Aehr Test Systems (AEHR) 2021 Q3 法說會逐字稿

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  • Operator

  • Good day, and welcome to the Aehr Test Systems Third Quarter Fiscal 2021 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jim Byers of MKR Investor Relations. Please go ahead, sir.

  • Jim Byers - SVP

  • Thank you, operator. Good afternoon, and welcome to Aehr Test Systems Third Quarter Fiscal 2021 Financial Results Conference Call. With me on today's call are Aehr Test Systems' President and Chief Executive Officer, Gayn Erickson; and Chief Financial Officer, Ken Spink.

  • Before I turn the call over to Gayn and Ken, I'd like to cover a few quick items. This afternoon at 4:05 p.m. Eastern, Aehr Test issued a press release announcing its third quarter fiscal 2021 results. That release is available on the company's website at aehr.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website.

  • I'd like to remind everyone that on today's call, management will be making forward-looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors that may cause results to differ materially from those in the forward-looking statements are discussed in the company's most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today's call, are only valid as of this date, and Aehr Test Systems undertakes no obligation to update the forward-looking statements.

  • Now with that said, I'd like to turn the conference call over to Gayn Erickson, President and Chief Executive Officer. Gayn?

  • Gayn Erickson - President, CEO & Director

  • Thanks, Jim, and good afternoon to those joining us on today's conference call and also listening online. Ken will go over our third quarter financial results later in the call. But first, I'll spend a few minutes providing some details on the quarter and the improved business momentum that we've started to see. Then I'll discuss what we see in the near term and talk a little bit to next fiscal year. And following our remarks, we'll open up the line for your questions.

  • During the third quarter, we began to see signs of recovery from several customer production ramp delays and pushouts of forecasted orders that we experienced related to COVID-19. We saw a significant increase in activity with both current and new customer engagements as business conditions began to improve, resulting in improved bookings and revenue for the quarter. Our $8 million in bookings generated in the third quarter is our highest bookings quarter in over a year, and we're glad to have 2020 behind us.

  • These bookings include 2 significant customer orders for our FOX-XP test cells during the quarter. One of these orders came from an existing customer for a partially populated FOX-XP multi-wafer testing burn-in system and multiple WaferPak contactors to begin volume production of their high-performance silicon photonics devices. This customer is a major supplier of fiberoptic transceivers in the data center interconnect market and is our fifth customer in the silicon photonics space that's using our FOX-P platform for production.

  • They're moving to silicon photonics integration to address higher performance and lower cost needs of the market and are transitioning from our FOX-NP system that they use for initial production burn-in and stabilization to our production XP system to meet their high-volume production forecast. This FOX-XP system is only partially loaded with blades and allows the customer to fill in the system by simply adding in additional blades or wafers of capacity as needed. They chose this option to align with their planned wafer capacity expansion.

  • The other FOX-XP test cell order was from a new customer to Aehr who is a supplier of sensors to a major mobile device manufacturer who is currently a current customer of Aehr Test. This initial order totaled $4.3 million and included a single FOX-XP test system, a set of FOX DiePak Carriers and a fully automated DiePak loader/unloader. This test cell is for a test and burn in application for a critical new mobile device that includes a new class of Fox DiePak Carriers and automated DiePak loader/unloader. I'll talk about this new DiePak in a few minutes.

  • During the quarter, we began shipment against this order and expect to complete shipments in this fiscal quarter we're right in now. We continue to expect follow-on orders from this customer for additional DiePak's and system capacity to address the production needs for this device. The increased business activity we saw at the start of the third quarter includes existing customers as they focus on their increasing their production capacity and particularly as the data center and 5G infrastructure-related silicon photonics optical transceiver market is starting to recover.

  • Multiple customers have completed upgrades of their facilities to accommodate expected deliveries of our FOX systems in the near future. In addition, we're seeing new customer investigations and evaluations for wafer-level burn-in with multiple silicon carbide customers and over a dozen silicone photonics and transceiver laser stabilization applications. We're also seeing evaluations for both wafer-level burn-in and packaged part burn-in for automotive devices. These discussions have significantly increased as potential customers believe COVID-19-related travel restrictions are expected to lessen substantially over the next several months.

  • While the customer delays we've experienced have been frustrating to say the least, it's important to note that we've not lost a single deal, we've not seen new competitive solutions introduced nor have any of our customers indicated any change to their plans to ramp their production using Aehr systems and consumables. This has really been about timing and when customers resume their plans that were clearly interrupted by the COVID-19 pandemic impacts. Our strong bookings this quarter is evidence of the increased momentum we're starting to see with our existing as well as new customers.

  • And let me touch on a few of the markets we're seeing this traction starting to take place. Let me start with silicon photonics. So we continue to hear from our customers as well as analysts and shareholders that follow the fiberoptic infrastructure markets for data centers and 5G that business is starting to return after a significant hit during COVID.

  • We heard from our customers that companies like Facebook, Amazon, and Google, were simply not doing their planned expansions and upgrades during COVID, even with all the pressure for more data and more bandwidth. As business conditions improve, we believe we will see a strong increase in investment in the space due to pent-up demand.

  • Aehr solution is unique in its ability to test and stabilize or burn-in entire whole silicon or other compound semiconductor wafer devices before they're singulated and packaged individually or integrated into a fiberoptic transceiver.

  • These transceivers are used in data centers and as data center interconnections as well as 5G infrastructure connection. Our solution has been proven to be an enabler for whole wafer processing that significantly lowers the cost of manufacturing.

  • In the case of silicon photonics, the laser devices are bonded directly to a silicon-based device that has all the logic, multiplexing and demultiplexing and other high-speed communication subsystems, all integrated into a single silicon-based integrated circuit.

  • Our solution actually makes it feasible to burn in integrated silicon photonics devices while still in wafer form without adding the cost of a transceiver printed circuit board and other mechanical infrastructure of the final transceiver module, and that has both yield and significant cost savings.

  • This becomes critical, in particular, in communication speeds of greater than 100 gigabyte transceiver bandwidths. Several large players in the market are working on direct optical to optical switches, which will further simplify the deployment of greater than 100 gigabyte transceivers at the data center and data center interconnect levels. Silicon photonics transceivers are much less expensive to build and much more scalable for quantity and capacity due to wafer level processing. Analysts see silicon photonics as a catalyst to higher growth and deployment of fiberoptic communication across all data center layers as it becomes significantly more cost-effective and there's enough capacity to displace copper-based coaxial cables in data centers.

  • Per Yole research, the silicon photonics market is expected to grow at a compound annual growth rate of 42% between 2019 and 2025 to a $3.6 billion annual market, and we believe that the industry will transition to wafer-level or singulated die for this critical manufacturing step, which is where our FOX-P products standalone is the most cost-effective solution in the market.

