ACM Research Inc (ACMR) 2023 Q4 法說會逐字稿

Good day and thank you for standing by.

Welcome to the ACM Research fourth-quarter and full-year 2023 Earnings Conference Call.

(Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker, Steven Pelayo, Managing Director of The Blueshirt Group.

Please go ahead.

Great.

Thank you.

Good day, everyone.

Thank you for joining us to discuss fourth-quarter and fiscal year 2023 results, which we released before the US market opened today.

The release is available on our website, as well as from newswire services.

There is also a supplemental slide deck posted to the Investor section of our website that we will reference during our prepared remarks.

On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please turn to slide 2.

Let me remind you that the remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking.

These forward-looking statements represent ACM's current judgment for the future.

However, they are subject to risks and uncertainties that could cause actual results to differ materially.

Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission.

Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call.

ACM is not obliged to update you on any revisions to these forward-looking statements.

Certain of the financial results that we provide in the call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain and loss on short-term investments.

For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website, and also on slides 13 and 14.

With that, let me now turn the call over to David Wang, who will begin with slide 3.

David?

Thanks, Steven.

Hello, everyone, and welcome to ACM Research fourth-quarter and fiscal year 2023 earnings conference call.

Please turn to slide 3.

I'm pleased with our fourth-quarter results, which conclude a strong year.

For the fourth-quarter 2023, we delivered one USD170 million in revenue, up by 57%.

For the year, we delivered the $558 million in revenue, up by 43%.

Profitability was good for both the fourth quarter and full year, with operating margin of 21% and 22%, respectively.

We ended the year with just over $300 million of cash and time deposits.

For shipments, the shipments for fourth quarter were $140 million, down 29% year to year.

Shipment for the full year were $597 million, up by 11%.

On our third-quarter call, we noted a delay of shipment to several customers due in part to adjustment in their fab build outs.

While we don't normally share our expectation for shipment, I will provide more color in this case.

We view the lower shipments for the fourth quarter to be a one-quarter event.

We'd expect to deliver nearly all of the delayed tool during year 2024.

We expect our first-quarter shipments to be much higher than fourth-quarter levels, even with normal Chinese New Year shutdown.

And we expect our total shipment to grow faster than revenue for the full-year 2024.

Now I will discuss the key growth drivers, both for the market and specific to the ACM.

According to third-party estimates, the overall Mainland China WFE market grow around 15%.

If we exclude lithography tools, which is more than double in China in 2023, we believe the rest of the market growth for China WFE was close to 5%.

In any case, we attribute ACM higher growth rate of 43% to: one, a leading product portfolio for the China market, including auto bench cleaning and our ECP tool for the front-end and packaging; two, continuous spending and market share gain at our current customer; three, broader participation with new customer in China; and four, good execution by our production and service team.

I will now provide detail on product.

Please turn to slide 4.

Revenue from single wafer cleaning, Tahoe, and semi-critical cleaning products grew 48% in 2023 and represented 72% of total revenue.

ACM offers what we believe in the industry the most comprehensive cleaning portfolio.

We support nearly 90% of our all-cleaning process fab for memory and logic devices.

This coverage positions us as a key partner for both China mature node development and international markets.

At the high end, we believe our flagship SAPS Tahoe and TEBO single wafer cleaning products deliver technical feature not available from any of our competition.

We entered into the 20-millimeter auto bench cleaning market several years ago.

It's proving to be a significant winner for the mature node spending.

We have delivered more than 70 auto bench tools today.

And note the very strong contribution in 2023 was good profitability.

By our estimate, ACM will become the larger China-based supplier for auto bench in 2023.

For Tahoe, we made a good progress during the year.

Our engineering team modified technical feature to meet production requirements for the key customer.

I'm pleased to report ACM has been qualified for mass production at several customers.

And we expect a strong ramp with good orders for delivery in the first half of 2024.

This is good for our customer and good for the environment, as our proprietary Tahoe design significantly reduce the consumption of the sulfuric acid.

