Good morning, good afternoon, ladies and gentlemen, and welcome to Besi's analyst session. Joining us today are Mr. Richard Blickman, CEO Mr. Ruud Bomsmer, CTO and Ms. Hedwig van Kerkhoff, SVP Finance, whom will provide a review of Besi's business, development and capital allocation strategy as well as a discussion of trends in the semiconductor FMB equipment market.
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. The audio webcast will remain available at Besi's website. I would now like to turn the call over to Mr.
Richard Pickman. Go ahead please, sir.
Hi. Good morning, good afternoon, ladies and gentlemen, and welcome to our Annual Analyst Presentation. The presentation you can find on the Besi website and also available in this webcast. The agenda for today on Slide 3. First, I will start with a brief strategic overview, then Ruud will take over and focus on what's happening in our end markets and specifically what are the drivers, followed by product development strategy and then I will take over again and discuss with you strategic initiatives, progress, capital allocation strategy and then we end the session with some outlook comments and a summary.
Before we start, this is an analyst presentation, which is focusing on our technology, our market position on the company and all numbers we present are numbers related to the latest press release of April 30, our Q1 and our guidance for Q2, we will not provide any additional information about the development of the market in relation to our numbers. We will present the Q2 numbers end of July and you're most welcome to focus on those numbers at that point in time. But let's start with Slide 5. The first half twenty twenty business prospects have surprised to the upside. If we simply look end of April, the guidance we provided for the Q2 and we look at what happened in the market in May, public information tells you that the semiconductor industry so far has fared pretty well.
The targets for 2021, 2023, a rollout of 5 gs and also new features in mobile and cloud infrastructure. We refreshed our strategy in Q1 2020 and also continued the exercise in implementing certain impacts of COVID-nineteen to our strategy and the initiatives are clearly defined and well underway. There's definitely engagement with the leading mobile and logic players for the next generation systems and we have an attractive capital allocation to enhance shareholder value. Simply the dividend over 2019 results we have paid out after the Annual Meeting April 30, early May. And as we guided for the Q2, this segment in the world is still very pretty well.
And there are favorable long term drivers in place to generate strong advanced packaging growth where we will focus on in particular in this analyst update. If we go to the next slide 6, just as a reminder, the cyclical behavior of this industry and what you can see very nicely is periods of about 4 year average. Every average of those 4 years, Besi has improved its performance, its market position, its margins. And if we simply take the first half twenty twenty midpoint of our guidance that would imply roughly 12.8% increase versus the first half of 2019. So basically a cycle return to growth, albeit due to corona somewhat less certain.
If we go to the next slide, also clearly visible is improved performance cycle over cycle. So in 2015, our net was about 16.6% over revenue of $3.49 and last year 2019 if that would be the trough in retrospect over revenue, which is pretty similar, our net was 25.8 our operating income was 25.8 percent, which is an increase of 58.7%. The next slide 8 shows you in some more detail the quarterly developments and which is quite interesting here to see that this recent downturn has lasted from Q3, 2018 until Q4, Q1, 2020. And as we simply follow the midpoint of the guidance, there is and we saw that with the order intake in Q4 and also in Q1, we see a gradual return to a growth cycle. If we go to the next slide, Slide 9 and we analyze the gross margin development of Besi and the operating margin development compared to our closest competitors ASMPT and KNS, you see a very nice development over the years Q1, 2016, 2017, 2018, 2019 2020 and the developments of both gross margin and operating compared to our peers.
Next Slide 10, if we look at the spending forecast 2020 versus 2019, the latest numbers show a similar roughly flat versus 2019 spending. Although the comment here is clearly that in the current uncertain world, it's difficult to really understand how the impact of COVID-nineteen will be on our industry in the next 6 to 12 months looking forward. In the comments here, we've seen a significant upwards revision in Q2 after the Q1 earnings of the sector. So VLSI took down its forecast for 2020 significantly directly after COVID hit, but then have revised it upwards in the Q2 recently. There's a continued strength in logic cloud application, probably also because of the different way of working in the world and offset by a weakness in memory discrete analog and in particular in automotive applications.
If we go to the next slide, we see that also graphically, we see a beautiful development since 2013. All cycles and also some key points in those cycles, we see the bottom, the last bottom directly after everyone understood that COVID is for real. So in February 2019 And we've seen first in 2020, sorry. And then it improved. It showed significant improvement after Q1 numbers and in early Q2.
So the outlook has improved. But the question is, of course, is this holding up in the current environment. So careful we should always remain. If we go to the next slide, Slide 12, we simply see here the assembly market was set to rebound in 2020 despite challenges, which simply from general information in the market seems to be the status as it is today. It's very interesting to simply follow the uncertainty in the sector in the world and so far for the semiconductor industry that has worked out positive.
Next slide 13 also tells you the current environment. Assembly markets turned upwards in Q4 post 35% down in 20 19. Recovery interrupted simply by COVID as mentioned earlier and the recent upturn is fueled by renewed mobile investment for the next cycle, increased Chinese investments since second half of last year and that continued and continued logic cloud expansion. If we look forward, repetitive to say a volatile situation, H2 is difficult to predict. VLSI expects a significant rebound in 2021 till 2023.
The assembly market fundamentals, however, are very strong. 5 gs could be a game changer. Chinese want to be as much as possible independent from outside semiconductor devices. Mobile makers pack more features, functionality into the handsets and also further advances in the cloud, artificial intelligence and logic applications. A brief update on COVID-nineteen.
If you look at Besi, it's remarkable. Our business is fully operational. We had in February some slowdown in China after a sort of lockdown in different areas in China, but that quickly reopened early March. In the meantime, Malaysia took over and then difficulties started in Malaysia where China took over from Malaysia. So all in all, we have been, I would say, very successful and lucky that we had no operational issues so far.
European facilities are open. R and D has continued. There's a lot working from home and also alternative schedules, people coming back to the offices. So that's all basically working well. Our production cycle is functioning simply because we also have dual sourcing for many of our modules in place.
Immediately when COVID became serious, we expanded our supply base simply by minimizing the risk of not being able to supply systems to the market. We have stacked up a little bit in critical components simply to be also prepared if a second round hits that we can continue to deliver. And simply if we look how we have operated so far, we can say we are pretty healthy. We had one false case on 1600 employees, which is amazing. And so simply Besi is holding up very well in this COVID environment.
That brings me
to the next slide, the impact of U. S.-China trade dispute, Slide 15. It can be said that this conflict is reshaping the global semiconductor supply chains. And since it is highly capital intensive, it will take some time to see the real impact of how the infrastructure will reshape. We have seen already since the past 2 years some further capacities being built outside of China and on the other hand China becoming less dependent upon imports.
Besi is well prepared that if we are confronted with simply less U. S. Parts in our machines, all of our systems are being tested for that so that we are able to continue supply even when the maximum content of 25% is lower to 10%. Our exposure to China is very well manageable. In 2019, it was about 31.5 percent of our total revenue, which consists mainly of foreign IDMs with operations or through subcontractors in China and we have a limited exposure to high end Chinese smartphone manufacturers.
If we look at the next slide, Slide 16 and some market trends, The latest numbers from VLSI have been released recently. And the basic message is that although the markets dropped by 32.5% in 2019, our shares have remained relatively flat in that environment. And that's not unusual. In the past many cycles in downturns, we have sometimes lost slightly market shares, but in upturns we have gained significantly more share than the overall market. If we go to the next slide 17, financial performance improved in the first half twenty twenty if we simply follow the guidance.
What we mentioned earlier in the midpoint of the guidance revenue should then increase by about 13% versus the first half of twenty nineteen simply driven by renewed mobile investments and continued demand for logic and cloud applications. We see a slight improvement on projected gross margins year over year. Operating margins are expected to reach 25% level. OpEx under control, 31.5% of revenue in H1 2020 versus 33% in the comparable first half of twenty nineteen. Our next slide, our business model objective remains in a next up cycle to reach levels beyond the past peak where we reached close to €600,000,000 revenue.