  • Now we will talk about silicon carbide. Our lead customer for silicon carbide continues to forecast significant additional capacity needs, and as such, we expect them to add a significant number of our FOX-XP systems over the next few years. They are a leading supplier of semiconductor devices with a significant customer base in the automotive semiconductor market and are using our FOX-XP system for high-volume production burn-in and infant mortality screening of silicon carbide devices at wafer level for electric vehicle power modules. This customer has told us they plan to significantly increase their capital investment in the silicon carbide business this year, which most certainly would include burn-in equipment that would drive FOX wafer-level systems and WaferPak sales to them.

  • Silicon carbide continues to be promising as a key growth driver for Aehr. For those who are not familiar with the nature of silicon carbide, it's a very impressive material for high-power and particular high-voltage devices for applications such as electric and hybrid electric vehicle powertrains and electric vehicle charging infrastructure. These devices reduce power loss by as much as 78%, which has essentially changed the entire market dynamic. With this development, we see most, if not every automotive company that's working on electric vehicles moving to silicon carbide-based powertrain and charging systems in the near future.

  • The challenge with silicon carbide is that it's known to have high infant mortality rates. However, after reliability burn-in screening, like that offered by Aehr's FOX product solutions, these defects can be completely removed to providing extremely reliable devices for these mission-critical applications. Aehr is able to provide a complete solution for one of the key reliability screening tests on an entire wafer of devices, basically all of them at one time, while testing and monitoring every device for failures during the burn-in process to provide critical information on those devices. This is an enormously valuable capability as it allows our customers to screen devices that would otherwise fail after they're packaged into multi-die modules, where the yield impact is 10x or even 100x as costly.

  • A critical capability that only our solution can provide in the market today is ability to test 100% of up to 2,000 or more die on a wafer and a single insertion while providing 100% traceability of past fail results of each device, including exactly what time the test and burn-in cycle the devices fail. Our systems are not only able to test 100% of their devices on 4-, 6-, 8- and 12-inch wafers, but we can test in burning 18 wafers at a time in a single FOX-XP system, thus significantly reducing the cost of test in burn-in.

  • We are engaged with multiple new potential customers in silicon carbide. In addition to the very large opportunity for silicon carbide with our lead customer, we're very excited to report that a new potential customer that produces silicon carbide power devices has asked us to demonstrate our full wafer-level burn-in solution on their silicon carbide wafers, including putting a system on their manufacturing floor to demonstrate our capabilities. This customer is currently a large player in silicon carbide right now, and we're confident that we can prove to them that our solution will catch 100% of their infant mortality failures that otherwise would show up at their customer.

  • Additionally, we expect to move to wafer level evaluations with other potential customers in the next few quarters, as we're currently engaged in detailed and very promising discussions with several other major suppliers of silicon carbide. We've invested in a special clean room at our facility that houses each of our tools including our FOX-XP wafer -- multi-wafer system, our FOX-NP dual wafer system and our FOX-CP single wafer system. This allows us to run many customer wafers at the same time, making it easy to do multiple valuations in parallel, particularly in a COVID social distancing world.

  • We anticipate that silicon carbide wafer level burn-in will become the industry standard for low-cost and 100% traceability for burn-in and reliability screening. Aehr's FOX-XP system has very unique capabilities. They are a great fit for silicon carbide reliability and burn-in tests, backed by significant IP patents and experience with the unique challenges of wafer-level burn-in test systems and contactors. This creates a barrier to entry, that, we believe, will enable us to capture multiple key companies and significant market share in the silicon carbide space in the next year or 2.

  • The silicon carbide semiconductor device market is growing at a tremendous rate, with unit growth of high-power devices expected to grow at over 50% CAGR from 2019 to '25, again per Yole research. When we look at the total available market opportunity for silicon carbide and silicon photonics wafer level and singulated die test, we see approximately $250 million of needed capacity, including consumables based on total wafer starts, yields and test times.

  • Now I've mentioned WaferPak several times. These and our DiePaks are Aehr proprietary, full wafer and singulated die and module contactors that are consumables, if you will, and that work with our FOX family of test systems. We're also seeing increased orders for our WaferPaks from existing customers in the silicon carbide and silicon photonic segments for their installed base of FOX multi-wafer test systems.

  • Towards the end of our fiscal third quarter and into our fourth quarter so far, we have received multiple orders for new designs and added capacity for volume production test of silicon carbide semiconductors for electric vehicles and electric vehicle chargers as well as silicon photonics devices for data center and 5G infrastructure fiber optic transceivers. We are forecasting additional orders for our WaferPak and DiePak consumables during the remainder of the current fiscal year and from our installed base of customers.

  • As we've noted before, Aehr's proprietary test and burn-in solutions include these customized WaferPaks and DiePaks that are needed not only for new system orders, but also for each new design win or each new device added to production test. As we increase our installed base of FOX systems with current and new customers, particularly with the NP and XP multi wafer and singulated die/module test and burn-in systems, we expect our consumables business will continue to grow in absolute value and as a percentage of our total sales. Over the long term, we expect these recurring consumable sales to account for up to half or even more of our total overall revenue.

  • During the quarter, we successfully demonstrated and began shipments of a new solution using our standard XP high-volume production system and FOX NP systems, but with a new class of DiePak that's going to be a great addition to our product family. This new DiePak is capable of handling extremely small devices and also very high-power density devices with higher parallelism than ever thought possible before. The new solution also includes a fully automated pick-and-place handling system that automatically loads and unloads these new DiePaks and transfers them to and from carts. This new class of DiePak can handle devices down below less than 2-millimeter -- by less than 2-millimeter, by less than 1 millimeter, which is incredible. The size of such a device is small enough to rest on the tip of a pen or a pencil. We will send out to investors a photo of a device of this size sitting on the tip of a person's finger to show how small it is.

  • I do want to note for anyone that sees this, this photo is absolutely not our customers' device and I want to make sure that's perfectly clear. But it is of similar size of a type of device that our new DiePaks can handle. Devices as small are extremely hard to handle, and particularly in any kind of parallelism. Often a discrete device, this small is handled with special handling equipment and a tester that can only test one device at a time. This new FOX-XP system and DiePak solution is capable of testing very complex die and modules in addition to them being tiny.

  • For example, the capabilities and features that are being used today in production on these microscale type modules include the ability to individually read every device ID, read digital or analog temperature sensors, have device power supplies on every single device that's continuously logging and individual programmable current drivers which is critical for optical transmitters and receivers as well as programmable voltage and current limits, the lead back of independent photodiodes or internal or external which are part of our integrated into our DiePak photodiodes and programmable current and voltage driver levels per device as well as programmable pulse width. These are features never thought in a burn-in and test system that we have a massive parallelism on our systems.

