ACM Research Inc (ACMR) 2022 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ACM Research First Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time now.

Now I'd like to turn the call over to Mr. Gary Dvorchak, Managing Director of The Blueshirt Group. Mr. Dvorchak, please go ahead.

Good morning, everyone. Thank you for joining us on today's call to discuss first quarter 2022 results. We released results before the U.S. 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 portion 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, the CFO of our operating subsidiary, ACM China.

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.

Also, certain of the financial results that we provide on this call will be on a non-GAAP basis which excludes stock-based compensation and any unrealized gain or loss 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 our IR section of our website and on Slide 8.

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

Thanks, Gary. Good afternoon, everyone, and welcome ACM Research First Quarter 2020 Earnings Conference Call. I would like to start today by review our Q1 results and then provide an update on latest status of our Shanghai operation. Please turn to Slide 3. As we mentioned in our business update prior to this call, late in the first quarter our operations were impacted by citywide lockdown in Shanghai. Our hearts go out to all those affected, including our employees, business partners and customers. The government has been working diligently to bring the outbreak under control and we fully support their efforts. We also thank our dedicated and hard-working team, some of whom have literally lived at our facility. Our team has kept ACM operating as best as we could under these challenging circumstances.

Q1 revenue was $42.2 million. Shipments were $67 million and non-GAAP earnings per share was a one cent loss. We ended the quarter with $533 million of cash and time deposits. Revenue and shipments were significantly below plan as the lockdown limited our ability to ship finished products, process final acceptance and produce new tools. As an example, we had 13 completed tools that could not be shipped in Q1 due to logistical issues. We expect to deliver all of these tools in the second quarter. We expect the Shanghai lockdown to be temporary, and we have begun to increase the level of operations. At the end of April, Shanghai government put ACM on the "White List" of essential business. This enabled us to increase production and restore logistics to our facilities. We started "closed loop production" at our Chuansha facility, also known as "2 spots, one line". This is where workers travel as a group between our factory and their hotel or dorm, on a dedicated bus. We have started receiving incoming supply and shipping products, and we are bringing back more people to work every day.

Demand remains very strong. We are in constant contact with our customers and we are committed to deliver tools to support their capacity expansion plans. As of today, we have not seen any changes to our order book, which remains full through Q2 and Q3 and is building into Q4. We expect solid growth in 2022 from our core cleaning products, the significant ramp of ECP tools, and increased shipments of our furnace products. The main obstacles to achieve our plan are the pace of reopening of the City of Shanghai and in turn, our ability to scale production.

We have been able to partly offset the lock-down by having our Shanghai R&D and management teams work from home. Our team is focused on expanding our current portfolio and introducing two new platforms later this year. Please keep in mind that our R&D center and the production facilities in South Korea are unaffected by the Shanghai lockdown and are assisting with the recovery. Meanwhile, our global sales team in the rest of Asia and in U.S. and Europe are pursuing potential new customers in those regions.

We are committed to gaining additional share of the $8 billion market addressed by our current products. We are on track to double our addressable market opportunity by year-end with introduction and initial shipments of two new product categories. Q1 R&D expense increased significantly due to increased manpower, and was also elevated for the quarter due to the cost of building development tools. We are committed to investing in new products, but do expect our R&D spend to moderate to a 'run-rate' level in Q2 and beyond.

I will now highlight new product development and recent announcements. Our ECP product cycle remains strong. Q1 revenue for ECP furnace and other products was $12.2 million, or 29% of sales. We shipped 20 tools in 2021, and anticipate significant growth for 2022. We are gaining market share with our proprietary ECP technologies in China market for both the front end with our ECP "M-A-P", and in advanced packaging with our ECP "A-P" products. Long-term, our goal is to achieve a 50% market share of the China plating market and a 25% share of the global plating market. Today, we announced a new volume purchase contract for 10 Ultra ECP ap high-speed plating tools from a leading China-based OSAT customer. Our ECP ap was previously qualified by multiple China-based OSAT customers for advanced WLP applications. We expect to deliver some of these tools later in 2022 and majority in 2023.