With the big drivers in place, we should be prepared for higher revenues than what we achieved in the last sub cycle. Of course, with similar gross margins, a higher market share as mentioned earlier as we demonstrated in previous upcycles and that then leads to net margins which are comparable to what we achieved in previous peak cycles. Headcount split 80% Asia, 20% Europe. Currently, it's about 71% Asia and 29% Europe. If we go to the next slide, I will hand over now to Ruud who will take you in a wonderful journey through what is happening in our end markets and in particular what are the drivers for the next cycle where our growth will come from.
Wirt? Yes. Thank you, Richard. It is a special way of doing this presentation on the in a virtual way and I hope you can all follow the screen very well. I'll start with a little bit Slide number 20.
Of course, advanced packaging is clearly critical to the next generation of applications. We see the mobile revolution going on, the digital society coming up and that means in principle higher accuracies, greater miniaturization, complexity increasing, density increasing, of course performance and also lower power consumptions. Advanced Packaging has always been our key element. And if you go to the next slide, even Gordon Moore, famous for his law on the advanced side of the front end, where he predicted every 2 years of doubling, he actually already mentioned in his original publication in April 1965 that back end could be actually also very important. He literally wrote, it may prove to be more economical to build large systems out of smaller functions which are separately packaged and interconnected, 1965, Very good that we sometimes remember this.
On the right, you see some of the IDs that are playing today where we split up monolithic chips in chiplets and try to make a complete library of functions that can be adapted. Next slide. We also see that the key players, you see some of them on the sheet here, recognize the importance of advanced packaging in designing their next generation devices. On the left, you see the company in Taiwan bringing up a complete new class of devices called SOIC, System on Integrated Chip. They have their info, which you see on the bottom side, their COWOS.
Intel very active, bringing up new classes of packaging. Foveros, you may have heard this term, which is a vertical stacking. EMIP, which is a bridge connection and combinations of those. Also Samsung Active, I will not go over all of those, but also you see also the Microns, the Hynixes, all the ones are busy bringing advanced packaging to a next level. Next slide.
What we also see, this was my conference on 3 d integration in Dresden in end of January this year, this was the last fiscal conference we had. After that, COVID struck and is all now virtual. And we even the ECTC, an important one, is spread over 3 weeks of presentations now. But ASE presented something nice. They said the value of semiconductor packaging is increasing actually faster than the value of semiconductor revenue.
And that's a strong statement that packaging, especially with the smaller dimensions, is becoming a more important part in our semiconductor world. If I go to the next slide then, we would like to stress Besi has always focused consistently on the advanced packaging world. We have never digressed to other areas to S and T type of things or whatever. We stay very well focused on advanced packaging. And basically key is of course process knowledge in of course in die attach, but also in molding and plating, extreme precision at very high speeds that is then typically for die attach, mechatronics is a key element and item or an issue that becomes more important is optical system development, metrology and fission.
We just developed a very nice 2d, 3d fission system where you can see very precisely how a surface is on a die that you are working on. And sometimes it's good to remember that our company in Austria started as a vision company recognizing number plates for the first time. Another part that is important and sometimes more important than in front end is all these processes run very fast. So you need also very fast real time software, especially in the pattern recognition. And all these things are yes, we are day in, day out working and bringing this to a higher level.
On the top, you see some examples in an RF circuit, some other circuits, you see hybrid bonding on the right also. This is our world. On the next slide, I add one more thing to it. We have also focused always on operational and financial excellence. It is nice to do all the technology, but at the end of the day, we also have to show performance because that's what we do for our shareholders.
This is based on best in class technology being close to our customers. It's very funny, we do a lot of contacts now on WebEx. We just had this morning a very big one. We do this very regularly now, but I hope we can start traveling back and see people physically also. Operational excellence is key.
We're always busy with cost reduction. And an element that we look strictly in is the active cycle management because our business, you have seen that in the presentation part from Richard, goes up and down very fast and we are always looking at can we adapt fast enough and not have too much ballast in the company. Another element is the other way around. We have to bring our products fast to the market and we also have to wrap up the production very fast and we have shown that we can do this very well. On the right, you see a graph of how often new phones are introduced and that means you in the past you may have 4 or 5 years now every year we have to bring new additions.
If we go to the next sheet that is Slide 26, you see where our revenue is generated. The largest part in the mobile world with the mobile Internet devices, 2nd is the whole computing section. Then actually spares and services has becoming a substantial part, very regular and solid income for us. Automotive 17% and then we have industrial and some high end LED on 9%. I would like to go a little bit over the development in the 3 main areas, mobile, compute and automotive and dive a little bit deeper there.
If we go to Slide 27, you see our key end user markets and these are basically our growth drivers. On the left, mobile Internet, the 5 gs ramp is really on its way now. Of course, this means more mobile content, more features, but it also opens up a whole spectrum of new applications. On the left, you see things like the massive machine type communications. You can think about smart city, smart homes, gigabytes in seconds that will move.
On the right side, you see 3 d ultra high density television and you see 8 ks coming up, it may go further, cloud services, augmented reality, industrial automation, mission critical applications. The idea is that 5 gs will be also very, very fast. And of course in the bottom we still have the self driving car. Some other areas maybe micro LED display I will come up later. The second group is computing and the digital society is clearly accelerating.
Cloud infrastructure is growing 12%, 13% per year. Areas like artificial intelligence are everywhere now in our application field, data mining, medical is a large area and on the bottom I put a work at home economy because I think a lot of our digital transformation has been going faster than we expected. And many of you will actually probably like that you can work from home and that life is actually continuing this way. 3rd element, automotive. And the only automotive business at this moment is somewhat down because the number of cars sold is reduced strongly, we still believe this will continue.
And whether autonomous driving will be there tomorrow, it probably will take some time, but it's certainly continuing. In the car, you will see more powerful compute systems. If you want to drive auto numbers, you have to have strong vision systems around you that have to be very fast. You see new sensors coming in like LIDAR. But also a big part is electrification and also building up the whole infrastructure to do all the charging.
All of these, I would say, developments are positive for our business. If I go now to the next slide, a little bit about mobile. And we are getting into a Phase 2. The top sheet was from the latest Samsung investor presentation. We see in we get now mass market 5 gs devices coming in with several 5 gs chipsets, standalone network deployments, the adoption of millimeter waves and of course industrial IoT.
On the bottom you see this is from the Ericsson Mobility report. That's always an interesting guideline to see how are things developing subscription wise. And the estimate between now and 2025, there will be €2,500,000,000 additional 5 gs subscriptions. And of course, on the right side, you see another element that is the number of IoT connected objects that will be connected to the net is also growing very strongly. The numbers are fluctuating on what people think about €30,000,000,000 €50,000,000,000 dollars a large number of devices connected to the net.
If then I go to Page 29, this explains a little bit 5 gs. And one of the new things in 5 gs is that we will be using higher frequencies. On the top, you see frequency 6 gigahertz already 28 up to 39 gigahertz. And in that range, you also talk about millimeter waves. To do this, you have to build up a complete new network infrastructure.
New in this is beside the massive MIMO stations, you also get small cells and even indoor radios as they are called. In the phones, to accept 5 gs, you need much more components. On the right is a nice plot where you have a 4 gs phone that had about 4 gs filters. A 5 gs phone needs about 70 filters. The same with bench, 15 to 30.
The filters go from 30 to 75. The switches inside the phone drivel and also the MIMO devices quadruple. And that means all this has to be all mounted in the phone and hopefully with our equipment. On the next slide, I go a little bit deeper. On the left side, you see the 5 gs network expansion.
This is a slide from Infineon. That's where you see ACDC components for the power supply. Where you see ACDC components for the power supplies in here. But if you see to the left, you see something new that are the 5 gs millimeter wave antennas and that's a complete new class of antennas. These millimeter waves have a penetration radius of maybe a couple of 100 meters.
That means you need everywhere, you need 100 in a square kilometer, you need several of these cells to cover. And that means an enormous growth rate in that application. Inside the building, you have the same issue also there. You have to put a new type of transmitter working with millimeter waves and also there is a big growth area. Another new element you see here is called FOC Computing.
The network with all the devices creates so much data that you cannot simply dump this all in the cloud to a big data center. You have to do more local computing. And that means more powerful computing close to where it's being generated. A lot of our customers in the infrastructure you see to the right is all famous names. And to the left, you see also something new.