  • This new FOX-XP system and DiePak solution is configured with -- up to 9 high-power blades that can each test and burn-in up to 1,024 devices at a time. Each device is thermally control via conduction for the devices making direct contact with a thermally controlled surface that provides a superior or in the case of these tiny devices, possibly the only way to effectively cool these devices compared to an air controlled chamber.

  • Our new DiePak auto loader can automatically pick and place tiny or large devices from industry standard trace to our DiePak. Visually inspect every single device, read device barcode information if it's available and track every single device from data from our FOX production systems to place the devices into different physical output bins. Watching the loader handle these tiny devices is really incredible, and they can load and unload devices at thousands of devices per hour. We believe this solution further sets us apart from any other company in the industry.

  • Let me talk about packaged parts for just a minute as well. Recently, we've been receiving and responding to requests for information about the planned introduction of our new package part burn-in system which is under development and has very high voltage test capabilities. We continue to see indications of renewed demand for packaged part burn-in application, particularly from customers seeking high-voltage capability, and expect to generate additional new opportunities with this new product introduction as we head into our fiscal year calendar 2022.

  • With our increasing customer visibility, including facility improvements that customers have made to install our tools on their test floors, we continue to expect orders from the customers that told us they would ramp in the first half of our fiscal year. We expect -- I apologize -- people that had told us they would ramp actually in the second half of our fiscal year that we're in right now, many reads to that, we are convinced now. We expect to end our fiscal year with a strong year-over-year growth in our bookings. Unfortunately, the timing of some orders were delayed causing us to come in short of our revenue expectations for this fiscal year.

  • Importantly, we expect this positive bookings momentum will continue, which will drive revenue growth in the next fiscal year. Looking forward this quarter and into our fiscal 2022 that begins June 1, we feel our outlook is very promising, with forecast from current customers to ramp in silicon carbide for electric vehicles and electric vehicle chargers, silicon photonics for data center and 5G infrastructure, 2D, 3D and other mobile sensors and flash memory devices. We also expect to announce new customer bookings and shipments, particularly in silicon carbide and other automotive devices during this calendar year.

  • For the fiscal fourth quarter ending May 31, 2021, Aehr expects revenue to be at least $7 million, a 33% sequential increase from the third quarter and to be profitable for the fiscal fourth quarter. With that, let me turn it over to Ken to review our financial results in more detail, provide an update on our guidance, and then we'll open up the line for questions. Go ahead, Ken.

  • Kenneth B. Spink - VP of Finance & CFO

  • Thank you, Gayn, and good afternoon, everyone. As Gayn noted, during our fiscal third quarter, we began to see signs of recovery from the several customer production ramp delays and pushouts of forecasted orders that we experienced related to COVID-19. We saw a significant increased activity with both current and new customer engagements as business conditions began to improve, resulting in improved revenue and strong bookings of $8 million for the third quarter, our highest booking quarter in over a year. These improved results along with the growing demand for silicon carbide and silicon photonics gives us increased optimism that our products are poised to serve larger and growing market opportunities, and that we will continue to see improving financial results as we move through the remainder of this calendar year.

  • Turning to a review of our financials. Net sales in the third quarter were $5.3 million, up 213% from $1.7 million in the preceding second quarter and down 14% from $6.1 million in the third quarter of the previous year, which, as you recall, was our last reported full quarter before COVID-19. The sequential increase in net sales from the preceding Q2 reflects an increase of $3.4 million in wafer-level burn-in revenues and $163,000 in customer service revenues. The increase in wafer level burn-in revenues is primarily due to an increase in system revenues of $2.3 million and an increase in WaferPak/DiePak revenues of $1.1 million.

  • The decrease from Q3 last year includes a decrease in wafer-level burn-in revenues of $867,000 with customer service revenues remaining flat. The year-over-year decrease in wafer-level burn-in revenues was primarily due to a decrease in WaferPak/DiePak revenues of $1.2 million, partially offset by an increase in system revenues of $297,000. There were no package part system revenues in Q3 '21, Q2 '21 and or Q3 '20.

  • Non-GAAP net loss for the third quarter was $464,000 or $0.02 per diluted share and includes a warranty charge of $299,000 related to a voluntary replacement of a component to improve long-term reliability of our systems. This compares to non-GAAP net loss of $1.7 million or $0.07 per diluted share in the preceding quarter, and non-GAAP net income of $452,000 or $0.02 per diluted share in the third quarter of the previous year. The non-GAAP results exclude the impact of stock-based compensation. On a GAAP basis, net loss for the third quarter was $735,000 or $0.03 per diluted share and includes the warranty charge. This compared to GAAP net loss of $2 million or $0.08 per diluted share in the preceding quarter, and GAAP net income of $245,000 or $0.01 per diluted share in the third quarter of the previous year.

  • Gross profit in the third quarter was $1.9 million or 36% of sales, up $1.5 million compared to gross profit of $377,000 or 22% of sales in the preceding second quarter and down from gross profit of $3 million or 49% of sales in the third quarter of the previous year. The increase in gross margin from the preceding Q2 is primarily due to a decrease in unabsorbed overhead costs to cost of goods sold due to higher revenue levels in Q3 '21 and favorable direct material margins related to nonrecurring engineering revenue recognized in Q3 '21.

  • The decrease in gross margin from Q3 last year is primarily due to an increase in warranty costs as a percentage of sales in Q3 '21 and an increase in unabsorbed overhead cost to cost of goods sold due to lower revenue levels in Q3 '21. The increase in warranty cost resulted in a 6-point percentage point decrease in gross margin from prior year. The impact of unabsorbed overhead resulted in a 3 percentage point decrease in gross margin from prior year. Because our manufacturing overhead costs are relatively fixed, we scale very well. As our revenues grow, the increases flow to the bottom line, and our margin percentages are favorably impacted. Our product mix also impacts our gross margin percentage.

  • Looking at our results from Q3 last year, about half our revenue came from higher-margin WaferPak/DiePaks, and we recognized gross margins of 49% and were profitable on just $6.1 million in revenues. As noted earlier, during the quarter, the company recognized a charge to warranty of $299,000 related to a voluntary replacement of a component to improve long-term reliability of our systems. This had a significant impact on our gross margins in the third quarter. Without this warranty impact, gross margins in Q3 '21 would have been above 42% of sales, much improved from the 36% we reported. With improved revenue levels and a relatively fixed labor and overhead, we expect gross margins above 45% of sales with a good mix of product and consumable sales.

