Everyone has coffee, water, cookies because the industry can't offer you more. Well, welcome to today's session, analyst presentation. We hold that every year. Many of you have attended many times. Next slide please, Cor.
I don't know who's pushing the button. Ruud, it's your job. That's a nice one.
You can sell sales.
Okay. So agenda for today, strategic overview, end markets and drivers. Ruud will update you on the big picture, also more focused picture what does it mean for Besi. And that's the product development strategy. Then I'll update you on the strategic initiatives and then our capital allocation, acquisition strategy.
And then the last point where you all came for is outlook and summary. Anyway, let's start with the strategic overview. Alloway, here. 2019, those of you who haven't woken up yet, it's become very clear that it is a transition year with an anticipated turn somewhere either end of this year, next year, depends on many things. But we'll tell you more what are the drivers for that next upturn.
So then in those years of downturn, our focus is always on increased development spending for next generation systems. It won't surprise you that the investment is increasing simply because the specifications of the end products are ever more complex, smaller designs, which require more accurate systems, more expensive components and more uncertainty because also our customers never know exactly what the final design of their end products will be. So that's a very interesting time. Exploring new opportunities to exploit our technology leadership. And new opportunities means different processes, which are also complex.
And then number 3, a hobby of Besi is always cost, cost, cost, cost. How can we build these machines at lower cost? So enormous focus on the supply chain, but that starts with designer. Why do we have so many components in machines? Why can't we build that more simple, all focused at reducing cost.
So for the next upturn, hopefully getting lower costs with higher margins. Disciplined capital allocation to maximize return on investment. Well, all of you know, number 1 is our shareholders and whatever we earn on top of a safety level, which is about 20% of our revenue in net cash, we distribute to shareholders either dividends or share buyback, both. So we'll spend a little bit of time on that. And then some of you who don't know yet, we are focused on profitability and not in the first on market share because in technology land, every next cycle is depending on the system you have to offer.
So market share won't help you. Profitability will help you. Our business model versus our peers, we've also added some more background simply for you to help you in explaining what is different and some elements you may like better or not like. We're happy to hear your comments. And then of course, we're well positioned for the next upturn.
We've showed that in the past, I would say, decades. We ramp faster than our peers. We also correct faster and better than our peers. But anyway, some background why and how we can further improve that. And there are certainly favorable long term drivers in place to generate strong advanced packaging growth in the future.
Remember all of the major winners in this technology environment, whether it's Apple or Intel or Samsung or TSMC, they all say in very clear words that assembly packaging, advanced packaging has become more and more critical for their end product success. So that has been already very advantageous to us, but we expect that to be even more in the future. Next slide. And some perspective. Well, you all know this slide back from 2,006, We show here a clear trend, 1st in revenue, always peak years and then absorption years usually 3, sometimes 4, sometimes 2.
And that's based on new technology rounds implemented in end products in end markets. But then also very nice to see, we've done a bit better than the average. And also our profitability, here explained by gross margin has increased significantly and that trend is certainly what we are working hard on to continue. So the right button finally, who stands spending that money? Just to give you again a clear view, who are the potential customers and where are we and who is doing more or less.
Well, one of the big disappointments this year is clearly the top one Samsung who spent EUR 21,000,000,000 in 2018 and is forecast to spend only EUR 15,000,000 nearly half in 2019. Intel is a bit better, good for us, slightly more. Hopefully that stays. INEX, all the memory guys are falling off a cliff, but that's not unusual. And we see TSMC, but we can go further down the ranking.
And in total, whether it's and certainly won't be right, VLSI has a picture, but that picture today is certainly not the same picture. It will be at the end of the year. So forecasting now minus 16 could very well be minus 20, minus 25. It certainly won't be minus 10, statistically. So on the right side, IDM and Foundry CapEx also self explanatory those numbers.
But it took FLSI some time and the whole industry, I think, to realize that we are in a cyclical industry. A year ago, I think same time, May, June, we saw the first clear signs of peak of a cycle reached and Besi started to prepare for this next downturn. And many didn't understand why because then the opinion was shared, there's no more cyclicality in this industry. Well, please accept and remember forever that this is a cyclical industry, and it gives great opportunities. Logic and cloud application are one of the few bright spots.
Take Intel, for example, partly TSMC, and that is some in some way helping us. So again, now the right button here. So here you see the cyclical behavior. Assembly equipment spending, total 2017, 2018, 4.4percent, 4.5percent and then reducing by minus 17% to 3.7 percent, which is our forecast today, which could certainly be worse. But if you look historically, minus 20 70%, minus 16% is in 20 15%, we had the same picture.
Besi over that same period, you see in the dark green, has done certainly better in upswings, sometimes also in downturns. But as I mentioned before, this is a nice picture, but key is to focus on profitability and not on market share. Current environment. In some bullet points, downturn of 4 quarters continues post extended super cycle. Well, super was 8 quarters, so 4 quarters down.
It's still, let's say, early. Q1 2019 results indicated some stabilization, maybe some seasonal patterns were included. Certainly, the U. S.-China debate currently has a clear impact. People have become hesitant because historically, the semiconductor industry has been highly sensitive to any trade or economic GDP issues.
And the end effect is that our customers stand on the brakes. GDP growth still favorable, although excess chip inventory persists. What does this sentence mean? We still have a positive GDP, however we look at it. If that also changes, you could certainly see an extension of the correction we currently have in our industry.
Looking forward, timing of the rebound uncertain. Is it a U? Probably not. Well, the best one is a V shape and a quarterly correction. Some people a year ago were of that opinion.
Well, then a you. Today, they are more canoe. Canoe can stretch over more than 4 quarters. Anyway, however you want to call it, a big question mark. VLSI anticipates recovery 2021, excellent.
5 gs could become a game changer. We're very well prepared for that. Mobile makers, advanced 3 d and facial recognition, a lot is happening there. Data mining, analytical artificial intelligence needs keep expanding. Well, those are in a summary what we are reading every day in every type of message, whether that is directly from customers or analysts.
So tariff battle is reshaping semi supply chains. What certainly is happening because of this current situation is that you see some customers hedging their bets and investing less in capacity in China, starting to invest in capacity outside of China, many of the U. S. Customers in particular. If you look at Besi, our exposure to China is very limited compared to our peers who have revenues of over 50% out of China, that's not the case with us.
And of that 24%, most of that certainly 80% of that is outside Chinese customers, customers like in the automotive, in the mobile space, who organize production, assembly of parts in China. Both foreign and IDMs and Chinese subcontractors limited exposure to Weiwai. So far revenue impact you could say is neutral. There's some softness on the U. S.
Side offset by increased demand on the Chinese side who want to be independent, more independent from outside supply. But still, the whole picture is an uncertain picture. You see that here. Our peak revenue is quarter 2, 2017,000,000. And Q1 2019 was less than half of that EUR 80,000,000 Q2 guidance slightly better.
Margins creeping slowly further up. Actually this slide is amazing if you see that. So no impact or hardly any impact on gross margin related to our revenue. That's unique. It also gives us the ramping capability.
Remember, ramping Q1 2017 to Q2. If you go further back, Q1 2016 to Q2 2016. So if the tide turns, we can accelerate very fast and the tide will turn at some point. So gross margins here compared to our competitors and peers, just for you as a reference, Besi variance Q1 2016, Q1 2019 6.7% better ASMPT less, KNS also slightly better. But then operating margin of 6%, 5.9%, better and the others minus.
Well, anyway, just to give you a reference, you're always telling us our peers and competitors are doing better. Anyway, these are numbers, public numbers. OpEx, very important. And you can see from the peak in Q2 Q1 2017, Q2, Q1 2018, we have managed to bring that back very nicely also by taking out cost all the time. And the basic OpEx over the past 3 years has roughly stayed around €26,500,000 That means significant operating leverage, which we all hope and are sure will come.
So, VSI finally came with some market share numbers just yesterday before this meeting. We told them otherwise we have to postpone this meeting. But again, market share is interesting, but you have to understand that all the data they collect is partly public and the rest is based on some data collected by sources which you do not you cannot verify. But still in the end, our market share in 2018, still somewhere 32.4% in the addressable market. Die attach declined a little bit.
Packaging has increased significantly. Plating has increased significantly. So Besi hasn't done too bad. But anyway, these are numbers. So R and D spending.
As I mentioned in the very beginning, there's a clear trend up, not because we like to spend more money, but simply because the complexity is increasing and our share of the pie at our key customers is gradually growing, which is wonderful, but also has a big risk whether we succeed in those developments. But still clearly, Dietetics, 2017, euros 24,300,000,000 2019, expected, euros 28,000,000 Packaging, Plating all a bit more adding to EUR 40,000,000 expected. Then we have, of course, our capitalization and amortization, and that leads to an end number. But important is that every cent we spend is focused on identified and customer orders underlying these development programs. Our model, mentioned that also last year.
Clearly, in the next upcycle, we are aiming to reach a higher level of revenue than the last cycle based on the success proven, but also many of the new R and D programs underway and also successfully underway, That should give us the opportunity to have a larger share of the pie. And then with margins similar level what we currently have, net margins also demonstrated. Headcount split seventy-thirty today, eighty-twenty in the future. So that is our model in the next upcycle. Few words about the end markets.
Well, this becomes too complicated. Ruud, please help me.
Yes. First of all, I think I'm going to move also forward because otherwise you sit so close after the table. Let me go a little bit over where we're going. This picture I had last year also, basically our digital society, this has not changed. The phone market, Internet, all the data centers, automotive, medical environment, all of that requires more and more basically semiconductor content.
And if we look at what are our key markets, first of all, we have the mobile world. This one became bigger: automotive, computer, PCs, industrial and then others and also spares and services already a good part of our business. Steady growth in automotive, increased electronic content, computing, of course, but mobile still a very important part. If we look at all the doom saying, and I was we discussed this with Richard mid last year saying super cycle, everybody telling us, Yes, the world will continue. It will be different.
