Good morning. Good afternoon, ladies and gentlemen, and welcome to Besi's quarterly conference call and audio webcast to discuss the company's 2021 fourth quarter and annual results. You can log in to the audio webcast via Besi's website, www.besi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer, and Miss Hetwig van Kerkhof, Senior Vice President, Finance.
At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I would now like to turn the call over to Mr. Richard Blickman. Go ahead, please.
Thank you. Thank you all for joining us today. We will begin by making a few comments in connection with the press release we issued earlier today and then take your questions. I would like to remind you that some of the comments made during this call and some of the answers in response to your questions by management may contain forward-looking statements. Such statements may involve uncertainties and risks as described in the earnings release and other reports filed with the AFM.
For today's call, we'd like to review the key highlights for our fourth quarter and year ended December 31, 2021, and also update you on the market, our strategy, and the outlook. First, some overall thoughts on our performance. Besi performed solidly in the fourth quarter last year, despite the adverse impact of a flood at one of our Malaysian production facilities.
For the quarter, revenue and net income rose by 56.5% and 50.4%, respectively, versus the fourth quarter of 2020, while gross margin, excluding a one-time flood-related inventory impairment charge, increased to 61% versus 60.4% in the third quarter of last year and 58.3% in the fourth quarter of 2020.
Revenue for the quarter was aided by continued growth for automotive and high-performance computing applications in a quarter which is typically the seasonal low point in smartphone demand. Orders of EUR 202.6 million were above December guidance of between EUR 180 million and EUR 190 million, reflecting strength by IDMs for automotive and mobile applications.
Profit efficiency also maintained at elevated levels, with net margins reaching 39.1% in the fourth quarter last year versus 40.4% net in the third quarter last year, despite lower shipment levels. For the year, Besi reported strong results which exceeded many of our key strategic planning targets three years ahead of schedule.
Revenue, orders, and net income rose by 72.8%, 98.9%, and 113.5%, respectively, versus 2020. In addition, net margins rose solidly from 30.5%- 37.7% in 2021, and return on average equity increased from 39.5%- 57%, despite the many challenges faced during the year. Strong revenue and order growth this year benefited from increased demand across Besi's principal end user markets, geographies, and customers.
It was also supported by favorable market conditions, driven by an under-investment in assembly capacity over the past decade, a new 5G smartphone product cycle, continued investment in advanced packaging applications to support digital infrastructure growth, and increased investment from Chinese customers for mobile and mainstream electronics applications.
In addition, Besi received initial orders for hybrid bonding systems from two leading producers, with initial shipments made in the fourth quarter last year. Substantial growth in profit levels and efficiency were aided by operating leverage in Besi's business model as we limited expense development to 18.9% relative to a 72.8% revenue increase. As such, operating expense margins declined from 25.1%- 17.2%.
Expense trends were even more favorable given that reported and gross R&D spending increased by 10.6% and 25.8%, respectively, as we accelerated investment in Besi's wafer level assembly portfolio. Besi ended 2021 with a solid liquidity base consisting of cash and deposits of, in total, EUR 672.2 million or EUR 8.62 per basic share. Cash generation was strong this year, with cash flow from operations increasing by 71.5% versus 2020 to reach EUR 277.9 million or 37.1% of revenue. Further net cash of EUR 370.4 million increased by EUR 171.7 million or 86.4% versus the year end of 2020.
Given profits earned in 2021 and our solid financial position, we propose a cash dividend of EUR 0.0333 per share for approval at Besi's 2022 AGM. It will be the 12th consecutive annual dividend paid and reflects a payout ratio relative to net income of 92%. Including the proposed dividend, Besi will have returned EUR 1.2 billion to shareholders over the past 11 years, or approximately 25% of cumulative revenue during this period.
Amazing. Next, I'd like to speak a little bit about the current market environment and our strategy. As seen in this next chart, the semiconductor equipment industry has continued its upward growth trajectory into 2022. CapEx budgets of the major players have been increased on multiple occasions in 2021, particularly for high-performance computing and automotive applications.
According to industry analysts, the current market upturn is anticipated to continue in 2022. VLSI revised upwards both their 2021 and 2022 forecasts in February, with growth anticipated of 55.6% and 14.3% respectively. The assembly equipment market is expected to reach $6.4 billion this year, excluding any contribution from hybrid bonding revenue, driven by data center, artificial intelligence, high power computing, and new 5G phones and applications.