  • Operating expenses in the third quarter were $2.5 million, up $225,000 or 10% from $2.3 million in the preceding second quarter. Expenses were down $190,000 or 7% from $2.7 million in the third quarter of the last year. As I've noted on past calls, we have taken significant actions over the past year to control spending, reduce cost and lower our breakeven. Starting in Q1, we implemented temporary cost reduction initiatives across the company due to the customer order pushouts and delays in production ramps we experienced. These cost reductions have resulted in total cost savings of over $1 million in the first 9 months of fiscal 2021.

  • With customer service activity and business improving, we eliminated the pay reductions for non officers at the end -- at the start of Q3. The 30% pay reductions for our executive staff remain in place. The sequential increase in operating expenses from the second quarter is primarily due to an increase in employment-related expenses as a result of eliminating pay reductions for non officers. The decrease in expenses from Q3 last year is primarily due to a decrease in SG&A of $248,000, which includes a decrease in the U.S. of $155,000 and a decrease of $109,000 at our German and Japan subsidiaries. The decrease in the U.S. reflects a decrease in employment, travel and trade show expenses resulting from cost reduction measures taken in response to the COVID pandemic.

  • The decrease in SG&A at our Japan and German subsidiaries is due to restructuring actions taken to move to a sales rep distributorship model in these regions. SG&A was $1.6 million for the third quarter, up $142,000 from the preceding second quarter and down $248,000 from the prior year third quarter. R&D expenses were $903,000 for the third quarter, up $83,000 from the preceding quarter and up $58,000 from the prior year third quarter.

  • Turning to the balance sheet for the third quarter. Our cash and cash equivalents were $4.7 million at February 28, 2021, up from $1.3 million -- up from $3.4 million at the end of the preceding quarter and included borrowings of $1.4 million under our line of credit.

  • Accounts receivable at quarter end was $2.7 million, an increase of $1.3 million from the preceding quarter end related to the increase in revenue in Q3 compared to Q2 and a decrease of $996,000 from the fourth quarter of fiscal 2020. Inventories at February 28 were $8.3 million, down $718,000 from $9.1 million at the preceding quarter end. Property and equipment was $617,000 compared to $683,000 at the preceding quarter end.

  • Customer deposits and deferred revenue, short term and long term, were $667,000, up from $75,000 at the preceding quarter end related primarily to the increase in backlog from the prior quarter.

  • Our current and long-term debt of $1.7 million is related to funds we received during the fourth quarter of the last fiscal year under the Paycheck Protection Program, or PPP. The company applied for forgiveness of the PPP loan on November 6, 2020. While the SBA has 90 days to review and approve the application, it is our understanding that the SBA has experienced delays in their review and this delay is not an indication of issues with the application or a likelihood that the loan forgiveness would be denied.

  • Bookings in the third quarter totaled $8 million and included orders for 2 FOX-XP test cells. Over $4.5 million in revenues were recognized in Q3 '21 related to $8 million in bookings, showing how quickly we can turn orders to revenue. Backlog at February 28 was $3.7 million, up $2.7 million from the end of the preceding second quarter. Effective backlog, which includes backlog at the end of the fiscal third quarter plus orders since the end of the third quarter is $5.3 million. Now turning to our outlook for fiscal 2021.

  • As Gayn mentioned, with our increasing customer visibility, we continue to expect orders from the customers that projected a ramp in the latter half of our current fiscal year. Unfortunately, the timing of these orders has been delayed. And we believe this caused us to come short in our original expectations for this fiscal year. However, we expect to end our fiscal year with strong year-over-year growth in bookings. And for our fiscal fourth quarter ending May 31, Aehr expects revenue to be at least $7 million, a 33% sequential increase from the third quarter and be profitable for the fourth fiscal quarter. Again, the growing demand for silicon carbide and silicon photonics give us increased optimism that our products are poised to serve larger and growing market opportunities, which gives us confidence that we will continue to see improving financial results as we move through the remainder of the calendar year.

  • Lastly, looking at the Investor Relations calendar, Aehr Test will be participating in 2 investor relations conferences in June. We will be meeting with investors virtually at the Craig-Hallum Institutional Investor Conference on June 2 and also at the 13th Annual CEO Summit taking place on June 15. We hope to see some of you virtually at these conferences This concludes our prepared remarks. We're now ready to take your questions. Operator, please go ahead.

  • Operator

  • (Operator Instructions) We'll take our first question from Christian Schwab of Craig-Hallum Capital Group.

  • Christian David Schwab - Senior Research Analyst & Partner

  • Gayn, at length, you talked about the huge opportunities in silicon photonics and silicon carbide. Can you tell us how much revenue you would anticipate doing in those markets in fiscal year '21? And can you give us any projections or ranges of potential outcomes of what that business could grow to in 2 to 3 years?

  • Gayn Erickson - President, CEO & Director

  • Okay. So we historically have not been breaking down by segment. And I think maybe that's something we can look at for year-end. And part of that is just sort of triangulating all the different events. Although honestly, if we go back and look at each of the press releases, we probably could add it up.

  • And we're also -- obviously, one of the challenges we've had has been able to provide an appropriate guidance, given all the other uncertainties and our plans are not to give guidance for next year until the following earnings release, and it would still be my assumption that we will tell our investors as best we can what we understand about the market.

  • Having said that, I do think that while we are -- we do expect to have a good year in silicon photonics, I think absolute revenue growth year-over-year from this year to next. And I think the silicon carbide is likely to be higher, meaning our growth in silicon carbide will be higher than our growth in our silicon photonics. And I think it's very likely that the silicon carbide revenues will be higher, if not substantially higher than the silicon carbide revenues.

  • So you add up all those things, and we are definitely feeling optimistic about year-over-year growth. But let's also be fair, the last -- the first few months were -- the first few quarters were lousy. And we are not excited about what they were. We're excited about the continued communication with the customers, the -- what they're telling us in terms of the value of our products, what they're telling us about their ramps and how we fit into that and how we are basically unique in how we fit into that.

  • But we're on the edge of our seats like all other shareholders, waiting for those orders to turn into first bookings and then into revenue, and we have the capability and capacity to address those needs. So I mean I hope I gave a little bit of color, but I do think we'll see year-over-year growth in both.

  • And I think that the silicon carbide will see stronger growth and be higher as a percentage of our total revenue than the silicon photonics will be. There's a lot going on in silicon carbide. And the quantities of units -- unit growth, the test times and kind of the uniqueness of what we have, I think, is going to parley into significant market share in that space.

