Good afternoon, ladies and gentlemen, and welcome to the conference call regarding the results of the fourth quarter and of the financial year 2022 of AIXTRON SE. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let's now turn the floor over to your host, Guido Pickert.
Thank you very much. Welcome to our Q4 and full year 2022 results presentation. I'd like to welcome our CEO, Dr. Felix Grawert, and our CFO, Dr. Christian Danninger. As the operator indicated, this call is being recorded and therefore considered copyright material. As such, it cannot be recorded or broadcast without permission. Your participation in this call implies your consent to this recording. Please take note of our safe harbor statement, which can be found on page two of our results presentation slide deck, as it applies throughout the conference call. This call is not being immediately presented via webcast or any other medium. We will place an audio file of the recording or a transcript on our website at some point after the call. I would now like to hand you over to our CEO, Felix Grawert, for opening remarks. Felix.
Thank you, Guido. Let me also welcome you to our full year 2022 results presentation. I will start with an overview of the highlights of the year and then hand over to Christian for more details on our financial figures. Finally, I will give you an update on the development of our business and our guidance. Let me start by giving you an overview of the key business developments in the year on slide two. Demand for our equipment was very strong, resulting in an order intake of EUR 586 million, up 18% year-on-year, driven by the strength of the end market our customers are serving. In fact, the 2022 order intake was the second-best order intake in the 40-year history of AIXTRON.
I'm very pleased that the area of silicon carbide and gallium nitride power electronics has been the strongest demand driver, representing the majority of our equipment order intake for the year. Orders for our silicon carbide power solutions have more than tripled year-on-year. This strong development is a result of major capacity expansion activities of our customers. Also a great success of our new G10-SiC Multi-wafer system. This product is being adopted by our customers in an amazing speed since the launch in Q3 of last year due to its excellent cost per wafer composition. This is a huge team success. We now have a highly competitive tool in the market.
With this, we very much look forward to the wafer size transition from 6 in to 8 in, as this is a trigger point for many customers to look into their tool installations and tool-based SIMUs. I think we can say that for silicon carbide at AIXTRON, we have also now reached a tipping point of broad market adoption, similar to what we have seen for gallium nitride some years ago. While we have seen an acceleration of demand for silicon carbide, orders for gallium nitride power electronics also continue to grow year-on-year, reflecting our customers' aspiration to replace the incumbent material silicon with gallium nitride-based solutions in more and more applications. In summary, the biggest demand drivers for the quarter are our systems for silicon carbide and gallium nitride power electronics. Demand for laser tools in the area of optoelectronics also remains strong.
Demand for tools to produce LEDs is mainly driven by MicroLED production orders, more than offsetting lower demand for traditional red/orange/yellow LED tools. As a result of all that and of the delayed export licenses last year, due to which we are not able to ship all tools we had produced in 2022, we can report a strong order backlog of EUR 352 million, up 64% year-over-year. Overall, we could grow our annual revenue 8% year-over-year to EUR 463 million. Our cost margin ended up at 42% and our EBIT margin at 22%.
With this, we have successfully mastered the global supply chain issues of the year 2022 and also maneuvered around some of the delays in export licenses that required us to shift some production slots back and forth within the year 2022. In this place, I would like to express a strong gratitude to the entire AIXTRON team that had made all these achievements possible in a difficult year, 2022. Namely, that we fully delivered on our upgraded 2022 growth guidance in all aspects. I will hand over to our CFO, Christian Danninger. He will take you through the full year 2022 financials. Christian.
Thanks, Felix, and hello to everyone. Let me start with the financial highlights of our income statement on slide three. As Felix mentioned, orders in the quarter and the year continued to be strong and our backlog was up, fueled by the mentioned trends in demand. Revenues in 2022 were at EUR 463 million. Gross profit at EUR 195 million, both up 8% year-over-year. EBIT at EUR 105 million and net profit was EUR 100 million for the year, were both up 6% year-over-year. Quarterly revenues at EUR 183 million in Q4, even at the very strong level of EUR 181 million in the same quarter of last year.