We continue to innovate in our cleaning and look forward to additional market share gain in 2024, where we ramp up on several key new products, including our bevel etch cleaning tool, high-temperature SPM single wafer cleaning tool, and the semi-critical CO2 dry cleaning tool.

Revenue for our ECP, furnace, and other technology grow 33% in 2023, and representing 19% of total revenue.

We hit an important milestone for this category in 2023, with more than $30 million in revenue.

ECP demonstrated a strong performance.

I want you to know that our first tool shipments grow even higher than 33%.

We are taking a good share for overall trading, with a particular strong growth in front-end process in 2023.

For furnace, 2023 was a customer development year with many evaluations underway.

We expect an even broader customer footprint and good revenue contribution in 2024.

We also made great progress with our furnace ALD product development.

In summary, we expect another year of strong growth in this product category in 2024.

Revenue for advanced packaging, which you exclude ECP, but includes service and spare, grew 31.5% in 2023, and represent 9% of total revenue.

This category includes a range of packaging tools, including coater, developer, scrubber, PL sweeper, and wet edges, and service and spare parts.

Last year, we also introduced ULTRA C v vacuum cleaning tools.

And we continue to explore new products and technology to participate in the next generation of advanced packaging.

We believe ACM is the only company in the world that offer a full set of wet tool, polishing, and plating for advanced packaging.

We expect the advance packaging to become more important as industry looks for packaging innovation such as 2.5D and 3D in the process and fan-out.

These are critical for high-performance computing applications such as AI, which has seen increasing demand globally.

Finishing up on products, we made good progress with our new track and PECVD platform.

We are engaged in active dialogue with our key customer and intend to release additional evaluation towards this year.

And with our cleaning, plating, and furnace product line and track and PECVD platform, both the proprietary technology that position them as a successful choice for major customer globally, including both in and outside China.

We are making a good progress in the evaluation of our track tool.

We are confident that the proprietary architecture of our track tool is well-suited for the high throughput required in next generation of lithography tools.

We are engaged with multiple customers for our PECVD tool.

We're expecting significant progress for PECVD product development and evaluation in 2024.

Turning to slide 5, our product SAM, we estimate our product portfolio address a $16 billion market opportunity.

Our business is now primarily driven by three major product groups: cleaning, plating, and advanced packaging.

We anticipate continued growth in this category and look to incremental revenue contribution from our newer products, starting with furnace in 2024, followed by track and PECVD in 2025.

Please turn to slide 6.

We remain committed to our medium-term $1 billion revenue target.

We believe we can achieve this with the range of the market share by product in Mainland China alone.

We have achieved scale with a differentiated product that have been proven in China market.

And we have put the resource in place to address international markets.

To be clear, long term, we see our additional $1 billion-plus opportunity from international markets.

Moving on to the customer, please turn to slide 7.

In China, we are market leader in cleaning and cleaning tool, with sales to nearly every semiconductor manufacturers.

Our sales and service team are now driving deeper adoption of our products across this customer base.

The unestablished player market growth is being driven by an influx of where-founded new entrants.

For 2023, we have three 10% customers.

SMIC was our top customer, at 18% of the sales.

SIEM was our second largest at 15%.

And CXMT was our third, with 13%.

We had a stronger contribution from second- and third-tier semiconductor manufacturers, including power, analog, CMOS image sensor, and current power semiconductors, and other investors and some new customers.

Total second- and third-tier players represent about 30% of our 2023 sales.

On the international front, I'm pleased to report that a large US manufacturer qualified as the first SAPS cleaning tool for revenue in the first quarter.

We also plan to deliver the ULTRA C b backside cleaning and bevel etch tool to this customer in the second quarter of 2024.

This demonstrates a deepening relationship, which we believe can lead to production orders.

Furthermore, this enhanced the ACM brand and position us to attract new opportunities with other major global customers.

