ACMR - NASDAQ

Good day and thank you for standing by. Welcome to the ACM Research Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gary Dvorchak. Please go ahead.

Thank you, operator and good day everyone. Thank you for joining us to discuss third quarter 2023 results which we released before the U.S. market opened today. The release is available on our website as well as from Newswire services. There's also a supplemental slide deck posted to the investor section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to Slide 2. Let me remind you that remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward -looking statements. Certainly, the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized loss on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website, and the Slide 12. With that, let me now turn the call over to David Wang, who will begin with Slide 3. David, go ahead.

Thanks, Gary. Hello, everyone. And welcome to ACM Research third quarter 2023 earnings conference call. Please turn to Slide 3. For the third quarter, revenue was $168.6 million, up 26% from the same quarter last year. Shipment were a record $213 million upward 31%. Gross margin was 52.9% and operating margin was 26%. For the first nine months, we grow revenue by 38%. This is in light of our decline in global WFE spending. We attribute our outer performance to market share gain, and the penetration of new products and new customers and general healthy market for mature nodes in China. Let me touch on each of these, beginning with the mature nodes investment in China. China's domestic and mature nodes, WFE investment remains solid. We believe due to China's goal to reduce the gap between its domestic and mature nodes capacity and end market consumption of semiconductor chips. We see a continued investment in 28 nm, 45 nm, and power devices for EV market. The ramp of EV production in China is a driver for capacity investment in power devices and other trading edge devices. This creates a tailwind for us and we believe we are still in the early stage of China's semiconductor capacity expansion plan, which we believe will continue to be a growth driver for us. As China identifies effort to boost its domestic or semiconductor capability, we believe we are well positioned to benefit and further increase our market share due to our strong market position, differentiated technology, and multi-product portfolio. Moving to products, please turn to Slide 4. Single wafer cleaning, Tahoe and semi-critical cleaning grow 33% in Q3 and 42% year-to-date. In the last few years, we introduced and began ramping our semi-critical product line including auto bench and then last year we introduced advanced and the high temperature SPM tools. In Q2, we introduced our super critical CO2 dry and cleaning tool. This quarter, we introduced our ULTRA C v Vacuum Cleaning Tool to meet the flux removal requirements for chiplets and other advanced 3D packaging structures. We have already received a purchase order for the new tool from our major Chinese manufacturer which we expect to be delivered in the first quarter of 2024. ACM has one of their broadest cleaning product portfolio in industry, covering early 90% of all cleaning process steps in both memory and logic devices applications. We believe this product portfolio would play a key role among material nodes development in China. and advanced nodes in our international effort going forward. ECP, Furnace & Other technology grew 4% in Q3 and 24% year-to-date. Growth in this category was driven primarily by ECP products, cycle with some contribution from furnace. Our high temperature anneal and LPCVD furnace, including silicon nitride and body are in production at key customers. And ALD furnace is under evaluation on a multiple customer sites. Advanced packaging excluding ECP, but including service and spare grew 12% in Q3 and 40% year-to-date. This category includes a range of packaging tools, including coder, developer, squabber, PR stripper and web and service spare parts. ACM is only customers that offer both a full set of wet tool and advanced plating tool. We believe that advanced packaging will become more important as industry looks for packaging innovations, such as 2.5D and 3D in the process and fan out to drive higher performance for new applications such as AI and GBT. Finishing up on product, we continue to make a good progress on self-effort with our new track and PECVD platforms. We are in active discussion with our key customer, and we plan to deliver more evaluation tools this year. Similar to our cleaning, plating, and furnace product line, our Track and PECVD platforms, however proprietary technology that we believe will make them win with the major customer, both in China and outside China. I'm pleased to report good progress with our Track tool evaluation at the customer site. We believe our Track tool with a new proprietary architecture design will meet the requirements of a higher throughput of the next generation lithography tool. Moving on to customer, please turn to Slide 5. We continue to make progress on customers both inside China and internationally. In China, we believe ACM tool are now used by near all the semiconductor manufacturers. With our sales and the service team are working to expand the deployment of each of our major product line across our growing customer base. In addition to our current customers, we are also seeing a good number of full-funded new entrants. Our team has done a good job of getting traction for our products with these customers. These are the new customers. This will be reflecting our shipment this year until customer acceptance at a later date. In the U.S., we announced this morning a purchase order for another product from a large U.S. manufacturer, the Ultra C b backside cleaning and bevel etch tool. This tool combined backside cleaning and a bevel etch function. The tool is expected to be shipped to their U.S. facility in the second quarter of 2024. And as this customer's ongoing evaluation of two steps cleaning tools, we believe this demonstrates a deepening relationship, which we hope will result in demand for additional ACM tools. Furthermore, we believe this will enhance ACM's brand and positions us to attract new opportunities with other major global customers. In Europe, early this year, we announced our order for our first evaluation tool, Ultra C cleaning tool from our major European-based global semiconductor manufacturer. We delivered the tool about four weeks ago and our team have already started installation process. To support our growth initiatives, we continue to make progress on our facility expansion in China and other regions. Please turn to Slide 6. In China, construction of Lingang production and R&D center is nearly complete and is expected to begin initial production early 2024. In Korea, as noted in the prior calls, we have increased our commitment to support our objective to address global market. We now have more than 150 employees in Korea with the three facilities including sales and administration, development labs, small-scale production, and cleaning rooms to support the wafer test for customer evaluation. And we are making plans to build a new factory on the land. We purchased earlier this year. We believe a strong commitment to Korea will improve our relationships with our key Korean customers. Our resource in Korea will also offer another base for supporting international customers in U.S., Europe, and other parts of Asia. In the U.S., we leased a facility in Oregon earlier this year to add to our service support and their demonstration capability for R&D and customer activity in the region. As a reminder, for 2023, we expect to spend about $75 million CapEx. This includes continued investment in our Lingang facility, remodeling for a new headquarter for ACM Shanghai, and our investment in Korea and U.S. I will now provide our outlook for the full-year 2023. Please turn to slide 9. We are updating our 2023 revenue outlook to be in a range of $520 million to $540 million versus our prior range of $515 million to $585 million. The range of outlook reflects among other things, management's current assessment of the continued impact from international trade policy together with the various expected spending scenario of key customer, supply chain constraint, and the timing of acceptance for first tools under evaluation in the field. Now, let me turn the call over to our CFO, Mark who will review details of our third quarter results. Mark, please.

