ACM Research Inc (ACMR) 2021 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the ACM Research First Quarter 2021 Earnings Conference Call. (Operator Instructions). Please be advised that today's conference is being recorded. (Operator Instructions).

I would now like to hand the conference over to your speaker for today, Gary Dvorchak. Thank you. Please go ahead.

Good morning, everyone. Thank you for joining us on today's call to discuss first quarter 2021 results. We released results after the U.S. market closed yesterday. The release is available on our website as well as through Newswire services. There is also a supplemental slide deck posted on the investor portion of our website that we'll reference during our prepared remarks.

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

Before we continue, please turn to Slide 2. Let me remind you that 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 on this call will be on a non-GAAP basis, which excludes stock-based compensation, a loss relating to the change in fair value of our financial liability and an unrealized gain in trading securities. 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.

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

Thanks, Gary, and good day, and welcome to today's call. We are off to a great start with a solid result for the first quarter. We delivered strong revenue growth, record shipments and excellent profitability. First quarter results demonstrate the competitive strength of our technical expertise, breadth of our product portfolio and our growing production scale.

Revenue grew to $43.7 million, up 80% year-over-year. Shipments were $74 million, up from $67 million last quarter and up from $12 million in the first quarter of 2020. We delivered good balance of growth and profitability with a 41.4% gross margin and 11% operating margin. We are committed to deliver profitable growth as we continue to invest in R&D for new products and global sales and marketing.

On the bottom line, we report 35% of net income per diluted share, up from 11% in the same quarter last year. We ended the quarter with $79 million of cash. We also hold SMSC's stock market share worth $27 million equivalent as of quarter end.

I will now discuss the recent operation highlights on Slide 4. First, our Q1 revenue growth was broader basis, driven by current and new products and customers. Our wafer cleaning and other front end process tool represent 33% of total sales in Q1 and grew by 42%. Our advanced packaging and other process tools and service and spare business accounted for remaining 27%, with revenue up more than 6x year-over-year.

As highlighted on Slide 5, we have 5 major front end customers in Foundry, 3D NAND, and DRAM. We also have several back end wafer packaging and assembly customers. Our newer customers manufacture power and analog devices. As we discussed on our last call, we had penetrated 2 of the 5 key cleaning edge nodes of our analog, Power IC, and CIS manufacturing in China.

I'm excited to share with you that during the first quarter, we received orders from additional 1 of the 5 key cleaning edge node customers. We are actively engaged with the remaining 2 players with the goal of receiving orders from 1 or both of them later this year. On top of that, during the first quarter, we also penetrated 2 additional advanced packaging houses and one compound semiconductor IC manufacturer.

Looking forward, we believe our existing front-end and back-end customer alone represent a significant opportunity for ACM. Most of them are still in early or middle stage of multiyear capacity expansions, and we expect to continue adding more new customers as we believe every major semiconductor manufacturer can benefit from all technologies.

Second, we delivered total shipments of $74 million in the first quarter, another record for the company. This is a major accomplishment, especially during the Lunar New Year holiday period. It is a strong testament to our production team, which has been aggressively adding capacity to meet strong customer demand.

As shown on Slide 6, our original facility in Zhangjiang includes our R&D, SG&A, and prototyping and production of newer products. During the first quarter, we expanded production capacity by leasing a second building at our factory in Chuansha. This will provide us with enough floor space to gradually increase our production capacity to more than 500 million, up from current level of 350 million.

Our long-term plan is to build a production and an R&D center in Lingang region of Shanghai. The 1 million square feet of the floor space will enable us to increase our annual production capacity to $1.5 billion. We expect additional architectural and design work to be completed this quarter with initial production target by the end of 2022.

Third, we invested in our global sales team since hiring Jim Straus to head our U.S. and Europe sales effort last year. We have added several other senior employees in the business development and service team. Yesterday, we announced the addition of Elad Nadler, a 21-year veteran of major U.S. semi-cap equipment makers. Elad will lead our U.S. service and the delivering team, we now have a seasoned team of world-class industry veterans to drive our efforts to expand our business to additional major customers beyond our base in Asia.

Our team remains deeply engaged in technology discussions and evaluation with U.S. and Taiwan based semiconductor manufacturers. We are making good progress and are confident that we can secure win at 1 or more first year customer during 2021.

