科磊 (KLAC) 2007 Q3 法說會逐字稿

Good afternoon and welcome to the ICOS Vision Systems third quarter 2007 earnings conference call. With me today is Antoon De Proft, President and Chief Executive Officer.

You should have all received a copy of the press release, which was issued earlier today. And if you didn't, a copy has been posted on the Investor Relations section of the Company's website at www.icos.be.

Before starting the call, I'd like to mention that certain statements made by management during the course of this conference call may constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of ICOS to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, those detailed in the Company's reports filed with the regulatory authorities and its annual report.

Now I would like to turn the call over to Mr. Antoon De Proft. Please go ahead, and I'll be standing by.

Well, thank you, Michael, and welcome, everyone, to our third quarter 2007 conference call. I will start by discussing our performance during the third quarter. Then I will comment on the outlook of our business, and after that I will be glad to take your questions.

Revenues for the three months ended September 30, 2007, were EUR 20.1 million, representing an increase of approximately 9.7% over the second quarter revenues of EUR 18.3 million, a decrease of 3.9% compared to the EUR 20.9 million reported for the third quarter of 2006. Income from operations for the third quarter were EUR 1.7 million compared to an operating income of EUR 0.7 million in the second quarter and EUR 2.9 million reported for the third quarter last year. Net income for the third quarter was EUR 2.6 million, or EUR 0.26 per share, compared to net income of EUR 1.1 million or EUR 0.11 per share for the second quarter of 2007 and net income of EUR 2.9 million or EUR 0.28 per share for the third quarter last year. Revenues for the nine months ending September 30, 2007, were EUR 57.5 million, representing a decrease of 31.6% over EUR 84 million for the same period last year. Income from operations for the nine first months of 2007 were EUR 3 million compared to EUR 22.1 million for the same period last year. Net income for the first nine months were EUR 5.3 million, or EUR 0.51 per share, compared to net income of EUR 18.7 million or EUR 1.77 per share for the first nine months of 2006.

We're pleased with our third quarter results. The market recovered as anticipated, and driven by the increase of component inspector sales, our sequential revenue growth of almost 10% was at a high end of our guidance. In addition, the strong leverage in our business model positively influenced our margins and bottom line. We also continued to repurchase Company shares during the quarter.

The new customers, our first-time buyers, accounted for 10% of revenues during the third quarter of 2007, and those customers, who are mainly located in U.S., China, and Taiwan, and were buying wafer inspector solar cells and component inspection products. This percentage of first-time buyers illustrates our continuing growing market penetrations for all product lines.

Then the new product sales accounted for approximately 9% in the third quarter. These new products includes mostly wafer inspectors and new variants of our component inspectors.

The third quarter has been fairly intense with respect to R&D and new product introductions. We continued our intense R&D efforts across all product lines and spent net 18.4% of revenues in R&D. Let me remind you here that we do not activate any R&D work, rather expense all R&D costs immediately in the quarter. The high R&D expenditures of today are therefore an investment in the future and the Company's potential financial performance.

Going forward, we intend to keep the absolute number of growth R&D spending approximately flat, and we expect that as the revenues for our newly introduced product lines will continue to ramp up, we will return to our historic range of about 12% R&D.

As a result of our intense R&D efforts, we introduced no less than three major new products, one in each of our three product lines during the third quarter. First, we introduced our 300 millimeter wafer handler during the SEMICON West Show in San Francisco. That was in July. With this introduction, we now offer our superior 2- and 3D image processing capabilities to memory and other high-volume markets. According to market researcher IC Insights, approximately 35% of the wafer capacity in 2007 is 300 millimeter pins. This introduction was the last major missing link in our product lineup for advanced 2- and 3D inspection of any sized wafers.

