The conference is now being recorded.
Good morning, good afternoon, ladies and gentlemen, and welcome to Besi's quarterly conference call and audio webcast to discuss the company's 20 2Q4 and annual results. You can log in to the audio webcast via Besi's website, www.besi.com. Joining us today are Mr. Richard Stigmann, Chief Executive Officer and Ms. Hedwig van Kerkhoff, 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 Biedmann.
Go ahead,
Thank you. Thank you all for joining us today. We will begin by making a few comments in connection with the press 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 For today's call, we'd like to review the key highlights for the Q4 and the full year 2020 and update you on the market, Our strategy and the outlook. First, some overall thoughts on the quarter and full year results. Q4 2020 results exceeded expectations with revenue and net income reaching €109,700,000 44,600,000 respectively, increases of 18.7% And 32.3 percent versus the Q4 of 2019. Revenue exceeded guidance as The industry upturn gained momentum and demand growth broadened across our end users markets. Of note, Q4 2020 orders grew by 65.8 percent sequentially to reach 157 €200,000 a record level for a quarter, which is typically our weakest of the year.
Bookings growth was fueled Primarily by strong demand for high end and mid range smartphones by Asian subcontractors, a resurgence of demand from European Out of IDMs and incremental capacity purchases for cloud infrastructure applications. Net income growth Of EUR 10,900,000 versus the Q4 2019, primarily reflected higher gross Margins as a result of increased labor efficiencies as well as a 7.5% reduction in operating Expenses, both of which more than offset unfavorable headwinds from a weaker U. S. Dollar versus the euro. As a result, net margins grew to 40.7% versus 36.5% in the Q4 of 2019.
For the full year, Besi's results rebounded strongly with revenue increases by 21.7% To reach EUR 433,600,000 and a net income rising by 62.7 percent to reach EUR €132,300,000 In addition, orders of EUR 470 EUR 2,100,000 increased by 35.4 percent versus last year as an industry recovery We took hold in the Q4 of 2019 and accelerated in the second half of twenty twenty. Aegis' results were even more impressive considering the multiple headwinds faced and organizational challenges This posed by the global COVID-nineteen pandemic increased trade tensions between the U. S. And China, Decreased shipments to automotive end user markets and an approximate 8% decrease in the value of the U. S.
Dollar versus the euro In the second half of twenty twenty, Besi's revenue and order growth benefited from improved industry conditions, Increased shipments for mobile applications due to a new 5 gs smartphone product cycle and increased investments by Chinese customers. Profit growth was aided by higher revenue levels and a gross margin expansion of 3.8 points Associated with Besi's strong advanced packaging market position and a more favorable product mix, it was also aided by Stable fixed production headcount levels, which helped drive labor efficiencies. Year over year Operating expenses grew by only 1.7% versus 2019 despite strong top line growth Due to continued structural cost reduction initiatives and reduced corporate travel and overhead associated with the pandemic 3.5% versus 22.8% in 2019. Besi's profitability has increased Significantly, since the last industry downturn is measured by a comparison of the years immediately following cyclical Telecom in 2020 grew by 99.3% versus the comparable period of the prior cycle, While operating margins rose from 20 percent to 34.6%. The increased efficiency of Besi's business model positions as well for expanded Profit growth in the current industry upcycle.
The cash flow productivity of Bevy's model by cash flow from operation rising from 26.3 percent in 2016 to 37.4% in 20 20. Cash flow from operations in 2020 rose by 34.9% versus 2019. Leidy's Strong cash flow generation has supported our shareholder friendly capital allocation plan. We committed Allocation of EUR 866,100,000 to shareholders since 2011, representing almost 20% of cumulative revenue during such period, amazing. We ended the year with a solid liquidity base consisting of cash And deposits aggregating €598,700,000 or 8.20 €2 per basic share, which represents an increase of 46.6% versus year end 2019.
