Morning. Good afternoon ladies and gentlemen and welcome to Besi quarterly conference call and audio webcast to discuss the company's 2025 first quarter results. You can register for the conference call or log into the audio webcast via Besi's website www.besi.com. Joining us today are Mr. Richard Blickman, Chief Executive Officer, and Mrs. Andrea Kopp-Battaglia, Senior Vice President, Finance. Currently all participants are in listen only mute. 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 will now turn the call over to Mr. Richard Blickman. Please go ahead sir.
Thank you. Thank you for joining us today. We will begin by making a few comments in connection with the press release issued earlier today and then take your questions. I'd like to remind everyone that on today's call management will be making forward looking statements. All statements other than statements of historical facts may be forward looking statements. Forward looking statements reflect Besi's current view and assumptions regarding future events, many of which are by nature inherently uncertain and beyond Besi's control. Actual results may differ materially from those in forward looking statements due to various risks and uncertainties including but not limited to factors that are discussed in the Company's most recent periodic and current reports filed with the AFM.
Such forward looking statements, including guidance provided during today's call, speak only as of this date and Besi does not intend to update them in light of new information or future developments. Nor does Besi undertake any obligation to update the forward looking statements. For today's call, we'd like to review the key highlights of our first quarter ended March 31 of this year and update you on the market, our strategy and the outlook. First, some overall thoughts on the first quarter. Besi reported solid first quarter results, important new advanced packaging orders in a challenging market environment. Revenue of EUR 144.1 million was down 1.5% versus the first quarter last year due to the ongoing weakness in mobile and automotive end user markets, partly offset by strong revenue growth from hybrid bonding and other AI related computing applications.
In contrast, orders increased 3.3% versus the first quarter last year and 8.2% versus the fourth quarter last year due primarily to increased bookings by Asian subcontractors and AI-related data center applications. Besi's profitability in the first quarter of this year remained at attractive levels despite ongoing weakness in mobile, automotive, and Chinese end user markets and expanded R&D investment in next generation assembly solutions. Net income of EUR 31.5 million decreased 7.4% versus the first quarter of last year primarily due to lower revenue and gross margins realized, partially offset by an 8.9% decrease in operating expenses.
Besi's gross margin has trended towards the lower end of our target range over the past three quarters due to primarily a less favorable product mix, particularly with respect to high-end smartphones and net forex headwinds beginning in the second half 2024 from adverse movements in some of our principal transaction currencies versus the euro on a sequential basis. Q1 2025 operating expense growth of 10.3% versus the fourth quarter of last year was due to higher consulting costs. It was at the lower end of guidance as we continue to control overhead development despite increased R&D investment. In addition, cash flow generation remains positive with net cash increasing by 10.8% versus the fourth quarter last year to reach EUR 159.4 million which represented 26.3% of our latest 12 months revenue. As such, we continue our highly attractive capital allocation policy.
In Q1 2025 we repurchased EUR 22.1 million of our shares, bringing total cumulative purchase to EUR 51.4 million under the current EUR 100 million program. Further, at our AGM to date, shareholders approved the proposed dividend for 2024 which will distribute EUR 172.5 million in cash to shareholders, which equals EUR 2.18 per share. Next, I'd like to speak a little bit about the current market environment and our strategy. TechInsights currently forecast a 13% assembly market upturn in 2025 followed by a 26% increase in 2026. Most analysts continue to expect significant growth in advanced packaging for AI applications in 2025 and a second half upturn in mainstream assembly markets.
However, the slope of the current trajectory anticipated for mainstream markets this year is subject to many variables including the potential impact of tariffs on global trade. Despite near term uncertainty, we believe that the long term fundamentals of our market remain strong due to the ongoing AI buildout, onshoring of advanced packaging fabs in the US and Europe, and increased adoption of hybrid bonding and other next generation assembly systems for new AI, logic, memory, and consumer use cases. Of note, significant progress was made on Besi's wafer level assembly agenda this quarter as we received hybrid bonding orders from two leading memory producers for HBM4 applications as well as follow on orders from a leading foundry for logic applications.