Secondly, we introduced our component inspector CI-T120S and CI-T130S, a complete solution for high-speed flip chip substrate inspection, during the SEMICON Taiwan show in September. The CI-S series addresses the growing need to inspect 100% of flip chip substrates with 2D and 3D metrology and inspection at high volume and accuracy. We are the first to bring a solution to the market that combines bump inspection, substrate top and bottom surface inspection, and substrate warpage inspection all in one, compact system. This new product builds on ICOS's long-time experience with 2D and 3D inspection and metrology and on our expertise in the areas of component handling and sorting. The addition of this unique inspection system for advanced substrate inspection serves both to enhance the value to our customers and to strengthen our position as the supplier of choice for visual inspection equipment for the semiconductor packaging and assembly industry.

And thirdly and finally, we launched a microcrack inspector, our latest addition to our solar cell inspection product lines at the Photovoltaic Solar Energy Conference and Exhibition held in Italy, also in September. The microcrack inspector addresses the growing need of solar wafer and cell manufacturers to detect non-penetrating microcracks in an early stage of the production process. It is designed to validate the structural integrity of wafers and can easily be integrated into the outgoing or incoming wafer handling process. By avoiding breakages later in the process, the overall yield can be substantially improved. In introducing this new module, we are expanding our portfolio of solar wafer and cell inspection products, building on our long-term experience with inspection algorithms, camera technology, and image processing, and further demonstrating our commitment to adding value to our customers' manufacturing processes.

Then the competitive situation with the introduction of those three major new products, a major new product in each of our product lines during the third quarter, we further strengthened our competitive position in our existing market, and we also expanded our total available market. In our component inspector product line, we believe that we continue to be very competitive in reaching introduction of the C-IS series. We expanded the potential market for this product line to the rapidly growing market for advanced flip chip substrates. For wafer inspection, we believe we have strong technology in this field, and we are rapidly gaining market share based on a high rate of new customer wins.

At the same time, we need to realize that there typically is a period of six to nine months between the receipt of a first-time order from a new customer to the moment of first revenue recognition. In addition, follow-up volume purchases typically take another six to nine months from the moment of first revenue recognition. And as a result, we need to count on 12 to 18 months between new customer wins and significant revenues from such customers.

During the last conference call, I mentioned that we gained new customers for our new, for our wafer inspectors at the rapid pace of approximately one new customer per month. I am pleased to say that this rate has continued since then, resulting in already 10 new customers so far this year. As a reminder, last year we had two customers going into the year and added four additional customers during the year. In other words, we are well on our way to triple the number of customers this year and to lay the foundations for rapid growth in this product line in the years to come.

The reason for the high number of new customer wins can be found in our strong image processing background, including our unequaled 3D metrology capabilities and our 20 years of experience with aligning dies and wafers. Such features make us unique in applications such as wafer bumping and (inaudible) inspection. The newly introduced 300-millimeter handler will allow us to expand into higher volume market segments such as memory, and we believe that we are well positioned to further gain market share in this rapidly growing market.

Moving on, then, to our solar cell inspection product line, we announced last week the receipt of an order for solar cell inspection equipment worth EUR 1.9 million from a new customer based in China. This order illustrates the rapid growth that we are experiencing in our solar cell inspection product line. This year so far we more than doubled the amount of customers for our solar cell inspection products with respect to last year, and we currently have more than 20 customers buying solar cell inspection equipment from us.

When we include customers that buy through a distributor or integrator, we count more than 30 customers currently located throughout Europe, the U.S., and across Asia, including Japan, Taiwan, and China. Market researchers estimate that the growth of silicon use for solar cells will increase over 40% nearly between 2006 and 2010. With our a strong customer basis, and our established line of inspection equipment, we believe to be perfectly situated to leverage our market leadership and benefit from the industry growth driven by expanding production capacity among solar cell manufacturers and by the rising need to improve use to ensure output quality in more automated facilities.

Then the organization. The total number of employees stood at 343 full-time equivalent at the end of the third quarter, compared to 342 full-time equivalents at the end of the second quarter. The number and spread of our personnel remains almost identical with respect to the last quarter. We continue to consolidate our R&D activities for solar cell development and we are planning to further extend our software development center in India.

