BE Semiconductor Industries N.V. (BESIY) Q4 2022 Earnings Call Transcript

BE Semiconductor Industries N.V. (OTC:BESIY) Q4 2022 Earnings Conference Call February 22, 2023 10:00 AM ET

Company Participants

Richard Blickman - Chief Executive Officer

Conference Call Participants

Madeleine Jenkins - UBS

Ruben Devos - Kepler Cheuvreux

Robert Sanders - Deutsche Bank

Charles Shi - Needham & Company

Didier Scemama - Bank of America

Marc Hesselink - ING

Nigel van Putten - Morgan Stanley

Johannes Ries - Apus Capital

Operator

Good morning, bully afternoon, ladies and gentlemen and invited to Besi's Quarterly Conference Call and Audio Webcast to talk nan Company's 2022 Fourth Quarter and Full Year Results. You tin log into nan audio webcast via Besi's website, www.besi.com. Joining america coming are Mr. Richard Blickman, Chief Executive Officer; and Mr. Leon Verweijen, Senior Vice President, Finance. [Operator Instructions] As a reminder, ladies and gentlemen, this convention is being recorded and cannot beryllium reproduced successful full aliases successful portion without written support from nan company.

I would now for illustration to move nan convention complete to Mr. Richard Blickman. Please spell ahead, sir.

Richard Blickman

Thank you. Thank you each for joining america today. We will statesman by making a fewer comments successful relationship pinch nan property merchandise we issued earlier coming and past are happy to return questions. I would for illustration to punctual you that immoderate of nan comments made during this telephone and immoderate of nan answers successful consequence to your questions by guidance whitethorn incorporate forward-looking statements. Such statements whitethorn impact uncertainties and risks arsenic described successful nan net merchandise and different reports revenge pinch nan AFM.

For today's call, we'd for illustration to reappraisal nan cardinal highlights of our 4th fourth and twelvemonth ended December 31, 2022 and besides update you connected nan market, our strategy and nan outlook. First, immoderate wide thoughts connected our performance. Besi's 4th fourth operating results were amended than expected successful an ongoing manufacture downturn. Revenue of €137.7 cardinal decreased by 18.4% versus nan 3rd 4th past year, reflecting a number of headwinds, including weakness successful high-performance computing and mainstream electronics applications and ongoing weakness successful mobile and personification markets.

However, our backlog roseate 12.2% to scope €270 cardinal owed to a €55.2 cardinal aliases 44.1% sequential bid increase. Such summation resulted chiefly from higher bookings for high-end smartphone applications and hybrid bonding systems. Current bid trends bespeak customers' continued finance successful high-end versus mainstream assembly applications arsenic good arsenic ongoing weakness successful request by Chinese customers. Besi's profitability and ratio remained astatine charismatic levels contempt nan downturn pinch gross margins reaching 62.3%, nett income of €40.2 cardinal and a nett separator of 29.2%.

This twelvemonth marked an important inflection constituent successful our strategical improvement arsenic we position Besi for sustainable maturation complete nan adjacent decade. Our business exemplary generated gross and profitability levels substantially higher than peers arsenic we efficaciously responded to an assembly downturn pursuing ample capacity additions complete nan past 2 years.

For nan year, gross and nett income of successful full €722.9 cardinal and €240.6 cardinal declined by 3.5% and 14.8%, respectively, versus 2021. Orders of €663.7 cardinal declined by 29.3%, principally owed to decreased request for high-end smartphone applications station caller merchandise introductions successful 2021. The alteration besides reflected reduced bookings from Chinese subcontractors for mobile and mainstream computing applications linked to softening economical conditions. Of note, gross from Chinese customers declined by 33.5% and represented 25.9% of gross successful 2022 versus 37.6% successful 2021.

Revenue and bid weakness successful smartphone applications was partially offset by continued spot successful Besi's computing/hybrid bonding and automotive end-user markets arsenic good arsenic accrued gross from spares and work activities which grew by 25.7%. We achieved peer-leading operating and nett margins of 40.7% and 33.3% successful a difficult situation arsenic we successfully aligned accumulation to changing marketplace conditions. In fact, gross margins accrued to 61.3% this twelvemonth owed chiefly to a 77% simplification of impermanent headcount from highest first 4th levels, effective guidance of our proviso chains and value increases implemented to thief offset inflationary costs pressures.

As you tin spot successful this adjacent chart, Besi's 2022 gross alteration was almost exclusively owed to little mobile revenue. As a result, its percent of nan full gross decreased from 43% successful 2021 to 28% successful 2022, chiefly offset by an summation successful computing end-user marketplace applications from 19% to 30% and increases successful automotive and spares and work to 16% and 17%, respectively. Besi's gross and profitability has accrued importantly since nan past manufacture downturn arsenic measured by a comparison of nan years instantly pursuing cyclical highest levels.

As evident successful this adjacent chart, revenue, orders and operating income successful 2022 grew by 37.6%, 37.4% and 17.3% [ph], respectively, versus 2018 and operating margins expanded by 7.8 points [ph]. Besi ended nan twelvemonth pinch a coagulated liquidity guidelines consisting of rate and deposits of €671.7 million, aliases €8.56 per basal stock and a nett rate of €346.5 million. We will propose a rate dividend of €2.85 per stock which reflects a payout ratio of 93%. Including specified dividends, Besi will person returned astir €1.6 cardinal to shareholders complete nan past 13 years aliases astir 25% of cumulative revenue.