The current upturn is unique in the challenges faced with respect to production and shipment schedules, both at Besi and at our customers. At present, we are shipment constrained due to shortages of a variety of components such as wafer handling systems and mainly electrical components, which we buy from third parties.
In addition, the timing of shipment has also been affected by delays at certain customers who don't have planned facilities or production lines in place as per schedule. As such, our backlog has increased significantly over the past year and currently extends into the third quarter. Despite such challenges, we continue to execute on our strategic priorities, the most important of which is the development of a wafer-level assembly portfolio.
During 2021, we refined the strategic plan 21-25 and initiated changes to our organization and management structure to better realize its potential, while maintaining the exciting growth opportunities available for Besi's existing products. In the fourth quarter last year, we began shipping hybrid bonding systems to a customer with additional orders and shipments expected in the upcoming quarters to support their second half 2022 production objectives.
The introduction of hybrid bonding cluster tools is also on track for H1 of this year. In addition, significant interest has been expressed by the industry's largest customers for other Besi sub-10 nm assembly systems for 3D chiplet-based architectures such as our TCB chip to wafer and embedded bridge die attach systems. I'm also pleased to note significant progress in our ESG activities.
Besi expanded reporting against SASB and GRI frameworks in 2021, and is preparing to comply with the new TCFD requirements in 2022. We also significantly reduced usage on a relative basis in the areas of emissions, energy, waste, and water consumption this past year. In many areas, Besi is already ahead of targets set for 2022, even despite significant business growth in 2021.
Further, we set an objective of net zero carbon emissions by 2050. Now a few words about our guidance. We have a favorable outlook entering 2022, as evidenced by Besi's strong order intake in the fourth quarter last year, backlog at year-end of EUR 327 million, and increased CapEx spending announcements by many of the leading semiconductor producers recently. It also reflects ongoing investments by IDMs in high-end advanced packaging solutions, capacity shortages in a number of Besi's end user markets, and favorable order trends to date in Q1 of this year relative to Q4 last year.
For Q1 2022, we forecast that revenue will increase by 15%, ±5% versus the fourth quarter last year, and by approximately 38% at the midpoint of guidance versus the first quarter of last year. Given supply chain constraints, we expect our backlog at the end of Q1 to increase versus year-end levels.
In addition, we estimate that basic gross margin will range between 59% and 61%. Further, we expect baseline operating expenses to increase by 0%-5% versus the fourth quarter last year, and for overall operating expenses to increase by 35%-40% versus the fourth quarter due to approximately EUR 9 million of non-cash share-based compensation expense. That ends my prepared remarks. I would like to open the call for questions. Operator?
Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. To be registered for questions, you may press star one at any time. Your questions will be answered in the order that they are received. For questions, star one, go ahead, please. The first question is from Mr. Didier Scemama, Bank of America. Go ahead, please.
Yeah, good morning. Good morning. Good afternoon, and thank you. I just had a few questions, Mr. Blickman, if I may. So first of all, can you give us an update on your hybrid bonding installed capacity and capacity plans really going forward? Because when I look at your largest foundry customer CapEx plan, especially for advanced packaging and I think the plan announced yesterday by your largest IDM customer with regards to 3D and hybrid bonding ramping in the second half of 2023, I'm just wondering whether, you know, the previous guide of 12-15 units production per month in terms of capacity is appropriate or whether you need to scale that up a little bit more. I've got a follow-up. Thank you.
Well, excellent. Number one, it's always very encouraging to hear customers confirm further rollout of next generation technology, which is, in this case, hybrid bonding. Our capacity in place and you mentioned 15-20 systems. That is for the new facility we opened up in Malaysia, but we also have a clean room facility in Austria.
Due to the flooding end of last year in Malaysia, we were forced to develop another facility in a clean room, which helped us to overcome the cleaning and preparation of our clean room facility in the main facility in Malaysia. All in all, it is more than the 15-20 systems we have indicated earlier.
In true numbers, if we look at both customers, we will certainly be able this year to fulfill their demands, because as we mentioned earlier, 2022, 2023, 2024, the capacity will be built gradually, not all at once. If we simply translate their indicated numbers to numbers of machines, we should be able in the next two, maybe three years, to be able to fulfill that demand in our current facilities. In case we need to expand further, it takes us about nine months to add an additional facility and to train the people. We will certainly be in time to be able to deliver additional systems beyond what we have indicated as our capabilities so far.