Then the revenue breakdown for product line. Inspection systems accounted for 84%, and inspection modules for 16% of third quarter revenues, compared to 81% of inspection systems and 19% of inspection modules for the second quarter revenues of 2007. This is mostly the result of the growth in our component inspector sales. For the fourth quarter, we in fact expect all three major product lines to contribute to our growth.

First, we expect a further market recovery, and as a result, a further gradual growth of our component inspector business. For our wafer inspectors, we will be able to recognize revenue during the fourth quarter from several customer wins that we achieved earlier this year, and we will start volume shipments to an additional customer that we acquired last year. As a result, we expect wafer inspector revenues to more than double during the fourth quarter and generate 10% to 15% of revenues in the fourth quarter. For the year, we expect wafer inspector revenues to more than double with respect to last year. Finally, we expect our solar cell inspection products to grow slightly and contribute approximately 10% to our overall revenues in the fourth quarter. We remind you that indications for product sales rates often depend on individual orders and may vary substantially from quarter to quarter.

The revenue breakdown per geographic area. During the third quarter, we realized 82% of our turnover in Asia, of which 7% in Japan and 75% in other areas of Asia. Further 11% of turnover was realized in Europe and 7% in U.S. During the third quarter, we saw revenues increase in most areas except for Europe. For the current quarter, we expect a rebound in Europe that compensates the decline of the third quarter and further strong growth in mainly Taiwan and Korea.

Then the financial information for the third quarter. On revenues of EUR 20.1 million, we achieved a gross margin of 54.2% compared to a gross margin of 53.5% in the second quarter. For the current quarter, we expect the gross margin to be in the range of 53% to 56%, and that compares to a guidance of 51% to 54% that we gave for the third quarter.

Our net R&D expenses in the third quarter amounted to EUR 3.7 million, or 18.4% of revenues. Our R&D expenses benefited in the third quarter from a grant of EUR 303,000 compared to a grant of EUR 165,000 in the second quarter of 2007. For the fourth quarter of 2007, we expect a grant of approximately EUR 160,000, and our net R&D costs to increase slightly to within the range of EUR 3.7 million to EUR 3.9 million. SG&A expenses increased to EUR 5.5 million compared to EUR 5.3 million in the previous quarter. The increase was mainly caused by higher commission expenses in line with our sales activities. For the fourth quarter of 2007, we expect our commission expenses to increase further as a result of anticipated higher sales levels. We therefore expect SG&A expenses to increase within the range of EUR 5.5 million to EUR 5.8 million.

Let me also remind you that our SG&A expenses for the fourth quarter will include for the last time the entire amortization cost of the intellectual property related to the wafer inspection acquisition activities from Siemens. As a result, our amortization expenses will decrease with approximately EUR 215,000 per quarter starting with the first quarter of 2008.

The operating profit for the third quarter was EUR 1.7 million compared to EUR 666,000 reported in the previous quarter, showing the strong leverage of our business model. During the third quarter, we realized a net financial income of EUR 586,000 compared to EUR 527,000 of net financial income for the second quarter. Our net financial income consists mainly of interest income, and the net impact of currency exchange effects remain limited. We incurred a tax benefit of EUR 311,000 compared to a tax expense of EUR 103,000 in the second quarter. As indicated before, our tax rate can vary with our geographical mix of sales and manufacturing, especially when compared on a quarterly basis. For the running quarter, we expect to continue to see a tax rate below 10%.

Consequently, we realized a net profit for the third quarter of 2007 of EUR 2.6 million or basic earnings per share of EUR 0.26.

Then the cash flow information. In the third quarter, cash flow, defined as net income increased by noncash items, was positive at EUR 2.6 million, while changes in working capital and provisions used EUR 2.0 million in cash, resulting in a positive net cash flow provided by operating activities of EUR 0.6 million.