Further Besi's net cash of €198,700,000 increased by €68,400,000 We're 52.5 percent versus year end 2019, which includes return of €91,300,000 in the form of dividends and share repurchases. Net cash in Q4 2020 We also benefited from the conversion of €8,000,000 of the 2016 convertible notes, An additional EUR 13,100,000 converted in January 2021, leaving a balance Of €96,900,000 currently, given profits earned in 2020, continued strong cash flow generation In our solid financial position, we propose to pay a cash dividend of €1.70 per share for The year 2020 proposed distribution is the 11th consecutive annual dividend paid, is 68.3% Higher than over the fiscal year 2019 and reflects a payout ratio of 94%. We have also upped quarterly share repurchases to approximately $10,000,000 per quarter post the cancellation of 1,500,000 treasury shares in October. Including the proposed dividend for 2020, we have Approximately EUR 866,000,000 to shareholders since 2011, representing almost 20% of cumulative revenue during such period. Next, I'd like to speak a little bit about the current market As you can see in VLSI's most recent climate index Report the dramatic decline experienced in the Q2 2020 was followed by a retracement Back to pre pandemic levels and an acceleration in the second half of twenty twenty.
The principal question now It's a slope of the trajectory this year given the spread of new COVID-nineteen variants and the emergence of Component shortages and transportation constraints within global supply chains. Given the upturn in the second half of twenty twenty, BRSI has now revised the 2020 assembly equipment forecast Upwards to 20% growth. In addition, we revised upwards 2021 To also 20% and for cumulative growth of 36% through 2023 when the total market is expected To reach US5 $1,000,000,000 ACI's priorities for 2020 focused in part on addressing COVID-nineteen pandemic and its impact on our global organization, supply chain and customer delivery dates, A variety of initiatives were developed to adjust our business model to the new economic and workplace realities caused by the pandemic. Cost reduction efforts primarily centered on the continued consolidation and reduction of Besi's European footprint. We also reorganized our R and D organization to better align it with customer roadmaps for the current investment phase.
Gross R and D spending grew by roughly 8% as we developed a Class 10 clean room in Austria to further hybrid bonding Development and hired additional personnel for targeted customer R and D programs. In addition, we announced our ESG strategy in the context of our industry, culture and increased scale to focus on 3 strategic pillars, environmental impact, People Well-being and Responsible Business. With these pillars, we identified key focus areas Including energy use, renewable energy, sustainable design and diversity and inclusion, short, Medium, long term goals were set to measure our progress in the decade to come. In 2021, we have 3 At present, we are working closely with our supply chains to overcome any parts or logistical The project joint development project as we continue progress towards our goal of system availability in the second half of 2021. Now a few words about our Q1 2021 guidance.
Looking ahead, we estimate that the 1st quarter 2021 revenue will increase by 30% to 40% versus the Q4 2020 with gross margins ranging between 58% 60%. Baseline OpEx I anticipate to rise by 15% to 20% versus the €23,300,000 Realized in the Q4 last year primarily due to higher variable sales related expenses and product development activity, Total operating expenses are expected to increase by approximately 50% to 55% versus the 4th primarily due to approximately €10,000,000 of non cash share based compensation expense. We maintain a favorable outlook as we enter into 2021. TIFF's stance is reinforced by our Q4 2020 results and by the expanded CapEx budgets of our principal customers. In addition, orders received to date in the Q1 2021 exceeded total bookings for all of Q4 2020.
This represents another signal that of the current strength in customer demand. Longer term, we are optimistic about Besi's prospects Given our strong performance during last industry downturn and the current pandemic and favorable secular growth drivers. That ends our prepared remarks. I would like to open the call for some questions. Operator?
Thank you, sir. Ladies and gentlemen, we will start the question and answer session now. And to be registered for the question and answer session, you will start at any time. So that's And the first question is from Mr. Peter Olofsen, Kepler.
Go ahead please, sir.
Yes, good afternoon. My first question is on the outlook. Well, obviously, a very strong guidance for the Q1. I was just curious what you see in terms of, yes, seasonality for the rest of the year. I mean, usually, we see a nice pickup in Q2 versus Q1 and then some seasonal slowdown in the second half of the year, do you expect to see this kind of pattern also this year?
