ACM Research, Inc. (ACMR) Q4 2022 Earnings Call Transcript

ACM Research, Inc. (NASDAQ:ACMR) Q4 2022 Earnings Conference Call February 24, 2023 8:00 AM ET

Company Participants

Gary Dvorchak - Managing Director, Blueshirt Group

David Wang - CEO

Mark McKechnie - CFO

Conference Call Participants

Mark Miller - The Benchmark Company

Quinn Bolton - Needham and Company

Christian Schwab - Craig-Hallum Capital Group

Chaolien Tseng - Credit Suisse

Suji Desilva - ROTH Capital

Operator

Good day, ladies and gentlemen. Thank you for opinionated by, and invited to nan ACM Research Fourth Quarter 2022 Earnings Conference Call. Currently, each participants are successful a perceive only mode. Later, we will behaviour a question-and-answer session, and instructions will travel astatine that time. As a reminder, we are signaling today's call. If you person immoderate objections, you whitethorn disconnect astatine this time.

I would now for illustration to manus nan convention complete to your speaker today, Gary Dvorchak, Managing Director of nan Blueshirt Group. Please spell ahead.

Gary Dvorchak

Thank you, operator, and bully morning, everyone. Thank you for joining america connected today's telephone to talk 4th fourth 2022 results. We released results earlier nan U.S. marketplace opened today. The merchandise is disposable connected our website arsenic good arsenic from Newswire services. There's besides a supplemental descent platform posted to nan investor information of our website that we will reference during our prepared remarks. On nan telephone pinch maine coming are our CEO, Dr. David Wang; our CFO, Mark McKechnie, and Lisa Feng, nan CFO of our operating subsidiary, ACM Shanghai.

Before we continue, please move to Slide 2. Let maine punctual you that remarks made during this telephone whitethorn see predictions, estimates aliases different accusation that mightiness beryllium considered forward-looking. These forward-looking statements correspond ACM's existent judgement for nan future. However, they are taxable to risks and uncertainties that could origin existent results to disagree materially. Those risks are described under Risk Factors and elsewhere successful ACM's filings pinch nan Securities and Exchange Commission. Please do not spot undue reliance connected these forward-looking statements, which bespeak ACM's opinions only arsenic nan day of this call. ACM is not obliged to update you connected immoderate revisions to these forward-looking statements.

Certain of nan financial results that we supply connected this telephone will beryllium connected a non-GAAP basis, which excludes stock-based compensation and an unrealized summation nonaccomplishment successful training securities. For our GAAP results and reconciliations betwixt GAAP and non-GAAP amounts, you should mention to our net release, which is posted connected nan IR conception of our website and mention to Slide 12.

With that, fto maine now move nan telephone complete to David Wang, who will statesman pinch Slide 3. David?

David Wang

Thanks, Gary. Hello, everyone, and invited to ACM Research 4th fourth and fiscal twelvemonth 2022 net convention call. Starting pinch nan 4th fourth results, gross was $108.5 cardinal compared to $95.1 cardinal past year. Shipments were a grounds $193 million, up 69% year-over-year.

Gross separator was 49.6% and non-GAAP operating separator was 17.7%. As anticipated, arsenic a consequence of U.S. export regularisation (ph), respective customers reduced accumulation astatine their precocious nodes facility. We besides knowledgeable immoderate hold from our supplier owed to proviso concatenation constraints. Despite nan effect to our 4th fourth revenue, we are pleased pinch our results.

For nan afloat year, 2022 marked different twelvemonth of advancement connected our ngo to go a awesome supplier to nan world semiconductor industry. We delivered 50% year-over-year apical statement maturation during nan COVID-19 related restrictions, proviso concatenation disruption and accrued waste and acquisition regulations. This results show -- were driven successful portion by our multi-product portfolio strategy.

Turn to Slide 4. We are focused connected deepening our position successful cleaning our halfway merchandise segment. In 2022, our Canadian merchandise grew by 44% to $272.9 million, driven by 1 -- by our azygous wafer cleaning devices and continued penetration of semi-critical ordered scope (ph) tools. We expect nan ordered scope to play a cardinal domiciled among mature nodes improvement successful China and going forward.

We installed respective important caller cleaning tools, including viable separator tool, high-temperature SDM single-wafer cleaning tool, and nan precocious somesthesia IP barren instrumentality and a super-critical CO2 barren instrumentality for DRAM, which is important for our world efforts. ACM now has 1 of nan broadest cleaning merchandise portfolio successful nan industry, covering astir 90% of each cleaning projects there.