Very well. The 12-15 is now 15-20 and going higher, as far as I understand from your answer. Would you share with us maybe what you think order intake for Q1 might be with regards to hybrid bonding and whether you feel, Mr. Blickman, confident enough to give us some form of guidance for the full year, when it comes to hybrid bonding units or revenues? Is that something you're prepared to do at this stage?
No, we are in that sense always careful because in the semiconductor industry, plans are always very positive, but execution depends on many other factors. It's not only our beautiful hybrid bonding tools, but it's also depending upon in first instance the availability of wafers and also the availability of the relative devices required.
We're dependent upon certain input, and experience has taught us not to be overexcited. On the other hand, as answered to your earlier question, we have to be prepared. That's the best I can share. We are prepared. We've had two very important months, January, February, in terms of adoption of hybrid bonding.
We, as we mentioned, shipped systems in Q4, also in Q1, and the systems are in full production, and that has always focused on performance issues which all have been resolved in a very positive way, which has given us significant confidence in further rollout. Remember last year we were in the very initial phases, now we are in full production phase, and that transition is very critical. It's fair to say that we have accomplished that in a very positive sense. That bodes well for further rollout in this year and the years to come.
Thank you so much.
The next question is from Mr. Stéphane Houri, Oddo BHF. Go ahead, please, sir.
Yes, hello, good afternoon. Thank you for taking my questions. I just wanted to come back on your visibility on the year. You've shown this VLSI forecast for 14.3% growth for the year for the assembly equipment market. Is there any reason why this is not including, by the way, hybrid bonding and spare parts and services. Is there a reason why you think you could not do at least this kind of growth for the year 2022? Thank you. I have a follow-up.
Well, if you look at our quarterly revenue over the past year, we are certainly able to do more than what we have done in the fourth quarter and what we are guiding for Q1. Our capacity basically is in place. We mentioned there are certain supply chain risks, and that is consistent with all of our peers in this industry.
There's certain shortage in electronic components, also in certain modules. We've been able to overcome many of them in the past two years on an ongoing basis by redesigns, finding other sources. The limitation is not our ability to do that. It's certainly not our product position at our customers, evidenced by our financial metrics. The risk in market growth is simply supply chain.
That is also to repeat what was in the comments at our customers. Our customers, some are facing limitations simply because of physical expansion, but also other suppliers in the supply chain causing delays. In China, for instance, because of COVID issues, certain regions have been closed down, and that has led to delay in delivery of machines simply because those factories are closed. There are certain, let's say, risks, uncertainties ongoing, but the market demand is intact and we continue every single day to find solutions for certain constraints. In the meantime, it has become our hobby. Nothing is impossible, so we look at all this very positively.
Okay, very good. Thank you. I just wanted to come back on the hybrid bonding story. Do I understand correctly in the question of Didier that you're now talking about 15-20 tools for the Singapore or for the Malaysia facility? If you take all your facilities together, how many hybrid bonding tools do you think you can produce every month at full speed, let's say?
No, what I indicated, that 15-20 is max. Customers don't set up these capabilities in high volume at once. There are many aspects. It's in front-end environment. You need the people. You need to qualify these machines, which takes longer than, let's say, in, I would say, ordinary assembly environment.
That will go gradually. Key is that it has become, in the last two years, you can say from development and longer-term roadmap, transition to mainstream. That is evidenced, also by the call of a major IDM yesterday, and that bodes very well. Besi is prepared for that, and Besi will further prepare as demand develops. Also with support centers, which we are setting up support centers in Taiwan, in the U.S.
We are gaining every single day a lot of experience. Also, we should not forget the center of excellence in Singapore, Applied Materials, where since December 2020, a hybrid tool is developing on an ongoing basis, all kinds of samples for the major five in this industry. The momentum is gradually building.
Okay. Just one last point. Would you say that your hybrid bonding order book has increased during the quarter?
We have. Otherwise, we would have mentioned we haven't received a major volume. We received major volumes in Q2, Q3, which are now being delivered, installed, and the next round, as we mentioned, should come in the following months.
Okay. Thank you very much. Very clear.
The next question is from Mr. Robert Sanders, Deutsche Bank. Go ahead, please.
Yeah. Hi, good afternoon. I wanted to pick up on TCB. One of your competitors, K&S, talks about the fluxless TCB project that they have, and they argue actually that TCB will be several times larger as a market than hybrid bonding.
