ASMPT Limited (522) Earnings Call Transcript & Summary

Good morning and good evening to all attendees. My name is Romil, and I'm from the Investor Relations side. I will be the moderator for today's call. On behalf of ASMPT Limited, let me welcome all of you to the group's investor conference call for the second quarter and first half of 2024. We would like to sincerely thank you all for your continued support and the interest in the company. [Operator Instructions] As part of our standard disclaimer, please do note that during this conference call, there may be forward-looking statements with respect to the company's business and financial conditions. Such forward-looking statements would involve known and unknown uncertainties and risks that could cause actual results, performance and events to differ materially from those expressed or implied during this conference call. For your reference, the Investor Relations' presentation for our recent results is available on our website. On today's call, we have our Group Chief Executive Officer, Robin; and the Group Chief Financial Officer, Katie. Robin will cover the group's key highlights, outlook and the next quarter's guidance, while Katie will provide details on the financial performance. With that, let me now hand the time over to Robin.

Thank you, Rom. Good morning and good evening to everyone. It is a pleasure to have you all for our 2024 interim earnings conference call. Today, we will cover the group's highlights for the second quarter and the first half of 2024. Before we delve into the details of our business performance, let me take this opportunity to give some highlights on the semicon industry. In the first half of 2024, the semiconductor industry presented a varied picture. At one end, there was surge in demand in the logic and the memory segments, primarily driven by the rapid growth of generative AI. However, the general semiconductor or the mainstream site experienced slower than anticipated pace of recovery. This was mainly due to the tepid consumer spending and electronics demand, further exacerbated by softening in the industrial and the automotive markets. Amidst this dynamic external environment, there continues to be strong demand for the group's advanced packaging or AP solutions. Our first half bookings for AP solution contributed a higher proportion of overall group bookings on both year-on-year and half-on-half basis. Mainstream bookings for the semi segment were up half-on-half in the first half of 2024. There has been an increasing inquiry levels and customer engagements that are typical green shoot recovery segments. However, semi mainstream order flow has been rather sporadic and lacking the bulk orders of volumes that would more properly indicate a broader base recovery. For SMT mainstream business, this stayed buoyant over 2-years and only started to soften in the second half of last year. Even as the SMT market continues to remain soft, our SMT business has maintained its leading market share position. These differing trends in our business segments and solutions clearly demonstrate the advantage of the group's unique and broad-based portfolio. SEMI and SMT follow different business cycles so a slowdown in one can be compensated by momentum in another. Moreover, our AP and mainstream solutions have exposure to different facets of the industry, which also helps the group to navigate through different industry cycles in a resilient way. Let me now move to Advanced Packaging solutions. As highlighted before, we firmly believe that the group has the industry's most comprehensive suite of AP solutions that serve a diverse range of applications. Among these applications, the demand for generative AI and high-performance computing continues to be insatiable, and we are deeply embedded in the supply chain that comprises the biggest names in AR. We believe we are in a commanding position to capitalize on this rapidly proliferating demand trend. Propelled by this trend, our AP solutions grew the percentage share of group revenue. Last year, AP contributed about 22% of our group revenue. For the first half of 2024, AP's contribution increased to around 25%, or approximately USD 210 million. Within AP, the highest revenue contribution was from a Thermo-Compression Bonding, or TCB, followed by System-in-Package or SiP under SMT, and our photonics solutions. For bookings, it was a similar scenario, with our AP solutions having the strong order momentum for the first half of 2024, and AP bookings showing significant year-on-year and half-on-half growth, with TCB, SiP and Photonic solutions dominating the order flow for AP in the first half. I will highlight some recent updates on key AP solutions and provide details on order wins for this. First off, let's talk about the High-bandwidth memory, or HBM. Here, I'm pleased to update that we won orders in HBM for both our Hybrid Bonding and TCB tools. For Hybrid Bonding, the group had yet another major breakthrough. We won maiden orders for 2 next-generation Hybrid Bonding tools in the second quarter for HBM applications. This win demonstrates a strong recognition of our technology and competitiveness for this emerging solution. Next, TCB. Our ongoing engagements with key HBM players are progressing well for [indiscernible] and above stacking. And our tools are showing promising results. In addition, we won orders for 2 tools in July 2024 for next-generation fluxless TCB solution. We strongly believe that our fluxless TCB is gaining more traction in HBM. For logic applications, TCB continued its order winning momentum in the second quarter of 2024 as we won