The ECP and nan furnace and different technologies, gross much than doubled year-over-year to $77.5 cardinal and correspond 20% of our gross mix. This was driven by a important publication from our ECP cleaning devices pinch accrued penetration astatine our apical customer for some ECP MAP for beforehand extremity and ECP ap (ph) for nan back-end. We expect a beardown merchandise rhythm successful 2023 from our furnace products, our higher somesthesia Anneal and LPCVD furnace, including [indiscernible] expanded to aggregate customers.

We expanded our furnace level pinch nan preamble of our thermal atomic furniture separation, ARV, ultra FLA, furnace instrumentality (ph). We delivered nan first ALD instrumentality for customer successful September and 2nd 1 to different customer successful November 2022. Advanced package, not including SAP, work and spell and different process instrumentality grew somewhat year-over-year.

This conception includes a scope of packaging tools, including coater, developer, scrubber, PR shaver and a bedewed etcher, and besides work and spare parts. ACM is nan only institution that offers some a afloat group of bedewed (ph) devices and precocious plating tool. We judge precocious packaging will go much important arsenic business looks for packaging innovations specified arsenic 2.5D and 3D successful nan connection and nan instrumentality retired to thrust nan higher performance, peculiarly successful China.

In Q4, we added 2 awesome merchandise categories, Ultra-Lith Track Coater/Developer devices and Ultra Pmax PECVD tool. We estimate these 2 caller devices double our served addressable marketplace aliases SAM to $16 billion. This awesome caller class reenforce ACM's position arsenic a multiproduct level company. Our Ultra-Lith Track Coater/Developer devices is simply a earthy improvement of our expertise successful cleaning, coating and improvement system, which we person built complete nan past decade pinch our halfway competence successful package and robotics mixed pinch our improving stand-alone coater developer instrumentality performance. We are good positioned to competing successful a $3.7 cardinal way market.

We judge galore world logic representation shaper are seeking a 2nd way proviso source. Our proprietary architecture creation enables Ultra-Lith Track to process 400 aliases moreover much wafers power, which is required for nan adjacent procreation of Lith tools, specifically designed for representation shaper customers. The instrumentality has a aggregate characteristic that heighten capacity crossed defectivity, throughput and costs of ownership We delivered nan first Ultra-Lith Track Coater/Developer ARF instrumentality to a home Chinese customer successful nan 4th fourth 2022 and scheme to present i-line exemplary later this year. We person besides begun improvement of a KrF model.

Our Ultra Pmax PECVD instrumentality marks ACM's participate into a caller process area for front-end semiconductor manufacturing. We judge our proprietary creation provides amended [indiscernible] trim movie accent and improved particle performance. We targeted this merchandise for world logic and representation manufacturing. We expect a bully attraction for 28-nano and supra larger customers, which we position arsenic a awesome description opportunity successful China. We judge this is aligned pinch China's attraction connected adding manufacturing nodes capacity, adding mature nodes capacity to lucifer home consumption. We expect to present our first PECVD instrumentality to IC manufacturers soon. We besides expect our Ultra Pmax PECVD instrumentality to beryllium utilized successful cleaning process for representation fabrication.

We look to those 2 caller merchandise class provided different deficiency of maturation to ACM successful 2024 and beyond. These aforesaid devices are utilized by astir each of nan Chinese-based semiconductor manufacturers. Our income and work teams are perpetually moving to summation amended traction pinch each of our customers crossed each of our awesome merchandise lines. Our 2022 results demonstrated impressed maturation for our halfway cleaning devices and a bully merchandise rhythm successful ECP. We expect a akin merchandise rhythm for a furnace successful 2023 and a semipermanent publication from Track and PECVD.

I will now supply item successful our 2022 customers. Turn to Slide 5. For 2022, we had 3 10% customers. The Huahong Group stay our apical customer astatine 18% of sales. SMIC was nan 2nd largest astatine 15%, and YM (ph) was our 3rd astatine 10%. 6XMT and SK Hynix besides lend but were little than 10% and 5%, respectively. We had a stronger publication from 2nd and 3rd tier semiconductor manufacturer, including powerfulness analog CMOS image sensor, composite semiconductor and different devices. Although nary of them individually was a 10% customer, this customer group represents astir full 20% of our afloat twelvemonth sales.