Both gross margin and EBIT margin in 2022 were on the same levels as the corresponding margins in 2021, which was for 2% and 23% respectively. OpEx in the year went up to EUR 91 million, predominantly driven by higher variable compensation elements and higher personnel costs due to more staff, combined with slightly higher R&D spending. In fiscal year 2022, AIXTRON has primarily driven the completion of new product generations. In 2022, we completed a major publicly funded development project, which is why we recorded less other operating income from grants at EUR 5 million compared to a year ago at EUR 9 million. In 2022, we again utilized tax loss carryforwards and capitalized some additional deferred tax assets in the amount of EUR 9 million due to expected future profits.
Now to our balance sheet on slide four. Partially due to the shift of shipments as mentioned, by Felix, and mainly due to the preparation for higher deliveries in subsequent quarters, inventory levels at the end of 2022 went up to EUR 224 million compared to EUR 121 million at the end of 2021. The advanced payments received from customers were significantly up year on year at EUR 141 million from EUR 77 million, also indicating higher levels of shipments to be expected. The down payments represented about 40% of the order backlog. All this led to a total cash balance, including other financial assets, of EUR 375 million, which was below the EUR 352 million we had on the books last year.
Just a quick word on our free cash flow on the next slide before I turn back to Felix. Free cash flow in the fourth quarter was EUR 8 million compared to EUR 49 million in 2021. The difference compared to the previous year is mainly related to temporary working capital effects, like the mentioned increase in inventories and high accounts receivables due to the very late shipments in December 2022. We have also increased our investment in property, plant, and equipment, especially in R&D related lab equipment and extension. With that, let me hand you back over to Felix. Felix?
Thank you, Christian. Before giving you our updated view on the outlook for this year, I would like to share some highlights on our market development. The momentum remains strong in all areas. We see capacity build up or expansion activities in most of our addressed end markets. In particular, the area of wide-bandgap power electronics based on gallium nitride and silicon carbide has developed very strongly, now representing the biggest contributor to orders and revenues, in addition to the contribution from optoelectronics and MicroLEDs. Let's now take a deeper look at the area of silicon carbide-based power electronics. Here we see the demand accelerating, especially since we launched our new G10 silicon carbide technology solution.
Since its launch in Q3 of last year, this tool was received so well by customers that it now already represents the vast majority of all orders for our silicon carbide manufacturing solutions, suggesting a similar development in revenue going forward. With the new G10-SiC, we have again made great steps forward in the tool performance. In combination with our multi-wafer output, this enables our customers to produce SiC devices at a highly competitive cost position. We strongly believe that cost will be one of the major decision criteria in this market. Beyond the current volume ramp of the industry, driven by the fast adoption of battery electric vehicles, we see further demand down the line, driven by government policies pushing towards electric vehicles, similar to what we have seen from EU lawmakers who have banned the sale of new CO2 emitting cars from 2035.
Furthermore, we see the widespread promotion of renewable energy as very positive for the broad adoption of silicon carbide power electronics. We believe that demand for our silicon carbide manufacturing solutions will be the strongest growth driver for AIXTRON in 2023, and possibly even beyond. We observe a similar trend for our equipment in the area of gallium nitride-based power electronics, which continue to be in high demand by our customers. We see large industry players expanding their capacities at scale, while we continue to see new players entering the arena of GaN power. The adoption of GaN replacing the incumbent material silicon is going full speed ahead. The GaN market volumes are growing steadily, driven by our customers tapping into more and more sub-segments of the vast power electronics space, such as, most recently, the efficient conversion of household solar power.
Today's market participants have to increasingly make an active choice between fab investments into incumbent silicon-based device manufacturing or the novel wide-bandgap materials, GaN or SiC. Besides the much higher energy efficiency, this is the main driver for the acceleration in GaN power. For the gallium arsenide indium phosphide material system, we have just launched our new high-volume manufacturing platform, G10-AsP. It marks a major step forward in both the area of MicroLEDs, but also in the segment of high performance lasers and VCSELs. To all these three segments, the new G10-AsP offers the value of much lower particles, uniformity improved by a factor of 2x to 3x, and a much reduced consumption of process gases, which translates into a reduction of cost per wafer. Cost will be a main driver in this segment.
In the second half of 2022, we have seen a remarkable slowdown in all consumer electronics related investments of our customers, while fab expansions and telecom datacom did continue. We observed that the development work towards MicroLED solutions continue at the vast majority of our large customers despite spending cuts in other areas of these companies. At this stage, it seems that not all technological challenges for mass production, in particular in downstream processes such as mass transfer of pixels, have been solved yet. Given the focus and dedication of our customers, we are convinced that MicroLED display will be the next generation of display technology. With that, let me now present our full year guidance for 2023 on slide six.