Also, on February 17, we announced orders of 21 ECP tools. Those orders were split between 13 Ultra ECP map and 8 Ultra ECP ap copper plating systems.

On April 21, we announced that our 18 chamber, 300 mm Ultra C VI single-wafer tool was qualified for mass production by a mainstream memory chip manufacturer in China. This tool provides 50% more throughput than our 12-chamber tool, but with a similar footprint, and is an important tool to support higher volume production lines at one of our key memory customers. We expect the 18-chamber cleaning platform to play an important role with this customer and others for 3D NAND, DRAM and Advanced Logic production.

On February 13, we also announced volume purchase orders for 29 Ultra C wb wet bench tools for 300 mm wafer applications from several China-based customers. While these are semi-critical tools, we believe our newly developed low pressure dry technology allows us to gain wet bench market share from our major international competitors and gives us a strong advantage over the smaller local competition.

I will now provide an update on our major customer initiatives. First, for our major U.S. customer, our U.S. services team is staffed and is engaged in daily sessions to prepare for the delivery of tools for our Ultra C SAPS V 12-chamber cleaning tool. The evaluation tool is in final assembly, and we remain on track to deliver it later this quarter, and production tool shipment is soon to follow. We believe a successful evaluation could lead to larger business opportunities with this and other major customers in the region.

Second, for the global IDM with a China-based packaging facility, we delivered the first Ultra C pr wet stripping system in Q4 2021, followed by a second tool in Q1. We have also received orders for two additional systems to be delivered in Q3. We are hopeful that success with our first product can lead to a broader adoption of other WLP tools, including ECP ap, at this important customer.

Third, for a major global semiconductor manufacturer with a China fab, they ordered an Ultra C SAPS V 12-chamber cleaning tool to evaluate in their China facility, and we are on track to deliver the tool in Q2. Finally, we received an order for an Ultra ECP map copper plating tool from a regional Asia-based semiconductor manufacturer. This tool was delivered in Q1, and the customer has begun its evaluation with our service and process team.

We are confident that successful qualification of these opportunities can result in larger business opportunities, and we continue to build our sales pipeline with other top-tier players.

We continue to move forward with our Lingang construction, and plan to complete the first production building in the beginning of 2023, with production commencing in the middle of the year. We are also planning R&D centers in Wuxi and Beijing to support several key mainland China customers. And we are considering a more meaningful investment in South Korea. We currently have more than 100 R&D engineers and supporting staffs and two leased production facilities. In addition, we are actively evaluating land in South Korea to build our own facilities and to further establish a local footprint near two additional major players and to provide customers with a secondary production center to ensure robust supply chain and production continuity.

Now let me discuss our outlook. Since we have been added to the "White List" and we are increasing our production and logistics activities, we feel that the worst impact of the lockdown could be behind us. While there is some uncertainty on the pace of the city of Shanghai re-opening, our order book remains intact, and we believe we can make-up lost ground for the full year, starting with the second quarter. As such, we are maintaining our full year guidance for revenue in the range of $365 to $405 million. Among other factors, our outlook assumes a timely return to scale of ACM's production and shipping operations in Shanghai, the absence of unexpected interruption of our supply chain, and continued demand by our customers.

Before I turn the call over to Mark, I want to update you on auditor situations. As we have previously discussed, in early March, we are included on SEC's list of noncompliant companies due to our use of China-based auditing firm for 2021. As indicated in our prior press release, we have begun to interview potential U.S. auditors that would allow us to comply with the PCAOB inspections. Although the current SEC guidelines

Allow us until the 2023 fiscal year to transition, we are in advanced stages of evaluating potential auditors, and we are committed to engage a PCAOB-compliant audit firm for our 2022 fiscal year.

Now let me turn the call over to Mark, who will review details on first quarter results. Mark?

Thank you, David. Good day, everyone. Please turn to Slide 5. Before I begin, keep in mind that unless I note otherwise, I will refer to non-GAAP financial measures, which excludes stock-based compensation and unrealized loss in trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release.