Or could it be somewhat different?
Well, that's of course a very interesting question. If you take statistics, then typically the First half is always stronger than the second half. The current environment And the pandemic now for the last 12 months may have some impact That would change or let's say could have an impact on this Nobody knows. So we always look ahead 1 quarter. This time we look can look a bit further with the current order intake levels.
That's about it. Sorry, I'm sorry, I can't give you an answer which we all would like to know.
Let's see how it develops then. And but and then maybe On your lead times, you indicated that some of your priorities right now include scaling your production And also working with your supply chain on any component shortages. So when it comes to Scaling production, is that mainly adding headcount? Or does it also require additional CapEx? And To what extent have any component shortages resulted in extended lead times?
Or are your lead times same as before?
Well, In any upcycle and if we look back 2017, but also further back, The key challenge is to be prepared in time. And as we have Shared our operating model for many years is built on a simple concept that We are, let's say, minimal dependent upon specific suppliers. So for many Modules, we have multiple suppliers. Within this COVID time, also the suppliers Have difficulties, some have more difficulties, others less difficulties. So Just to share that in 2020, it won't be a surprise and we also share that after Q3 and Q2, it is a much more challenging exercise, but positive With increased demand, we organized the whole supply chain.
So far so good. Of course, we need some more headcount. We need headcount because we build more machines. Also for installation, we need always To increase our headcount, and the typical concept we use is that these are temporary contracts. So benefiting from cyclicality, which is the nature of our industry.
But at this time, Yes. Life is more challenging in a positive sense, but our organization has shown That they can handle this in an excellent way.
Yes. Because we have heard stories that From some of your clients that they are seeing extended lead times for some equipment. And I think wire bundles have been mentioned By some of your clients. But in your case, it's still yes, the lead times are still within normal range, I should say.
They're a bit longer. I mean, it's of course, when you have in every upcycle, the lead time builds. But I think on a comparative basis, we are able to manage these up cycles very well. Again, the weakest link determines whether you are able to complete and then ship a system After Tester. And that's pretty critical.
We have meetings every Monday, Wednesday, Friday to discuss those issues, What we can do to improve and we always find solutions so far. But simply to share with you today's world is a very interesting challenging world.
There may be a question on the FLSI forecasts that you shared. I know they can change quite a bit as time passes. But therefore, Carlsco for the industry to reach about $5,000,000,000 in size by 2023. In the past, you have talked about your ambition to grow your market share to 40% and to grow revenues to 800,000,000 Provided that the Villezei forecast prove accurate, do you think that you can then reach your revenue ambition by 20 Dmitry, or might that take somewhat longer?
No, it's and you are saying that very well. This industry is very hard to forecast. And VLSI since many, many years It's very closely engaged in the whole supply chain. And the fact that they have to change their forecast time and again only confirms The cyclicality but also unpredictable in terms of technology, advancement and markets. So when I see those numbers and I've seen them for a few years, I always take them with a certain caution.
Key is that our model generates In the first place, results financial results, which are above The average of the industry, otherwise you can't finance a technology company. EUR 800,000,000 This is a number which we have used as a model simply to share with our customers that we are able To increase our delivery of systems above the previous peak of just Short of €600,000,000 in 2017 and our infrastructure is in place to be able To do that €800,000,000 so that is the reason for the €800,000,000 because of the growth Model of our customers. At the same time, advanced packaging, The very clear, consistent choice on new product developments, new technologies And they deliver in the end the most sound growth over time. So those combined should allow us to grow our revenue, whether in 2023, it is €800,000,000 or it is €700,000,000 or it's €900,000,000 The key is To be the number one choice of the leaders in this industry. And what are those drivers?
Of course, ongoing technology from 10 nanometer design to down to 5 nanometers And that requires systems which simply are more accurate in placing the Dice into a next End product and we've come a long way in that. It also allows technology change Into hybrid bonding, those equipments more accurate to have a higher ASP, average selling price. So that will also support increased revenue. So it's not like For like, the revenue mix in 2017 will be different, was different in 2020 and will be different in 2021 And certainly in 2023. We also mentioned in the past, not only hybrid bonding, but also flip chip for memory.