First of all, it is important to note that we have adjusted our U.S. dollar to euro budget exchange rate at which we record U.S. dollar denominated orders and backlog for 2023 to $1.15 per euro from previously $1.20 per euro. This has just a minor effect on our orders and backlog, as only less than 1/3 of those are recorded in U.S. dollars. Secondly, please note that we expect to have a positive extraordinary revenue effect from the shift of some units that have been produced in 2022 and will be shipped and recognized as revenue in 2023. Based on strong customer demand, we expect orders for 2023 in the range of EUR 600 million-EUR 680 million.
In 2023, we expect total revenue in a range of EUR 580 million-EUR 640 million. This includes the above-mentioned shift of units that have been assembled already in 2022 and shipped in 2023. We expect a 2023 gross margin of around 45% and an EBIT margin between 25% and 27%. In summary, we expect a double-digit growth of the AIXTRON business in 2023, driven by the strong demand from power electronics and in particular from our new G10-SiC tool. With that, I'll pass it back to Guido before we take questions.
Thank you very much, Felix and Christian. Operator, we will now take questions, please.
Yes, thank you. Ladies and gentlemen, if you would like to raise a question, please press nine star on your telephone keypad. If you would like to withdraw your question, press nine star again. The first questions are coming in. Meanwhile, I will repeat. Ladies and gentlemen, if you have a question to stage, please press nine star. The first questioner is Mr. Martin Marandon-Carlhian of ODDO BHF. Please go ahead.
Hi, thanks for taking my question and congrats for the strong results. My first question is on MicroLED. Can you maybe give us a bit more color on your assumption in terms of orders and sales for MicroLED for 2023? It also looks like the first smartwatch using MicroLED may be delayed by a few months. Has this impacted your clients' roadmap in terms of ramping up their capabilities? That's my first one, and I have a follow-up.
Thank you very much. On that question relating to the MicroLEDs. We expect in 2023 to get a decent amount of orders and a decent amount of shipments on MicroLEDs because we see that our customers are continuing their, first of all, their R&D efforts. Also we see that customers are continue or start to build pilot lines, smaller scale pilot lines to really gain first experiences with the full production set, yeah, including the mass transfer and all these. With that, I would say, for us, the MicroLEDs might be in the order of 10% of orders and revenues in 2023. This is not yet the large, big volume ramp that could have been expected previously.
That might be shifted, a bit into the future, because as we have indicated in some of the complementary process steps, which has nothing to do with the epi, yeah, but it's the pixel transfer of the fully completed wafer with the MicroLEDs on it. We hear that on this process step that follows many steps after the epi deposition, there is still some technical challenge and topics to be resolved. That's our current understanding.
Okay. Very clear. Thank you. You also talked about very strong orders in silicon carbide with your new G10 tools, starting Q3 last year. I was wondering, was it more driven by one or two specific customers or by winning also new customers?
Very much, both. We have a strong repeat orders from existing customers, very strong. In addition, we have a very large success in winning new customers. Some of these new customers are ordering one or two tools, but also we have one new customer which is ordering relatively large quantity tools at once, so to say. All this is building up now in a very, very strong pipeline that we see for the G10 SiC.
Thank you. That's very helpful. Thank you.
Thank you. Next, we have Mr. Michael Kuhn of Deutsche Bank. Please go ahead, sir.
Good afternoon, gentlemen. Firstly, on the sales guidance, looking at the midpoint, I think you will add around EUR 150 million. Is that purely driven by power semis, or do you expect growth in other areas as well?
I haven't looked now in the detailed split of that. Let me give you a qualitative answer without now having the detailed numbers in front of me, yeah. I would say the very strongest contribution by far comes from the power semis, as we highlighted, also in our introductory remarks. To some extent by gallium nitride, which we continue to accelerate the ramp. Now as just discussed in silicon carbide, which is really adding an additional segment, an additional growth. This is by far the biggest growth driver. On the remaining optoelectronic business, as indicated before, we see a continuation of the business of MicroLED, not yet in an accelerating manner. That might come a year later, yeah.
