Aehr Test Systems (AEHR) 2021 Q2 法說會逐字稿

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  • Operator

  • Good day, and welcome to the Aehr Test Systems Second Quarter Fiscal 2021 Financial Results Call. Today's conference is being recorded.

  • At this time, I'd 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 Second 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 this call over to Gayn and Ken, I'd like to cover a few quick items.

  • This afternoon, Aehr Test issued a press release announcing its second 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 in the Investor Relations section of the company's website.

  • I'd like to remind everyone that on today's call, management will be making forward-looking statements today 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.

  • And now with that said, I'd like to turn the call over to Gayn Erickson, President and CEO of Aehr Test Systems.

  • Gayn Erickson - President, CEO & Director

  • Thanks, Jim, and good afternoon to those joining us on the conference call online and also listening on the -- over the web. Ken will kind of go over the second quarter financial results later in the call. But first, I'll spend a few minutes divvying some details around the challenges we experienced during the quarter and how we responded. Then I'll turn to what we're seeing now and why we think things are moving in the right direction. And then following our remarks, we'll open up the lines for your questions.

  • As we anticipated on last quarter's call, our bookings and revenue for the first half of our fiscal year were negatively impacted due to several customer-specific production ramp delays and pushouts of forecasted orders due to COVID-19-related impacts as well as the continued challenging global business environment created by the COVID-19 pandemic. These customers continue to indicate they believe the pushouts are temporary and may require additional system capacity in consumables in the current fiscal year. We continue to be optimistic about generating significant bookings and revenue increases in the second half of this fiscal year compared to the first half based on these customer forecasts and the initial order flow we began to see already starting in the second half.

  • At the beginning of the third quarter, just last month, we announced that we received a design win for a new high-volume production test and burn-in application for a critical new mobile sensor application. This engagement with a new customer, who is a supplier of sensors to a mobile -- a major mobile device manufacturer, began with an initial $4.3 million order for an initial test cell consisting of a FOX-XP production test and burn-in system, a set of DiePak Carriers and a FOX Automated DiePak loader/unloader. This initial test cell is expected to ship during this fiscal third quarter, and we expect follow-on capacity orders from this customer in this fiscal year for additional test system capacity, DiePak Carriers and a DiePak automated solution [burn-in].

  • We're proud to have been selected for this application, which we were awarded due to our unique technical capabilities and cost effectiveness of our solutions that was critical to this application, which will require 100% test, burn-in, traceability and validation of these devices. Our highly differentiated FOX solutions achieved this test requirement and met the customer's low cost of test targets due to the significantly higher parallelism that can be attained on our FOX XP systems and DiePak.

  • During the second quarter, we also received a design win on an initial order from our lead customer for multiple DiePak Carriers for test and burn-in of the next-generation sensor modules for mobile devices (inaudible). This order expands deployment of our test solutions to additional devices with this large multinational customer, and we're excited to engage with them earlier in the design cycle for this product.

  • The customer will use our proprietary DiePaks for production qualification, test and burn-in of these devices. We expect this to turn to volume production orders for additional DiePaks, and had anticipated beginning shipment of the incremental DiePak capacity in our fiscal fourth quarter. However, this customer recently told us this capacity need is likely to be delayed until after our current fiscal year, and instead, will push into the first or second quarter of our next fiscal year that begins in June. We continue to be optimistic about the mobile sensor market space and continue to see increasing interest in our FOX systems and DiePaks for production test and burn-in of complex 2D and 3D sensors in multiple mobile applications.

  • Since the beginning of the current third quarter, we've received multiple follow-on orders and are seeing an increase in bookings forecast for our proprietary WaferPaks and DiePaks consumables across multiple market segments' growing installed base of FOX wafer and singulated die/module test systems. This reflects customer capacity and consumable needs for our previously announced design wins from customers for devices in silicon photonics, silicon carbide, mobile sensors and flash memory. We're forecasting additional DiePaks and WaferPak orders during the second half of the fiscal 2021 from our installed base for these applications in these key market segments.

  • As we've noted before, Aehr's proprietary test and burn-in solutions include customized WaferPaks and DiePaks that were needed not only for new systems 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 our FOX-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 1/2 or even more of our total overall revenue.

  • In Q4 of our prior fiscal year, we announced a new design win with a new Tier 1 customer for a FOX-NP system that we shipped in Q1. This customer is a global leader of communication transceivers for data center, telecom, 5G infrastructure, and is forecasting to transition to our FOX-XP wafer-level test and burn-in systems during this fiscal year to meet their volume production forecast. In addition to the order we expect to receive this fiscal year, we expect them to continue to place additional systems and consumer orders over the next several years.

  • We also announced that we began a new relationship with a new customer that is the world's largest outsourced semiconductor assembly and test supplier. During the first quarter, we began an initial marketing and sales campaign with this customer for our FOX-P family of products, including Aehr WaferPaks and DiePaks for production test, burn-in, reliability, screening of devices with full wafer, singulated die and modules. This campaign is generating discussions with multiple potential new customers and continues to gain momentum with new customers, including yet another opportunity as late as the last few weeks. They have asked us that we not name them publicly yet as they see their move into the silicon photonics assembly, packaging and test space as a strategic initiative. They want to gain market share with some critical target customers before going public with what they see as a competitive advantage of being able to provide a total solution, including full wafer-level test and burn-in before assembly of the silicon photonics engines into the transceiver modules. We expect to make this partnership public in due course.

  • We continued to expand the device wins and release to production of the FOX-XP for silicon carbide devices during the first quarter and the second quarter. We added a couple of new device design wins for the new high-voltage silicon carbide devices on our FOX-XP system with our lead customer. They are using the FOX-XP system to high-volume production burn-in and infant mortality screening of silicon carbide devices at wafer-level for a few key applications, including electric and hybrid electric vehicles. They are forecasting additional bookings and capacity needs for our FOX-XP systems and WaferPaks during this fiscal year and for years into the future.

  • For those who are not familiar with it, silicon carbide is a very impressive material for high-power and particularly high-voltage devices for applications such as the needs of electric and hybrid electric vehicles, powertrains and electric vehicle charging infrastructure. (inaudible) most if not every EV or HEV automotive company is moving to silicon carbide-based power drive and charging systems. The challenge with silicon carbide, it is known to have high infant mortality rates. But after a reliability burn-in scheme, these defects can be completely removed to provide extremely reliable devices for these mission-critical applications.

  • Aehr is able to provide a complete solution for one of the key reliability screening tests of an entire wafer at a time while testing and monitoring every device for failures during the burn-in process to provide critical information on those devices. This is enormously valuable capability that allows our customers to screen devices that would otherwise fail after they're packaged into multi-die modules where the real impact is 10x or even 100x as costly.