  • Christian David Schwab - Senior Research Analyst & Partner

  • Okay. Your original guidance for this year was $25 million to $28 million. And then we saw, obviously, challenges, COVID-19-related pushouts from customers that kind of started last quarter, and we were still quite optimistic for the back half of the year until now. So when we look at next fiscal year, in your commentary, Gayn, that there are no lost opportunities, they've just been pushed out or delayed. If we kind of have "normal conditions or normalizing conditions," if you will, is there any reason why you can't be doing $25 million to $28 million? I know you're not giving guidance, but is there -- what are the obstacles for you to recover that revenue plus the growth that we just talked about in photonics and silicon carbide. It seems to me you should be able to do $25 million, $28 million next year, it just got pushed out the year. Is that fair? Or am I thinking about that wrong?

  • Gayn Erickson - President, CEO & Director

  • Yes. So maybe let me see if I can do this in a couple a few ways. So in general, there's no reason from an infrastructure capacity, supply chain at this point that we believe we wouldn't be able to do those revenues and more just from our ability to supply, let's do that.

  • Related to the markets themselves, I actually feel we have more market opportunities going into next year. And the only reason is we've now seen albeit only a couple more of the silicon photonics customers transition to production. But I feel like we have now 5 folks that are in production to address the market.

  • The part that I -- and I've tried to communicate subjectively and objectively as best I can. But if you follow my transcripts over the last 2 or 3 quarters and stitch it together, last summer, when we saw some of the softening of the silicon photonics forecast, we're like, it made no sense to us. Wait a minute, how is it that data centers are slowed down?

  • I mean, everybody is on Zoom and the whole deal. And it wasn't until really the fall, I think, when I -- in one of my conference calls that we started to see that the silicon, the transceiver companies, my customers were all reporting lousy quarters, and all of their sales dropped in last quarter or in the summer because the data center folks weren't actually buying and doing those upgrades.

  • So it's, okay, well, if the Amazons of the world aren't buying, and therefore, my customers aren't giving orders, big shocker, they're not buying more equipment, but it just didn't seem intuitive. Then it hasn't changed. And so it's only now that we are hearing from folks that those ramps are coming back this summer or something along those lines.

  • Now do I think the double count, like while they're a year behind. I don't know that -- I'm not sure that's as obvious is they'll just resume where they left off and will continue to grow from there. On the silicon carbide, If you just look at where it was, I don't even know a year ago, let's say, last summer, this idea of the electric vehicles, electric chargers.

  • And if you understand how the silicon pieces are like the critical subsystem in those inverters and things that change AC electricity into DC that allow you to charge a DC battery system. That's component. And then you -- would -- we have even anticipated sort of this shift where everyone is talking about electric vehicles.

  • The General Motors announcements, et cetera, are now with the U.S. government in the new plan, what is it $500 billion, I should be careful, but I think towards electric vehicle charging systems. So that transition has got everybody scrambling. And I -- my understanding is, and we actually know of both publicly and not publicly, companies that are making some massive investments to redirect capacity -- fab capacity infrastructure people towards silicon carbide to go after that.

  • So in that sense, as we head into next year, and I know I always seem a very optimistic guy. But we weren't looking at that level of strength last summer in silicon carbide. I mean we'd just gotten our customer -- first customer to production. People were talking about it. But we didn't have the visibility that we had.

  • And now we're actually talking to multiple major players and hearing about it. And so I think that there's -- we will head into next year stronger in terms of more customers in production, some more products, actually some more product offerings, even just the configuration we do for the silicon carbide than really we had before. And so I feel very good about it.

  • I just -- I'm sure -- maybe I'll do it with someone else. I'll talk at some point about what we're feeling in terms of still COVID restrictions, but it's still there. It's like it clearly has slowed down customer orders, and I can't -- I know it's extremely frustrating for our shareholders.

  • I'm a big shareholder. It is unbelievably frustrating to hear time and time again what is imminent, here it is. It's right here. I don't -- here's where the system is going to go. Look at the picture of where your system is going to sit and then go get the order. So this is during the break. We're going to make it through, and I think we're going to be in better shape on the other end.

  • Operator

  • We'll take our next question from John Fichthorn with Dialectic Capital.

  • John A. Fichthorn - Co-Founder and Portfolio Manager

  • So I guess my first question is really, I'd love some clarity on the ramp because you've talked a lot about silicon carbide and silicon photonics. And you might have reversed that in one of your answers. You said, I think silicon photonics would be higher in revenue next year than silicon carbide.

  • Gayn Erickson - President, CEO & Director

  • I apologize, I believe it's silicon carbide. Yes.

  • John A. Fichthorn - Co-Founder and Portfolio Manager

  • Will be higher in revenues, not just growth rate...

  • Gayn Erickson - President, CEO & Director

  • Yes.

  • John A. Fichthorn - Co-Founder and Portfolio Manager

  • I just want some clarity on that. So if you could give us some clarity on the growth rate, though, of your kind of 2D, 3D sensor order that you got that kind of kicked off the quarter that everybody is excited about. Is that part of your backlog? Is there continued growth in that order book? Or was that kind of one and done?

  • Gayn Erickson - President, CEO & Director

  • Well -- okay, so we -- what I think I was pretty clear on, and I apologize because you get a little elusive. We're trying to be at least vague enough to protect the nondisclosures stuff that we have. But we started shipping that in Q3. We got the order in Q3. We started shipping it and then we believe we'll complete the shipment of it. I'm quite confident we'll complete the shipment of that initial order this quarter.

  • And then what I specifically stated in there, and I'll just stick to that. We do believe that there will be additional capacity of DiePaks and system-level capacity for that moving forward. And the timing of that and the quantities of that were being a little elusive of, but I do believe there will be more.

  • I think I have shared with people and on these calls before, that I'm always a little an extra cautious or nervous about this particular application because -- or this kind of market segment because there's been so many variations in road maps and ramps and things like that, that have burned us or surprised us in the past. So I try to be as cautious as I can about that. But based on what I've been told from them, et cetera, there will be more.

  • John A. Fichthorn - Co-Founder and Portfolio Manager

  • Great. And we've had conversations before and maybe -- or maybe it was on your conference call, where you basically said it's almost impossible for you guys to stick around in the $20 million to $30 million revenue run rate. Like if we take the number of customers you have in production, which I'd love to hear a little clarity on how many guys are actually in production that are Tier 1 customers. How many Tier 2 customers are in production? Like, if you just take those numbers and you say, gosh, a Tier 1 customer is kind of $5 million to $10 million or whatever the range is, and Tier 2 is this, it's almost hard for us to do $20 million to $30 million. And yet kind of here I come, I've got another year of $20 million to $30 million, and I'm looking at another year of $20 million to $30 million. Like is there a breakout? Or was your original read wrong? Like give me some kind of thoughts on how you think your real market opportunity is in the near term, medium term.

  • Gayn Erickson - President, CEO & Director

  • Yes. I mean, I definitely -- you know what -- and I'm trying to take it on the chin of not predicting very well on this environment. But this feels like we just lost a year. But this -- is there a breakout? I think there is.