Not for 2023, we see that on a good and a stable level continuing. We see in the year 2022 no or minor business in the area of red/orange/yellow LED. If you remember, that used to be always a certain part of our revenue, yeah. That is also dragging our margins down a little bit. You may have seen and remarked the 45% cost margin. Yeah. Now we got rid of this diluting effect, so to say. Yeah. That helps us a little bit. That falls out in this year because of the weakness of the consumer electronics market. We do see continued momentum on the other optoelectronics business.
Namely, we do see that the optical datacom business continues a very steady, a very solid growth path. We expect that further to continue also in future years, because we all know that the volume of data and data traffic is exponentially continuing and expanding, yeah. You know that we have a very strong market position in this one. We continue to serve that market. It continues to be growing. However, in absolute terms, the number of tools here are smaller than what we see, what needs to go into the silicon carbide power electronics, yeah. Just bear in mind, one silicon carbide wafer can just serve a couple of electric vehicles, yeah.
While one wafer of optoelectronics, I don't know, can serve a couple of thousand optical transmitters. That gives you already an idea why the silicon carbide is currently now adding so many tools and so many units. Maybe that helps you a little bit.
That helps definitely. One quick follow-up on sales mix. In the fourth quarter, the LED/MicroLED sales, was that MicroLED only, or did you still ship, let's say, old LED tools in the fourth quarter?
Mostly MicroLED. The red/orange/yellow LED was towards the end of the year and in 2023. Almost dead, I would say.
Okay. Fantastic. Then, a few more on P&L and also CapEx. CapEx went up quite a bit to around EUR 30 million last year. Is that kind of a new run rate, or do you rather expect a moderation here this year?
Well, CapEx is primarily as we indicated in the report, is primarily related to R&D activities. Yeah. Lab expansions, also, tools that go into our labs, and that just goes in parallel with all of our R&D efforts continuing at around that level. Rather going up slightly, yeah.
Metrology solution, yeah. To measure particle defects. Some of these tools are horribly expensive, yeah. Sometimes costing a couple of million for just a metrology tool. I would rather say that the run rate will rather go up.
Yeah. We still stay with our message. We have not changed our asset light operating model, this is primarily R&D driven and not operations driven. Yeah. You can expect that it's CapEx requirements are not significantly increasing driven by our volume growth, but it's really driven by our R&D activities.
Okay, that's good to hear. Maybe one more. You showed, I think about, EUR 17 million of overdue receivables, which was quite an increase year-over-year, but you still regard them as recoverable. Can you add a few more details on that position?
No, there's no concern on unrecoverable accounts receivables. That might only be timing effects, but there's no concern at all there.
All right. Then very last one. On the payout ratio, 35% this year and last year, is that a new permanent number we should look for? How do you more generally think about shareholder participation, both in terms of dividends and also potentially buybacks?
Yeah. To your first question, we continue to not formalize give out a formal dividend policy, yeah. However, after the strong year, 2022, we wanted our shareholders to, for sure, participate well in the good result of the year. We did not want to go down with the percentage from the prior year as a percentage of net income, yeah. That does not formalize a policy into the future. In general to cash allocation, of course, we are planning in general to continue with paying dividends, and we are also considering share buyback programs.
Right now, I mean, you've seen our cash flow in the last year, which was primarily driven by these working capital effects, okay. When we turn that into cash, especially at the receivable burst, but also part of the inventories, we will realize a strong most likely a very strong cash flow during the course of the year, and we will consider then how to have our shareholders participate in that in the right form.
Excellent. Many thanks.
Next, we have Mr. Adam Angelov of Bank of America. Your line is open.
Hi. Can you hear me okay?
Yes, Adam. Go ahead.
Okay. Perfect. Yeah, thanks, and good afternoon. Firstly, just one touch on gallium nitride. The penetration you're seeing there in different markets, it feels like data center is just starting really. I think, you know, in the consumer market, people are a bit unsure. Is that highly saturated now, i.e., are all smartphones coming with fast chargers? Just your view on that would be good. Then, yeah, the future growth drivers for GaN, beyond data center perhaps. Then, yeah, maybe start there and continue.