  • A critical capability that only our solutions can provide in the market today is the ability to test 100% of the volume of wafer in a single insertion while providing 100% traceability of possible results of every single device, including exactly what time during the test and burn-in cycle the device fails. This is a critical feature for this customer to provide confidence to their customers that are -- that they are removing all early like (inaudible) prior to shipment. This customer has made public presentations in industry conferences, touting the cost and quality assurance advantages of our FOX solutions compared to traditional packaged or module-level test. Our systems are not only able to test 100% of devices of 4, 6 inches as well as the ability to test 12-inch wafers, but we can test and burn-in 18 wafers at a time on a FOX -- single FOX-XP system.

  • We continue to see the total available opportunity for silicon carbide and silicon photonics wafer-level and singulated die test markets to be approximately $250 million of [loaded] capacity including consumables based on total wafer starts, yields and test plans. The silicon carbide semiconductor device market is growing at a tremendous rate, with unit growth of high-power devices expected to grow over 50% CAGR from 2019 through 2025 per year of research.

  • Turning to our packaged part of business. As I talked about before, we've had -- we have started to see forecast for renewed demand for packaged part burn-in applications particularly from customers seeking high-voltage capability, reflecting a move towards higher voltages and other market requirements for devices and automobiles. We expect to see bookings resume from certain current Aehr customers this fiscal year and also expect to generate additional new opportunities with our planned-in reduction of a new packaged part burn-in product that adds a very high-voltage test capability. We're being relatively conservative with our forecast in packaged part volume as this segment still seems to be heavily impacted by COVID-19 delays and customer evaluations. Still, we do see the need for high-voltage capabilities in both wafer-level and packaged parts as a high-growth opportunity for Aehr and expect orders from several new customers, including both Tier 1 and Tier 2 level customers for packaged part burn-in system this fiscal year and next.

  • As we look to the second half of this fiscal year and beyond, we remain actively engaged in discussions with a large and growing group of potential new Tier 1 and Tier 2 customers that are considering using Aehr's products to support several high-market growth opportunities. These not only include silicon photonic, silicon carbide production burning, but also applications for automotive, memory in general and microcontroller applications. The breadth of opportunity for our products makes us more and more excited about the broad-based adoption of wafer-level building.

  • We continue to receive specific forecasts from existing customers for additional new capacity and expected additional bookings and shipments and revenue for our systems and consumables. These customers are on key growth segments that we have started to already penetrated, including silicon photonics and silicon carbide, and they have already purchased initial systems from us and are either in production or sampling the customers. They have told us explicitly that they plan for and will require additional capacity utilizing our FOX-XP systems to test up to 18 or more wafers at a time or DiePaks with up to 1,024 devices in each of 9 blades per system. These customers have asked us to anticipate and secure specific capacity to meet their needs, and have indicated they expect to place orders for this capacity this fiscal year.

  • We're certainly excited about this strong level of interest. At the same time, COVID-19-related impacts have affected our customers and hindered our ability to forecast the timing of these orders. We continue to engage in ongoing discussions with a large number of potential new customers. However, these discussions have clearly been slowed by travel-related restrictions due to the COVID-19 pandemic and related precautions taken by several new potential customers worldwide, including policies for limited on-site engineers. This absolutely has delayed evaluations in initial orders for Aehr systems and controller products in the first 6 months of this fiscal year.

  • Given this fiscal year's guidance has been almost entirely based on current customer forecast, we are taking a more conservative approach to our fiscal year forecast at this time in revising our revenue guidance for fiscal 2021 to be between $20 million and $25 million while continuing to expect to be GAAP profitable for the fiscal year. With a fiscal year second half revenue range of $16 million to $21 million, this new revenue range reflects significantly increased revenue in the second half compared to first half revenue of under $4 million. As we look into the second half of fiscal '21, we remain optimistic about the growth opportunities for our systems and consumables within our installed base of customers as well as our ability to expand the number of customers using our family of FOX-P solutions. We have additional potential customer engagements that could provide upside to our revenue for the fiscal year as well.

  • We maintain our confidence in the long-term demand for our products, the attractiveness of the key markets that we serve and our belief that we will come out of this worldwide pandemic stronger than we've been in with more production customers, more applications and higher-value products. Our key customers are serving some of the highest growth markets, including data centers, 5G infrastructure, sensors and technology for smartphones and tablets, electric and hybrid electric vehicles and memory and data storage in competing data -- computing, data centers, mobile devices and hundreds of applications that are keeping the world connected.

  • As a result, we believe our products will be in high demand this year and for years to come.

  • And with that, let me turn it over to Ken before we open up the line for questions.

  • Kenneth B. Spink - VP of Finance & CFO

  • Thank you, Gayn, and good afternoon, everyone. As Gayn noted, our revenue and bookings for the first half of the fiscal year were negatively impacted by several customer-specific production ramp delays and pushouts of forecasted orders and the continued challenging global business environment created by the COVID-19 pandemic. However, these customers continue to indicate they believe the pushouts are temporary. Based on these customer forecast and the initial order flow we have started to see since the beginning of the third quarter, we expect significant bookings and revenue increases in the second half of this fiscal year. At the same time, as we discussed on previous earnings calls, we have taken significant actions to control spending and maintain our cash position as a result of customer orders' pushouts and delays in production ramps.

  • In our fourth quarter of the prior fiscal year, we completed the restructuring that resulted in permanent savings of approximately $120,000 per year and also required mandatory vacation days to reduce costs. Starting in our current fiscal year, we implemented additional temporary cost reduction initiatives across the company. These measures included 30% pay reductions for our executive staff that took effect starting last quarter. The total of all cost reductions resulted in savings of over $550,000 in the second quarter. With our recent bookings and improved forecast for the second half of the year, the temporary pay reductions for nonofficers were eliminated starting in the current fiscal third quarter. The pay reductions for our executive staff remains in place. It is also important to note that even with these cost controls, our operational capacity in bandwidth have not been negatively impacted, and our main focus continues to be growing our revenue base within the large market opportunities that Gayn mentioned earlier.

  • Now turning to the financial results. Net sales in the second quarter were $1.7 million, down 16% from $2 million in the preceding first quarter and down 76% from $6.9 million in the second quarter of the previous year. The sequential decrease from the preceding Q1 reflects a decrease of $484,000 in wafer-level burn-in revenues partially offset by an increase in customer service revenues of $155,000. The reduction in wafer-level burn-in revenues was primarily due to a decrease in system revenues of $630,000, which was partially offset by an increase in WaferPak/DiePak revenues of $146,000. The decrease from Q2 last year included a decrease of $5.1 million in wafer-level burn-in revenues. This was primarily due to a decrease in system revenues of $2.8 million and a decrease in WaferPak/DiePak revenues of $2.3 million. Customer service revenues were flat compared to prior year.