Further important announcements were made by two leading semiconductor producers with respect to future hybrid bonding applications such as ASICs and co-packaged optics. In addition, a leading US logic manufacturer successfully began production of AI related logic devices utilizing Besi's hybrid bonders in integrated production lines. Finally, Applied Materials announced on April 14 a 9% ownership position in Besi. Besi and Applied Materials have been successfully collaborating since 2020 to develop the industry's first fully integrated equipment solution for die-based hybrid bonding. The collaboration brings together Applied's expertise in front end wafer and chip processing with Besi's leadership position in bonding accuracy and speed. We welcome their shareholding as a strategic long term investment and view it as further validation of our wafer level assembly technology and strategy.
Now a few words about the guidance. Besi's business development this year reflects the contrasting growth trends seen in the assembly equipment market between AI and mainstream applications. The timing and trajectory of a mainstream assembly upturn is more difficult to predict now given new tariff uncertainties. However, demand for advanced packaging for AI applications remains strong given upcoming new device introductions and use cases planned in the 2026 to 2028 time period. We continue to assess the potential impact of tariffs on Besi's customers, supply chain and end user markets. For 2Q 2025 we forecast that revenue will be flat plus or minus 10% versus 1Q 2025, with gross margins in the range between 62-64%. In addition, aggregate operating expenses are forecast to decrease 0-10% versus the first quarter this year, primarily due to a reduction in consulting cost. That ends my prepared remarks.
I'd like to open the call for questions. Operator.
Thank you. If you like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. We kindly request you to limit the number of questions to two questions per person. You will be advised when to answer your question. We will take our first question from Nigel van Putten, Morgan Stanley. Your line is open. Please go ahead.
Hi, yeah, thank you. Good afternoon. Got a question on the hybrid bonding orders you've received for HBM. If my understanding is correct, both customers already received tools a couple of years ago and were also working with you in Singapore and Austria. Now they put in new orders. Can you provide some context what you think that means, what stage of development they are and if you have any clarity on their intent and as a follow up. Thanks.
As we all know, the preferred technology to stack memory is a reflow process. DC thermal compression is used by all three major memory manufacturers today because the cost is simply more advantageous than using a hybrid bonding process. Hybrid is better because it has less metal in between the contacts. Because a reflow process is reflowing a soft metal and driving current through a circuit, you need simply more current. That means that the performance of a hybrid bonded device is better theoretically than a reflow bonded device. Cost is also a factor for some people. Say 6 times higher using a hybrid process compared to a reflow process. Nothing new in the past year. Exactly a year ago, JEDEC released their standards to allow 16 stacking of devices using this reflow process, which resulted in a height above the standard.
The industry has been developing, which is very, very understandable, this technology which is proven in the next generation. At the same time they are developing the hybrid bonding process as an alternative, number one, for better performance, less energy consumption, less heat dissipation required. All of them are testing this hybrid bonding as a next preferred solution. You can see in this quarter continued testing and also taking a latest machine. We're talking about single machines, not the whole production facility. These are testing machines which should provide the answer in the second part of this year for HBM4, a certain part using hybrid bonding and another part using the conventional process, TC process. It's important to understand what this means.
It means simply continuing development, testing the benefits, understanding better how we can impact the cost and in preparation of a next step in stacking 20 dice where it is likely that a reflow process has hit certain limits and then hybrid bonding is the only way to go. That is in a nutshell where we are.
Are understood that was actually very helpful. Do have a quick clarification. I guess you just repeated customers are still looking at sort of a dual parallel track for 4 or 4E 16 high. I think you're involved at least one customer on both sides also TCB. Maybe can you provide any color on your TCB developments within memory? Also where you think sort of both tracks stand. I think you sort of implied that there may be some testing going on already at 16, but the big implementation is beyond that. Did I understand that correctly? Also how do you look at. How do you look at your Besi's TCB venture?
Thanks.
Well.
Our TCB is a continuation of focusing on this reflow for the past 25 years. You have seen in this first quarter significant increase in demand for mass reflow flip chip machines. TCB is used for those processes where mass reflow is too critical to accomplish with smaller bump pitches. We entered the TCB world 12 years ago and we developed six years ago a next generation TCB which can produce at smaller bump pitches than the current market suppliers and that process is coming into the window of those customers gradually as we reported in the last quarters. We have said all along that the first half of this year 2025 should also make clear whether this next generation TCB is being adopted for HBM4 to a certain extent.
That will be exciting to understand in the next few months what will happen. Besi has in its offering all three. We have mass reflow flip chip for many, many years and today very successful. We have TCB, which is also very successful in focusing on the next generation. We shipped another system this quarter which already has produced data for bump pitches well below the current next generation. So below 20 micron bump pitch, data has been produced below 10 micron bump pitch. That system comes very close to hybrid bonding. We offer the customers both solutions in a reflow process and the most advanced hybrid bonding process.
