AXT Inc (AXTI) 2023 Q4 法說會逐字稿

Good afternoon, everyone, and welcome to AXT's fourth quarter fiscal year 2023 financial conference call. Leading the call today is Dr. Morris Young, Chief Executive Officer; and Gary Fischer, Chief Financial Officer. My name is Eric, and I will be your coordinator today. (Operator Instructions) Thank you.

大家下午好，歡迎參加AXT 2023財年第四季財務電話會議。今天主持電話會議的是執行長莫里斯楊博士；以及財務長加里·菲舍爾（Gary Fischer）。我叫 Eric，今天我將擔任您的協調員。（操作員指示）謝謝。

I would now like to turn the call over to Leslie Green, Investor Relations for AXT.

現在我想將電話轉給 AXT 投資者關係部門的 Leslie Green。

Thank you, Eric, and good afternoon, everyone. Before we begin, I would like to remind you that during the course of this conference call, including comments made in response to your questions, we will provide projections or make other forward-looking statements regarding among other things, the future financial performance of the company, market conditions and trends, including expected growth in the markets we serve, emerging applications using chips or devices fabricated on our substrates, our product mix, our ability to increase orders in succeeding quarters, to control costs and expenses, to improve manufacturing yields and efficiencies, to utilize our manufacturing capacity, the growing environmental health and safety and chemical industry regulations in China, as well as global economic and political conditions, including trade tariffs and restrictions.

謝謝你，埃里克，大家下午好。在我們開始之前，我想提醒您，在本次電話會議的過程中，包括對您的問題的回答中所發表的評論，我們將提供預測或其他前瞻性陳述，其中包括公司未來財務業績、市場狀況和趨勢，包括我們所服務市場的預期增長、使用在我們的基板上製造的芯片或設備的新興應用、我們的產品組合、我們在接下來的幾個季度增加、使用在我們的基板上製造的芯片或設備的新興應用、我們的產品組合、我們在接下來的幾季度健康和安全和化學工業法規，以及全球經濟和政治狀況，包括貿易關稅和限制。

We wish to caution you that such statements deal with future events are based on management's current expectations and are subject to risks and uncertainties that could cause actual events or results to differ materially. These uncertainties and risks include but are not limited to overall conditions in the markets in which the company competes, global financial conditions and uncertainties, COVID-19 and other outbreaks of contagious disease, potential tariffs and trade restrictions, increased environmental regulations in China, the financial performance of our partially owned supply chain companies, and the impact of delays by our customers on the timing of sales and their product.

我們希望提醒您，此類涉及未來事件的陳述是基於管理層當前的預期，並受到可能導致實際事件或結果大不相同的風險和不確定性的影響。這些不確定性和風險包括但不限於公司競爭市場的整體狀況、全球金融狀況和不確定性、COVID-19和其他傳染病的爆發、潛在的關稅和貿易限制、中國加強的環境法規、我們部分擁有的供應鏈公司的財務表現，以及客戶延遲對銷售時間和產品的影響。

In addition to the factors that may be discussed in this call, we refer you to the company's periodic reports filed with the Securities and Exchange Commission. These are available online via link from our website and contain additional information on risk factors that could cause actual results to differ materially from our current expectations. This conference call will be available on our website at axt.com through February 22, 2025.

除了本次電話會議中可能討論的因素外，我們還請您參閱本公司向美國證券交易委員會提交的定期報告。這些內容可透過我們網站上的連結在線獲取，並包含可能導致實際結果與我們當前預期存在重大差異的風險因素的附加資訊。本次電話會議將於 2025 年 2 月 22 日之前在我們的網站 axt.com 上提供。

Also before we begin, I want to note that shortly following the close of market today, we issued a press release reporting financial results for the fourth quarter of 2023. This information is available on the Investor Relations portion of our website at axt.com. I would now like to turn the call over to Gary Fischer for a review of our fourth-quarter 2023 results. Gary?

另外，在我們開始之前，我想指出的是，今天市場收盤後不久，我們發布了一份新聞稿，報告了 2023 年第四季的財務表現。此資訊可在我們網站 axt.com 的投資者關係部分找到。現在，我想將電話轉給加里·菲舍爾 (Gary Fischer)，以審查我們 2023 年第四季的業績。加里？

Thank you, Leslie, and good afternoon to everyone. Our revenue for the fourth quarter of 2023 was $20.4 million, up from $17.4 million in the third quarter of 2023, and down from $26.8 million in the fourth quarter of 2022.

謝謝你，萊斯利，祝大家下午好。我們 2023 年第四季的營收為 2,040 萬美元，高於 2023 年第三季的 1,740 萬美元，低於 2022 年第四季的 2,680 萬美元。

To break down our Q4 '23 revenue for you by product category, indium phosphide increased sequentially to $5.4 million, reflecting a stabilizing market with a continued improvement in artificial intelligence, PONs and data center applications. Gallium arsenide also grew to $6.0 million, with excess inventory largely worked down and certain applications showing improvement. Germanium substrates were $1.1 million down slightly from the prior quarter.