  • There were no packaged parts system revenues in Q2 '21 or Q2 '20. Non-GAAP net loss for the second quarter was $1.7 million or $0.07 per diluted share. This compares to non-GAAP net loss of $2 million or $0.09 per diluted share in the preceding first quarter, which excludes the impact of stock-based compensation expense and a $2.4 million adjustment related to the closure of our Japan subsidiary and non-GAAP net income of $456,000 or $0.02 per diluted share in the second quarter of the previous year.

  • On a GAAP basis, net loss for the second quarter was $2 million or $0.08 per diluted share compared to GAAP net income of $107,000 or $0.00 per diluted share in the preceding quarter and GAAP net income of $251,000 or $0.01 per diluted share in the second quarter of the previous year. Gross profit in the second quarter was $377,000 or 22% of sales, up $150,000 compared to gross profit of $227,000 or 11% of sales in the preceding first quarter, and down from gross profit of $3.2 million or 47% of sales in the second quarter of the previous year.

  • The increase in gross margin from the preceding quarter is primarily due to a decrease in unabsorbed overhead costs to cost of sales, due to an increase in manufactured parts and inventory and a change in product mix. WaferPak/DiePak consumable revenues accounted for 46% of revenues in the second quarter compared to 31% in the preceding first quarter. The decrease in gross margin percentage from the second quarter last year is primarily due to an increase in unabsorbed overhead cost of goods sold due to lower revenue levels and an increase in warranty costs as a percent of sales.

  • Operating expenses in the second quarter were $2.3 million, down $93,000 or 4% from $2.4 million in the preceding first quarter and down $631,000 or 21% from $3 million in the second quarter of last year. The decrease in operating expenses from the preceding first quarter is primarily due to a decrease in R&D expenses of $80,000. The decrease from the second quarter of last year includes a decrease in SG&A of $656,000, primarily due to cost reduction initiatives implemented in fiscal 2021. SG&A was $1.5 million in the second quarter, flat from the preceding first quarter and down $656,000 from $2.2 million in the prior year second quarter.

  • R&D expenses were $820,000 in the first quarter, down from $900,000 in the preceding first quarter and up from $795,000 in the prior year second quarter.

  • Turning to the balance sheet for the second quarter. Our cash and cash equivalents were $3.4 million at November 30, down $2.9 million compared to $6.3 million at the end of the preceding quarter. Accounts receivable at quarter end was $1.4 million, up $313,000 from $1.1 million at the preceding quarter end relating to the timing of revenue in the second quarter compared to Q1. Inventories at November 30 were $9.1 million, up $955,000 from $8.1 million at the preceding quarter end. The increase in inventories includes an increase in labor and overhead of $371,000 related to an increase in manufactured parts and inventory. Property and equipment was $683,000 compared to $622,000 at the preceding quarter end. Customer deposits and deferred revenue, short-term and long-term, were $75,000, a decrease of $331,000 compared to $406,000 at the preceding quarter end, related primarily to the decrease in backlog from prior quarter.

  • Our current and long-term debt of $1.7 million is related to funds 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, and the Small Business Administration has 90 days to review the application -- review and approve the application. Bookings in the second quarter totaled $1.6 million and did not reflect any system orders. Backlog at November 30 was $1.1 million, down $147,000 compared to $1.2 million at the end of the preceding first quarter.

  • Since the start of our current fiscal third quarter, the company has received a $4.3 million order from a new customer for a FOX-XP test cell and also additional WaferPak/DiePak consumable orders, improving our overall backlog.

  • Now turning to our outlook for fiscal 2021. As Gayn mentioned, COVID-related impacts continue to affect our customers' customers, creating delays in some anticipated orders and overall caution with our customers that have resulted in delays of some of our customer production ramps. With that in mind, we are taking a more conservative approach to our forecast for the second half of the fiscal year. As such, we are revising our revenue guidance for fiscal '21 down to between $20 million and $25 million, while continuing to expect to be profitable on a GAAP basis for the fiscal year, which includes the impact of the net gain on the dissolution of Aehr Test Systems Japan and the anticipated loan forgiveness of the PPP loan. This new revenue range still reflects a significant ramp in the back half of the fiscal year compared to the first half. This concludes our prepared remarks. We are now ready to take your questions.

  • Operator, please go ahead.

  • Operator

  • (Operator Instructions) And we'll take our first question today from Christian Schwab with Craig-Hallum.

  • Tyler Leroy Burmeister - Research Analyst

  • This is Tyler on behalf of Christian. First question. So on the multiple, I think you called 1,000 previously or more than 1,000 Tier 1 and Tier 2 potential customers' engagements you have, either in silicon photonic and silicon carbide as well as other customers. In the next couple of quarters of fiscal year and into next year, should we expect a majority of orders from these customers? Or how many of this customer pipeline would you expect to turn into orders?

  • Gayn Erickson - President, CEO & Director

  • Okay. That's a good question and kind of tease up how we are looking at our forecast. And I know there's -- we had lots of feedback with respect to people on how we look at our forecast and what we're doing. And primarily, what we discussed is forecast for revenues and less about exactly what the bookings are. And obviously, bookings come before revenues because you book, ship, get revenue.

  • Right or wrong, when you started off the year, we tried to be clear in communicating that when we set the expectation for the year we had -- we're basically communicating the majority of the forecast was only with installed base customers, customers that were already won, that were already communicating to us that they intended to buy more. Arguably believed to be a conservative stance at that time because the alternative was just sort of looking into what was going to happen, et cetera, how do we anticipate. So we, quite frankly, just listen to what our customers are telling us.

  • Generally speaking, when you look at forecast, you actually forecast not only what the customers specifically tell you, but you anticipate winning new deals or that the customer will ramp or something, and that was always a bit of a challenge to do. In our latest, if you will, guidance, we again took now our current specific customers, including the deal that we just wanted in and what are they specifically telling us. This is what we and the Board have decided is our best way to communicate our guidance because we have clear line of sight to those deals. It also helps to explain in my prepared comments, it says, "Oh, then we have other deals." So again, I just want to make sure people understand that most of what we are talking about when we guide is I have -- customer A has told me they need this configuration for this price by this month. And that's how we built up our forecast.

  • The downside, of course, to that is if a customer needs something, you can be wrong in specific incremental steps. And this is -- we just try to do our best at digging that out. In that range, if you want to interpret because this is -- I guess we could have been as clear, what they tell us is right dead in the middle of that, okay? So -- and we said, okay, there's some downside upside, and we're just -- we're trying to be as appropriate as we can in this environment to give people some guidance while we continue to be -- still, we manage the business to ensure that we are profitable.