Beyond the US, we saw our first evaluation tool, ULTRA C SAPS five cleaning tool in a major Europe-based global semiconductor manufacturers in the fourth quarter.

To support the growth, we made progress on our facility expansion in China and other regions.

Please turn to Slide 8.

In China, construction of our Lingang production and R&D center is nearly complete.

We expect the initial production in middle 2024.

In Korea, we are making progress with a key customer.

As noted in their prior call, we have increased our commitment to support our objectives to address global markets.

We now have more than 150 employees in Korea, with their facility including sales, administration, small-scale production, and the development in lab with a cleaning room to support our internal R&D and wafer demos for the customer evaluation.

And we are making initial plans to building a new factory on the land we purchased early last year.

We believe a strong commitment to Korea will improve our relationship with our key Korean customers.

Our resources in Korea are providing another basis to support international customers in the US, Europe, and other parts of Asia.

In the US, we leased a facility in Oregon last year to add to our service support, and demonstration capability for R&D and customer activity in the US and Europe.

I will now provide our outlook for the full year 2024.

Please turn to slide 9.

In early January, we introduced our 2024 revenue outlook in the range of USD650 to USD725 million.

This implies 23% year-over-year growth at the midpoint.

We are reiterating this outlook today.

We believe the China equipment market will grow in 2024.

We expect our full-year revenue growth for 2024 to outpace both China growth and global growth rates.

Now let me turn the call over to our CFO, Mark, who will review details of our fourth-quarter and full-year results.

Mark, please.

Thank you, David.

Good day, everyone.

Please turn to slide 11.

Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation, unrealized gain loss, and short-term investments.

A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

Also, unless otherwise noted, the following figures refer to the fourth quarter of 2023.

Comparisons are with the fourth quarter of 2022.

I'll now provide financial highlights for the fourth quarter and full year of 2023.

Revenue was $170.3 million for the fourth quarter, up 56.9%.

Revenue for single wafer cleaning, Tahoe, and semi-critical cleaning was $122.3 million, up 63.9%.

For the full-year 2023, this category grew by 48.0%.

Revenue for ECP, furnace, and other technologies was $32.1 million, up 59.0%.

For the full-year 2023, this category grew by 33.4%.

Revenue for advanced packaging, excluding ECP, services and spares, was $15.9 million, up 15.8%.

For the full-year 2023, this category grew by 31.5%.

Full-year 2023 revenue was $557.7 million, up 43.4%.

Total shipments were $140 million for the fourth quarter, down 29%.

For the full-year 2023 shipments were $597 million, up 11%.

Gross margin was 46.8% for the fourth quarter, versus 49.7%.

For the full-year 2023, gross margin was 49.8% versus 47.4% in 2022.

This exceeded our normal expected range of 40% to 45%.

We do expect gross margin to vary from period to period due to a variety of factors such as sales volume, product mix, currency impacts.

Operating expenses were $43.6 million for the fourth quarter, up from $34.8 million. R&D

was $28.8 million versus $17.0 million, as we invest in our new product initiatives.

Sales and marketing were $7.2 million versus $11.8 million.

The decline in sales and marketing was primarily due to a significant reduction of costs-related promotional tools.

G&A was $7.6 million versus $6 million.

For the full-year 2023, operating expenses were $154.4 million, up from $117.4 million. R&D

was 15.1% of sales; sales and marketing was 7.4% of sales; and G&A was 5.2% of sales, all for 2023.

For 2024, we are planning for R&D in the 16% range, sales and marketing in the 7% to 8% range, and G&A in the 5.5% range.

Operating income was $36.0 million for the fourth quarter, up from $19.2 million.

Operating margin was 21.2%, up from 17.7%.

The full-year 2023 operating margin was 22.1% versus 17.2% in 2022.

For the fourth quarter, we recorded a realized gain of $0.5 million from the sale of short-term investments.

Recall that realized gains are included in the non-GAAP earnings.

Income tax expense for the fourth quarter was $8.1 million versus $2.7 million.