And we said, No, not sure. I was sitting in Seoul Airport. And beside me, I heard people talking about semiconductors. And then my ears, of course, they become big. And it was the founder, one of the founders of Raspberry Pi, this is a little computer out of England, a very nice little thing, and the head of Samsung U.
K. And I started talking with them and how they see it. And then the Samsung said, I said, and this was around this time of the year last year, And he said, since 3 weeks, they see all the orders going down, the orders cancellations, pricing going down. And they had expected it already earlier. It didn't come, but they said, now it's there.
And then I said, Richard, oh, now we have to be careful. And when we said that, everybody said, Ah, you're too pessimistic. But we think we have a good feel for that, yes? But despite all this doom and gloom at the moment, if you look at this is from Ericsson, the data over the basically over the mobile networks, it's still growing with 30%, 40%, 50% per quarter. It's a real high growth number.
So per quarter, 17%. But on a yearly base, enormous. So this data traffic, this is growing. So the fundamentals of our industry are not shattered at all. They are clearly there.
It's also funny if you see and this is mobile networks, voice is just this here and it's all data. And if you analyze the data, more precisely, 60% is video. And with increased video content, not only more movies but more whatever we have, but also with 4 ks, 8 ks coming up, the data is tremendously increasing in the networks. Now 5 gs should help us in that, and 5 gs is starting to come now. If you see this, these are the expected subscriptions in 5 gs.
And you see it starts here about 2020. But this is roughly the same curve as you had here if you go back here as the 4 gs network started. So we are in the beginning phase of 5 gs, and that will give us a very long time positive momentum, I think, yes. Where is this happening? North America is a big road mark for 5 gs.
Western Europe to some extent. Northeast Asia that includes and also China is also growing very strongly. So here are the growth areas for 5 gs. This is from for all of you who want to read more background on this. Ericsson always have these mobility reports.
And the next one comes out just a couple of days after this meeting, so I had to stand with the older one. But it's always very interesting to go through that. There's a lot of data in that for understanding this, yes? What's also clear is that 5 gs rollout seems to be faster than the 4 gs rollout. So if you take the comparable time frame, 4 gs, there were 4 operators and 3 OEMs.
At the same time, we're already 20 have announced and 20 OEMs have announced. So there's a lot of momentum in this. And the other part, and you have seen this before in 5 gs presentations, 5 gs is much more than only a faster telephone. It will be around mobile, of course. It will be industrial.
It will be automotive. It will be, of course, in the computing area, smart cities, retail. It will spread much deeper than the 4 gs networks. What is expected in this network is, 1st of all, with all this data going, about 100 to 1000 times traffic capacity: more connections, better usage of the spectrum, decreased latency. That means the reaction time between the network and your phone or an IoT device or a car will become much faster.
And of course, yes, more data. Now the question is how it's all nice that you say, oh, I need to bring more data over this network, but how do you do that? Yes? Because also a 4 gs network is already a very good network. And the whole area here is if you go to higher frequencies, 1 gigahertz, 3 gigahertz, 24 gigahertz, you can have work with a higher bandwidth.
That means the data channels, you can put much more data in the data channels. And you see here that in a 24, 28 gigahertz network, you can have much higher peak rates, 10 to 20 gigabits per second. And that is simply because you have more room, you have more space available. And that is what you see happening. This is what is a real new part in the 5 gs network.
You get higher data transfer. It means also you have to have new transmission technology in there and more advanced networks. And what you will also see, you will get a lot of small cells closely by. If you take an area like Amsterdam and here, this area, you need a lot of data everywhere. Outside Amsterdam, it may be a little slow.
So you get a lot of new hubs, so to speak. And if I go one picture further, and this is current technology in 4 gs. You have a base station and that radiates around and you pick up data. It sends data up and down. In 5 gs, and this is in the millimeter wave, something new, and this is, for some people, a little scary, you will get a new type of base station, and this will actually direct a beam to where you need the data.
And in this beam, you can send over much more data than in the in a normal broad range. And these are active antennas, active phased antennas, as it's called. And these are these base stations that you see everywhere. But if you open a base station like this, you will see an enormous amount of small antennas. These are like 24x24 or 10x10.
And by phasing these antennas, that is why it's called active phasing, if you send that pulse a little bit later than here, you can drive this beam in a certain direction. You can steer this beam. So this beam will follow, in this case, the little train here or it will follow maybe a car. And that's the disadvantage of this technology, and it's a nice one here from Google, is that the wave propagation, the distance you can cover with this technology is much shorter. So where you have in 4 gs in, say, sub-six gigahertz, you have 1.5, 2 kilometers here or maybe 0.5 kilometer or less.
Means you need much more of these base stations, so you will see much more small cells. Will this be everywhere? I think this will be sorry, this will be mainly in the bigger agglomerations where you really need a lot of data. But the second step then, of course, is if you send out this data, you have this beam, it's all very nice. But then the question is, how do you receive on your mobile phone this beam?
How does that work? And what you see is you need new antennas for that. So 5 gs, IoT, 1 gigahertz, 6 gigahertz can be done with the classical antenna packages. That is still really doable. And you will not see you will see little or no change in how you do the packaging.
Here, a little bit changed, but here, you need what is called antenna in package. You have to have the antennas very close to it, and you will see multiple antennas, new modems to handle all this data. And we are actively involved in these things. And if you look at this year, this is an example from Qualcomm. This is the first new, I will say, antenna module.
Of course, there's a modem connected also to it. But you also need, per telephone, more of these antenna systems. So you will have 2 or 3 or 4 because these millimeter waves, if you have phone in your hand like this or you have it like this, it will work differently. With the older antennas, they are much more random, much less sensitive to this. So yes, you need new technology and you need more of it.
So this is an interesting area, and we are clearly involved. A lot of our customers in this field like the Kormos, the Skyworks, the Avagos, the Muratas, they're all working on this integrating this new technology, getting these antennas to the right format. Now in the mobile space, it is not only 5 gs. There's a lot of other things happening also. You've seen people start to come with foldable phones, yes?
Now if you think about this, if you fold the phone one time, two times better, but you have to do this many times, you have connectors in there. And these connectors have to be very, how shall I say it, bendable. Now we have some projects running in plating where we actually make these connectors with a specific plating technology. Another thing you see is more and more cameras. I think this is one which has about 5 cameras in there, which is basically good for us because we do a lot of camera mounting also.
Richard already mentioned face recognition. We are heavily, very heavily involved in this special in this 3 d phase recognition where you have VCSEL sending out basically small very small laser beams and then reconstructing the picture. What you also see is new fingerprint technology that you have a fingerprint sensor somewhere here that you don't have a specific spot anymore. You can just push on the screen. So this world is ongoing.
This is more what we do with our classical machines actually. Another thing you see in the and I call this also mobile space is who of you has an Apple Watch here? Okay. At least no, yes, I think 5 points this time, yes. You also.
So at least 2. Gentlemen, buy all a watch because you helped me, yes. And what you also see now, you get more sensors again in this in the 4th generation. This is if you look in the internals, it's unbelievable what is all cramped in there. And we are involved, of course, in this type of technology.
And also here, you can get an ECG already out of your phone. I'm not sure if it's good or bad because you say, oh, shit, I'm dying. Not a good idea here. Another part sorry, this is a little too much maybe. Another part is you see also in the and I call this also mobile space.
You have these new Googles where you can look through and you get, at the same time, a projection of what you're doing. And this is initially just started with gaming, but it's becoming a very big market for education and also for instruction. We have done for ourselves even a few cases where we have a service engineer with his glasses on and you can see what you do and you have a picture of what you have to do, works very nicely. And if you open one of these things, there's an enormous amount of electronics in it, not only So this mobile world for us is still developing very, very well. And yes, the number of smartphones at this moment is a little bit slowing down, but we see more than enough opportunity to continue in here.
That is a little bit the big picture for the mobile world. Then if we go to the automotive world, and this I found special because both BMW and Mercedes Daimler joining together in a new mobility service provider instead of buying to consuming. But nevertheless, you still will need a lot of cars. I like this idea that you can take up a car everywhere. I'm a big Mercedes fan, so I thought, hey, with BMW this is let's see.
But there's a lot happening. And in this car industry, the number of vehicles, €94,000,000 This is my normal car. This is oh, this is an Audi. It's not good. €105,000,000 Yes.
The growth is not very big in that in, say, units in the automotive industry. But the content with the electrification, you see a big growth. Automation and I think on the last maybe 2 meetings ago, I had a picture of a Mercedes with this big red button that you could switch out the automatic, but it works very well. Connectivity, of course, is growing and also comfort and more things in the car also clearly there. So here is still very good growth.
Long term, we clearly see this. And the number of packages in cars is unbelievable. If you really this is from Amcor, just an example. And so you have wafer level fan out in the radar part. You may have in the Inflow systems, you have SiP here in the electronics, in the lighting.
Still have a lot of wire bond packages because of anything with power typically has or wire bond or clip bonding, but you have a lot of that in there also. QFN is really coming in. So a car is, for us, a very good thing. And we see this. That's also why our share in automotive was bigger than last year.
It was the other way around. And you see a lot of technology fan out coming in, wafer level, chip scale packaging coming in, new packaging in here for the sensors, Power, copper wire going to copper clip for better cooling. We also see flip chip QFN coming in. And in the automotive industry, you always have to take care. Testing is enormous because you have to guarantee this typically for 10, 20 years.
So before this it's a slower process, but once you are in, it is running very, very long. Another part we see in the in not only automotive but generally in the power is you start to see new materials coming in, silicon carbide, gallium nitride. And these materials, they are a little bit of different semiconductor material and you can use higher switching frequencies. And that means a lot of DC, AC, DC, DC converters, they are based on switching technology. And the higher speed you can switch, the more efficient these modules become.