orders for chip-to-wafer applications from a leading IDM and OSAT customers. In addition, in joint development with our leading foundry customer for our next-generation fluxless TCB solutions remains on track. We are, therefore, confident that our next-generation fluxless TCB solution will become the preferred choice for ultra-fine pitch logic applications. Our TCB order winning momentum was also seen for chip-to-substrate applications. Here, there was continuous and meaningful order flow from a leading foundry customer and its OSAT partner in Q2. Based on the robust expansion plan for our foundry and OSAT customers, we remain confident of winning more TCB orders in the rest of the year for chip-to-substrate applications. Let's now look at our AP solutions for Photonics and SMT. For Photonics, I will cover in a later slide. Now for SMT, SiP solution had strong order wins in the first half despite overall weakness in the SMT market. SiP demand mostly for RF modules for high-end smartphones and wearables from leading global players and also from AI and server-related applications. For this slide, let me give more color on TCB's potential. We are convinced that TCB has a unique positioning across the market, and I will highlight 3 interesting market developments here. First, TCB is a key enabling technology to power generative AI's computing architecture. As logic chips evolve into multichip configurations of CPU, GPU and NPU to drive AI applications from the cloud to the Edge. These complex architectures have multiple and larger chip interconnects that require flexible chip handling and large die bonding capabilities. Second, the fast-growing HBM demand, primarily driven by generative AI requirements is accelerating memory stacking on 8-Hi to 12-Hi and above, and these are far more stringent bonding requirements. Coupled with the recent relaxation of HBM package thickness requirements, these HBM trends place TCB technology in the sweet spot to intercept increased demand in the near future. This is also in line with our view that mass reflow beyond 8-Hi will face technical challenges, while hybrid bonding for HBM is still at an early stage. This means a longer runway for TCB to serve HBM. Third, TCB is also well positioned to capitalize on the proliferation of AP in edge servers and edge devices. This trend is still in the early stages, but will rapidly grow as AI applications move from cloud to Edge servers and devices. This market development signal and accelerated adoption of TCB, and the obvious expansion of the TCB addressable market. You may recall that in our Q2 2023's earnings call, we highlighted a graph in the middle with the dotted trend line. Since then, we estimate the TCB potential getting even stronger and thus, we have presented this updated graph now, and we will provide an updated AP addressable market in the coming quarters. Against such a strong market potential, the group's TCB solutions are enabling the most demanding industry application to its best-in-class capabilities. These capabilities and the evolution include: improvement in placement accuracy from 3 to 5-microns to less than 1 micron. [indiscernible] is reduced from 30 to 50-microns down to ultra fine pitch of 10 microns for fluxless TCB, and large die handling of up to 70x70 MM. And for HBM applications, tendering of thin die with thickness from over 50 microns to less than 30 microns and chip gap below 10 microns. These capabilities are reflective of our technology advancement, and our R&D teams are tirelessly working on further improving these capabilities. Another exciting area in our AP portfolio is the photonics solutions, which shows promising growth potential that will continue over the next few years, driven by an increased demand for optical transceivers at data centers to meet strong growth in generative AI and expansion of 5G networks. Thus, there is an increased traction for 800G and higher optical transceivers, which translates into a compounded annual growth rate of about 31% for our addressable market from 2024 to 2028. This high growth potential and momentum is mainly driven by major AI players who require faster transmission speed, higher bandwidth and lower latency. Again, this demand backdrop, our market-leading photonic solutions saw meaningful order flow in the first half as our advanced solutions are capable of handling the complex requirement for higher bandwidth optical transceivers of 800G and above. And let me add that the estimates of this addressable market mention only includes application where higher accuracy is needed for bonding of laser and photo diodes, which is an area of our expertise. The automotive market has contributed strongly to the Group in the past few years, and particularly for SMT. While this market has softened off late, it continued to contribute to the highest proportion of group revenue from end market application perspective. Automotive application contributed about 24% of the group revenue in the first half of 2024, or approximately USD 200 million. Both our business segments had similar revenue contributions for automotive. For SEMI, the solutions catering to certain niche areas of the automotive supply chain contributed the most to revenue, including solutions for power and Silicon Carbide modules and for smart LED headlamps used in high-end vehicles. SMT also contributed strongly by converting its backlog, while deftly navigating ongoing softness in the automotive market. With those highlights, let me now pass the time over to Katie who will talk about our group financial and segment performance in Q2 and first half of 2024. Katie?