For the full-year 2023, income tax was $19.4 million versus $16.8 million in 2022.

Net income attributable to ACM Research was $28.7 million for the fourth quarter, up from $12.6 million.

For the full-year 2023, net income attributable to ACM Research was $107.4 million versus $54.8 million in 2022.

Net income per diluted share was $0.43 in the fourth quarter, up from $0.19. For the full-year 2023, net income per diluted share was $1.63 versus $0.83.

I will now review selected balance sheet items.

Cash, cash equivalents, restricted cash, and time deposits were $304.5 million at year end versus $326.5 million at the end of the third quarter.

Total inventory at year end was $545.4 million versus $507.4 million at the end of the third quarter.

The mix was split between raw materials, $235.1 million; work-in-process, $81.4 million; finished goods inventory, $228.9 million.

Inventory also included the finished goods at our own facilities.

As David said, nearly all of the finished goods at our own facilities is expected to ship during the year 2024.

Capital expenditures were $15 million in Q4 and $61.9 million for the full year.

For 2024, we expect to spend about $80 million in capital expenditures.

This will be primarily to complete our investment in Lingang and will also include remodeling the new headquarters for ACM Shanghai and investments in Korea and the US.

That concludes our prepared remarks.

Now let's open the call for any questions that you may have.

Operator, please go ahead.

(Operator Instructions) Suji Desilva, Roth MKM.

Yeah.

Hi, David.

Hi, Mark.

Congratulations on the progress.

Great job there.

Can you talk about the international customers?

It sounds like you're making progress there.

Just trying to gauge the pace of that.

As you guided '24 full year, do you have some contribution from international customer in that assumption?

Or would that be upside and there's a potential first-half timing?

Or is it most likely the backend or the second half?

Okay.

Thanks, Suji.

Okay, this tool was shipped a year ago, right?

Then through our service parts engineer hard working, and then we have our first tool get their acceptance.

So that's what we got into the production, their mass production.

And also, I want to say that this specific SAPS makes sonic tool.

We will address the customer needs.

And we can see -- get a good cleaning performance and also much less audio consumption.

So that's really what our customer likes, is the tool.

And we believe there's definitely first of all qualification, we'll either do their additional order for the same customer, right?

So meanwhile, and as mentioned also, we have our secondary different tool, which is backside and also bevel cleaning.

It was ordered by the same customer, and we'll ship them in the second quarter of this year.

So obviously, this is a key customer in the US.

And we want this to be another example in also encouraging other a big player in adapt our differentiated technology, right?

So we're saying that will be the good outcome.

And also, there's a, of course, international, I call their revenue contribution to our year 2024 forecast.

We can see that, too.

Yeah, Suji, I'd just add, for 2024, I mean, a lot of things go into our forecasts.

We don't have a -- 2024 will be a building year for us for the international, and we'd expect some additional contribution, whether we get an order that ships for -- one or several tools that ships this year or next year will depend on how big it can be for us.

Okay.

And then the second question is, can you just explain, again, the shipments, and what the delays, what the dynamic was there?

Maybe I didn't catch that in the prepared remarks.

Yeah, I think in the Q3, you'll also recall, we mentioned about that, the delay.

And it's because of our customer, they're building the plan, and there are certain, I call them plan delay or the iteration is not enough, either resource or floor plan not fast enough.

But anyway, there's continuing investment going on.

So those portions of the delay, as I said, will be definitely delivered in 2024.

And that's also added to our shipment.

Those two had been built already.

It's going to also save the cash we spent the last year already.

So we'll see what happens.

And I will say that also, the total shipment that we're expecting 2024, and there will be quite an increase.

We believe that it will increase.

We believe it will increase rate higher than their -- I call the revenue increase, right, in comparison to 2023.

So this is another, I consider a great year for us in 2024.

Okay.

That sounds like good momentum.

My last question is around the overall demand environment.

I'm just trying to understand, in China, whether the memory market has stabilized, and capacity is increasing again across NAND and DRAM.