Also silicon carbide, for example, has a lower loss when it's on. That means when the current flows through, there's less resistance in the device, and that gives a higher efficiency. And they can work at higher temperatures. A normal silicon module, at the juncture, you may come to temperatures of about 100, 120 degrees. In a silicon carbide, you may go to 150, 180 degrees.
But that still means you're bonding to the surface area where you're if you bond it on copper, that bonding has to be also able to carry these higher temperatures. So you see new bonding technology like diffusion and compression coming in there, yes? And one of the things here also, you can work with a much smaller form factor that is a factor 2 or 3 better. Then our classical area where everything started with the computing market. Also, that market is really exploding because it's artificial intelligence, high power computing, analytics, especially genomics, for example the networks, the memory security enormous increase again in what is needed in computing.
So it's data and computing, both long term, are in a very positive trend. This was from Intel in May, their investor meeting, yes? And this high end, this computing is everywhere now. It is in the past, it was maybe your high end computer in a data network, but it's in gaming now. It's in medical.
There's some enormous fine pictures you can get. Autonomous machines need a lot of intelligence to function. Automotive, of course, in the mobile space, these are very advanced processors if you really look in them. So this high end computing is basically penetrating the almost all devices now.
And then the
question is, yes, it had always been based on Moore's Law, and I had something on Moore's Law in, but we skipped it because we said that we'll break the time. But the question is always, will this shrinking, will it go on? And ASML has been the master in this field, and they have been able with so called single patterning with shorter wavelengths to always work in this direction and get the cost per pixel down. They stopped around here, around 2,008, 2010. And then so called there was no way to bring the wavelength any more shorter.
And then multi patterning started. So instead of doing one mask, you can make a pattern 4, 5, 8 times and then you still can go to smaller dimensions, but it's very expensive. So this blocks the industry somewhat. And now with the new EUV, this trend cost down should start again because then you can work again with 1 or 2 masks only. And basically, ASML has also the next generation.
Here, you went at a certain moment, you went to so called wet systems where you have a higher numerical aperture. And they're already working on the next generation for this also. This will be installed in Hamburg. So my personal belief, having been in the industry now since 1984, that's why I like this plot so much, Richard, you were also in 1984, correct?
We wrote this.
Yes. We wrote this. I was in IMEC has this ITF conference always in Antwerp. It's a nice conference. And Martin van den Broek got his lifetime award for his work at ASML.
And then after that, I said, Oh, very nice and congratulation. But I said, Please remember that who sold your first machine? And it were we, but it was not even a past 2,500. It was a past 2,000. Martijn van den Broek, he remembered.
He said, yes, that was there, yes. But anyway, the message here is this will continue. And I think this will continue till certainly until 2,030. On the other side, it will not only be shrinking. We will need much more complex structures.
You need to get data and the computing much closer to each other. In the past, you would have it here. You will stack this together. You will need things for cooling. What you also will see is that to get enough data from A to B and I had a nice picture showing a very congested road, 3 lanes, fully congested, 5 lanes, then this road is very nice.
And we have this between Amsterdam and Utrecht. You see this effect to some extent. And in that way, you can get more data to the system. But that also means you have more contacts. Every lane is a contact.
And what you see is to do that, you need to get to smaller pitches between your contacts, so to speak. And you see that today, 40 micrometer is what is mostly used in, say, the higher end area. But you see this going to 20 micrometer, maybe 5 micrometer and even below. And then if you go below 5 micrometer, maybe in the 1 micrometer area, you need also a new technology probably which is called direct bonding where now you do it with solder. There's solder material in between the bonds here.
And then you will have a direct bond where you just put 2 copper stacks on top of each other, and they will bond directly. These are some examples where you have the memory connected with a bridge here, then so to here, and you need more and more lanes in here. What is also important, and that is something that Intel recently published, is if you want to do this building block IDs like here, where you have all these nice devices all coupled and you may even split this up. But if you do that, you need a standard interface between these things. Otherwise, you can never mix and match.
So Intel recently published a standard interface for a kind of mismatch of devices. And that was an important step because there was no interface definition so far that was universal. So that did Interweb. And of course, at the end of the day, if these dimensions become smaller, we have to more accurately place these devices. You see here the here you see these pitches.
And if this is 40 micrometre, and I think 2 or 3 years ago I explained this once, if you go 40 micrometer means you need an accuracy of about 4 micrometer. Now if you now go back to this picture where you start to see pitches of maybe 3 micrometre and 1 micrometre patches here, if you take 1 cent of that, you need to comment to the accuracies of about 300 nanometer for all types of machines. And of course, this all has to be molded in a good way. We are also involved in that. And another plot I took this also from ASML because ASML always puts the focus on here, process technology is 30%.
But if you look in the top picture, 3 d stacking, multichip architecture, memory integration, that's already a bigger portion than this year. So my microman simply is this is the daily world and we are very well positioned for that. So you see this really changing. This part becomes a more important part of solving our next generation problems. Now all the big players are working on this in different ways with interposers, COBOS, Foveros.
Intel introduced this recently. Stack memories, like we've shown this before. Sometimes embedding in substrates. Here, we see something. Substrates and people try to get rid of substrates because it's, again, cost but also bandwidth issue.
So TSMC working hard to do it. In all of these projects, if I look at it, in almost all of them, we are clearly involved. And which will be the winner? I think there will be a couple of them. Company A will use this one.
Company B will use this. But in all these projects we are. So then what does that mean at the end of the day for our machines? And I you have all seen this picture before. We have 3 key areas.
1 is die attach, where we have to place the die very precisely. Then in packaging, We have to once the die is placed, we have to mold it. And then if it is a classical lead frame, we have to bend the feed with trim and form, and we have to singulate it, and we have to plate it. So these are our three main areas. We have shown this picture many, many times.
Richard explained this is about 80%, 15%, 5% roughly in numbers. And if we start with DiaTouch, we're working and generally, we're working on next generation TCB, nano accurate direct die bonding systems, high speed, high aggregate flip chip, large panel bonding. And we are working on a lot of enhancements of our existing portfolio because very often it is not revolution, it's evolution. Step by step, we move forward. One of the things I mentioned is the TCB world at this moment in about 40 micrometer, 20 mic we think this will stay till about 10 micrometers.
So there's still a lot of life in this. And we are working on a next generation TCB system. We see 2 main issues. 1 is higher accuracy. We already have a very high speed machine for TCB.
And the other thing is in that I didn't mention, all these complex devices also get bigger. So we also need bigger bonding heads where we can do bigger dies. And that's what we're doing in our next generation. Some examples of work we've been doing, this is in die to wafer stacking. We're 16 on top of each other with very good results.
The bond head we have, and this is confirmed by more people now, is the most precise available, yes? But yes, this is we expect into 2019 to 2020 that this will be a next round of TCB for us. Next step, and this is the most advanced. I mentioned that as you go to 5 micrometer and smaller spacing with maybe bumps of about 1 micrometer, we have to go at this moment to about 200 nanometer accuracy. And there are tools in the market that can do about 500 nanometer accuracy, but they're all very slow.
And we have are on our way to develop a much faster machine, a machine that can do 2000 to 3000 dies per hour, which is a factor 10 better than current technology. And what we do, and this is something we patented, is we have on the substrate, there is a fiducial. We have a fiducial on the die here that we have to place. We have a second window here. We measure this distance between that, and then we can look at this fiducial and this fiducial at the same time.
This is the most technical complex thing I have in this presentation for you guys. And when we then go down, we can continuously track, are we still compared to this fiduciary and that are we still on the same spot on the right spot. And what you do is you go then slowly down with piezo elements to actively steer this to the position. And compared to all our competitor systems, they have a measurement system in between here. They measure this position, that position, then that is a system that's about this big.
You pull this out and then you go down, but then you don't know what you're doing anymore. And we can actively steer the dye to the right spot. And we are reaching about 300 nanometer accuracy at this moment. We do this work in our facility near Innsbruck in Radfeld. And what we see now that facility is close by on highway.
Actually, the highway is just behind the building. And we can see the trucks driving on the highway when we do displacement. If there's a lorry passing by, we see it in the vibrations in the system. And we do most of the measurements now on the weekends, but we will probably build a better room for that. But yes, you get in a level of accuracies that, let's say, 10 years ago you could not even think about.
200 nanometer, be aware that ASML is in the 5 nanometer area, and we are getting very close to the same issue. That means also not only you have to build a very precise machine, also elements like particles, like how you have to build these machines in clean rooms. And they're also going to be located in a clean room environment. So it's a next level for Besi. Will this be massive volume immediately?
This will go step by step because only the most advanced companies work on these technologies. And so far, results are very promising, yes. Then another part is flip chip and fan out is still growing. And one of the questions we got there from a lot of our customers is, can you make a faster machine? Our machine is already the fastest in the world.
We are typically at 8000 to 9000 dies per hour. And I showed you a movie last year on this presentation where we showed a 4 head machine with 4 individual bonding heads moving here. That machine is now starting to be released in the field with results up to 20,000 we're getting. Factor 2 better than current technology. 1st, evaluations.
Positive can be used both in the fan out world and also in the normal flip chip world. And we also see a good application for this in the memory space where we will replace some of the wirebond now with flip chip. Another element we are working on is a big panel machine. I think I also showed you one sheet of this last year. And then we were in the development phase.
We can now proudly say that the first commercial shipments are happening. Actually, this month, we'll ship the first one. And this machine can handle 720x650. And there are 2 elements in why you do this. 1 is you want to go to lower cost by simply being able to put much more dies.
This is the big picture. Then there's a second thing is also we focus very much on very high accuracy. That means for the high end products, but also for micro led applications where you have to go to a very, very high accuracy. So this machine has been very well received. And at this moment, what we see from the industry, we are roughly a factor 2 better in accuracy at a good speed.