  • Martin, who's our VP of Sales, and I spent a lot of time talking and talking about the number of customers that are in production and how this works. He and I, between the 2 of us have over 60 years in this space and kind of focus on our experiences with how you get customers. And to some extent, you focus on the basics.

  • We have these great products that we've identified some really key markets, where we're not only differentiated, but they need capacity. You typically start by focusing on 1 or 2 of the big players, hope you get one of the market leaders. And then once you've proven that out, the word spreads or you spread it and you move on to additional customers, and you gain market share.

  • There's lots of books on that, that we've all read on how to kind of do market penetration, and that's how we focus. And we've been fortunate enough to the lead customers we've had across mobile, silicon photonics and now silicon carbide are key leaders. I mean we're not talking about third tier.

  • These are the best of the best, and they have helped us to validate our products. They themselves are buying and will continue to buy. And that news has gotten out. And it's not just that it's the marketing fizzle, the products really do what they say they're going to do and it's applicable to other customers.

  • And so the game is now get as many of those customers as you can to gain the market share and then enjoy the market growth with respect along with them. And so the reality is that's where we thought we were at a year ago with the number of customer engagements.

  • We have a funnel like every other business, that talks to the customers. You just talked to and people are asking for quotes and people you're going to go through the whole process. And Brannan and I were walking through that a year ago, and started to realize even a little bit before them and thought how in the world are we going to manage through all these different customers? Because it's not like these aren't important customers.

  • I mean there's a lot of them on there that are big Tier 1 potential customers. So at that time, we came up with the idea, and I give it to Brannan for it. We came up with this application center, where we said, let's take all of our tools, let's invest the money, let's buy one production tool of everything we have, put it into a clean room setting, so that we can actually do multiple customers demos at the same time. That room has locks on it and has limited access. It has cameras in there and then we can basically have a completely secure environment to protect the IP of customers et cetera and do these benchmarks.

  • By the way, then COVID came. And so then we kind of twisted that into this COVID nontouch application, but quite frankly, that's not why we did it. We originally did it to try and figure out how are we going to get to all of these customers. But when COVID happened 1 year ago, what we felt was all of a sudden, activity picked up.

  • We're like, oh, wow, this is -- everybody is busy. Honestly, when I look back, I think it was everybody trying to keep busy on Zoom. Then about summer, they're like the activity has dropped. I can't invest in a new tool right now because I can't bring it into the facility because I can't even get in myself.

  • And so it's like everything just got put on hold, like the whole funnel, you could just look at it. So we focused at that time, we were already saying, let's just focus our energy on our current customers. The bulk of the forecast that we communicated at that time was with current customers that knew us and already had tools, so they knew how to buy more.

  • And we said -- and what we're communicating is what they're telling us. Well, obviously, what they told us didn't happen. What they said they would buy and what they said they would ramp, and they pushed them out. But each of those customers is still planning to buy.

  • The difference is probably in the last 2, 3 months that funnel of customers has started to kick back in again. Same people kind of right where they left off. And It's getting busy. I was up at 6 a.m. this morning on a conference call for an hour with another customer.

  • We're kind on weeklies with them right now. And it's that kind of activity that makes it encouraging. And so I do think as you kind of set as inflection or as you pop or whatever, you kind of get out of this. The way we're going to grow is by growing customers who themselves are growing. And that's kind of our plan with some key hot markets that I think are going to allow us to get past this $20 million, $30 million range and continue to grow.

  • John A. Fichthorn - Co-Founder and Portfolio Manager

  • You've given kind of customer accounts, some idea of funnel pipeline in the past. Can you give us how many Tier 1 customers do you have? How many customers are in production? How many conversations -- however you want to classify it, if you could give us some clarity, that would be great. And then I'll...

  • Gayn Erickson - President, CEO & Director

  • Let me tell you what, I don't have the numbers in front of me. And if the more clarity you have, the less I probably want to give them to you because I don't want to be too specific in things, but to give you a feel that I think is fair. We have several current customers that I'd call out the Tier 1, 2, 3, 4 of them that they themselves could be buying in that, I think we said $4 million, $5 million, $6 million, to even $10 million a year, okay?

  • Then we have maybe a half a dozen other customers that are Tier 2 or smaller right now. In terms of actually in production on our FOX tools, okay, the new FOX-XP systems, we now have 5 silicon photonics customers that are actually shipping products to their customers off of our tools. So that's in production.

  • We currently, as we've said, have one lead customer in silicon carbide that's doing that. And then within the mobile sensor, we have several companies that are suppliers to a big mobile supplier. So each of those are different companies, but arguably, there's a collective of an awareness of our solutions by their end customer, but we have several different applications and they're all in either production, where it's 100% or they're doing sampling.

  • So I hope that kind of gives you a feel. And that's in addition to our historical installed base where we had a handful of customers that were in FOX products, including flash memory and all that are still using our products in production.

  • John A. Fichthorn - Co-Founder and Portfolio Manager

  • Great. And I'll make this as my closing remark, which is, if you're at that inflection and you're seeing this activity, it all sounds great. But we want to see activity from insiders and this Board has been granted shares. You have been granted shares. You said you're a big shareholder. You're a big share getter. We're big shareholders, and we've been big share buyers. And it's hard -- there's been 12 months of a lack of credibility here, maybe years in this Board and this management team. And if we don't see you guys on the tape buying stock, I just don't know how else to measure your conviction. So I would encourage everybody to once again reach into their pocket like the rest of the shareholders on this call and buy some stock. And otherwise, I really -- I wish you the best of luck, and I hope this is the year of the breakout.

  • Gayn Erickson - President, CEO & Director

  • Thank you, John.

  • Operator

  • We'll take our next question, Larry Chlebina with Chlebina Capital.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Gayn, a follow-up question on the $4.3 million order for the 3D sensor. That's being done at an OSAT for the end customers. Is that correct?

  • Gayn Erickson - President, CEO & Director

  • I think the way we described it, it is the supplier of that sensor to that -- to the end customer. I don't know we guided to exactly what...

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • I know you were working with an OSAT as well and we thought that would eventually maybe generating.

  • Gayn Erickson - President, CEO & Director

  • So that actually -- that specifically is a different deal, okay, that particular one. So for clarity, what we announced last year at the end of May, is a new silicon photonics customer who bought a system and actually was working with an OSAT to build them their silicon photonics devices, okay? And that customer has now moved from an NP to an XP. So when we described that, we were pretty clear about that being an OSAT. But related to the 3D -- I call it mobile sensor customers, we're always extra vague because of the non-disclosures.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • So in getting one step further on the mobile sensor application, you're going to fill that order out this quarter. Is that a new application for the end customer or a totally new product or an existing product, but a new application? Or is it something that's additive to maybe a process they had...