We have all heard of graphic processors, of CPUs, but there's also new infrastructure processes are being developed that are actually also very powerful. On the phone side to the right, you see, of course, next generation 5 gs phones. Obviously, they have to have a 5 gs reception and transmission part. Companies like Qualcomm are supplying this. Also, there's much more handling of power inside the phone because there's more applications running so that there are new devices being developed there.
You get new Wi Fi. The whole GMS, GNS networks have improvements there. And also even the Bluetooth is going further. We also see more complicated sensors in the phone. Very many sensors get fused.
As they say, that means in one sensor package you have more sensors built in which makes actually the handling of the packaging and mounting these devices more complex. Also there on the bottom, you see a number of customers we are working with. If I continue now to the next sheet, this is sheet 31. Mobile also creates many new opportunities in what we call the Internet of Things world. And to handle all these devices, you see on the bottom left, you see something that is called the edge layer That is the 1st layer of calculation levels.
This is typically located in buildings themselves. These are quite powerful computing stations. Companies like NVIDIA, Google and many others are developing special boards with high power computing systems to do the calculation close by. If you move to the right, you see a fully automated factory. That's the dream, of course.
You see a picture where people are being observed and you see a little picture there with a red line where somebody goes outside an area who should not be there. So this type of location calculation needs to be done very fast. You want to do that close by the position. This is typically an edge application. This edge area is growing with about 40% per year and the expectation in 2030 in 2,030 is that edge computing will be actually bigger than cloud computing.
And all these devices need quite complicated packaged processors. Then I move a little bit to the general data world. We all know that data generating is still exploding. Expectations around 2025 is under 75 Zettabytes being available. If you think about it, 10% is original data, the rest is being transferred up and down and about 30% will be even real time data.
So this whole drive to more data is continuing. If we don't want to drown in energy usage for this, of course, we have to keep developing more energy efficient packages and more powerful packages. This computing world, the advanced computing, the HPC is another area of real growth besides the standard Internet things. Cloud computing, of course, already a €230,000,000,000 business. But automotive and manufacturing and healthcare are also adopting high power computing at a very fast rate.
And these are actually massive markets that are coming up. Gaming is of course an interesting market with 150,000,000,000 and all these markets need computing power, faster data transfer, artificial intelligence and high level fission systems, of course, graphics and all based on ever more powerful processors and also clearly on memory needed for this. On the bottom you see some cases of course the Intel's, the Navigas, the AMVs, the Next, the Googles are all working on this and in all these projects we are involved. Going to the next slide. We're now at Slide 34.
You see on left, you see the latest NVIDIA A100 Processor that's built by TSMC on 7 nanometer technology. It's COOS based, that means that's an interposer below this, has 54,000,000,000 transistors and works with HBM2 memory and can do 1.6 terabytes per second data transfer. But in the bottom, you see the effect of that. A classical data center station would be about 11,000,000 630 kilowatts. You see about 8 of these big stacks full of service.
With this new processor, you can bring this down to 1 stack at $1,000,000 and only at 28 kilowatt energy users compared to 630 kilowatt. Initially, you could say, no, that's bad because we'll sell less, but we have always seen that these improvements actually generate bigger markets. The model of such an advanced package you see in the middle, this is a substrate. On top of that is an interposer that is typically connected with classical C4 bumps. Then on top you see micro bumps where you have different chiplets.
You may have even a bridge connecting that. In the below side, you see an application what AMD is doing where they combine 14 nanometer input output area with 7 nanometer cores. And this drive to go into more chiplet base is only accelerating. If we go a little bit to why this chiplet area on the left, you see the very well known yield versus die area curve. If you want more powerful computing, the most logical thing is to make the die area bigger because that's the fastest way to get more computing power in the die.
But bigger dies have lower yields and that is very simple because of particles and defects. And if you make the dye bigger, there's a bigger chance you have a defect in that dye and the yield goes down. If you break up this chip in smaller parts, you can actually grow in yield. The improvement in yield, of course, is partly taken is eaten away partly by the extra cost for now having communication with these the chiplets. But we start to see that it is cost effective now to go to this chiplet structure.
And you see AMD is doing this with a horizontal infrastructure, lady and many companies doing this now with interposers, even active interposers and Intel is going even in a three-dimensional direction. So the advanced computing part is developing very well for us. There's a lot of handling in that for our machines. And yes, we had high expectations of this area. If we now go to the next part, which is a little bit on automotive, and despite that automotive is a little down, on the left, you see a curve saying electrical car sales growing strongly and expectation is that by 2,040, the number of electric cars sold per year will be higher than the number of cars sold with the conventional engines.
At the same time, you also have to build a substantial infrastructure. On the bottom, you see a curve where you say that by 2,040, there are more than 300,000,000 charging stations should be available. And Infineon always published very nicely in their presentations the content, the power content in a car, in an electric car. And if you then multiply this simply by the number of cars expected, you see an enormous growth in power devices. And that's what we are also seeing.
We see much more demand now for that. And that's for us a positive thing because we have a good position there. We also have the, of course, focus on efficiency and power convergency. You see more silicon carbide, for example, coming up, which has a higher efficiency than classical silicon. We also see that Tesla is, of course, in everybody's wording, everybody follows this, but we also expect that conventional cars will strongly come back probably in 2025, but maybe we sit together that it's expected that Volkswagen is actually the leader.
And of course, significant infrastructure investments will be required. Going to the next slide, this was Slide 37. We are now at Slide 37. On one part, electrification is a strong grower. On the other side, everybody keeps talking on autonomous driving.
I drive a lot, so I like this idea. But I also think it will still take a long time because before you have everything legally arranged, before the whole infrastructure is really working, probably another 10, 15 years. But there will be a slow increase from what we call level 2 to level 3, 4 and 5. And to drive autonomous, you need many more sensors on the outside of the car. You talk about long range radar, you talk about LiDAR, you talk about camera systems, you talk about short, medium range radars, even for the parking, the ultrasound, which you know very well, the peeping that you get when you drive somewhere in.
And if you see what the level of sensors in a Level 2 car, it's about $160 If you go to Level 4 or 5, which is more or less autonomous driving, you talk about $1,000 of sensors in there. 2nd part that comes into an autonomous car is of course a very strong supercomputer. You see 2 examples there for Level 3 and Level 4 or 5 with many more cores to keep this going. Further, you need to further develop the Internet to have the connections between the cars and to get the traffic things. We also see there is more collaboration needed between the large players because also the software effort to get all of this done is substantial.
But we see this long term also as a good growth opportunity. Let me now turn a little bit to the product development strategy. Yes, and if we go to Page 39, in short, our main activities in 2019 were developing a nano accurate hybrid die bonding system, designing our next generation TCB systems and also work on the next generation high speed and high accuracy flip chip and fan out systems. In 2020, we continue on our NanoAccurate Hybrid system. We have excellent initial results.
We also started some time ago with working on microLED. I have a few slides on that also. Our next generation TCB system nears completion. And of course, we're also continuing developing our next generation soft solder and plating systems for the automotive and the power applications. Slide 14, there's an overview of the next generation bonding technologies.
And I mentioned here hybrid bonding. If we see historically, wire bonding is a long time around, 1975 more or less started. Then we got into the flip chip world that started 1995, pitches of products between 150 going down to about 80 micrometers. The big difference between wire bonding, if you see the left picture down, you see the little wires coming from the chip. And you can only connect wires on the outside of the chip.
If you go to flip chip, you can use the whole area of the chip to make connections that all the little balls you see there. And the next step was fan out where you actually expand the area of the chip by molding around it. So you have again more surface area to make connections. And then the next step we saw was the TCB bonding, where you go to a much smaller pitch, up to 80, 50, 30 micrometers. You start at stacking dies.
These are some examples from, in this case, from Micron published. Some stacking goes now to 7 or 8. 12 is coming up. And this technology will certainly stay around a while. But the next thing we start to see is what is called hybrid bonding, and especially tied to wafer hybrid bonding, which is used for pictures below 20 micrometer.