And these machines are also in a completely different price range than a normal dye bonder. A normal dye bonder is between 200,000 to 400,000, 500,000. The TCB is a little bit more. But these machines, they go in the €1,500,000 to €3,000,000 range. Let me see here.
Next is these were one of the some of the most advanced parts, but also our bread and butter machines, especially like the EVO multimodule system. We have more than 6,000 of these machines now installed. This is one of the workhorses of the industry, and it's used for things like 3 d face recognition, camera, fixed axis alignment, high end SIPs, high end and large interposers, high end LED power sensors, a very broad application range. And in the telephone business, for example, people have a very short range. Every year, you want something new.
And that means these machines can be adapted also very quickly. You can do almost anything you can do on these machines. And what we did over the last year, better cameras in there, a new motion control system, operating system. We are now reaching 3 micrometer accuracy with this system that is very interesting for photonics, for example, and high end products. We still can use same tooling on there.
And yes, this is one of our highlights. We simply produce a lot of these machines every year. And almost every mobile phone in the world somewhere is connected to this machine. Another machine that is a something dropped out here. This is our epoxy machine, the 2,100.
It's basically the fastest epoxy machine in the world at this moment. General ICs, automotive sensors, stack memory, more than 3,000 of these machines installed. New things are dual dispensing, a better bond line thickness. What you start to see if you mount a sensor, you have to mount it very, very precisely. And we can measure this with a 3 d measurement where we can do a fillet height control.
We developed a better and even more precision bond head, active jet compensation. And we're also starting to add cell of learning and artificial intelligence in these machines. For some reason, my oh, there they are. Yes. So this is fillet control where we measure with a 3 d camera.
We measure to the outside whether this is correct. And there's also something in the industry. It's called poka yoke and it's not a game. Basically, it means that your machine has to be so smart that it can work with very dumb operators. It's more and more difficult for to get operators.
So the machine has to be learn itself, analyze itself, and we start to see more of this mistake proof states here. And that's an element, but that means more computing power also in the machine here. And we're receiving orders for these machines. Another area we never do not speak much about this, but we have over 1,000 soft solder machines. And the big companies in this field, whether it's the Infineon's, the STs, they are basically 100% relying on these machines.
And this is for automotive. We are adding every year some new features. This plasma cleaning came in our dual writing expansion. High pressure bond has because for diffusion bonding or the silver sintering, you need more force to make this process. We've added that, improved the illumination.
This is an example. This is just recently published. If you look to one of the big ones that I just mentioned, this is an embedded dye here that we put into a substrate with a diffusion bonding process. And the net effect of this is better heat conviction here for 48 volt in for automotive power. This machine, yes, has been a standard in the industry for soft soldering, and we yes, we keep ahead of competition here.
Then we go to molding. Our molding lines are have about 300 of these installed, the LM series for large areas. It's a standard thin dye molding, exposed dye molding, mobile, advanced SiP application, automotive memory. What we are introducing this year is more in double sided molding with an exposed die on one step and also 120 molding tonne molding capacity because we start to see that these substrates and the lead frames become bigger and bigger. And if you have this bigger, you simply need more force.
So we have now 90 tonnes and we're going to 120 tonnes. And the first 120 tonne will have to ship, I think, in about a month from now. If you look at this exposed dye mold, you see this a lot with sensors, with fan out technology where you have to clean certain areas, have them clean, have them in contact with the outside world. And this is for an antenna device, 5 gs, but I cannot say who it is, but you could combine this, yes? And we have about 90% of this, what is called this exposed die market.
So everything where you have sensors, everything where you have these antennas now coming in. We do this with a very precise control of the clamping. I have another picture later. And yes, this machine has been highly regarded in this thing. Some examples where you see you get devices on this side, you get devices on that side, and that means you have to double side mold this.
We do that. This isn't even sure what it is here, yes? And we are involved in these steps here. Then on wafer molding. We have about 10 of these systems installed now.
That's the beginning. And one of the key advantage of our approach, which is the no die swim, we can fill very good and narrow gaps. Wafer placement into the mold is very precise, and we can do this very planar. And better I show this here. In our case, we have what is called transfer molding.
Our molding material comes in from the side. You have to imagine you have your dies clamped between 2 plates. And then we bring in the molding material. This molding material, it's almost like water when you start with it, yes? And you see here in the first 30 seconds, you flow in this whole area.
And then you increase the pressure to do the final molding. And because we come in here with very low forces here, it almost flows in. And then you do the pressurizing. The pressure is everywhere the same around the dies, and that means the dies don't move. And if you do this with compression molding, the molding has to come the molding material has to come from the top here.
It goes it has to come in down. It's much more difficult. So there you always have what is called die swim. We are able to do this work on, 1st of all, on the whole area. We have very straight line sheet.
That means the dies are picking are staying very well in where they should be. And also, we have absolutely no flesh. We have no covers on these covers. And yes, we think we have a but this is in the beginning phase. This is for RDL layers, for example.
And we have a yes, we started building up a very good position. This is something that, with the next upturn, should bring us much more machines. Some of the last areas, Besi trim and form. Richard had some elements on, say, supply chain, on modularity. This is a good example of a machine that we brought to a level where it's fully modular.
You have a lot of elements you can couple to it. It's a building blocks. And here, it's very often used in the automotive. We can configure very fast. We introduced full tracking and tracing in this machine.
Nowadays, in an automotive device, it is not 6 Sigma anymore. It is basically 0 failure. So when we see a mistake in, say, in strip in here, we punch this separate element out. And what comes out is 100% good. This has had a real high interest, sorting and offloading.
We had to improve the vision systems for that and add selective punching to remove bad eyes. And these systems are installed in about 1,000 by now, yes. Very popular system in the automotive industry. Last part, Besi Plating Systems. We never talk much about it, but we have more than 800 of these massive lines in the world.
And about 80% of the market for lead frames is plated with Besi plating lines. We also this is a solar line. We have a bunch of solar also. What is key advantage of this machine is the very high plating uniformity. And you have to imagine in if you have a device and you have to plate it, you always have an element of uniformity, but especially of the minimum thickness.
And if you have a more uniform layer, you can normally go to a better or a lower minimum thickness and that remains immediately saving in material. The second element is the way we transport the material in this machine leads to a very low chemical waste, so it's a very clean machine. You have very little material that gets lost. The only disadvantage for us, it's an extremely robust machine. These machines live 20, 30 years.
And I've already said we should develop a bacteria that eats these New is wet able flank, flexible connector. Foldable phones are New is wet able flank, flexible connector, foldable phones I already mentioned, chemical D flush. And in this flexible, this is a machine we delivered a couple of years ago. We developed this machine for RF identification. You have these little tennis strips that you have on a product and you can't do RF identification.
This machine had such a high capacity that with 2 or 3 machines, you could cover all the RF need. But now we see a high interest for these for the flexible connectors. For connectors you have here, you have in this foldable phone, it has to go out. Yes, that's the new area. 2nd element is better pre cleaning.
We're developing a machine that does a much better pre clean. And the 3rd element is in automotive. This is a QFN, and this is your copper contact bonded to the strip. You get solder in here, but you always have an open area here. And this can lead to corrosion and to problems in this area.
And we're now developing a method where we can fully do it this way. And yes, that is very highly regarded by a number of key automotive players. And be aware, Europe is still a very good automotive country. All the there's about 50% of the car industry is still Europe. So we get a lot of interest for this also.
I think that was the last sheet I have. In summary, all these assembly steps, process steps, they become more and more important everywhere. 5 gs is for us important because we see development at this moment everywhere, and this will lead in the next upswing. It will lead to substantial orders. Continuous improvements in the computing work with the 3 d part, yes?
And advanced packaging, we've said this many times, will become more and more. I really like this ASML plot because that's the best advertisement for us, yes? And we're working with the leading customers on this: fan out, TCV, high speed, high accuracy die bonding, camera sensor system development, exposed die, trim and form systems, ultrafine, different plating. That's about it for today in a snapshot of what we are doing.
Excellent, Ruud. One more thing to add after all these development programs. Rule of thumb, 50% of the spending, so as we showed in the slide, EUR 40,000,000 this year. 50% is focused on extending current platforms. So we showed many applications being developed whether it's in die attach or in packaging or in plating.
Sustaining, we call that. And roughly 50% is spent on brand new process development. And the key message is you can't live on one or on the other. So if you spend your life only on sustaining, you die. If you spend your life only on the new world, which is highly unpredictable, you will also die.
So anyway, we don't die. Next, strategic initiatives. As always, maintain best in class technical leadership. Ruud showed you a summary of where we are working on, but the key is, of course, pick the winners, as we always say that, which customers, which end applications do we expect to be the winners in the next round. And if we do our homework right, that also can lead to best in class leadership.
So we are highly dependent on our key customers for that. As I mentioned in the earlier part of the presentation, get more share of the pie. The only objective of spending this EUR 40,000,000 is to get the highest return on that investment. And you get that by being smarter, having better machines, allowing higher margins, but at the same time, get more share out of that generation. Increased scalability and cost reduction, I will spend a few more words in the next slide, and that's why they are equal size.
If technology can be beautiful, but if you can't build the machines and you can't build them better than your competitors, then it's all nice, but it leads to nothing. And growth via timely acquisitions. Although we haven't done any in the past 10 years, we still maintain a key focus on are there any additional processes available which can fit into our portfolio, which supports our key strategy in achieving higher returns. So revenue initiatives, increased market presence and share. As I already said, where are those things?
Again, pick the winners. Who are going to be the most successful in the next technology around? Many we know for certain who have those leadership positions, but some we don't know. We also mention here expand our presence and share of wallet in China. Certainly, China will be the largest growth market for the next 10 years, a population of EUR 1,400,000,000 with an enormous momentum in development.