I think that's a very good question. I think gallium nitride tends to be associated a bit with the consumer stuff, I think that really should be taken out of the perception, yeah. The consumer stuff is a fantastic starter because it doesn't count so much on the reliability of devices. In the end, if your smartphone charger doesn't work anymore, you throw it away and you buy a new one, right? If you have a telecom base station sitting somewhere, let me say on a remote island location, it doesn't work anymore, you need to fly over with a helicopter just to replace a part, yeah, that's a bit more tricky, yeah.
If the data center goes down, yeah, you hit your service level agreement in terms of uptime, and that's really painful with your customer, yeah. Therefore, the consumer stuff were the first market to penetrate, but the consumer market in the end is really not the most relevant, also in terms of die size, yeah. On an 8 in wafer, you can put a couple of 1,000 smartphones to supply with, while in terms of data center, you need much larger chips. You may only be able to serve a couple of dozens or a few hundred of servers from one wafer. Just to put that up front. That being said, I think the real interesting adoption for gallium nitride just started.
It started with data centers and telecom base stations, which is, I would say, a traditional high voltage, high power solution. Also historically in the silicon business, that used to be key market driver. They are step by step now converting from silicon to gallium nitride simply because these devices are operating essentially 24/7 the entire year round. A server never gets switched off. When you can realize a benefit in energy efficiency, you see the benefit in your P&L. Also we see right now that additional areas are getting penetrated. One of the biggest areas that's currently taking off is the area of solar. Also a solar inverter is essentially running, I would say, maybe half of the hours of the year, always when the sun is shining, right?
Now with solar inverters, you need very big die sizes. They're very big converters you have in there. You achieve a benefit in efficiency, which you see in the individual P&L. The dynamics is very favorable here for the gallium nitride. There's new market segments coming, and these market segments are on the one hand being served by both the established big players. I think everybody knows who the big three, four established players in gallium nitride are. They continue to accelerate their capacity expansion. On the other hand, we see now new entrants coming into this market being attracted.
Typically, the new entrants focusing or they're having a very narrow focus on one of these segments, having a unique, go to market or application, benefit, and now looking into building out their own fab capacities. It's an acceleration of the demand in this market.
That's very helpful. Thanks. Just wondering on the power electronics business, if you could roughly quantify the size of gallium nitride versus silicon carbide for maybe 2022 revenue and then, moving forward into 2023, either in terms of order or revenue, where you think it lands.
I would say in 2022, so for AIXTRON power electronics revenue, it might have been 40% silicon carbide, 60% gallium nitride as a relative split. I think in 2023, it's probably the other way around, 40% gallium nitride, 60% silicon carbide, just as a rough indication. Yeah. You see gallium nitride is continuing to grow, and silicon carbide is clearly adding on top. The biggest single biggest individual growth driver for the year, so to say.
Yeah. That's very helpful. One more, if I could just squeeze it in. I think you talked about potentially getting to 50% market share in silicon carbide, in the past. Is that still the number you're looking at? You know, given the positive momentum you're seeing, yeah, how are you viewing that number now? That's all for me. Thanks very much.
I think that's a decent number to look at.
Okay, great. Thank you.
Next we have Olivia Honychurch of Jefferies. Please go ahead.
Hi. Thanks for taking the question. Apologies in advance if there is a bit of background noise. Just on the overall order outlook, maybe to ask a previous question in a slightly different way. You said that power saving silicon carbide and then GaN are gonna be the main drivers of growth this year rather than MicroLED. The MicroLED, you're seeing a lot of revenue from your first major customer this year, but it does feel as though that there may be a little bit of a payoff in 2024 without there being another big order. I guess the question is, do you see enough demand in GaN and SiC into 2024 and 2025 being able to keep driving good strength in the business, even if we do get a little bit of a head start in MicroLED?
Olivia, sorry, I can't understand the question at all. Maybe you shoot an email to Guido, and we just pick it up from that one.
It's online.
Background noise. No chance, no chance to hear what you say.
All right. Okay, I will do.
Good. All right. We'll come to that. Guido just bring it up in here then when it arrives in your inbox, yeah? Operator, next question, please.
Of course. The next questioner is Mr. Malte Schaumann of Warburg Research. Your line is open.
Yes, good afternoon. First question is a follow-up on the MicroLED side. Could you share maybe a number of with how many customers or potential or active players, active customers you're currently discussing on projects besides your large commercial customer?
