at 16, but the big implementation is beyond that. Did I understand that correctly? And then also, how do you look at your, you know, Bessie's TCB venture? Thanks.

Well, our TCB is a continuation of focusing on this reflow for the past 25 years. And you have seen in this first quarter significant increase in demand for mass reflow flip chip machines. TC is used for those processes where mass reflow is too critical to accomplish with smaller bond bed pitches. So we entered the TC world 12 years ago And we have developed six years ago, a next generation TC, which can produce at smaller bump at pitches than the current market suppliers. And that process is coming into the window of those customers gradually as we reported in the last quarters. So we have said all along that the first half of this year, 25, should also make clear whether this next generation TC is being adopted for HBM4 to a certain extent. So that will be exciting to understand in the next few months what will happen. BASIC has in its offering, so all three. So we have mass reflow flip chips, for many, many years and today very successful. We have TC, which is also very successful in focusing on the next generation. We shipped another system this quarter, which already has produced data for BOM-PET pitches well below the current next generation, so below 20 micron BOM-PET pitch. Data has been produced below 10 micron bomb pad pitch, so that system comes very close to hybrid bombing. So offer the customers both solutions in a reflow process and the most advanced hybrid bombing process. But this year, again, will be a very important year to understand how much of HBM4 will be reflowed and which are the machines used in the industry by which competitor, and then which part may be hybrid bonded. Is that HBM4E, or is that for the next generation? So we will update you quarter by quarter. Also in the next month, we have the Capital Markets Day. So an exciting development in the memory front.

Perfect, thank you very much.

We will take our next question from Charles Sir, Needham and Company. Your line is open, please go ahead.

Hey, thanks for taking my questions. Richard, congrats on the two additional hybrid bonding orders from two memory customers. Sounds like you were you are expecting maybe they will get, they will, they will be qualified for HBM four, four generation, the earliest. And, uh, but, uh, if I look at the NVIDIA, um, the latest roadmap update, the Ruben, Ruben ultra HBM four will come to the market. Second half 26 HBM four years, like second half 27. Yeah. Memory makers probably need to start production a little bit before, those NVIDIA product availability timeline. So wonder what's about getting your hybrid bonding tools in right now? Is that enough time for you to get qualified for the generation? How much confidence do you have in that timeline? Thank you.

Well, that's, of course, a very important question. So there are two important factors. Number one is what is the window of introduction that is often up for revision, because it is not only the bond work, but there are many other processes. And number two is the competitive landscape. What is available by what time? So as I said, also in response to the earlier question, it will be very exciting in the next couple of months to see how the industry will fill in this demand and which processes will be used. As much as I understand today.

Thanks. Maybe a second question, Richard. I think in your earnings press release last quarter, you talked about maybe a second half recovery for the mainstream business, but obviously the language in the press release in the current quarter turned a little bit more cautious, so you're no longer saying you're expecting maybe a second half recovery. Wonder what you think about that potential revenue trajectory for the mainstream business can be. Do you think at least the second half can be flattish over the first half or any additional color on the second half would be great? Maybe let me add one thing. The reason why I ask this is when I look at the consensus revenue numbers, looks like a lot of the my peers are modeling a much bigger second half revenue estimates. What's your thought and any comment you can provide would be great. Thank you.