This year again will be a very important year to understand how much of HBM4 will be reflowed and which are the machines used in the industry by which competitor and then which part may be hybrid bonded. Is that HBM4E or is that for the next generation? We will update you quarter by quarter. Also, in the next month we have the capital markets day. An exciting development in the memory front.
Perfect. Thank you very much.
We will take our next question from Charles Shi and Needham & Company. Your line is open. Please go ahead.
Hey, thanks for taking my questions Richard. Congrats on the two additional hybrid bonding orders from two memory customers. Sounds like you are expecting maybe they will get qualified for HBM4E generation the earliest. If I look at Nvidia's latest roadmap update, the Rubin Ultra HBM4 will come to the market second half 2026. HBM4E is like second half 2027 and memory makers probably need to start production a little bit before those Nvidia product availability timeline. I wonder what's your thought getting your hybrid bonding tools in right now? Is that enough time for you to get qualified for the generation? How much confidence do you have in that timeline?
Thank you.
That is, of course, a very important question. There are two important factors. Number one is what is the window of introduction that is often up for revision because it is not only the Bonder but there are many other processes. Number two is the competitive landscape, what is available by what time. As I said also in response to the earlier question, it will be very exciting in the next couple of months to see how the industry will fill in this demand and which processes will be used as much as I understand today.
Thanks.
Maybe a second question Richard. I think in your earnings press release last quarter you talk about maybe a second half recovery for the mainstream business. Obviously the language in the press release in the current quarter turned a little bit more cautious. You are no longer saying you are expecting maybe a second half recovery. Wonder what you think about the potential revenue trajectory for the mainstream business can be. Do you think at least the second half can be flattish over the first half or any additional color on the second half would be great. Maybe let me add one thing. The reason why I ask this is when I look at the consensus revenue numbers, looks like a lot of.
My p eers are modeling a much bigger second half revenue estimates. What's your thought? Any color you can provide be great.
Thank you.
I think it is fair to say that since February 20 and April 23 in the world a lot has happened and there are major, major impacts to be, let's say, expected or considered, however you want to phrase that, of these different tariffs. If you look in the historical perspective, any disruption to an economical situation is for our industry, 9 out of 10 out of 10 has a negative impact. More caution. That is why we are, yeah, let's say, probably more careful than simply following the statistical trends in this industry that often results in when things have crystallized that you may have an even steeper recovery. That could also very well happen.
Take the 2008-2009, the financial crisis as a reference or take for that matter 2019, 2020 and then the impact of COVID. These impacts are first causing some caution and then after, again, a stronger increase. Our caution is because of this phenomenon. We also see that as customers, we mentioned in the call February 20th, that already before the Trump tariffs there was a big, yeah, let's say slowdown in automotive, also disappointing in high-end smartphones. Not a big, big year to be expected. Why, with all this tariff uncertainty, would all of a sudden the market look better in the second half? We do see, and you see that in our order intake, some improvement year- over- year, quarter- over- quarter. As long as it is single digit, it is not a very strong upturn.
When you would see second half this year a major uptick, you should see orders increase dramatically in the first and the second quarter because there's a lead time. In a longer answer, Charles, I hope that you are right that we do see a strong recovery in the second half. Besi has demonstrated we can ramp very quickly. We're also prepared for that, of course, but in the current state of tariffs and economies and a lower dollar, that usually has a negative effect.
Thank you, Richard.
Thank you, Charles.
We will take our next question from Didier Scemama, Bank of America, your line is open. Please go ahead.
Yes, thank you. Good afternoon, Richard. I just had a question on the first court order. Did it play out the way you expected or did you see any push outs from anyone, whether it's the IDM or the subcontractors? The reason why I'm asking is because it's really in response to the previous question. It's really because if the customers are worried about tariffs in some respect, they might pull in as they see as they've done probably for semis. When it comes to back end capacity, they probably pushed out.
Right?
Not knowing exactly how it's going to play out.
If we were to have a b it of more clarity on those tariffs, y ou know, who knows, that might happen?
Do you think that they come back quickly in Q2 to actually cater for the seasonal uptake for smartphones and PCs that we normally see, especially smartphones? For Besi, I've got a follow up as well.