Fourth, we continue to gain traction with our ECP tools. We are especially bullish on our opportunity for our ECP product line. In the frontend, small geometries require advanced plating solutions. Meanwhile, backend advanced packaging has become more important as industrial shifts to packaging innovation to drive higher performance as industry moving to post Moore's Law. Our ECP product line includes the MAP for advancing copper interconnections, the TSV for through silicon via for front-end and AP for advanced packaging. ACM ECP MAP product presents an alternative, differentiated solutions that can provide a uniform plating on ultra-thin seed layer.

During the first quarter, we introduced a proprietary high-speed copper plating technology that can deliver improved uniformity at higher throughput, is essentially important for advanced packaging customers. The high-speed capability, combined with our proprietary technology to improve uniformity at a large area give our ECP AP system a strong competitive position to win the market. The tool supports copper pillar bump for copper, nickel and tin-silver plating and high-density fan-out (inaudible) wafers. This ECP AP with high-speed plating rate, together with our SAP copper polishing tool position us to grow and become an important provider in 3D advanced packages.

According to Yole Development's Status of the Advanced Packaging industry 2020 report, the market size of 3D stacking and fan-out will increase annually by 16% to 21% over the next 4 years. We believe the total global market for ECP will expand faster, by up to 3x from the present $500 million to up to $1.5 billion in the near future.

Fifth, we recently broadened our Ultra Fn furnace dry process tool portfolio. We added a different semiconductor manufacture process, including (inaudible) low-pressure chemical vapor deposition or LPCVD and (inaudible) LPCVD. This new capability built on the configurable systems previously announced oxide, silicon nitride LPCVD and high vacuum alloy are nearly in process capability. The Ultra Fn furnace platform was the design from the grounder up to meet customer best-in-class requirements as devices continue to shrink and increasing capacity. Because today's devices are designed with complex, fine geometry, providing consistent and stable heat control is paramount in maintaining wafer integrity.

To meet this demand, the Ultra Fn heater features proprietary control algorithm, which provides stable temperature control, we delivered several first tools supporting this new application in Q1 and expect to deliver additional units as we progress through the year. We also plan to add high-temperature oxidation and annealing capability to our furnace product line in the third quarter.

The next major development in our furnace roadmap is a batch atomic layer deposition or ALD process, which we view as the most challenging and promising product for advanced manufacturing nodes. Put it all together, we are making great progress, growing our business with new product line.

Please turn to Slide 7. As noted in the prior calls, our current products address a market more than $5 billion. ACM is committed to becoming a multi-product company. We are positive on the growth opportunity from our core cleaning tools, including SAPS, TEBO and Tahoe and our semi-critical cleaning tools. We are also beginning to see meaningful contribution from newer product offering, starting with ECP, which we expect ramping in 2021 and beyond, followed by our furnace product which expect a ramp in 2022 and beyond.

As we mentioned last quarter, we have begun significant R&D investments in 2 major new product categories to achieve our long-term goal to double the total addressable market of our products from $5 billion today to more than $10 billion. As is ACM policy, we will provide more detail on this new product categories after we secure customer orders for first tool deliveries.

Before I provide our updated 2021 outlook, let's discuss the status of the stock market IPO of ACM Shanghai. We continue to make progress. Our team submitted a second verification report to the Shanghai Stock Exchange Commission or SSEC in late March. This report explains the class action lawsuit that was filed in the U.S. last year related to the short salary report published on October 8, 2020. We are responding to other important and manageable inquiry. We remain confident that we will receive approving from SSEC and then move into CSRC registration process to complete IPO. But consistent with this practice, the SSEC has not provided us with a timetable that would enable us to predict the precise timing of IPO.

Now let's move into our 2021 outlook on Page 8. Our guidance reflects optimism about our growth opportunity for 2021. We are reaffirming our guidance, our revenue in the range of $205 million to $230 million, representing 39% annual growth at the midpoint. Our outlook for 2021 is based on several key assumptions. First, the global COVID-19 situation continued to improve. Second, stability in the U.S.-China trade policy. Third, a range of spending scenario for the production ramps of key customers. Fourth, variants in the trajectory of DRAM recover. And finally, a range of outcomes for timing of customer acceptance of first tool.

Our results and outlook demonstrate the successful execution of our strategies. Our stronger growth is supporting acceleration in R&D spending and new product. We are building our global sales, marketing resource to penetrate the new customers in new region. And we are scaling production capacity to support our long-term growth plan. Our mission to become a major equipment supplier to the global semiconductor industry remains on track.

To conclude, I would like to thank our employees for their hard work and dedication. I also want to thank our customers, partners, and shareholders for their continued support and confidence in ACM Research.

I will now turn the call over to Mark to discuss the financial results in more detail. Mark?