We have now sold over 10 systems, so that's going very well. Hybrid bonding this year will be Key for process qualification with an anticipated mainstream production ramp In 2022, if that materializes, our model simply It's very close to what the industry should offer us as growth opportunities. Always with the uncertainty of technology advancements will Hybrid bonding become mainstream? Will flip chip for memory become the next generation? Or will they still be able to use certain wirebond applications?
And at the same time, what we haven't discussed yet, new developments Our features in iPhones, new screens, microLED, old technologies with very bright Futures, but still a lot of developments to be realized before it becomes mainstream applicable. So in a longer answer, I hope I gave you some more color on the revenue growth model.
Yes, thanks. It's a very comprehensive answer. My last question relates to automotive, Which I think for most part of last year was quite weak. But I understand that in Q4, It contributed to the strong order intake. But to what extent is it In full recovery mode or is it still at a very early stage of a pickup?
And is it still Quite modest. Could you give some idea how strong the recovery there is?
It's picking up and it's picking up very positively. And you hear that from our customers who have released numbers, But also in general, the sentiment for automotive is very strong. OpEx, So expansion in infrastructure typically kicks off when Utilization rates are increasing and we see that. So in the course of 2021 And also the shortages which are everywhere, let's say, Publicly linked to also end customers, which are also our customers. So that bodes well.
It's also extraordinary. We didn't mention that specifically In the comments, you mentioned it last year automotive was very weak, which is very unusual. Usually Automotive represents about 15% to in certain times 20% of our revenue forever And last year was below 5%, which is amazing. But that also always leads to an Catch up. Or let's say, an increase in demand, which is above The average.
So anyway, in also a longer answer that should contribute again to our growth And last year it didn't. So our 21% revenue growth was by increased high end Smartphones and also the computer infrastructure.
But with Automotive down to such an extent. Does it mean that mobile was there maybe closer to half? Or what was then the share of mobile last
Well, both mobile and the computer infrastructure, so laptops And what have you, plus data centers are big, both had a major share. We don't share specific numbers as you know more in general, but it's very well high end smartphones was It's above the average.
Okay. That's very helpful. Thank you very much.
Thanks, Peter.
The next question is from Mr. Huguen de Vos, KBC Securities. Go ahead please.
Yes, good afternoon. Thanks for taking my questions. The first one relates to the A strong demand for smartphones by Asian subcontractors. It appears that trends in Asia are impressively strong and you're now also generating more than 80% of Sales in the region. Could you maybe talk a bit about what you're seeing in Asia in terms of investment appetite?
And also related to 5 gs smartphones, supposedly, shipments are about to be more than double in 2021 versus last year. So curious to hear a bit your take on where we are in the cycle today and how long that may be one of the big drivers for Besi?
Well, if we look historically, smartphone cycles are Typically 3 years. But due to the pandemic last year, smartphone was also Because working from home, the whole different society, entertainment, All the restrictions of people and entertainment Closed in many countries. That has probably Helped an investment cycle very positively around the world. 5 gs has made its entry and we are very strong in certain components of 5 Chief for high end smartphones, but also medium. So That certainly should continue in this year's models with again further increased capabilities.
It's hard to for us to understand what is typically related to the pandemic and what is More than natural pattern of next generation Hi and Phones. It is probably a mix. And if you take all the publications, this year It look positive for next generation. Then typically It should wait after that for some time for again the next generation. These are patterns which have to do with GDP.
How will worldwide economy recover? The world is expecting a strong recovery, which is a usual pattern after a crisis That bodes well for those products also. And there is another school of thought, which is more cautious that it will take more time For the world to recover, but who knows?
Okay. Thank you. And The second question is to come back on flip chip. You talk about increased focus by memory manufacturers and then systems sold. I believe last call you were quite positive on sort of the next generation flip machines, which could deliver more output than conventional machines And that this could be sort of a great entry into the memory space.