You can't neglect that and there are certainly huge opportunities. The key is, of course, you have to be very careful to watch out those areas which are not available to us. And our support in Asia, only one liner. We have since many years our support center out of Singapore. Those of you who visit Singapore are most welcome to see that.
We have application labs for all of our products now, supporting the ever growing installed base and that is of key importance to have a larger share of that market going forward. Grow in excess of the addressable markets, yes, we have done that. That's nice. But the key is, of course, to demonstrate that going forward. And how do we achieve that?
By, number 1, picking the right development programs at the winners and at the same time constantly improve our operating model. You see those revenue opportunities, one area, while we go over them 1 by 1. Like Ruud explained in significant detail, 5 gs. And if you simply look Besi's position in that supplying not only precise placement equipment, but also packaging, plating for that matter, we are heavily involved in that already and that can offer us significant more growth than we have had in the past. You see here the expand of share in the Korean Chinese Android mobile customers that also remains as it is.
Increased share of wallet in memory. Wirt mentioned the flip chip opportunity in next generation memory devices. We've not only been qualified, but we've also received machines already, orders for that. Expand the Japanese automotive supply chain. Automotive, key to Besi, and you've seen last year more than 20% of revenue as opposed to in the previous years, about the mid teens.
So that's growing. Also Japanese, rum and Renaissance for many years. The Chinese Semiconductor Infrastructure, JZET, TFME, Huichan, key customers of us. And then, of course, our complete portfolio in the Chinese markets, we have built over the past 4, 5 years step by step certain systems used by customers in China, manufactured in our own facility in Lusan. And over time, we are organizing to be to offer the complete portfolio locally.
And then Ruud mentioned it already, renewed customer interest. TCB is going to be hot. Wafer level is growing slowly but surely. And panel, as you've also seen. Anyway, the drivers for that, digital society, big data, smart everything and cloud expansion.
Spares, so anyone who has any doubt about the future, maybe this year will be uncertain, but until 2,030 growth. Anyway, that's we always see those beautiful hockey sticks. Important, pairs and service, growing gradually, now around 15% of revenue and imagine 80,000,000 business. It's a lot. 10 years ago that was maybe €10,000,000 €12,000,000 So why is that the case?
Not because our systems are less good, less performing. Those of you who analyze our P and L in detail have certainly observed that our warranty has decreased year over year. Systems are in much better performance. That's also bottom line, etcetera. But why then growth in this area, spares and services, because customers want 24 hours production out of those machines.
And by organizing that as a separate business, we have been able to support our customers ever better year on year. Beautiful margins and also in downturns support because spares and service are always required. Cost initiatives, to say that again. First of all, our customers need to know, are we able to grow beyond our last peak? And we have certainly prepared for that.
So in any case, our customers should not be worried if the next round comes where the Besi is able to supply. But then ever better supply chain, European, Asian, outsourcing higher value systems and modules and reduced the cycle times. Gain further supply chain and materials efficiencies. Although our margins look beautiful, we are convinced we can still improve significantly. If you look at that very carefully, we still are unique system builders.
We are not like the automotive industry. The pressure under pressure and in downturn that always helps, we can still achieve significant improvements. Optimize production between Malaysia and China to reduce costs and better local market needs. What does that mean? Those who deliver the fastest get the best orders because our customers are never certain.
So lead time, delivery time is key and not only delivery time, but also when are the machines ready for production. And there is the biggest opportunity to further increase our market shares. And then a bold statement again. We are certainly EUR 15,000,000 per year of a perfect organization. And you can bet your life that in the next years we will achieve that.
40% is in the supply chain. Still many companies supplying to us. We have over 1,000 suppliers, which can be improved. Headcount costs, we are still moving certain activities from West to East, more and more in the support. And then last but not least, common platforms, common modules.
If you look at the nice slide we have presented of all of our machines, 18 maybe, they all are different. They have hardly any look alikes. So in the next generation of systems development, more and more shall be common like electronic cabinets, tracks, name any part which is similar on neighbor machines. And that is simply copying the intelligence from the automotive world. They are highly commonized in all their models, and that's one of the key goals for Besi in the years to come.
That also has a significant impact on our supply chain. Simply imagine all those variations, you need different suppliers, different inventories and whatever you can commonize is a significant advantage. Working capital, to name another one. We review that every weekend. Every Friday is Supply Chain Day.
Every Monday is production, planning, meeting, 11 Supply Chain, Friday, 10 because if you don't focus on that 52 weeks a year, the progress is very minimal. So extremely disciplined and that's how we're going to get there. Also our model has shown to be extremely supportive in managing these cycles. So in the different colors, the bottom of these, you see in dark basic green, you see the European, U. S.
Headcount, you see in the light green the Asian headcount and the gray on top is a flexible layer. Well, you may have noticed that since the mid of last year, we have reduced our headcount by 450 people. No major restructurings, simply stopping certain contracts in the production environment, contracts for a month or 3 months, and over the quarters, we have reduced that part. Also moving more from Europe to Asia in the support side, in the admin side, Singapore is now a full fledged limited risk distributor, LRD structure. So all the orders come in, all the invoices go out, the money comes in, and we've moved that out of Europe to Asia.
But also the whole supply chain sourcing is done in Asia, so back office. Support, as I mentioned already, so the support is sustaining on the installed base is more and more organized out of Singapore. Several key people have moved from Europe with their families to Singapore to further bring our key technology to our customers in Asia. So the headcount development is key in that, but not just restructuring, but where do you organize your business and your support and maintaining your flexibility in managing through the cycles.
Next.
Development actions, redesigned common modules, as I already mentioned, increased standardization, lower unit cost designs and maintenance hours, shorter cycle times. Few words about capital allocation. Simply to reconfirm how we see that. I already mentioned it at the beginning. All the profit we make belongs to shareholders above a certain baseline, and the baseline is an industry adopted net cash to revenue ratio.
So simply between 40% 100% of our profits can be distributed to shareholders either in form of dividends and also share buyback programs continuously ongoing. Currently EUR 12,000,000 per quarter, so EUR 48 per year, and that is to be continued. If you compare that to the peers, slightly more, I would say. I don't know why, but that is those are simply data. Share repurchase program, I already mentioned, the average, the number just for your models.
And then the consolidating in this world. If you look at Besi, we've done certainly our consolidation work since the start, 1st October, 'ninety three, first packaging plating, then die attach since 2000 until 2009. And if you look at the same time what have our peers, competitors done, they've bought much more. And they go, why doesn't Besi buy? Anyway, two messages.
They've gone more broadly, diversification. We have said all along because of all the complexity, Ruud's wonderful presentation, our strategy has been to focus on the ever increasing complexity, which we will continue, and you don't solve that by acquisitions. And at the same time, and we see that here, that translates into capital allocation over the last 6 years. And then the return on average equity, well, I think investors are always interested in returns. Maybe some are more interested in acquisitions, but this is simply data of the public company information.
That's what's happened. So we will continue our focus, but at the same time, keep a key eye open where we can increase our return on average equity. That's our key job. Anyway, for that you need money, the money we have. We raised some more with 2 convertibles, one end of 2016 and one end of 2017.
So about EUR 290,000,000 net out of those convertibles available for the next still 5 years. And that also gives us ample means to go through any of the cycles. Outlook. When is it current, July 23 or 2024? We will tell you the outcome of the Q2, guided up slightly with revenue, some seasonal effect maybe.
Gross margins, flat, a bit disappointing, should be higher. Just joking. Anyway, so gross margins should be similar, which I think is an enormous achievement for the organization and OpEx less, well, core debt could be more, minus 5%, we should be able to reduce some more costs. No, that's about it. With these beautiful bullets, we'd like to end the presentation.
Are there any questions? Yes, please.
If market share is an output
of your business strategy, why are you guiding to a 40% objective? What gives you the confidence that you can grow it that much and maintain the margins that you've been talking about?
Well, if we look at the past decade, our overall market share was low mid-20s. And by simply maintaining this very dogmatic focus on die placement, die manipulation, I sometimes call it. So you can sort, you can place, you can flip. I'm very focused on those key customers, pick your winners. And Ruurt explained in, I think, significant detail sufficient detail that, that complexity is only increasing.
And even more so, it is increasing to a level where our competitors today, the distance is greater than it was 10 years ago. And our cost and supply chain initiatives and the proven track record of our operational model and the operations organization in Asia should give us that opportunity. Of course, we are in a tight competitive landscape. Don't underestimate the competition in the different areas, But still, we think it's very, very reasonable to assume that we should at least our customers will offer us a chance to perform. Whether we succeed in that is still to be seen.
One of the things also mentioned by Ruud Quickley, this complexity leads to increased ASPs. Already, TCB is practically double machine price compared to a flip chip machine. The output, however, is significantly lower, so you even need more TCB machines to achieve the same output. One level higher, you are moving to and we quickly said that machines which are between €2,000,000 3,000,000 a piece where you will need again more to reach the same volume than compared to previous generations. So those things also add up.
That market grows in number of dollars faster, although the volume is growing slower. So it's not all equal is my message in comparison. Does that help? Excellent. Next question.
Thanks. On the EUR 800,000,000 objective or ambition, first, the previous peak, the EUR 600,000,000 What are the big moving parts there? And I can assume maybe that mobile is a little bit more comparable than it was in the previous peak. And then the big growth coming from Automotive and Compute? Or how should I see that?
Yes. Also again, take the slides we presented. On all three fronts, whether it's communication, mobile Internet devices or computer space or automotive, they all have significant changes which translate into more complex machines. So it's not just the same, let's say, machines, but then the next round, 3, 4 years later, but it's more complex machines, which are more expensive. And certainly, the volumes will grow in the mobile Internet device space, computing space, maybe a bit less in Automotive, but the content in automotive.
So that's behind why if we do our homework right, we could achieve a higher next peak.