Thank you, David. Good day to everyone. As David indicated, we're up starting 2021. Unless I note otherwise, I'll refer to non-GAAP financial measures, which excludes stock-based compensation and unrealized gain and trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

Now the first quarter, shown on Slide 9. Revenue was $43.7 million, up 79.6%. You may have noticed a more detailed reporting of our revenue in yesterday's earnings release. Revenue for single-wafer cleaning tools, which includes SAPS, TEBO, Tahoe and our semi-critical cleaning, was $32.4 million, up 42% from $22.8 million. Revenue for ECP furnace and other technologies was $5.6 million versus 0 in the first quarter of 2020. Revenue from advanced packaging, excluding ECP, services and spares, was $5.8 million versus $1.6 million in 2020.

Total shipments were $74 million versus $12 million in the first quarter of 2020 and $67 million in the fourth quarter of 2020. This includes delivery for revenue in the quarter from delivery to systems awaiting customer acceptance for potential revenue in the future quarters. As David mentioned, this was another quarter of record shipments. This was a great accomplishment by our production team during the holiday shortened Lunar New Year period.

Gross margin was 41.4% versus 42.2%. This is in our normal expectation of 40% to 45%. We expect gross margin to continue to vary on a quarterly basis due to a variety of factors, including product mix and manufacturing utilization.

Operating expenses were $13.5 million versus $8.4 million. The increase in operating expenses reflected higher R&D on new products, sales related activity, and preparations for the China STAR market IPO. Operating income was $4.7 million, up from $1.9 million. Operating margin was 10.7% versus 7.8%.

Unrealized loss on trading securities related to the change in market value of our SMIC investment was $1 million in the first quarter of 2021. Note that we exclude this noncash item from our non-GAAP results.

Tax benefit was $2.8 million versus a tax expense of $304,000 in the year ago period. The benefit was because of stock options that were exercised during the quarter.

Net income attributable to ACM research was $7.7 million versus $2.4 million in the year ago period. Net income per diluted share was $0.35 compared to $0.11 in Q1 of 2020. Tax items and the effect of foreign exchange fluctuations on operating results provided a net benefit of $3.8 million or $0.17 per share in the first quarter of 2021 versus a net benefit of $0.6 million or $0.03 per share in the first quarter of 2020.

Now I will review selected balance sheet items. Our cash balance was $78.8 million at the end of the first quarter, up from $71.8 million at the end of 2020. In addition to the cash balance, we also had trading securities of $27 million related to our SMIC investment. Short-term borrowings at quarter end were $23.5 million, down from $26.1 million at the end of the fourth quarter of 2020. Long-term borrowings were $17.4 million.

Total inventory was $103.2 million at quarter end versus $88.6 million in the prior quarter. The quarter-on-quarter increase in inventory was driven primarily by growth in finished goods inventory. This represents first tools that have been delivered to customers for evaluation and our pending acceptance and which grew to $47.1 million at the end of Q1, up from $32.4 million at the end of Q4. The combined balance of working process and raw materials was essentially unchanged over the same period.

For 2021, our base case for capital spending is $10 million to $15 million. Our 2021 investments will be focused on capacity increases at our Chuansha factory, investments to support our R&D programs as well as the planning and some initial spending on Lingang.

In summary, we continue to execute on our strategy. We are participating in the growth of major new IC fabs. We are ramping production. We continue to develop and deliver innovative products to a broadening array of customers. We're positive on our opportunities in China and expansion outside of China. We remain committed to achieving our mission to becoming a major player in the semiconductor equipment market.

Now let's open the call for any questions that you may have. Operator, please go ahead.

(Operator Instructions). Your first question comes from the line of Patrick Ho.

Congrats on a nice quarter. Maybe first off, in terms of the increase in inventories and the increase in shipments. Maybe, Mark, if you can just give a little bit of detail whether you experienced any component shortages or any supply constraints. Given that your revenue levels were very healthy, it doesn't seem like there were any issues, but if you could detail some of the issues you may have had to manage through during the quarter?

Maybe I'll let David go ahead and start.

Yes. Okay. Patrick, good question. Actually, we see the demand is higher, right. We've got a lot of demand from our customers, either existing customers or new customers. We do feel pressure in our supply chain or components leading time getting longer. So in other sense is, we actually project an IPO and therefore we propose to do some long leading items, advanced purchasing from our vendor, try to managing the delivery time. But again, this supply chain is real dynamic changing, right. And we sometimes see some supplies come out. And because of our vendor has been loaded up because there is too many orders come in. So as you say, yes, this is definitely one challenge we're facing right now. And I should say also, maybe there -- especially in the middle and end of this year, we see probably the delay or this trend will continue. So anyway, it's good (inaudible) many as we can. Also expanding our capacity, hire more people and put quality work and also do the successful installation. So it will be very, very busy year. Mark, anything you want to add on that?