As David noted, our Q1 results were impacted by the lockdown in Shanghai, with revenue and shipments below plan, and we had 13 completed tools that could not be shipped in Q1 due to logistical issues. To be clear, these tools included both repeat shipments and first tool shipments. As I review our results, keep in mind that we believe the year-over-year comparisons are less meaningful, due to the circumstances created by the lockdown.

Revenue for the first quarter of 2022 was $42.2 million, down 3.5%. Revenue for single wafer cleaning tools, which includes SAPS, TEBO, Tahoe and semi-critical cleaning was $26.0 million, down 19.7%. Cleaning was 62% of sales in Q1 2022 versus 74%. Revenue for ECP furnace and other technologies was $12.2 million, up 120.7%. This category represented about 29% of sales, reflecting growth in our new product group. Revenue for Advanced Packaging (excluding ECP), services & spares was $3.9 million, down 32.3%. This category was about 9% of sales.

Total shipments for the quarter were $67 million, versus $74 million in the first quarter of 2021. Gross margin was 46.9%, up from 41.4%. This was higher than our normal expected range of 40-45%, reflecting a favorable product mix. 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 $27.7 million, versus $13.5 million. The majority of the year-on-year increase was from R&D, with modest growth in sales and marketing and G&A expenses. As David noted, Q1 R&D expense grew significantly due to manpower, and for the first quarter, it was particularly elevated due to the cost of building development tools. For the full year, we now expect about 16% R&D intensity at the mid-point of our outlook range.

Operating loss was $7.9 million, versus operating income of $4.7 million in the year ago period.

Unrealized loss on trading securities was $3.9 million in the first quarter of 2022, versus an unrealized loss of $1.0 million in the year-ago quarter. This non-cash item is excluded from our non-GAAP results.

Income tax benefit was $4.0 million, versus a benefit of $2.8 million in the year-ago period. As described in our earnings release, a change in the U.S. Internal Revenue Code Section 174 that went into effect on January 1, 2022, has caused a meaningful potential increase in ACM's effective tax rate for the full year. We are still evaluating the impact to the 2022 tax provision, and we note that Congress is considering legislation to defer the capitalization requirement to later years.

Net loss attributable to ACM Research was $0.6 million, versus net income of $7.7 million in the year ago period.

Net loss per diluted share was $0.01 compared to net income per diluted share of $0.12 in Q1 2021.

I'll now review selected balance sheet items. Cash, cash equivalents and time deposits was $533 million [at the end of the first quarter, versus] (added by the company after the call) $63 million at the end of the fourth quarter of 2021.

Total inventory was $271.5 million at quarter end, up from $218.1 million at the end of last quarter. This included finished goods inventory of $106.6 million, work in process of $56.8 million, and raw material of $108.2 million. These items were above normal levels at quarter-end due to the impact of the lock-down. The 13 tools that we could not ship in the first quarter were reflected in both finished goods inventory and work-in-process.

In closing, as David noted, we believe the effects of the Shanghai lockdown will be temporary, and we are making steady progress for a gradual return to scale production. Demand for our tools remain solid, and we have several strong product cycles ahead. And we will continue our investments in new products, new customers, and capacity as we look through the lockdown, and drive forward to with our mission to become a major player in the global semiconductor industry.

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

(Operator Instructions) Our first question comes from Suji Desilva with ROTH Capital.

A couple of questions. First of all, on the White List activity that called you essential business, how soon does that imply you can get back up to full production, full shipment?

Great. That's a good question. Yes, actually, as I mentioned, we already have our "2 points, one line" and "closed loop production". And we're adding the people to our facility. By current pace, we calculate it will probably take a few weeks, and as we gradually add more people, hopefully really by the end of this month, we can have our other employees and our workers start getting to our China factory. And meanwhile, also we're starting to send people into our Zhangjiang office, which is a design engineer site. Hopefully also then gather our design engineer back in the office too.

Okay. That's encouraging to hear. And then David, perhaps, or Mark, the ECP furnace category is growing here. It's 29% of revenue. What are the sub segments there that are showing the most growth? Is it across the board? And how does that mix look like it's going to look a year out? I know the single wafer cleaning is also growing very well, so curious if that's going to grow in the mix a year or two out.