During the third quarter, we generated EUR 430,000 from investing activities, and we used EUR 3.7 million for financing activities. The financing activities include the repurchase of our own shares, for which we received the authorization at the extraordinary general assembly of shareholders held on June 6, 2006. We purchased during the third quarter a total of 105,984 shares for a total consideration of EUR 3.6 million. That's an average of EUR 33.66 per share. Since the program has started, we have now repurchased a total of 500,720 shares, and we will continue to repurchase our own shares on a regular basis in the remainder of 2007 and into 2008.

We now turn to the balance sheet. Cash balances stood at EUR 56.8 million at the end of the third quarter of 2007, down from EUR 59.6 million one quarter earlier. Our cash receivable increased to EUR 17.4 million from EUR 16.2 million at the end of the previous quarter. Days outstanding decreased to 78 days at the end of the third quarter, slightly down from the 80 days at the end of the previous quarter. Inventories remained almost flat at EUR 20.6 million as compared to EUR 20.9 million one quarter earlier. The inventory split was EUR 5.7 million of raw materials, EUR 9.9 million of work in progress, and EUR 5.1 million finished goods.

The stockholders' equity decreased to EUR 92.9 million at the end of the third quarter from EUR 94.5 million at the end of the second quarter.

So then the business outlook. When we look ahead, we see all product lines contributing to further revenue increases, Especially in the wafer inspector product line, we will start to reap the benefit from the customer wins and market share gains that we have realized over the last 12 months. Combined with the continuing market recovery and further growth in solar cell revenues, we expect strong sequential revenue growth, most probably between 10% to 20%.

This concludes my comment, and I would now like to open the call to questions. Operator?

Thank you, sir. (Operator Instructions.) Our first question comes from the line of Siddy Jobe. Please go ahead with your question, announcing your company and location.

Good morning. Siddy Jobe, Bank Degroof, Brussels. Antoon, I have two simple questions, and the first question, do the sequential revenue growth for the fourth quarter that you see, so you see it as a combination of both market recovery and the launch of new products? And could you perhaps indicate which has the overhand?

Well, it's really a combination of both. It's hard to pin that down more detailed, but roughly, you can say that both considerably contribute. It's not that one is really dominating the other.

Okay. Could you refer to that there's a need of 12 times, because in the third quarter, in fact, first-time buyers and also sales of new products decreased from the Q2 '07 levels. That is correct?

Well, but let's be--I think you're referring to the number of first-time buyers that contributed to the third quarter sales? We have to be very careful with these statistics as they really, I mean, can vary substantially from quarter to quarter.

Okay. Thank you. Okay. And perhaps another different question. On your balance sheet, you have a nice amount of cash there, and now that we see the market recovering, wouldn't it be interesting for your shareholders in effect to redistribute--or let me rephrase it--to optimize your balance sheet?

Well, yes. That is why we started a program of repurchasing shares. We started that around the middle of last year. And I, well, I gave you some of the numbers. We are using our cash to do that. We've opted for that approach rather than a dividend approach. But we see that really as a policy to return cash over long term under the form of this buyback program.

But you don't see it accelerating towards the future?

Well, it's like a dividend policy. Yes, we could accelerate that, but we really see that as very similar to, like I said, a dividend policy. We want to do that for the long term rather than having a one-time buyback, so, but it's possible that we--of course, we evaluate that with the Board of Directors on a regular basis--and it's possible that we review that, just as we could review a dividend policy.

Okay, then I'll leave the floor for my colleagues.

Thank you.

Our next question comes from the line of Steve Barbureck. Please go ahead with your question, announcing your company and location.

Good afternoon, Antoon. Steve Babureck from Exane BNP Paribas in Paris. The first question is regarding the wafer inspection business. What was your market share in Q3, and how much do you think you can capture in 2008?

Well, we don't give that information out, Steve, but the number remains a relatively small number, and, well, we believe we can grow that substantially over the years to come. But we don't give the exact numbers.