Thank you, Robin. Good morning and good evening, everyone. Let me take you through the group financials. This slide covers the group's key financial performance for the first half of 2024. Revenue for first half was down half-on-half and year-on-year due to declines in both our segments. For group bookings, there was solid growth of 11% sequentially, albeit a slight decline year-on-year. SEMI registered growth in its bookings for both half-on-half and year-on-year, while SMT bookings were down in line with its market softness. The group ended the first half with a backlog of about USD 820 million, and the book-to-bill ratio was marginally below 1 at 0.98. Group gross margin improved to both half-on-half and year-on-year, mainly driven by SEMI. Group's operating margin was at 5.8%. It was down by 512 basis points year-on-year, mainly due to lower sales, but increased by 212 basis points half-on-half from a low base. Adjusted net profit of HKD 314.6 million followed the similar trend. It was down 49.5% year-on-year, but increased 158.1% half-on-half. The Group continued to have a healthy balance sheet at the end of first half with cash and bank deposits at HKD 5.44 billion, while bank borrowings were at HKD 2.53 billion. For first half, the group revenue of USD 828.7 million declined 17.1% year-on-year and 5.8% half-on-half due to declines in both SEMI and SMT. From end market's perspective, automotive continued to have the highest contribution to group revenue. Communication was next, mainly due to high-end smartphones and photonics applications. Industrial declined in line with market softness and was mostly in SMT. Group bookings of USD 808.6 million declined 3.6% year-on-year, but was up 11.0% half-on-half. SEMI bookings recovered and the segment's book-to-bill ratio was above 1 for the first half. AP contributed strongly to the group bookings. Group gross margin improved to 40.9%, mainly due to semi's favorable product mix. The margin improved by 67 basis points year-on-year and by 276 basis points half-on-half. In the second quarter, the group delivered revenue above the midpoint of guidance previously issued. Revenue of USD 427.3 million was an increase of 6.5% quarter-on-quarter, mainly due to growth in SEMI and partially offset by decline in SMT. I would like to highlight that our AP solutions registered strong quarter-on-quarter growth. Group bookings of USD 399.3 million were down slightly by 2.4% quarter-on-quarter. It was mainly due to decline in SMT, while SEMI registered bookings growth. Group bookings were up 3.5% year-on-year, with strong growth from SEMI. Group gross margin of 40.0% was down by 184 basis points quarter-on-quarter, mainly due to decline in SMT, while SEMI's margin remained stable. Operating margin of 4.0% was down 360 basis points quarter-on-quarter, in line with lower gross margin and higher operating expenses, that was mainly due to timing of the provision for incentive shares. SEMI registered a revenue -- delivered revenue of USD 212.5 million in the second half -- second quarter, an increase of 20.9% quarter-on-quarter. The IC/discrete business unit had quarter-on-quarter revenue increase, mainly driven by TCB. Optoelectronics business units revenue increased quarter-on-quarter, mainly due to photonics and high-end automotive headlamps. CIS business units also had revenue growth quarter-on-quarter, but from a low base, and it was mainly driven by high-end smartphone applications. SEMI bookings increased 11.6% quarter-on-quarter to USD 221.9 million, and was driven by strong growth in AP. The book-to-bill ratio continued to remain above 1 for 2 consecutive quarters. I'd like to highlight that since Q4 2023, SEMI quarterly bookings have been increasing year-on-year, with Q2 2024 growth at 37%. SEMI continued to have a healthy gross margin due to higher volume and favorable product mix. It was at 44.5%, down just 14 basis points quarter-on-quarter. SMT delivered a revenue of USD 214.8 million in second quarter of 2024. It was a decline of 4.7% quarter-on-quarter, mainly due to softness in automotive and industrial end markets, mostly from Europe and Americas. However, revenue from AP grew quarter-on-quarter for SMT. SMT bookings declined 15.6% quarter-on-quarter to USD 177.4 million, in line with this market softness, and it was mostly due to automotive applications. However, SMT continued to maintain its leading position in market share. SMT gross margin was at 35.6%, a decline of 409 basis points quarter-on-quarter. Its gross margin moderated in the second quarter from a higher margin in previous quarters due to product mix and volume. This slide highlights our best estimates of revenue breakdown by end market applications for the first half of 2024. These end market portrayed extent of our broad-based portfolio and our wide exposure to diverse end market applications. As highlighted earlier, automotive remained a top revenue contributor for the group. Automotive has remained in this position since 2022, owing to our comprehensive range of automotive solutions, strong backlog, engagements with a growing base of customers and our presence in certain niche areas of the automotive supply chain. However, this end market is witnessing softness that may continue. The Communication market was the second highest revenue contributor to the group at about 17% as its revenue grew on both year-on-year and half-on-half basis. Revenue growth was mainly due to high-end smartphone and photonics applications. The Industrial market declined as the market softened and contributed about 14% to group revenue. This decline came mostly from SMT. The Consumer end market had similar contribution at about 14% of group revenue. Please take note that others include revenue from spares, services and other applications that cannot be meaningfully identified, and this revenue has remained stable. Our diverse customer base includes IDMs, OSATs, fabless foundries, high-density substrate manufacturers, high bandwidth memory players, EMS companies and others. This customer base is also spread across the globe, and gives us the advantage of maintaining a low level customer concentration risk. For the first half of 2024, our top 5 customers accounted for approximately 16% of group revenue. In this slide, we observed the first half revenue contributions by different geographies and compared them on a year-on-year and half-on-half basis. Note that China had a stable revenue year-on-year and its contribution to group revenue increased from 30% to 36%, while Europe and Americas declined in revenue year-on-year. Europe's share of group revenue was down year-on-year from 30% to 23% and Americas from 19% to 17% due to softness in Automotive and Industrial end markets. We have an existing dividend policy to maintain dividend payout at about 50% of group's profit on an annual basis, and we remain fully committed to enhancing shareholder value and returning to shareholders. For our 2024 interim results, the Board has declared an interim dividend per share of HKD 0.35. This is a decline of 42.6% year-on-year, and is in line with a decline of 49.6% year-on-year in net profit. Let me now pass the time back to Robin for revenue guidance for the third quarter.