And I will go a little bit deeper in what is this hybrid bonding. If we turn to Page 41, this is a little explanation. On the left, you see 2 die areas, the top die and the bottom area, and you see dielectric material and the metal contact. If you polish these surfaces very flat, and I talk about 5 nanometer flatness, almost atomic flatness, then if you imagine that you put 2 very flat surface on top of each other, they more or less stick. In the original physics, this was van der Waals force.
It is they call it also dangling bonds bonding. But basically, you stick to very flat surfaces together. You cannot take them apart anymore. And that's what we are doing here. We create a very flat surface.
We activate the surface with a plasma step. Then we bring these surfaces together. The dielectric in the middle bolts immediately. And this dielectric is already a very strong bond. And this whole bond is done at room temperature.
You don't have to heat up anything, you just connect it. Then as a last step, once the dies are bonded with the dielectric, then you bring them to a temperature step and then the metal that is slightly recessed will expand and will make the final contact. This is a very elegant way. The 2 new things that come in here is, of course, the surface activation, the very high precision and with the high precision also cleanliness. In the middle part, you see the difference.
You see on the bottom picture, you see a classical solder bonded die. And you see the copper pillar and the solder cap. You can imagine that if you bring the distance between these contacts smaller, say you bring it to 20 or 10 micrometer, the solder will actually contact the next contact and you have assured. This limits simply how far you can scale this down. And with a direct copper to copper bonding, you are not having any shoulder anymore.
You have nothing that squeezes out there. It's a direct very clean bond. And it's also you are not needed anymore underfill. The distance is very small now and the heat transfer also much better. And of course, we see this especially for very dense pitches, say 10 micrometer pitches or less.
That means a lot of contact means also you have to very accurately bond this. If I go now to the next sheet, this hybrid die bonding compared to flip chip and TCB has substantially better properties. You see on the left table, you see classical 2.5D or 3D or hybrid bonding. You see the interconnect type. It's a micro bump or it's a hybrid bond.
The chip distance, 100 micrometer, 30 micrometer, basically 0 in the hybrid bond case and also the distance between the bond pad pitches goes down substantially. The netto effect of that, you see the speed compared to a classical 3 d IC goes up a factor of 12. The bandwidth density goes up almost a factor of 200, and the power efficiency goes up a factor of 20. And to make it more visible on the bottom, you see a classical bump for flip chip. You can do about 120 of such bonds in a square millimeter.
TCB, about 800 of these bumps, the bumps are already much smaller. And in the hybrid, you can see you can do 12,000 and there is already a publication coming out that it will go to 1,200,000 contacts per square millimeter. This also allows and this is what you see on the right side for a complete new class of devices where you have chip 1, chip 2 and chip 3 connected almost without any distances and very giving very fast data transfers. System on integrated chip, this is called, some other calls it hybrid bonding, and it opens up a new class of devices. How do we do this very accurate placement?
On Page 43, you see the base principle of this. We have developed an optical system, we call it Van Gogh, substrate camera system, where we are able is we see the green part on the bottom is the substrate where we have to put a dye. On the blue part is the dye you see on here. And we are able with our camera system to see both the substrate fiducials and the tool die fiducials at the same time. And then with the bond head, we can go down to the bonding position in a controlled way.
With piezoelectric motors, We then follow the position very precisely and we've been able to do this at about 150 nanometer now accuracy. And you have to imagine 20 years ago, 30 years ago, this was front end maximum. We do this now in back end. And what is more, and this is important, we can do this at high speed. There were systems on the market that do this at like 100 dies per hour.
We are currently at about 2,000 dies per hour, and we think we can go further than this. On the right, you see a few pictures how this looks then in the real world. Going to Page 43, there's, of course, an estimate of how big will this market become. This depends, of course, on the adoption rate. We think that the number of big ones will start adopting this now.
Then bigger IDMs and OSATs will probably follow and we'll also get at a certain moment even replacements. And cumulative, we see this as a market in 2,030 that the total installed of between 1,000,000 30 that the total installed of between 1,000,000,000 and 2,000,000,000 of tools is possible. We talk about 700 to 1400 systems. Now let me turn to another subject, a little bit about microLET. MicroLET is it's a little buzzword at this moment.
You think about watches and smartphones. In the middle, you see applications like virtual reality and augmented reality. Here, you might have a microLED device in a glass and you will be guided if you're working in the stockroom, you might be guided to where the project is lying. This could be one application. And of course to the right are probably later on larger sizes TVs and TVs with a very high density.
Now MicroLED, I have a little slide on this Slide 46, trying to explain a little bit the basics what are we talking about here. On the left, a classical LCD display. And this display, you have to imagine in the middle where the yellow arrows are, this is a liquid crystal. If you put voltage on this crystal, it will turn a little bit and then it will allow light to pass through or if you put more voltage, it will stop the light. So on the back, you have a backlight, that's the light source.
The filter is nothing it's a big filter that you can see here and then you get the colors. This is well established technology, low cost in the meantime. The brightness is somewhat limited. It's quite needs quite some energy. At this moment, a lot of people are working on better backlight sources.
So mini LED, not micro LED, but mini LED, for example, is used as a backlight for improving LCDs. And yes, that's I think development in LCDs will continue. The second technology that came up over the last year is OLED display. Here you don't need a backlight anymore. The light is generated in the device itself.
It's basically a light emitting diode. But to get the colors, you have to add a organic layer. And this organic layer is also the problem. This one still has lifetime problems That's why you don't see these applications in, for example, your PC because if you have a taskbar all the time, over time this taskbar will not disappear anymore. It's somewhat higher brightness and also somewhat lower energy than a classical LCD, but still has limitations.
The next step is microLED that you see to the right. Also here the light is generated directly in the device, but here you use really III V semiconductors. You have no organic material anymore. Sizes of these LEDs, that's why they're called micro LEDs are 10 to 50 micrometer. It's clearly an emerging technology, has at this moment still at a high cost, but it also offers the highest brightness, lowest energy.
And at this moment, people also expect that lifetime issues will not be there. To do this, to build these microlets, there are 2 basic production methods, you see this on the right. 1 is called mass transfer. Here you pick up a whole bunch of these little minilets and put them on a backplane. The second way is what is called monolithic, where you create more or less the microlamp on a wafer and then take it out from the wafer and mount a whole device on a backplane.
This is much more like a classical TCB flip chip type of process. Today, there are more than 20 processes under development. There is no yet any standardization. All the big companies work on their specific technology. And for us, it is difficult to see which one of this will be the winner.
Let me go to the next page, Page 47. On the micro lefler, we are working on 2 concepts. 1 is for the mass transfer. This is a system based on what we call our YUPEL concept. Is a large area diet test machine with very precise placement over a wide area.
First system is delivered and accepted. There's interest from additional customers and this is probably a potential application for like smartphones and wearables. On the other side, we're also working on monolithic micro LEDs, utilizing our next generation TCB system that fits very well for that. Probably there the applications are more like the augmented reality and the virtual reality glasses. So we're working on both sides.
Success in the whole micro LED environment depends significantly on improving the productivity. Market potential is substantially, but there's also still a lot of development needed for this. I now turn to Page 48. We go now to the so two elements we discussed, the hybrid and the microLED. We now go to our more classical product portfolio review.
We have the die attach equipment, die bonding, multi module, flip chip, die shorting, die in attach. We have the molding equipment, the trim and form. And we have also the simulation and then of course our plating equipment. We'll go over these 1 by 1. First of all, in the DiaTouch world, our EVO system.
This is by far the most successful multi chip module system. We have now more than 6,400 installed. You can check the last one from last year. We've progressed very well with this. The key competitive advantages of these systems are the combination, of course, of accuracy and high speed.
We now have a tool with 3 micrometer accuracy available. It's multi die, multi wafer and it has an extreme broad application field. And it's very quickly to develop a new application and bring it from R and D to production. What is also nice with these machines, you can actually put them side by side. We have done up 4 side by side that you can do multiple steps to manufacture a quite complex device.
Some examples you see here on the bottom, which are some optical devices that we have done with these tools, which have multiple steps in there. New developments in 2020 for this tool is further optical inspection, especially 3 d inspection, next steps in factory automation, Factory 4.0 and we get more and more requests for power applications with higher bond forces. This has to do with the upcoming silicon carbide technology in power applications. Target markets 2022: camera modules, 3 d structured lights, infrared, fingerprint sensors, motion sensors in the automotive lidar, faxal placements, MEMS mirrors, radar, IGBTs, sintering, industrial, of course, power IGBTs. In the high power computing 2.5D interposers, We placed interposers with these 2 larger than 70 millimeter, which is the only one in the world that can do this at this moment.