Very good question. I think we're talking clearly about a double-digit number of customers. As mentioned before, the research and pilot line activities continue to be very strong on the MicroLED side. It's clearly all the display makers, yeah, who's currently in the display business. We also work with the large consumer electronics companies here. Given the weakness in the consumer electronics market, we have heard from some of these large giants about job cuts. Yeah, I think that went around through the press, especially in the fourth quarter in Silicon Valley in the Q4. We were very happy to then see that none of the MicroLED programs has been affected by these job cuts, yeah, that we saw in the consumer area.
Those activities are ongoing. As mentioned, display makers, consumer electronics players, of course, also a number of technology-driven startups who drive and develop new technology, of course, with a clear aspiration and a clear idea that when it comes to the rent, they either sell or license their technology, or they get bought up by one of the giants who has the cash to put down double-digit billion investments into fab. That's clear.
Mm-hmm. Good. If these customers build a pilot line, kind of are they also ordering all colors from your side or do they kind of mix and match and just pick, I don't know, red or something from you and then blue from other ones, or are they going with one supplier here?
Those players who do the full color game, yeah, are ordering all colors from us, RGB. Nevertheless, we also know that there is some players who work with color filters. Yeah. They only do blue LEDs and the green and the red is being created by color filters or some other color conversion method. Yeah. This is a different approach. These ones are also ordering tools from us.
Yeah. Okay, good. With respect to the technical delays, we see in the industry, from your point of view, do you think that will be sorted out in the next, let's say, six to 12 months? Or have there been some serious threats that could lead to a larger push out of the technology adoption?
Honestly, I should admit we are not very close to this step because it's not directly connected to what we do. Yeah. Everything around the epi and the steps directly before or after the epi, we typically know from close collaboration with customers. This step, as mentioned before, is clearly many process steps after our step. Therefore, we don't have a, let me say, original, genuine insight or market insight. Yeah. I wouldn't therefore want to give a qualified opinion.
Okay. Fair enough. On the service spare parts business, you're guiding for an increase to EUR 100 million this year, which is quite substantial. Nevertheless, you're still growing revenues quite substantial as well. Should we expect then another strong rise then in the future years, 2024, 2025? Do you expect that level to be more or less sustainable at the EUR 100 million you're expecting?
No, I expect further growth in this area.
More or less in line with top line growth or is there a different function?
Oh, there's multiple factors involved. It grows with the installed base of our current series of tools, which of course is growing step by step as we grow the revenue. It's not directly connected to the revenues.
Okay, good. A question on the tax losses. I saw that the tax losses have, according to the annual report, increased quite substantially. I was wondering if you could, what's the explanation for that? I think they've gone up from EUR 150 million [audio distortion] . What's the reason?
Yeah. Christian here. I take that quite detailed question. Good catch. There has no, there has been no change in the tax loss carryforward. It's a pure disclosure topic, yeah. In this year, if you read very closely, we are now disclosing the absolute amount of tax loss carryforward, which is the EUR 283 million that you find in note 14. While in the prior years, we disclosed actually the deferred, the actual deferred taxes on these losses. It's a technical difference, yeah. It's just because this IFRS standard here actually requires this disclosure, so there's no content-wise change. It's a pure, it's a pure disclosure change. Yeah. Does that answer your question?
Yeah. Fine. Thanks. Quickly, a last one on your R&D budget. Maybe you can share a number. Obviously, R&D budget is expected to go up quite strongly this year. Will it exceed EUR 70 million in 2023 or come close to that number?
It will exceed the number.
Okay, good. Thanks.
Ladies and gentlemen, if you still have a question to stage, please press nine and star. Meanwhile, we have received the questions of Olivia Honychurch.
Thank you, operator. On the overall order outlook, you said that power semis are the predominant driver of orders rather than Micro LED. For Micro LED, you're seeing a lot of revenue from your first major customer, but it sounds like that may tail off slightly in 2024 without there being another big order yet. The question is, do you see enough demand in GaN and silicon carbide into 2024, 2025 being able to keep driving good strength in the business, even if there's a bit of an air pocket in Micro LED?