And maybe someone like CXMT is actually progressing to DRAM production versus development efforts?

Yeah, I mean, you can see that CXMT is our third customer in year 2023, right?

So we're expecting this memory business to continue growth.

And again, it's order memory in China is still a multi-year expansion.

And so we see that there is good market for us.

And also, we see that continued growth.

All right.

Thanks, guys.

Congrats again.

Yeah, thanks, Suji.

Thank you.

Charlie Chan, Morgan Stanley.

Thanks for taking my questions.

David and Mark, happy Chinese New Year.

Gong Xi Fa Chai, and congrats for a very solid 2023 results.

So my first question is actually on the full-year guidance, because I had the impression that your ACM Shanghai entity, they have a pre-memory 2024 outlook, revenue growth of more than 30%.

I remember it was like 37% YoY growth.

So I calculated your midpoints, such as in the ACMR.

It's growing like 23% YoY.

So what's the discrepancy between your ACM Shanghai entity versus the parent company?

Yeah, well, there's a slight difference, like a revenue recognition rule.

We're using either Chinese GAAP versus US GAAP.

So that's the primary reason to show the difference of our forecast.

In general, I see that is a US GAAP will be first to take a long-time evaluation.

And after that, you can recognize the repeat order, just I'm assuming, right?

But in China, you have to -- no matter it's new or repeat order, you have to really score and basically accept -- kind of initial acceptance by the customer, then you can record revenue.

So that difference show their quarter revenue difference.

In other words, probably you can see, China has a forecast, mean that is we have a lot of probably new tools and the new customer, right?

That will be there quickly, can be recognized revenue, versus the US recognition rule.

So that's the difference we see there.

I see.

Thanks, David.

So my next question is about the China CapEx sustainability, right?

I mean, right now, as you said, right, it's for local sufficiency.

But you also see that some of your major customer, their gross margin already dropped to like 10% gross margin, right?

So I'm a little bit worried about the sustainability.

So any signs or lead indicator we should pay attention to, right, to check the China CapEx sustainability?

Yes, well, I should say there, as we said a couple of times before, is that China's fab is still in a multi-year expansion, demand is the logic for memory, right?

Also, a lot of our, I call their mature nodes, is very related to the EV, AI, GPT.

It's still in the building process.

Also, I want to say another thing, is the consumption of their chip.

Especially mature nodes in China, is way higher than capability can be produced in China, right?

So you look at that gap and still say, next few years, in China, and probably, the market will continue to grow.

Okay.

Got you.

So yeah, one last question, I will be back to the queue.

So a question to Mark, since you are ramping up the Lingang new campus, can you give us some updated gross margin and also OpEx assumption for 2024?

Yeah, hey, Charlie.

Thanks for asking.

So yeah, and I said it in my prepared remarks, I gave some detail there, but I'll go ahead and repeat it.

Yeah, we're anticipating -- our target model for gross margin is unchanged at 40% to 45%.

Obviously, we've done better than that for the last several years, but that's going to be at the margin level that we're -- that's our target level.

And then for the OpEx levels -- and these are non-GAAP numbers.

We expect R&D -- continue to invest pretty strong in R&D.

And you should always expect, as we're a growing company, to spend at about -- a 16% level is our outlook for non-GAAP for 2024.

Sales and marketing, we expect in the 7% to 8% range.

And then G&A, about 5.5%.

Okay.

Okay.

Thanks, again, for -- yeah, so, yeah.

Thanks for the recap of those guidance.

You bet.

(Operator Instructions) Mark Miller, The Benchmark Company.

I believe you -- well, first of all, congratulations on another great quarter.

But just wanted to get a little more into the OpEx in the December quarter.

You did mention the SM -- sales and marketing was down.

You said it was because of a demo system?

I'm confused why that fell so much.

Yeah, it was a significant decline in the sales and marketing promotion tools.

So we took that out of the sales and marketing expense.