Thank you, Katie. Let me capture our views about the near term. First, we remain very positive about the prospects of our AP business. However, recovery of our SEMI mainstream business is taking longer than anticipated due to the tepid consumer spending. Lastly, the SMT business continues to experience a softening market. In view of this continuing dynamic situation, we expect revenue for the third quarter to be between USD 370 million to USD 430 million. At midpoint of $400 million, this will be a decline of 9.9% year-on-year and 6.4% quarter-on-quarter. This quarter-on-quarter decline is mainly due to the lower revenue from SMT. Looking at the longer term, we remain optimistic about prospects and potential for growth owing to a unique and broad-based portfolio. This confidence is further supported by long-term structural trends of automotive electrification, smart factories, green infrastructure, 5G, 6G, IoT and AI across cloud, data center and Edge devices. On a broader level, these structural trends are also moving in tandem, with a sustained increase in 2 key areas of increased CapEx spend from nations securing the supply chains, [indiscernible] onshoring and organization preparing themselves to deal with a more dynamic global supply chains. This concludes our presentation for the second quarter of 2024. Thank you, and we are now ready for Q&A. Let me pass the time to Romil to facilitate.

Thank you, Robin and Katie for your presentations. [Operator Instructions] With that, can I request Gokul to unmute yourself and ask your questions?

Can you hear me now, Romil?

Yes.

So firstly, I wanted to ask about the TCB segment. You seem to have raised your addressable market estimates, I think from my calculation, looks like around 50% higher than your previous target from last year. So could you also talk a little bit about what are your expectations for ASMPT shipments? I think last time we talked about, I think, [ 350 tools ] cumulative until 2023 end, that was back in, I think, February of 2024. So could you talk a little bit about what you're expecting for, on a forward-looking basis, how -- like, let's say, when do we hit 500 tools cumulative shipment? Is that something that will happen by middle of next year? Also, since you talked about Fluxless TCB, when do these Fluxless TCB tools start shipping? And do we think ASMPT can keep the similar market share in Fluxless TCB compared to the flux-based ECB that you have dominant market share in given there is more noise from some of your competitors now coming into the market for fluxless TCBs. That's my first question.