No. Actually, David, I think you covered it well. Patrick, I don't know if you've got another question.

Yes. My follow-up question, maybe for you, Mark, most margins came in within the range that you guys have previously targeted between 40% to 45%. But at the same time, a lot of moving pieces, increasing utilization, but you also have start of product mix, all of these variables. Over the next several quarters, how do you look at those influences? And which ones are the biggest ones we should be looking out for?

Yes. You bet, Patrick. So on the gross margin side, Q1, we did 41.4% in our normal 40% to 45% range. This is due to -- really it's almost always due to product mix. So in Q1, we had a higher mix of semi-critical and back-end products. Those carry a lower relative margin. And these are new early stage products. They haven't necessarily hit volume or we haven't done a significant amount of cost downs on them. So they're newer products. We do expect the margins on those products to improve as they mature. And then you balance that. The other side of the mix is our flagship cleaning tools and ECP, where we get very good margins. So no change to our target gross margins range of 40% to 45%.

David, did you have anything to add?

Yes. I think Mark covered it very well. As you point out is, clearly there is a mix in between the low-margin product and high-margin product. And I think as time going on, as volume increase, there's certain semi-critical cleaning tools and also some packaging tools, as volume increases, we can increase our manufacturing efficiency, get a higher quality and therefore increase margin by pricing, also reduce the cost in our manufacturing. So I think that this is still within our range of 40%, 45%. And we are confident that will continue in our range. And as time going on, we'll obviously, we'll try to increase the efficiency and also increase -- improve the quality and then make it more of a stable process, and that's our goal and this will improve margin.

You have a question from the line of Donnie Teng.

Congrats on a good result. The first question is regarding to your shipment and revenue. So it looks like we have very strong shipment trends since second quarter of 2020. But look at our sales trend, it's like our sales trend was a little bit slower since fourth quarter last year and the gap between shipment and sale is getting bigger and bigger. So I understand that we need to ship to customers first and then wait for customers' acceptance. So just wondering how are we able to resolve this kind of huge gap going forward? And is there any -- if you are seeing any longer acceptance period by your customers? Or is there any other issue?

Donnie, thank you. Actually, looking last year or this year or Q1, this year quarter, we see a new -- we increase new customer, right. Normally, new customers, even for the, I call it the mature existing product and they are not the revenue until they qualify their process in the production line, right. Also a lot of new customers, there is a new production line, so they relatively will be the longer time to qualify even our mature product. Meanwhile, also we're shipping some new tools to the existing customers, especially like I mentioned, we have vertical furnace and also have advanced packaging tool for the copper plating. And also we have a front-end copper plating for both MAP and TSV. So those kind of tool, it's new, even for new customer or for the existing customers. They'll also take a little bit longer time than normal expectations. Again, that's a process we have to go through as a nature of the semiconductor business. We try to do our best supporting and meet the customer requirement, to our best of supporting and fix any problem happen in the valuation period. That's our goal, right. But I think looking at history so far, we are very confident in almost every first tool or first customer, new customer, we got our tool final qualify. So like you said, it's a matter of timing, but we'll go through that process.

Mark, anything you want to add on that?

Yes. No, I think you covered it well. And I don't think -- we haven't seen any change in the timing of acceptance rates on broad levels. Part of our outlook for (technical difficulty) when we'll get acceptance on those. And so we mentioned that as one of our guidance dependencies.

So simply say is that we are expanding the new -- more and more new equipment. So more shipment, but probably longer qualification time. Is that correct?

Really, actually, Donnie, it depends on the product, right. And some product, even new, we got acceptance within 6 months, put it this way, right. And I should say, regularly, say, a 6-month to 1-year time line. And we do see some difficulty, a tool maybe get longer than 1 year, right. So -- but I say major of our tool get qualified within 6 months, 1-year time line. I think that time should be no change.

And my second question is regarding to your full year guidance. So based on the very strong shipment and actually, as you have seen, lots of foundry or memory companies have started to add CapEx. So just wondering if there is any chance that our sales momentum in the second quarter or beyond to be stronger than our expected? And also, could you comment on DRAM market outlook because Hynix sales was quite slow last year. So just wondering when are we seeing the DRAM sales from DRAM can start to pick up this year?