I think the argument is just that hybrid bonding is expensive and TCB will be good enough for a lot of the sort of 50-10 micron area. I just wanted to get your thoughts around that. Also related to that, whether you thought that there would be a sort of virtuous circle from the adoption of hybrid bonding on your TCB demand, or whether you thought that perhaps some customers will choose your hybrid bonder but use another third party for TCB. Thanks a lot.
Well, as we mentioned, TCB is on our roadmap since over a decade. We were, I would guess, one of the first with real production systems. That's an ongoing development which has accelerated for applications chip-to-wafer. There's a chip-to-substrate world, TCB, and a chip-to-wafer world. There are many applications. There are bigger devices, smaller devices, integrated devices with the opportunity of building chiplets. Which offer significant advantages in speed, in cost, and also in heat dissipation, energy consumption. There are many drivers for moving the needle more towards a combination of hybrid bonding and chip-to-wafer.
The messages we receive from customers, from publications, conferences on an ongoing basis, is that it certainly will be a variety of technologies going forward. Important, as answered to a previous question, in the past two years, hybrid bonding has developed from a development stage technology to a mainstream technology, which offers significant growth in the years to come.
Can I just ask one follow-up, which is just on the, you know, on this large IDM that was talking last night, as well as your other large customer, the large foundry. Are you seeing these companies willing to pay big prepayments? 'Cause obviously Besi is receiving, you know, much larger prepayments than historically. I was just wondering if you were able to secure much larger deposits as part of longer term deals.
Well, if you look at Besi over the years, and we mentioned that on many occasions, we are not market share driven, we are margin driven. In this technology-driven market, it's a matter of saying yes and also saying no to opportunities. Attractive commercial payment structures to customers, in my experience, are not the critical factor. The critical factor is the performance of your tools. The consistency of that, the support, and that translates in payment conditions and also in cash generation. We will move more with this hybrid bonding into the front end, you could say, business environment. That is different from the back end.
One can expect that over time, also the contractual obligations and related to that, the payment structures will be more similar to that of front-end companies. We are now in combination with our partnership with AMAT, in the initial phase of combined offerings, and that already brings those terms more closer together.
Got it. Thanks a lot.
The next question is from Mr. Marc Hesselink, ING. Go ahead, please.
Yes. Thank you. My first question is also on hybrid bonding. In the elaborate presentation that you have on your website at the end of last year, you stressed that there is the potential to significantly exceed the initial expectations. What needs to happen then? Is that simply a very strong end market for those leading nodes? Or would that also mean that the design companies really start to indeed design your way of the chiplets that you can produce on your machines? You need that change from these guys, or is that the wrong way to think about it?
No, no, that's precisely the way to look at it. Every chip company designs circuitry for an end application, and they have to decide which technology to use. Do they use a substrate as an interposer or a hybrid bonding or a chiplet, whatever design. Those decisions will determine which technologies will be used.
What I haven't said to previous questions, of course, it's all a matter of cost. This industry is, in many views, the industry over years, over time, which has been able to combine technology and cost savings in the best, in an exemplary way. That's every day in the decision of customers which process technology to use is a combination of what is feasible and at the same time, what is the most cost-effective way.
The beauty about hybrid bonding and chiplets is that also addresses a cost because it eliminates many other cost factors in substrate-based technologies and in combining individual components. That is why hybrid bonding has gained more traction than initially was anticipated. Time will tell.
Yeah. The big improvement that AMD mentioned, I mean, that kind of things are driving it, that other design also have to move into that direction.
Well, for certain applications, it's not. I mean, there's a myriad of device designs and applications. You can't say for every application. You have to be more specific for which application. Those customers will advertise which technology they use.
Okay. Clear. My other question is on the favorable order trends that you mentioned versus the fourth quarter so far. Last year, you had a very strong first quarter on order intake. How does it compare to that one? Maybe taking into account also where are we now with the 5G cycle? Is the next generation of 5G's going to be pretty much incremental on the very strong year that we saw last year, or is that all a bit too early to tell?
It's a bit early to tell. On the other hand, as we mentioned in the press release, but also in the call, we received already initial orders in the fourth quarter, which is relatively early. Mostly it's in the first quarter. That also has to do with supply chain constraints. Probably there's also a cycle. One year, there are more new features than in other years, but it's hard to tell which features will be decided in this next generation high-end smartphone to be launched in September timeframe. That's always exciting. We have to be ready for that. Time will tell.