And of course, in the 5 gs world for the cloud storage, the photonics, the placement of the photodiodes and the facials. And if I go to the next system, we are at the epoxy systems. This is our 2nd high runner, over 3,300 installed now, the most successful epoxy system in the industry, high accuracy and speed. This system has running capabilities up to 18,000. What we see more and more is that the very high control for the bond like thickness.
When you put a dye in the epoxy, you want to be sure that it is very parallel to the substrate and that also the bonding height is very constant and we excel in this part. We added in the last year a high level of cell up diagnostics and machine learning. We work, we see that the dies get thinner and thinner. We developed a very nice new ultra thin die injector and we now also add convocal inspection on these tools. A new development in 2020 will be 6 sided inspection where we can with a new optical device, including a liquid lens, we can inspect the dye from every side and give a signal everything went well or you have to divert this one.
And also there we see higher bond forces. NAND was mark, MEMS and sensors, flip chip on leadframe packages, high end ICs. And a nice one is also we do some special cooling elements. These are very small Peltier elements with a very vertically directed silicon part. And this is used to cool lasers used for photonics transmission.
In our poker Yoke, our intelligence of the machine has brought the setup time back from 45 minutes to less than 10 minutes, about 75% reduction in setup time. In the high speed world, for flip chip, our 8,800 SEQ is in the market now from the original machine, the single head flip chip machine, we have delivered more than 1,000 machines. Currently, we think it's the highest speed on the market. We have a novel collateral principle in die handover and that minimizes the times you have to touch the die. We also developed an ejection mechanism for ejecting 4 dies at the same time.
In 2020, we will expand this application, add machine learning to it and also new inspection systems. Markets, especially flip chip DRAM, there's a large shift in bringing DRAM from wirebond to flip chip and of course the general flip chip and fan out market. First systems very well qualified now with customers. To the next system we go is the soft solder. There a big step we are making is we're bringing our classical 2,009 system on the level to the 2,100 system that will be a next generation soft solder system.
The 209 was already the standard in need for a next generation tool and we're developing this. There will be also plasma treatment included in this machine and of course the fully automated fully automated qualified including traceability. The 2,100 soft solder system will have a new tunnel design in that, it's in the left middle picture. We have shown that this tunnel has a much higher cleanliness level than our former tunnel. This has been highly tested now with a number of customers and well appreciated.
Target market, of course, automotive, high reliability power packages, silicon carbide and in industrial all power devices and the IGBTs. Then we turn to the next round of systems. We go to the TCB, our next generation tool. We expect market introduction end 2020, especially developed for logic applications, but we're now moving also to memory applications. The competitive advantage are it's both a chip to substrate and a chip to wafer system.
Precision level will be in the 1 micron range, high productivity. The system on the left top you see would be a 5,000 per hour system. And we've also developed the capability to use very large dies to 70x70 millimeter die size. And here we also will implement a tunnel concept to create protective atmosphere with an ultra low gas usage. There are tunnels currently available, but they use much too much gas.
And we have developed a very nice concept to reduce this. Target markets, of course, HPC, memory and in some cases also monolithic microlatch. We have been working on dye to wafer with thermal compression bonding already since 2016. On the bottom right picture, you see die to wafer with 20 micrometer pitch already done in 2016. Last part here is the die attach large panel.
I'm now on Page 54. We have here the largest area in the industry, very good accuracy, 1.5 micrometer and 1 micrometer use an unique measurement frame. We're capable of using all our Besi bolt heads and high speed with special cooled linear motors. We'll further expand this system. On the bottom you see a special bond head we designed for this.
You also see the enormous good results we get in accuracy in 0.3 to 0.5 we have seen already. Auto build, auto tilt is a new thing we're going to introduce in this machine and we talk about HPC, microLAN and general ICs. Let me now turn a little bit to the packaging world, to the molding world. Our LM system with over 3 25 systems. We see a lot of activity at this moment.
It's the most cost effective industry. It's a standard for thin die molding, also exposed die molding where we think we have about 90% market share. A strong element of this tool is the dynamic clamp force control and the possibility to compensate for board thickness variation. Double sided molding and foil assisted molding are in high demand at this moment and also this tool has a very low power consumption and low weight. We'll introduce 180 ton molding system for larger area this year, which has 4 individual clamp forces, so we can on this large area balance the clamp force and get a very even molding performance.
Fission system for 0 defects and also ESD capability has improved. Applications, 5 gs, wearables, automotive, memory. And on the next page, Page 56, you see some applications, antenna packages, wearables, all of these done almost exclusively on our tools. Then on the wafer molding, again we are further experimenting with wafer molding. On the bottom left, you see a case where we do multiple different dyes in an exposed version.
We continue with that. We introduced exposed diode glass and metal carrier this year. And also here we built in a new particle detection system because for these very advanced devices you want to be sure there are no particles. 5 gs and wearables are the main application areas. Next we come to our high precision trim and form tools.
We have now about 10.50 of these tools installed, handle the most complex high density lead frames, full product traceability had been introduced, many offload configurations, Laser marking has been added, selective punching, if there's one defect, you can push this out in a separate way. Single product handling will be added because we start to see very big products that come in this machine and also laser deflesh. Mainly, it's all leadframe based power IGBTs and general leadframe based packages, basically automotive industrial applications. And then at last one, plating systems. This tool, the top line you see is our standard plating system, over 820 installed by now.
It's an industry standard for leadframe plating. If you follow VLSI market share numbers, you see extreme high numbers. Sometimes we're even a little bit puzzled ourselves by this. And a key competitive advantage of this tool is the very efficient chemical usage and very little spillover, high precision plating. We also have a solar version for high efficiency cells and we keep upgrading this tool.
We just added the new Selective Litho system to it, new efficient power supplies, flexible connector application is one very interesting for inside the phones and target markets industrial, automotive and also so that brings me to the end of the review of say what are the markets doing, what key technologies are being developed, where are we with our systems. In a short summary on Page 60, we could say advanced packaging is the clear solution for smaller, thinner, more complex and more functional devices. Assembly is a very important gating step by now. Specification start to go front end like. The value of packaging increasing, decreased node sizes make the necessity for packaging very clear, 5 gs happening, data generation creating the need for more complex devices, hybrid bonding micro lab upcoming and we are at the forefront of these developments.
I think there's more than enough. I hope you could follow this part. I think we'll return now to Richard and questions probably at the end of the story. Thanks, Lourdes. Well, let me switch on Slide 62 to take you through our strategic objectives.
First of all, in the top, you see maintain best in class technology leadership. Number 2 is increased market presence in addressable markets. I think Wirth gave you many directions which should accomplish that. Enhance scalability, reduce structural cost, in a few slides some more about that, balance our business objectives with social, ecological be better positioned in the strong growing wafer level assembly market, maybe through acquisitions and also continue to reward shareholders via capital allocation policy above the average of the sector. On the next slide, Slide 63, revenue initiatives simply confirming what we had said again through partnerships with next generation leaders in our industry with ever more promising developments, especially in the hybrid arena, but also through ever growing end markets, exploit those opportunities, increase mainstream penetration with high quality mid range systems and expand the presence and share of wallet in China.
Our service combined with operational excellence, we can see over the years a significant growth in the percentage of spares and service as a percentage of revenue. 10 years ago, that was below 5%. Today, it's closer to 20%. And then on R and D, we have started to invest more simply anticipating on the major expansion of semiconductor advanced packaging requirements, which activities going on. We added last year about 40 people, so far this year another 9 people, simply all focused on targeted customer developments with high growth potential and that should bring us into a next level of revenue in the years to come.