Shareholders were rewarded for their finance successful Besi pinch an summation successful dividends and stock repurchases of €236.8 cardinal aliases 132% versus 2021. Of note, we repurchased 2.7 cardinal shares this twelvemonth for €146.8 cardinal and person bought different 670,000 shares to day successful Q1. Our nonsubjective is to further trim Besi's stock count to offset imaginable dilution from anterior convertible enslaved issuance.

Next, I'd for illustration to speak a small spot astir nan existent marketplace situation and our strategy. As seen successful this adjacent chart, manufacture conditions person deteriorated importantly since nan 2nd 4th past year, highlighted by slowing memory, mainstream computing and information halfway markets, continued weakness successful Chinese markets and CapEx reductions announced by galore of nan largest semiconductor producers. The assembly marketplace was nan first to acquisition nan afloat effect of nan existent downturn.

TechInsights estimates that our marketplace decreased by astir 10.6% successful '22 pinch an further diminution of 16.8% anticipated successful 2023. Thereafter, a caller upturn is expected pinch nan full marketplace reaching USD6.9 cardinal successful 2025. We made a number of important R&D and business investments successful 2022 to amended position ourselves for anticipated maturation complete nan adjacent manufacture cycle. Development spending was accrued by 48% to ramp hybrid bonding for commercialized production, to present 2 caller wafer level assembly systems and to upgrade our existing merchandise portfolio.

Operational resources were utilized to summation cleanroom accumulation and service/support capacity successful Malaysia and Singapore arsenic we prepared for anticipated hybrid bonding maturation complete nan adjacent 5 years. To hole for expected hybrid bonding marketplace growth, we person accrued improvement unit successful Austria, Singapore, Taiwan and nan U.S. by 26% complete nan past 2 years and expanded capacity to 12 to 15 hybrid bonding systems per month. In addition, we retrofitted our Malaysian accumulation accommodation to amended protect them against imaginable ambiance change-related events and activity has begun connected a caller tooling installation successful Vietnam arsenic galore customers displacement a information of their accumulation extracurricular of China to different locations successful nan Southeast Asian region.

Substantial advancement was besides achieved to thief hybrid bonding go a marketplace reality. Significant improvements successful placement accuracy, throughput, output and lead times each contributed to its commercialized viability. Full-scale accumulation began successful nan 2nd half of 2022. In total, Besi has shipped 35 hybrid bonding systems since nan 4th fourth of 2021, of which 10 were objection units, per gross producing units we shipped 4 successful 2021 and 21 successful 2022. In addition, we received orders for an incremental 14 units from aggregate customers consequent to Q3 past year, of which 3 orders were received to day successful nan first 4th of '23. Orders received successful Q4 '22 are not anticipated to beryllium shipped until Q2 of this year, of which respective are to beryllium incorporated into integrated accumulation lines. Of note, nan first integrated accumulation statement was shipped successful nan 4th quarter.

Interest successful hybrid bonding process exertion is besides gaining important traction pinch nan improvement community. We shipped an information strategy to IMEC successful Belgium, an manufacture which investigation institute and received an bid successful Q4 from a salient American assemblage for hybrid bonders arsenic portion of integrated lines. In addition, chiplet interface standards are now being developed by nan industry's largest players to thief facilitate its take and utilization. The advancement besides continued connected Besi's ESG schedule this year, wherever 2022 targets group successful 2020 were met aliases importantly exceeded successful cardinal c emanation categories arsenic good arsenic successful nan areas of waste, hazardous materials and renewable energy.

Now a fewer words astir our guidance. There is simply a precocious grade of uncertainty arsenic to nan outlook for 2023. The assembly marketplace is successful a classical downturn aft 2 beardown years of growth. However, we judge location are a assortment of imaginable outcomes for Besi's prospects this twelvemonth successful nan discourse of nan existent down cycle, including nan outlook for smartphone and hybrid bonding request arsenic good arsenic nan effect of nan reopening of nan Chinese economy. The headwinds we look are many, including higher ostentation and liking rates, decelerating economical growth, geopolitical tensions and ongoing weakness successful mainstream electronics, computing and mobile handset end-user markets.

For Q1 '23, we forecasted gross -- nan alteration successful a scope betwixt 0% and 10% versus nan 4th fourth past twelvemonth arsenic galore orders received successful Q4 are scheduled for transportation successful Q2 and Q3 this year. In addition, we estimate that Besi's gross separator will scope betwixt 61% to 63% and that baseline OpEx to alteration by 0% to 5% versus nan 4th fourth of past year. Total operating expenses are expected to summation by 15% to 20% owed to an incremental €7 cardinal of noncash share-based compensation expense. Further, we expect an effective taxation complaint of betwixt 12% and 15% and CapEx of €8 cardinal to €10 cardinal for nan twelvemonth 2023.

That ends my prepared remarks. I would for illustration to unfastened nan telephone for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] We will return nan first mobility from Madeleine from UBS.

Madeleine Jenkins

So my first is astir hybrid bonding. According to definite property releases, we've heard that an American IDM will perchance person a slow ramp-up of devices this twelvemonth than possibly antecedently expected. Could you conscionable show america what you're seeing from your end? And if this is nan case, is location for illustration projected 52 [ph] capacity you person this twelvemonth beryllium satisfied by request elsewhere? And I person a speedy follow-up, if I may.