  • Gayn Erickson - President, CEO & Director

  • You know what, I -- yes, I don't want to comment about that just because of the specific nature of -- in particular, this customer. So in fact, I will correct you. You said 3D sensor, I never said that. All I've ever said is it's a sensor related to mobile, just correcting what I did and didn't say because that's vague enough, I can get away with that.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • My end question is, is this end product commercialized already in the marketplace? Or is it going in the marketplace? Or is it hope to go in the marketplace? And that's why you're not sure what the capacity.

  • Gayn Erickson - President, CEO & Director

  • You know what I'm going to take the fifth on that one. I know the answer, and I think it's best for me not to talk about that. I can tell you, it's a really cool device, if that's a subjective as I can get away with and very interesting, and unbelievably small. How is that?

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Okay. So is it -- does that have anything to do with this new DiePak design? What caused you to go down that path to start developing a new DiePak for these...

  • Gayn Erickson - President, CEO & Director

  • Yes. So we have identified this -- we had actually identified this concept. There's, I think, 3 or 4 different concepts of DiePaks that would maybe at some point would make more sense technically, we do these nondisclosures with customers of how we've implemented the DiePaks. And I am going to spend more time talking about DiePaks this year because I think most people understand a WaferPak. You put a wafer in this thing and then it goes into our system, but DiePaks are a little bit more elusive. And DiePaks really the kind of thinking is that we've taken the technology for the really small micro probing capabilities of our WaferPaks to make contact with small devices. So we can actually contact an individually singulated silicon or other compound semiconductor die in our DiePak, okay? So instead of it being a whole wafer of them, they're already cut and singulated and then we can test them. And we do that today. So it also is quite applicable -- go ahead, sorry, go ahead.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Well, you developed this system, and I'm wondering, is there an order behind it or a customer behind it that you developed it for?

  • Gayn Erickson - President, CEO & Director

  • Yes. Yes. Well, DiePak was part -- actually DiePak was part of that first big order.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • 4.3?

  • Gayn Erickson - President, CEO & Director

  • Yes.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • That's what the motivation or the driver for them. Okay, now I get it.

  • Gayn Erickson - President, CEO & Director

  • And these -- and the ability to actually handle all these tiny little devices and contact them, there's a whole family or there's a whole style of components that have come out, and there's lots of different names in packaged styles, but sort of a generic thing is called QFM. It's a leadless component. The part has no physical pins to it. So making contact to it electrically as well as thermally, but in a test environment requires you to have pins in your tester.

  • Parts used to -- most parts have pins on them and then you press the part against the printed circuit board. And -- but as the devices have gotten smaller and smaller, they're so small, they don't even have pins on them. They have tiny little pads, and they use surface mount technology for mounting. Contacting them electrically and handling them is really hard.

  • And so our DiePaks have evolved for the same technical reasons that we can contact a tiny little die with electrical pads on it with no pins. We can do the same thing with individual devices or modules, and have all the same thermal control and everything else.

  • And that is completely unique. And you -- I mean we're doing -- I've personally inspected. I have access to the nondisclosures and all to get access to these devices. You're under a microscope doing all this. It's amazing. And I alluded to this and the IR folks will get you a photo. But we've taken a photo as an example of a kind of device that this DiePak can handle. It is not the customer device, I would be really clear. But it is tiny. You drop it on the table, you can't find it.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • I got a sense of it. Now switching to silicon carbide. You have a potential new customer that you've been working on and now it's evolved to an actual trial. You said in their facility, is that what you said?

  • Gayn Erickson - President, CEO & Director

  • Yes.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • So you've taken wafers from this customer in your facility in your lab that you set up to do this work...

  • Gayn Erickson - President, CEO & Director

  • Larry, our plan -- to be more specific, our plan is that we will be taking wafers and doing in our facility, and then it will move to their facility.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • And then when it moves to their facility, are you going to take an NP over there to do it? Or how does that work?

  • Gayn Erickson - President, CEO & Director

  • You know what, I think that would be the easiest thing. I think we'll see how that goes. If they immediately want to go into production, they're probably going to want an XP, I'm not going to -- I tell you what, Larry, I'm not going to loan them an XP. So if they want an NP, that's easy because we can practically ship it overnight because it's small enough, but for an XP I am happy to quote them.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • The real trial will be in your lab on their wafer, and then that's the proof that hopefully will progress to an order of magnitude of some sort. So this potential customer with COVID, to get into their facilities, I'm assuming it's in Europe is -- does it necessitate being vaccinated, and I would assume maybe that's a trump card that you might be able to pull to get in there, hey, we're all vaccinated is that kind of a requirement to break into the...

  • Gayn Erickson - President, CEO & Director

  • Let me talk to you about -- so folks that follow the market, the major suppliers of silicon carbide today exist in the U.S., in Europe and Japan, and there are some players coming up in other parts of Asia. So Larry's guess of it being Europe is 1 in 4 chance. I'm not going to comment on that yet, okay? But all of those places have similar COVID restrictions.

  • So one thing I do believe is going on is that customers are assuming that they will subside. But right now, so like a lot of us, I'm tired of talking about COVID, personally. I'm full of energy, I'm not sick of work, I'm fine, but just the whole COVID thing. And as a CEO, to sit here and talk about COVID, once again, as like an excuse is super frustrating.

  • But the reality is it's real. So I'll give you an example. Right now, we want to install a system in Taiwan. We are installing the system in Taiwan. To go to Taiwan, first of all, it depends on what country you're coming from, okay? More restrictions on U.S. than Japanese people, right?

  • We had to get approval like weeks or days or weeks ahead of time. My engineer flew in, sat in a government-sponsored COVID hotel, he has not allowed out of his room into the hallway for 14 days or he'll be arrested. And that's -- they have arrested 2 people so far, not my guys, to make a point out of it. Then he's only allowed to stay in country for so many days and then he's got to leave. By the way, you go back to his own country, 14-day quarantine. So it 28 days of overhead.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Since the availability of vaccines, and is that going to be alleviated?

  • Gayn Erickson - President, CEO & Director

  • You know what I really don't personally know anything more than anyone else. I know that Vernon and I are getting our second shots next week. I mean, my staff is at different stages, depends on what city and countries and stuff you live in. Most, if not all, of our support staff is doing it. I have not personally heard one customer say, oh, if you've got a vaccine now I'll let you in differently.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • That's why I was wondering. Okay.