And then on the gross margin mission, you mentioned also more outsourcing on more higher value parts. How does that compare to your gross margin? You don't have to give away part of your gross margin? Or just in the mix of the total, you can win more on the other hand by having the right machines ready? Or how should I see that?
Well, first of all, again, to explain how is our outsourcing model organized. The unique thing about Besi's operating model is that we have for many of our modules multiple suppliers. So we don't have single source maybe for a few where we haven't found a second one, but for every module developed at the development stage, we organize multiple suppliers simply to be independent of any of those suppliers. At the same time, to on an ongoing basis improve the cost structure. And what's the cost structure?
Not only the cost, but the delivery time and the number of modules, so the scalability, which is equally key. But still, I mentioned quickly, we have 1,000 suppliers plus, And the key is to find in that whole range of suppliers for these 18 different platforms More cost savings through better selection of those suppliers. So we evaluate all of those suppliers all the time, because still compare this to another industry, which is far more mature, the automotive industry, our model is extremely or extremely is very expensive in that sense. So there's a lot to be gained. And any gain in that supply chain, combined with the design of more advanced or lower cost of ownership machines, improves your gross margin.
If there would not be any improvement feasible, our gross margins would not increase and maybe at best stay because of development success. But that's the whole battle.
Yes. I think maybe to add a little bit to that for the flavor, Richard mentioned that we really have every Friday a call with high level management. Richard and myself, Cor is in there, but also the product group managers, supply chain manager, where we go over specific areas. And every week something else. Every week we want to, what can we do more here?
What can we do more? And that's the kind of discipline. In the beginning, it's very but now after a while, you see this brings us a lot because every time we analyze, hey, can we get 5 why is this guy more expensive? And we do this at a level where a lot of, I will say, other types of managers say, I have my people do that. I'm not interested.
We are interested also in these small things. We are really we have on Friday one element is the supply chain part. We also have our accounts receivable meeting on Friday with Core. And then if we have an account receivable CHF 500 that is not paid last 2 years, then we go after it, yes? Even at our level, we say, why is this not paid?
Because it can be an indication that there is something wrong with the company. It can be an indication we do something wrong in our machine, and we want to know that also. But that's a very yes, I would say we are very practical on a high level, also busy with the details of running the business.
For instance, recently we did the all the travel agencies. Yes. And it's amazing how much cost we simply say by changing the travel agencies. And we simply want to see that. Why?
Why? And then we change and somebody said, oh, but they do less, this, that. But anyway, just to give you sufficient background about why we think there's still enormous improvements to be achieved. And you have to do something for that. You have to work hard at that.
That doesn't simply happen by an objective. Please, next question. This table first closure. Hi there, Wim from ABN. You mentioned on the one hand that you still have about EUR15 to EUR20 1,000,000 in cost savings that you identified, earmarked, whatever.
At the same time, you also mentioned on multiple occasions that the world's becoming more complex platforms become more complex. And obviously, you're also targeting a significantly higher revenue base. What kind of cost base do you think you need in order to kind of cater to the EUR 800,000,000 ambition? Well, we mentioned already that the infrastructure is in place. So that's no worry.
The supply chain is also in place by our whole structure. And simply remember, you guys have all gone to school. My first school was next door here, the Montessori. I was born here across the street. Anyway, 4 times 170, how much is that?
EUR 680,000,000. So it's not a big stretch to EUR800,000,000 with a mix of machines which will have higher ASPs. So we don't have to buy market share, which we will never do. So in perspective, the only question which is very important, Will that be achievable with our product range in this industry? Are we with the winners?
Do we have the right development programs? And again, sustainability of existing plus the new technology developments. And that's the biggest risk factor. Are we at the right party or are we in a wrong party? With all the uncertainty you mentioned, that's highly critical.
And the only way we can manage that, and we haven't said that yet, the R and D programs, every 2 weeks, we review the whole list, every delta, a change at a customer and his timing and often that is not just because of end markets, but because of materials, because of other steps in the whole process. That has a significant impact. We have a limited number of people and you have to constantly review whether we have the people on the right programs. We've added people in the R and D programs simply because we anticipate that there will be more. In some occasions, we've said in the last round, we had 3 major new avenues.
Today, we have 7 new avenues. Whether they all will be big avenues or very small lanes, you don't know. And that also adds up to potentially a higher revenue level in the next peak. Is that sufficient? No.
Excellent. You had a question well, then we had this table, all three.
We'll keep it here for the time being. Michael Rotterger, Petercam. I have a question on your R and D, which you mentioned is becoming increasingly complex and expensive. Yes. And about half of it is spent on the existing products and half on the new systems, which have all these fancy ASPs.
My question is on the existing products, 200,000 to 500,000 per unit. They have to go even faster than they already are, even smaller dies, even more complex. So do you see the ASPs there growing faster than, say, in the past 10 years simply because of that new complexity? And that will give you probably also a push from the previous peak of €600,000,000 to where you want to be.
But that's a good question. The ASP of many of those machines has not grown. We have added certain functionality, which customers are willing to pay for. We have significantly reduced the cost by improving the supply chain and our own operations in the number of hours we need to build those machines. So the revenue growth has not come from those machines.
The revenue growth has always come from next generation.
So basically, you've given all the improvements, well, for free to the customer. They get the operational improvements without an extra price to pay.
Look at the margins.
Yes, but that's because you have been very efficient. That's not something they have to do.
No, no, no, no. The margins tells you everything. You would never achieve this growth, this constantly increase of margins if it is 1 or the other. It's a combination. But the big jumps, that's what I wanted to say, are in the new systems.
But in the existing range, they are more gradual. And the customer is only willing to pay more if he gets more functionality and lower cost of ownership on existing platforms.
Yes, but there have been improvements. So suppose that you have 20% higher output with an improved version of your existing machine,
and
the client still pays the same ASP?
No, no, no, no. He pays you explain well, cost of ownership is how they evaluate us against the competition. And you have to demonstrate clearly on existing platforms even more than on new things. Is there really this are these numbers is it nice PowerPoint presentations or are these real demonstrated data? And that's how you sell those machines.
And whether the price goes up by 20 or by 15 or by 30, we sell it based on cost of ownership. And the cost of ownership improvements translate in an ever growing gross margin, even in down cycles. But then what we haven't said, if a customer doesn't want that, if there's a short business horizon, maybe a year or a customer program, we are very happy that he buys a lower cost machine. We're not interested to maintain just that market share because So very important question to understand about our strategy. Many may do it differently.
They may say, well, we can get much more out of this market if we have a lower margin.
Yes. I think it's also very simple. If a machine is, say, 20% better and you basically increase the price also with 20%, then Christian will say, no, yes, what do I get for this? It's not a big reason then to go. So you have to find this mix of because we have been improving the machines all the time.
And yes, we have been improving step by step also pricing. One of the elements you see is many of our machines have different names. Simply, if you go to an Asian buyer and you say, Oh, I have an EVO 2,200 and it's now 10% better, and I have to charge with 10% more or 8% or whatever. It's the same machine. Why should I pay more?
So you have to make a new version number of it. You have to a lot of things to keep that. And there's a lot of pressure on that, but we have been able to do that very well. Otherwise, we would not be able to keep these margins at that level. But we have always had this performance speed, accuracy, speed, accuracy always 1 step so, 1 step so.
And it has been working very well for us. A quick one. No, no, no.
A quick follow-up. Yes. Basically, that's my the idea I wanted to share is is if you boost it by 20%, you share it with the clients of 10% each, both companies win.
No, we don't share.
You share the operational benefits, and that is part of the way to get from €600,000,000 to €800,000,000 simply because your ASPs are probably going to be going up if you spend all that money on your R and D.
Yes, but my message is that growth is less coming from the existing product ranges. It is more coming from the new product ranges. Yes. And then again, gross margin before revenue growth. Okay.
Next question. Yes.
How difficult is it to prepare I
think you were online. You were waiting a very long time there.
No problem.
Oh, okay.
How difficult is it to prepare the organization for, on the one hand, the cyclical slowdown risk, as you mentioned, and on the other hand, the secular growth opportunity in AI and IoT and big data and gaming, crypto mining, autonomous vehicles, and probably I forget a few, especially if they happen simultaneously at the same time. How difficult is it then to prepare on the one hand for the upside, whereas at the same time you also want to, well, keep a lid on the cost for maybe the cyclical downside that you encounter as well?
It's an excellent question. We said at some point in the past days, we can write a book about that. The answer is, if you manage the business on a weekly basis and you see negative or positive changes, you immediately adjust your organization. So I mentioned quickly, we have 450 people less. Those times when we waited for that we were really in the downturn and you had a massive restructuring, everything stops.
But if you and it's all communication as well, if you take people along that on the one hand we have less machines, less business, on the other hand we have increased development requirements. And I can only say the more we do that in line with what is happening, the better the organization understands. And also we split we have split the organization. R and D is here in Holland, packaging, plating in Austria and Switzerland, Dietetch. And we have operations in Asia.
We have the support in Asia, operations in Malaysia, China, support center in Singapore, many would say, well, all in one factory is much lower cost, but also this focus has brought us a lot and at the same time has brought us that you can manage much more easily the cycles, both up and down. In the past, when it was in 1 factory, any decline would have a very negative impact on the total. In an upturn, you would pull all the people out of R and D to support the operations. Today, that's not the case. So anyway, it's a very fundamental our customers do the same.
If you look for instance at Intel or Infineon or ST, everyone has learned how you manage the cyclical business is by splitting those parts of the organization, which might seem very ineffective to other businesses. Next.
At the end of Q1, you talked about 1695 employees. You said that you are meeting a lot weekly with management. Can I have an idea how big the management is? You talk about how many people?
Easy, 9 people. Our management team is only 9 people. And then 4 And salespeople? Are close to sales. We have sales in Asia.