按產品類別細分我們 23 年第四季的收入，磷化銦環比成長至 540 萬美元，反映出市場趨於穩定，人工智慧、PON 和資料中心應用持續改善。砷化鎵的價格也成長至 600 萬美元，因為過剩庫存基本上減少，某些應用也出現了改善。鍺基板銷售額較上一季略有下降，為 110 萬美元。

Finally, revenue from our consolidated raw material joint venture companies in Q4 was $7.9 million. In the fourth quarter of 2023 revenue from Asia Pacific was 77%, Europe was 16% and North America was 7%. The top five customers generated approximately 28% of total revenue and no customer was over the 10% level.

最後，我們第四季合併原料合資公司的營收為 790 萬美元。2023 年第四季，亞太地區營收佔 77%，歐洲佔 16%，北美佔 7%。前五名客戶創造了約 28% 的總收入，並且沒有一個客戶超過 10% 的水平。

Non-GAAP gross margin in the fourth quarter was 23.2% compared with 11.3% in Q3 of 2023 and 32.5% in Q4 of 2022. For those who prefer to track results on a GAAP basis, gross margin in the fourth quarter was 22.6% compared with 10.7% in Q3 of 2023 and 32.1% in Q4 of 2022.

第四季非公認會計準則毛利率為 23.2%，而 2023 年第三季為 11.3%，2022 年第四季為 32.5%。對於喜歡以 GAAP 追蹤結果的人來說，第四季的毛利率為 22.6%，而 2023 年第三季為 10.7%，2022 年第四季為 32.1%。

The primary drivers of the sequential improvement in our corporate gross margin in Q4 were higher additional volume, product mix, and improved gross margins at both G&A and volume. Beyond the near term, we remain confident that we can get back to the mid-30% range as the environment strengthens through higher overall volume, more favorable product mix and the benefits of our recycling programs, along with continued efficiency improvements throughout our business.

我們第四季公司毛利率連續提升的主要驅動力是額外銷售量和產品組合的增加，以及一般及行政費用和銷售毛利率的提高。短期內，隨著整體產量增加、產品組合更加有利、回收計劃帶來的好處以及整個業務效率的持續提高，環境將逐漸改善，我們仍然有信心回到 30% 左右的水平。

Moving to operating expenses, the reduction in overall revenue, we have maintained spending discipline in our operating expenses to align with the current environment. Total non-GAAP operating expense in Q4 was $7.5 million, down from $7.8 million in Q3 of 2023 and down from $8.9 million in Q4 of 2022.

談到營運費用，由於總收入減少，我們一直保持營運費用的支出紀律，以適應當前環境。第四季非 GAAP 總營業費用為 750 萬美元，低於 2023 年第三季的 780 萬美元，也低於 2022 年第四季的 890 萬美元。

On a GAAP basis, total operating expense in Q4 of 2023 was $8.2 million, down from $8.6 million in Q3 and down from $9.6 million in Q4 of 2022.

根據 GAAP 計算，2023 年第四季的總營運費用為 820 萬美元，低於第三季的 860 萬美元，也低於 2022 年第四季的 960 萬美元。

Our non-GAAP operating income for the fourth quarter of 2023 was a loss of $2.7 million compared with a non-GAAP operating loss in Q3 of 2023 of $5.8 million and a non-GAAP operating loss of $256,000 in Q4 of 2022. For our reference, our GAAP operating line for the fourth quarter of 2023 was a loss of $3.6 million compared with an operating loss of $6.7 million in Q3 of 2023 and an operating loss of $1.0 million in Q4 of 2022.

我們 2023 年第四季的非 GAAP 營業收入為虧損 270 萬美元，而 2023 年第三季的非 GAAP 營業虧損為 580 萬美元，2022 年第四季的非 GAAP 營業虧損為 25.6 萬美元。作為參考，我們 2023 年第四季的 GAAP 營業線虧損為 360 萬美元，而 2023 年第三季的營業虧損為 670 萬美元，2022 年第四季的營業虧損為 100 萬美元。

Non-operating other income and expense and other items below the operating line for the fourth quarter of 2023 was a net loss of $62,000. The details can be seen in the P&L included in our press release today. For Q4 of 2023 with a non-GAAP net loss of $2.8 million or $0.07 per share compared to the non-GAAP net loss of $4.9 million or $0.12 per share in the third quarter of 2023. Non-GAAP net income in Q4 2022 was $2.0 million, or $0.05 per share.

2023年第四季的非營業性其他收入和支出以及營業線以下的其他項目淨虧損62,000美元。詳細資訊請參閱我們今天新聞稿中的損益表。2023 年第四季非 GAAP 淨虧損為 280 萬美元或每股 0.07 美元，而 2023 年第三季非 GAAP 淨虧損為 490 萬美元或每股 0.12 美元。2022 年第四季非 GAAP 淨收入為 200 萬美元，即每股 0.05 美元。

On a GAAP basis, net loss in Q4 was $3.6 million, or $0.09 per share. By comparison, net loss was $5.8 million, or $0.14 per share in the third quarter of 2023. GAAP net income in Q4 2022 was $1.3 million, or $0.03 per share. The weighted average basic shares outstanding in Q4 of 2023 was 42.9 million. Cash, cash equivalents, and investments were $52.3 million as of December 31. By comparison at September 30, it was $43.6 million.