Donnie, yes, that's a good question. Actually we see there, like, we see the demand become strong, right. I mean, our Q2 -- I mean, Q1 is very busy. I can say probably Q2 is even better than Q1. And even looking at Q3, Q4, it's pretty tied up, right. I also want to mention one thing because of a new customer, new product come out, and we are really balanced between the revenue versus shipment. And if I say, for maximum revenue, obviously, that should take all the PO or existing customers' order. However, we also balance the new customer and the new tool. So it's really kind of -- it's a little bit of dilemma here, right. We need to maintain good new customer, future revenue. At the same time, whether we sacrifice some delivery for the existing or repeat order. So I think we're going to make a very good balance between that and then need revenue, obviously, at the same time. We also have new product, new customers that can take our tool, right. That's for your first question. For the second one, probably you'll see, we also noticed that there's -- our customer Hynix and probably they increased their spending this year, maybe this new tool, 2022 spending to the 2021. I mean, I think that's very good news. And maybe some other vendor feels, long leading item vendor maybe they have some indication. This model was still really actively working with our customer. And maybe I can report to you any issues later very soon. At this moment we're still kind of waiting for their instruction for the leadings.

We have a question from the line of Suji Desilva.

Congratulations on the progress here. Can you talk maybe -- can you talk about the lead times you are quoting to your customers versus 3 months ago and your ability to meet demand, whether it's surging or whether it's been pretty steady because you control your own manufacturing?

You're asking our leading right now? Is that correct?

Yes. The lead times you're quoting to your customers? If they're extending at all.

Well, depending on product, right. I should say, our average normal leading time used to be about 4 months. And obviously now we're extending, right. And some product even go to 5 months and some even go longer. But the reason for that is a certain component or sub-system or subcomponents where get a longer -- long order time and lead time there. So which is our vendor supply may kind of delay. Further, obviously, we have a volume -- manufacturer busy and the manufacturer floor. And as I mentioned, we're expanding our manufacturer spacing right now, we're also hiring more people. So that's a secondary fact that we consider right now. So answer your question, yes, we do see our leading time for our product get longer. Average I should say between 5, 6 months right now.

And then you mentioned in the press release, global customers and opportunity there. Can you update us on what the remaining steps might be for additional customers? It sounds like you have visibility through shipments potentially into qualifications there. But any color there would be helpful.

Yes. Actually, you know that we are actively working with the first tier customer. And sorry, maybe I couldn't mention who it is. And we did -- 2 months ago we did a very good demo for one first year customer. And so far, the final result, they are satisfied. And we're in the kind of business agreement and negotiation right now. So hopefully we can win this customer and within the time line. Also we're working with additional other first tier customer, too, right. That's why I mentioned our -- my speaking is, we got 1 this year. Maybe we'll try to even make more. That's our goal.

If I can ask one last question on the IPO. Do you have a sense that with the report you filed that you need to have further comments, responses, or a second report required? Do you have any sense of what the remaining steps might be?

Good question. I think we're actively working in the last 3 or 4 months, right, working with SVC (inaudible) in China. And the process in China here, it's not like you submit it, they take it. And they -- some reports are early, even -- I mean, February, March timeline, and they're asking, continue to say, add more material, add more of your comment. So we're doing very active dialogue and engagement with SVC. So by April 30, you're looking there, I think the report or other requirements, we almost finished the -- but again, I've been waiting for them to make a final acceptance. We are not there yet. And I should say when they accept all our reports, with acceptance finish, then I think we're moving into the registration process, CSRC, right. So we are now in the final phase of the acceptance for the report. And then we can say, we are pretty close to the registration for the CSRC. That's the status right now.

You have a question from the line of Charlie Chan.

Congratulations for good results. So just to follow that question from Suji about IPO timing. So when your report gets accepted by SEC, does that mean they need another 50 days to review your documents or this tends to be quicker?

Well, it's hard to predict, right. I mean, as I said, we did -- I'll probably say we did 95% of our job already. Hopefully, 99% or 100%, right. Always something we need to add more. But I think at this moment, we don't know yet, put it this way. It can be 1, 2 weeks, it can be more week, right. This moment, I should say, that's where we're right now. Finally, acceptance is going to be by SSEC. But we believe we did the most we can do and we submitted whatever they requested so far. And our team, our banker, our lawyer, and also including (inaudible) firm, our team did a great job. So at this moment, the best way we're just patiently waiting there, right.