Yes. I think for this year, the copper plating and furnace will grow, right? And major actions still come from copper plating. As you see, last year, 22 were shipped for the copper plating and 7 for the furnace. This year, I would say revenue-wise, obviously, copper plating will be more than furnace. And meanwhile, I can still say our cleaning tool demand is still very strong. As you can see that we have single wafer cleaning and also last year have introduced this Bevel Etch cleaning. And also, later this year, we're probably getting to our supercritical CO2, the cleaning tool in the market, right? And meanwhile, we also have this big order for the auto bench and we just announced order too. Also, by the way, as I mentioned, auto bench, this key technology we call low pressure drying, we developed in the last 2 years and have been qualified as we will become the driving factor for us to gain the market share from competitors. So also leading other small competitors in China. We still maintain very strong leading position in China cleaning market.

Okay, that's great. And then lastly, on the tools, the 13 that you're unable to ship, I'm curious what portion of those roughly is a first tool? Because I imagine those maybe take a little longer to get in place versus the repeat tools as you kind of recover the shipment process here.

Yes. I mean the 13 tools is mixing our cleaning tool, our batch tool and copper plating and also advanced packaging tool, right? And obviously, the 13 tools, we are going to ship in May, right? And some of them actually have been shipped out already. All of the 13 tools can be shipped out probably by mid of May, will all ship out and for the logistics.

Okay. One last question if I can sneak it in. Have your customers' capacity expansion plans also been impacted? I'd imagine they have. And then just if so, are those getting back on track? Because obviously, that's the fuel for your demand to kind of re-achieve your count of '22 numbers. What's going out the customers' capacity expansions and their ability to kind of install tools?

We're always keeping weekly dialogue with customer, right? And there's some tools shipping timeline, we couldn't do that. We'll try to really quickly ship the tools out. And also, they're also trying to push us for May and June to get them tools. Our engineers are working very hard. I think we try to catch up the manufacturer scale. And hopefully, we can deliver in Q2 and based on plan, right? Obviously, Q2 will be better than Q1, obviously.

Our next question comes from Quinn Bolton with Needham & Company.

Since demand and bookings remain strong, I just wanted to focus more on the production and the lockdown effect. First, David, just wanted to clarify your response to the Shanghai facility getting back up and running at full capacity. Did you say in response to Suji's question that you would be back up and effectively back to full capacity by the end of May?

Yes. I think by the plan. We're gradually putting people in the production line. And that's our goal, right? Hopefully, we can go earlier, but that's probably realistic plan and we will gradually get to 50%, eventually they'll get 100%, right? That's our goal. Obviously, our goal is by the end of this month, we try to recover 100%.

Got it. And then sort of a second question.

Hey, Quinn, just to kind of clarify one thing, because what David mentioned is all of our employees back to the facility is our target by the end of the month. I mean the logistics will still have to catchup to get our supply chain and some of those details worked out. We'll gradually get our overall output, the full capacity, as we move through the year. But in terms of our staffing, we're targeting that by the end of this month.

Got it. And I guess sort of a related question next, Mark, obviously, you haven't shared the quarterly progression of your annual plan. But through the lockdowns, you had press released that you were going to come in well below your internal plan. As you sit here today, are you going to be below the internal plan at the beginning of the year in the second quarter and then expect to catch up in Q3 and Q4, since it's a much, much heavier back-end loaded year? Or do you think the second quarter can be back in line with the original operating plan?

Let me add something, Quinn. What happened is, obviously, we have ordered those parts either from the overseas supplier and also supplier in China, which are most close to Shanghai, right? And most of all, our machine shop sited in Shanghai, they are not shutdown, right? So those parts of the machine have been fabricated already.

Obviously, we try to deliver. And as I said, we already got this return production, so we have special permission. We have just a car or a truck can load the parts back to our factory now. As I said, the deals are still there and the demand is still strong. And our long-leading items on the line, of course some of them are waiting to clear the custom in the port of Shanghai. So that's why I should probably maybe Q2 still get some impact. However, those are parts, those are other than what eventually is still no delay.