And going forward, you won't see that expense level in the sales and marketing, yeah.

And so we looked at it, and for the full year, sales and marketing was about 7.4% on a non-GAAP basis.

And so we expect that sales and marketing level to be in the 7% to 8% in non-GAAP next year.

Can you give us a little -- you say you had a lot of quals underway.

Can you give us a little more color on what's going on with your quals and timing of quals in terms of when you expect revenue generation?

Oh, in terms of -- yeah, David, he's asking about our evals at our customers.

Maybe I'll let you address that, and then I can add to it, but

--

In general, right?

Yeah.

Yeah, and so that's -- I think, Mark, our finished goods inventory, it's largely comprised of evaluation tools at our customers.

And so I think -- yeah, David?

Yeah, let me say that obviously, there's the finished goods in the customer side for evaluation, mostly in the first tool.

And those first tool can be the first of a new customer, right?

Especially if they're first-time buyers, they want to make sure those tools not just qualify for tool itself, some kind of qualify the whole production line to look at the yield to come out.

That takes some time, right?

Also, there is also the first tool is a pretty brand-new tool, and we need a customer to view what's called a beta tool, right?

You evaluate that, and that sometimes takes a process 1 year, even 1.5 years, depends on how the other tools -- first, building the mature, how much you are theirs.

So those kind of tool what we consider as our first tool.

Okay.

And just final question, you previously said you were doing more investment in Korea to, I guess, get more business from SK Hynix.

Can you give us an update, what's going on there?

Okay, great.

So Hynix actually is a real long-term customer, right?

And we are fully engaging with the customer, I mean Hynix, right now, because we're a real -- advertise our investment, also expansion in our R&D force in also manufacturing in Korea.

We do have about 150 employees in Korea right now.

As I mentioned, we bought land, and it will appeal to, also, to building a factory there, other, future property tie-in.

So key point I'm trying to say that is we have our model tool, like cleaning, copper plating, and including furnace.

And there are also a demand of PECVD and also track.

So all these five tools, we're trying to engage with the customer in Hynix, and because our relationship and also because our local R&D force.

And also, we offer customer with differentiated product and differentiated technology, which has quite the interest or get the interest from the customer in Korea.

Thank you.

Thanks, Mark.

Thanks.

(Operator Instructions) Christian Schwab, Craig-Hallum Capital.

Hey, guys.

Fantastic year and great quarter.

So I'm trying to better understand the two or three reasons better, either from a product category standpoint or a customer standpoint, your conviction in your ability to outgrow WFE not only in China, but also globally year over year.

Okay, great.

I think you know, the ACM, we started beginning from Bay Area, right?

In ACM, on the philosophy is the, I would call differentiation, right?

In each product we're building, like cleaning, you already know that SAPS, TEBO, and Tahoe are pretty differentiated products, and same thing for the copper plating.

So our goal is building differentiated product, and this movement widely has been accepted by the local customers in China.

And with those differentiated product and the technology, I think we can penetrate or get into international, right?

Example is we're already guiding to the Hynix.

And also, we have our one bigger manufacturer in US adapted SAPS already.

Also, we have a European company and also adapted SAPS based on cleaning, too.

Beyond that, I think the next one is Tahoe.

Our TEBO, plus we have our semi-critical CO2 dry.

With Tahoe -- with TEBO, too, it will be exciting for the pattern wafer cleaning too, right?

And beyond that is also, as I have said, we have also furnace.

And for furnace, ALD and including copper plating, and it was another a very candidate product to be able to penetrate international markets.

So as I say that is of course, we're in the develop PECVD and the track also has our proprietary, differentiated design point.

So ACM really develop other, I call this differentiated product, which is a real offer differentiation, offer the different benefit than other our competitor is doing.

And that's our confidence and also our proven record.

We can put a tool and sell in international market.

Great.

So congrats again on a very differentiated and better product than your competitors.

Just in a quick last follow-up then is on the international front.