根據 GAAP 計算，第四季淨虧損為 360 萬美元，即每股 0.09 美元。相比之下，2023 年第三季的淨虧損為 580 萬美元，即每股 0.14 美元。2022 年第四季的 GAAP 淨收入為 130 萬美元，即每股 0.03 美元。2023 年第四季的加權平均基本流通股為 4,290 萬股。截至 12 月 31 日，現金、現金等價物和投資為 5,230 萬美元。相比之下，截至 9 月 30 日，這一數字為 4,360 萬美元。

Depreciation and amortization in the fourth quarter was $2.2 million and capital investments was about $4 million. Total stock comp was about $800,000. Net inventory was flat quarter to quarter, 38% of the inventory is raw materials, and WIP 58%, finished goods makes up approximately 4%.

第四季的折舊和攤提為 220 萬美元，資本投資約為 400 萬美元。總股票補償金額約為 80 萬美元。淨庫存較上月持平，庫存中38%為原料，在製品為58%，成品約佔4%。

This concludes the discussion of our quarterly financial results. Turning to our plan to list our subsidiary, Tongmei, in China on the STAR Market in Shanghai. In regards to the time of the IPO, we need to resolve one open item. Although it is moving slower than we expected, we are making progress and are confident that Tongmei remains an excellent candidate for listing.

這就是我們季度財務表現的討論。談到我們將中國子公司同美在上海科創板上市的計畫。關於IPO的時間，我們需要解決一個懸而未決的問題。儘管進展比我們預期的要慢，但我們正在取得進展，並有信心同煤仍然是上市的絕佳候選者。

With that, I'll now turn the call over to Dr. Morris Young for a review of our business and markets. Morris?

說完這些，我現在將電話轉給莫里斯楊博士，讓他回顧我們的業務和市場。莫里斯？

Thank you, Gary, and good afternoon, everybody. We believe that we are now beginning to see a recovery in our market. In Q4, we achieved 18% sequential growth in revenue and a 43% sequential improvement in our non-GAAP net income. While the overall demand new markets remain soft -- somewhat soft, we are seeing increased orders for indium phosphide for both artificial intelligence and PON-related applications. Further, the gallium arsenide market, which was the first of our market to go into a correction, appears to have largely worked through excessive inventory.

謝謝你，加里，大家下午好。我們相信，我們現在開始看到市場復甦。第四季度，我們的營收季增 18%，非 GAAP 淨收入季增 43%。雖然新市場的整體需求仍然有些疲軟，但我們看到人工智慧和 PON 相關應用程式對磷化銦的訂單有所增加。此外，砷化鎵市場是我們市場中第一個進入調整的市場，似乎已基本解決了庫存過剩的問題。

Looking individually at these product lines, our gallium arsenide revenue grew 42% sequentially in Q4, reflecting increasing strength in both wireless and LED applications, as well as depletion of excess inventory, and our continued success in attaining export permits for most of our customers. We're seeing new demand for HBT key applications where we historically have had very little market share. We believe this is the result of both improving market conditions and a desire among customers to diversify their supply base.

單獨看這些產品線，我們的砷化鎵收入在第四季度環比增長了 42％，這反映了無線和 LED 應用領域的實力增強、過剩庫存的消耗，以及我們繼續成功為大多數客戶獲得出口許可。我們看到了對 HBT 關鍵應用的新需求，而我們過去在這一領域的市場份額非常小。我們相信這是市場條件改善和客戶希望實現供應基礎多樣化的結果。

We also see improving demand geographically in China across a variety of applications, including LEDs, wireless switches and high-power lasers. As we look forward, the micro-LED market continues to solidify. Several Tier 1 companies are driving this adoption, and a new product could come to market as soon as next year.

我們也看到中國在各種應用領域的需求不斷增加，包括 LED、無線開關和高功率雷射。展望未來，Micro-LED 市場將持續鞏固。多家一級公司正在推動這項技術的採用，新產品最快將於明年上市。

As many of you know, we have been investing in our eight-inch gallium arsenide technology in support of these applications, and we have recently made groundbreaking advancements in both our defect density and yield. This innovation positions us strongly to gain a leading share in the market while efficiently supporting growing market demand.

大家可能都知道，我們一直在投資我們的八英寸砷化鎵技術來支援這些應用，我們最近在缺陷密度和產量方面都取得了突破性的進展。這項創新使我們在有效支持不斷增長的市場需求的同時，佔據了市場領先地位。

Now turning to indium phosphide. Sales grew 10% in the quarter with early signs of recovery in the PON market, and brand new demand related to artificial intelligence. We view AI as an emerging new application for indium phosphide that will develop in exciting ways over the coming years.

現在來談談磷化銦。由於 PON 市場出現復甦跡象，以及與人工智慧相關的全新需求，本季銷售額成長了 10%。我們認為人工智慧是磷化銦的新興應用，它將在未來幾年以令人興奮的方式發展。

Today, AI applications are primarily using gallium arsenide VCSELs, which requires a relatively small amount of substrate material. But as the industry moves to 800 gig and then 1.6 terabyte speeds, we expect that there will be a necessary transition to indium phosphide.