We have sales in the U. S. Asia in total, yes, sales and service together is EUR 190,000,000. EUR 190,000,000. And in Europe and U.
S, it's about
60 something.
62,000,000? 62,000,000. And then in R and D, is that of what amount of people do we have to think? And is that gradually going up?
Yes, it's gradually going up. We just added another 27 in this year so far. Well, if you look at dietetics, packaging, Singapore, First of all, dietetics, my last count was we were at 3.80 people in R and
And then one other small question. When I met you a few times last year or the year before, you were talking about kind of new applications with a growth potential in solar business. But now you tend to talk less about that. Can you give some flavor?
Maybe, Ruud, you can give
No. We have been a big proponent for solar because I've been quite involved in that. We simply see that the solar market is more difficult. It goes really up and down. As soon as it becomes successful, then often the business models are corrected by the government.
Even in Holland, this happened. And suddenly, things are down. So it's been more difficult. But we slowly but certainly increased our momentum in there. We have now quite a bunch of systems in the meantime there.
We're working on 2 big new projects. The whole area is our technology is very much geared to the high end, very efficient solar cells, back contact cells, for example. And that area is that part is growing. And but yes, now China has reduced subsidies again, so that thing slowed down a little bit. It's been I would say it's been more difficult than we initially anticipated, but we see a steady growth in that.
And these are also very big lines, so they are 80 to 100 meters long and have quite a nice price tag. But it takes a long time to get into the qualification round because a solar cell, if you buy a solar cell, you wonder this thing works for 20, 25 years on your roof. Otherwise, the financial model doesn't fit. So getting into the qualifications takes a long time. It took longer than we thought.
It's even worse. And I think in automotive, it's already very tough to get in. In the shoulder, it's even more. But we have now quite a bunch of lines now. So it's just not a I think here we show a little bit of the new things we are working on that like what we saw for automotive or this wettable flake, for example, in plating or the other part.
This whole flexible thing is very interesting, also high end machines. So those are some of the new things. But the solar is steadily growing. We'll have every year now 2, 3 lines going in, yes.
I have a couple, but I will limit myself. First, on the next generation flip chip machine, maybe just a follow-up on new product qualifications, etcetera. First, evaluations are positive. How does that typically work? How long does that take until
Maybe it depends a little bit on, but typically 3 to 6 months. You have to put the first one in. Then they test it, they try it, and then they say, Oh, it's not working, and this is wrong. And then you go 2 or 3 times there. You fix this, you fix that.
And then suddenly, it is there where it should be. And then you typically are Richard has shown our competitors, typically, competitor has a machine also there or both competitors have there, and they measure the performance of these machines against each other. And then what we typically win out at the end is not only speed and accuracy, but at the end of the day also reliability of the machines because our operators, let's say, the customers' operators, they like these machines because they have a tendency to run always and always inspect. And yes, that is a thing where we think that we keep our R and D efforts in Europe because the especially the Swiss and the Aussians also, of course, the Dutch also, they have this built in quality feel in a design. And that's we definitely want to keep.
But all in all, we have 3 to 6 months, sometimes longer. Does that answer it to some extent? Yes.
That's that, Ruut, you can add
to that.
There are some specific differences in design of the 3 parties. Ours is the most accurate in placement integrity. The other 2 are and that's already demonstrated less in that sense. But all three are new standards. All have increased the output by multiple bond heads.
But as I mentioned already, it's not just evaluation. We also received orders so and also the data. So it looks very positive.
And there's a currency issue. Sometimes, if you think about it, you have to put this die always there. And the better you do that, if we have 3 micron and another has 4 micron and say the spec is 5 micron, then with the 3 micron, you're mostly more in spec than if it's a little bit broader. So that's also a reason why operators like these machines because they are continuously putting it on the right spot, so to speak, yes.
Maybe a different type of question. You've shown a couple of slides from ASML. Think every earnings call from AMET, etcetera, people are talking about advanced packaging. KLA acquired Orbotech. Just generally, how has that changed maybe your conversations with your customers?
Also, are there new peers now, new competitors? Or just in general, how that sort of translates?
No, you have to look at it at in my view, they are completely different worlds. And nothing has changed in the past 20 years since the debaters, especially here in Holland. This world is nicely segmented. You have the leadframe assembly world, you have the substrate world, you have the flip chip world and you have a little TCB efforts and then you have a small growing wafer level rerouting different processes, different companies. And that wafer level is closer to the front end world.
And yes, front end companies are looking at that. Customers are, of course, saying to front end companies, why don't you do this? And then they say, well, this is a Mickey Mouse market compared to my €10,000,000,000 market. They won't say it in that way, but that's basically what it means. So there's a gap between the worlds.
But it would be interesting to see what will happen in the next 3 to 5 years. Will that really become part of the front end world? Or will it be a world in itself? And why is that not clear? Because the accuracies all the time, mentioned also by Reuters, it's a complete different challenge to accomplish wafer level rerouting interconnects then to develop a 95 layer whatever chip with 7 nanometers, but that's a whole different world and different people.
And to have that in the same organization is probably hard to imagine at this time.
Yes. But I think if you look at the last 5 to 8 years, the level of people we talk with now is really increasing. It's really going up. In the past, it would be you would talk to the OSATs and now it needs to be cheap and fast, and that's it. And now you start look at where the investments are happening.
TSMC is investing heavily in back end. Samsung is heavily in back end because they see it as more and more an essential product feature for them to do these 3 d structures. And so you talk at a much higher level. So that has changed, to my opinion. We're at a much higher level with these people now.
Yes. But then that's certainly true. That's why you also see these slides and much more. But simply read what they explain to the world. Packaging interconnect has become a bottleneck and will become an even greater bottleneck.
But the key question is how is it going to be organized? Will we as a simple little busy company fit into that world? Or will the customers dictate that will be an applied or a Lam world? And that's very, very important. And in the meantime, the only thing we can do is simply continue with our wonderful development in those areas.
Helko, you are the next.
Jojo, Jesma, it's very different. We have two questions. What can you say about the opportunity of the micro LED screens for the coming future? Will that be the next game changer for Besi? And the second question is about the who or I then at this moment?
What can you say about the impact so far? We saw 2 days ago Skyworks Solutions. What can you say at this moment?
Yes. Two questions. 1 on the micro LEDs, micro LEDs. We see a clear interest in that in our big panel machine. This very high accuracy is very attractive for that spot, yes?
And whether micro LEDs will finally be big time, we think one of the most logical ones is starting with for example. And the big advantage from the microlabs is that you have a much brighter picture in daylight. You have a better angle. You can look at the watch. Now sometimes you only need to look like this so that you don't have these things.
So we see big progress in there. But it is a complicated process because and I've run big LCD machines. I know one pixel missing. And you see this. Your eyes is very sensitive to that.
So there's a lot around it to make it work. But we see a good chance in that, yes. But I cannot say more than this. I can only say we are deeply involved in it. And then the other question, Huawei, is it's a mixed blessing, I think, at this moment.
What we see is, yes, issues, but we should also move to some of our Chinese customers. And say depending on this whole situation, we need to build it more locally now. So we actually start to see, hey, we get more requests. We also see some movement to Southeast Asia where people say, oh, let's move it there. So it's difficult.
It has pluses and minuses in it. We are not, as Richard said, not deeply in the Huawei chain. We were more in the other chain. We are progressing in that area also. But at this moment, it's maybe not too bad that we were not too deeply.
But long term, we still want to get also more in the Android phones.
It's Finn de Jong, NIBC. Two questions also. Maybe to start off with the mobile phone market, it's getting clear now probably what the new features will be for the next generation phones. Can you maybe elaborate a little bit what that means for you at this moment? And maybe especially with a focus on 3 d sensing and touch?
Yes. In the 3 d sensing world, that part, there are further improvements in it, and we are working actively on that. Also on the cameras, there are new lens types, for example, being worked on. This whole alignment of the lenses we're working on, You see these features. But I think it will be more and more difficult because it's the cameras are already very good.
So the incremental improvements are slightly smaller. It will go a little bit slower, yes? We see in the 5 gs, this whole antenna structure, how you have to do that, is getting complicated. We see more fan out coming in the phones, which is good for us also. So there's a lot of things going on in the phone, but I think the next upcycle will probably be 2021 on the phone side, yes.
And the 3 d sensing and the face recognition? I think now more Android
Yes. We're getting more requests for that because we are on the non Android side very well in there. And people say, okay, do this also here, but it's we have to do this very carefully.
Okay. And then I got triggers a little bit by your remarks on the Apigee Diebonder, where you said that you were working on AI and self learning?
No, that's in the machines itself, yes. Yes. Yes, yes. And we have a few projects now in that direction. And you need more much more sensors in the machine itself, And you need more camera to look at things and then the machine learns to sell, oh, something goes wrong, then I adjust.
Normally, an operator will see how that goes wrong. I have to adjust something. And these things we are putting in there. But a current diebonder already has like close to 3,000,000 lines of software in the machine. Half of our R and D people are software people by now, yes?
And yes, this becomes bigger and bigger. But these are the things we're doing. And these requests come from everywhere, also from China. They come from of course, clearly from Japan, from Asia because it becomes more and more difficult to find operators also for these machines. And another element that is I didn't mention that too much, but you start to see more automation in the machines now.
They're fully automatic loaded. Actually, they don't want operators on the machines anymore.
Is it something that's only for the epoxy tool? Or is that also something that can be used for
the other Generally, we see this in all our machines. That level of automation and also this intelligence in the machines is really increasing at this moment, yes.
Well, yes, it's good to add still something to that. Forever, customers would dream of having lights out factories, so fully automated lines and programmable from a distance. It's fair to say that we have come a long way and that we can program, for instance, Diebonder department for the machines from one station. And as we had mentioned, more and more these machines become self diagnostic and self adjusting. That is based on a philosophy of Islands of Automation operated, let's say, Bluetooth.
