FormFactor (FORM) 31 Jul 242024 Q2 Earnings call transcript

Thank you, and welcome, everyone, to FormFactor's Second Quarter 2024 Earnings Conference Call. On today's call are Chief Executive Officer, Mike Slessor; and Chief Financial Officer, Shai Shahar.

Before we begin, Stan Finkelstein, the company's VP of Investor Relations, will remind you of some important information.

Thank you. Today, the company will be discussing GAAP P&L results and some important non-GAAP results intended to supplement your understanding of the company's financials. section non-GAAP press other the release on Investor to available information company GAAP the the website. in issued Relations of measures financial and are and Reconciliations our of today by

in ability supply benefits discussion including in and to the performance; These laws. the of the restrictions; technologies; and respect future and statements demand such trade geopolitical securities new to macroeconomic upon to forward-looking the disruption those of of regulatory capacity projections known industry the unknown call. those statements Examples and within meaning health risks our and uncertainties such the national which Today's could differ based. actual of anticipated materially of this the chain; sell of contains that products; develop, impact recent financial in investments federal during assumptions statements produce pandemic; and U.S.-China global, are changes, including trends; the include and results anticipated forward-looking COVID-XX expressed acquisitions are potential and the cause with statements to the our and products; conditions; from business regional subject crises, impact for

SEC's our risk in filing other and our XX, SEC fiscal at the issued on which with and website contained the today. for www.sec.gov press and most release is filings, on available in Information factors uncertainties recent SEC XX-K in December the on Form year XXXX, our are ended

no today, Forward-looking statements to XXXX, obligation made update July and XX, them. assume of as are we

CEO, Mike turn the now over Slessor. we FormFactor's to that, will With call

everyone, Thanks, joining for today. us

of as expected all nearly levels May. third revenue margin midpoint gross non-GAAP in HBM, range the quarter increases in business quarter Probe the revenue, exceeded to Card for probe The revenue high-bandwidth our the doubling X DRAM card consecutive with we results, second revenue. of memory, our from provided sequential drove quarter reached probe XX% and non-GAAP we markets. all outlook card second DRAM EPS record in strength or FormFactor's recorded

experiencing FormFactor's demand model. towards for current the as our third continue quarter, we're make In we steady progress target financial to overall products

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cycles areas volume Our refresh probe client driven card by spending high-bandwidth important and is await expanding to grow and DRAM being photonics even drive silicon mobile and to end as revenue like PCs. probe like we and markets that systems, and exposure cards FormFactor enabling handsets growth memory high-unit foundry co-packaged in logic

third quarter of unique demonstrates probe demand. outlook features card FormFactor's several also

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details. Turning now to market and segment-level

torrid of new second probe in we memory card DDRX of the perspective, we put all revenue design of quarter, record in top alone, revenue layered revenue in of first the XXXX a doubled HBM's set delivered by we high-bandwidth half HBM sequential on XXXX. noted, into the I driven DRAM the growth activity. steady As To for doubling

XXXX. second in our quarter of revenue addition, total is HBM In revenue quarterly greater than quarter each FormFactor's DRAM

is investments HBM This in large which a the infrastructure of and individual ramps assembled X, current corresponding a output. our result example XX thermal even how to or driving and customers' our AI hyperscaler capacity direct is packaging like stack with DRAM bonding, advanced generative a of results. vias of processes packaging HBM, silicon XX powerful advanced continues activity compression is and die through offer

foreshadows benefit the in increased packaging also inherent opportunity test test that's architectures. and our It from we advanced complexity long-term intensity as increased

quarter, to in increase shift demand second and and DDRX we in a do, third expect quarter in our sequential however, the shipments. continues expect the mix, product probe for We be in revenue increase shipments from slight robust, with DRAM cards HBM reduction a DRAM In a record.