On the cost reduction, in a similar way, every year we define key targets to reduce our costs and where are those costs in the 3 areas supply chain, product design and overhead. Systems Manufacturing, rule of thumb, 1 third of the cost is materials. So the supply chain is extremely critical to continuously focus on cost reduction in all the various components modules in today about 18 different platforms in the basic portfolio. Product Design, all costs starts where the ink dries up and that's in R and D. So constantly our engineers are focused on developing new generation products with ever lower cost and we can do that through a reduction of platform standardization, reduce cycle times using better subcontractors and we have seen over time an enormous improvement, but we still are certain that we're only at the beginning.
So cost down engineering, the focus not only on technology leadership, but also on cost leadership is a major initiative for the coming years. And then the third one is the overhead. We've come a long way in moving from West to East, where end customers have their operations. And the target is to have in the future roughly 80% of our headcount in Asia. That's partly due to growth, which we anticipate will come in the next cycle, but also still to further reduce European facilities overhead in the Netherlands, but also in Switzerland.
Reduce also our overhead by the new way of working and gain efficiencies, further efficiencies from our spare parts consolidation in Asia and also more web based service of spares to our customers. A few words about CSR objectives, you see that on the next slide, Slide 65, where around the circle of CSR, we see in the top safeguard safe and healthy working conditions, maintain best practices in environmental and ethical behavior, reduce environmental impact of products and operations, promote employee talent training and diversity, conserve natural resources, develop sustainable supply chain, minimize impact of conflict minerals, reduce packaging waste, transportation and energy, and last but not least, responsible tax practices in all jurisdictions. You've seen these goals. Each year, The change which will happen this year is that we will add more KPIs to those goals simply to demonstrate our serious approach to our CSR responsibilities. And you see that in the next slide, Slide 66, where we have the highlights listed 2019 and also what establish KPIs in the monitoring and upscale sustainability initiatives.
Next slide. That brings me to the capital allocation strategy. Most of you know that we have a very simple strategy. We distribute between 40% 100% of our net profit is available to distribute in dividend. Underlying that policy is that we maintain roughly 20% of our revenue in net cash, simply to be prepared in the unpredictable cycles in this industry, the ever increasing capital required for development programs.
Developments. I added to that how many people we have increased our staff in R and D and simply to avoid any dilution risk for shareholders, we maintain a net cash position of around 20% of revenue. Everything above that, we distribute to shareholders either in form of dividend and share buybacks. And you can see in the next slide as well, Slide 69, that over the years, we have not only defined that strategy, but we also applied that. And we see in very strong years an enormous return to shareholders, but also in down years with maintaining our gross margins in the mid-50s, net margins around 20%, allowing significant returns to shareholders.
And since 2011, we have distributed about €732,000,000 to shareholders. And we see in the next Slide 17, how much that is roughly in dividend trends and you see per year the dividend per share, which we have distributed. And it's amazing. In 5 years, above 90% of our net income has been returned to shareholders and of which 1 2 years are even 100% of our net income. Anyway, next slide, share repurchase program also simply continuing the program year after year.
So far this year, €5,600,000 with an average share price of about €33 And what we can see here in total since 2015, euros 72.1 purchased under the current €75,000,000 program, 3,200,000 shares, average price over that period €22.51 Next Slide 72 shows you relatively our return on equity versus ASM Pacific and KNS. And it's fair to say that since 2013, we have gradually increased our returns visavis those competitors and that has led to a significant return on equity over time. That brings me to the last slide to finalize with the outlook for the Q2, Slide 74. We guided April 30 that our revenue could be up by 5% to 25% versus Q1, our gross margin in the range between 56% 58% and then our operating expenses down by 10% to 15% compared to the Q1. These are our prepared slides and if you have any questions, we are happy to answer them.
Operator?
Ladies and gentlemen, we will start the question and answer session now. And the first question is from Mr. Marc Hesselink, ING. Go ahead please, sir.
Yes. Thank you. Firstly, maybe on the €800,000,000 ambition and what we're now seeing with COVID-nineteen. As far as you can see right now, does it have a positive or a negative effect on the future opportunity that you have? And maybe also taking into account your the competitive position with for you the flexibility to have production both in China and in Malaysia?
Well, in the current time, it won't surprise anyone that there are different views varying from a a significant acceleration in demand of semiconductors, especially the acceleration of the rollout of 5 gs, also data centers, simply new business models, so expect the growth. On the other hand, there are also views that maybe the impact COVID-nineteen on global GDP could be significantly negative and that would put some, let's say, delay on the next cycle. Now I hope that in the slides we presented Besi's position in those growth areas has improved over the years and is currently very strong and we are also benefiting from that. We saw that in the turn of tide in Q4. Q1 continued order increase.
So end of April, we're all very careful. What I mentioned VLSI in the meantime has changed its view from a negative year 2020 to an expected growth in 2020 for assembly equipment even double digit. But I continue to say it's uncertain times and who are we to be able to tell anyone which way it will go. Page is very well prepared for that. We can accelerate very rapidly.
We've also demonstrated with downturns that we maintain our margins. So we are pretty comfortable in what the future will bring us.
Great. And my second question is on thanks for the extensive update on the new products and the even more advanced techniques. Could you maybe indicate a bit the relative size of those market and how quickly it's moving from the IAEA stronghold in flip chip today towards the new techniques?
Yes. Thank you for this question. We tried to explain that these new technologies are upcoming and I showed one draft where we estimated how quickly will this go. And I think it will still take a number of years before this becomes to real volume because this is always with new technology. And I think in the coming period, 2023, 2025, we should see this in a much higher volume entering.
But it does not say that all these other technologies will disappear. What you always see is that we have seen this even with our soldering systems, they have a very long lifetime because a lot of products keep coming and also have, as Richard mentioned this already, as mainstream, maybe a little bit more middle class. These are large volumes that also keep generating a very good business for us.
Okay. And final question. Also, you mentioned, first, still the opportunity to move more into the mid market. Is that related to what your earlier talks about getting a stronger presence in the Android supply chain? And if so, can you give an update on where you stand and if you think there is indeed a quick win in market share possible?
Well, quick wins is not so, let's say, to be expected. Big wins are always in new technology applications or in new features where you grow from scratch to significant mainstream application like 5 gs antennas, also the AirPods. But there are many more devices and what we would explain is clearly on every product there is a certain specific application always on the high end, always on offering accuracy and speed as a combination where they simply need less basic machines than that of our competitors. And that has proven over time, if you go back to our second slide, the development since 2000 and 6 cycles whereby we double outpace the growth in an up cycle and we are more or less stable in a down cycle that simply focus on the growth elements, products in every next cycle.
The next question is from Mr. Peter Olofsen, Kepler Cheuvreux. Go ahead please.
Yes, thanks for letting me ask a couple of questions. The first is on the gross margin. If we look historically, we have clearly seen is that you have been able to grow your revenues from cycle to cycle. And with a growth in revenues, also your gross margin expanded. If we then look at your ambitions, the €800,000,000 basically implies a doubling of revenues.
But if I then look at your gross margin target to 55% to 60%, you are already in that range. Well, I would say usually, if you have a doubling of revenues, you would usually assume also some leverage and in gross margin expansion. I know you already have the highest gross margin in the industry, but why wouldn't we see any leverage if you would double your revenues? That's my first question. My second question is on plating, where we have been talking about the solar opportunity for a couple of years, which I think is potentially pretty sizable opportunity.
But it seems that we haven't seen it really take off yet. But correct me if I'm wrong, but what's keeping that particular market from really taking off? And then my final question is on R and D. You mentioned that you're adding people in R and D. I recall from a conference call last year that you were expecting R and D expenses in the P and L to increase towards a figure in the mid-forty million in a number of years from now.
Is that still what you are expecting?
Yes. First of all, gross margin, that's a good point. We always try to be a bit conservative on the cost side. But clearly, when revenues increase and you have better utilization rates in your operations. Also the product mix is important.
It's very fair to assume that from the current levels, there is certainly an upside to the gross margins. We've also mentioned that before. So you're right that we do not guide for that, but it would be a possibility certainly if revenues start to increase again. We'll see. On the second question, Solar, Wirth will respond, but I can also respond to your R and D.
Last year we were just below €40,000,000 about €38,000,000 on an annual basis. We added roughly 40 people, that's 1,000,000 per quarter cost on average. So gradually we grow to above €40,000,000 and if all goes well that also adds to our revenue in the years to come. Otherwise we've done a lot of the growth. But your math is very accurate.