Well, it's I think fair to say that since February 20 and April 23 in the world a lot has happened. And there are major major impacts to be, let's say, expected or considered, however you want to phrase that, of these different tariffs. If you look in historical perspective, any disruption to an economical situation is, for our industry, nine out of 10, I would say 10 out of 10, has a negative impact. So more caution. And that is why we are, let's say, probably more careful than simply following the statistical trends in this industry. That often results in when things have crystallized, that you may have an even steeper recovery. So that could also very well happen. Take the 2008-9, the financial crisis, as a reference. Or take, for that matter, 2019-20, and then the impact of COVID. So these impacts are first causing some caution, and then after that, Again, a stronger increase. So our caution is because of this phenomenon. We also see that as customers. We mentioned in the call February 20, that already before the Trump tariffs, there was a big, yeah, let's say slowdown in automotive. Also disappointing in high-end smartphones. Not a big, big year to be expected. So why, with all this tariff uncertainty, would all of a sudden the market look better in the second half? We do see, and you see that in our order intake, some improvement year over year, quarter over quarter. But as long as it is single digit, it is not a very strong upturn. And when you would see second half this year a major uptick. You should see orders increase dramatically in the first and the second quarter because there's a lead time. So in a longer answer, Charles, I hope that you are right, that we do see a strong recovery in the second half. Basie has demonstrated we can ramp very quickly. We're also prepared for that, of course. But in the current state of tariffs and economies and a lower dollar, that usually has a negative effect.

Thank you, Richard.

Thank you, Charles.

We will take our next question from Didier Simmermann of America. Your line is open, please go ahead.

Yes, thank you. Good afternoon, Richard. I just had a question on your first court order. Did it play out the way you expected or did you see any push-outs from anyone, whether it's the IDMs or the subcontractors? The reason why I'm asking is because it's really in response to the previous question. It's really because if the customers are worried about, you know, tariffs, in some respect, they might pull in, as they see, as they've done probably for semis. But when it comes to back-end capacity, they're probably pushed out, right, not knowing exactly how it's going to play out. So if we were to have a bit of more clarity on those tariffs, and, you know, who knows, that might happen, do you think that they come back quickly in Q2 to actually cater for the seasonal uptake for smartphones and PCs that you normally see, especially smartphones, for basics? I've got to say the follow-up as well. Thank you.

Yeah, that is what I tried to explain just now. If you look back in whatever downturn scenario we've had in the past many, many years, you have the hesitation because our customers don't, let's say, have the confidence in the end market demand. You sense that it takes longer. also take the Intel specific situation, Intel restructuring, whether it's announced or not, but people expect a major, a major, let's say restructuring impact, um, that usually slows down orders for some time, but then it catches up. Um, But we have this nice slide in the deck going back to 2006. I invite you to look at that quarter by quarter. And you see those impacts in every cycle along the way. And always the recovery is very steep. The question is, however, will that be in the second half of the first half of next year? But it will recover.

No, no, I get that. Sorry, sorry, trying to be a bit more precise on that. Did the quarter play out the way you expected, e.g., you know, did you miss by 10 million, 20 million, or just help us understand how much you think your orders missed so we can try to understand how much it can sort of recover if and when tariffs are a bit more clear.

Well, revenue was fine, was okay. It was also more or less in the middle of the guidance. So that was not disappointing. Orders, I just phrased it in other words, but we feel some delay. How much that delay is, whether it's 10 million or 20 million, it could very well be. On the other hand, look at the orders and the guidance. So we received in orders much less than what we got. So we expect some orders still to come. And that will, if all goes well, may well have an upside. We got a plus minus 10% on 144 million. The order intake was much less. So that more or less gives you the answer, DBA. But the bottom line is that we feel there's some caution. Let's put it that way.

Yeah, I think it makes complete sense. And sorry, just as a quick follow-up, on the hybrid bonding side from Foundry customers, you said you saw some follow-up orders. Can you elaborate a little bit? Is it coming from AI applications, computing applications? co-package optics. Just give us a sense of also the magnitude of that contribution to revenues in the second half, please. Thank you.

Well, we've said all along that that customer in Taiwan is not very transparent in terms of the end application. The end application we hear from their customers. So whether that's AMD or whether that's NVIDIA, NVIDIA, as we all know, is developing very much on this co-package optics. We also know from high-end smartphone applications where certain modules are being assembled using the hybrid technology. So there's an ever-growing application field using hybrid bonding. Currently, a fleet of 50. A few more systems will be added August, September, if all goes It was according to plan. There's a big program for 26. There's a site announced, advanced packaging, which potentially is twice the size of the site which currently is operating the hybrid bonding systems. So they're big plans and a lot of development. And that should kick in somewhere in 26 years. So then you should receive orders in the later part of 25. But anyway, that is what we understand today. Okay.