And then we're trying to catch up in Q3, Q4. That's why we put this year our revenue and also including shipments probably still within our plan. Of course, we have to do a lot of good work and to manage well our workers' efficiency and we'll probably run more than 2 shifts and consider 3 shifts. That's all we consider to catch the demand and also meet the requirement of delivery time for our customers.

Got it. And then just lastly, on the 2 new platforms since the R&D folks had to work from home, have there been any delays in the intended launch dates of those 2 new platforms? Or do you still expect to introduce one in the first half and one in the second half of '22?

Yes. I think that's still actually less impacted. The reason I say that is, that 2 platforms partially designed by our Korean team and partially designed by our Shanghai team. Obviously, Korean team has no impact. They're working still pretty normal. And the Shanghai team work at home, and they're working very diligently right now, so we will not see much impact for the second half of the year deliver early first and later in the second -- that's our plan. I think we can make it.

Our next question comes from Charlie Chan with Morgan Stanley.

Yes, I know it's kind of a tough quarter for you, but it seems like the full year is still fine. My question is about, first of all, because the other big foundries like TSMC and UMC, they mentioned about some bottleneck of global equipment. So even you still have a purchase order, but my concern is that given those other increments of bottleneck, whether your China customer can really build those production lines on time. Because even for TSMC, the equipment delay is like 3 to 6 months. At UMC, they're expecting to have parts come in on time. Just wanted to get your thought whether that it's going to impact your future order.

Yes, it's a really good question. And it's really hard for us to comment whether our customers' production is on time or not. But at this moment, all customers in China really want us to deliver on time. Of course, they want us to deliver ahead of time, but we cannot do that. At this moment, I'd say our customers still pursue their full speed to do their production line installation. And at this moment, I think that's our job. Assuming they got other parts, other important equipment for international, bigger guys and then we did our portion. So far, I didn't see anybody delay, say push delay and postpone their delivery. We not have any customer in China told us postpone their order to deliver later. That's the standard right now.

Okay. Got you. And another thing is more about the competing landscape. I was just aware that there is a new competitor in the cleaning category called the IDG Power. It seems like management comes from ex Lam Research. I'm not sure if you are aware of this competition. And what would that change your long-term market share targets, especially in China? Thank you.

Yes, you mean the China market, right? That's your question? Is that correct?

I'm sorry, I'm talking about a new competitor called IDG power, and it seems like they want to make entrance to the cleaning market.

Another company? IDG? Okay. Well, I mean, the main competitors are the international big 3. We have also a local player coming. This more than I think we are working on many competitors. With the beginning of wafer fab tool, got first PO from Korea market. You have an international big guy, also Korean local guys competing. I think we're okay with our competition. Our goal in China is very clear.

With our technology superiority, single, auto bench, SAPS, TEBO, Tahoe, also semi-critical products. We're definitely in leading position in this market. I think, again, our goal is to take 50% of the market. The rest of 50% are bigger 3 international players and also their new small group of companies in China, and that's okay.

And we like competition and as long as they are competing on product, right? We're okay. I think we are pretty confident and also very strong relationship and customers like our tool, like our innovation. Especially also, they like us to have their future solution. And not just also cleaning products, we do have a couple of competing corners. And soon we come with 2 new platforms in the second half of this year. We are really a multi-product platform company and we feel very comfortable about our potential growth.

Okay. I just wanted to make sure you are aware of new competition. And maybe last question is to Mark. I know you maintained the full year revenue targets. But from a CFO perspective, if you kind of run through the full year projection for the bottom line, after this shutdown, do you see kind of any downside to your original budget for the bottom line for 2022? I just want to make sure whether the following quarter can fully make up the loss in the first quarter. Thank you.

Yes, hey, Charlie. We don't charge on the bottom line, but we certainly talk about the top line, the $365-$405 million, we're maintaining that outlook. We would anticipate that you run through our overall operating model for the year, it would probably be not that changed from what we anticipated before the lockdown. Just the revenue shifted to the back half of the year. Where we are evaluating are there going to be additional costs associated with the lockdown? I mean at this point, there may be some, but we don't really think they're going to be that material. We'll have to evaluate that as we move through the year.