Gokul, I will break down your question into 2 parts. Let me request Robin to address on the growth we are sort of showing in our slide for the addressable market of TCB. Maybe Robin's expectations and how should we read this? And yes, you said correctly that by end of 2023, we had an installed base of about 350 tools. So how is that progressing? Maybe Robin can update that as well.

Yes. Let me answer the question first. Yes, I think we said some time back that for the first 10-years our TCB business and from '12 to 2021, right, from 2012 to 2021, we said that during this period, 10-years and also for the next 3-years from '22 to '24 we will ship [ equivalent ] amount of TCB tool. So I think we are on track in this -- from this perspective, right? So I think that's the first question, Gokul asked?

Yes.

What's the next question?

So next is on the Fluxless, what is the progress on that? And any indication when the tools will start shipping? And can we give more indication on whether we'll maintain high level of market share when it comes to Fluxless as well?

Yes. So Gokul, I think you know that fluxless is a ultra fine pitch next-generation TCB tools. We are in the joint development with the leading foundry for chip-to-wafer. I think the results within our expectations is we pass some reliability test, and I think we are confident that our fluxless TCB tool for chip-to-wafer will be the preferred choice going forward for logic applications. Now in terms of HBM, I'm pleased to announce that we have won 2 tools for fluxless HBM applications. So I think this is also a testimony of our capability. We are recognized for TCB technology, not just for logic, but also for HBM. So in terms of -- you also asked about whether we will see fluxless TCB shipment this year. We believe so. In the second half, we would see some of these shipments flowing through in our -- for our business for TCB.

Okay. Robin, just to clarify. So this 350 tools by end of 2023, is there any forward-looking guidance that you can give us in terms of what kind of run rate are we going to see, given that you now see an expanded TAM by 2027?

Yes. I think going forward, I mean looking -- by the way, the chart is a trend chart, it's not really the -- it's a trend chart for the addressable market, right? So don't try to use a ruler to try to measure what is the increment between the last update and this one. It's just to show you a trend. Now yes, I think we are confident that going forward TCB will be a key contributor for our AP business. We believe HBM 12-Hi and above will have to use TCB because of the limitations on mass reflow, which we mentioned many times. For HBM 12-Hi and above, for logic application, chip-to-wafer will be also -- we need to also use the TCB because there are more chiplets to be packaged at the chip-to-wafer level. So I think going forward, TCB will be a key driver for AP business.

Okay. So just to clarify, I think I can put that as my second question is, one, let's say, your 2027 addressable market expectation, how will you rank order HBM, logic, foundry and OSAT and IDM, if you take those 3 categories in terms of most important within the TCB shipment, is HBM up on top, followed by logic below that and then IBM? Or is there a different order? And also for HBM, are you already shipped -- qualified for 12-Hi production at the any of the HPM manufacturers? Or are we still talking about mostly sampling tools and not yet qualified for production because the production will obviously start coming through with a much bigger volume of tools?

Gokul, I'll break into 2 as well. So your first question of this part is in 2027, as per our expectation of addressable market, and if everything goes well, how will the ranking look like between, say, our major customer groups from HBM to OSAT, IDMs in terms of the packing order?

Yes. Now looking at the -- Gokul, looking at the number of interconnect for HBM versus the logic side, I think naturally, the potential for a TCB application in the HBM arena will be definitely higher, followed by the emerging AI trend for data center. So logic -- 2.5D packaging logic will follow soon after HBM, and then perhaps the HPC market arena.

The other part of the question is whether we have qualified already at any of the major HBM players for 12-Hi? And our tools, which are planned and Robin talked about, are they still in the sampling phase for valuation or this going, what was the production?

Yes. So Gokul, I think you are aware that we've been saying we already have a couple of tools in the key HBM player doing 12-Hi and above. So we are qualified for 12-Hi and above for sure. And with the recent win in the 2 tools for fluxless HBM, I think -- we are -- with that win, I think we will establish also ourselves as a serious player in the HBM application market for TCB.

So is that for multiple customers? Or is it just for 1 customer on the HBM 12-Hi?

The first couple of tools, which has been around for a while is for 1 customer and the recent win is for 2 customers.

Okay. And do you think you will be the tool of record, the main tool for that 12-Hi process? Or do you still not know that?