Thank you, David. Good day, everyone. Please turn to Slide 10. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the third quarter of 2023 comparisons are with the third quarter of 2022. I'll now provide financial highlights for the third quarter. Revenue was $168.6 million up 26.1%. Total shipments were $213 million up 31%. Revenue for single-wafer cleaning, Tahoe and semi-critical cleaning was $132.4 million up 32.8%. For the first nine months of 2023, this category grew by 42.0% versus the prior year period. Revenue for ECP, furnace and other technologies was $25.5 million up 4.0%. For the first nine months of 2023, this category grew by 24.4% versus the prior year period. Revenue for advanced packaging excluding ECP, services and spares was $10.6 million, up 12.4%. For the first nine months of 2023, this category grew by 40.2% versus the prior year period. Gross margin was 52.9% up from 49.4%. This exceeded our normal expected range of 40% to 45%. The increase in gross margin was primarily due to a favorable product mix, improved gross margins for specific product lines and a favorable impact from fluctuations in the renminbi to U.S. dollar exchange rate. We expect gross margins to continue to vary from period-to-period due to a variety of factors, such as sales volume, product mix, and currency impacts. Operating expenses were $45.3 million up from $32.6 million. The increase was due to higher R&D, sales and marketing and G&A cost in support of new customer and new product activities and a boost in the post-COVID travel activities. Operating income was $43.8 million, up from $33.5 million. Operating margin was 26.0% up from 25.1%. We recorded a realized gain of $0.7 million from the sale of short-term investments for the quarter. Recall that realized gains are included in non-GAAP earnings. Income tax expense was $0.7 million, down from $10.5 million. This was driven by one-time items for the third quarter, but we still expect the full-year tax rate to be in the 20% range. Recall that as a result of a change in Section 174 of the U.S. Internal Revenue Code. Our effective tax rate for the full-year remains elevated. Net income attributable to ACM Research was $37.6 million, up from $28.2 million. Net income per diluted share was $0.57, up from $0.42. I'll now review selected balance sheet items. Cash, cash equivalents, restricted cash and time deposits were $326.5 million versus $376.1 million at the end of the second quarter. Total inventory was $507.4 million versus $471.1 million at the end of the second quarter, and it was split between raw materials, $202.0 million, work in process $83.4 million, finished goods inventory at $223 million. Capital expenditures were $26.2 million for the quarter. Year-to-date capital expenditures were $49.5 million. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