如今，人工智慧應用主要使用砷化鎵 VCSEL，它所需的基板材料相對較少。但隨著產業速度逐漸提升至 800GB 和 1.6TB，我們預期必然會轉向磷化銦。

AI will drive up the need for massive data transfer requirements with increased bandwidth, low attenuation and low distortion. We believe this will result in increased demand for indium phosphide as the best platform for rapid data transfer. We are already seeing development work happening today with next-generation silicon photonics devices and electro absorption modulated lasers, or EMLs for high-speed data center transceivers.

人工智慧將推動對高頻寬、低衰減、低失真的大量資料傳輸要求。我們相信這將導致對磷化銦作為快速資料傳輸的最佳平台的需求增加。我們已經看到下一代矽光子元件和電吸收調製雷射（用於高速資料中心收發器的 EML）的開發工作正在進行中。

Early revenue from these applications contributed to our indium phosphide growth in Q4 and will help drive our expected growth in Q1.

這些應用的早期收入促進了我們第四季度磷化銦的成長，並將有助於推動我們第一季的預期成長。

This interest in indium phosphide for AI applications is intensifying the market demand for six-inch indium phosphide. The speed, signal clarity, and long-distance capability of indium phosphide are optimal for AI applications. And as market grows, customer wants the scale and cost benefit of large diameter substrates. We're excited by the progress we are making in our R&D efforts and expect to continue to lead our industry with the best-in-class materials.

人們對磷化銦在人工智慧應用方面的興趣正在加劇市場對六英寸磷化銦的需求。磷化銦的速度、訊號清晰度和長距離能力非常適合人工智慧應用。隨著市場的成長，客戶希望獲得大直徑基板的規模和成本效益。我們對研發工作的進展感到非常興奮，並期望繼續以一流的材料引領業界。

While consumer in healthcare applications for indium phosphide today contribute only modestly to our revenue, we continue to see positive development activities and believe there is a great potential on the horizon. We are very early in our adoption of this material across a multiple way of emerging applications. And our success in supporting Tier 1 customers proves our capability for large volume, high precision devices.

儘管目前磷化銦在醫療保健領域的消費應用對我們的收入貢獻很小，但我們繼續看到積極的開發活動，並相信未來具有巨大的潛力。我們很早就開始在多種新興應用中採用這種材料。我們在支援一級客戶方面取得的成功證明了我們生產大容量、高精度設備的能力。

Finally, sales from our raw material business grew 13% with continued gross margin improvement. Overall, the pricing environment remains relatively stable, and we don't expect any major changes in Q1. In closing, we are looking forward to the coming year with optimism. We believe that the trend that we have driven our revenue and customer expansion remain very much intact with new catalysts such as AI, providing a strong incremental opportunity.

最後，我們的原物料業務銷售額成長了 13%，毛利率持續提高。總體而言，定價環境保持相對穩定，我們預計第一季不會有任何重大變化。最後，我們滿懷樂觀地展望來年。我們相信，在人工智慧等新催化劑的推動下，我們推動收入和客戶擴張的趨勢仍然完好無損，提供了強大的增量機會。

In addition, I'm exceptionally proud of what AXT team accomplished in 2023, paving the way for exciting future. Not only did we successfully navigate export license -- export control license process on behalf of our customer, we delivered breakthrough innovation in the development of large diameter gallium arsenide and indium phosphide substrates, and we will set a new bar of excellence for our industry.

此外，我對 AXT 團隊在 2023 年的成就感到特別自豪，為令人興奮的未來鋪平了道路。我們不僅代表客戶成功辦理了出口許可證——出口管制許可證流程，還在大直徑砷化鎵和磷化銦基板的開發中實現了突破性創新，並為我們的行業樹立了新的卓越標準。

In addition, we implemented a recycling program that both advances our ESG commitment and improves our efficiency.

此外，我們還實施了一項回收計劃，這不僅推進了我們的 ESG 承諾，也提高了我們的效率。

Finally, while the progress on our IPO may be less visible externally. I'm very grateful for the diligence of our team and confident that we can successfully bring it to fruition. In the meantime, we will continue to prioritize cost savings and efficiency, and we are focused on accelerating our return to profitability. And thank you to our customers, our shareholders for their continued support. I will turn the call back to Gary for our first quarter guidance. Gary?

最後，雖然我們的 IPO 進展在外部可能不太明顯。我非常感謝我們團隊的勤奮，並相信我們能夠成功實現這一目標。同時，我們將繼續優先考慮節約成本和提高效率，並致力於加速恢復獲利能力。並感謝我們的客戶和股東一直以來的支持。我會將電話轉回給加里，詢問我們第一季的指導。加里？

Thank you, Morris. In keeping with our comments today, we expect Q1 revenue to be between $20 million and $22 million. We expect our non-GAAP net loss will be in the range of $0.06to $0.08, and GAAP net loss will be in the range of $0.08to $0.10. Share count will be approximately 42.6 million shares.

謝謝你，莫里斯。根據我們今天的評論，我們預計第一季的營收將在 2,000 萬美元至 2,200 萬美元之間。我們預計非公認會計準則淨虧損將在 0.06 美元至 0.08 美元之間，公認會計準則淨虧損將在 0.08 美元至 0.10 美元之間。股數約4,260萬股。

This concludes our prepared comments, Morris and I would be glad to answer your questions now. Eric?