  • By the way, in that range, you could also interpret we're profitable at the low, so we must be pretty profitable at the high end, and that's a fair way of thinking about it. So there's still a dynamic range within that forecast. And you specifically asked about customers and we talked about Tier 1 and Tier 2. And just for folks that have not listened in the last couple of few calls, we were describing Tier 1s as customers that were significantly large enough to do maybe $6 million to $10 million a year on a, call it, average or a good year, whereas maybe a Tier 2 might be $1 million to $3 million. It's not how much we love those customers, but just sort of the buying power, which is a combination of their size, the markets they serve, et cetera. And we have a number of both of those, both as customers that are already qualified in those new opportunities. So back to your question, in terms of do we anticipate in our forecast for current customers, absolutely include some of our biggest current installed base customers as well as some of the smaller guys.

  • And in the case of the Tier 1 that we announced that we won early or late in May at the end of the last fiscal year, as they shift from buying the first NPI system to production, we see them being a Tier 1 customer. I mean they're physically a very large company and have a significant forecast with us. And so that's an example where they bought small to begin with. We consider them a Tier 1. They were already a customer, but they've only bought a small amount, and they're about to buy a part of a significant test out from us. So we have that in silicon photonics for certain. We have many more customers. We have both, I think, 5 or 6 customers that are already qualified for silicon photonics. And then we have a -- over twice that many companies were engaged with on the silicon photonics in the photonics space.

  • Again, in our revenue forecast, primarily, there is no revenue in the ways that we shared with you related to new customers coming in. One of the challenges right now is the reality is we're 1 month into our third quarter, and while we do have inventory, there's only so much time until even with large orders, we're not going to be able to necessarily ship at all before the end of May. And so I think as we anticipate this year, you can see that the bookings, for example, would continue to be strong as the ramp has mostly just shifted which would afford us to have a believable strong backlog going into next year.

  • Related to just new customers going forward, again, we're not talking -- we try not to forecast all the bookings and things like that. But for certain, we do have over this next 18 months and certainly into next year, anticipate that we will win a number of new customers across several segments, including silicon photonics, including silicon carbide, as well as some new application spaces that we haven't spent a lot of time at talking about that we kind of alluded to in the memory and market controller space with some other things. There's actually a lot of activity and a lot of discussion in the market around wafer-level burn-in right now. But I think one of the themes that -- and I really spend a lot of time answering this. But one of the challenges right now is there's a lot of folks that are -- the semiconductor industry, I want to make sure people understand, is actually doing really well right now, which seems to be a big disconnect with respect to why is Aehr having a couple of the worst quarters in recent memory. This is kind of a straight away, if you will, where everyone going as fast as they can. The microns of the world, many semiconductor companies, they're basically buying exactly what they're doing, and they're just going fast. There's actually not a lot of kind of new development. There's not a lot of new process terms. People are kind of just sticking to their medium and doing exactly what they're doing. And so in a scenario like us, where we're just winning into these new silicon photonics, silicon carbide applications, some of those customers have kind of pulled back slowed down those ramps to their customers. And as a result, the bulk of our business is involved in this NPI or this new product introduction space.

  • I'll just say one more thing here. Last quarter, I mentioned it. It was absolutely dead on that prior to them, everybody was just completely holding their breath. They -- it was -- we couldn't fly in and see them. They were just sort of -- things were just sort of moving laterally. But over the last, I'd say, 3 months, customers have realized they're not going to wait for the pandemic to be over. And the conversations are here's the order, it's coming, how are you going to install it. We could -- maybe later in the call, I'll go into the actual tactical logistics as flying in people and they're sitting in quarantine, then they do the installations and how to manage through all that. But we need to do that because we're going to be installing a bunch of systems in the second half.

  • Tyler Leroy Burmeister - Research Analyst

  • That was great. I appreciate all that color, Gayn. Second question here. I want to follow up on your new customer order, this $4.3 million order, for a customer serving a large mobile manufacturer. So I know we've kind of been surprised or maybe disappointed in the lack of follow-through previously here. So I'm just wondering if you could add some color, some comments on your conviction that this customer will turn into more meaningful revenue in the future, just kind of your best expectations for that customer today.

  • Gayn Erickson - President, CEO & Director

  • Sure. And I -- let me add to your comment about, I'll use the word disappointing follow-through. I'm not sure you used that word, but I'll use it. For those folks that are kind of new to us or not familiar with the story, we had a very large mobile manufacturer who it turned out was the initial lead customer on our new FOX family of wafer-level and singulated die/module products. And when they were first buying from us, there was -- it was unclear how they would deploy the tool in terms of which high-volume applications, how long the test time was, and then as it turned out, what percentage of the devices were actually tested.

  • What we have made clear is that we've seen that market space, in this case, turn to what is called sampling, which means they do not test 100% of every single device using our tool. Instead, do it for a quality reliability sampling, which I won't go into a lot of detail. But the way to interpret that is, if you're only doing a 5% or a 1% sampling, you only buy 5% or 1% of what you could. So there's a huge dynamic range there. And then the initial orders from these customers in these applications, we did not know whether they were going to be doing sampling or higher volume production. And in fact, the sampling rate was lower than expected. And therefore, while they bought $10 million or $15 million worth, they didn't buy $50 million worth.

  • Now specifically in this application, and we have to be really careful about what things we say. So I'm now going to try and say the same things I've said before and specifically in the release. We have been told and are clear that this is actually a production burn-in, meaning it is a 100% test, right? So the good news is it doesn't have the 1% or 5% multiplier times. The test time and the volume percentages I don't want to get into, I never will. Technically, there's some even uncertainty exactly what applications it will go into, although there are some of us that are right into the programs and know more than we ever talk about. All I will say at this point is that we have been told there is volume behind it. We absolutely believe it, and they are at -- this is -- happens one of the customers that's asking us to secure allocation of capital and slots, et cetera, for additional capacity this year. So my voice may not sound it. I'm actually really excited about this one. I will maintain an extra amount of conservativeness and believe it as I see it. But so far, so good. And it doesn't take a lot of $4.3 million test cells to add up when you're doing this level of revenue. So this is actually really encouraging.

  • The other specific thing I want to say on that because it may come up somewhere else on this new customer, and I really need it to come up through my pores. I am actually really excited about this not just because of the potential dollars, which are significant, but that the customers specifically understood and selected this -- our system based upon its capability for 100% validation of the device. This part could have been tested with what is known in the industry of a packaged part burn-in system. We sell them. Suddenly, one of the differences between a packaged part burn-in system with a traditional convection oven is that you have to use lots of shared resources. I wouldn't go into it. All it means is you just do not have the traceability and the validation of every single device.