Thank you. [Operator Instructions]. We will take our first question. Your first question comes from the line of Charles Shi from Needham & Company. Please go ahead. Your line is open.

Hi, good evening, Dave and Mark. Congrats on the strong Q3 results. I have a first question on shipment. The shipment figure you posted for Q3 looks like you're making a new record here. But just to really want to understand what you see in terms of shipment going into Q4, do you largely see the number going to be flat Q-on-Q or for Q4, or what's the dynamics behind the very strong shipment figures? Thanks. That's my first question.

Yes. Okay. I think the shipment is really number indicated wherever you get a new customer and also ever our product is going to spread out and with the cleaning, cover plating, and also our latest new product furnace. And so I think that's the reason driving the shipment. And also we think Q4 shipment continue in our timeline. And I would say obviously there's certain components, right? And also -- there are also some maybe customer, their production line, and maybe some I call the pulsing may impact our shipment. But anyway, we think the whole year and our shipment will be still a very good number for supporting our growth. Hey Mark, anything do you want to add on the shipment?

Yes, no, thanks David. Yes, I mean shipments, I think as David noted, it's repeat ship revenue and it's also the first tool. So yes, we're certainly pleased with the shipments in the quarter. We don't guide specifically by quarter on shipments, but we're not anticipating a big increase sequentially in Q4.

Thanks. So David, I just want to have a follow-up, because I think I heard you mentioned certain customers may be passing, which may have an impact on shipment. Did I hear correct? Is that the Q3 comment or Q4 comment? Thanks.

Yes, well, I just say, I call it a quarter, right? And looking the whole year, right? We do see some, I mean customer, their production line is not ready. And they do have a face to deliver. So that's something we can feel there for sale not ready. And that costs our shipment delay, right?

Okay. So I just want to make sure, so it's not anything related to export controls, et cetera?

No, actually this moment our product, we follow all other -- I call it expert control rule there, whatever we receive the order, all to follow their, all their, I call it restriction. And they also follow the rule, right? Also U.S. and that we also, components that action. So anyway, so far we do not have any, because of our expert control, we cannot ship.

Got it, thanks. Maybe a second question from me. Congrats on shipping, receiving a PO from the other, from the U.S. semiconductor manufacturer for another set of evaluation, I believe. Wondering, can you remind us, what was the first evaluation that you shipped to this customer? What application was that for? What was the status of that the first evaluation? Thanks.

Great, actually we do have a two, all right we see border we deliver last year actually we made a quite a progress, even this is our first ship with this new customer and we make a lot of progress and we're making their product and the customer happy with our performance and obviously, we're looking for future, maybe order and because of how to, it does offer measure requirement especially using mech cleaning, they offer a much better cleaning efficiency and also diluted chemistry, they can see the consumption chemical. Well, we're looking for this bigger contribution for their process.

Yes, any expected timeline for the culture of the first evaluation since you already shipped the second? Thanks.