我們的準備好的評論到此結束，莫里斯和我現在很樂意回答你們的問題。埃里克？

(Operator Instructions)

（操作員指令）

Richard Shannon with Craig-Hallum.

理查德·香農 (Richard Shannon) 和克雷格·哈勒姆 (Craig-Hallum)。

Great. Thanks, Morris and Gary for taking my questions and congratulations on a lot of good into the year. I'll just start with a question for Gary on your fourth quarter numbers here. Specifically on gross margins, while obviously volume helps here, the fall-through margin here was nothing short of excellent things, about 90%, which seems unusual, but maybe you can delineate more of the dynamics here. Obviously mix helps.

偉大的。感謝莫里斯和加里回答我的問題，並祝賀你們今年取得了許多美好的成就。我首先想問加里一個問題，關於你們第四季的數據。具體到毛利率，雖然銷量顯然有所幫助，但這裡的跌幅利潤率簡直是極好的，約為 90%，這似乎不尋常，但也許你可以在這裡描述更多的動態。顯然混合有幫助。

But I'm wondering if there were some increase in utilization or unusual pricing in raw materials that helped you do this, and really want to get a sense of sustainability. I haven't had a chance to run your guidance for the first quarter to see what that implies for gross margin, but want to get a sense of the fourth quarter as it leads into the first?

但我想知道，是否有利用率的提高或原材料的異常定價幫助您做到了這一點，並且真正想了解可持續性。我還沒有機會了解您對第一季的指導意見，以了解這對毛利率意味著什麼，但想了解第一季之前第四季的情況嗎？

Okay. Well, as usual, the biggest items that contribute to these kinds of improvements are going to be product mix, indium phosphide was up Q to Q. And volume, volume was up over $3 million. There was a better improvement from the two raw material companies, and that also contributed. I think in terms of sustainability, we should be in about the same range in Q1. It may be plus or minus a little bit, but we'll see. And well, I think that's how I would respond. Go ahead, Morris.

好的。嗯，像往常一樣，對這些改進貢獻最大的是產品組合，磷化銦的產量環比上漲。兩家原物料公司的業績都有了較好的改善，這也起了一定的作用。我認為從永續性的角度來看，我們在第一季應該處於大致相同的範圍內。可能會有一點點加或減，我們拭目以待。好吧，我想這就是我的回應。繼續吧，莫里斯。

Yeah. I'm not a finance guy, but from what I know is that when we -- we have a policy of writing up into which we didn't -- we don't sell for 12 months period of time. And when the revenue come down, then the write off for the excess inventory, it will start to impact us. But when I would pick up the volume that not only the write off becomes less, but also we will have the opportunity to pick up those write off items to be on sale, thus improving our gross margin, that could be a [benefit].

是的。我不是金融人士，但據我所知，我們有一項書面政策，但我們沒有遵守，在 12 個月的時間內，我們不會出售。當收入下降時，過剩庫存的註銷就會開始對我們產生影響。但當我增加銷售量時，不僅註銷的商品會減少，而且我們也有機會把這些註銷的商品拿去銷售，從而提高我們的毛利率，這可能是一個[益處]。

Okay. That would certainly make sense. Thanks for that clarification. And maybe I'll follow-up here just on the guidance for the first quarter here. Obviously a little bit of growth at the midpoint here. How do we think about the major segments that you report on, whether they're meaningfully different than that may be on kind of average growth at the midpoint?

好的。這當然是有道理的。感謝您的澄清。也許我會在這裡跟進第一季的指導。顯然這裡的中間點有一點點成長。我們如何看待您所報告的主要部分，它們是否與中點的平均成長率有顯著不同？

I think the significance is that the indium phosphide will continue to grow. Gallium arsenide, I think, will grow substantially. Again, Germanium is actually stable or in the beginning away to the overall revenue contribution. Actually raw material is going to decrease quite substantially quarter over quarter, not because the business is weak, but I think it's just that, you know, the raw material business had a great fourth quarter and the first quarter, it didn't pick up the large volume opportunity in Q1. So overall, although the revenue growth is modest, but actually comes mostly from the contribution of indium phosphide and gallium arsenide.

我認為意義在於磷化銦將會持續成長。我認為砷化鎵將會大幅成長。再一次，鍺對於整體收入的貢獻其實是穩定的，或者說剛開始是穩定的。實際上，原材料的季度環比增長將大幅下降，這並不是因為業務疲軟，而是因為原材料業務在第四季度和第一季表現良好，但沒有抓住第一季的大量銷售機會。所以整體來說，雖然營收成長幅度不大，但其實主要來自於磷化銦和砷化鎵的貢獻。

Okay, perfect. Thanks for that delineation. So let's jump into some of the product categories here in data center, meaning indium phosphide here. Sounds like it's got some opportunities here, clearly, we know this optical space where it seems like it's very nice here. Maybe you can talk about -- and I think you've been a little bit limited in kind of a narrow customer base in your past. I think you had one major customer there. Maybe you can talk about the efforts for diversification? And ultimately, how do we think about either data center growth this year versus last or maybe just the overall indium phosphide category?