For 2023, we expect maturation from our China-based customer pinch a stock summation successful our halfway cleaning instrumentality and SAP and nan furnace merchandise cycle. We besides expect first income to nan U.S. and European markets. We person 2 cleaning devices astatine nan U.S. installation of a ample U.S.-based manufacturer. An information is going well, and we are optimistic it will lead to further orders from them successful 2023.

Today, we announced an bid for our first information instrumentality to a top-tier European customer. The instrumentality is planned for transportation successful early Q4 this year, and we are opening to prosecute work squad to support it. We are optimistic this could lead to our repetition orders of this product, orders for our different products and unfastened nan doorway for different imaginable awesome customers successful nan region.

Next, I want to item our marque finance successful caller facility. Please move to Slide 6. Construction of an Lingang accumulation R&D halfway is astir complete and remains connected way for first accumulation successful nan 2nd half of this year. Our Lingang Campus were including 1 cardinal quadrate feet and including 2 R&D buildings, 2 mill building and 1 accessory factory. The accessory mill will beryllium equipped pinch a cleaning room connected nan laboratory of nan aforesaid people arsenic our customer IC accumulation statement to velocity up R&D and merchandise process verification.

Upon completion, nan Lingang field is expected to person an yearly gross accumulation capacity complete 1.5 cardinal [indiscernible]. We are moving guardant pinch nan acquisition of caller full-owned headquarter for ACM Shanghai successful Zhangjiang area, Shanghai, nan Silicon Valley of China. We paid astir $47 cardinal for their building successful nan 4th fourth aliases moving later this year. This is an important summation for ACM that will supply nan stableness for employees, thief america pull caller talent and let america to put successful world-class omni halfway to velocity up nan improvement of our tools.

Support our world description will summation our finance successful Korea. This will service arsenic a 2nd root of accumulation capacity for business of continuity and will supply further entree to a greater excavation of R&D talent. We already person a squad of astir 70 section R&D engineers who person co-developed our furnace, way and PECVD merchandise pinch our Shanghai R&D team. This installation will beryllium successful nan astir of respective awesome semiconductor manufacturers, which we judge will thief execute greater traction.

For 2023, we expect to walk astir $80 cardinal to $100 cardinal CapEx. Our main project, including Lingang facility, capacity adhd successful Korea and caller ACM Shanghai headquarter pursuing this important investment. Our awesome spending task will beryllium complete for nan adjacent respective years.

We stay committed to our $1 cardinal gross target coming to Slide 8. We stay bullish connected nan home China semiconductor market. We expect our China customers to proceed to adhd aliases moreover velocity up capacity arsenic successful mature nodes arsenic made successful China capacity is overmuch little than nan section marketplace consumption. Domestic request for semiconductors will travel accrued accumulation of electrical vehicles and user electronics. The mostly of our customers' request has been for mature node accumulation site, including 20 nano and supra logic devices, powerfulness devices and IoT, and we expect bully maturation for years to come.

We judge we tin execute our $1 cardinal gross target successful nan adjacent early from Mainland China alone. Our exemplary is based connected 55% marketplace stock successful cleaning, 50% successful ECP, 35% successful furnace and 15% each for Track and PECVD. You spot upside imaginable from world markets, we are making bully advancement pinch nan Korea, U.S. and European customers and expanding our world income and supporting teams. We are besides accelerating our R&D and accumulation installation successful Korea to beryllium adjacent to respective awesome semiconductor players and supply a 2nd tract supporting worldwide customers.

I will now supply our outlook for nan afloat twelvemonth 2023. Please move to Slide 9. We reaffirmed our 2023 gross outlook to beryllium successful nan scope of $515 cardinal to $585 million. The scope of our outlook reflects, among different things, nan imaginable effect from existent U.S.-China waste and acquisition argumentation and together pinch various expect spending script of cardinal customers, proviso concatenation constraints and nan timing of acceptance for first instrumentality connected information successful nan field, among different factors.

In conclusion, we are proud of nan advancement we person made successful 2022 and excited for nan opportunity that nan statement had successful 2023. We stay committed to our ngo to go a supplier to awesome world semiconductor manufacturers and to present innovative solutions to our customers.

Now fto maine move nan telephone complete to our CFO, Mark, who will reappraisal specifications of our 4th fourth results. Mark, please.

Mark McKechnie

Thank you, David. Good day, everyone. Please move to Slide 11. Unless I statement otherwise, I will mention to non-GAAP financial measures, which excludes stock-based compensation, unrealized nonaccomplishment of trading securities. Reconciliation of these non-GAAP measures to comparable GAAP measures is included successful our net release.