Okay. All right. Thanks very much, Richard.

Thank you, DJ.

We will take our next question from Robert Sanders, Dutch Bank. Your line is open. Please go ahead.

Yeah, hi, good afternoon. Hi, Richard. I just have two questions. Firstly, if you could just talk a bit about Hynix. They're in a quite public dispute with Hanmei at the moment. I was just wondering if that could potentially create an opportunity for you either in TC or hybrid bonding. And then the second question would just be, if you could just confirm that you had mid-single-digit orders in the quarter, just to help our modeling for hybrid bonding, that would be great. Thank you.

Yeah, the last is even more precise. Yeah, in the mid-single-digit. On the Hynek situation, and that is public knowledge, they are like the other two, developing both technologies and continuing using the MUF process and reflow. And they are also continuing to test hybrid bonding solutions. They are also preparing local supply and a second source. So that fits into the total picture that 25 may well show some direction in those three continuing to use reflow plus starting to more seriously develop hybrid bonding stacking. So partly relying on our, the AMET Center of Excellence in Singapore, also development in Radveld, and that's where it stands. On the dispute you are mentioning yeah there's and we've mentioned that in every call the current landscape of tc bombers is able to produce with a certain bomb pad pitch and a certain process but that's not good enough for the next generation it needs to be a tighter bumper pitch it needs to be fluxless then which fluxless solution is it a plasma solution Or is it some type of chemical solution? That is currently in full swing. And some are more advanced in their solutions offering than others.

Great. Thanks a lot.

Thanks.

We will take our next question from Aditya Mertuku, HSBC. Your line is open. Please go ahead.

Yeah, good afternoon, guys. Thank you for squeezing me in. So firstly, Richard, maybe when I look at the roadmaps for AI accelerators, Rubin Ultra, which is meant to ship in the second half of 2027, is expected to be the first accelerator that uses 16 high HPM. Until then, the market seems to be dominated by 12 high HPM. So given this backdrop, even if hybrid bonding gets qualified for 16 high HPM, despite all the short timelines. Would it be fair to assume that hybrid bonding will not be used in volume production until 2027? Or do you think it could still be earlier, maybe with some test versions of 12 high HPM? And I've got a follow-up.

Yeah, well, the way you... summarize it is pretty much how it is presented to us and again we come back to the basic reason why using hybrid bonding and stacking is simply the performance so is there a differentiator using a hybrid bonding process which is more expensive compared to a reflow and that is up for the debate at each of the three producers. And that's where we are continuously doing tests in the hybrid, but also in the TC. So in another way of putting it, it's on everyone's mind, but how it will sort itself out is not yet clear.

Understood. And as a follow-up, you mentioned earlier that smartphone applications are looking at hybrid bonding. TSM on their last call, not the one this month, but in the previous quarter, they were specifically asked if they see smartphones going to hybrid bonding anytime soon, and they basically said no. So I don't know, are these use cases being developed by somebody else or maybe not your main customer in Taiwan. And also, I just wondered if you might be able to comment on the competition from China. There seem to be a lot of companies coming up in China addressing hybrid bonding. Thank you. And apologies for the third question.

No, they're good questions. Number one, there is no final answer in whether it will be used or not at this moment. So they're all testing. They're all understanding the benefits of one over the other, so the hybrid plumbing process over reflow, they're all aware of the performance increase. Cost is a major issue right now because it has to take place in clean room, and there's a factor of four to six more cost. So to ask the question, Will it be included in the iPhone 2025? The answer is no. We have always said, going back capital markets days, I think three years, maybe even four, that we expect 2027 to be the first in using that. So you have to be also aware that this testing is ongoing. And that doesn't mean that this is, well, maybe not used this year, but it can very well be next year or the year after.