Yes, just curious where you could talk a bit more about the opportunity, Whether you may have become more confident or not since October? And maybe more broadly, what your views are on the memory market for 2021?
The first question, are we more positive? Yes. We have seen positive developments. We are not only qualified at one customer, but also another customer. So our technology And our system is becoming very mainstream capable.
And we also see increased confidence that this crossover point from wirebond to Flip Chip will occur. Also if you Looking to the broader information about the memory forecast for 2021, that should be a positive Development. Although memory is usually more cyclical than logic, so one has To be even more careful, we are looking at this very positively. Okay. Thank you.
The next question is from Mr. Nijs van Putten, Kempen. Go ahead Please go ahead.
Yes, hi. I would just like to follow-up on the comment in your prepared remarks about the order book in the quarter to date. So yes, clearly a very different year than in the past. But am I correct to assume that at least historically, you tend to see a lot more activity after Chinese New Year, Which was last week. So I'm just curious in terms of how this current situation would imply maybe a lot more strength in the quarter or perhaps You've seen unusual activity at the start of the quarter.
Any sort of context and color would be very helpful.
Well, Again, what is usual is, let's say, proven different in the 4th quarter, Where the Q4 is usually the lowest, where we have seen a record booking level for the company. Q1, a very good start so far. Also with major Programs announced by customers increased spending for 2021. As mentioned in the comments also VLSI is confirming strong growth expected for 2021. So yes, simply said that that's a very good start.
So far in the earnings season, we have not seen any disappointments yet. Sometimes that happens. But also to an earlier question, the first half year is usually a positive Start. The key question is, of course, how long will this last? Will this continue through the second half?
Or should we see a pattern, a strong first half followed by and somewhat more modest second I don't know. We all don't know. So far, the industry independent Wiehlasein, But also major customers are very positive. When that occurs, After many, many years, I always become a bit more careful. If all lights are green, watch out.
Anyway, who am I? But that's what it is, Nigel.
It's very helpful. My question about the order book. In terms of composition, do you see any different behavior? Are people or sorry, your customers Putting in orders for multiple quarters where they might in the past have only done the quarter ahead. Is there any change from the past you're seeing?
No. The word around the world is caution. This time, Probably because of the nobody knows how the COVID will pan out. So you sense Caution at all of your customers and that's very positive because the Overbooking, which is usual to our industry, maybe this time That is less of a risk. But needless to say, with growing With increasing lead times, it often results in customers Making sure they have booked slots and that may lead to overcapacity.
Another phenomena, we also have Bear in mind always, on average, this industry grows by maybe 5%, 6%. And when you have years with double digit growth, But you also could face some overcapacity. So in general terms, We're used to that. That's why we have an operating model, which can with breakeven levels, which are very well known At slightly above €50,000,000 per quarter. And also our whole supply chain model Because cyclicality is the name of the game.
That's very helpful. Thank you so much.
The next question is from Mr. Marc Hesselink, ING. Go ahead, please, sir.
Thank you. My first question is on hybrid bonding. Just like with Memory Express, you mentioned in the press release. Does it imply that also on this side you made a big step up in the customer involvement over there?
Yes. 2020 will be the year in the history book whenever of a major change In hybrid bonding applications, so the industry has embraced From Technology Solution to a mainstream technology On a broader scale, large IDMs And simply follow the publications all easily available through the Internet. Hybrid Bonding is being Developed from an early stage to a mainstream stage from 2022 onwards. So 2021 will be the year of further process modification, Systems tested also prepared for volume manufacturing. Partnerships Like our partnership with AMET has helped us tremendously in increasing Our customer engagement in this phase of hybrid development Expansion.
So major change in 2020 to the positive.
Clear. Thanks. My second question is on market share. It seems to do pretty well. Is it mainly because of the mix that You are with the right clients and your clients did very well?
Or did you also increase your share of wallet with your current client base?