  • Gayn Erickson - President, CEO & Director

  • But yet -- but I believe -- I personally believe is that, that will help and will subside. But I think that most customers are thinking, some are not 30 days. And so until we actually see -- I mean I think today, restrictions -- I am a U.S. citizen, I can't fly to Germany. That doesn't even matter. So you get these sort of micro restriction things that kick in. And in that environment, new customers, new evaluations are being held up. It's weird.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • I see that. One comment or question. The CP customer, where does that stand? Is that still in the pipeline? Is it...

  • Gayn Erickson - President, CEO & Director

  • It's in the pipeline. Last -- just 2 months ago, they were buying spares for it. It's being used around the clock, and we're like tapping our fingers on the table when they're going to ramp. My understanding, both publicly and what I can share, they just simply put that project. They held off for a year were just 1 year has gone. But they've been -- they're sampling to their customers and doing things, et cetera. I don't have the latest update of when they're supposed to ramp. We did, at the beginning of the year, have a CP forecast for them by May. And I think we pushed that out a couple of -- several months ago. But the tool is being used around the clock. It happens to be at a facility that they -- it's an active congress to get in and thank heaven, systems never broke. I mean, it's been fine. Everything is great. It's all good. There hasn't been any issues. Things happen, but luckily, we haven't had any issues. And so we're just waiting for them to buy more.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Last question. I was just looking at spot memory prices today, and I was just shocked at how strong they were, especially DRAM going back up differently. Is there -- does that -- maybe what the appetite for somebody to expand and maybe open an opportunity for your memory project. Is that -- are you getting any feedback that...

  • Gayn Erickson - President, CEO & Director

  • We've seen some healthy signaling, if you in the flash space, I'll be specific. And in some of my conversations with the other flash and DRAM guys, I continue to hear new programs have been on hold, like they haven't really not -- they're still -- as people understand or follow the space, how is it that Aehr Test, just make sure people draw their attention to it.

  • A lot of companies in our space have absolutely had incredibly great years. And just that would not be how I would describe it with us. But I have a lot of friends in this market as well. None of them have been selling new tools. Everybody's new product investigations were put on hold. By the way, having been in this industry for 30 years, that's one of the nice things about some of these weird cycles.

  • Customers are always trying to figure out how to buy the new tool to get the test cadence down or get the cost down or whatever. If they simply continue on with the current tool, and buy more and more of it, they have no leverage or any way to get their costs down.

  • So you make a lot of money in this time. So what's happened is Advantest and Teradyne and the Cohu's of the world, they're just selling a lot of the same testers to the same customers, and they're getting installed and they ship them and the customers sell them themselves or on-site people install it, but nobody is buying new stuff.

  • Well, if you happen to be Aehr Test who just introduced a bunch of new products to go into these new exciting spots a year ago, guess what, you get hit. We didn't have that many customers that we're able to ramp. That's reflected in the revenue that we have. And a lot of the new business just got pushed out.

  • Operator

  • And we'll take our last question from [Raghu Garim with Garim Capital].

  • Unidentified Analyst

  • I have a general question. I understand new business is difficult to get approved, new tools, I understand. The industry as a whole is scrambling to increase capacity worldwide. And they're producing at highest capacity levels, everyone. And you have legacy business yourself because you are not a new player, and you are only talking about carbide and photonics.

  • This is new stuff. What happened to your legacy business? If you see your presentation yourself, what you put in your website, see how many customers you have? Those are all legacy customers. They are not photonics. They are not everybody. Some of them are.

  • You have so many customers in your presentation, you see are worldwide, what are they doing? They are not ordering anything -- everybody is increasing capacity. If something is not right, you're guessing wrong or some -- this is -- nobody lost 1 year because everybody is booming. You, only you thinking, unfortunately. So there is something here, which I want you guys to have internally some critical assessment what is going on.

  • And because it's been going on like this a few quarters at least, you have certain expectations, COVID is everywhere. It's not only for any one country. They're all supplying, and nobody has capacity.

  • Even the tool guys have no capacity, you know how much lead time each one is waiting for tools. So I want you to tell anything you have because this is your best chance, the operator said, this is the last question. So you tell really what's going on in your last question.

  • Gayn Erickson - President, CEO & Director

  • Let me try to describe it as I understand it. So prior to COVID -- so if you are -- it said, where is your business? What's it look like? And let's say, the fourth calendar quarter of 2019, clearly before COVID. What we had been communicating to our shareholders is we had been -- had made a transition fairly substantially from packaged part which has been a historical business that was running $2 million to $3 million a quarter or so to our new wafer products.

  • And what I mean by that is that our new FOX family called the FOX-P family is quite new. Initial revenue shipments in the last 18 months, for example, of the FOX-P and the NP systems and the XP itself is only a few years old with the first customers going into production, within the last 18 months, including COVID, okay?

  • So like 18 months from now, be looking backwards. We had just seen -- in fact, I think it was in Q4 calendar that we were just finally banking a drum that our lead customer for the FOX-XP and silicon photonics had finally gone to production.

  • In fact, maybe Ken would look back, maybe it was the January conference call of 2020 because that's when they had just finally gone into production. And so what really is, is when you talk about legacy products or whatever, we have made a transition as a company over to these new products with these new customers in market at that time. Our legacy business was actually quite small.

  • It was services and support and a little bit of packaged part burn-in business that we have seen substantially go away. Now one thing I am curious on is that we -- I mean, we went for -- during COVID, in particular, very little spending was being done and certainly no new product or new investigations were being done in the packaged parts space.

  • And so it's just recently that we've had customers turn back on in what would be traditionally our legacy package part business and start to put RFQs and information out requests for capacity and proposals and all. So our legacy business, we really did see go to almost nothing. And it was only the new products that we were getting revenue on in these newer spaces.

  • So that's a little different. I mean, again, my background is I came from Verigy, that was acquired by Advantest. I had products that -- our products had 50 or 100 customers in production. During this COVID, those customers continue to buy those products and have had their company Advantest bought those products, has done very well.

  • My understanding is the new products that were coming out of those were all pretty much slowed down. And customers were not buying the new things during these last 9 months.

  • So I think that's the best I can try and explain what's different about us and say like in Applied Materials or a Teradyne or an Advantest, we really are kind of in a scenario where we were making this transition to these newer products, and we got hit. So we're just not riding the wave of a broad rising tide because of the segments. I hope that helps.

  • And I think, operator, you'd suggested to it there. And I think just time-wise, we're a little over that kind of a typical 1-hour allotment that we do. So let me just say thank you for everybody for attending the call. As always, we will make ourselves available for calls with you.

  • I used to always invite people if you're in town, swing by, but we're still kind of limiting that a little bit ourselves. But if you're a customer, you're welcome to come by, we'll figure it out. But other than that, I appreciate your time, and we will talk to you at the next call as well. Bye-bye now.

  • Operator

  • This concludes today's call. Thank you for your participation. You may now disconnect.