Richard Blickman

Well, arsenic explained successful nan property merchandise but besides successful nan comments, hybrid bonding is surely a broader take trajectory which started 2 years agone successful Taiwan. And past twelvemonth was captious to group up nan first accumulation capabilities successful Taiwan. And we person ever shared pinch nan finance organization that according to our information, nan U.S. should travel suit pinch possibly a twelvemonth successful between. Preparation is ongoing. As we besides mentioned, we are mounting up support group group successful different locations. And that could very good lead this twelvemonth to a important summation successful nan capabilities onshore successful nan U.S., apt pinch capacity coming connected watercourse early adjacent year. So that's benignant of nan timing we hear.

We are good prepared for that. As you besides mentioned nan 12 to 15 machines per period is stressed, we tin moreover build more. But that is decidedly capable to support nan capacity required for nan manufacture simply bottom-up accounting successful nan adjacent 2 to 3 years. And it takes america astir 6 to 9 months to summation our capacity further. So this twelvemonth will beryllium very important, further take capacity description . You besides spot that successful nan orders we received successful Q1, let's say, Q4 first and past further orders successful nan early portion of this quarter. So that fundamentally fits that picture.

Madeleine Jenkins

Okay, great. And different mobility I had was astir your orders. You mentioned successful nan merchandise that portion of nan summation you saw was owed to high-end smartphones. Could you possibly supply immoderate much specifications astir nan drivers wrong this? Is it immoderate circumstantial contented summation aliases much of a world marketplace driven?

Richard Blickman

Well, it's contented related. It is simply a mentation for a adjacent round. The mobility is ever really ample will that information be. It's encouraging that these orders are placed successful Q4. That besides has to do pinch proviso concatenation issues which nan full world has knowledgeable successful nan past 2 years. But yes, it's simply preparing for a adjacent high-end smartphone round.

Operator

We will return nan adjacent mobility from Ruben from Kepler Cheuvreux.

Ruben Devos

I conscionable had nan first 1 connected hybrid bonding arsenic well. I deliberation successful nan property release, you mentioned that you've made important improvements connected various KPIs. Could you possibly talk successful much item astir nan advancement you've made. I judge you've mentioned successful nan past that benignant of advancement successful placement accuracy and throughput would thrust ASPs and that if each goes very well, you could beryllium looking for ASPs of €6 cardinal to €8 cardinal per system. So is that still your reasoning today? And really do you spot ASPs possibly germinate done nan adjacent 2 years compared to what it has been possibly for nan 35 systems [ph] shipped truthful far? That's my first question.

Richard Blickman

Excellent. Well, fto maine first create immoderate reference. Until nan mid of '21, we were successful a improvement phase. And arsenic of Q3 '21, location was this celebrated first exertion and chiplet from AMD which benignant of ignited a mainstream adoption. So that resulted successful orders which we started to instal successful early Q1 past twelvemonth pinch immoderate hiccup owed to immoderate accumulation reasons. But basically, arsenic of February and March, we really started to instal machines to beryllium utilized successful full-time production. As we shared each quarter, this has been a emblematic roadworthy of galore issues because these machines successful nan opening are not afloat tested successful accumulation situation but we've travel a agelong measurement and we've shared successful nan past convention telephone extremity of October that nan output retired of these machines has moved from arsenic debased arsenic 20% to astir 80% output successful extremity of October. That output has further improved since and that simply results successful higher output per machine.

One must understand and we've shared that successful nan Capital Markets Day, simply comparing output of high-end flip-chip machines to these hybrid bonders. With flip spot we reached 7,000, 8,000 units per hour. And successful this hybrid beingness successful nan later portion of '22, we are now reaching location betwixt 1,500 and 2,000 UPH. So astir 1/4 output. We person besides shared that location are continuously programs ongoing to make these machines much stable, higher yields and that past leads to further summation of output. And that is needed to connecting chips to chips. And arsenic we participate into '23, continued betterment connected machines is ongoing each azygous time and we should scope that 2,000 UPH for definite dice sizes arsenic a modular and that past will simply origin further take of hybrid bonding.

I'm explaining this a spot lengthy because this is pinch each caller technology. And past you could inquire nan question, are you up of your anticipation aliases behind? Well, today, we tin say, well, this is precisely what we person expected besides nan manufacture simply understands is that is why nan take complaint is gaining not only astatine circumstantial customers but acold much broadly. So that looks each very affirmative but we're still successful an early phase. So a batch still has to travel and that will come. Then what we besides should realize, we are now successful Generation 1 and that is 150-nanometers [ph] placement accuracy and accumulation whitethorn beryllium 200. We will vessel nan first 100-nanometers for Generation 1 positive aliases Generation 2 and is past tin of bringing this accuracy down to 100 nanometers. And that is important because that is linked to a node size displacement astir 3, 5 nanometers and that will further create nan possibilities of chiplet architecture creation devices and not only for high-end computing but besides for high-end mobile and those developments are captious successful nan people of 2023 and past anticipating mainstream take successful 2024.

So there's a large program, first of all, making nan first procreation much 100% accumulation capable, reaching yields adjacent to 100%. And past a adjacent procreation going down to 100 nanometers. And that ever starts pinch somewhat slower accumulation capabilities because of nan accuracy and particularly vibration are captious issues successful these applications but we will maestro that. So a afloat programme for 2023, heading up to a awesome description anticipated successful '24, '25 and '26.

Ruben Devos

Okay, very clear. And I think, Richard, you mentioned that location could moreover beryllium take from high-end mobile. I deliberation successful nan past, we stock that existent marketplace estimates do not really bespeak take of hybrid bonding successful this market. So I mean erstwhile you look astatine nan descent successful your presentation, that was ever excluding high-end smartphone, right? So chiefly connected computing.