Well, I mean, if you look at the numbers and you look at simply gross margins, net margins, Something has to be right. So we probably, but that data is Always, yes, available in May, April, May timeframe, so that you can have a real sense So market share development, but the key is, are we at the right customers as you are asking and I think the answer It's positive with what we have demonstrated. The share should also be positive Because of the margins, but the key is, of course, Who are the winners of the future? We have so far been very successful, but Every new development is a new challenge and we have Strong competition. We have competitors in Asia, ASM Pacific.
We also have Japanese competitors. We have others like K and S who want to enter into the advanced packaging space. So everyone understands in the advanced packaging, This is where the growth is and where the margins are. So, and Very interesting and a wonderful challenge for the years to come.
Okay. Final question is, the last time you benefited quite a lot, if I'm correct, From the crypto boom, and I was wondering how it is today given where those currencies are again?
Well, that's an interesting observation. Yes, there is certainly In that world, in Asia, we haven't calculated the percentage, That is also contributing. Last time, it did last only very short In the second half of twenty seventeen, anyway, that's a wildcard, let's put it that way. Okay. So far, it has not been very big yet?
It has helped in certain flip chip sales. So revenue also in the order intake, but as I said, as percentage, I haven't calculated It's not like high end smartphones or the computer space, but It's also an application.
Okay. Thank you.
The next question is from Mr. Robert Sanders, Deutsche Bank, go ahead please.
Yes, hi. Thanks for taking my question. The first one was just I noticed that one of your complementary equipment companies, Suez, has set up a factory in Taiwan with a big Optimism around TSMC. Do you think that TSMC is getting much more clear about its Time lines and when it's going to aggressively ramp, you said 2022 for hybrid bonding. So have they maybe pulled in their schedule, like I think Intel Pulled in like by a year, is that something you see or is it too early to say?
No, you're very right. And it's also widely public TSMC is building 2 fabs for advanced packaging. They're stepping up their commitment in many ways. And that is very positive for also hybrid bonding applications. The other one you mentioned, Intel is also widely publicized, has pulled in.
And that also offers unique opportunities for all of us.
And great. And when if you ramp in let's assume both companies ramp in 2022, would you know Today that you're the tool of record or is it still the decisions that are yet to be made, you're just in the kind of qualification phase, the trial phase
at the moment? Well, we're all in a trial phase, lower volume still. One should see orders in the second half Of the year, if 2022 is going to be mainstream production volume, but it all looks That is what the schedules are. But they, as always, can be impacted by Other steps in that whole process flow, it can also be impacted by end market decisions. But you're very right in but that's also widely publicized The schedule is 2021 further qualification and selection and 2020 To rollout in mass volume production.
Good. And just my last question was just a follow-up To previous one, your backlog today as of February 2019, how much is shippable Let's say, to June, how much is like after June? Is it almost entirely Shippable before the end of June?
That's a good question. I would say 80% is first half year, 20% is already 3rd quarter. Okay. Thank you. For instance, plating lines have a lead time of 24 weeks.
There are some programs which are spread over Q2 and Q3, Preparing for product launches in Q3, Q4, but 80% is certainly first half.
Great. Thanks.
The next question is from Mr. Johannes Reiss, ABB Capital. Go ahead please.
Yes, hello. Also some follow on questions. I know that you are primarily maybe active with foundries and IDMs, but Do you also see an increasing demand from the OSATs where we hear that they are also fully booked?
Yes. And that's not unusual. If you understand a bit how the We are structured. Clearly, IDMs drive the development roadmaps. And at some point, subcontractors are used For capacity expansion.
So in a cyclical downturn, When that ends, for mainstream products from previous cycles, Volumes are increased at subcontractors. So you usually see first The ramp at the subcontractors of let's say existing products, new product launches We'll develop in the next cycle and will at some point be loaded also at Circle Trackers. So today, with a major ramp underway, subcontractors I'm enjoying this industry upturn and also IDMs are Starting to expand newly launched products and increasing capacities also at subcontractors.