好的，完美。謝謝你的描述。那麼讓我們來看看資料中心的一些產品類別，這裡指的是磷化銦。聽起來這裡有一些機會，顯然，我們知道這個光學空間看起來非常好。也許您可以談談——我認為您過去的客戶群有點狹窄。我認為你在那裡有一個主要客戶。能談談多元化的努力嗎？最後，我們如何看待今年與去年相比資料中心的成長情況，或只是整個磷化銦類別的成長？

I don't know, where did you get that idea from. We have a limited narrow customer base. I don't think we have a narrow customer base. I think we have a (multiple speakers)

我不知道你從哪裡得到這個想法。我們的客戶群有限且狹窄。我不認為我們的客戶群狹窄。我認為我們有一個（多位發言者）

Don't you have -- don't you just have one larger, a big contributor to data center and many other smaller ones or some number of smaller ones then?

難道你沒有──難道你只有一個較大的、對資料中心貢獻很大的，還有許多其他較小的或一些較小的？

Yeah. Data center, Silicon photonics specifically was sort of narrow, and they didn't grow. They are poised to grow. They've been telling us it should grow substantially in Q -- in 2024, but we haven't seen that yet. I think they are incrementally better in Q1 than Q4, but they're telling us their visibility is still not good. But the overall they are telling us that Q -- 2024 should be substantially better than 2023. So I think, you know, from what we see our indium phosphide, the telecom business is not great. The data center actually still got some inventory to digest. PONs market in China actually is picking up a bit.

是的。資料中心、矽光子學等領域較為狹窄，而且沒有發展。它們已經做好了成長的準備。他們一直告訴我們，它應該在 2024 年第一季大幅成長，但我們還沒有看到這一點。我認為他們在第一季的表現比第四季度略有好轉，但他們告訴我們他們的知名度仍然不佳。但總體而言，他們告訴我們 2024 年應該比 2023 年好得多。所以我認為，從我們對磷化銦的看法來看，電信業務並不好。資料中心其實還有一些庫存需要消化。中國的PON市場其實正在逐漸復甦。

Okay. But this still not robust compared to the peak time, but it's better than Q3 for sure and is continuing to be better in Q1 than Q4. And what I think is surprising to us, I think, is the AI application. It first started something like six months ago and we thought it was -- well first, the customer wouldn't tell us it's AI. And then they come back again and they want more in Q4 and they now gave us yet another figure order in Q1.

好的。但與高峰期相比，這仍然不夠強勁，但肯定比第三季度要好，第一季的表現繼續好於第四季。我認為令我們感到驚訝的是人工智慧的應用。它大約在六個月前開始出現，我們認為——首先，客戶不會告訴我們它是人工智慧。然後他們又回來了，他們想要在第四季度有更多訂單，現在他們在第一季又給了我們另一個數位訂單。

So cumulative diluted delay days, it's in the millions of dollars range. So and this time, they also admit to us that it's AI-related. So we are cautiously optimistic, although they are not giving us good visibility how much they will grow in Q2 and Q3, but at least I think it's so far, it's a very good sign. And I believe this indium phosphide solution for AI will come. It's a matter of time, but I think I'm glad to see it's coming already soon.

因此累計稀釋延遲天數在數百萬美元左右。所以這次，他們也向我們承認這與人工智慧有關。因此，我們持謹慎樂觀的態度，儘管他們沒有給我們第二季和第三季將成長多少的良好前景，但至少我認為到目前為止，這是一個非常好的跡象。我相信這種用於人工智慧的磷化銦解決方案即將問世。這是一個時間問題，但我很高興看到它很快就到來了。

Okay. More of some interesting detail there. It seems like you're splitting up, I guess what I would call datacom, you're kind of splitting it between Silicon photonics and AI and others here that perhaps a bit more detail that we could take offline there. But that sounds -- it sounds good to hear here. Let's see or maybe just touching on the side of indium phosphide here. It sounds like you're incrementally more positive on the consumer electronics and health care side here. Maybe just to get a sense of where that's coming from? And do you see any large customers kind of impacting your year this year?

好的。那裡有更多有趣的細節。看起來你正在分裂，我想我會稱之為數據通信，你把它分裂成矽光子學和人工智慧以及其他一些領域，也許我們可以在那裡離線獲取更詳細的資訊。但這聽起來——聽起來很不錯。我們來看一下，或只是觸及一下磷化銦方面。聽起來你對消費性電子和醫療保健的看法逐漸變得更加積極了。也許只是為了了解它是從哪裡來的？您認為今年有哪些大客戶會對您的業績產生影響？

Well, Richard, we are up -- we are cautiously optimistic. They are requesting a fairly sizable (cold) and waiting qualification process for -- to launch later this year. But we don't have no signal it will become reality. I mean the volume is substantial. We know it's gone for consumers, but is still into qualification process, whether what they will launch and will launch later on this year, we don't know. But we have at least, let's see, two customers requesting for the same volume, for the same type of material that they request. I mean, from the volume of it, we know it's a consumer product.