Thank you.
Yeah, that is what I tried to explain just now. If you look back in whatever downturn scenario we've had in the past many years, you have the hesitation because our customers don't, let's say, have the confidence in the end market demand. You sense that it takes longer. Also take the Intel specific situation, Intel restructuring whether it's announced or not. People expect a major, major, let's say, restructuring impact that usually slows down orders for some time but then it catches up. It always gets, we have this nice slide in the deck going back to 2006. I invite you to look at that quarter by quarter and you see those impacts and in every cycle along the way and always the recovery is very steep.
The question is, however, will that be in the second half of the first half of next year? But it will recover.
No, I get that.
Sorry, trying to be a bit more precise on that. Did the quarter play out the way you expected? For example, did you miss by $10 million, $20 million or just help us understand how much you think few orders missed so we can try to understand how much it can sort of recover if and when tariffs are a bit more clear?
Revenue was fine, was okay. It was also, yeah, more or less in the middle of the guidance. That was not disappointing. Orders, I just phrased it in other words. We feel some delay, how much is, whether it's EUR 10 million or EUR 20 million, it could very well be. On the other hand, look at the orders and the guidance. We received in orders much less than what we guided. We expect some orders still to come, and that will, if all goes well, may well have an upside. We guided plus minus 10%, EUR 144 million. The order intake was much less. That more or less gives you the answer. The bottom line is that we feel there's some caution, let's put it that way.
Yeah, I think it makes complete sense. Sorry, just as a quick follow-up on the hybrid bonding side from foundry customers, you said to some follow-up orders. Can you elaborate a little bit? Is it coming from AI applications, computing applications, co-package optics? Just give us a sense of also the magnitude of that contribution to revenues in the second half please.
Thank you.
We've said all along that customer in Taiwan is not very transparent in terms of the end application. The end application we hear from their customers. Whether that's AMD or whether that's Nvidia. Nvidia, as we all know, is developing very much on this co-package optics. We also know from high-end smartphone applications where certain modules are being assembled using the hybrid technology. There's an ever-growing application field using hybrid bonding, currently a fleet of 50. A few more systems will be added August, September if all goes according to plan. There's a big program for 2026. There's a site announced for advanced packaging which potentially is twice the size of the site which currently is operating the hybrid bonding systems. There are big plans and a lot of development and that should kick in somewhere in 2026.
Then you should receive orders in the later part of 2025. Anyway, that is what we understand today.
Okay.
Okay.
All right, thanks very much, Richard.
Thank you, Didier.
We will take our next question from Robert Sanders, Deutsche Bank. Your line is open. Please go ahead.
Yeah, hi, good afternoon. Hi Richard. I just had two questions. Firstly, if you could just talk a bit about Hynix. They're in a quite public dispute with Hanmi at the moment. I was just wondering if that could potentially create an opportunity for you either in TC or hybrid bonding. The second question would just be if you could just confirm that you had mid single digit orders in the quarter just to help our modeling for hybrid bonding, that would be great, thank you.
Yeah. The last is even more precise.
Yeah.
In the mid single digit on the Hynix situation and that is public knowledge. They are like the other two, developing both technologies, continuing using the MUF process and Reflow and they are also continuing to test hybrid bonding solutions. They are also preparing local supply and a second source. That fits into the total picture. That 2025 may well show some direction in those three continuing to use Reflow plus starting to more seriously develop hybrid bonding stacking. Partly relying on the AMAT center of excellence in Singapore, also development in Radfeld. That is where it stands on the dispute you are mentioning. Yeah, and we have mentioned that in every call. The current landscape of TCB bonders is able to produce with a certain bump pitch and a certain process but that is not good enough for the next generation.
It needs to be a tighter bump pitch, it needs to be fluxless. Then which flux is the solution? Is it a plasma solution or is it some type of chemical solution that is currently in full swing, and some are more advanced in their solutions offering than others.
Great, thanks a lot.
Thanks.
We will take our next question from Adithya Metuku, HSBC. Your line is open. Please go ahead.
Yeah, good afternoon guys. Thank you for squeezing me in. Firstly Richard, maybe when I look at the roadmaps for AI accelerators, Rubin Ultra, which is meant to ship in the second half of 2027, is expected to be the first accelerator that uses 16-high HBM. Until then the market seems to be dominated by 12-high HBM. Given this backdrop, even if hybrid bonding gets qualified for 16-high HBM despite all the short timelines, would it be fair to assume that hybrid bonding will not be used in volume production until 2027? Or do you think it could still be earlier, maybe with some versions of some test versions of 12.5 HBM? I've got a follow up.