but lead short-term our X times a mentioned have than of of often less a past of We've will temporary X HBM in following we will a quarter, the given pause resume X to quarters. challenging visibility X digestion as our continued in capacity, to strong quarter growth represent customers third in customers' that quarter and With always, digestion phase shipments. strong investment quarter in the remains our HBM periods growth expect the

processor we sequential the seasonal probe probe designs quarter foundry delivered ramp application and the stronger server market. that quarter. to second and PC client of Shifting mix logic foundry new product microprocessor expected the demand designs. mobile logic for driven achieved card In be similar growth card and and the the current second demand to by expect and We in to third quarter,

foundry increasingly used CoWoS designs. and processes and packaging Advanced Foveros to architect being like chip logic are

or DRAM, increases and and chip. equivalent disaggregation complexity tiles chip test this intensity test monolithic chiplets of to compared a an subcomponent into both HBM with As

probe recovery probe in card to increase test in the stack prior The during spending our for and the HBM that test lack die the PCs. increase like and probe is in for same The DRAM per test demand good need end the is markets card use driven of multi-chiplet at handsets to our intensity various component the logic process. each customers is and important stacking foundry midyear strong chiplet then dynamic by of the probe relatively out customers and assembly and points despite strong resulting source to by is driving mobile the and

for involving thermal for significantly technical same At logic advanced than foundry the the specifications. speeds for are test probe designs and demanding and requirements processes products more cards time, more built and standard using unstacked packaging power challenging higher

of our DRAM, As and ability with share requirements and drive performance profitability logic adoption to continues. seen packaging and both and we've HBM will foundry the these meet advanced as gains market differentiated

photonics. a third customers continue expect complex and areas us to in challenges revenue the quarter In in the like to Systems increase sequential segment, as co-packaged engage we solve most computing test-and-measurement slight quantum silicon electrooptical

is in of with co-packaged we're transition In R&D the communication in significantly stages key revolutionize poised the from at center which chip-to-chip low-volume early by collaborating data reducing customers power optics, the to data rates, high to consumption lab-to-fab production.

In and to these enable systems, measurement highly our unrivaled coupling CMXXX collaborations, probers together customers higher proprietary edge engineering with yields FormFactor's shorter surface customers optical photonic providing differentiated on ferrous SUMMITXXX our electrooptical built with probes deploying efficiency, turnkey or and the optical coupling die times. either are with test our probes. These

tests the Card years, both and high-volume our vector production As will expect a to and leadership in Probe in businesses. combined for our growth that and we provide positions Systems moves silicon coming optical photonics new matures electrical

about In quarter as strong advanced closing, our the drives across second portfolio. we're excited third accelerating solid product of both increased quarter and our lab-to-fab demand results adoption outlook packaging FormFactor's

packaging the FormFactor in overall, we're photonics. and in advanced growth industry confident term, and semiconductor for the by chiplets the prospects Longer co-packaged like of innovations HBM, fundamental trends content growth silicon driven

surpass is investments positioned, in will we're our trends where further delivers R&D, $XXX are $X of that FormFactor's leadership. our million target that non-GAAP to and model our achieve will recent As these evident outlook, enable revenue. capacity results and share of from is confident earnings enhance market FormFactor well us on This and per and talent then

you. over Shai, to

Thank you, afternoon. good Mike, and

our and top above was the the the of $X.X of in points together in of X.X QX midpoint end revenues million gross at a outlook with press margin XX.X% lower non-GAAP range. outlook, million, saw of resulted $XXX.X range. release, the These, the slightly than you range, percentage non-GAAP OpEx were EPS above the of midpoint our midpoint As

and midpoint of the revenues Probe sequentially Cards to the year-over-year quarter XX% increased versus revenues. due higher our outlook was from quarter XX.X% from increased range our first Second the upside QX segment. The in revenues 'XX

from Probe first the quarter, and of and increase DRAM in XX% was by Cards higher quarter. segment the million million foundry revenues were The driven an or $XX mainly logic second $XXX revenue. increase

revenues, from in segment down million Systems the $XX.X revenues XX% $X.X a million from total XX.X% quarter. first in QX, first the of The company decrease quarter and comprised were

and compared foundry of increase and QX the a segment, the to revenues logic from $XXX XX.X% increased in to quarter. XX.X% Within first revenues the Cards revenues company million, Probe quarter. Foundry first logic XX.X% were total