How much of the year-over-year growth are you looking for from that, I guess?

I know it was asked earlier, but you mentioned it numerous times as why you thought you would outgrow the market.

So I'm just wondering if you're willing to provide any clarity, more clarity there.

Yeah, hey, Christian, I'll hit that.

So in terms of our outlook, I mean, the range, we have a pretty small contribution from international this year.

It's still going to be kind of development.

So really, substantially, most of that growth that we're planning for in 2024 is from the China market, the Mainland China market.

Yeah, new product cycles, additional customer traction.

Okay.

And then I guess my very last question then is, the TAM for your products outside of China globally is substantially larger.

How many years do you think is reasonable for us to assume it takes for broad-based success internationally?

It sounds like this year was a great building year.

Initial shipments starting in '24.

Is that a '26, '27, or '25 event?

Or is it too early to know?

Yeah, Christian, this is a very good question.

I think the way we're doing right now, obviously, it's quite a quicker, fast growth in the Mainland China market, right?

It's a lot of product we qualify here now.

So those are -- I think our goal, we're saying, reaching $1 billion, even by China market only, right?

We're thinking next few years, we should be reaching our goal.

And then simultaneously, in a couple years, three years, the goal was start also global market expectation -- I mean penetration.

So the key is really how we are executing our international sales plan.

Now we have a hiring, good people and sales guy in Korea, actually also in the US, in Europe.

And we see that there are quite a bit of progress.

And that's what this way for the international market and as we talk to the customer and we're looking for a packet again, our differentiation, right?

So with that in mind and as I mentioned, a couple of products we have right now, we do have confidence as the first, I call, US customer data to see more of a customer may have additional auto.

So we see that happen, but then you ask you which year.

It's hard to really give you precisely.

But I think as I said, we have a bigger revenue with a strong financial supporting our sales here with also division product definitely will penetrates into the international markets.

If you're asking, next fiscal year is a very exciting.

We have to -- quickly executional plan and to quickly reach that goal.

And eventually, as I mentioned a couple of times before, we under half from Mainland China, half from outside Mainland China, right?

So like you said, the real revenue contribution actually be more bigger outside Mainland China.

Thank you.

That's great.

No other questions.

Thanks, guys.

Thanks, Christian.

Thank you.

Charlie Chan, Morgan Stanley.

Thanks for taking my question again.

So I think the new customer contribution caught our eye SiEn.

So it wasn't in our radar screen.

So I'm not sure why SiEn becomes such a big customer.

And if you can provide us some more details.

Is that purely 12-inch equipment are also including some engine equipment?

Thank you.

Yes, I think the primary we sell to the SiEn is the 12-inch tool, right.

And also there, most expansion now is a mature node.

So we actually sell a lot of our auto bench.

They're probably the largest auto bench customer right now for us in China.

So of course, they also buy the wafer, right?

So that's why primary driving there to become the second largest customer in 2023.

And looking forward, I think also we are very good relation and engagement with them in copper plating, our furnace, and also online.

So that's another contribution we can say from SiEn, right.

And it's great customer, and we're happy with our auto bench tool be largely deployed in the SiEn production line.

Okay.

Yes.

So it's a great business, right.

So I'm assuming company consults your lawyer about the US export control before you're shipping to all the customers, including SiEn, right?

Is that right assumption?

Well, I mean, we'll strictly to follow all the export control rule, right?

And for those whatever restrict their customer, we have to be very carefully US parts, right and personally involved.

Also, now you say technology.

Yeah.

So we're pretty very carefully managing and control and follow strictly with their export controller of the US.

Okay.

Thanks David.

And next question is about the advanced memory HPM.

So can you comment and talk about your opportunity in Korea for the HPM production line?

I think we asked that question last quarter as well.

And also, there's some recent news about China may also have their own HPM production.

So can you comment about your potential opportunity at the Korea and also China customers.

Yeah, well let's put it this way, obviously, you know Hynix is the number one provider, right?