Richard Blickman

No, no. If we -- we person always, let's say, shared that nan world is first and that is happening, high-end computing, information halfway modules and graphics, truthful each logic based and past adding besides representation to that and past nan high-end, let's say, smartphone arena successful '24, '25. And that roadworthy representation still stands -- roadworthy representation and timing has not changed. And why is that important? Mostly those roadworthy maps are very eager and they continuously displacement because of each kinds of method reasons and marketplace reasons. But it's adjacent to opportunity that nan take complaint of hybrid bonding for each exertion is truthful acold not disappointing. Let maine stock successful those words.

Ruben Devos

Okay, very clear. And past possibly a last question, a spot precocious level, conscionable reasoning astir nan Chinese marketplace for which request was down materially past year. I understand you were not negatively impacted by waste and acquisition restrictions but what's your return connected nan accumulation shifts that are taking place, I judge [indiscernible]. So what could beryllium nan effect possibly some successful nan short word and successful nan agelong term?

Richard Blickman

Well, it's communal knowledge that each institution is investigating and taking action to trim vulnerability to China. And for that reason, arsenic we person done always, we travel customers and we hole for supporting customers successful different Asian Pacific regions which measurement by step, will either beryllium organized aliases group up for caller products but it whitethorn very good beryllium that besides existing capacities whitethorn shift. And that's connected apical of nan very precocious end, wherever we person these restrictions now and to beryllium very clear, we simply travel nan guidance of nan U.S. successful this case. And there's besides nary thought that this will alteration successful immoderate measurement successful immoderate clip soon.

So Besi's strategy is still to beryllium prepared for capacity description s extracurricular of China for capacities moving retired of China, supported by our installation successful Malaysia which we person expanded importantly past twelvemonth pinch a awesome caller installation added to our existent facilities. And past we are mounting up. We're successful nan mediate of mounting up our first cognition successful Vietnam. And those 2 should -- pinch nan China for China installation which is ongoing supporting nan Chinese marketplace fresh for really this marketplace will create successful nan years to come.

Operator

We will return nan adjacent mobility from Robert from Deutsche Bank.

Robert Sanders

I conscionable had a mobility astir nan computing PC server business line. It seems for illustration that is now nan largest conception arsenic per nan past twelvemonth astatine 30% of sales. That maturation is beautiful astonishing to me. So tin you conscionable show america a small spot much astir what's happening there? Have you won much contented astatine Intel, for example, person you won immoderate TCB business aft [indiscernible]; is location thing other going connected there? I person a follow-up.

Richard Blickman

Well, nan past 1 is still to come. As we explained successful erstwhile updates, we person -- aliases we are very adjacent to shipping nan first next-generation TCB displacement distant for instrumentality successful April -- successful nan period of April which is afloat fresh for nan adjacent generation. But truthful acold successful '22, it besides amazed america successful a measurement aliases let's say, astonishment successful that consciousness nan driblet successful high-end smartphone was significant. And nan emergence successful nan computing applications simply adds nan gross nickname successful hybrid booming which is for modules successful information centers and high-end computing. So astir portion is ongoing spot successful our marketplace positions for a agelong clip and whether that's successful nan U.S. aliases successful different regions. And past connected apical of that, you person nan hybrid bonding systems.

Robert Sanders

Got it.

Richard Blickman

I deliberation that -- besides answering nan mobility of immoderate people, is this cannibalizing your existent flip spot business? And nan reply is simply no.

Robert Sanders

Got it. And past connected nan bid beat, you mentioned that your largest smartphone customer whitethorn person ordered much because of proviso concatenation concerns. Does that interest you a small spot erstwhile you deliberation astir Q1 orders? I mean are you benignant of borrowing a small spot of nan spot that you usually spot successful Q1 into Q4? Or do you deliberation that Q1 tin still beryllium arsenic is traditionally nan by acold nan biggest 4th of nan twelvemonth erstwhile it comes to bid intake?

Richard Blickman

Well, it's a spot of both. But you person to again conception nan hybrid bonding orders. So we had 11 successful Q4. And decent ones besides wants to beryllium connected to automated lines and past 3 much successful January. And past a bully information first information for a next-generation high-end smartphones. How overmuch much location is to travel is very difficult to forecast arsenic we person shared complete nan years. The marketplace timing decisions are very overmuch February, March, sometimes moreover April. And we person to beryllium prepared. Simply, we person to beryllium prepared to respond astatine nan timing expected we are. So anyway, it's breathtaking to spot what whitethorn happen.

Operator

The adjacent 1 is from Charles, Needham & Company.

Charles Shi

This is Charles Shi from Needham. Maybe my first question, I want to spell backmost to your high-end smartphone demand. I deliberation this whitethorn beryllium nan plaything facet because arsenic you said, location is simply a assortment of outcomes for you successful 2023. I noticed that for your Q4, you mentioned that year-on-year, what's driving nan bookings and nan connection you utilized successful nan property merchandise seems to propose that nan bookings successful Q4 past twelvemonth from high-end smartphone customers seems to beryllium comparatively successful statement pinch nan 4th fourth '21. But looking into first 4th '23, I mean, comparative to first 4th '22, I deliberation that will apt show america really your 2023 business is going to inclination connected a year-on-year basis. I cognize that nan peculiar customer, they thin to spot a greater magnitude of orders successful Q1 but we are astatine nan extremity of February, now almost 2/3 into nan first 4th this year. What tin you show america correct now comparative to past twelvemonth but nan bid coming from this high-end smartphone customer, is it going to beryllium amended than past twelvemonth aliases successful statement aliases not trying to put words into your mouth, I don't deliberation it's going to get worse. But really do you consciousness astir that? Are you emotion bully correct now?