So strong demand from all three parts of the market at the moment. Yes. On the cycle at all, I think in previous calls, you said one of the meetings we had, you said This cycle could or there will be larger because 5 gs is a really big driver because you have to Not only is radio frequency ships difference, but nearly everything because of So signal is very yes, it could easily maybe disrupt. And on the other side, there's also this Big move to artificial intelligence, the cloud and EV Addas in auto, a lot of big drivers, which are all user maybe It's a lot of semis. Therefore, in general, without knowing how the strength will develop over the quarters and the half years, But in general, this cycle seems to be a really big one.
Nigel called it recently a major cycle. Is that right?
What you do not mention, but what is shared by many Is that due to this COVID, imagine a working from home model. Yes. The online shopping, which was of course On the roadmaps of many, but that has been accelerated. That has been pulled forward. And I dare to say thank you to this pandemic, although it's horrible for many people.
But that has accelerated The technology roadmaps, which many people sort of predict That is the basis for a stronger cycle than usual. But again, here a note of caution. We have heard all these theories many, many times.
This time is too broad, yes.
Of course, we all benefit and we have a business model operating model that we can benefit. We are all in a phase now that we try to explain why this time it's more than last time.
But there are good arguments at the moment, let's say, in this way.
Yes, yes,
yes, yes, certainly. Another We didn't mention, I don't know exactly how strong you are, but you always you also count LED as a potential market and there seem to be a big Upswing in LED through to micro LED, therefore, Mini LED, first, Mini LED as backlighting. Is it also something you could benefit going forward? Because Koligge so far in the recent call was extremely positive on this market.
Well, that's also very interesting. If you simply look at our industry, You have many technologies and one of them has always been LEDs. And of course, there There's a drive towards microLED, which could require or will require high placement accuracy. But then in this whole LED over the years, it's a Volume and lower technology application field with many risks. And we are certainly involved in the Development of MicroLED applications.
Still it's the earliest 2023, 2024, many hurdles still to be overcome. Also choices to be made, is it single, is it multiple with a matrix, is it what technology is used for So as we have said many times, the new growth Drivers for our equipment in sequence is for Flipchip memory is the closest by hybrid shortly thereafter following As we discussed in an answer to an earlier question, this year further qualification, mainstream reduction 2022 And then MicroLED out further in 2023, 2024.
Okay. Maybe a follow on, on hybrid Good morning. How big could PISA's market?
Well, it could be a very If you imagine that the high end processors today are placed on 2 substrates carriers And if this will be replaced by wafer Level 1, so hybrid bonding in many variations, Also chipsets, chiplets, and that's why this market is expected to go beyond the EUR 4,000,000,000, Which was the maximum for the past 10, 20 years, we never passed €4,000,000,000 and now we should reach €5,000,000,000 The only reason for that is more complex technology, Which leads to higher ASP solutions because of more complicated machines. So That answers your question. It is a higher OpEx. $1,000,000 a piece and everyone was saying, oh, that's a lot of money. And today, dollars 150,000,000 So Over those 35 plus years, technology increase Has caused ASP increase and the same will happen in ever tighter Specs and placement of Dice.
Also, I said back end, Mohs and Mohs law gets more important. And your for example, your cooperation with Applied Materials, is it The name of the game going forward is that because back end gets more important at front end and back end will work closer together to social?
Yes. Because In a very simple way to explain that, in back end, as we have Used many times, interconnect, we place chips onto something, Which brings it to an end application. That placement technology is not available in front end. In front end it is Physical, processes, chemistry, materials, so the combination of building chip Structures with individual devices is the handshake between the front end and the back end.
Okay, very clear. So really last question is a topic which is very hot at the moment that All regions try to build their own semiconductor industry or build it up. So for the discussions in Europe, the discussions In the U. S, the discussions about new fabs of TSMC in the U. S.
And in Europe, you are have short lead times, you come later in the cycle. But do you believe there could be a next big wave of investments coming for the whole industry also for you maybe In 2020, it is true and follow on because of this attempts to derisk the supply chain and Catalyst dependent on Thailand, which is also political, a little bit dangerous place looking towards ambitions of China.