Okay. So, but you can't remember if you can continue to gain market share in this market in '08?

Well, I have given the statistics about the customer wins, and so if you add that up this year, we've had 10 customer wins. You have to understand that volume is only coming in effect, I also said that we just started a volume shipment to one additional customer that we gained last year. So of, for instance, those 10 customers, we don't have any volume shipments at this moment, because they have to count on 12 to 18 months. But it's of course to be expected that we get volume shipments from those customers, so it's quite, we're quite confident that we can continue the growth, or the strong growth path, for the wafer inspectors.

Okay, thank you. And the second question is regarding your sales growth versus the equipment makers. In 2007, like overall CapEx in the industry will be slightly up, and ICOS should have a 20% decline on year for sales. Next year, as you look at the consensus, we have a 40% year-on-year increase while the world CapEx will go down by two percentage points. So, in other words, do you expect the back end to outperform strongly the equipment market next year?

Well, yes, it's important to make that distinction, because if you look at CapEx numbers, they are, of course, always dominated by front-end investments and the back end, we are unit driven, and that does follow another (inaudible). If you look at market researchers, that's typically the pattern that you see, that indeed in 2007 the back end grew the equipment and the--I mean, the front end grew and the back end shrunk--and next year it will be the other way around. So it's very careful to, you have to be very careful with looking at CapEx guidance for semiconductors and apply that directly to us, because we're, again, much more unit driven.

Okay. So you're confident that the back end market could actually have a strong digit growth, strong growth for next year?

Well, you know, Steve, that we do not give guidance ourselves. But that's what I read from the market forecasters, and it does make sense. I mean, we've gone through weak periods in the back end. We see healthy unit volumes, the little visibility that we have here and there is encouraging for 2008. But once again, we do not give guidance because we do not have the good visibility, and we have to be honest about that.

Okay. And the last question regarding the level of inventories. Some other back-end players mentioned that the high level of inventories was slowing down the back-end rebound. Is that, what's your feeling about the current level of inventories across the full chain?

Oh, it's hard to say across the, but it's true that the upturn is, well, moderated. It's not a very aggressive, very fast upturn. It's a more gradual upturn. I think in general, also what you see is that there is a little bit of a decoupling between different cycles. So it's all these cycles are a little bit different, and that probably also explains why you have not a very aggressive but a more gradual upturn.

Okay. Thank you very much.

You're welcome.

The next question comes from the line of Fritz de Vries. Please go ahead with your question, announcing your company and location.

Hi, Anton. Fritz de Vries, Rabo Securities, Amsterdam. I'd like to ask you about the component inspectors in the Company for Q4, because you mentioned that you will double the sales of the wafer inspector. You are seeing continuous growth for the solar inspection machines. Does that mean that for component inspection tools, the rebound in Q4 will be relatively modest, and is that relating it still to the DRM sector?

So I said that the, during one of the earlier questions, that it's actually both. That it's not so that the market recovery gives the lion's share of the growth or the new products. It's fairly well distributed, so that gives you an idea of the growth of the component inspector, the overall market. So on a sequential basis, that is a moderate, gradual increase. I'm sorry, there was another aspect to your question.

You mentioned earlier in Q2 that especially the DRM-related amount, component inspector, was relatively short. Has that strengthened during Q3?

Yes, well, I think indeed in Q3 that it still has an effect. We'll see how returns going forward. In all honesty, you know that we're, what we sell our equipment to subcontractors and IDMs alike. There is no difference, really, in our equipment when it's used to memory or logic or other applications, so that I have to say we don't do a lot of segment research work there, because for us what counts is the total number of ICs that goes out, so I absolutely do not want to claim to be an expert on the memory versus other segments. But I think what I said, that that's the case.

Okay, also, I understand. Perhaps a second question. You mentioned that wafer inspectors 10% to 15% of total sales in Q4, and solar inspection machines, they'll be 10% of sales in Q4. Can you also give an indication for the full year 2007?