Please help me with your second question. Hello? Sorry.

Can you repeat your second question?

Yes. Apologies. I was on mute. I was just saying, recently there's been a lot of news flow around hybrid bonding competition coming out of China. I'm probably going to mispronounce the names, but the names I've seen are Tujing, Shanghai, Yingguan, and a couple of others. So I just wondered if you could give us your thoughts on how you see hybrid bonding competition arising out of China.

Well, there's of course a lot of not only in China, but also outside of China. Everyone now understands that hybrid bonding at some point for the applications we discussed earlier is a fact of life. So anyone building a precise bonder is developing also a hybrid version. So that's not new. How advanced they are is still a big question. But you expect more competition coming from every region. We are currently with the 100 nanometer well advanced in comparison to everyone else. And certainly when we will ship the first 50 nanometer, which should be by the end of Q3, early Q4, That is not available at anyone else in the world. Also, 100 nanometer is not a standard used by anyone else. So we continuously build on our lead. We follow closely the roadmap of TSMC, and we also fulfill that roadmap. In China, the status today is with many of the devices, like also the coals, is a reflow process. So a TC process, mass reflow process, not yet in production, an HB process, a hybrid bonding process. We are very successful in the Chinese market today, delivering a lot of mass reflow flip chip systems, We have two types. We have the 2100 and we also have the quantum, which I used for a similar two and a half D modules in China. So the process of reference, having a market share of close to a hundred percent. But anyway, your question is absolutely right. But with, Boundless forever we have seen Chinese competitors trying to capture a certain segment in this market.

Understood. Thank you.

We will take our next question from Ruben Davos, Kepler Chiru. Your line is open. Please go ahead.

Yes, good afternoon. Thanks for letting me on. I just had one regarding the copackaged optics. I think in your prepared comments, you talked about two leading semiconductor producers that have made announcements. I think you've alluded to NVIDIA in this call, and I think Intel has also been quite explicit on its roadmap with hybrid bonding applications into ASICs and copackaged optics. Yeah, could you... Maybe talk about your engagement with those two, but also maybe with some others that might also be candidates. I'm just thinking Marvel or AMD and these types of names. And then just on a follow on that, I think last year at the investor day, you talked about sort of the market scenarios for hybrid bonding, but you always excluded co-packaged optics. Yeah, very curious your thoughts on how you think that size of the market could be maybe relative to, for instance, the HBM market or the high-end logic market with server processors. Thanks.

Well, we did not... I cannot remember that we left co-package optics out of the potential market applications. It's more... well, there are two areas in this application field. There is these connectors where we are forever with photonics applications, which is done with a two micron, one micron precision. We have major market position in those applications with a broad range of customers, also the top ones. Those are those connectors which are included in the data center processors directly. And then we have package optics where we are also engaged with the customer you just mentioned and also the other one since early days. So that is a very, yeah, let's say interesting market, which is also in early days. We have the right technology for that, also the customers for many, many years. So at the next capital markets day, we will make very clear to you what the potential of that market may well be and what are the different processes. but it's a key focus of our product strategy all right great looking forward to that

Then the second question just on applied material. I believe you've been working with them since 2020. Could you walk us through how that collaboration has evolved in the past five years and now that they've taken a stake? Do you see that more as a strategic edge or could it be the first step toward maybe deeper integration?