Yes. Well, You said it in the best way. And it's very Clear that development will continue in the years to come. But The key question is what will be the impact on global GDP? We can all dream of building fabs here in the Netherlands or in Frankfurt.
The question is, I will The question is, our end markets grow. But That is definitely what we hear and see. So that also is very interesting There is not only one way street to Asia that we will have again a more global Infrastructure for Semiconductor Manufacturing.
Had you already contacted politicians on this topic or are they first talk with the front end guys?
No, no, no, it's very interesting you asked that question. Of course, we have been contacted and they asked a simple question, what can we do to help Yes, because they are interested in every country, the Netherlands, Switzerland, Austria. So That's very active, also in the U. S, not to forget.
Super. Great answers. Thanks a lot and all the best friends there, Alci.
Yes, for you too, Johannes.
Thanks, bye. After next time. Thank you.
The next question is from Mr. Michael Roch, Petercam, go ahead please.
Yes, good afternoon. Well, after Johannes, I only have two questions left. The first one is on the strong recovery in automotive. Does it have any particular impact on your gross margins other than utilization?
Well, that's also a very good question. And the Answer is, which you may not like in that sense, depends. Let's say for New products in the automotive, clearly the margin potential is at our high end levels. There is a lot of power devices, which have been around for many, many years, which need additional capacity And margins for those applications are a bit more at the medium end. So between, Let's say 50,000,000 and 70,000,000.
So it's a range, It's not one product, but usually automotive was a much more stable end market. So also in downturns, automotive had less impact than the high end logic And other applications, but that trend was broken last year, Well, automotive was very weak, which we have never seen before. At the end, customers for many years have been very solid customers. And why? Because Automotive is more critical in terms of requirements for safety and Security, so since a long time, every product needs to be attached With its history, far more critical than products for consumer end markets.
In other words, if your phone doesn't work, it's less critical than your car doesn't stop. So anyway, Mix of high margin and more medium margin.
Okay. But that also means then in the long term, say, 5 to 10 years, that the ongoing electrification We'll basically benefit you and all the other players because the share
of
our chips and other stuff will become more important.
Yes, yes, yes, yes, certainly. Certainly. And also the environmental requirements. Don't forget the amount of waste in semiconductor Applications is under a lot of pressure and that requires new developments. And new developments You are always offering the potential of higher margins.
Good. Then my second question. Last year, you had 22% sales growth, but your working capital was flat. Do you think you can keep it that way?
Isn't that amazing? Yes. It is. Again, it has to do with Our ramping capabilities, we did increase our inventory a bit because of The risks of COVID, so what we now typically do is reorganize our inventory for next Quarter sales at the early part of the quarter, so to minimize the risk of not having Components available in time, I forgot to answer that to an earlier question. You can also see that our Inventory is about 10% higher because of that decision.
But if you look at the cash turns in our company, it's amazing.
Yes. And you mentioned, just like on previous occasions, you have multiple sourcing, so there's not really a risk Well That there's something that you can't get. What's your biggest worry from that viewpoint now?
Well, there are 2 typical risks. 1 is unpredictable weather suppliers In any country are facing a lockdown due or temporary lockdown, usually ten Because of a small COVID explosion, we've had that with several suppliers. But that has then been resolved And it doesn't last longer than 10 days. But there's another risk of the shortage of components. In every upcycle, we've had certain issues with critical bearings, Guide rails, certain camera modules, so far so good as I mentioned to earlier So to answer your question, there are in the past, You could say, well, you did not have the first risk of an explosion of positive test In a supplier, you always have the risk of the availability of components.
Okay. That's yes, so far, it seems to manageable.
Yes. Okay. That's it. Thank you. Thank you.
No further questions at this time, sir.
Well, then I thank everyone for joining us in this call. And if you have any further questions, don't hesitate Stay safe, stay healthy and have a nice weekend. Thank you all.
Ladies and gentlemen, this concludes the Besi results call. Thank you for attending. You may now disconnect your lines. Have a nice day.