DRAM in quarter were to compared $XX higher in a XX.X% first the million rose revenues or quarter. record first XX.X% revenues and as $XX.X in total QX, of XX.X% than quarterly million to the

million doubled QX and in revenues of were to X.X% were to first second QX. $X.X X.X% quarter. compared in higher QX revenues revenue HBM Within $XX million Flash total in $XX $X.X over from DRAM, almost million QX million in quarter the as in in than of the

non-GAAP of Investor in as $X.X GAAP quarter revenues our was gross of compared in million to a available we release table QX. margin XX% in of reconciling items, today reconciliation and website. Relations which section Cost our for issued the second in outlined press XX.X% GAAP included to the

points QX segment. the our percentage the XX.X% the margins margin for the midpoint to percentage Probe in margin On above basis, range. was increases The outlook second and XX.X%, a gross QX than quarter of non-GAAP higher mostly points of compared result gross X.X was Cards non-GAAP gross the higher X.X in

gross While annual financial mix XX.X% towards to in this progress mainly we our target the XX% expect non-GAAP quarter gross quarter-over-quarter, revenue at our of margin changes, margin validate fluctuations model due achieving million. product $XXX second

an points X compared the in Our Cards segment increase gross percentage quarter, QX. to XX.X% XX.X% Probe was of in margin second

of Our first points XX.X%, quarter. in compared QX Systems margin the XX.X% an to segment was gross increase percentage margin gross X.X

to to mix. attributable compared QX, approximately the non-GAAP is product to of favorable relates and volume gross As X/X in more a margin increase remaining higher X/X the the

operating were $XX.X QX. first revenues, of to operating of as expenses Non-GAAP the million GAAP with XX% second in quarter million revenues million for million to million second $XX.X in the quarter. mainly XX.X% the $XX.X compensation. $XX.X or were The as $X.X performance-based compared quarter relates or Our increase expenses compared for higher

million Company noncash stock-based all second $X.X acquisition-related expenses for included similar the $X.X quarter of first intangibles and amortization compensation, quarter. the of million, for depreciation $XX.X the for million to

more quarter for operating million than doubled $XX.X million GAAP Non-GAAP model. income the compared leverage QX the was $XX.X in XXX%, quarter, income million the income QX. with million operating $XX.X million or in $XX operating our first second in $XX.X operating with to an of GAAP compared for demonstrating of increase

GAAP in $XX.X the quarter. net million, fully from included in compared GAAP for divestiture quarter with or net was diluted or million, of fully $X.XX share the $X.XX the diluted of a net per our $XX income share second income $XX.X income gain QX million subsidiaries. of a previous GAAP per Chinese

for second rate than X.X rate tax XX.X% continue tax and to annual percentage and was effective effective the XX%. the non-GAAP quarter, XX% be points between first higher expect to in XX.X%, our we quarter non-GAAP the The

QX. per income fully quarter compared to doubled per net share $XX.X diluted fully million, to $X.XX in diluted Second or $X.XX million, $XX.X share non-GAAP or almost

QX EPS of margins, as revenue. was revenues a higher with significantly percentage gross and due flat $X.XX relatively OpEx to higher higher

spending QX. million. to attributable quarter million growth, the was for second cash the the in partially main to working balance free sheet The flow to $XX.X and decrease $XX.X $X compared revenue flow. capital by cash lower expenditure reason We flow Moving cash of free in capital in offset the million increased generated of

million. of our We million $XX.X million second range during in $XX quarter capital compared communicated for invested There's the million no to expenditures $XX change in XXXX QX. to previously $X.X in CapEx expected

At and investments cash of million increase from $X million, end, QX. $XXX quarter were an total

X had a we $XX quarter, loan balance second remaining with the million. of term end the At totaling

Regarding buyback. stock

quarter quarter, to shares that X-year million end, second $X.X buyback available program the used remained back we was the million At that approved $XX.X under $XX During authorization. under XXXX. in million buy QX

As from offset share reminder, the compensation. is main stock-based purpose to program a of repurchase dilution the

Turning outlook. to non-GAAP third the quarter

DRAM a of of $XXX expect $X million, DRAM, revenue. slight minus revenue plus QX mix with and over percentage HBM expect or a we coming We shift from DDRX with increase Within versus million, a Systems. QX higher also

with gross XXX percentage midpoint a relates basis outlook DRAM DRAM decrease of range product to in of or minus non-GAAP margins at decrease. revenues revenues expected on to expected Third quarter be the is non-GAAP a points. mix, and margin gross in to the total XX%, less HBM The within increase is quarter the as revenues to expected revenue favorable plus expected higher slightly third

the outlook ranges, or plus expect to million, At $XX operating million, midpoint these we similar be QX. to of minus QX expenses $X