  • The FOX products have as much as 100x the resources available to the devices, which allows us to 100% know that that part got tested as well as thermally conductive cooling and heating gives us the ability to certainly know it was actually burned in properly, right? That is more expensive than packaged parts. But in certain applications, we're able to, through wafer-level or singulated die, test many more in parallel that we can actually do it more cost-effective, while at the same time, giving them much better data. They specifically spent more money to ensure that this device was a 100% burn-in and clarity, and we have reason to understand why that was important to them. And that is super encouraging to me because, honestly, that's what we've been out touting for years, and they get it. And so that was just really encouraging, and I think this is going to lead towards more business and other opportunities that are similar to it because of the level of clarity of the value of this type of burn-in and test. Okay?

  • Tyler Leroy Burmeister - Research Analyst

  • That's great. I appreciate that. And then last quick one, and I'll turn the call or the questions over. A little bit of a modeling question, I guess, as well as, fundamental. Your implied second half guidance with the visibility you have today, any color on Q3 versus Q4? Would you expect Q3 and Q4 to be kind of similar in size or more of a progressive improvement through the end of the year and Q4 sequentially better? Any color there would be great.

  • Gayn Erickson - President, CEO & Director

  • I mean I would -- so I guess we talked about it, but let me put it out there. I think it's pretty fair to say that Q4 would still be bigger than Q3 given the -- just the current situation of our backlog, albeit when we put the press release out for that order for about $4.3 million, and we've had orders since then, by the way. We just haven't put out press releases on them. I'm not sure if I even said it originally. I think we got it at, like, 9 o'clock in the morning on the 1st. It's like it missed our quarter by less than 12, certainly less than 24 hours or something. That was pretty sad. So it would be nice to sit there and backlog -- but it's certainly in backlog from day 1. So you do need a little bit of a running head start to make sure you can ship things. So we haven't announced any significant orders as we are expecting yet this quarter. But I wouldn't say it's fair that the second -- that Q4 would be, revenue-wise, larger than Q3. Bookings, I'm not sure it might actually be spread out or even, but I think revenues start to be larger in the fourth quarter.

  • Operator

  • (Operator Instructions) We'll now hear from John Fichthorn with Dialectic Capital.

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

  • So a little bit of a follow-on from the questions you just got asked in a slightly different way since you answered some of my questions. Hey, the bullet customer 1 with a $4.3 million order and then the bullet customer 2, are those different customers? Or same customer different vendors?

  • Gayn Erickson - President, CEO & Director

  • You know what, I actually do -- all right. I'm actually getting some feedback, John, I'm not sure if that's you. Okay. It seems to be better now. Okay. We had not made that clear, although I think most people had interpreted and you probably got -- [you're going to hear them and quote]. So I do want to make it clear here. The end customer is the same, okay, but the subcon is different, the application and the device is different. That's a good thing for us. And just because the end customer is the same, I can tell you, you don't just win one application and then you get another one. Internally, the groups can be different, the applications are different, et cetera. So this feels like a new win to us, not certainly with the subcon, but even within the application in the group that it was won in. And one of the reasons, in particular, I'm excited about is because there's cross-pollinization going on in that customer to recognize. And they found us in this application. They came looking for us and said, can you do this? So that's the answer, John.

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

  • Great. Great. That's sounds exciting. And so without having to give any time line around it, what do you think the total revenue potential is in these 2 products, either one of them alone or 2 of them together, like over whatever period of time. I don't...

  • Gayn Erickson - President, CEO & Director

  • Well, I'll tell you what, the one I -- I'm going to ease my way out of this one a little bit. But one thing is just looking historically, sometimes it's good to just point to people whether it's historically happened so you can say to it publicly out there. We have been having a couple of million dollars with the DiePaks in Q4. I think each of the last 3, 4 years or so, right? And normally, what we did is we did a set of DiePaks somewhere around fall, and then that turns into production around May. I've kind of made it pretty specific back as we would have expected again this time, but they got pushed into the summer. So that's one example.

  • So that type of device has generally been maybe a few million dollars a year of just the consumables. This new application, I could have just simply say there will be more. And a test cell is $4.3 million or $4 million or so. So they come in pretty good-sized charts. We have ranges of what it is, and we also know that all of the deep data is not in. And our visibility of this is actually still relatively limited. Meaning, we can see the capacity needs maybe over the next 6 or 9 months or so. But we will see as the device finally gets out in its deployment in all the different devices, what the growth rate is.

  • I'll tell you, I'll share one thing, and I can -- I think this is okay to say. I have been told by the customers, you could think of even this one in the past, this is how big it is and how great it's going to be, and then they have not bought that much. And this is a customer that has certainly done that before. This time, they told us less about how great it's going to be. But it's more obvious from their actions how big it's going to be. So I don't know if that's a good thing. But it seems like when they tell us how great it is, it isn't as big as it is. And maybe the fact that they haven't said as much this time, maybe that's a good sign or not. But we know it's going to -- it's a good-sized deal and building more revenue and bookings.

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

  • But I have to believe that they need to plan their business. And so they have to give you some level of visibility. I mean what are your lead times today? And you would say the scope of those lead times, like, I mean, either lead time shifts or can you help us with an idea as opposed to revenue guidance through year-end like where do you think your backlog is at year-end? Maybe that will help us understand what you think the scope is as we move forward.

  • Gayn Erickson - President, CEO & Director

  • I think what I will share with is, given that the majority of what we have done with our forecast is basically shifted in time. I think it's fair to say that we believe -- and I think if things play out as we expect, we should have a pretty strong backlog going into next year. I know that's kind of the weak way of describing it. But I think it would be a fairly substantial backlog going into the year, which is very different than it was this year when we were moving into this year, and certainly last quarter.

  • So you actually asked a different question, and I want to answer that, and that is we'll -- given your lead times and stuff, how much visibility does it give you. There's pros and cons of our having a manufacturing capacity and infrastructure and supply chain to be able to ship significantly more than any of the revenue numbers we talked about, and I mean 10x at least. So the downside is that as the customers come in, and particularly this customer and other large Tier 1 customers, they kind of do a deep dive and make sure you have the capabilities to serve them, okay?

  • So they know darn well that if they give us a multisystem order that we can ship that in 5 to 6 months, okay? So they don't have to get us too much visibility. They're not forecasting 40 systems with us and think that we're going to ship those inside of 6 months. But even at $4 million test cells, keep in mind, that's only one system to us. And we have no challenge shipping multiple of those per month with reasonable lead times. And our typical lead times on the Street are in the 16 to maybe 24 weeks or so kind of configuration in the backlog and stuff. So they don't have to give us that much visibility.

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

  • Okay. And so that was great, by the way, great weaseling out of answering the question. I applaud you. That was a black belt CEO dodge. I'm very impressed. So the -- on the transceiver customer, that sounds kind of like a new thing. What is the size of that opportunity? Maybe you could answer that one.