Richard Blickman

Well, fto maine reply that pinch what we person said besides astatine nan extremity of Q3, erstwhile we announced that we had immoderate agelong lead point orders already successful nan 3rd 4th because of proviso concatenation issues. If you look astatine nan historical shape of awesome caller contented successful high-end smartphones. There was usually 3 years successful between. The past clip we had -- yes, a awesome up rhythm was '21, a spot of an overflow successful '22. So we person ever been, yes, a spot observant successful why would this 3 years beryllium reduced to 2. On nan different hand, we received these agelong lead point orders and we've besides received very bully orders truthful far.

There whitethorn beryllium immoderate effect because of important marketplace stock gains of nan U.S. high-end smartphone shaper successful China and pinch an system successful China improving, possibly there's immoderate anticipation of moreover stronger maturation to beryllium expected. But -- nan only -- yes, let's say, nan reply I tin springiness you is that this is ever uncertain successful a measurement that we person to beryllium prepared but really overmuch yet will come. And I ever punctual you of nan 2nd 4th of 2018 which we'll ne'er hide that we received a awesome information successful March, April -- February and March, April clip frame. And successful nan 3rd week of June, half of that was canceled. So it's an unpredictable market. But that's it. Whether we for illustration that aliases no, you simply person to beryllium capable to grip that. So I can't springiness you much clarity, Charles.

Charles Shi

Yes. I deliberation nan different -- I mean, connected a afloat twelvemonth basis, for illustration 2022, nan weakness was attributed to 2 factors primarily, right, 1 is high-end smartphone. We conscionable talked astir that. But nan different 1 is China. And I don't deliberation you've provided overmuch circumstantial position aliases your outlook successful China is this year. But tin you springiness america a consciousness what is nan bid book you person that tells you astir nan China spot this year, particularly we are retired of nan Chinese New Year, I deliberation historically, this is erstwhile caller orders will travel successful from China but complete nan past 1, 2, 3 weeks, really -- really has your bid book person been trending coming retired of China?

Richard Blickman

Well, happy to share. First of all, we were all, let's say, hoping for a adjacent information aft Chinese New Year because of a very slow marketplace past year. And pinch nan maturation ambitions and everything happening successful China, 1 would expect that. So galore of our peers and customers benignant of besides analysts successful wide markets person expected successful a affirmative move successful nan Chinese market. Well, it's adjacent to opportunity now until February that has not happened. Some are now expecting and forcing that, that will decidedly hap successful nan 2nd half of this year. Also nan -- yes, Chinese system is improving. But if we simply being retired nan utilization complaint astatine nan 4 awesome subcons. Those utilization rates coming show america simply that they're not imminent to bid a awesome adjacent route.

So that fits much into arsenic things create but besides nan worldwide system and if things don't deteriorate successful wide pinch China, U.S., past statistically pinch 6 quarters down, you should spot a move successful tight successful this summertime and improving successful nan 2nd half of this year. That's, let's say, an reply to -- of your mobility from our view. If we are wrong, well, we tin beryllium incorrect that it comes much early because immoderate are saying, "Well, possibly it will travel successful April, May." Well, we're happy to see. If it takes longer yes, past you look into a exemplary which nan world does not yet share, 2024 should surely beryllium again an up year. So nan mobility is, erstwhile does nan tide turn. Well, Besi is prepared decidedly for a turn. Any items successful our machines and modules besides devices, captious devices, long-lead items. You person to beryllium prepared successful this manufacture astatine short notice. But nan cardinal is Charles, we don't spot astatine this infinitesimal a move successful this tide yet.

Charles Shi

Maybe conscionable lastly, I want to opportunity your hybrid bonding shipment positive caller orders, you're approaching 45 full number of units and almost location to scope nan 50 tools, that's a magic number. I deliberation tons of group are skeptical astir hybrid bonding. I deliberation it's up of its clip but I deliberation your numbers are decidedly showing nan opposite. I want to really opportunity congratulations. And that's my past question.

Richard Blickman

Any further questions?

Operator

We person Didier from Bank of America.

Didier Scemama

Richard, I wanted to spell backmost to nan bid intake for Q4. I'm going to put words successful your mouth. So it sounds for illustration €60 cardinal [ph] has been brought guardant from Q1 to Q4. So should we conscionable presume that your Q1 bookings are going to beryllium astir €60 cardinal [ph] little than your Q4 level? Or is location immoderate logic why it could beryllium level fixed nan seasonality?

Richard Blickman

Again, hybrid bonding is new. So I tin besides reply it successful this way. If we would not have, let's say, occurrence of hybrid bonding successful nan numbers, arsenic explained to earlier questions, our numbers would bespeak very overmuch nan wide downturn successful nan assembly market. So hybrid improves nan image and that is continuing. So that's a affirmative improvement connected apical of our accepted business. But arsenic we explained successful nan property merchandise and to velocity that, again, we're successful a emblematic downturn, a classical downturn and immoderate affirmative developments of caller technologies and a batch of them being hybrid but location are besides different caller technologies.