I can give you some indication. It's both in the 5% to 10% area.

Okay. Thank you, Antoon.

Our next question comes from the line of Eric de Graff. Please go ahead with your question, announcing your company and location.

Hi, Antoon. It's Eric de Graff from Petercam in Amsterdam. And most of the questions I would like to ask are already answered, and one remaining on wafer inspections. You indicate in this already, indicated earlier that the fourth quarter would be a very important quarter for wafer inspection. Should we expect that to be a very exceptional quarter and to slow down in the next couple quarters of 2008, or is this just the beginning of the dull-in phase, and should we expect a structurally higher level coming out of the wafer inspection? And maybe in addition, do you think that you will provide separate numbers on the wafer inspection systems going forward like you do on the general inspection modules and system splits?

Well, for now we expect to (inaudible) aspects we make it now. We haven't made a decision on whether we would change that reporting. But while yes, it's obviously to be expected, as I also indicated, with all the new customer wins, and so the wafer inspection going forward remains substantial and in effect grows. So it's not so that Q4 will be an exceptional quarter. But of course, you know how it goes. You have relatively large quantums, so you may have variations from quarter to quarter, but on average, we expect substantial increases in the wafer inspector sales in the coming quarters, and Q4 is not the exception to the rule.

Okay. Well, that sounds perfect. Thank you very much.

Thank you.

Our next question comes from the line of Simon Schafer. Please go ahead with your question, announcing your company and location.

Hi, Antoon. It's Simon Schafer. I was wondering on the flex tape business. I know it was quite small already last year, but is that effectively zero now?

I'm sorry. I didn't understand very well.

The flex tape business. I know it was already small last year. But has that effectively gone away?

That is, that is the case, yes.

So in terms of annualized revenues this year, is that less than EUR 2 million?

Yes.

Understood. Thank you. And then, this is maybe more a clarification on what you said earlier, but year to date, what have been your revenues for solar cell?

Well, I gave quite a bit of color there already. For the whole year, it will be in the 5% to 10% range, and in Q4 it will be around 10%.

Answered, but no more detail as to what it would have been in actual terms if you recognized that already?

Actual terms in which?

On the solar cell side.

Right, well, that's what I just.

Okay, fair enough. Thanks. And just based on the market, of the penetration that you've seen now for the, on the wafer inspector on the basis of the new customers, and that's obviously doubled this year. Is that doubling again next year, or is that a conservative assumption based on what you know today in terms of lineup?

Doubling--that's very hard to predict. But you have to realize that there is not hundreds of customers for such products. So we are currently at this, at this adoption rate of approximately one new customer per month. Again, we continue that over the next year, for instance. Well, this is not a guidance, but there is no reason why this adoption rate would suddenly stop. More importantly, as far as the revenues goes is that we would want to concentrate also on converting more of these people into volume sales.

Got it. Okay. And then on the gross margin side, that's shown a relatively high degree of variability. You actually managed to come in above your guidance this quarter. From what you're saying about the outlook, that's a little bit higher than what we thought. So what's the big swing factor here, and what's the run rate level now?

Well, the biggest factor you see is that the ups allocation becomes relatively smaller as the revenues increase, and that is also, I guess, the nature or reason why we've increased the guidance, indeed, with two percent points versus the last time. But, of course, we missed the guidance just slightly on the upside. So that's why we increased it with 2%, again based on the ups allocation.

Just in terms of revenue scale.

Yes. That's correct.

Understood. So assuming that we know that some of your businesses are growing structurally because of the adoption rate of your new customers, there's really no reason as to why that 53% to 56% shouldn't persist into next year unless you see a big cyclical collapse on the combined side.

That is correct.

Okay. Thanks so much.

Thank you.

(Operator Instructions.) Our next question comes from the line of Yogesh Jadhav. Please go ahead with your question, announcing your company and location.