And I think Donnie also asked the question, I tried to ask, meaning you see foundries like (inaudible) CapEx, right, maybe by 50%, 70%. Do you see a similar revision of your customers, especially in China already in the past 2 months?

Yes. Again, obviously, you can see that, Intel and TSMC, they make a very fast or they may announce their bigger CapEx expansion, right. Again, I mean, China, our customer in China right now, they have a multiyear expanding plan, right. And I don't see that last 2 months (inaudible) changing. However, they keep -- they're speeding -- speed up. And also there, again, this is a multiyear expansion right now. So we see more of a demand for existing customers. More than that is also second-tier customer. As I mentioned, 5 (inaudible) customer. And they also speed up their plan to do, also additional other maybe more than 5, right, people coming on. So there's a lot of demand we have in China. And as (inaudible) mentioned, they are probably still -- I heard somebody say they got some license. They're still waiting for some license. But rest of other customers in China, they are keeping spending. And also, I can see that the demand is stronger, but not like I said, like Intel or TSMC, that was probably announced, take away, not like that way. They're more like gradually keep growing stronger and stronger. That's what I see the customer in China.

And then also good (inaudible) on OpEx in first quarter, right. I mean it's 33% OpEx ratio. So maybe this question is to Mark. So for the coming 2 to 3 years, do you think the OpEx ratio still could be around 30%? Is that kind of right assumption for the coming 2 to 3 years?

Yes, Charlie, on that front, I mean, obviously, we don't guide a lot on that area. But this year, we're investing pretty heavily at R&D, sales and marketing, what have you. And so -- but if you look down a few years, we'd obviously like to see some leverage, some better leverage on the top line. So longer term, we would expect to grow our top line faster than our operating expenses.

Yes. Maybe, Charlie, I want to add one sentence. Obviously, next few -- Charlie, okay. Maybe I'll add one sentence there. I think next few years, definitely, we'll continue to invest in R&D, right. As I mentioned, we do have additional plans or further demand, 2 great new products, and that will put more R&D in the next few years, obviously. So R&D will be our #1 investment and continue going. Further, sales and marketing will continue too as we are very good at, I call it, self-marketing in Mainland China, some happening in Korea. However, we do think we still need to enhance our marketing and sales in the Taiwan, in the U.S., maybe in the future in Europe. So that marketing and sales, continued investment too, right. So in the next few years, I think the balance between the profitability versus growth opportunity. So we're probably putting more effort on their growth opportunity, right. Sales and marketing, new product development, that's our -- still our major spending area.

Yes. This is actually my last question. So David, can you give us some direction or timing about when are you going to add a new (inaudible) and can you update your TAM? I think currently, it's like $5 billion, right? And any possibility to explain that TAM in the coming year?

Yes, that's a good question. Actually, as I mentioned in the last earnings call, we already are doing 2 new product development actually, right. And this is one maybe earlier and one maybe little bit later. I think probably maybe by beginning next year when we introduce our first card product. And then hopefully we can get a second one come on later next year, right. That's our time line. We already -- I mean, I started this initial, I call the feasibility study and initial R&D almost a year ago, right. So it takes time, but with our excellent team both in Korea and in China, and I think they are very efficient. And also we have a very good sales channel and understand customer requirements and also with our software control and all the control system, all this kind of thing is really adding our speed from the R&D product on the market. So we'll continue that effort. And as I said, this will be 2 new products will add additional $5 billion addressable market to add to our existing $5 billion. So I think the future of product addressable size will be beyond the $10 billion. That's our targeted goal.

You have a question from the line of Quinn Bolton.

Sorry, guys, I was on mute. Congratulations on the nice results. I wanted to start with the shipments. You guys have seen very strong shipments over the past 3 quarters, increasing from $59 million in the third quarter to $74 million here in the first quarter. Is there any reason why you would think that that trend in shipments would take a big step down over the next couple of quarters? Or do you expect shipments to remain at pretty healthy levels?

Yes, Quinn, very good question. I think our shipment continue and will be probably increased, right. That's what happened here. We are packed with PO, right. However, we're struggling to make our manufacturing capacity increase. And we are also balanced between the PO versus new tool. And so that's our balance right now. Obviously, there's another factor. We all know that the supply chain is very tight right now and especially some long leading items get longer and longer. That's our struggle right now. Yes, I mean, we try to do our best, managing our supply chain and also manage our manufacturing capacity with good trained people, with good quality. And so we see that shipment will continue to increase in the next few quarters.