  • Gayn Erickson - President, CEO & Director

  • Okay. So let me -- it's interesting. So first of all, it feels like all of these silicon photonics guys have kind of a similar pattern, and that is they start with 1 or 2, what we call blades, which is, say, 1 or 2 wafers of capacity to begin with. We now can do that with our FOX-NP systems. And then when they go to production, they buy XP systems of either 9 or 18 blades or something more. And so I think a general rule is to think about it that way. In fact, each of our initial silicon carbide -- I'm sorry, silicon photonics customers have all seemingly started off that way. I think except their initial customer because we didn't have the NP systems to begin with. But the first XPs they purchased, they were doing all the calls and everything else in the 2, 3, 4 wafers at a time, even though we shipped them a 9- or an 18-blade system. So what it feels like is, oh, you buy $0.75 million or $1 million for test or something which is an NP system with a couple of wafers. And then you transition and you're buying a $3 million or $4 million test you make the production and then you duplicate that over time. And the capacity of that just gets into what do you think is the market size. So there's -- if you look at silicon photonics, and John, I think you have listened in on this before, not everybody understands, but you told these numbers out with the silicon photonics. So silicon photonics is an industry description of integrated device used for electrical to fiber optic or optical transmission. So historically, fiber optic transceivers to and from, okay, are a very complex module made up of lots of different IPs and mechanical and electrical structures and lasers and things all integrated into this little package that is being used in the data centers. It is used in telecommunication for cross town. It's even used for underwire undersea fiber optic transceivers. They all -- the cost of a transceiver can be from $300, $400, $500 or more up to $10,000 per one. Well, the industry had been working for maybe a couple of decades, companies like Intel, who said, listen, the world hasn't gone to fiber optics because the cost of those transceivers is just so expensive. We're not going to have a fiber-optic communications hub in our house if the transceiver is $900 per channel, okay? And this is actually one of the big misses in the 1999, 2000 hubbub around why JDSU and the world is going to go fiber optic, and then it went nowhere. The reason is it's just too expensive. And so the world went in other directions and other kind of communications protocols and all.

  • But the need for fiber optic or the end, if you will, of RF or microwave transmission through regular coaxes, et cetera, was running out of steam. And so folks like Intel were saying, I have an idea, I'm going to integrate all that stuff into one silicon and take the cost of -- the manufacturing advantages that you see with silicon manufacturing and I'm going to make a wafer with 500 to 1,000 devices on it, and I'm going to take the cost from hundreds if not thousands of dollars down to tens of dollars, and that's what they did, right? And there have been several other big companies, Ciscos of the world, that have been making these investments. And the big deal is, it allows the world to go much higher bandwidth at much lower cost. I mean like a tenth of the cost.

  • And when Intel introduced their first product in there, it was devastating to the industry because there were companies out there that were selling these products for $3,000 a piece or $1,000 a piece, and Intel was selling them for $400 and making huge margins on it. And so there are large numbers that went away. And so the industry analysts have said, "Wow, it's an enormously elastic market." And as the world puts out as much silicon photonics devices as they can, they're going to shift from copper-based communication protocols to fiber optic communications-based protocol. So there's this elasticity where the cheaper they make it, the more they'll come. So up until recently, the whole story is there's not even close to enough manufacturing capacity out there to meet the market needs. The big players include Intel, right? And people know that they happen to be just because they are a 10% customer of ours, okay, a favorite of ours. But there are other players, some of which we have mentioned and some we haven't that are in that space. And it's sort of a Wild West, and everybody is getting into it.

  • The one thing that's interesting about the customer -- I'm going back now to the customers that we won in May, okay? They are a large player in the transceiver business, right? And they're getting into silicon photonics. So unlike a lot of the players in the space that aren't actually making transceivers and are just getting into silicon photonics, okay, these guys are one of the biggest players in transceivers, and they're going to shift their business to silicon photonics. So there's -- the ramp is different for them. As soon as it works, the instead of selling CA to a customer that can sell CB and all the differences of manufacturing costs and the reliability of the footprint is so much smaller, that it's a better product for them.

  • One of the things -- just one more thing -- background on the whole silicon photonics space is that fiber optic communications is measured in both protocols and speed. And the speed of fiber optic communications were like 50 gigabit or something, which is very fast, by the way. But they're going to 100 and 200 and 400 and 800. Well, it turns out copper is completely running out of steam. It can't -- the fastest fiber optic communication or nonfiber optic communication is like 112 gigabit. And as they go above that, they're going to have to go to photonics. So there's other reasons in silicon for people to go to photonics as a communication protocol. And the good news is those photonics devices need not just a burn-in, but an aging and stabilization that Aehr Test provides with our wafer-level solutions. So people that are going to whole wafer silicon photonics are all looking at how do I do wafer-level stabilization of these photonics devices, and that's what we offer with the FOX-XP.

  • And so that's why, right now, almost all of the players in the market are talking to us. But they -- I mean it's unbelievable how they have, I'll call it, stalled in the last 6 months. We were trying to figure out how we were even going to be dealing with all of the different benchmarks last summer, when we put the new marketing and the clean engine in place in our facility last February. And right now, it's just sort of a lot of Zoom calls and stuff, but it's nowhere near the activity that we think will come back as soon as we get through this pandemic. So that specific customer has the ability to ramp significantly, and in fact, be bigger than our biggest customer in this space. And we do believe that in times like this.

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

  • Great. You almost answered it in the last sense, and I appreciated the warm up, bigger than your biggest is -- would be great. So I'll give it to somebody else. My last comment is, once again, I would like to reiterate that I think your Board should continue to see some turnover. I appreciated that there was some last year, but Board should be refreshed. You did miss for 6 months. And I think you guys should either add or I'd like to see some board members buy some stock or management. Like we're all out here risking our capital. You're on this Board for 12 to 44 years, reach in your pocket, buy a share. It shows that you believe in the story also. It shouldn't all just be Christmas presents of gifts and pay to be a board member and have your 4 nice dinners a year. Shareholders would like to see you risking some capital alongside of us. And that is a message from me directly to them. So thank you and good luck in the back half.

  • Gayn Erickson - President, CEO & Director

  • I appreciate it. Thank you.

  • Operator

  • Next, we hear from Tom Diffely with D.A. Davidson.

  • Thomas Robert Diffely - MD & Senior Research Analyst

  • Just a couple of quick ones. First is when you look at the recent cost-cutting you've done, has that impacted your ability to do trials with new customers? Or has it limited your engagement with new customers at all?