I'll now supply financial highlights for nan 4th quarter. Revenue was $108.5 cardinal versus $95.1 (ph) cardinal past year. Total shipments were $197 cardinal versus $117 cardinal shipped successful nan twelvemonth agone period. Revenue for azygous wafer cleaning devices and semi-critical cleaning was $74.6 cardinal versus $61.9 million. Revenue for ECP furnace and different technologies was $20.2 cardinal versus $19.5 million. Revenue for precocious packaging, excluding ECP, services and spares was $13.7 cardinal astir level versus past year.

Gross separator was 49.7%, up from 47.9% successful nan anterior year. This exceeded our normal expected scope of 40% to 45%. The accrued gross separator versus nan anterior twelvemonth play was chiefly owed to merchandise operation and a affirmative effect owed to nan alteration successful nan renminbi to U.S. dollar rate rate. We expect gross separator to proceed to alteration from period-to-period owed to a assortment of factors specified arsenic income volume, merchandise operation and rate impacts.

Operating expenses were $34.8 cardinal versus $25.1 million. We incurred higher R&D costs owed chiefly to accrued personnel. Sales and trading disbursal was higher owed to promotional devices and unit costs. Operating income was $19.2 million, representing 17.7% operating separator versus $20.4 million. Other disbursal nett was $6.6 million, this was owed chiefly to nan effect of nan speech complaint changes connected our payables and receivables for nan period.

Income taxation disbursal was $2.7 cardinal compared to $3.2 cardinal successful nan twelvemonth agone period. The effective taxation complaint for nan afloat twelvemonth 2022 has accrued chiefly owed to nan request for taxation purposes to capitalize and amortize antecedently deductible investigation and experimental expenses nether IRS Code 174 that was effective January 1, 2022. The company's taxation proviso assumes nan norm will not beryllium overturned and is based connected capitalization of each nan R&D expenses for taxation purposes.

Net income attributable to ACM Research was $12.6 cardinal versus nett income of $18.1 cardinal successful nan twelvemonth agone period. Net income per diluted stock was $0.19 compared to nett income per diluted stock of $0.27 successful Q4 2021.

I will now reappraisal selected equilibrium expanse items. Cash and rate equivalents, restricted rate and clip deposits were $420.9 cardinal astatine nan extremity of nan 4th fourth versus $473.2 cardinal astatine nan extremity of nan 3rd quarter. Total inventory was $393.2 cardinal astatine twelvemonth end, up from $327.8 cardinal astatine nan extremity of past quarter. This includes vanished equipment inventory of $146.9 million, activity successful process of $79.1 million, earthy materials of $167.1 million.

Net rate travel from operations was $1.3 cardinal for nan 4th quarter. Net rate travel utilized successful operations was $62.2 cardinal for nan afloat year. Capital expenditures for Q4 was $72.6 million, which included a $47.2 cardinal costs for our caller office building successful Zhangjiang and spending connected our Lingang mill and different items. Capital expenditures for nan afloat twelvemonth was $91 million.

That concludes our prepared remarks. Let america unfastened nan telephone for immoderate questions that you whitethorn have. Operator, please spell ahead.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We person a mobility from Mark Miller pinch Benchmark Company. Your statement is open.

Mark Miller

Congrats connected different beardown twelvemonth and outlook. I had a mobility astir nan location distribution of sales. It looks for illustration China was down 20% sequentially. How overmuch of that was owed to nan restrictions successful China? Just wondering what produced that 20% diminution successful -- sequential diminution successful China sales.

David Wang

Yeah. Mark, I deliberation it's really difficult to springiness you a precise number. And obviously, there's reducing of finance successful precocious notes. And that percent really overmuch contribution, I don't person nan number correct now. However, I should opportunity location also, we spot location are still beardown request successful nan worldly nodes, right? So that's nan measurement we deliberation this year, our gross proceed to grow, of course, besides positive our caller merchandise deployment, particularly ECP and nan furnace.

Mark Miller

In position of different regions, that showed a bully uptick complete anterior 4th and year-over-year. Can you -- is that coming from nan U.S. aliases Taiwan? Or I'm conscionable wondering wherever nan different region summation successful revenues is coming from?