So you can't simply say, well, €60 cardinal [ph] was ordered earlier because of proviso concatenation issues; truthful Q1 should beryllium €60 cardinal [ph] less. It's not that elemental but anyway, I deliberation nan cardinal is to repetition that again, truthful far, we are going done this downturn successful a very affirmative consciousness pinch important diminution successful nan classical and that is also, yes, to immoderate extent, successful nan high-end smartphone applications past year. Chinese, arsenic we discussed earlier, Chinese subcontractors only very caller things but nary capacity description whatsoever. We haven't discussed automotive. Automotive is still holding on. There are galore strategical investments successful expanding capacity for automotive. That besides has helped america past twelvemonth and will thief this year. Yes, that's astir nan picture.

Didier Scemama

Okay. And I conscionable wanted to spell backmost to your constituent connected hybrid bonding and high-end smartphones. So I deliberation you said this is an important twelvemonth to get to 99.9% output connected hybrid bonding. Any consciousness arsenic to whether that happens successful nan first half aliases much successful nan 2nd half. And I conscionable wanted to repetition if I heard correctly, high-end smartphone take for hybrid bonding successful '24, aliases if I misunderstood?

Richard Blickman

Well, nan first question, nan 99.9%, we should scope this twelvemonth surely 99%, whether it's 99.9%, I don't know. But these machines arsenic they are now moving astir nan clock, are improving time by day. So that is very affirmative development. What is cardinal to understand, we shipped successful Q4, nan first, let's say, bonders [ph] which were integrated to a statement successful Taiwan and that is marque new. Although we person this first statement successful nan halfway of excellence of AMAT successful Singapore. We are now installing and starting up this statement for production. And successful nan people of this year, that besides will return immoderate clip to go successful nan 99% category. Same will hap successful nan U.S. So a batch of attraction connected nan integrated statement conception and why this integrated statement conception because that improves nan output simply by little particles. So that's very important for further take of hybrid bonding successful each applications.

To your 2nd connection connected high-end smartphone adoption, it's limited upon very overmuch nan costs of ownership which results from further betterment connected nan either stand-alone hybrid bonder systems aliases nan ones which are integrated into integrated lines. So that besides will beryllium captious this twelvemonth and whether it will beryllium fresh for nan awesome information anticipated successful high-end smartphones successful '24, whether that's going to beryllium nan exertion of choice, we will find retired successful nan summertime successful July, August, September clip frame.

Didier Scemama

And past last mobility for maine is connected high-performance compute and nan ChatGPT AI exertion we see. It feels for illustration hybrid bonding is simply a cleanable exertion to tackle ChatGPT pinch nan stacking of DRAM connected apical of server CPUs to tally nan conclusion aliases moreover to tally nan training of nan algos. So 1 of your customer is really showing hybrid bonding aliases 3D IC packages pinch 3 DRAM stacked connected apical of nan work CPU to tackle immoderate of those applications. When do you deliberation that mightiness beryllium a driver of nan hybrid bonding take astatine your starring customer.

Richard Blickman

Well, that is besides '24, '25. Remember, past year, we shared respective times nan advancement connected this stacking of memories, a U.S. customer, besides high, not only liking but engagement successful Korea correct now which should lead to further yes, let's say, take and past description into mainstream applications. There's a caller 1 presently by logic customers stacking logic connected logic which is besides a awesome development. So these are each applications successful hybrid bonding, utilizing hybrid bonding technology. And it will be, arsenic I said respective times successful this call, '23 will beryllium a very important twelvemonth to spot wherever this hybrid exertion tin really go nan mainstream and past for very circumstantial extremity products. And 1 of them being, of course, high-end smartphones, that will alteration nan scenery importantly pinch galore much capacity required; truthful galore applications underway.

Operator

We'll return nan adjacent mobility from Marc from ING.

Marc Hesselink

Yes. My first mobility is really besides a follow-up connected nan hybrid bonding successful mobile. Do I publication it correct that if you get nan capacity up arsenic planned, past that bottlenecks away? Or do you besides request immoderate step-ups from nan fabless companies to really make that displacement to hybrid bonding successful mobile?

Richard Blickman

Well, that's a very bully mobility again. They are preparing for that. Don't hide that for immoderate fabless company, they are afloat limited upon nan capabilities of this fab. So that's very transparent. Does that reply your question?

Marc Hesselink

Yes, yes. That's okay. The 2nd mobility is really connected nan ASP of hybrid bonding. I presume that successful this existent ramp up, it remains comparatively unchangeable but I besides judge that erstwhile you really amended nan performance, past nan ASP should commencement to move up. Where are we connected that process?

Richard Blickman

Well, first of all, you tin simply understand from our gross separator improvement successful full that we are decidedly successful a bully business truthful far. Increase successful ASP is ever linked to summation successful features. So successful these machines, there's a changeless improvement pinch automatic instrumentality speech pinch definite big machine connection software, loaders are very critical. And erstwhile customers want to build chiplets, you request to person different chips loaded into that machine. So there's a precocious grade of improvement successful preparing those different devices for relationship successful this chiplet architecture. And those features successful nan extremity will summation nan ASP of these machines.