Yes, I mean, well I think we're close to, there's a two right, one is real R&D or evaluation tool, another one is just like, repeat order tool, so for the R&D two year right, two-year finish and by the second tool I think we're very close to final qualification and we call their sign off for our revenue, we are very close.

Thanks, David. I will hop back to the line.

Great, thanks.

[Operator Instructions]. We will take our next question. And the question comes from the line of Suji Desilva from Roth Capital Partners. Please go ahead. Your line is open.

Hi, David, hi Mark. Congrats on the progress here. Mark, on the gross margin you said about improving gross margin for specific product lines. Any color there, it seems like you're trending above the target. Consistently, just want to get any update there.

Yes, Suji, we won't really break it out by product line, but we had a good mix of differentiated products and some cost downs. We also got a little bit of tailwind from foreign exchange. Obviously, we're pleased with that level, but we're not changing our 40% to 45% target at this point.

Okay, thanks. And then I noticed you mentioned AI, GPT chips in the prepared remarks, David. Clearly, there's import export controls on some of those products for U.S. semis vendors. Is there a burgeoning China AI chip market that the foundries are servicing there? Can you give us a sense of how big that might be versus the global AI chip market because that could be a very exciting opportunity for you guys.

Yes, well I didn't really mean that advanced packaging, most of that operating, right. I mean, this is the real product we're talking and we're talking about not only China market, we also talk about the global market too. So in general, it's that right and in China, I still say most of our tool is for mature product and this moment for the packaging. So, as I said, we're really looking for our tool to be spread out not only in China market, which is the moment you'll know, also looking for our cover on the long side of operating, we'll be selling in the global market, which is more of the bank, AI and also GPT.

Okay, appreciate that color, David. And last question I have is on the vacuum cleaning tool. You mentioned chiplets. That's the first time I've heard you guys talk about chiplets. Is that a new growth driver area or is that really just an element of the advanced packaging functionality that you have? I was curious there if that's an incremental opportunity.

Yes, we see there's a new product, new requirement come out, right? You look at this, all the advanced packaging, all the chiplets, when they have a package finishing, there's also flags inside the gap. So those kind of gaps are hard to clean and those are that. So with our vacuum type of cleaning, you can really either chemical or the water getting into the small gap because of vacuum status. That's really made clean very well. So we see that market growth. And again, there's a lot of this chiplet going on in the whole industry. And for both our setting, the mature nodes or the advanced nodes. So we're looking for this product, to be add another, I call it revenue booster for our product portfolio.

Okay, great. Appreciate the color. Thanks guys.

Thanks, Suji.

Thank you. [Operator Instructions]. We will take our next question, and the question comes from the line of Christian Schwab from Craig-Hallum Capital. Please go ahead. Your line is open.

Great. Hey, Mark, can you just walk us through the puts and takes on your original top-line revenue guidance on why your guidance for the year is near the low end versus the high end?

Yes, actually David, do you want to take that? I could probably go next.

You have to take it first. I will hold for that.

Okay, I'll go ahead and take that then. So Christian, thanks for the question. I think there's a couple of things here kind of from the beginning of the year. I'd say first is, if you just think about the overall China market, we're not necessarily market readers, but based on some third-party data, it does sound like the China market as a whole is down year-on-year versus our expected flat. Still great spending on mature nodes, but the market may be a little less strong than we had anticipated. I would say despite that, our year-to-date revenue was up 37%. Our midpoint of our outlook is up 36%. So, our product cycles and our new customer activity is contributing. The third point is, we did, I think David talked about a little bit. Certain customers, we saw maybe a slight delay, one to two-quarter delay, either due to their facilities, just kind of a timing thing for them to get their tools installed, or just almost a digestion where some of our bigger customers may have seen a large number of tools shipped, and they're just kind of working to get those deployed. The last thing I'd say on that is also, Christian, a lot of our shipments this year have been first tools, to new customers or newer products. And so, for those ones, we'll get more revenue next year. So, kind of a combination of things there. I mean, we're still pleased with the growth. We would have liked, obviously to be at the higher end, but this is where things stand right now. David, anything to add?