David Wang

Actually, we do person -- we're expecting immoderate gross this twelvemonth will travel from extracurricular Mainland, China, right, and immoderate gross expected from Korea and immoderate from U.S. And besides we're expecting astir apt not existent gross from location successful Taiwan, but they're really expecting customer astir apt breakthrough successful clip of this year, but not revenue.

Mark Miller

Thank you.

Gary Dvorchak

Yeah. Thanks, Mark.

Operator

[Operator Instructions] Our adjacent mobility comes from Quinn Bolton pinch Needham & Company. Your statement is open.

Quinn Bolton

Sorry astir that. I was connected mute. Hey, guys. Congratulations connected nan beardown 2022 results and nan very beardown '23 outlook successful nan reliable WFE situation this year. I conjecture a fewer questions. One for David aliases Mark, tin you conscionable springiness america immoderate consciousness astatine nan '23 guidance of $5.15 to $5.85. Do you expect immoderate meaningful publication from precocious nodes successful China aliases person you efficaciously zeroed retired nan precocious representation and logic nodes successful that guidance?

David Wang

Yeah. Let maine springiness a first shot. And I deliberation we still spot immoderate astir apt still acquisition going on, but obviously, rather reduced, right, compared to past year. And truthful that's not that overmuch counting successful our projection for our -- this year's, telephone it, projection. And however, we do spot -- and also, location are immoderate velocity up and for nan customer and moreover immoderate caller customers, right, successful China for mature nodes and besides for their powerfulness devices.

So that's we spot location our gross maturation and from awesome from those customers, right? And plus, arsenic I mentioned, and besides different products dispersed retired by ECP proceed to summation marketplace share. And nan furnace this year, we deliberation we'll summation much quickly pinch nan marketplace share, too. So that's nan probate factor, right? Next 1 is besides including immoderate world publication income from extracurricular Mainland, China.

Quinn Bolton

I wanted to besides inquire conscionable connected nan shipments, a very awesome number astatine $197 million. And successful nan 4th quarter. I cognize you don't guideline to shipments connected a go-forward basis. But tin you conscionable talk astir was location thing typical going connected successful December? Was location immoderate business benignant of either pulled retired of nan September 4th aliases possibly pulled successful from March.

You talked successful nan prepared book astir immoderate proviso constraints. Hard to spot nan effect of proviso constraints erstwhile you're astatine astir $200 cardinal of shipments a quarter. So conscionable trying to get immoderate consciousness connected what's your outlook for shipments, possibly qualitatively since I cognize you don't springiness guidance for that number.

David Wang

You mean nan future? I talked astir past quarter.

Quinn Bolton

Well, conscionable yes, possibly David conscionable talk astir nan spot successful shipments successful nan 4th quarter, was location thing different that led to specified a beardown number? And past immoderate comments you mightiness beryllium consenting to make astir really you expect shipments to inclination complete nan adjacent fewer quarters?

David Wang

I see. Well, actually, past 4 quarters, shipments besides effect by constraint, right? If we person nary proviso concatenation concern, possibly vessel much that's evidently there. And positive this, I telephone it waste and acquisition regularisation besides limit that shipment too. So anyway, I deliberation nan adjacent fewer quarters, we still tin spot that nan continued quarter, I'm not saying that 4th higher than nan 4th quarter, right, but I should opportunity adjacent year. And this year, we'll spot that proceed to summation our shipment, right?

Quinn Bolton

Thanks. And past for you, Mark, obviously, gross separator adjacent 50%, good supra your target scope of 48% to 45%. How overmuch of nan spot successful nan 4th fourth was owed to that higher shipment level? I presume you're getting beautiful bully mill utilization astatine that benignant of shipment level. Was that a large driver to gross separator aliases is it really much conscionable a usability of nan operation of devices that you shipped successful December that led to that adjacent 50% margin?

Mark McKechnie

Yeah, Quinn. It's going to beryllium predominantly astir nan operation of products. The absorption helps a bit, but it's not a large portion. It's really astir nan mix. And arsenic I said successful nan prepared remarks, we besides had immoderate use from nan rate rates, but it's chiefly astir mix, Quinn.

Quinn Bolton

Can you quantify nan FX effect Mark? I mean, my conjecture is your operation pinch furnace and ECP driving a batch of nan maturation successful '23. It sounds for illustration your operation is going to enactment beautiful patient successful '23.

Mark McKechnie

We're not changing our 40% to 45% gross separator target, Quinn. It's -- we're successful -- it's a competitory manufacture successful general, and we surely want to activity good pinch our customers. But 40% to 45% is nan correct target longer term.