Yeah, the way you summarize it is pretty much how it is presented to us. Again, we come back to the basic reason why using hybrid bonding and stacking is simply the performance. Is there a differentiator using a hybrid bonding process which is more expensive compared to a reflow? That is up for debate at each of the three producers. That's where we are continuously doing tests in the hybrids, but also in the TCB. In another way of putting it, it's on everyone's mind, but how it will sort itself out is not yet clear.
Understood.
As a follow up, you mentioned earlier that smartphone applications are looking at hybrid bonding. TSMC on their last call, not the one this month, but in the previous quarter, they were specifically asked if they see smartphones going to hybrid bonding anytime soon. They basically said no. I do not know, are these use cases being developed by somebody else, maybe not your main customer in Taiwan? I also just wondered if you might be able to comment on the competition from China. There seem to be a lot of companies coming up in China addressing hybrid bonding.
Thank you.
Apologies for the third question.
They're good questions. Number one, there is no final answer in whether it will be used or not at this moment. They're all testing, they're all understanding the benefits of one over the other. The hybrid bonding process over reflow. They're all aware of the, yeah, the performance increase. Cost is a major issue right now because it has to take place in clean room and there's a factor of four- to six- more cost. To ask the question, will it be included in the iPhone 2025, the answer is no. We have always said, going back capital markets days, I think three years, maybe even four, that we expect 2027 to be the first in using that. You have to be also aware that this testing is ongoing.
That does not mean that this is, maybe not used this year, but it can very well be next year or the year after. Please help me with your second question. Sorry, can you repeat your second question?
Yes, apologies, I was on mute. I was just saying recently there's been a lot of news flow around hybrid bonding competition coming out of China. I'm probably going to mispronounce the names, but the names I've seen are Tuojing, Shanghai, Yingguan and a couple of others. I just wondered if you could give us your thoughts on how you see hybrid bonding competition arising out of China.
There is of course a lot of activity not only in China, but also outside of China. Everyone now understands that hybrid bonding at some point for the applications we discussed earlier is a fact of life. Anyone building a precise bundle is developing also a hybrid version. That is not new. How advanced they are is still a big question. You expect more competition coming from every region. We are currently with the 100 nanometer, well advanced in comparison to everyone else. Certainly when we will ship the first 50 nanometer, which should be by the end of Q3, early Q4, that is not available at anyone else in the world. Also, 100 nanometer is not a standard used by anyone else.
We continuously build on our lead, we follow closely the roadmap of TSMC and we also fulfill that roadmap in China. The status today is with many of the devices, like also the corals, it is a reflow process. So a TC process, mass reflow process not yet in production, and HB process, a hybrid bonding process. We are very successful in the Chinese market today, delivering a lot of mass reflow flip chip systems. We have two types, we have the 2100 and we also have the Quantum, which are used for similar 2.5D modules in China. So the process of reference having a market share of close to 100%. Anyway, your question is absolutely right. With Bondage Forever, we have seen Chinese competitors trying to capture a certain segment in this market.
Understood, thanks.
We will take our next question from Ruben Devos, Kepler Cheuvreux. Your line is open. Please go ahead.
Yes, yes, good afternoon. Thanks for letting me on. I just had one regarding the co-package optics. I think in your prepared comments you talked about two leading semiconductor producers that have made announcements. I think you've alluded to Nvidia in this call and I think Intel has also been quite explicit on its roadmap with hybrid bonding applications into ASICs and co-package optics.
Yeah.
Could you maybe talk about your engagement with those two but also maybe with some others that might also be candidates. Just thinking Marvel or AMD and these types of names and then just on a follow on on that, I think last year at the investor day you talked about sort of the market scenarios for hybrid bonding, but you always excluded co-package optics.
Yeah. Very curious your thoughts on how you think that size, the size of the market could be maybe relative to for instance the HBM market or the high end logic market with server processors. Thanks.
Well.
We did not. I cannot remember that we left co-package optics out of the potential market applications. It is more. There are two areas in this, in this application field. There are these connectors where we are forever with photonics applications, which is done with a 2 micron, 1 micron precision. We have major market position in those applications with a broad range of customers. Also the top ones, those are those connectors which are included in the data center processors directly. We have co-package optics where we are also engaged with the customer you just mentioned and also the other one since early days. That is a very, let's say, interesting market which is also in early days. We have the right technology for that, also the customers for many, many years.