好吧，理查德，我們上漲了——我們保持謹慎樂觀的態度。他們要求進行相當大規模的（冷）並等待資格認證流程 - 以便在今年稍後啟動。但我們沒有跡象表明它會成為現實。我的意思是數量相當大。我們知道它已經面向消費者推出，但仍處於資格審查階段，他們是否會在今年稍後推出，我們不知道。但是，我們至少有兩個客戶要求相同數量、相同類型的材料。我的意思是，從它的數量來看，我們知道它是一種消費品。

Okay. Fair enough. Well, that's good to hear. Last question, I will jump out of line here. Just touching on the micro-LED topic here. I guess I want to get a sense of your visibility and confidence in this market taking off. And I think you mentioned in your prepared remarks and sometime in calendar '25 here seems to be kind of a moving target in this space. And I think it's largely due to yields on the pick and place here outside of your direct -- scope of your work here. But I just want to get a sense of your level of confidence that that can happen next year?

好的。很公平。嗯，很高興聽到這個消息。最後一個問題，我就不多說了。這裡只是談論微型 LED 話題。我想了解一下您對這個正在起飛的市場的知名度和信心。我想您在準備好的發言中提到過，在 25 年的某個時候，這個領域的目標似乎會改變。我認為這很大程度上是由於您在這裡的直接工作範圍之外的挑选和放置的收益。但我只是想了解一下，您對明年實現這一目標的信心程度？

Well, there I think you probably know better than I do. I think from our end, our development of the eight-inch gallium arsenide [wafers] supporting this, both in terms of capacity, our yield and our quality. Now we have made great advancements in the last quarter, and we are now very confident. And we have customer visit, I think, twice now. And the third attempt to visit us will happen next quarter, and we will soon see the qualification process.

好吧，我想你可能比我更了解。我認為從我們的角度來看，我們開發的八英寸砷化鎵[晶圓]在產能、產量和品質方面都支持這一點。現在我們在上個季度取得了巨大的進步，我們現在非常有信心。我認為，目前我們已經有兩次客戶來訪了。第三次訪問將在下個季度進行，我們很快就會看到資格認證過程。

So I think what we can tell you is our customer are telling us they are ready to launch sometime in 2025. And so that's why we get [good]. Whether it's going to -- I mean, right now we're running hundreds of wafers per month. Okay? And so we continue to deliver now. But so I guess, they are in [pilot line] production. And so far, so good. Our wafer performs very well. So I'm optimistic.

所以我想我們可以告訴你的是，我們的客戶告訴我們他們準備在 2025 年的某個時候推出。這就是為什麼我們得到[好的]。不管它是否會——我的意思是，現在我們每月要生產數百片晶圓。好的？因此我們現在繼續提供服務。但我猜他們正在進行[試驗線]生產。到目前為止一切順利。我們的晶圓性能非常好。所以我很樂觀。

Okay. Fair enough. Thanks. That is all the questions from me guys. I'll jump back in the line.

好的。很公平。謝謝。這就是我所有的問題。我會重新回到隊伍裡。

Thanks, Richard.c

謝謝，Richard.c

Charles Shi, Needham & Company.

查爾斯·施（Charles Shi），Needham & Company。

Yeah, thanks. Morris and Gary, congrats on the fourth quarter results. I want to ask you a little bit more details about the new opportunity you see in data center side, I believe you're referring to the datacom transceiver market, 800 gig plus, EML-based lasers. Obviously, Coherent, I believe is one of your end customers who we're very bullish about how much growth this part of the market is going to be. But for us, it's getting a little bit hard for us to think about how to translate their forecast of the 800-gig-plus optical transceiver opportunity growth to your indium phosphide wafers. So have you guys tried to quantify how much of that TAM this part of the applications are going to kind of drive for you guys?

是的，謝謝。莫里斯和加里，恭喜你們第四季的業績。我想問您一些關於您在資料中心方面看到的新機會的更多細節，我相信您指的是資料通訊收發器市場，800千兆以上，基於EML的雷射。顯然，我相信 Coherent 是你們的最終客戶之一，我們非常看好這部分市場的成長。但對我們來說，思考如何將他們對 800G 以上光收發器機會成長的預測轉化為磷化銦晶片變得有點困難。那麼你們有沒有嘗試量化這部分應用程式對你們的 TAM 的推動作用有多大？

The other related question is, based on your knowledge today, are you single source in your phosphide wafer supplier, or do you think the end customer may be sourcing from your competitors as well? Thanks.

另一個相關問題是，根據您今天的了解，您的磷化物晶圓供應商是否是唯一的來源，或者您認為最終客戶也可能從您的競爭對手那裡採購？謝謝。

Charles, I think that's a little bit tough question, and it's a fairly long list. So let me say this. I think right now, the data center -- I do want to clarify one thing, it's a very hot item, this core optical cable project. And we're not related to that project. And that is mainly using VCSEL using a plastic fiber.

查爾斯，我認為這是一個有點難的問題，而且這是一個相當長的清單。所以讓我這麼說。我認為現在，資料中心——我確實想澄清一件事，這是一個非常熱門的項目，這個核心光纜項目。我們與該項目沒有關係。這主要是使用採用塑膠光纖的 VCSEL。

And I think there's a big company, data center wants to change out coaxial cable with VCSEL, with plastic fiber. We're not in that. Whether that optical cable will move from 400G, 100G, to 800G, or not because they can use parallel pass, we're not in that at all. And what we're talking about the 800G, 1.6 gigahertz -- terabytes, I think we're talking about potentially for a little bit longer distance, perhaps and more power data transfer.