Okay, yes, I just want to make sure this is fully temporary. That's why I asked. Thanks for your information.

And our next question comes from Mark Miller with The Benchmark Company.

The 13 tools that could not be shipped in quarter one, can you estimate approximately what revenue this represented?

David, do you want to take that first?

Yes, Mark, please.

Yes, I can hit that. David talked a lot about the spot lockdowns that started in mid-March and then the so-called 5-day lockdowns which were started at the end of March. And of course, we didn't completely shut down. On the 13 tools, we're not really going to quantify the exact specifics, but there's 5 cleaning tools, a couple of ECP tools and the remainder were advanced packaging. We did mention that those tools are reflected both in finished goods inventory and work in process on the balance sheet. We also had some impact from acceptances and qualifications that were delayed and then, of course, some slowing of production. I'd also point out, this is typically our seasonally weak quarter because of the Chinese New Year. A lot of the business would fall in the last month of the quarter. Typically, our quarters would be more linear. And the overall mix relative to our plan, it doesn't take a lot of tools given the ASPs really to move that. I don't know, David, if you wanted to add any more to that?

Yes, I think pretty well, Mark. Yes. Yes, pretty good.

You're expecting these tools to ship by the middle of May?

Yes. I think we started shipping some of them already and we will probably complete all shipments by mid of May. And yes, that's our plan.

You're interviewing auditors. When do you think that process is going to be complete and you'll have an auditor selected?

Yes, Mark, on that front, look, we remain committed to the NASDAQ, we're confident we're compliant. We've been evaluating auditors for the past several quarters. As David mentioned, we're in the advanced stage of selection and we're working hard to appoint one for 2022, which would be a year in advance of the mandate. We're not going to give a lot more detail on that. When we something to announce, we'll certainly do so.

(Operator Instructions) Our next question comes from Chaolien Tseng with Credit Suisse.

One very quick question for the R&D expense on a full year basis. Did you mention earlier it will be around 15% for the year?

Yes, and actually our goal, obviously the whole of this year, R&D spending anywhere between probably 15% to 16% range and obviously higher, a couple of points higher than last year. The reason for that is that we increased more R&D for the existing product line expansion and also add furnace and including furnace R&D. And plus, we do have 2 new platforms of the new product that's all adding on the engineering manpower and also building the development tool, testing, all this stuff. That's why we're planning increasing a few points to R&D for this year's budget. Mark, anything you want to add on that?

Yes, I wouldn't add a lot. I mean our overall operating spend, there's always a mix between sales and marketing and R&D. But we're clearly investing in our new product opportunities, and there was some elevated costs in Q1 because of the development tools.

Next question is on the competition side. And just by the way, the new local competitor that Charlie mentioned earlier should be IDG Energy, I think one investor (inaudible) is to do different focus right now. But my question is on the Ultra ECP side because it looks like the company's Ultra ECP is getting through to customer orders now and also based on the announcement in February. Do you see any strong local competitors in China for our Ultra ECP tool? Another question for Ultra ECP is that I remember in February, you also mentioned that one of the ECP tool orders is from a top-tier Chinese foundry. Has that top-tier Chinese foundry also ordered ECP for wafer level packaging application?

Yes, I'll hit competition first. Copper plating is a really relatively new technology. You look at a real competitor in the world, there's just a few companies can do that. The reason is really difficult technology, number one. Number two, also have IC I call it a barrier, for the people getting into the business. I think ACM is one company coating the entire IC for the copper plating technology, both in damascene application and also in advanced packaging tool. Regarding the local competitor, I think they have to take time, right? I mean, number one, they've got to create a new IC that will make sure they don't step on other including ACM or other big guys, IC number one. Number two, you have to really overcome a few key technological barriers. At this moment, we are pretty confident on our technology and IC and also, we have a way to penetrate very fast for the Chinese local customer. Either damascene application or the advanced packaging tool, too. With that in hand, we have very strong confidence. And also, we not only try to capture the local Chinese market and also with our partial plating technology and also high speed, the copper plating for IC, I think we're also aimed toward the international market. Long-term run, we want to say 50% in China and 25% in global market, that's our goal. Answer to second question, yes, and all major top tier customers in China and all have operating tool. And you can say SMIC, Huali Huahong and also on 1 PC and also 6 MP, all have our copper plating tool. And we also get our application in the second tier and third tier of the foundry in China. Of course, we sell more just than we announced. We have just received very volume first order from one wholesaler, the most packaging company in China, tend to reorder. They show their confidence and to our technology and also with our performance.