Are you willing to share if you're also up year-over-year on the order intake or just only your first and fourth quarter?
Well, the first quarter is still on the way, yeah? It's too early to tell what will be the complete outcome, exciting, and we will share that with you end of April.
Okay. Okay. Perfect. Thank you.
The next question is from Mr. Charles Shi, Needham. Go ahead, please.
Hey, Richard. Good afternoon. Thank you for taking my question. I wanna go back to the order trend from, I mean, your direct or indirect customer, the largest U.S. sub smartphone manufacturer. This year, through the supply chain, we see a common theme that this particular company is pre-building a lot of stuff, pre-building for their late 2022 new product launch a little bit earlier than the previous years.
The seasonality pattern for a lot of the companies in the supply chain seems to being pulled forward a little bit, meaning Q1 seems to be above seasonality, Q2 seems to be below typical seasonality. My question for you is that, are you seeing a similar trend, or it's still unclear at this point?
We see a similar trend. Don't forget, the supply chain constraints are forcing, and that's not only for high-end smartphones, but also, as we mentioned, our backlog continues to build, visibility into the third quarter, which is for us unusual at this stage, only for certain long lead time machines. But that is a phenomenon. Still, it's very healthy. One could argue building backlogs are usually, in retrospect, pointing towards overcapacity, but these are all identified, and as you mentioned, for well-identified end products, launches. As said, we can confirm your statement.
I just wanna clarify.
Maybe this time, and that's why I said you have to look at all products and not only high-end smartphones. There's clearly automotive is growing. There are many capacity expansions and new product launches scheduled for this year and also well into next year. Also the data center, the whole computer space expansions are expected to be significant this year. Every year is different in that sense. The patterns are different, but it's too early on February 17th or 18th today to understand how this unpredictable industry will develop in the next four quarters.
Understood. Maybe a question on the supply constraints. Obviously, you did mention in the press release it's not only supply constraints on your side because of the flooding, but seems to be also because of your suppliers. You are still supply constrained in Q1. That's my takeaway from your press release, but can you confirm that? If you don't really have the supply constraints, well, can you try quantify what your Q1 revenue would have been? I mean, your guidance would have been. Thank you.
No, it is very simple. Quick math. As we indicated, EUR 25 million revenue was impacted. We were able to pull forward certain machines which helped us and especially our customers that we did deliver in time or with slight delay. That EUR 25 million which we pulled forward, we were not able to fill that gap immediately. That will take a few months simply because of supply chain availability. Think about controllers, electric motors, precision guide rails. There are many critical components which suppliers do not have on the shelf. Whether it is then EUR 25 million more, but a major portion of that could have been more revenue in Q1.
My last question, I wanna go back to the question on TCB. You just gave very specific application, a description of the application. You mentioned it's a chip-to-wafer TCB. My question for you is, obviously your competitor is talking about thermal compression bonding for heterogeneous integration. Is your TCB, the traction you're seeing, a similar application or different application here? Thank you.
Well, we don't know precisely which application, but if the ones we do know, our competition is not the U.S. equipment manufacturer, it's the Hong Kong, Singapore.
Got it. Thank you, Richard.
The next question is from Mr. Didier Scemama, Bank of America. Go ahead, please.
Oh, thank you for taking my follow-ups. I just wondered, Richard, whether you could talk a little bit about the business outside of advanced packaging, you know, flip chip, let's say your more mature technologies, et cetera. Some of your OSAT customers appear to be guiding CapEx flat, some others have got CapEx up. I mean, is that the way to think about the trajectory of your business for 2022 for the non-advanced packaging part of the portfolio? I've got a quick follow-up after that. Thank you.
Now, as I mentioned, there's certainly growth expected, let's start with automotive, and that is covering all of our products. So that is die attach, and especially the soft solder die attach, then packaging, molding, trim and form, plating for that matter, and that's very strong at this very moment. Maybe it's better to also mention where we see some weakness.
In China, for, we think, reasons of simply customers being able to set up more capacity, there is some expected temporary delay in further expansion. They've been enormously expanding in the past couple of years on an ongoing basis. We do not see that at others. In the computer space, I mentioned that earlier, there's ongoing expansion, major expansion.