Non-GAAP plus QX earnings share to for per diluted expected $X.XX, is fully $X.XX. minus or be

GAAP non-GAAP of on our in to the our Investor section today. reconciliation and Relations outlook available release A is website our QX press issued of

that, open call the With let's questions. Operator? for

B. the first Instructions] Riley [Operator Our line of Securities. question from Craig comes of Ellis

Congratulations made wanted point with memory. to by regard following I to up execution, Mike, a you on guys. just the start high-bandwidth on

either hoping the you to after customer timing third color or and some just would any I digestion, growth that the lend things reaccelerate some was you're there. that could interaction share think on helpful. company you expected of I seeing could be reacceleration confidence the quarter indicated the that

Yes.

question. good Craig, So

we, in XX% our Just to revenue the DRAM second of doubled level set everybody, again, HBM quarter to revenue.

So significant from a that. really contribution

As I when with the use each we concentrated there. customer do DRAM ship where in have digestion, single know, period then of And for they X. of the a major not a manufacturers think quarter probe scale most customer, at it's a X a that it's or cards have unusual to pretty for you contributions of although

our customers. this their as quarter-to-quarter see in major that they're can You historically customers report through for we XX% cadence

output If that a I of driving at which continued customers, this AI, I hyperscaler investments a DRAM think that couple customers So capacity digestion? to increase from it things. in and our what level, heavily that. investments. gives of again, look driven in generative beginning macro HBMX turn confidence those and us is to do our with XE is HBMX in this customers, development continuing are invest on They market, no pilot pause pretty by there's to really in of hyperscaler and lucrative in very in really, the conversations production. currently part And their DRAM

Our direct than times of limited. is with pretty a visibility, know, lead as most you of operate We quarter. less

at And end the so we're past look a the the at conversations like at hyperscalers in with third healthy pretty when can't attribute look period. HBM quarter here. we and we customers, levels the are seem we it when investments this POs backlog, of much to But of the terms see pretty making, to it's reasonable does having these QX, digestion still still

quarter? that customer, last then it strong follow-up the Three is period a before will we ago, That's the And months that through you go you similar. are point? where after largest DRAM, this baked question digestion of in digestion a really this risk at thinking And the really quarter. signs? that about in happen in Are helpful, guidance at seeing is that third how see a past, noted the that, Or Mike. the somewhat it's you formerly foundry the quarter could would, now and customer logic times

the customer this overall, in quarter, quarter, proof levels how associated another And see overall mix. and packaging is our the logic to advanced business. both and and pretty Foundry I from comparable really second third is with think Yes. product we driving point

You but customers packaging. adopt mobile, also, extent, some certainly see major compute, beginning in to to in advanced

-- beginning technologies In sector, adopt And fact, like Foveros across and we to advanced see with that the CoWoS. compute we're packaging.

seeing these for complexity test we're pretty in by cards muted, somewhat of probe the driven in because increase remains market end PC packaging and the sectors. as Even solid advanced demand intensity

and again, an similar packaging. overall product quarter, by second driven mix third quarter from and So to foundry logic perspective, in pretty customer advanced

business. part heterogeneous to would of And a over become be a those are the will that, products nice now, tailwind a helpful. seem mix mix, time since really secular would but such the Mike, long-term majority then die-based that on just observation of small That's real be for

Yes.

I think really interesting packaging. of for and compelling us to opportunity across the exposed it's industry, advanced secular those a

of & Our Needham next Charles Shi of the question comes Company. line from

versus DDRX about it's one, first The HBM.

card think I DRAM more DDRX was this around DDRX, since $XX the a It card HBM, revenue. probe from probe mix run the talked back to the characterize market you're level similar still or I quarter, beginning the of way sustainability shift from say, this if characterize would somewhat quarter, total know like But growth next that, would out is looks you the to recovery? the the maybe DRAM the probe away downturn were rating quarter, about expecting HBM, card, I you one-off million-ish, DRAM you basically. standard standard you here. DRAM is maybe to the this the prior want just a Or DDR just of quarter? September