So by the end of this year with adding as we mentioned about 9, 10 people more this year, we should gradually grow to mid €40,000,000 on an annual basis. So that's the R and D cost. Thank you. Wirt on solar. Yes.
Maybe one remark about this gross margin and the volume. We have of course, it's logical more volume should also finally bring a better gross margin. But over the last couple of months, we have also seen that it's for us very wise to have somewhat broader supply chain base to secure everything and that may have a little bit of an impact on the other way. So I think it's possible because I'm heavily also involved in the supply chain and it certainly is the goal to bring it up. On the solar thing, on the solar systems, I've been always pushing very hard for that because I still firmly believe in this market, but it has been indeed slower than we anticipated.
And One of the issues is that for solar cells, you have to give a guarantee of 20 plus years that they keep functioning and people have been very careful doing step by step going in this, say, next technology. So it took longer for us to, I would say, establish. We've also seen that the classical cells have kept moving up, but now we see clearly that the high efficiency cells become the next area of interest. We're working both on the back junction cells, so to speak, and what is called heterojunction cells. And yes, I see in the coming time, it should bring more than it did in the past.
Okay. Thank you. Thank you.
The next question is from Mr. Winfried, ABN AMRO. Go ahead please.
Yes, good afternoon. Can you hear me? Yes. Very good. Thanks for the extensive presentation.
I would like to start off on Slide 5, which is the well known chart whereby you basically see that every quarter there's a cycle of about 4 years where you keep improving your margins in the upcycle. But if we would extrapolate this chart, we would actually enter a significant period of growth again as of, well, this year, next year. Obviously, there 2 moving parts here, but I understand that there was a lot of short term uncertainty in relation to COVID and a possible recession, etcetera. But given the big trends that you've referred to in your presentation, including 5 gs, your increased share of wallet in mobile applications, the strong drive for compute and possibly a return on the automotive market. Is it conceivable that we would be kind of replicating this charge in the coming years as well in terms of growth for the coming 4 years?
Or should we kind of take it a bit more cautious and say that the current slow markets will last for a few more quarters to come? 2nd question will be on M and A. And I noticed that you put it in your capital allocation policy. Obviously, it takes it always takes 2 to tango in for M and A. And in the semiconductor industry, it even takes 3 to tango because you need to have a buyer and a seller, but also your clients need to approve of it.
Would you say that COVID-nineteen is increasing the optionalities or increasing the chances of M and A in your specific end market? And which kind of M and A should we be looking for in terms of applications that you are targeting? And then the last one is on the cost reductions that you mentioned, €10,000,000 Would that be kind of a net number? Or is that a gross number that will be eaten away again by natural inflation that you see in any cost base? Thanks.
Excellent. Well, the first question, every company in this industry predicts that the period we are than the previous cycle, whether we call artificial intelligence, etcetera, data world. So combined with the package developments, the advanced packaging development, what Hubert explained in some detail, the growth drivers for the years to come combined with the focus on advanced packaging should offer us a similar growth model and maybe even higher than what we have had in the past. So the big picture longer term looks you could say very bright. The current situation due to COVID, whether the world will be confronted with negative GDP or whatever disruptions in the global world may occur.
Historically, that always has a negative impact on the semiconductor industry. It usually means delays of a year or 2 years, but the basic underlying growth of technology continues. Ambezi is ever more positioned in those growth drivers over the past you could say 25 years. On your other question on M and A, of course this industry like many other industries is a consolidating environment. We see that with the end customers.
We see that also on the supplier front. But the difference with other industries is that M and A is driven by technology. Technology in integrating processes in new advanced applications. Those are the drivers for M and A. There may be M and As on the lower technology or you could say sunset world of this industry, but that's not a world where we are looking at.
Our future lies in evermore expanding our offering of products in the applications in advanced packaging. So we are well prepared if opportunities do occur that we can act independently, but also offer any potential combination the synergies from the start. So very focused considerations in every downturn, many companies are revisiting their long term strategy, especially the ones who are not so well financially positioned. So it's an interesting period where many opportunities are visited or revisited and time will tell. €10,000,000 and we always formulate every year in our strategic paragraph, on the one hand you have revenue growth, on the other hand you have cost savings and the target is clearly an addition of all the programs we are working on to reduce costs.
And in the 3 major areas, which we have listed, there are continuous programs going on in to reduce cost over time. Of course, some of that reduction is absorbed by whatever pressures in product cycles, but you can fairly conclude over the past years and again back to Slide 5, what is it, Slide 6, where you see increased margins over time. It's always part is improved product position in the market and the other part is the benefit of ongoing cost savings. So this €10,000,000 is an identified number based on today's situation in all those three areas and some will be accomplished this year, some next year. It's always over a period of 3 years.
Very clear. Thank you very much.
The next question is from Mr. Nigel van Putten, Kempen and Co. Go ahead please.
Hi, good afternoon gentlemen. A question on the packaging side. It seems from the slides that the molding business is seeing quite some impetus from 5 gs millimeter wave, but also DRAM and also Power Products, if I'm correct, which are probably 3 of the 4 strongest drivers of the business in the coming years. So do you expect that business to grow more significantly than the attached business? And also in terms of market share, do you expect that to rise to level similar as the attached business?
That is a complicated question. First of all, in the molding area, we've seen real strong position now in devices you mentioned, but also in all kinds of advanced SiP system and package devices and we've built a very good position now in there. And of course, we're trying to expand that further. Our market share in the packaging and the molding area has been smaller than we have in the die attach area. And of course, we're trying to get that share up by new applications and by also introducing a number of new features.
The die attach area itself, we are really expanding. And the thing that Richard didn't mention, but with these new applications in the dye test, we also see that the equipment price is in a different class now. A tool for, say, the 200 nanometer world is definitely a different price class than a tool that's in the 3 micrometer area. So that helps also in bringing the financial volume up there. So what you haven't said, Ruud, in the applications which are shown on those slides, in the ultra thin molding, our estimated market share is around 90%.
So that tells you that the competition is currently not able and that's because of adaptive clamping, that is because of also keeping one side cleaner. Those capabilities offer significant market growth in the years to come because everything is becoming thinner, smaller. And yes, we have demonstrated also with margin, simply again remember, we haven't said that is margin before market share. If you focus on the high end margin, which is always at the forefront of packaging development and you maintain that position, market share follows. So we have made significant progress in the molding application simply because of ever smaller thinner applications.
A number of these applications that we show, we are basically 100% nobody else has been able to do it at this level. And yes, that brings also our position in the industry up because people recognize this and we get clearly more
to supply both the alternative molding and packaging and die attach, for example, an integrated module in a 5 gs front end module? Or is that still selected on an individual supplier level?
Well, always at the end, it's a cost of ownership model which customers need to a final decision. But the development trajectory, which is proceeding that decision can vary between 2 years 5 years and it's clear from our product portfolio today that offering out of one hand the die attach applications and the packaging and to some extent the plating as well, but for a limited product range, but for the broader product range, packaging and dietage together has improved our position at the leaders in this industry year by
year. Got it. Thanks. Final question is on high performance compute together with memory. It seems like both are interesting markets.
And thanks for the slide showing the potential for hybrid bonding. Would it be fair I mean, EFMC has said that in a couple of years, I think it's a 5 year horizon, they'll make a lot more revenue from HPC relative to mobile, maybe I forget the numbers, but more imbalanced. Could that would it make sense to assume the same for you guys? I mean, just a ballpark number longer term that maybe high performance computing together with memory could be a market that is at least similar to mobile excluding MicroLED?
What we are seeing, I mentioned this also, for example, this edge computing is really taking up. That is one of the reasons why, say, TSMC is explaining that their computing part will be probably comparable to their mobile part. That's why they're also investing a lot in that area. And that will have some impact on our division of shares in that market also. How that will be exactly, we have to see, but it's clearly a positive trend and it's combined because the advanced processors that you start to see, they also eat a lot of we expect that HBM type of memories are really starting to take off now because for these high power computing, that's a very good option.
And also those need either TCB or hybrid BONE packages.