Yes. I think let's put it that way, Gokul, we are confident of our capabilities, right? So I think with these 2 wins in terms of fluxless HBM application, we hope to establish ourselves, and we believe we can in the HBM market.

Donnie, can I ask you to unmute yourself and ask your questions?

I think for the outlook of SEMI SMT, do we have any expectation how the recovery pace in the third quarter and in the second half of this year?

Yes. So I think if you look at our guidance for Q3, we are guiding $400 million for Q3. That's down 10% year-on-year and 6% Q-on-Q, mainly due to SMT. As we say, the SMT, unfortunately, the overall market has softened. And also, the automotive market and industrial market, which is our stronghold basically typically are also soft. So for that reason, we are facing some headwinds in terms of SMT business. However, for SEMI, we expect the Q3 revenue to be kind of flattish for SEMI. And for SEMI, we continue to be very positive for AP business, as I mentioned earlier. However, the recovery of the SEMI mainstream business is taking longer than anticipated due to reasons I explained in the opening remarks, tepid consumer spending. But we do see, to be honest, increasing wire bond, and hybrid wire bond and tie bond business for consumer-related applications. And this is a sign that -- hopefully it's a sign that some of the green shoot signal that the -- some volume is coming back in the next few quarters. We don't know for sure, but we do see some increasing momentum in terms of wire bond and die bond. So I think that's the picture I can give to you for Q3.

Donnie, you have a second question?

Yes. Do we have any color on the booking of third quarter?

Yes, we don't guide as usual, but certainly, we can give you some color. Now we think our group bookings for Q3 to come in at a low-single-digit Q-on-Q decline. Again, we look at Q3, the decline in bookings are mainly due to SMT. But we expect SEMI to be flattish and -- but with an upside bias for SEMI. So there's a possibility that SEMI will perform better than flat Q-on-Q for Q3 booking. Again, SMT declined really due to the overall weak SMT market. And in particular, for ASMPT, our strong market segment for SMT in terms of Automotive and Industrial softening. Having said that, we also believe at this point that SMT booking is probably near the bottom already. Now something worth noting about SEMI, I think Katie mentioned before in the opening remark is also that our SEMI quarterly bookings have shown year-on-year increase since Q4 '23, and this trend should continue into Q3 '24. So from that perspective, in terms of the good trend that we are seeing for SEMI, we believe SEMI bookings have probably reached a bottom supported by the very strong booking momentum for AP and also the improving sentiment for the mainstream business. So this is some color I can give you for Q3.

Next, can I request [indiscernible], can you unmute yourself and ask your questions?

My first question is, just wanted to hear your thoughts really on how you see equipment throughput for TCB improving down the road because it has a lot of implications on the market TAM and where ASMPT is positioned? Are you able to increase your prices to say a customer -- you are able to increase your throughput as well?

Yes, generally, not just for TCB, but I think generally for equipment market, the next generation of 2 typically have better capabilities in terms of placement accuracy, in terms of throughput, and from that perspective, customer typically amount for giving, they are willing to pay more for more advanced tools. I think that's a general perspective applicable also for AP tools.

Sure. Okay. And then my second question is regarding in memory itself, is there a difference in intensity of throughput usage between the customer that's adopted a mass reflow MUF process versus a TC NCF process? Or is there really no difference in terms of the orders you expect from different customers in memory?

So I think for AP, as I said many times, you -- I mean it differs from customer to customer, right? So AP is very -- AP solutions are very customized. So we cannot generalize what is the output for TCB from 1 customer with the other. Now typically, you talk about mass reflow. Typically, mass reflow has a higher throughput compared to TCB. For reason is that mass reflow typically just pick and place and they are like go to die. Where TCB, you have to pick and place and bond the die, what we call, C2 bonding. So obviously, TCB will take a longer time compared to a mass reflow.

Next, Donnie, can you unmute yourself and ask your questions?

Yes. My first question is regarding to your forecast or your roughly outlook on the TCB shipment trend into next year versus this year. The reason is because I think this year, our substrate, TCB still accounts for the majority of our TCB shipment. You can correct me if I'm wrong. But for next year, if we consider maybe we can get more on wafer TCBs and HBM TCBs. Should we expect that the volume will be trending up next year? Or there is a possibility that our substrate TCB shipment may decline considering large [indiscernible] companies have started expanding capacity aggressively in 2024 already?