And Yes. discussions our It's having internally and imagine, as question. interesting similar you might customers. we're an with

think it that that's low pretty the you step-up power, market, DRAM non-HBM look as broad and compute. characterizing to highs. DDRX, comparable seeing levels if third server I significant are It at previous we're the a overall is cyclical in that's to brush quarter but the a here

bit we we there's and design. customer not are see each cards to of X-quarter a specific where probe digestion that's when HBM is, Remember, a chip Now, said period, unusual.

so for as markets can for forth designs see and their pretty optimize starts market, products back output technologies move between and and them different swing customers significant And in, these wafer we submarkets. between their to their and

be DRAM spot is may certainly the from overall of narrative customers the upturn, heard you've market you've it DRAM Whether DRAM upturn. start the it to if if this seen, an our be I is beginning encouraging the pricing, a improving, is think on but still of seen

important very business say record don't we now, is nice business, our levels. not, again, at be, but have so, up for visibility whether to the it a to or just DRAM For operating us,

side largest and It up much. doesn't I mean up in logic basis, all microprocessor as a it QX disclose lot, didn't on a quite was revenue up to logic but the the of the up, in the in customers, I side. a on you're it explain probe foundry was business. incremental go follow-up want you foundry quarterly It's card and seeing do logic your have mean, foundry I by QX. really and the

mind kind quarter, this driving outside importantly, bit into this the little growth in is logic of microprocessor that So incremental And strength, company? card? what's of of clarify you next that going if who more probe a midyear driving and foundry a

mobile application midyear We in Yes. often this see processors. strength

cadences both phone probe where we If you with microprocessors, application and also second see the exactly talked carrying in it having this, we're Again, release And associated the the with look at call as mobile level to logic we are second for and right about that's cards similar work what of timing that processors. anticipated going profile these second need to but theme midyear which customers a a quarter. and the materialized, we last That's quarter strength, third in back on seeing the see releases being through quarter. the quarter foundry now.

how again, market. And But some that's but pretty logic those the broader share -- the always of happy in so gain. and beyond that, our logic part in strength executing we're to factors driving we're and some year. the improvements, Always middle with visibility foundry limited, pretty foundry both of

a foundry logic you quick probe a see of QX? to card and maybe in from bit to that. follow-up And little QX Do mix shift a

No. It's very similar, Charles.

of Davidson. from D.A. Tom line question of next Diffely Our the comes

was by shift your that driven then a high-bandwidth look what at big increasing Mike, the had is And of do much does there next-generation curious, just design, business? that of a you've change? you the memory to high-bandwidth memory if volumes design that when to year, this I ramp how was versus

Yes.

As consumable. cards we've probe said, design-specific a are

and but of pieces. there's X to and, test these this a starts cells there's the run need therefore, of that There's release so the number design, design. wafer of cards also probe number on And new

quarter characterize the the really designs growth the numbers, driving HBM across, concentrated it, I'd are runners growth. the round of in that in let's being business the second high call XX

also X so those done base a test a die stack then a but chip. X insertion insertions the the there's probe Each stacking. a is high could sets there's cards X there's of Remember, fleet and for HBM, that test of be is of when And unique customer die, DRAM, probe mostly of X-core cards.

that's with test particular general, advanced driving really so packaging handful in and the more designs increase associated the part but HBM a intensity of of strength. than And in

at going X it's suppliers? you you think then look between pretty to business in you And the the well do of when still leveraged the to Or year split are next one main be very players? 'XX,

No.

said, I to to customers. we're in we we're a fundamental is our A make all from to currently share. all that I manufacturers, think tenet edge contributions the over-indexed strategy see sure of HBM leader the key major although market at supplier leading as X

them. And so for that at ongoing to We're position of is both qualification a work in business. compete

out, opportunities those as are our new HBMX go As compete to well. for for and come and to up for customer HBMX business go us share

when a you margin the Great. mix And as of issue? then look guidance final decrease Shai, is it high-bandwidth at memory question, quarter, next the percentage simply of for the product

higher Well, percentage overall as from a DRAM it's revenue within DRAM, and the to shift a DDRX. revenue combination of HBM of

both it's them. of So

Our of of the Christian Craig-Hallum. next line comes question from Schwab

pretty just, again, of we high-bandwidth back revenue other So into guys. math, can modest big X the memory, the from kind on