Sorry, I'd just add on to that. Does it also tie into the higher prices for that type of product? I mean, I think maybe, again, roughly a number between, I think, EVO is the most used machine for the mobile sector versus maybe the hyperbonding or TCV applications for compute. Would it be fair to say that's a 5x, 10x higher? I think 5x makes more sense price point versus what's commonly used in most mobile
applications? Yes. You're not far off there. Yes.
All right. So more value driven rather than that it's going to be huge volumes, right? Okay.
Thanks a lot.
The next question is from Mr. Robert Sender, Deutsche Bank. Go ahead please.
Yes. Hi, good afternoon. Thanks for taking my question and thanks for the presentation. The first question would just be on chiplets. Is there any way of measuring a kind of penetration rate for chiplets at the bleeding edge like 7 nanometer or 5 nanometer?
I'm thinking in particular like things like system on chips breaking up with SRAM going off chip. Is that something you think can happen soon or is that a sort of longer term trend?
What we see in this field is that companies like in Taiwan, but also in the States are really looking at how to build the devices, especially to get the data transfer well done. And this idea that it was a very nice presentation from TSMC a couple of days ago where they indicated that for the first time the idea to go to this chiplets not only is attractive from, I would say, the idea of constructing like a legal block, but also from a cost point of view for the first time. If you go to chiplets, you have to think like following, you divide the die in multiple chiplets, but it means now you have to place these chiplets, you have to connect them and that balance of costs in the past was actually higher than the gain you would get out of say going to chip it. But for 5 nanometer and below, it's very clear that this chiple is also financially a better proposition. And that means that we expect that this will go faster in those areas.
And the idea is to split up taking up some ramp, for example, is really happening. But it also is now and you have to follow a little bit these publications, IDs that the company is bringing to stack that on top of each other in a chiplet format. Does that answer a little bit what you were looking for?
Yes. I mean, I guess, if I look
at the last 10 years, front end equipment spending has outgrown back end, but that's partly because of kind of cost inflation in EUV, etcetera. But I was wondering if you thought back end equipment could start outgrowing front end equipment if you take a very longer term view because customers like Qualcomm, they do smaller chips, but they lead some of the less scaling driven chips at older nodes. And therefore, if everyone does that at the leading edge, then your TAM would grow faster than front end?
Yes. We believe that there's a good chance that it will happen. Even if you look at some publications from ASML, for ASML, for example, they indicate already that the portion of say back end and how you compose these devices is growing substantially power there. Got it. On the power there.
Got it. And then on MicroLED, it does seem like Apple selected their initial kind of partners already and they're going with some proprietary tool sets for some of it. I was just wondering, how do you de risk your investment here given there's so many different proprietary processes? Do you kind of ask for NRE? Or do you think that there are steps in the process that are kind of where common tools will be used and therefore there's still an opportunity regardless of the technology process that is used by the big guys?
Yes. What you're right. There's an enormous amount of different technologies being proposed and you simply have to follow publications. I think in the mass transfer, there's like 20 different ways to do it. Also in the monolithic ones, there are several ways to do it.
Most in the mass transfer, they still depend on transferring dies with a sort of pickup mechanism. So what we are interested in is supplying the mainframe to do this, but we are open to accept different hats on this machine and that would allow for different solutions. That's a little bit of direction we're taking.
Got it. And just my final question would just be on you mentioned DRAM flip chip in your presentation. And I was just wondering if that has started to kind of inflect in the past being talked about, but there was a cost I think it was a cost issue, but is it now inflecting?
Yes, it's really starting. We start to see this with one big Korean company is already quite far with this, but the other 2 big ones are also starting with this now.
The next question is from Mr. Brian Chin, Stifel. Go ahead please.
Hi there. Good afternoon and thank you for hosting the webinar. My first question is it ties back into hybrid bonding. Again, I just I think you've talked about this, but what application that you had to look between mobile handset or high performance computing do you see as the biggest initial driver? Also what are the key issues related to both process and cost that you think could limit the early adoption?
And also if you had to make an early prediction, how large do you think the hybrid bond market size could be in 2021?
Many questions on hybrid following. Technically, let's say, application wise, we know that several options are being checked. We think that the first steps will be basically 1 or 2 dies connected in this method. And if you take a volume of, I would say, if one element in a smartphone will be done with this, you'll easily talk about 25 plus machines to give you a real feeling what that means. And I'm not talking all mobile phones, I'm talking mobile phones of the big guys.
And we are not yet completely sure which one will be the first application, but that will surface in the coming months. On the technology part, what is really new in this application, I tried to mention that you have to work with a perfectly flat surface that has to be extremely clean. And bringing the particle level down in these machines is certainly a technical issue that we are working on. We hired some of the people that are also working with ASML in bringing particle levels down. So we try to get the best people in for solving these issues.
And we think that for the pitches in the 10 micrometer range, particle wise, we have it now more or less in grip. Next step is, of course, these pitches will go further down and yes, then we have to get to the next level.
Okay. That's very helpful color.
And maybe just to kind
of relate that to the Fulveros technology, can you talk about which of Besi's products would be most suitable for that particular 3 d integration scheme?
Foveros would be at this moment still PCB applications. And for some of the panels, we might think about large panel system. It was nice. Also, there was last week a WebEx conference where the top guy from TSMC, 2nd in range with Intel and also Samsung. Packaging boss presented their views on where this has to go.
And all 3 of them said for them hybrid bonding is a key issue. And also Intel said we probably might have to work on this more than we initially thought.
Okay. Thank you. Maybe one last question, just going back to the mini LED or excuse me, the micro LED market. Is there a particular I know it's pretty fractured at the moment in terms of processing, but is there a particular mass transfer productivity level the industry is shooting for that you could share with us and kind of how short are we of that target currently? And also beyond sort of the mass transfer is pretty critical, but what are the other key areas of that ecosystem that maybe still needs development?
And kind of are you is there a particular when you look out in the next couple of years, is there a particular year you could kind of circle now that says this could be sort of the year we see more rapid adoption?
Well, probably we need another 2 to 3 years at least to get this at a level where you have the productivity. What is an issue at this moment, there's different, I would say, pickup mechanisms being, I would say, getting to some level that is working. But then again, you still have to rework sometimes. So one option is to place if you have 1 microLED to place actually 2 and having your controller away to shift away from the defect 1. But that, of course, means double placement of micro LEDs.
That's one way. Other things are repair schemes, but this is quite complicated if you go to bigger screens, and you have to also loosen it up then. Again, the other part is also a good testing methods of a complete screen, how you can test this well for every pixel because you know if you have a television screen, even if it's a normal LCD screen, if you have one pixel that's not working, especially with LCD because that's normally in the off state, the pixel actually light is showing up. That is still a critical point. So there's still work to be done there.
Thank you so much.
Yes, yes. I think also on the initial part where you made the microLEDs, there's still some work to be done also on the cost side. So you're talking about 65 processes, yes.
I really appreciate the color. Thank you.
There's another question from Mr. Wim Hille, AG Namoil.
Yes, good afternoon. Just a follow-up question on the hybrid bonding application that you developed. Given where you are and where kind of the industry is heading and where competition is heading, would you say that you would get a kind of above average market share in the high performing segments?
No. Our goal is a very substantial share in that market. We think at this moment, the indications we have is that we are leading in this area. We're talking here about you have to be careful. And the hybrid bonding is already known wafer to wafer.
And that is mainly used in the camera field in making the part there. That's a very limited application field. As soon as you go wafer to wafer, you are very limited in yield. And also, of course, you have you can only do this for products with exactly the same sizes. But the dye to wafer is really coming up now and there our development goal was to really bring a tool that has productivity.
And yes, what we see at this moment, we are leading and we'll keep yes, we'll certainly try to work on that position. And if we make a comparison with our flip chip activities that we did in the past, we basically had a large part of the flip chip market because we were early successful with it. So we would like to repeat that and even further expand there, yes.
Thank you very much.
There are no further questions, sir.
Then we would like to thank everyone to participate in this 2020 Analyst Update. Next year, we sincerely hope that we can meet many of you in person. Stay safe, stay healthy, and thank you again. Bye, Maric.
Ladies and gentlemen, this concludes the Besi webcast. Thank you for attending. You may now disconnect. Have a nice day.