At the next capital markets day, we will make very clear to you what the potential of that market may well be and what are the different processes. It is a key focus of our product strategy.
All right, great. Looking forward to that. The second question, just on Applied Materials, I believe you've been working with them since 2020. Could you walk us through how that collaboration has evolved in the past five years and now that they've taken a stake, do you see that more as a strategic hedge or could it be the first step toward maybe deeper integration? How are you thinking about your independence long term as packaging and maybe process control starts to converge?
Thanks.
That is a very big question, but let me start with the beginning. We started nine years ago with TSMC to develop this hybrid bonding for CPUs for logic devices because the smaller bumped pitches required a different process. As soon as that became, say, into an end market device. In 2019, I remember vividly the first discussion we had with Applied and how can we work more closely, or let's say work together in a closer way for the industry to support the adoption of this technology with offering number one process development, Applied as a center of excellence in Singapore, and at the same time support the development of automated lines because that improves the process window and the process quality. From then on, in 2020, we formalized that cooperation just before COVID broke out.
Ever since we have worked very closely on a weekly basis reviewing and bringing this technology to ever next and higher levels. It also has created in the market a clear model whereby a front end company having the experience with front end processes operating in front end fabs and a backend company for which this next generation has to be developed. That has worked step by step, customer by customer in the logic arena, in the memory arena, also in other areas. We are very positively surprised by Applied announcing an ownership stake of 9% in Besi that will only intensify our cooperation and lead to leadership position ever more into this market. That is what it is.
Okay, thank you very much.
We will take our next question from Martin Marandon-Carlhian, ODDO BHF, your line is open. Please go ahead.
Hi, thanks for taking my questions. My first question is on memory. What do you think are the key advantages in memory that allow you to win orders versus competitors for hybrid bonding? Because in logic it's maybe a bit more obvious as the precision requirements are higher. It seems that there is a technological gap between Besi and competition in that aspect for hybrid bonding. In memory, I'm curious to know about what makes the difference to win over competition.
On memory, number one, the dies are thinner, so the complexity is different. On logic, you have more contacts; memory, you have less contacts, but the device is thinner. The stacking is very much influenced by how you are able to control this variation in ultra-thin devices. One of the advantages of the reflow process, and that means a soft metal in between the two dies, accommodates for some of the delta in thickness. With hybrid bonding, it has to be completely flat; you have less room to accommodate the variation in thickness, but the process itself is better because you need less current, produce less heat. The performance of a hybrid bonded device is better than that of a reflow bonded device. You have the cost. The cost is in fact four to six times more expensive using hybrid.
The whole memory world is developing on an ongoing basis, the advantages of both processes and understanding when are crossroads in using one over the other in logic. You concluded already yourself that decision is more close and has been made by many customers. As we explained in detail, Intel finally also moved second half of last year, at TSMC already three years earlier, and the advantages are ever more clear because you have closer contacts, the bump pitches are smaller, and you have simply less issues with heat. That is where we are today. Besi again follows both roadmaps. The reflow process from what I mentioned also earlier, mass reflow starts flip chip, then TCB, individual devices, then hybrid bonding, and that is the complete offering.
Okay, thank you very much.
I have a follow up on your U.S. customer. What do you think needs to happen with your U.S. customer before receiving a follow up order for hybrid? Do you see they will wait to see what is the commercial success of their new CPU using hybrid bonding? Do you think they need to figure out what restructuring they need to do first or do you think they will necessarily have new capacity soon as there are new products now move more and more away from TCB and transition more and more to hybrid bonding?
It's about as you have just summarized, they are sampling the market with hybrid bonded devices. Clearwater Forest we will understand, that's what we are told, towards the early part of the summer, how successful that is and what we can expect in terms of capacity increase. We are currently running every single day and they're all test devices tested with customers. Then there's the next device already, let's say, presented, which will be more for high end computer applications, not so much for data centers. It's hard to forecast how successful that will be, but there's an enormous amount of pressure, commitment to make this all work.
Okay, thank you very much.
Thank you, Martin.
We will take our next question from Madeleine Jenkins, UBS. Your line is open. Please go ahead. Hi.