Yes, that's fine. I mean, perfect. I don't have any to add on that.

Yes, and you guys look to calendar 2024, would you expect the aggregate TAM in China to be flat, to be up, to be down, and what specifically would cause you to outperform the TAM growth inside of China once again?

Okay, good question. So actually you're looking their third-party data and next year China is the upper right. And we also feel they're good year, next year for China. And because I think China market is still in their early or middle stage of the capacity expansion, especially this matures in 28, 45, also EV market, right for their power devices continue to grow. And then also they have our new product, our furnace as I mentioned, end of last year, we have three customer, end of this year we're part of the 10 customer. So expanding quite rapidly with the customer in the furnace product, right? We have all LPCVD high-temperature plus our new ARD product. So we'll see their revenue contribution, right and for their year 2024. And plus other, also other new cleaning product, you mentioned that as other semi-critical CO2. And also our Tahoe product, I mention that is the, we see next year, our multiple repeat order will come in for our Tahoe tool. Also, Tahoe has offered 40%, probably to 70%, so [indiscernible] compared to their single SPM tool. And we see their big interaction from not only logic customer, also from their memory customer, also not only domestic, I mean only China also, we see the customer outside China interests for this Tahoe product. We believe this real revolutionary cleaning tool, offer real environment their friendly process, for saving those sulfuric acid. Next one, I'll see that, 2024, we see the international market penetration, they become more of a, I call materialized, and we see their property pickup and their international sell. And for our cleaning, for cover plating, and those well-proving, and also advanced product, right? And as I mentioned, even in the cleaning, I want to mention one more, there's a bevel on the backside cleaning, we just announced today, and to the same customer we have in the U.S., of the indication, our backside bevel cleaning tool, will be also another booster for our cleaning product, right and for 2024. And lots of us, they will mention that, it will still continue to grow, creating about cleaning, auto bench bevel, auto bench cleaning tool has been grown rapidly. And for the, a lot of mature products in China, they're using this auto bench tool, right? So that's another growing factor. And further than that is, as you say, next year, we see our Track system will probably go to model customer and also PECVD to get into their evaluation with customer too. But those two will probably make the contribution for 2025 revenue. But maybe that's very general view from 2024. Mark, anything you want to add on that?

Yes, I think you hit it pretty good, David. I mean one thing that it is interesting to talk about Christian is we actually had our International Sales Conference last week here and post COVID was our first face-to-face conference in a while. We had teams from Korea, U.S., Europe, even Taiwan in here meeting for three to four days. And I mean David you might say a few more things about it but it's pretty clear to us that the international markets there's good opportunity. There's a lot of customer activity in these regions and next year, we do think international can be more meaningful. But we would see next year is a building year. Yes, that's it thanks.

Thanks for that, it sounds like we have a lot of things going on about the product in the customer front. But if we could, if I could just ask one more question about the customer front, as you've made a couple of tools with a new customer in the United States and Oregon, can you give us an idea of how substantial that that could be over time not '24 or '25 but over time and then in addition to that, I think you mentioned that selling out of the Korean facility to international customers but also expanding opportunities with inside Korea now do you think you can expand the customer base inside of Korea or are you just talking about expansion of opportunities with your historical customer in Korea and that's my last question. Thanks.

Okay, thank you. Well actually our customer U.S. and including our relationship with the customer in Europe right is really adding our customer base and for international customer and as we said we got to repeat order for the same customer is we will show our relationship closer with the customer plus we'll offer different, I call their product for the customer and that's really a major attraction to the customer and regarding to their Korean customer again we have a historic customer, we have a fully cooperation with them and not only we talk about cleaning, we work on our additional new product to collaboration with them. We also have over 90%, the process of staff we can cover in the cleaning side. So we have a lot of advance and also our only ACM -made different products. We try to work with the customer in this historic customer. Obviously, we're also looking for other customers in Korea. And they're not only for our cleaning tool, plus including a compensating tool, and also other product we develop right now. And plus, I want to add one more, but we didn't mention all in the script. And we're also actually working with customers in Singapore, right. So again, our goal still long, long ago is still we may. In the future, our 50% of revenue come from Mainland, China. And also 50% of revenue come from China, right? That's our future global strategy.