Quinn Bolton

Understood. Thank you, Mark. Thank you, David.

David Wang

Thank you.

Operator

Thank you. And we person a mobility from Christian Schwab pinch Craig-Hallum. Your statement is open.

Christian Schwab

Hey, guys. Congratulations connected beardown execution and guidance. David, you're not unsocial successful seeing tremendous spot retired of nan Chinese home market, Applied Materials and their ICAP business, spent half nan telephone talking astir it. So erstwhile you look astatine China, successful your commentary astir adding mature node, 28-nanometer IoT powerfulness sensor is astir apt a smaller market. But successful saying that it does not -- nan capacity wrong China does not meet home demand, I think, is nan measurement you worded it. How galore years of beardown superior instrumentality spending do you deliberation it would return for that to occur? Is that for illustration a 3 to four, five, six twelvemonth adventure? How agelong do you deliberation that would take?

David Wang

Okay. Good question. I should say, still I conscionable mentioned aliases electrical vehicle, different user electronics, right? There's a batch of depletion complaint successful China [indiscernible] chips. And I look astatine customer aliases caller customer description plan, I would opportunity astir apt nan inclination will proceed to spell different astatine slightest 3 years, right? And that's nan -- I opportunity location astir apt a three-year clip line. I mean, again, it really depends connected nan existent situation, but we spot that inclination going up.

Christian Schwab

Great. And we've besides heard from immoderate different companies who waste into home China marketplace that location seems to beryllium a reinvigored effort to bargain from home Chinese suppliers versus world providers into nan superior instrumentality marketplace, if location is bully and competitory markets and products available, which, of course, you have. So do you spot your maturation imaginable perchance benefiting from that complete nan adjacent 3 years arsenic well?

David Wang

Actually, I deliberation for mature nodes, it is beautiful same, right? In this moment, you cognize that location are different restrictions regulatory, not constricted mature nodes, right? So I spot that arsenic still everybody tin sell. So we're not circumstantial to say, they person to bargain domestic, immoderate we are doing. However, because of nan past 2 years, 3 years, nan constrained proviso and walking and group -- that we make our R&D squad successful Shanghai we will make outstanding (ph), right? We still can't spell successful pinch nan customer. Maybe that will springiness a customer benignant of advantage of our proximity omni center, shaper closing.

I spot that arsenic a much large impact, right? So I mean, I should say, I will opportunity nan customer still see a faster instrumentality pricing and besides nan stableness of instrumentality arsenic a awesome information and not conscionable person to prime domestic. I deliberation that's a really adjacent market. We want to besides stock that marketplace pinch different players successful home and besides extracurricular China. That's really -- finally, it's really a solution game, right, your cost, your service, your merchandise quality. I look astatine that arsenic much major.

Christian Schwab

Perfect. And past my past mobility regarding first income to a ample U.S. company. And I deliberation that I heard you opportunity you thought you would get acceptance of those 2 devices and further orders from that customer this year. Is -- did I perceive that correct?

David Wang

Yeah. I deliberation that we suffice that tool. And hopefully, we're -- their continued description plan, and we've sewage to repetition nan order, right? That's what we're expecting.

Christian Schwab

Great. And is that -- pinch that customer, is that connected immoderate analyzable worldly for illustration gross each astir aliases thing for illustration that aliases is location a exertion displacement wherever it's opening up an opportunity for your products pinch that customer that possibly didn't beryllium before.

David Wang

Well, I'm not going to talk excessively overmuch astir that, right? We do person NDA. We moreover benignant of talk if nan customer is simply a logic and representation benignant of target either, but we cannot remark your question, sorry.

Christian Schwab

Okay. That's fair. And past I deliberation successful a convention telephone aliases 2 ago, you mentioned -- this is my past question, that you would expect income aliases shipments, I should say, extracurricular of home China successful almanac '23, a target of astir 10% of those shipments extracurricular of that market. Is that still nan number we should beryllium reasoning astir aliases did I retrieve that…

David Wang

Yeah. I should opportunity astir apt 5 to 10. It really difficult to springiness you a fixed number now, possibly by extremity of this year, I'll springiness you much detail. But nan target correct now of 5 to 10. That's our goal.

Christian Schwab

All correct Sounds perfect. Great. No different questions. Thank you.

David Wang

Thank you.

Gary Dvorchak

Thanks, Christian.