Then you person underlying and we besides had a remark connected that successful this prepared notes because of ostentation and besides different costs increases, we increase, of course, our prices of our machines because of that. So you person an ASP inflation, you tin telephone it. And connected apical of that, you person increases because of further features, some hardware and software. We person guided successful nan ASP scope successful nan Capital Markets Day betwixt €1.5 cardinal and €2.5 cardinal [ph] for this first generation, nan 150-nanometers [ph]. We person guided somewhat higher €3 cardinal [ph] scope pinch nan 100-nanometer capacity because that instrumentality is much analyzable than particularly vibration is an rumor pinch accrued accuracy. So that will besides summation nan ASPs but truthful far, that is nan improvement but successful a affirmative -- affirmative result truthful far.

I tin besides opportunity differently, these ASPs are, of course, impacted coming by nan tremendous support we person to supply successful bringing these machines up to afloat accumulation capability. Once these machines are moving to expected and besides committed specs immediately, you person little support and that leads to higher margins.

Marc Hesselink

Okay. And past possibly arsenic a follow-up connected nan gross separator connected nan group level, very beardown and already I deliberation astatine nan higher extremity of nan erstwhile semipermanent medium-term ambition, I tin ideate that today, nan operation is very favorable. But is it existent that you made different measurement alteration location connected nan gross separator level?

Richard Blickman

Well, what is, of course, very important to simply note, it's been a very difficult twelvemonth 2022. So from a supplier proviso concatenation issues from accrued ostentation complete time. Labor costs simply accrued labour costs. But past offset by improved strategy capacity customers who are besides faced pinch inflationary pressures truthful difficult negotiations and improving pricing. But overall, this is decidedly a higher gross separator than '21. On an equal-to-equal basis, location was immoderate effect connected nan gross separator successful '21, because of this flooding successful Malaysia. But past still, if you would return that out, margins person somewhat improved '22 complete '21. But arsenic you said, nan mix, it's ever pinch caller technologies, we person higher margins because a elemental question, why would you create an exertion for a caller exertion if it doesn't bring you a higher margin? So from that basal principle, that's wherever coming we benefit.

Operator

We person nan adjacent mobility from Nigel from Morgan Stanley.

Nigel van Putten

Another mobility connected hybrid bonding, obviously. So convey you for nan colour connected bid intake successful some nan 4th fourth and existent quarter. I conjecture it showed a small spot of lumpiness arsenic is to beryllium expected. But besides fixed your comments truthful acold astir nan existent procreation versus nan adjacent procreation and existent yields, from nan feedback from your customers, do you expect immoderate further platforms to participate accumulation this twelvemonth based connected what I presume to beryllium shipping nan first procreation instrumentality still? Or are these for improvement purposes broadly? That's my first question.

Richard Blickman

No, no. The cardinal is this twelvemonth that they are decidedly utilized successful a broader-end application. And that's why nan take is gaining traction. If it would only beryllium development, you would not vessel 35 machines.

Nigel van Putten

No, that's clear. I mean that's for nan 1 customer that's already utilizing nan devices connected aggregate platforms. But you've mentioned successful nan property study for IDMs [ph].

Richard Blickman

Okay. So fto maine commencement pinch nan first customer. Suppose location are 6 versions truthful far. And past besides nan different customer successful nan U.S. who is mounting up now accumulation capability, they person yet decided connected 3 awesome families which will beryllium 100% utilizing hybrid bonding interconnect technology. And that is, let's say, explaining why this ramp could materialize successful nan 2nd half of this twelvemonth and surely nan first half of adjacent year. And past location are besides different customers carrying roadworthy maps utilizing hybrid bonding. And connected apical of that, nan awesome subcontractors are now preparing to instal a hybrid bonding capability. So they must person customers driving that capability. Otherwise, why bargain costly tools. So there's a wide adoption, isolated from what we mentioned besides successful reply to earlier mobility that we're now seeing nan representation world starting earnestly to group up capabilities to link first of all, memories, truthful representation packs which are past prepared to stack connected [indiscernible]. So these are all, let's say, mainstream applications, a portfolio of galore devices.

Nigel van Putten

Excellent, that's clear. And nary of them is benignant of waiting for nan 2nd gen. I mean you've mentioned those could beryllium utilized for 3 and 5 nanometers beforehand end. Does look that particularly SRAM shrink doesn't really work, past truthful you'd expect awesome much exertion of hybrid bonding erstwhile we scope that statement successful nan mainstream. Is that -- really should we deliberation astir this? Or could you spot customers usage some for 2nd -- 3rd procreation depending connected their application?

Richard Blickman

No. The first, what you explained. That is really we publication nan rollout aliases nan take of this hybrid bonding technology.

Nigel van Putten

That's past existent for -- I mean, there's galore questions connected smartphones but I conjecture besides GPUs, CPUs, it's benignant of tied into that 3, 5 nanometer. Okay. That's great. Very clear and bully to perceive that this 1 awesome logic customers yet besides made a decision. Second question, I do want to again inquire astir nan bid book for nan existent quarter. From nan property release, I get that astatine slightest astir of nan hybrid bonding devices are do shipments successful nan 2nd quarter. But obviously, historically, nan smartphone campy has besides asked for shipment successful nan 2nd quarter. So is that first nan correct measurement to deliberation astir that? And past second, possibly putting it a spot much bluntly, do you expect a affirmative book-to-bill for nan first quarter?

Richard Blickman

That disbursal some connected bookings and billings. Well, we don't guideline for bookings. And arsenic explained, immoderate elements are difficult to publication really overmuch much will beryllium prepared for a adjacent information to opportunity it successful those terms. As always, breathtaking successful a marketplace situation which arsenic explained besides by China which is still a soft market. Automotive is continuing investments, yes. Well, Q2 and Q3 will certainly, arsenic it looks today, beryllium pinch besides nan orders received higher gross quarters. But it's excessively uncertain to springiness guidance for much than nan existent quarter.