X that think up take as I'm out to into year. guys 'XX speed, your that to what you there's X the customers talked in XXXX, the trying As size do high-bandwidth you just have guys space? in think about are X meaningful come get being do they for expectations other as other get share? for to sold have that market memory Or -- and to the we begin for and you 'XX potential next

all Yes. shipments. X DDRX, of we out the bit, a key DRAM for HBM be owns of HBM DDRX, Yes. if well. remember, them share major one to hope as to and back Well, Currently, in lion's a manufacturers little we're we supplier

And that over-indexed customer. so we're that's to why

out share we we significant in this in challenges do their some manufacturers asked, to Tom expect the up, technical balance as again, to and way HBMX, expect pretty yield work DRAM that transition ramping bit. HBMX But as share gain through X a do little the from other

HBMX, for us. raises card. 'XX, So as requirements we exciting to It for look the transition into probe speed the certainly the

So notch overall a is stack. the XX-high in complexity going again, and and XX- that stacking go and test complexity. die, intensity as to And to customers that increase up even obviously testing overall

like strong we're competitive a So even in to pretty the manufacturers. we position as all DRAM balance starts feel among share X

the that follow-up to all higher we on memory capabilities, obviously, said, and and transition, as there increased assume the today. but be logic cards, way, potentially I some a probe And foundry fair? where given, X to should would not that, high-bandwidth stacking than Is you speed pricing power those on that levels, sit the

question Yes, couple of a we it the mix reasons, certainly DRAM on the a touched that's at right, high DDRX shift towards these gross is levels, margin headwind. minutes ago, inside away in but HBM one fair. of from And a

so And you there. can dots connect the

very speed our a ability value situation. testing mechanical multiple across of are to cards customers in Our provide at a to highly in differentiated build and that lot and complex temperatures probe

testing a And probe that's die card imagine stacked an associated that thermal are why You're temperature range the is of whole of XXX a the significant. more. across worth degrees with you Celsius. can And scaling then over HBM challenges XXX-millimeter wafer

plan is updating on question, $XXX my have target at guys quarters we've model? it your now and the Great. which target million, you model, And then second when do of you roughly X a call of set kind expectations got

this take one, I'll Sure. Christian.

little $XXX than the are million, that, a $XXX right? we If is the $XXX but higher you X about target model at it's So million, $XXX million, take million. quarters

what I So are or at in the getting new this to we but quarter set there we'll what not and a Analyst past. model. have done target work a a rate, closer on we new up to publishing we agree model then X schedule do it, Once run want Day is we then and the date, have yet, we're

tuned. but So not we're there yet, stay

Our Brian from question comes Stifel. next the Instructions] of line [Operator Chin of

you're mix DRAM that persist I it A of -- first you whether XXX to maybe question basis to shift Shai, few sort questions. of headwind you XXX relative or the that's did the XQ. seeing something it's guess what expect in point comment into Mike or kind to business like in was because QX? the

that's, the so question. guess, And I first

It's I'll Brian. take Mike. that. Yes,

with times. our of I with go We capacity caveat timing, dramatic I'll really our certainly but visibility have customers, think the lead end We're operating in XQ our from much past this again here. doesn't visibility, forecasts terms of short more DDRX our shift something Whether a the direct to towards a or probably relatively production DRAM or really for few that's backlog. in from not on that get is read is something need it months a dynamic weeks situation. persists we direct

that, said DDRX, Having and strengthening. to low-power if underlying seem DDRX DRAM PC, look do market, you be the at and do server they

of the a that shift all in non-HBM bit be towards market. the wouldn't if was saw we it so there parts surprising And a of capacity some and growth those markets,

early our in that far the general but doesn't tell. a recovery. again, future, visibility of the fundamental DRAM for some into And place a DRAM are bit to recovery, little A go factors

accelerate last that shipments, half substantially even night year. player, in they was thinking that I Yes. Samsung pretty would the confident they back aren't but of the the dominant their seemed HBMX

XQ, HBM it's for at that but point maybe some I second not into your imagine So outlook factor half. in could the

That's right.