They're also a technology leader HPM.

And I think our current product definitely involved their process.

And also, we see the HPM either, know this is a copper plating tool, right, PECVD, order the packaging, whatever, they need it.

So that's the next tool.

We are working closely with the Hynix, and I should say the rest of our other tool furnace, and we're working with them too.

So there's a lot of -- including cleaning,by the way, actual other cleaning other than we sold them SAPS megasonic also working with the Hynix too.

So it's a very good opportunity.

HPM is a great, I call it demand and greater driving.

They need a lot of differential technology further supporting in HPM development in the future.

In China, really not much we can hear right now really, right?

Not much we have right now.

So in other words, we're really focused outside China for HPM expansion for the business opportunity.

Yeah.

So based on your comments and also other global equivalent vendors, right. they're talking about actually this year the global SP revenue comes from the memory.

So why Hynix?

Is that your top customer, or do you think this year Hynix can contribute more than 10% of revenue given HPM opportunity and also the memory spending recovery?

Well, I mean, obviously more than -- other than Hynix, we're also looking for other player, right?

It's key here.

Then the memory market HPM is really booming, right?

That's key here.

So we see that demand there as I mentioned, right?

This is cleaning, copper plating, it's real demand there.

I don't know what time we come back to 10%.

Our customer is how to predict it right now.

So really, we'll see, right?

Especially second half year or next year, it's really -- we want to see something recover from DRAM market.

Okay, got you.

Thanks, David.

Thank you.

Edison Lee, Jefferies.

Thank you.

Thank you for taking my question.

So David and Mark, congratulations on a great quarter.

I have just one question, which is the contribution of your three customers for 2023, which amounted to almost 50% of the revenue.

So can you give us some color as to whether you think that those top three customers will continue to be top three customers in 2024?

And what is your expectation on the contribution of the top three customers in 2024?

Yeah.

Actually, I look at this year's order list, right, and the top three customer continue, I think will grow, right?

And they probably still are major customer.

But also, we see their additional body of our home.

They have also their expansion plan, and their property simultaneously building two fab this year.

And also, they're building property next year, three fabs simultaneously, right?

So that's another bigger, I say their top customer will come back in our 2024 revenue contribution.

Maybe a related question is that based on your revenue guidance at the midpoint that implies 20% plus growth, and so that's significantly below the growth rate in 2023.

So do you think the key driver there is just some digestion period or it's a matter of taking time for your evaluation tools to be recognized as revenue?

So what are the key factors for the slowdown in terms of the growth rate?

Yeah.

I think the key driving force is I want to say that China WFE market is continue -- people say maybe -- I mean slightly increase at least a flat.

I see that that's number one important.

But second most important is we have our gain for our, I call it, a higher growth rate is because we continue to have a new customer coming.

And also, we have gain on market share from existing customer and also do have back a furnace will do the more contribution this year and for revenue, right?

So that's all -- added together, that gives us a basis to forecast our growth rate higher than the growth rate of the WFE market in China.

Okay.

And maybe the last one is that for 2024, what do you think is the percentage of overseas revenue in your guidance?

Yeah, hey, Edison.

We didn't break it out, but we did a couple other questions about that.

We mentioned it wouldn't be a very significant contribution for 2024.

We expect that to build in the coming years, but it's not a very significant piece.

We think it'll be bigger than it was this year.

And so you got the numbers, and you'll get the international numbers shortly, but it's not going to become a huge -- I wouldn't expect it to be more than 10%.

But I should say growth is higher, right?

I mean, obviously, it's a small number.

But then the real absolute number, like you said, was still a friction number of the total revenue.

Yeah.

Okay.

Got it.

Thank you very much.

Thank you.

I'm showing no further questions at this time.

I'd like to hand the conference back over to Steven Pelayo for closing remarks.

Okay, great.

Thanks, Mark and David, and thank you all for participating on today's call.

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Thank you.

Thank you.

This concludes today's conference call.

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