Thanks for the additional disclosure on the revenue breakdown by front and back-ended by tool type. What's pretty impressive is the growth in the advanced packaging or the back-end, where revenue was up by about 10x versus last year and back-end now, sort of somewhere between 25% and 30% of revenue. I guess, as you guys look forward, can you give us some sense of where do you think the split will be for 2021 between the wet cleaning and front-end tools versus the advanced packaging and other back-end tools?

Yes. And I can give what is really driving force for the packaging ratio go up is a copper advanced packaging plating, right. And obviously the (inaudible) plating is much higher than other (inaudible) wet cleaning. So that's a real major driving force. And we see that trend continue to increase. That's why I mentioned copper plating become ramping up this year, revenue will continue to ramp in next year. And that will be the real driving our packaging revenue continue to go up. And obviously, you also have a front-end of a copper pla1ting (inaudible) too, right. So to answer your question, yes, the major driving force for the advanced packaging really are superior advanced copper plating tool and for the (inaudible) application.

But David, do you think that the mix stays roughly 75%, say, 25% front-end versus back end in 2021? Is that about the right mix for folks to be thinking about?

Good question. And I couldn't give you that firm answer, right. It really depends on how our front-end fly too, right. You can see that (inaudible) continue to gather more attraction and our furnace, right, that we'll see the ramping next year, ramping for furnace products. So that's where we add additional revenue going on there. And I also say, front-end plating keep going to. So maybe that research is right, but I don't know how much of that would be precisely matching, right. Maybe go slightly higher, maybe go slightly lower. But I can see there both sides will continue to grow, right.

You have a question from the line of Christian Schwab.

Congratulations on a great start to the year. Most of my questions have been answered. I just have one quick thing. As we look at your guidance for calendar year '21, to me it appears kind of conservative given the spending trends in some of the leading customers that you're dealing with. I understand your commentary between having to manage new customers versus existing customers. And so if we're having a conversation in December, in my estimation that the expectations look a little conservative. Would that be like greater supply chain management? Or what would be some of the puts and takes to that?

Yes. I think the -- you mentioned a very good point, right. It's really -- I should say, looking at our guidance from year beginning until now and at this time, we didn't change it much or we didn't change it. The reason for that is we've got more deal coming, right. We've got more of a shipment going on. And but at the same time, we've got the supply chain, real holding out right now, also manufacturing capacity internally, expansion too. So I should say, yes, the major -- how we're managing our manufacturing, how we're managing our supply chain and really also how the balance, right, our revenue versus shipments, new customers versus existing customers. So that's something we have to really balance, that way they won't determine what the revenue, right. In the year beginning, it will give us our projection of the shipment, then obviously, we're going to change our shipment by now, give you update. But because the revenue-wise, and especially, we have so many new customers and new tool come out. So we'll see, right. And hopefully, we'll give you more new updates on the second quarter earnings call.

You have a question from the line of Chi Tsai.

So my first question is regarding your Asia IPO. So when I look at the Shanghai Stock Exchange website, is that your status as [inaudible] by the SSEC updated on April 30? So could you give us some update on the stages of your IPO and whether we are in the status of waiting for the CSRC already? And do we expect the Asia IPO to happen in third quarter?

Okay. So I think you are checking very carefully, yes, you've got it. Okay. There's a new update on SSEC, right. So basically SEC always updating, we will be receiving or accept new material, which is, in this case, we submitted our 2020 revenue, financial report. Also we submitted our additional verification report, right, for this class action. And also we submitted of a certain shareholder clarification requirement, right. This was recently required by SSEC for any company who go into file application anyway. So at this moment, I think the major 3 things where I should say, we're on the 95%, 80%, right. And we're waiting for the final acceptance altogether. So that's why they're updating that, so far our status at April 30. If that final acceptance, if they give us, I don't know, maybe a few weeks, maybe within 2 weeks. So it depends on how they process and how fast they go. So after that, then we will move into the CSRC registration, right. So again, it's really hard for us to give a precise timing. But we think maybe that's a few week is good timing, we're thinking. But again, nobody guarantee that, right? That's so far our best estimation.

Yes, that's very clear, but very happy that we are making big progress. So I think my second question is regarding the gross margin. So in first quarter, our gross margin was slightly down versus first quarter last year that our product mix has -- the wafer cleaning equipment was 95% last year, but it's down to 75% in the first quarter of this year. So I'm wondering, does it mean wafer cleaning equipment is higher gross margin products than other products? And how should we view this gross margin in this product, in a separate product, I mean?