Okay. And additional but color just the mainly terms this anyone multinational? I kind of on but of don't know missed drove that I if asked is that? -- there Is increase Q-on-Q, the what China any in part,

XX% it'll so so China increase, WFE the over Yes. to in suppliers revenue. some for a outlook, XX%, Reminder, in little teen, of a the good but on. topic be XX% QX, China still that nowhere concentration. a inside asked, wasn't And moderate as the percentage No, we to touch QX near of a have the are forecasting

business we stand significant face semiconductor semiconductor up to opportunistically the export that in can our we've own and direct the the domestic as its pretty from pretty and of domestic then purchaser managing We been business. formed serving exclusive in an the we're distributorship the situation. with Remember, And China industry best proactive controls China divested industry. of China response both operations some geopolitical headwinds,

So contribution where structural get don't we're business, we increase. from going of to again, headwinds. a moderate as I geopolitical see theme it the these almost significant China see a because

Great.

kind of a themes off-topic bandwidth, for little obviously center. question. here get last just in one me these key Let efficiency are data Energy usage

Yes.

area on photonics optics? Where for silicon opportunity couple of the company a significant are we in that curve has market years? how the And an of be that co-packaged in. could invested Understanding adoption maybe a is

Yes.

very, very are early. We

we've customers where allows overall better noise technologies better sites for of faster production. just of optical a lab As its the our I test are said, ferrous pilot very probe like signal and of coupling inching But been to stages with fundamental inside engaged measurement that in customers production in the handful we've of tools the got times out efficiency. years co-developing and yield early because that

you note, solve, entirely help a ways this though, of energy centers the is data associated but problem with As to it helps it's and pretty solve to going significant one solve, that's not consumption.

centers Going electricity budgets the to data silicon on usage, become data the the chip-to-chip compute industry in for something bigger energy potential going center bigger the to centers. users energy of have to broader And worldwide. photonics data impact to these has and confront communication as that's is

something that's a silicon an as So we not when, if. photonics view

into I volumes the curve 'XX of timing, at worldwide. into 'XX and late the foundries think the probably we start to moving inside earliest, of the significant the adoption running knee see where

of Cowen. TD the line question Robert Our of next comes Mertens from

is Mertens for Rob on This Krish.

foundry Or and margins general so high-bandwidth the and You both business, due better-than-expected the Card higher Was memory around mix to maybe of memory the XXX largely the attributed basis throughout end mentioned the markets? increase? volumes positive largely or Probe points logic more a to mix mix. the gross in

refer spot, of midpoint So versus were we if margin right? outlook gross QX, XX%. XX.X% So was right you to on the of

So you to. I'm what sure not miss refer

in really Sorry, just terms driven thought heard I'm X/X gross of I I and driven mix. by by sure. volumes the X/X margins, not

That's the increase QX. from

if XX.X%. margin, was gross in you the QX high So XXs, recall,

foundry QX XX.X%, logic that of And to QX the and from from to to about and HBM, X/X So QX. more it mix. in QX the volume increase change is mix the to XX.X% X/X over more relates

a tests progress size little probe qualifications look the provide the for and maybe on opportunity of more market just you could then And like? with color of Okay. MEMS-based could what GPU cards the

Yes.

it requires everybody the world's largest same transitions manufacturer on CoWoS GPUs foundry, packaging, The cards monolithic probe they the cards, to use MEMS to as get sizing is right? probe think largest primarily work. the longer I interesting. legacy GPU that no Maybe at page, for advanced

But process so the of it's qualification been is kind got and business, XXXX focused to say there I'd and a there. make more has competitor we've in initial And strategic -- that are has imperative us here of our ahead in we progress. been and on qualify us opportunity. HBM what a major some

products of the I of memory do again, AI these some the think, relatively that of of there's manufacturers, opportunity. with an you size But some to is in heard the where package amount asymmetry from the GPUs. as the difficult interesting almost associated memory XXx

during diminish this importance so the we ours, to unit-driven That's technologies meeting the a of not HBM of qualifying for to compelling well. GPUs as to like HBM businesses like, important exposure MEMS-based obviously, but transition And for becomes probe, opportunity. more much

back to conference would I Sir? like now you. the Mike Slessor for remarks. to turn closing Thank

and September joining All late in a conferences right. for couple of We've Thanks, at. early to got see hope you everybody, that August we us today.

Until then, care. take

you This today's conference concludes participating. call. Thank for

now may You disconnect.