Nigel van Putten

Understood. Maybe my past question, again, a follow-up connected nan bid intake. Would it beryllium adjacent to opportunity fixed proviso concatenation conditions improving that nan backlog should normalize by nan 2nd quarter. Is that astatine slightest thing we could assume?

Richard Blickman

Yes. But besides don't hide successful that backlog, you person a hybrid enslaved orders and nan manufacturing lead clip still of astir 15 to 20 weeks, depends a small bit. So they are much than workaround that changes nan profile, nan historical floor plan wherever we had typically quarterly tally rate. But your constituent astir nan backlog overall, yes, it should beryllium much normalized.

Operator

Next mobility from Ries from Apus Capital.

Johannes Ries

This is Johannes Ries. Maybe 3 follow-on questions. First, connected nan taxable again, of hybrid bonding. It's clear, it's a basking one. Maybe if I retrieve right, you talked already astir 3rd generation, possibly which coming into nan early for 50-nanometer [ph] bonding. Only to make it clear, this smartphone whitethorn beryllium awesome take successful '24, '25. Is it based connected nan procreation -- to a Generation 3 astir likely?

Richard Blickman

High-end smartphone Generation 1 and 1 plus, Generation 2, not Generation 3. Generation 3 is benignant of 50-nanometer [ph] is successful afloat development. Prototypes you tin spot successful Radfeld wherever we whitethorn have, again, a superior markets update successful June. But that will not beryllium shipped to a customer before, let's say, portion of '25.

Johannes Ries

But besides we past utilized possibly besides successful nan high-end smartphone marketplace aliases moreover different applications?

Richard Blickman

First, nan high-end computing application. That should beryllium linked to 2- and 3-nanometer architecture. So that's very advanced.

Johannes Ries

Okay. Maybe a marketplace -- possibly I'm not truthful progressive only to understand nan development. You talked -- said moreover hybrid bonding will beryllium utilized possibly to stack nan memories together. Is that possibly an exertion which besides will usage wafer-to-wafer technology? Or is it...

Richard Blickman

Yes. But wafer to wafer, nan limitation, arsenic we know, [indiscernible], not much than 2 [ph] and they person to beryllium identical. Whereas nan spot to wafer, you tin stack much than 2 [ph]. And successful nan past pinch TCB, we stacked 8 and we still are machines too. So -- and that is simply a similar, let's say, exertion inclination for nan hybrid applications.

Johannes Ries

Okay. I see. So for you besides successful nan game, let's say, for representation for usage cases successful nan representation space, okay?

Richard Blickman

Yes, certainly.

Johannes Ries

Great. Maybe connected your integrated solution, whether we will spell -- together pinch AMAT spell successful nan wide adoption? And what does it mean for your ASP? Have usage nan aforesaid ASP successful nan integration solution? Is it different and why?

Richard Blickman

The integrated solution requires a mechanical handshake, you person to simply understand that, that will beryllium integrated [indiscernible]. And past we person nan softer portion of that. So nan scheduling is nan critical, let's say, portion successful an automated line. We person started that improvement already complete 1.5 years ago. First strategy is installed astatine a cardinal customer successful Taiwan successful Q4, 2 much successful nan U.S. this year. And arsenic we besides said they will not beryllium successful afloat accumulation until '24. So '23 is nan twelvemonth of testing, qualifying devices and aimed astatine nan very precocious end.

Johannes Ries

And really possibly your account, possibly -- really you shares aliases revenues was purpose to punctual america get everybody successful portion of it [ph].

Richard Blickman

It is very transparent. We present bonders to customers. And AMAT delivers integration and besides different devices for that automated line. And that is separate. So we person nary deliveries to 1 another. We some present to those customers.

Johannes Ries

Okay. I sewage it. And possibly yet connected different technology, only you said you person different exertion going from -- really -- possibly what is possibly is nan improvement of nan TCBs exertion successful nan adjacent 2, 3, 4 years?

Richard Blickman

Well, we are astir to vessel successful April, extremity of March, nan first next-generation TCB tipped a wafer strategy to a awesome U.S. customer. And that is decidedly a cardinal improvement for nan adjacent galore years to come. So what is typical astir this adjacent generation? It's again much accurate. It tin execute accuracies astatine astir 1 micron. Other systems, competitory systems are not yet reaching that and it's besides difficult to reach. It besides has different capabilities which are unique. And that will decidedly specify nan adjacent procreation for each kinds of logic applications. So adjacent to nan hybrid bonding. We will past person a complete portfolio which tin beryllium utilized for, let's say, practically each high-end logic and representation chiplet architecture application.

Johannes Ries

So for hybrid bonding and TCB will create adjacent -- some abstracted technologies which for different usage cases and moreover TCB is an absorbing maturation driver going forward?

Richard Blickman

Yes, absolutely.

Johannes Ries

Great. And yes, it sounds very interesting.

Richard Blickman

Any further questions?

Operator

No further mobility astatine this time. Then Mr. Speaker, I'd for illustration to move nan convention backmost to you for immoderate further aliases closing remarks.

Richard Blickman

Well, fto america convey everyone for participating successful this call. And if you person immoderate further questions, don't hesitate to interaction us. Thank you. Bye-bye.

Operator

That concludes today's event. Thank you for your participation. You whitethorn now disconnect.