我認為有一家大公司，資料中心希望用 VCSEL 和塑膠光纖取代同軸電纜。我們不是那一類人。該光纜是否會從 400G、100G 移動到 800G，或者不會因為它們可以使用並行通道而移動，我們根本不參與其中。我們正在談論的 800G、1.6 千兆赫——兆兆字節，我認為我們談論的是可能更長一點的距離，或許是更強的數據傳輸。

So whether that customer is single source or not. So to answer your question are we -- can we quantify and so, you know, if Coherent is going to grow X percent are we going to grow with them? And so you have to take out -- I mean, I believe Coherent is also doing VCSEL. The VCSEL, the problem with that market is it doesn't use a whole lot of gallium arsenide substrates.

所以無論該客戶是否為單一來源。所以要回答你的問題是──我們能否量化，所以，你知道，如果 Coherent 要成長 X%，我們也會跟著成長嗎？所以你必須拿出來——我的意思是，我相信 Coherent 也在做 VCSEL。VCSEL 市場的問題在於它不使用大量的砷化鎵基板。

So the opportunity for us is much less than making the coaxial -- the plastic fiber for VCSELs. So as far as single source or not is concerned, I believe we are still the largest, I believe also best-in-class indium phosphide supplier. So we have multiple many, many customers and some of them use us a majority of their supply. And in fact, I think the artificial intelligence's customer that we recently engaged, I think we're single source.

因此，我們的機會比製造同軸電纜（用於 VCSEL 的塑膠光纖）要小得多。因此，無論是否單一來源，我相信我們仍然是最大的，也相信是一流的磷化銦供應商。我們擁有很多很多的客戶，其中一些客戶的大部分供應都來自我們。事實上，我認為我們最近接觸的人工智慧客戶是單一來源。

But whether they going to develop into multiple source or not, we don't know. But we are also very cautiously looking for other people wanting to participate in that development as well. So we have a very good position in a fast-growing marketplace, but whether they are single source or not, it's difficult to tell.

但它們是否會發展成多源，我們不知道。但我們也在非常謹慎地尋找其他願意參與這項發展的人。因此，我們在快速成長的市場中佔據非常有利的地位，但他們是否是單一來源，很難說。

Got it. So maybe a follow-up question. It looks like that for roughly two quarters, December last year, March this year, you are -- core business level is now I mean return to that [20] million plus per quarter level. Looking out a little bit beyond the March quarter, what's your best assessment right now? Are you going to be maintained at a similar level? Are we going to revisit that high 'teen's of millions per quarter, that kind of level? I mean, generally, I wanted to get a sense how you feel about the run rate going through the rest of the year? Thanks.

知道了。這或許是個後續問題。看起來，大約兩個季度，即去年 12 月和今年 3 月，核心業務水平現在回到了每季度 [2000] 萬以上的水平。展望三月季度之後的情況，您現在的最佳評估是什麼？你會維持類似的水平嗎？我們是否會重新達到每季數百萬這樣的水準？我的意思是，總的來說，我想了解一下您對今年剩餘時間的運行率有何看法？謝謝。

Sure. I think for next quarter, as I said, I think although we've only guided modestly higher overall revenue for next quarter, but raw material is decreasing. So there is a substantial increase in substrate revenue to compensate for that. So I think for substrate, revenue is going to continue to grow both in terms of indium phosphide and gallium arsenide. And for raw material, I don't think is going to drop off for the rest of the year. And we will have other joint venture journey to contribute as a revenue contribution as well later on of the year. So I think this year, it's going to be a continued growth year for 2024 compared to 2023.

當然。我認為對於下個季度，正如我所說，雖然我們僅預計下個季度的整體收入會小幅上漲，但原材料正在減少。因此，基板收入大幅增加以彌補這一點。因此我認為，就基板而言，磷化銦和砷化鎵的收入都將持續成長。就原料而言，我認為今年剩餘時間內價格不會下降。我們也會在今年稍後開展其他合資業務，以貢獻收入。因此我認為，與 2023 年相比，2024 年將是持續成長的一年。

The question I think is, how fast, how strong it's going to be? Whether we're going to reach $90 million, but I think it's probably better than $85 million.

我認為問題是，它的速度有多快、強度有多大？我們是否能達到 9,000 萬美元，但我認為可能比 8,500 萬美元好。

Got it. Thanks. So that will be all for me for now.

知道了。謝謝。對我來說現在就這些了。

Thanks, Charles.

謝謝，查爾斯。

I will now turn the call back over to Dr. Morris Young for closing remarks.

現在我將把電話轉回給莫里斯楊博士，請他作結束語。

Thank you for your participation in our conference call. As always, please feel free to contact me, Gary Fischer, or Leslie Green, if you would like to set up a call. We look forward to speaking with you in the near future.

感謝您參加我們的電話會議。像往常一樣，如果您想通話，請隨時與我聯繫、Gary Fischer 或 Leslie Green。我們期待在不久的將來與您交談。

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect your lines.

女士們、先生們，今天的電話會議到此結束。感謝大家的加入，現在您可以斷開線路了。