um yeah how are you thinking about your independence long term as a as packaging and maybe process control starts to converge thanks well that's a very big question but let me start with the beginning we started now nine years ago with tsmc to develop this hybrid bonding for um yeah, CPUs for logic devices because the smaller bump that pitches required a different process. As soon as that became, let's say into an end market device in 2019, I remember vividly the first discussion we had with Applied and how can we work more closely or let's say work together in a closer way for the industry to support the adoption of this technology with offering number one process development applied as a center of excellence in Singapore and at the same time support the development of automated lines because that improves the process window and the process quality. So from then on 2020, we formalized that cooperation just before COVID broke out. And ever since we have worked very closely on a weekly basis review in bringing this technology to ever next and higher levels. It also has created in the market a clear model whereby a front-end company having the experience with front-end processes operating in front-end fabs and a back-end company for which this next generation has to be developed. So that has worked step-by-step, customer-by-customer in the logic arena, in the memory arena, also in other areas. And we are very positively surprised by applied announcing an ownership stake of 9% in Beijing. That will only intensify our corporation and lead to leadership position ever more into this market. So that's what it is.

Okay. Thank you very much.

We will take our next question from Martin Marindale Calhoun. Odo BHF, your line is open. Please go ahead.

Hi, thanks for taking my questions. My first question is on memory. What do you think are the key advantages in memory that allow you to win orders versus competitors for hybrid bundling? Because in logic, it's maybe a bit more obvious as the precision requirements are higher and it seems that there is a technological gap between busy and competition.

that aspect for hybrid bonding but in memory i'm curious to know about what makes the difference to to win over competition well on memory number one the dice are thinner so the complexity is different so on logic you have more contacts remember you have less contacts but the device is thinner so the stacking is very much influenced by how you are able to control this variation in ultra-thin devices. And one of the advantages of reflow process, and that means a soft metal in between the two dyes, accommodates for some of the delta in thickness. With hybrid bonding, it has to be completely flat. You have less room to accommodate the variation in thickness. But the process itself is better because you need less current, produce less heat. So the performance of a hybrid bonded device is better than that of a reflow bonded device. And then you have the cost. The cost is in fact four or six more expensive using hybrid. So the whole memory world is developing on an ongoing basis. The advantages of both processes and understanding when our crossroads in using one over the other. In logic, you concluded already yourself that decision is more close and has been made by many customers. As we explained in detail, Intel finally also moved second half of last year at TSMC already three years earlier. And the advantages are ever more clear because you have closer contacts, the bump bed pitches are smaller, and you have simply less issues with heat. So, That is where we are today. Basie, again, follows both roadmaps. So the reflow process from what I mentioned also earlier, mass reflow starts, flip chip, then TC, individual devices, then hybrid bonding, and that is the complete offering.

Okay, thank you very much. And I have a follow-up on your U.S. customer. What do you think needs to happen with your U.S. customer before receiving a follow-up order for hybrid? Do you see they would wait to see what's the commercial success of their new CPU using hybrid bonding? Do you think they need to figure out what restructuring they need to do first? Or do you think they will necessarily have new capacity soon as their new products now move more and more away from TCB and transition more and more to hybrid bonding?

It's about, as you have just summarized, they are sampling the market with hybrid bonded devices, clear water forest. We will understand, that's what we are told, towards the early part of the summer. how successful that is and what we can expect in terms of capacity increase we are currently running every single day and all test devices tested with customers and then there's a next device already let's say presented which will be more for high-end computer applications not so much for data centers It's hard to forecast how successful that will be, but there's an enormous amount of pressure, commitment to make this all work.

Okay, thank you very much.

Thank you, Martin.

We will take our next question from Martin. Madeleine Jenkins, UBS. Your line is open. Please go ahead.

Hi. Thanks for taking my question. I just have one. We've been hearing that the Koreans are potentially working on a sort of combined HPM solution, so the hybrid bonding and TCB are in the same kind of HPM stack. I just kind of wanted to get your view on the technical side, what the viability of this is, and also if it's something you've been involved with. Thank you.

We have been involved in development stage. There are many different ways to skin a cat. So this fits into the category what's all possible and what makes sense. The excellent thing of our Center of Excellence in Singapore from Applied Materials is that that is a center of all kinds of those developments for the industry. We've added into our part also the TC Next product, which then allows customers to develop both and exactly addressing those two combinations of those two processes. How far that will go, where you will also see that is at IMEC. We shipped, as I mentioned earlier, the first quarter of the latest TC Next. They're already producing, already when the system was in outfield, all kinds of devices. But we will share more data about that at the capital market stage.