Operator

Our adjacent mobility comes from Chaolien Tseng pinch Credit Suisse. Your statement is open.

Chaolien Tseng

Okay. This is Chaolien. Thank you, David and Mark. My first mobility is, is that nan gross by region, is that based connected displacement to location aliases nan customer headquarter region?

David Wang

We're saying that is based connected -- it's not by really a quarter, we'll talk astir nan delivered to China territory, right? Final location we talk about.

Chaolien Tseng

Okay. So that's much for illustration a displacement to nan location of nan Fed.

David Wang

Let maine clear that. And while let's opportunity highly exclusive fto make sure. Highly exclusive we immoderate that is sold really to nan China allocation, we're considered arsenic for nan Hynix, right. Hynix person some unit successful China besides successful Korea. So did that reply your question?

Chaolien Tseng

Yes. So actually, my adjacent mobility is besides relating to these important customers. So I'm funny that really overmuch complexity manufacturing complexity are we preparing for this and immoderate different world customers by extremity of this twelvemonth aliases adjacent year? In Korea, nan accumulation capacity successful Korea. Because I'm conscionable reasoning that if immoderate -- yes.

David Wang

Okay. I deliberation fto me, Korean capacity aliases description and we're going to, well, doing from now on, right? As I said, we're expanding investments, including accrued capacity and that capacity astatine nan moment, we tin opportunity immoderate of them is still utilizing for China marketplace because we person a co-development instrumentality betwixt Korea and Shanghai. And besides that capacity besides will beryllium prepared for a secondary manufacturing halfway and to proviso customers extracurricular China, right? So that's a two-function successful location successful Korea I make judge I reply your question. Does that reply your question, Chaolien?

Chaolien Tseng

Yes. Because I'm conscionable reasoning that pinch nan U.S. Trade Act, if immoderate of our potential, I mean, U.S. aliases non-U.S. fab customers going to grow successful U.S.? Would they person to only acquisition immoderate cleanable furnace aliases ESP from our Korean accumulation broadside from our Shanghai accumulation broadside successful nan adjacent fewer years.

David Wang

Well, obviously, each customer either they telephone it a business continuity, right, because successful a earthy disaster, they're ever asking 2 sites, moreover three-site manufacturing. So you're asking customers, they prefer, they for illustration astatine these 2 locations and thing happened, they still person a conception stores tin proceed providing nan tool. So that's precisely wherever we're designed present arsenic I telephone it, a business continuity and to really make judge we tin proviso to each nan customers successful nan world.

Chaolien Tseng

Okay. Thank you. And adjacent question, I'm not judge if I missed this earlier, would you mightiness springiness america an thought connected nan R&D ratio into 2023 aft nan awesome summation past year?

David Wang

Let Mark reply your question. He knows much money. I don't cognize overmuch money. He's better.

Mark McKechnie

Yeah, Chaolien. So successful 2022, if you spell done nan numbers, nan non-GAAP basis, it was astir 15.3%, up from 12.7% successful 2021. We deliberation that's astir nan level we'd expect successful 2023 aliases connected 15% aliases so.

Chaolien Tseng

Understood. Thank you. And possibly my very past mobility is that I noted antecedently immoderate different analysts besides asked astir nan very breathtaking gross maturation successful 2023. And David discussed earlier that a information of that will travel from nan Tier 2, 3 fab customers successful China. So I'm still rather funny present because if you look astatine nan fab customer successful China Tier 2, Tier 3 fab, really would you remark connected your marketplace stock pinch this Tier 2, 3 fab successful China past twelvemonth versus nan marketplace stock outlook for this year?

David Wang

Yeah. Actually, if you look astatine nan number, we conscionable spot nan script, it's astir 20% correspond correct now successful past year, right? And I proceed to spot that number will proceed to increase. And because we spot nan caller customer travel retired and besides immoderate 2nd tier and 3rd tier customers for illustration immoderate description too. So it's -- we spot that group business will increase. Yes.

Chaolien Tseng

Yeah. And different question, much connected nan gross nickname side, further benignant of precocious statement restricted by nan U.S. regularisation -- nan U.S. October 7 regularisation for immoderate tools, either nan repeated devices aliases nan caller devices that we vessel to immoderate of these fab customers are each those related revenues already booked successful nan 4th quarter?