The other concept, Factory 4.0 or whatever, having all systems linked in an industry where demand supply and demand is volatile, plus there are a lot of changes to the products, Any program which has started to that concept has not reached the goals which were set at the beginning. So this is an ongoing battle, which to our view with the ever expanding products scopes with the ever increasing variety of semiconductors, which require all kinds of different settings in the assembly steps. That more the island concepts prevails than the direct line integration prevails.
All right. And then also the place of software within the supply chain. I guess it's a pretty we talked a lot about hardware side in the supply chain. And do you also have a wide variety in software vendors in there
or Too much. Too much. And And still, if you look at all these machines, also there, there's a lot of yes, of course, over time, there's a lot of development on yes, feature as Ruth said, there are so many lines in all these machines. And everyone says, if I use this, I can combine that. And so there's a diversification that you should expect over time, but you have to be very careful because development of all these software programs takes years.
And we've done some efforts in the past, which have also been very disappointing. But it's a similar challenge.
Just one add on question. Growing via timely acquisitions. Yes. Every time I meet you, you say me that the market is too expensive.
Yes. Still the case.
Is that still the case?
Still the case. If you look at the past, First of all, I've said that and I will say that again. An acquisition only makes sense if you can 100% integrate that product with its entire organization into your existing organization. Otherwise, the words are nice, the PowerPoints are beautiful, but you will not have the benefit of integrated technology, manufacturing in 1 facility, developing common modules, common platforms, you'd asked about sales force, service, etcetera. All that has to be positive.
That's number 1. Number 2 is it's always it's basically number 1, but anyway, my explanation now is number 2, but it's number 1 by far. If you only do that when a customer asks you or more or less forces you to do that. If you look at our history, why have we done all this? Because the Intel's and STs and Finions and all the communication people, they have and it started with Motorola and then Ora Lulu And we only did those steps when we clearly saw what that benefit would be to us.
Is it only Intel? Or can we use that for all the
winners? I think in the this nice slide with the acquisition history in the industry over the last years, we've looked of course also at all of these ones.
And we are looking today every single day. Yes. And it's very interesting today. People are all reevaluating their strategy. And simply imagine all board sitting and stock prices have gone down by 50%.
And what next? And those discussions are always happening. And some say arrogantly, oh, no, this next time will be double. Others will say, well, let's look at it. Let's look at it.
What are the pluses and the minuses? And our bigger pictures, the wafer level pictures, the all those discussions happen in downturn. In upturns, they happen because people want to cash out. They want to sell. And banks are happily or you're still part of banks, they're happy to do those deals, 2% of the total, ta da, bingo.
No, that's in a nutshell how the world operates. But you constantly are on the lookout. How can you improve? And we mentioned operating leverage. It also has to add to your leverage.
So to buy companies on the side which are separate, which you also have to manage. Well, managing a company may seem not so difficult, but it's extremely difficult. So that's the answer why it doesn't happen. There hasn't been a customer who said you have to help us, and we will help you by offering you whatever if you solve that for us. That's how it works.
Yes. A lot of these cases that you have seen, we've hold also to the light. And then discussed this also with some of our key customers, does this make sense, yes or no? And then yes, if it didn't make enough sense, then we stayed away from it because you also if you have to manage an integration, it's a lot of work for the management. You have to separate from the other.
As we are a very lean company by now, I hope you understood that we have a very small effective management team, so you have to be very careful how you what you can do with it.
Trio?
Yes. I thought maybe you could comment about your spares and services business because you've got it here as 15% of sales. I think last year, it was less. Obviously, your revenue base has gone down, so that business is growing. I assume it's higher margin than your 55% to 60% target.
So in this €800,000,000 mix, can you keep that €15,000,000 can that €15,000,000 go higher? What's the thinking there?
Well, certainly, if you benchmark, we benchmark on everything. And one of the things is, of course, customer support. But there again, you have to look carefully
in
who can you make happy doing that? So for a long time, there was this policy, we were always late. So to help to save our reputation, we would help with spare parts and service, mostly on a free of charge basis. That was historically the industry. And that has changed over time, and we've developed that also more in and that varies per customer, how much do they want?
We share openly. There are 2 types of parts. There are vendor parts, so those are parts which are from 3rd parties, which through the Internet today, anyone can find them. And then you have custom parts, which we manufacture. Well, on the fender parts, those customers who really want us to support that is fine, but the margins on that are low.
On the custom parts, the margins are of course high. So it's a mix. And then again, through the basic concept, it depends on whether customers want more support or less. We have some customers who ask us to support every quarter that differs because of race, because of their end demand, simply to keep their lines running at maximum output and they're paying for service people support. So there's a mix.
The 15% is just a number again. If you benchmark that to others in the industry, in the front end we know, it's more in the 20% range. And with the complexity of the machines increasing, you can expect that, that would need more support. So over time, it's likely to grow higher. But also there is a very interesting case.
About 10 years ago, we decided to separate that. It's become an independent business, run independently by our own people. And it's amazing to see how that has improved the support to those customers who are using that over time. You can easily imagine in the past, any part which was needed for production had a priority of parts needed for spares. At the same time, I think we were the 1st company to offer a website access to our inventory.
So our customers having certain, of course, entry protection for us. That has increased our support dramatically. So in the past, an operator who would need a part had to go to the purchasing department and they had to find whatever and it took forever to get these parts. Now they have direct link to our stock. And everything like that has a value.
But the summary is simple. In this world, complexity determines the support customers need. So with the increased complexity, they will need more support. Any further questions? Next, first row.
Just a quick question on the share buyback program because it has been almost EUR 100,000,000 the last 3 or 4 years and you continue. Do you cancel the shares? Or do you keep them in treasury?
We keep them in treasury.
Why is that? Why you prefer that versus canceling them?
Because we simply keep them. In the past, we've used them in terms of acquisition as a part of acquisition consideration. We also hold them for the convertibles in case we need that. So there are several reasons to keep those shares. Next question in the back.
Yes, please.
Maarten, back to you. When looking at your profitability and comparing it to PT and Quick and Sofa and your whole product portfolio, do you agree that you act much more at the high end of the market, much more technology driven than your peers and should therefore be somewhat less cyclical compared to the others?
No, no. The cyclicality is across the board in equipment because every equipment is a capacity, is a capital goods. You have less volatility in materials and in support. But over time, and we show that in one of the slides, there's no place to hide and it varies. Sometimes in a down cycle, you may have less or more impacts.
But again, it may sound strange to you, but that is the least of our worries. The key is where does this product fit into the customer's roadmap? And what is the value of that to that roadmap? That's the only and whether they buy 10 or 1 or 2, over time, of course, it should be more because we are a mainstream focused, not on specialties, also very dogmatic, mainstream focused. But there is no direct link between whether you are on the high end that you have less impact than on the low end.
Fine. Then when looking at the growth rate of the last 12 months you recorded compared to peers, you have done much worse than them. What's the explanation then for that?
Well, you said it partly already. It was because of the 2017 enormous growth in certain applications where we have grown double, nearly 50% year over year and that did not continue in 2018. So if you look at that separately, yes, in 2018, we grew less, but our margins improved. Our cash generation improved. That's the only thing which matters.
Excellent. No further questions. One last one, right, 1st row, 2nd row.
I had a couple
left. We're
talking before the presentation started about the infrastructure rollout of 5 gs that seems to be happening right now. Maybe a couple of years, but 4 gs didn't seem to be that much of an infrastructure investment on the smartphone itself. It was huge obviously.
So how does that look
in the next 2 to 3 years? Do you see maybe smartphones coming towards 2021, but before that, there's already some demand.
Yes. It's a chicken or the egg problem. If you don't have the infrastructure, you buy a 5 gs phone, but you can't do anything with it. Why buy a 5 gs phone? So and the infrastructure buildup is more costly than if you talk to the Nokias, the Eric Sones and so on, it was more costly than they originally anticipated simply because you need a lot of new things there.
But that's now happening. So I personally expect that in 2021, the next cycle for the phones will come. And the other part is we were very well into 2017 to 2018 in some of this new 3 d face recognition pass on. It's a big step forward. And then for a while, it's flat.
And I expect also that in the time frame 2021, we'll get the next sync in the mobile phones again. But it's we cannot say much about it at this moment, yes.
But maybe more specific. Is there more investment needed for or is there more exposed maybe to 5 gs infrastructure ramp than before? Or is that
Yes. I think we're a little bit more dependent on that now because that has to come before these next steps will happen on our side also. And yes, the telephone companies, whether you have the VIRIZONS or you name them, they all are struggling a little bit with getting this infrastructure in place. But it's happening. If you look at world scale, it's happening everywhere at this moment.
Korea is there. Japan is moving on. There's a lot of movement ongoing. So I think the moment is taking us down.
Big
cities.
Yes. But as Stuart said and on roadshows, you hear that from investors. It's a major investment of the telephone companies to set up these infrastructures and who's going to pay for that. So it will not be a straight line.
That's clear. Maybe last question then on one of your strategic initiatives is to roll out Korean smartphones. What about Korean logic and Korean memory?
Korea is, of course, a small country with only very few customers, but very big ones. And we are continuously working with them in the memory space to get in there. And we have in both, I would say both of the big ones, we are getting in step by step. We've delivered to the biggest one quite some equipment now fully automated also. So that's a positive development, especially in our 8,800 series tools.
So that's going well. We have some other areas in for example, there's a company working on panels that has very interest in what we're doing. So there's in Korea, a lot is happening. But very often, it's important to be in Korea because other ones look at what is Korea doing now. In the past, that would be sometimes Japan, but now often people look also to Korea.
So we're I'm very regularly there, yes.
Thanks. Well, then thank you all for taking the time. And if they're jesting the material, there are more questions, don't hesitate to contact us. Thank you.