So Donnie, just to summarize your question. Basically, trends in terms of shipment and volume going from this year to next year for both our chip-to-substrate and chip-to-wafer broken down and which side can be higher. Plus will there be any weakness in chip-to-substrate side going forward?

So Donnie, I hope -- I cannot be too granular, but I can give you a general picture. If you look at our trend line, right? So it's sloping upwards. And in fact, our trend is not steeper than what we have presented in the last June presentation. So I think based on this, the outlook for TCB is indeed very bright, okay? So with that kind of trend line, we expect the TCB contributions in 2025 and beyond to be continue to be strong compared to the prior years, okay?

Okay. Understood. And now maybe just a follow-up on this question is like, I'm not sure you have provided any specific timeline that whether you can start shipping the mass volume of the on wafer TCB to leading foundry. If not, could you elaborate more on that again? And also, have you seen any more meaningful on wafer TCB orders coming from OSAT companies after you start potentially you start to ship to the leading foundries maybe in the coming months?

So as I said earlier, our ultrafine pitch fluxless TCB for chip-to-wafer application is having this joint development exercise with the leading foundries. So we hope that, that would turn into some kind of order win in the second half of 2024. But we believe the volume would not be big this year, but we will be definitely more substantial going into 2025. Because looking at the demand for AI architecture, so purely based on that, I think the volume will increase. What's the second question, Donnie?

After -- okay, after potentially after you successfully shipping to a leading foundry sometime into the second half this year, you see other OSATs will follow TSMC suites to procure your on-wafer TCBs? I think TSMC is aggressively asking some other OSAT companies to expand the capacity in terms of the outsourcing the customers' products to OSATs?

Donnie, I really cannot answer this question on behalf of a customer. Maybe you can ask them. But looking at the chip-to-substrate, the leading foundry has already subcontract OSATs, and we are also winning orders for TCB to substrate applications from their OSAT partners, yes.

Next, Sunny, can you unmute yourself and ask your questions.

Could you hear me okay?

Yes.

My first question is to follow up on TCBs into HBMs. And so you talk about these fluxless TCBs, how likely do you think fluxless would be required for HBM 3, 12-Hi and HBM 4? I understand from a technology point of view, fluxless definitely provide better performance and better bonding position, but based on your engagement with the key customers, do you think they will certainly move into fluxless into 2025?

Yes. Good question, Sunny. I think for ASMPT Fluxless solution, we are rather unique because our tool way backward comparable and forward scalable, in a sense that we can, not literally, but we can switch off, switch on the Fluxless functions. So if a customer doesn't need the fluxless capability, they switch it off, they can just use it as a normal TCB. But if they needed for 12-Hi and above or 16-Hi or even 20-Hi, they can switch on the fluxless function. So we have a rather unique solution for a customer in terms of HBM application.

Got it. And so I have a follow-up on the competition for fluxless TCBs. My understanding is that the key know-how for the tools is in terms of how to deal with the upside on the surface of wafers or interposers. And every vendor has its own recipe. And so how should we think about the competitiveness of your offering? And you mentioned you have a joint development with a leading foundry. If your solutions turn out to be preferred by both logic and HBM customers, would it be easy for the others to replicate your solutions?

Yes, certainly. I think the short answer is yes, Sunny. So that's why winning Fluxless TCB for the first 2 tools, with 2 customers is important. It sort of opened the gate for us to establish ourselves as a serious player, serious player in the HBM market.

I see. And so you say that these orders of 2 tools for fluxless are for 2 different customers for HBMs?

Yes, yes, yes. For 2 different customers, yes.

I see. And so earlier, when you mentioned that for Q3 bookings SEMI is flattish, but with upside bias, is that relevant with the possible orders that may come through later in the quarter with regard to HBMs?

We think so. We hope so. So as I said, once we get into HBM, hopefully, this will become better known in terms of HBM application. I mean, we are already well known for logic. So with this win, we really opened the gate for us for HBM application, yes.

Got it. Sorry, just one last question. Also on HBMs. I guess. Before there is some supply chain feedback that your tools have pretty good bonding position, but [indiscernible] maybe is not as good as some of the -- of your competitors, and therefore, you couldn't really ship many tools to your customers. So I wonder, on that part, are your tools improving? How are you resolving the issues?