Great. Thank you guys.

Thanks, Christian.

Thank you. [Operator Instructions] We will take our next question. Please stand by and the question comes from the line of Charlie Chan from Morgan Stanley. Please go ahead. Your line is open.

Thank you. Hi, David, and Mark. Good evening and good morning. So first of all, my question is about your potential exposure to the high end memory, meaning the high with memory. We do -- you have some memory customers. So can you explain to us, first of all, what kind of a tool you potentially can supply to the memory customers for the HPM? And secondly, what is the progress for this adoption for your tool for HPM module? Thanks.

Yes, okay, Charlie, I really cannot tell too detail, right? But we have a multiple product and working for this customer for the HPM, right? And this is a real new growing market. And as I said, we have more than two products working with them. Also, we're trying to spreading also other products in our portfolio. And they're working more closely with their R&D group and to qualify our advanced technology for that. So I'd say we put all the effort in Korea and we have now 150 engineers R&D in the Korea and we really become local supporting for the customers and get a closer and faster response to the customer. So we're building continuously and building our production capacity and to meet the requirements and not only for the Korean customer probably also for the all the customer internationally. So that's the three effort we're putting right now.

Okay, I understand. Thanks David. The next question is for Mark. I know you explained the OpEx trend, but it's still a very, very big jump even those are new R&D expense a lot of the customer activity, but still pretty big jump versus a previous quarter. So how much of those increases like one of post-COVID travel? And should we use that $45 million a quarter as the new norm for the future OpEx?

Yes, thanks for that on the OpEx question. So we're obviously investing in the R&D side and our sales and marketing. We've got public companies, two public stocks. So I think the quick answer to the new level, yes, I mean I would actually expect the OpEx to be -- maybe even up a little bit next quarter. There is, as you know, a lot of our expenses are in renminbi. Third quarter, remnant B actually strengthened on the quarter, so that moved things a little bit. But in general, we would anticipate the OpEx to be at -- that's about the right new run rate, Charlie.

Okay. And so can we justify that increased OpEx was a very strong shipment because we calculate the OpEx ratio, OpEx by revenue, right? It seems like pretty high OpEx ratio. So is that more like correlates with the shipment, because it seems like shipment into, third quarter and fourth quarter are pretty strong?

There's a correlation there, Charlie. I don't -- we don't break it out specifically, but of course there's a correlation to our shipping level in our OpEx.

Okay. Yes, and also such as to the R&D, do you think that the peak spending of your R&D, I know you're already introduced to your new thing. So how much more aid for us, R&D you need to invest in for the future product line or current product lines?

Let me cover that. I mean maybe Mark can add more. The R&D is major, if you look two years ago or three years ago, general R&D spending above 12% right. As we especially after IPO in China aftermarket and so we start boosting on assets, starting good investment into new product right, you want to see number one and plus PECVD and also Track. And we look at their next two, three years at the very big opportunity for us to grabbing the market in China and plus with our new innovation or proprietary technology building to the owners, PECVD and also Track. And we were also getting to the market in international. Especially, I want to mention the Track. The Track system is going very well in the customer qualification. And plus, our new architecture really is aiming for the high throughput of this next generation tool, right. And so if people talk about even 400, 450, WPHE high throughput. So we attach our Track system, we are aiming for that market. And we're planning to be the second player in this array called the competitive market. So as I see that, so I think probably 15%, 16%, that's a range and we'll be keeping. And with that percentage wise, probably not much changing. But then we have a revenue for that, you can see that we still maintain a lot of that there on the money into their existing product and also new product. And especially even for existing product, like a copper plating and also their cleaning, right? We also do put effort in there. In recent years, we see there, this cleaning product become more and more important for their new advanced technology. Plus, I should say the copper plating market will rapidly, this chiplet, advanced 3D packaging, and this copper plating will become very important. So we're also putting R&D into both the existing production line.