  • Gayn Erickson - President, CEO & Director

  • I would say, no. I mean in no way have we slowed down anything. But my pause is things have slowed down that gives us some bandwidth that has allowed us to do cost-cutting, if you will, is candidly the case. And Vernon or myself or anyone of my staff was working 7 days a week anyhow, even though we all stepped up and said we're going to take direct cash pay cuts until we get to profitability because it's the right thing to do. But I don't believe that is the case. I don't think we're actually cutting anything that slowed down sales. That is, we are absolutely engaged in some R&D programs, some point where I can give more color on that. But the clear focus right now with everyone in the company, including every single day of the call, is the pending purchase orders and the ones that we have, ensuring that we can install them and ship them as quickly as we can get paid, et cetera.

  • Thomas Robert Diffely - MD & Senior Research Analyst

  • Okay. Great. And then maybe just a quick question on the competitive front. I mean the fact that things have stalled a little bit here for a few quarters, has that enabled the new competitors to catch up with you? Or have you seen any competitors try to do what you're doing in this situation?

  • Gayn Erickson - President, CEO & Director

  • So at this point, I would say we have not at all. We have not seen any new competitors there. We have not heard as anybody working on something that could be considered a multi-wafer system for doing the kind of things that we're doing. There's no conduction-based multi or singulated die or module systems like we do with our mobile customers. There just isn't -- when you're competing, it's like we're competing with a packaged part burn-in system. It's just interesting to see we also sell those, albeit arguably not much or none this year. There still is a -- there is some markets where packaged part is cheaper and people are willing to make those tradeoffs. It's very interesting that we have examples like in silicon carbide, there's either some automotive companies that are moving from packaged to wafer-level, so we see both sides. So we do these cost of ownership models and convince ourselves why the wafer-level makes more sense. So what I'm trying to point out is when we're competing, we're competing like against packaged part. And that is arguably an alternative, but very differentiated in terms of its value proposition. Not only taking it more parallel, but we get the yield advantage by somebody doing it at wafer-level before it goes into a packaged or a multichip module or something like that. And so that's the primary still alternative to us, no real competitors.

  • Thomas Robert Diffely - MD & Senior Research Analyst

  • That's good to hear. Just so we know that you're not actually losing any business, it's just purely being delayed.

  • Gayn Erickson - President, CEO & Director

  • Yes. And Tom, let me make that very specific. We have not lost a deal. Right? We have not actually said, oh, we lost so and so and said, hey, what happened in the entire last year. I mean nothing about this slowdown of pushout is a result of us losing a deal.

  • Thomas Robert Diffely - MD & Senior Research Analyst

  • Okay. Great. And then finally, just a clarification. Starting this quarter, very little backlog and you say going into next year with a fairly significant backlog or meaningful backlog. That means that new orders have to be quite a bit higher than the revenue. And the revenue in the second half year is projected to grow quite nicely. So I just want to make sure that I understood you correctly when you said you'd have a fairly significant backlog now into 2021.

  • Gayn Erickson - President, CEO & Director

  • That's the math, Tom. And again, that's correct. And the only caveat I just said is based upon what we are -- we understand and rolling up I believe that to be the case. I mean we have specific customer forecast for the summer. And they need to give us the order before then, so yes. And the summer, I bring that up because our fiscal year starts June 1. So we need them in the summer in the next fiscal year. So that's right. Yes.

  • Operator

  • We'll take our last question from Larry Chlebina with Chlebina Capital.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Gayn, I got 2 quick questions on timing. Your mobile center new customer, when you talk about more systems, you currently talk about this fiscal year, is that plural? In other words, in the Q4, is there one more system that you're sure of? Or is it more than one? Just to clarify that.

  • Gayn Erickson - President, CEO & Director

  • Yes. Let me make sure I understand. Okay. One of the -- Larry, to be able to understand our business very well (inaudible). One of the challenges is that our -- in the test business, the typical automated test equipment and the test suppliers like Advantest Teradyne, Cohu, for example, Verigy that I came from before here, the testers in the wafer-level test one wafer at a time. So one tester equals one wafer. Our solutions, we make single-wafer solutions with the CP, dual wafer solutions with the NP and up to 18 wafers in an XP. So when we talk about systems and systems capacity, sort of how do I interpret it? So the advanced question that he's asking me is how many XPs are we going to get versus just how many, what we call, blades or testers within it. All we have stated, Larry, is, and tried to clarify, is that there's absolutely no blades or systems or testers with the capacity and no DiePaks and no loader on motors. We're not getting clarity yet as to do we think there'll be multiple XPs in this fiscal year or not. I haven't gone there yet. Right?

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • So you're saying you're going to have loaders. But if you already got a loader on the system you're shipping this quarter -- if you have a loader, you obviously have another XP that use that loader on this year...

  • Gayn Erickson - President, CEO & Director

  • That's at least fair. I'll tell you what, I'll go this far. They need at least another XP DiePak and loader.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Okay. So at least there's one more system in Q4. But when I say yes, it implies to mean -- it implies to me that there's more than one. But there's at least one, is that correct?

  • Gayn Erickson - President, CEO & Director

  • Yes.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Okay. And then on your new NP silicon photonics customer that's going to buy the XP, is that expected in Q3 or Q4, that will be? You said this year.

  • Gayn Erickson - President, CEO & Director

  • Yes. I'm expecting the order before I ship it, and I don't have the order yet. How is that?

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • What would be the cutoff on that system if you got the order...

  • Gayn Erickson - President, CEO & Director

  • Yes. I mean I'll tell you what, we do have the ability to ship things on relatively short lead times. But generally speaking, inside of like 8 weeks or 12 weeks, you're pushing it. So that goes to one of the original questions, I think, from Tyler, which is do you think Q3 and Q4 will be the same? No, I don't. I think Q4 will be larger. And so we do have revenue in Q3, which ends at the end of February that we have not booked yet. And we definitely have revenue in Q4 we have not booked it.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Because you haven't identified...

  • Gayn Erickson - President, CEO & Director

  • Q3 is not over yet, but not everything that we booked in Q3 we're shipping in Q3 for certain.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Right. The CP customer for data center, is that still on track for at least getting off the ground before this fiscal year? On the data center customer with CP?

  • Gayn Erickson - President, CEO & Director

  • We have -- okay, I mean, we haven't really gotten -- part of this gets into how much forecast. So for folks that are listening for sort of clarity. So we won a new customer, about 1.5 years ago, for a data center-related application that we continue to state is for this extremely high-volume application, right? We do continue to forecast that they will buy multiple systems for production and have every reason to believe that. They are absolutely using the tool today for early production ramp, et cetera. We're trying to figure out when the ramp is. We know for certain the ramp is delayed because of coronavirus, okay. Probably, 100%, okay? So -- and we have not seen the end of it yet. So I don't know exactly when that is. So right now, I actually don't have that in our fiscal year any longer because I have not specifically been told by them that they're going to take it by May. That's why I pulled it up. It doesn't mean it couldn't still happen, and we have the ability to ship, but there's just -- I don't have the visibility with them as I do with some of the other customers.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • On an application in that system, that smaller system, you could -- if you got an order in a reasonable period of time, you could ship it quicker, and say an XP, in 4 weeks?