Yes. If you look at the new product we introduced, last year, also, obviously, this year too, we have a semi-critical product in cleaning and those is -- we call the scrubber and also auto bench. And compared to single-wafer cleaning, those semi-critical products, their gross margin is lower than that, right, obviously. And also certain, I call the advanced packaging tool, and also there're certain margin also either. So as altogether, which is really probably putting in the low side of 40%, 45%. However, as I said, as we are a volume increase and also with our product quality improve and then our pricing and also our manufacturing efficiency, also our supply chain management will give us space to increase our gross margin, right. So again, I think we still see this -- trend we're talking. And also as we have more advanced high-margin tool getting qualified in the customer, and this will bring the higher, I call, average volume higher. So at this moment, we're not talking much about worry about that, how (inaudible) of the product mixing. And we're -- our best ways we're going to certify customer and meet the customer requirement and at the same time, expanding our competitive position. And also give the good mixing of our product portfolio, that's the way we're trying to manage it, right. So I mean, that's the way we're taking right now.

The final question comes from the line of Mark Miller.

I'm just wondering with respect to your guidance. Do you see any potential upsides? I know Hynix has pulled in some of their spending plans. Also, could you give us a status? Do you have licenses to ship to SMIC?

Okay. So the -- let's put it this way, Mark, is for SMIC, right, and I had some company recognize this already and some company waiting. And at this moment, I can tell is, we'll continue shipping their product. And however, I can see that is our product ships to SMSC, and not as a volume as other customers at this moment, right. And so we'll see, right. Maybe they have to get a lot of other customers give their license, and they can really fully expand their capacity. And that moment expecting we get more of the PO, and we can ship more tool to SMSC. This moment, I think we're probably waiting and we're doing very good preparation too. And they need our technology, they need our product. And obviously they have the balancing and also make sure the timing and what they're going to largely expanding their capacity. So we're waiting right now.

So you're waiting to ship for SMIC and you'll need to require -- you need to get a license. Is that what you've said?

Let me clear that. And our cleaning tool, most were developed, right, in China, right. So this is a non-U.S. technology. So we talk to our export control lawyer in Washington, D.C., as long as we control our U.S. components, less than a certain percentage, and we do not need license to ship to the SMSC. Our legal quarter give us the advice.

And what about any upside factors and you can see in the year ahead? Do you think there would be significant upside coming from certain things?

For SMSC, you talk about?

No, just in general, in terms of your general market.

Yes. Actually, I look at demand here, right? And our product, as I said, our cleaning, which is our initial SAPS, TEBO and Tahoe get more acceptance in the market today. And also, we have a semi-critical product, especially for new customers. And also, we have copper plating and for the wafer packaging, also for the (inaudible) also have a vertical furnace component. So it's great. We have a new product. And also we have a new customer come out to buy the tool. It's great. This year, that's why we made the historical record high shipment in the Q1, right. And also our Q1 revenue was also record high, by the way. It's also record high in the last few years. So this year, we see the tremendous opportunity. As I mentioned, we did managing very well on our supply chain and managing good quality product in high capacity expansion, also have managing our expectation from customer and also our installation or service supporting too. So it's a lot of challenge we're facing. However, it's a very good (inaudible) is really good to expanding our capacity or to train our employee, train our service engineer too. So it's a great year. It's a real -- it's a tremendous opportunity, and we've got to catch. And in the meanwhile we also put effort into the new product development, and we'll also consider not just this year, we can see even 3, 5 years down a road, ACM continues to grow, right. And (inaudible) become the world class semiconductor provider. So I think our $10 billion future market, addressable market, and will bring us to the big player in the global market.

There are no additional questions at this time. I would like to turn the call over to David Wang for closing remarks.

Okay. Thank you, operator, and thank you all for participating on today's call and for your support. Before we close, Gary is going to mention some upcoming Investor Relations events. Gary, please.

Thanks, David. The company has a number of upcoming conference appearances, and we're going to let you know very quickly. May 12, we're going to present at the Credit Suisse China A shares conference on the 18th, will be the Needham Virtual Technology and Media conference. On May 26, we'll be at the Goldman Sachs TechNet virtual conference in Asia Pacific. We also have coming up the Craig-Hallum conference in Minneapolis on June 2, the Cowen Virtual Tech, Media and Telecom conference on June 3, and the Stifel Virtual Cross Sector Insight Conference on June 10. So all of those conferences are attendance is by invitation-only for clients of the firm. So please contact those firms, your sales representative if you want to register and sign up for one-on-ones. That concludes the call. So everyone may now disconnect, and have a good day.

Ladies and gentlemen, this does conclude today's conference call. Thank you for participating. You may now disconnect.