Okay.

Thank you, Richard. Thanks, Madeline. Okay.

We will take our next question from Martin Youngflesh, BNB Paribas. Your line is open. Please go ahead.

Martin Youngflesh, BNB Paribas Yeah. Hi. Good afternoon. Thanks for letting me on. I just have one quick one on the Q2 guidance. If you could just run us through the moving parts here, quarter-on-quarter. So do you expect hybrid bonding shipments to be relatively flat, quarter-on-quarter, given the remaining shipments to the Taiwanese and also the U.S. IDM? Basically, does the midpoint of the guidance imply flat mainstream and flat hybrid bonding quarter-on-quarter, or is it not the right way to think about it? Maybe if you can also tell us the backlog of the hybrid bonders that you should now have. Is it in the teens? Thank you.

Well, we are not providing specific information about what we ship or what we schedule to ship, but your assessment is also quite interesting and it ties to an earlier comment if there is a recovery partly which are quick turnaround machines then you can see a positive effect on which they may result in the higher end of the guidance um how many hybrids are still in backup we don't disclose But the key of your question, if I understand it correctly, the wide guidance range is typically or is because of this certainty, will the second half of this year show recovery in the mainstream business? If that happens, we have quick turnaround of epoxy bombers, soft-solder bombers, flip-chip bombers, not to forget, quoting activity continues. So that's the reason why we guide this range plus minus 10%.

Okay, got it. But just to follow up the order to the US IDM, has that been fulfilled of the SFQ1? Can you comment on that?

No, there's still a few systems in Q2, but the I could say 80% has been shipped.

Sounds great. Thank you very much.

And exactly according to plan, what we have shared in the last updates.

Okay. Sounds good. Thank you.

Thanks, Martin.

We will take our final question from Team Schultz Malandra, Redburn Atlantic. Your line is open. Please go ahead.

Yeah, thank you so much for just squeezing me in here at the end. I had two quick questions, please, Richard, if I could. First one, if we just leave hybrid bonding to one side and look at the core sort of much well-established business, could you just maybe share with us any color you have in terms of the utilization rates that are on that? I think if we look at foundries, they're running at about 80%. I'm just curious if you could share some kind of flavor of what the specialist test assembly packaging industry is tracking at. And then the second, maybe more forward-looking question I had was on the launch of the Gen 2 or the introduction of your new hybrid bonding platform. And I just wondered if you'd be able to share with us what the sort of expected timeline would be. When is the first tool coming? How long should we think about sort of eval qualification? and just kind of how that plays out through 2025 and into 2026. Thanks again.

Excellent. Well, the first, why are we a bit cautious? Utilization rates, yes, are somewhere in the 80%. But if you look at the data provided by the industry on inventory and pricing, and pricing has gone down again, Recently, in the latest data from March, January, February looked up. March went down. That is an overall picture, which doesn't tell you there's an immediate shortage. But that's hard to tell. Whether customers are reacting more cautiously because of the overall situation, we don't know. But in any case, for certain areas, there are shortages. One of them is the AI devices. As I mentioned earlier, there are Chinese versions, which are definitely in high demand. But then that's not the general market. Automotive, we've also not seen yet. We've seen technology buys new devices, power modules, but the big volume is still to come. Then we intend to ship the 50 nanometer generation tool by the end of September, early October. And what the plan is that throughout 26, that tool will be made fully production ready in Taiwan and used for mainstream production 27 for those devices under two nanometer design geometry. So that is well on track. And we will continue to update you on that progress.

Great. That's very helpful. Thank you.

Thank you, Tim. Thanks, everyone. Excellent questions. If you have more questions, don't hesitate

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