David Wang

Let maine [indiscernible] well, obviously, successful nan 4th quarter, location is immoderate gross coming from there, right? And I'm besides expecting still immoderate gross publication moreover this year, too. And obviously, we travel strictly for nan U.S. waste and acquisition regulation, which is nary U.S. portion and nary U.S. exertion more, right? That's our baseline there. But I still spot immoderate going on, but obviously, has been reduced arsenic we comparison past year.

Chaolien Tseng

Okay. Understood. Thank you, David.

Operator

[Operator Instructions] We person a mobility from Suji DeSilva from ROTH. Your statement is open.

Suji DeSilva

Hi, David. Hi, Mark. Congrats connected nan advancement here. Expecting maturation successful immoderate of nan newer products to show up materially successful '23 here. What is possibly nan competitory scenery connected immoderate of nan newer product, nan furnace and nan CMAP? How is that different from nan accepted SAPs, Tebo products?

David Wang

Yeah. Okay. Let's put it this way. So we're increasing -- I deliberation this year, we still proceed to spot our caller merchandise successful cleaning, right. I conscionable mentioned successful nan script, we do person a babble (ph) etcher and besides caller drying technology, including supercritical CO2. And also, we spot nan opportunity for moreover a azygous wafer SPM. So we still different description of our cleaning product, which is to screen almost 90% of cleaning process there, right?

Also, we spot immoderate of this differentiated exertion we introduced to nan world customers, right, Korea and nan U.S., Europe. And much than that is besides we person nan copper plating and furnace, right? And copper plating gained a batch of marketplace stock past year. We proceed to spot that inclination continues going on. Also, we're expecting a mates of ratings for getting into nan marketplace successful Korea and successful Taiwan, moreover beyond, right, Europe.

And different way, nan furnace product, and we do person high-temperature, Anneal, oxidation, and vacuum Anneal, LPCVD, including nitrite, poly, nan poly has (ph) been expanded aggregate customers successful China. And besides past year, we did besides introduce, right, this 2 caller ARD furnace merchandise for nan marketplace and pinch besides proprietary creation of our ALD furnace. We spot that there's besides penetration to nan marketplace successful China besides successful extracurricular China, right? So we spot that V3 merchandise will beryllium driving continuously maturation for 2023. And past that's nan truthful acold we say.

But that was our 2 caller integer product, PECVD and Track will return time. I deliberation we request almost a twelvemonth to measure astatine nan customer side, possibly besides putting successful aggregate customer site. And past that gross publication will beryllium astir apt 2024 and beyond.

Suji DeSilva

Okay. All right. Thanks, David. And past pinch nan maturation successful China from nan shipments, tin you separate what's happening successful China successful nan foundry logic marketplace versus nan representation marketplace to understand nan different dynamics location successful support of your '23 forecast?

David Wang

Okay. Let's put it this way. I still say, we're seeing mature notes grow, obviously, mostly successful nan logic and powerfulness instrumentality analog, possibly immoderate of nan compound semiconductor, right? So we spot that that inclination -- that full ratio will summation successful China. And I still opportunity our memory, I still spot immoderate growth, but nan comparative ratio was astir apt not turn faster arsenic this mature nodes market, right?

I deliberation past year, we are astir nan marketplace of 15%, right, travel from representation because a small much than 15% travel from representation market. This year, I should say, astir apt mightiness beryllium different scope aliases possibly a small spot somewhat lower. That's what we're looking correct now. And Mark, thing you want to adhd connected that?

Mark McKechnie

No, I don't deliberation I'd adhd anything, David. I deliberation you covered it well.

Suji DeSilva

Okay. Great. That’s really adjuvant successful color, Dave. Thank you. Thanks, guys.

David Wang

Thank you.

Mark McKechnie

Thanks, Suji.

Operator

Thank you. And I'm showing nary further questions successful nan queue. I'd for illustration to move nan telephone backmost to Mr. David Wang for closing remarks.

David Wang

Okay. Question truthful fast. Just springiness maine 1 second. Let maine get it. Okay. Thank you, operator, and convey you each for participating connected today's telephone and for your support. Before we close, Gary is going to mention our upcoming investor relations events. Gary, please?

Gary Dvorchak

Hey, David. Thank you. On March 14, we're going to coming astatine nan 35th Annual ROTH Conference successful Dana Point, California. Attendance astatine nan convention is by invitation-only for clients of ROTH. If you're an willing investor interaction your ROTH typical to registry for nan convention and petition a one-on-one. This concludes nan call, truthful you whitethorn each now disconnect.

Operator

This concludes today's convention call. Thank you for participating. You whitethorn now disconnect.