Thanks for taking my question. I just have one. We've been hearing that the Koreans are actually working on a sort of combined HBM solution. So the hybrid bonding and TCB are in the same kind of HBM stack. I just kind of wanted to get your view on like on the technical side what the viability of this is and also if it's something you've been involved with. Thank you.
We have been involved in development stage. There are many different ways to skin a cat. Yeah, this fits into the category what's all possible and what makes sense. The excellent thing of our center of Excellence in Singapore from Applied Materials is that that is a center of all kinds of those developments for the industry.
We've added into our part also the TC Next product which then allows customers to develop both and exactly addressing those two combination of those two processes. How far that will go where you will also see that is at IMEC. We shipped, as I mentioned earlier, the first quarter, the latest TC Next. They're already producing already when the system was in all kinds of devices. We will share more data about that at the capital markets day.
Okay, thank you, Richard.
Thanks, Madeleine.
We will take our next question from Martin Jungfleisch, BNP Paribas. Your line is open. Please go ahead.
Yeah, hi, good afternoon. Thanks for letting me on.
I also have one quick one on the Q2 guidance. If you could just run us through the moving parts here. Quarter on quarter, do you expect hybrid.
Bonding shipments to be relatively flat quarter-o n- quarter given the remaining shipments to the Taiwanese and also the US IDM?
Basically, does the midpoint of the g uidance imply flat mainstream and flat hybrid bonding quarter on quarter or is it not the right way to think about? Maybe if you can also tell us the backlog of the hybrid bonding that you should now have. Is it in the teens?
Thank you.
We are not providing specific information about what we ship, what we scheduled to share, but your assessment is also quite interesting and it ties to an earlier comment. If there is recovery partly which are quick turnaround machines, then you can see a positive effect on which then may result in a higher end of the guidance. How many hybrids are still in backlog? We do not disclose. The key of your question, if I understand it correctly, the wide guidance range is typically or is because of this certainty, will the second half of this year show recovery in the mainstream business? If that happens, we have quick turnaround of epoxy bonders, soft solder bonders, flip chip bonders, not to forget quoting activity continues. That is the reason why we guide this range plus minus 10%.
Okay, got it.
Just to follow up, the order to the US IDM, has that been f ulfilled as of Q1? Can you comment on that?
No, there's still a few systems in Q2, but I could say 80% has been shipped.
Sounds great.
Thank you very much.
Exactly according to plan what we have shared in the last updates.
Okay, sounds good. Thank you.
Thanks Martin.
We will take.
Sorry,
we will take our final question from Tim Schulze-Melander, Redburn Atlantic. Your line is open. Please go ahead.
Yeah, thank you so much for just squeezing me in here at the end. I had two quick questions please Richard, if I could.
First one.
If we just leave hybrid bonding to one side and look at the core sort of much well-established business, could you just maybe share with us any color you have in terms of the utilization rates that are on that? I think if we look at foundries, they're running at about 80%. I'm just curious if you could share some kind of flavor of what the specialist test assembly packaging industry is tracking at. The second maybe more forward-looking question I had was on the launch of the Gen 2 or the introduction of your new hybrid bonding platform. I just wondered if you'd be able to share with us what the sort of expected timeline would be. When is the first tool coming?
How long should we think about sort of eval qualification and just kind of how that plays out through 2025 and into 2026? Thanks again.
Excellent. The first, why are we a bit cautious? Utilization rates, yes, are somewhere in the 80% but if you look at the data provided by the industry on inventory and pricing, and pricing has gone down again recently in the latest data from March. January, February looked up, March went down. That is an overall picture which does not tell you there is an immediate shortage. That is hard to tell whether customers are reacting more cautiously because of the overall situation. We do not know. In any case, for certain areas there are shortages. One of them is the AI devices. As I mentioned earlier, there are Chinese versions which are definitely in high demand, but that is not the general market. Automotive, we have also not seen yet. We have seen technology buys, new devices, power modules, but the big volume is still to come.
We intend to ship the 50 nanometer generation tool by the end of September, early October. The plan is that throughout 2026 that tool will be made fully production ready in Taiwan and used for mainstream production for those devices under 2 nanometer design geometry. That is well on track and we will continue to update you on that progress.
Great. That's very helpful.
Thank you.
Thank you Tim. Thanks everyone. Excellent questions. If you have more questions, do not hesitate to contact us directly.
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Thank you.