That's very clear. And next, David, I want to learn more about the Korea side. Can you share a bit more about the production complexity in Korea and from what type of tools and the ramp-up schedule for this year and next year? And for the revenue guidance for this year, how much of that will potentially come from our Korea facility?

Okay, good question. And yes, as I mentioned, we do have a tool facility which is R&D manufacturing facility in Korea. And that's started making our, for example, partial auto bench tool, and also partial of our furnace tool. And also, some of them made also in China in a combination. As time going on, and also, we are saying we want to also expand the manufacturing in Korea and by we are consider buying the land and building a bigger space to take care of our manufacturing R&D in Korea.

Because we believe we want a building of R&D manufacturing center close to the customer. That's what we talked about many times. And this is really big movement. And also, we believe we have 2 manufacturing centers, one Shanghai, one is in Korea, we really make a robust supply chain and also keeping we call the continuity of the production. It's really what the benefit to our customers both inside China, also global customers.

So that's the route we keep. And we're not going to stop in Korea. As we do more business in Taiwan or in the U.S., and we're also building on centers in those region. Not including I call it Europe. As I said, semiconductor is international business, and we want to be putting our best design engineer close to the customer. Therefore, they can better service supporting the customer.

Thank you, David. And David, one last question for me, if I may. I hate myself ask this question, but this is one of the questions that investors have been asking me from last week, and I couldn't explain well. Some investors are very curious that there are also other semiconductor-related equipment makers in Shanghai with their major production in Shanghai. But it somehow looks like their revenue didn't get hit as much as our revenue in the first quarter. I'm just curious is there any reason if you have to say, I mean, first employee loss at home or the logistics issue or the customer acceptance issue and the small to raw material issue? What is the biggest factor for our weak revenue performance in the first quarter?

Yes, I know what you mean here. Obviously, on a different company, I couldn't comment what's their custom combination like quarter-to-quarter difference. And somehow this quarter, we got a combination, I said there's -- okay, you talked about Chinese revenue recognition, right? And China recognition really for you to sell the tool, and ship the tool to the customer site, okay? And that's something recognized simple, right? But U.S. recognition is upon shipment.

For the question here, yes, I mean this is a recognition rule by the U.S. rule impact a lot. Because if we cannot ship repeat order, the revenue cannot be recognized. So that's way you can see that actually our China revenue is higher than U.S. revenue, let's put it this way. You might see that not associated by the China revenue. And we also have some customers delay their production line, I call it facility buildup. We ship almost 10 tools in their facility, but they cannot install on time.

Anyway, this quarter is very strange in all combinations together. Chinese New Year and some delayed installation and also, as I said, this is the shutdown, all together. But anyway, I mean, it's one quarter, right? I mean I don't think it makes a major impact to our long-term business. We have to probably be careful about our future preparation for this kind of shutdown. And now we start setback call a "2-spots, one line" will continue for a while until this all pandemic can go away.

We'll really propel from now on, we will make sure if the same thing happened again, we will still maintain healthy production in the hotel, in the factory with the bus and moving close to production. That's our goal. And we will probably go through orders through this year. And even as it gets better, we want to make sure we've got robust production systems and not impacted by this COVID-19 spread out. I mean for our working engineers. Of course, expecting they didn't come back again. If it comes back again, your supply chain has got issues. So far, so good. We are hoping everything gets better from now on.

(Operator Instructions) And at this time, I'm showing no further questions. I would like to hand the conference over back to Mr. Wang for any closing comments.

Okay. Well, again, thank you to everyone for participating in our conference call, and I'll report you next earnings. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.