Yes, one last thing. Charlie, we've said this before, but if you look at it, kind of tax behind what David said, R&D expected around 15% of sales. But we should see some operating leverage on the D&A and the sales and marketing side. We got a little bit this year, and in general, that's the way our operating model is built.

So the R&D intensity will keep at 15% at least for the coming couple of years.

Okay, okay. Fair enough. Thanks for the comments. Thank you.

Thank you.

Thank you. [Operator Instructions]. There seems to be no further questions. Apologies, we have a question that's come through, one moment please. And you have a follow-up question from the line of Charles Shi from Needham & Company. Please go ahead, your line is open.

Hi, thanks for taking my follow-up question. So Dave and Mark, I really just want to go back to your comment, the overall China market. I know you said you are not the market leader here, but can you kind of explain why you are seeing China market down year-on-year as a whole? And what about quarter-on-quarter? What do you see there? I'm just looking at the data and the commentary from your U.S. peers. It seems like they are probably expecting Q4 overall China market to be holding relatively strong. I don't exactly know where your QonQ or year-on-year, but what's kind of curious why you think that overall China market was down year-on-year? Thanks.

Well, let me add on that maybe Charles, actually we don't have whole data, right? We're not collecting whole marketing data. However, you're looking at all the research reports to the semi or other U.S. bankers published. People talk about probably a few percent, I should say less than 10% down. People say whole year, one quarter base, right? And we see probably this year we see almost like a flat in over. I don't know yet, this moment I will say, flat is that we will stay here, but we will remember what I said probably end of this year, somebody published a real result. But I don't say, even this year flat, we see our customer expansion and we think next year is still another good year. And everybody expecting probably three, five, and six, the global market back. But I think in China this time, even downturn globally, the margin in general is still with semi and I will say, next year is another good year. These are also new products.

Yes and David, if you don't mind, maybe I'll add a little bit on to that. I mean, it's, again, it's hard for us to kind of read the overall market. So we look at third-parties and we look at some of the same public companies you probably look at as well, right? If you look at some of the semi-cap names, our Investor Relations team pulled together some data. that were Q3, a lot of companies had a pretty big uptick sequentially. Hard to know exactly what that was driven by, but we were encouraged by kind of a big lithography ramp in Q3 for one of the players. And we look at that hopefully as some kind of a leading indicator. But David, I don't know if you wanted to add anything on about that as well. There's a lot of tea leaves that we try to pay attention to. And we look at our own business, and this is kind of how we see it.

Yes, I mean, I think you are right. The lithography companies, they're just years revenue in China, almost double, right? Look at that. What's really indication say, normally [indiscernible] buying, right or shipment. So they get it right in first. So we'll see that those two are definitely driving another demand for the semiconductor capital spending in China.

Thanks.

Thank you. There seems to be no further questions. I would like to hand back to David Wang for closing remarks.

Thank you, operator. And thank you all for participating on today's call and for your supporting. Before we close, Gary is going to mention our upcoming investor relations events. Gary, please?

Thanks, David. Before we conclude I just want to give everyone a quick reminder on our upcoming investor conferences. On November 15th we will present at the 12th Roth, the 12th Annual Roth Technology Conference in New York City, November 16th, we will present at the 14th Annual Craig-Hallum Alpha Select Conference also in New York City, from November 29th to the 30th, we will present at UBS Global Technology Conference in Scottsdale, Arizona. And finally, on December 12th, we'll present at the Annual CEO Summit in New York City. Attendance at the conferences is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with their management team. This concludes the call. You may now disconnect.