The only softness to speak of is further expansion at OSATs in China. One of the reasons is also this COVID, where I mentioned that certain regions are closed for some time, so systems cannot be delivered. Yeah.
Okay.
If that helps.
That's great. Yeah, no, I just wondered also on the IDM front, I mean, historically these guys have not been investing heavily in assembly and packaging and you see now, you know, sort of rejuvenation of capital investment and capacity expansion in Europe, in Japan, certainly in the U.S., companies giving, you know, very substantial CapEx forecasts, not only for the 2022 year, but also for the longer term. One of the real focuses is obviously front-end, but you know, as they mentioned, you know, if you increase your front-end capacity, you also want to have more onshore back-end capacity and as well as offshore.
Do you think that this sort of rejuvenation of the lagging edge effectively from the diversified semiconductor companies in automotive, industrial markets, is going to lead to a more prolonged assembly equipment upcycle, if you want, and if you've got that visibility on those clients, et cetera, as you go into 2023 and beyond?
What we hear in those conversations with customers is what may change is next generation infrastructure. It's not anticipated that capacities will be moved over the world from Asia to Europe, for instance, or to the U.S. It's all focused on next generation. In the past, that would be then assembly developed in Asian facilities, and in the future, that may well be expanded again onshore in Europe and in the U.S., and we see those developments already happening.
Okay. Thank you so much.
Ladies and gentlemen, for any additional questions, you may still press star one. The next question is from Mr. Nigel van Putten, Kempen & Co. Go ahead, please.
Hi, thanks for allowing me to ask a question. Actually, I had one exactly on what you just discussed, that is China. I think ASE, was it this week or last week, kind of said, "We don't understand why Chinese OSATs are still investing," considering, I guess, they would have more of the orders, et cetera. I mean, 36% of revenue in the first half, I'm assuming a similar number in the full year. Can you talk about maybe utilization of the machines at these OSATs? I mean, you said softness, but to what extent should we, you know, kind of expect this to materially impact revenue in the year?
Well, the numbers we can track, and that's a very important number, is the utilization rate.
Mm-hmm.
Utilization rates below 80% is pointing towards, let's say, sufficient capacity. Below 60% is over capacity. There's also the seasonal effect. Q1, Q4 are always a bit softer than the second quarter and the third quarter for new products and whatever seasonal patterns. The key is to understand what happens in April, or let's say March, April, May, whether that utilization rate is above 80% and more equipment will be required. That's the picture.
Yeah, got it. I guess CapEx intensity has gone up significantly as I look at the three major ones. Like you said, it's also partly seasonal. On that, your own seasonality, what should we sort of assume or at least keep in the back of our head in terms of maximum capacity you can ship in a quarter? I think last year's second quarter was quite maybe a surprise to some. Maybe just to have that correct this year. Also, as a follow-up, I guess, is if capacity is a constraint expected into especially the second quarter.
Well, the EUR 250 million is a demonstrated availability. We have a mix of products, and we have 18 different platforms. As we have shared in previous calls, the ASPs for hybrid bonding tools are between EUR 1.5 million and EUR 2.5 million a piece. If you have many hybrid tools, the revenue becomes a different picture compared to a year ago. In essence, we certainly have the infrastructure available, supply chains.
There are some critical components, as I answered to previous questions, which limit the full capacity at this moment. That can also change in the months to come. Everyone is building capacity. Basic material is also a major issue, like lead frames and wafers. In every corner of this industry, capacities are being expanded. We can certainly handle more than what we have done in the peak cycle, in the peak quarter last year.
Got it. That's clear. My last question, you've talked about the EUR 25 million that couldn't be shipped in the fourth quarter. I think if my notes serve me well, you said not everything is included in the guidance for the first quarter. Just to get a sense, how much of the 25 sort of missing is now in the first quarter, and which is still in the backlog or which will still sit in the backlog for delivery later in the year?
I would say again, it's difficult to say that precisely, yeah, because it depends on both supply chain parts, and it depends on customers ready to take that in. I would guess it's about 50%-60% of that 25 will be shipped in Q1.
Okay. That's clear. I appreciate it. Thank you.
The next question is from Miss Najet El Kassir, UBS. Go ahead, please.
Good afternoon, everyone. Just two questions from me, please. If you can split your backlog, your order intake, between the legacy tools and the hybrid bonding tools, that would be very helpful. My second question is related to the capitalized cost, which have increased to EUR 23 million in 2022 from EUR 18 million last year. How we should think about the capitalized cost going forward. Thank you.