Yes. Good afternoon. In fact, a lot of my question has been already answered. However, I was just wondering if you disclosed any backlog figure or look to be a figure just to add an idea of the trend in terms of bookings for you.

No, as a matter of fact, we don't do that because in our major product lines, the component inspectors, we have very short delivery times, and we rotate a lot of the orders within the quarter. Our visibility there is, well, four to six weeks, so the backlog there is not really a good indication, and that's why we try to give some color and background instead.

And even in terms of order on the bench, order dynamics?

Well, but there you have a little bit of the same effects that most of the order that we get in a quarter are shipped in the same quarter.

Okay. Okay. Thank you very much.

You're welcome.

We have a follow-up question from Fritz de Vries. Please go ahead with your question.

Yes, hi, Antoon. Another follow-up question. Perhaps about the new flip chip component inspector and the microcrack inspector, especially right into the flip chip machine, how quickly do you think that it will be an important product for 2008, and how quickly do you think you can ramp that product up next year?

That's a very good question. What is happening there is that the substrates for flip chips are becoming a lot more complex than they used to be with multiple chips and much smaller (inaudible). And that means that the requirement for inspection is rapidly increasing. And how, when you ask how fast can we ramp up, well, it's a variant of our component inspector, so we can ramp up quite rapidly. How quickly will the adoption of the market go? We have to realize we're just at the beginning there. But we've been--well, without mentioning names--we've gone through a very long comparison study at one of the major users of substrates. And we've clearly come out as the best technology going forward. So we're very confident and hopeful for that product, and we are now in the midst of talking to all the major substrate suppliers worldwide. But it's always hard to predict how quick that ramp will be. But we'll see, but we're very hopeful for that product. But it's one of those that it's a lot easier to talk about the fact that it has very good potential as opposed to putting in the exact timing on that.

Okay. Thank you.

You're welcome.

Our final question comes from the line of Nico Melsens. Please go ahead with your question, announcing your company and location.

Hi, Antoon. Good afternoon, everybody. I'm Nico Melsens, KBC Securities in Brussels. Antoon, I was just wondering, could you talk a little bit about the recovery that you're seeing in your traditional business, maybe? Any differences in customer behavior between Q3 and Q4 that you expect? Because it's true, the recovery in that business is there, but it seems a very gradual recovery without a lot of power. Doesn't that mean there is an important risk that it could be short-lived? Could you give us your view on that, please? Thank you.

The, well, the difference between the third and the fourth quarter, while there is there, I don't think there is a lot of difference. What we do see is that the recovery comes mostly from subcontractors, but that's normal. That's the trend in the industry. That also (inaudible) explains why countries like Taiwan are growing very quickly. Is there an indication that this would be short-lived? Well, first I have to say our visibility is limited out to the four to six weeks, so it's always tough to make predictions after that.

But then you have to think about what will happen to units and unit volumes. And there, I think in general that the outlook is quite good. There is quite a bit of growth worldwide. Of course, that growth comes from emerging countries, and it typically also means that unit growth is good but there is price pressure in the chain. Look at portable phones, PCs, and so on. But unit-wise, I see no signs or no reasons why that would suddenly stop. We've gone now to about--well, we had a downturn of about five quarters or so. Why would it bounce, suddenly stop after going up two quarters? Everything is possible, but I don't see any indication. If you look at drivers for units, and well, you and other people may be better at that, but personally, for instance, I think that, an event like the Olympic Games in China should help unit volumes of all kinds of goods next year. But we'll see. When I, that's also why we don't give guidance beyond the current quarter, because that always--well, we don't have hard visibility beyond the six weeks, roughly.

That was very helpful. Thank you, Antoon.

Thank you, Nico.

We have no further questions, sir. I'll turn the conference back to you, sir.

All right. Well, thank you, everybody, for joining, and we're looking forward to talking to you again next quarter. Thank you.

Ladies and gentlemen, thank you for your participation. This concludes today's conference. You may now disconnect your lines. Thank you.