  • Gayn Erickson - President, CEO & Director

  • Similar, I actually have some CP capacity test cells around. If you kind of understand for those that have come and visited, I don't -- pictures of our products help a lot. So the product family or the FOX-P is -- has 3 different chambers, we call it. There's a single wafer, dual wafer and multi-wafer. And then in those chambers are blades. The blades are interchangeable between all the customers. And then in those blades are channel modules specific to applications. But there's only 3 flavors and everybody is made up of the same 3. So we just mix and match and configure the order. So if someone needed a couple of CP systems, I could ship them almost immediately.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Okay. So -- and it's good to know. So lastly, I'll be quick because we're running late. I'm going to shift a little bit to this mounted memory potential that's out there, I don't know, 4 years ago when you were developing the XP. There were 2 fabs that got initiated, and they were looking for somebody, the burn-in system at the end of the line. I think they want with total electron. You certainly are ready, or the XP wasn't even be bothered alone. In fact -- and the only thing I hear about that, application was a disaster. I think they had a [loader] system that worked around your IP, but it didn't work too well anyway. Can we get the sense that there's probably another 1 or 2 fabs that need to get off the mark shortly? Is -- especially with all the opportunities, you've got a full plate and the resources are limited, doesn't it make sense to joint venture? You need a -- you have a proven machine, though. It's proven, the XP, it's the key technology for that application. But you need automation, which is you don't have. Would it make sense to joint venture with somebody like a [bolt-on] automation, like they got a $5 billion market cap. It would derisk the entire project so you could get it off the mark. Certainly, you need to push XPs through your facility. You now have a good ops manager to help you do that. And so in order to secure that opportunity, it would be a monstrous. I think it would dramatically reduce the risk for the customer if you present yourself in that manner. And ultimately, if you could land some like that, you could deliver the rest of your life on the consumables because there will be some like 1,000 DiePaks or so on that. If you could add a little bit...

  • Gayn Erickson - President, CEO & Director

  • WaferPaks, the memory -- so we would teed up a ton of software, Larry. You clearly done your homework, okay? I just want to acknowledge several data points, and maybe trying to answer the one question that was embedded in there.

  • So I want to acknowledge, we do believe that some, but not even close to the majority of the memory companies had implemented wafer-level burn-in, and only in flash memory today not doing that. We believe that long term, that it makes sense for all flash memory, and potentially DRAM, to go to wafer-level burn-in. And there's some specific reasons that have taken some time. DRAM longer than flash, and we have a pretty good idea why, okay? The people that implemented wafer-level burn-in first with flash did it in a -- what we believe is a compromised way and we've gotten specific feedback that they would like -- that they're going to need more cost-effective, higher parallelism, lower footprint, more automation in the future. And we do believe that long term, that is an opportunity. And as long as I'm in the seat, we at Aehr will always be trying to get into that space. We have shared vaguely with people, and I would vaguely repeat it again. Part of the investment in us as a company is actually that [original wafer] related to automation and production cells, extending the XP and its capability. So it is more applicable and more effective for massively high-volume applications such as memory, right? And we are spending that money today.

  • So in this downturn, in addition to the investments we're making in WaferPaks, DiePaks, high voltage, packaged part and wafer-level burn-in systems, we're also engaged on automation and some other things that we think are particularly appealing to multiple markets, including and specifically the (inaudible). Okay? We alluded to the risks associated with us as a small company. And certainly, a big part of the risk profile 3, 4 years ago was the XP was but a glimmer in my eye -- or our eye and it was a sketch on a piece of paper, and that was too far of a fetch for a fab that's going to need up to 100 XPs per fab to go after. I believe that we are on a path to be able to reduce that risk, and that gives us opportunities. I will also tell people do not invest in our stock because you think we're going to sell a whole bunch of memory systems in the next 6 months. But we are engaged in working on some things. And very specifically, the engagement in that area slowed to a halt during COVID, not for us, but everybody. But then the guys are absolutely just focused on doing what they were doing then and not doing -- there's no, [I believe and understand], any programs and stuff that really didn't do on the wafer-level side of things right now. But I do believe they'll reengage. So -- but your comment about should we partner with somebody, et cetera, I think that is, I understand it makes sense. I don't want to comment about potential partnerships shifting to the end play. But I will acknowledge that could very well make sense to companies before they go off and try and spend hundreds of millions of dollars for their test on wafer-level burn-in systems.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Yes. And particularly, if you could just get your key technology, your XP system out the door was -- would be a tremendous boon to you. But also, the consumable business would be, like I said, it would be literally set for life. So anyway...

  • Gayn Erickson - President, CEO & Director

  • I believe that one of the critical weaknesses of the way people have deployed, and one of the headwinds of why people have not been able to do wafer-level burn-in across a lighter segment of flash as well as DRAM, is the contractor where it has proprietary technology with what we call our WaferPak that can address it. So I think that's one of the differentiated things. I actually think the tester is as well and the test on automation, but I'm certain, the probe cards that are out there cannot address the DRAM, the high-density, high-power flash memory coming up. And it's something the WaferPaks can.

  • Larry Edward Chlebina - President & Chief Compliance Officer

  • Yes. This seems like why you take on the automation, that's really not the key technology. Just like you said, it's the key technology and by partnering with somebody, it would dramatically reduce the risk to the customer. And we need to get down the road. Just my thought. But hopefully, you guys are seriously considering something like that.

  • Gayn Erickson - President, CEO & Director

  • I appreciate your feedback. And stay tuned, Larry.

  • Operator

  • That will conclude today's question-and-answer session. I would now like to turn the call over to management for any additional closing remarks.

  • Gayn Erickson - President, CEO & Director

  • Okay. Well, thank you very much, operator. And thank you, everybody. We appreciate you listening in and taking some really good questions and giving us some good questions. I absolutely want to acknowledge we understand that the first half was certainly one of the less exciting times of Aehr's history, even in recent memory. But I truly sit here at this edge and so glad that 2020 is behind because it wasn't -- not just last 6 months, it was really all of 2020, but we were feeling it. And starting up with this initial order and based on what the customers are telling us, it's not just COVID and all the other things going on in the world. We're actually more excited about 2021. So I'll leave it there and appreciate it. And as always, you know how to reach us. Do talk to us if you want to have follow-up conversations, et cetera. And thank you very much, and we'll talk to you next quarter. Bye-bye.

  • Operator

  • That will conclude today's conference. Thank you for your participation. You may now disconnect.