Excellent. Thank you. We mentioned in the third quarter call, end of October, that we had received orders for hybrid tools in the teens, in the high teens, which is close to 20. We received some more orders of individual systems. If you take an average of about EUR 2 million per bonder, and we have shipped so far a certain portion of that, a bit less than half, then you can calculate how much hybrid is in that backlog of EUR 326 million or EUR 327 million which we shared. It's not a lot. It's growing, but it's still small. We mentioned that in every call.
It could become very substantial once mainstream adoption in full volume becomes reality, which is supposed to be towards the end of this year and certainly 2023, 2024 onwards. It's still a small portion.
Your second question, yes, due to IFRS, we are forced to capitalize R&D, and it has increased last year versus the year before because of major investments in new developments in advanced packaging in particular. For certain hybrid bonding applications, chip to wafer, bridge attach, there are many other developments ongoing and they will be amortized as soon as we start shipping. We are starting already to amortize on the hybrid.
Thank you very much.
The next question is from Mr. Trion Reid, Berenberg. Go ahead, please.
Hello there. Good afternoon, Richard. Hi, it's Trion Reid-
Hey
From Berenberg. Hello. Hope you're well.
Good to hear you.
I have one question yes, good to hear you too. One question which is not related to hybrid bonding, but you mentioned in the press release about executing strategic initiatives to drive profitability and shareholder returns. You also mentioned that you've made some changes to the organization and the management structure. I wondered if you could give a bit more detail on what you're doing here and what you expect that to realize, and if it's not too delicate to ask, whether that includes any succession plans for yourself.
No, no. It certainly it's not a hidden message related to me. What is in difficult words explained is very simple. Because of the significant growth in the die attach arena, we have organized the structure, and we may have explained that in previous calls, I think so. We've called that Engine 1 and Engine 2. Engine 1 is the current technology in die attach, and Engine 2 is the submicron hybrid chip on wafer, chip to wafer TCB and certain other next generation development programs. We have made changes to the organization to maintain full focus in order to avoid dilution. We've added a significant amount of people, resources, both in Austria and in Singapore, the support center for die attach for Asia.
Those very thoroughly as always developed those in a strategic plan 2021-2025, which took us a good part of last year, second half, with our management team to develop an organization ready to support the EUR 1 billion plus target we have set out for the organization in the next round, which we have shared with you already end of July. The EUR 1 billion plus, plus, almost in June, in the end of this, or the Capital Markets Day. That's preparing the organization to support that growth.
That is very clear, Richard. Thank you very much.
The next question is from Mr. Timm Schulze-Melander, Redburn. Go ahead, please.
Hi there. Good afternoon, and thank you for taking my question. I just had one, and that was thinking about the hybrid bonding backlog deliveries. You've already got two customers now taking this forward. As you look over the next four to six quarters, could you just let us know if you can already identify any lumpiness? Then the second part of the question is, you talked about mainstream adoption at the end of this year. What specific product area should investors be focused on to judge whether you know that growth or and that inflection point is coming through? Thank you.
Well, the last question first. We will report on an ongoing basis on additional orders. Lead times being six, seven months for these complicated tools. Orders we should see in the first half of this year, first quarter, to support that rollout schedule as it is anticipated now. At the same time, we should see other customers at that forefront, entering hybrid developments and in particular, the memory side of the world. We also mentioned that earlier with the U.S. memory manufacturer, and at some point, the combination of logic and memory with the same technology offers the maximum advantage of using hybrid bonding in those multi-application chiplet designs. On an ongoing basis, the key is always to look for the evidence in orders.
Okay. Indeed, I was, I guess, trying to fish for whether there was an end market consumer or enterprise product that investors should be especially focused on to
Yeah. Sorry, I misunderstood then. The first mover in a clear product is AMD with a graphics which has been launched in September last year and has created a lot of visibility on the adoption of hybrid bonding in many ways. Our other customers also announcing using this technology. One should look for, of course, the end applications. If we are part of that, it will be evidenced by more orders, hopefully.
Fair enough. All right. Thanks very much.
Thank you.
Ladies and gentlemen, for any additional questions, please press star one. Mr. Blickman, there are no further questions at this time.
Thank you. Thank you all for joining this call and wish you all a good weekend. Bye-bye.
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