I understand the question relates to the years 2024 and 2025, beyond 2023. I would expect that we continue our growth path also beyond 2023 because we see the strong demand on the GaN and the silicon carbide side. Yes, in fact, the MicroLED topic is shifting or has shifted somewhat in terms of the big wave coming. We see the MicroLED continuing on the basis like 2022. It's not going down. It's rather staying stable on a stable level, yeah, rather accelerating. Sometime in 2024 or sometime in 2025, the MicroLED will kick in in addition.
The timing we can't tell, yeah, also relating to one of the previous questions we just had, but at some point it will also kick in.
Okay. A follow-up question here on another question before. New silicon carbide customer ordering relatively large quantities. Is that a Chinese customer or perhaps European-based one?
The majority of our silicon carbide customers is based in Europe and the U.S. This is where we currently see also the strongest momentum. On the one hand, we know that Europe is traditionally very strong on power electronics in terms of the device makers. I think we all know the name. Also the U.S. is very strong in power electronics, and we see further momentum now, of course, from the U.S. Chips Act, with U.S. customers also expanding their facilities.
Okay. One more question on the growth margin. You previously said that the 45% was a midterm aspiration, but now you're guiding to it in 2023 already. Does that mean we can now assume that this is, that the medium-term guidance should be higher, or is that about the level we should expect going forward?
It's a very good but also a very difficult question, because we all know that there is different market forces at work. On the, on the one hand, we have achieved the 45% much faster than we had expected due to the fact that the diluting red, orange, yellow business has now fallen off. On the other hand, along with the growing volumes that we see in our markets, our customers are driving for further productivity and further cost. We have to see how that develops. I would say 45% is for sure to be set. There might be an uptick in the years to come. Let's see.
That's the questions we have now.
Good.
back to the operator.
Olivia, did that also answer all? If there's others, just let us know. Yeah.
Operator?
Of course. Thank you very much. Next, we have Jeff Bernstein of Cowen. Please go ahead.
Hi. Thank you for taking my question. You guys have an investment, I believe, in an Australian company called BluGlass that was developing an RPCVD capability on your tools, I guess they've gone commercial with high power blue and green lasers. Can you just talk about what you see as the importance and the opportunity there?
Thanks for the question. Just to clarify, we do not have an investment in this company. BluGlass in Australia is a customer. They have purchased tools. They work on a specific technology. I don't want to reveal the details because I don't know what they have revealed themselves. We serve them as a regular customer as we serve other customers. Now, of course, all the collaboration and all what they aspire to do is under an NDA, as with all the other customers. I could not reveal in this place now details about what they do, what specific they try. Of course, I do know that, but that would not be the right thing to disclose it here in public.
I think you would need to approach their board directly and their management team.
I understand. Thank you.
Mr. Adam Angelov has a follow-up question. The floor is yours.
Yeah. Hi. Sorry. Just a very quick one, and thanks for letting me back on. Just wanted to check on the export licenses where you're at. Have you fully received everything that maybe was slow to come in the second half of 2022?
Yeah, we see that the missing licenses are now coming in one by one. Also now the units that we spoke about are shipping step by step. Not all of them are yet there. We see that the situation is, it starts to be relaxing.
Great. Thank you.
Next, we have Ms. Elisabeth Weisenhorn of Porticus Investment. The floor is yours.
Yes. Hello. I would like to raise also the question of these export licenses, because here in Germany, the economic ministry, they do have some change in their policy towards China. Sometimes I, yeah, I think maybe these, this slow process in giving out the export licenses is not only because of bureaucratic hindrance, but it is more of a systematic thing. Second, your part of turnover in China was always very high. Does that now change? How do you look at this from a risk standpoint?
I see two questions. The first, whether there is a systematic change on this policy. We cannot confirm that. We rather see that the licenses are coming. Some are coming a bit faster than expected, others are coming a bit slower than expected, but they are all coming. We cannot confirm a systematic change here to your first question. To the second part of your question about the China share of revenue, that's a very good observation, that's related mostly to the end market and the end application and the regional strength of different applications.
For the last 10 years, AIXTRON had a very strong China exposure, driven largely by the LED market and the LED industry, which was mostly located or which is mostly or was mostly in the traditional LEDs located in China. While we all know that the highly innovative MicroLED topic is mostly driven out of Europe and the U.S. We currently see, as mentioned before, the biggest growth momentum coming from gallium nitride and silicon carbide power electronics. Again, an application or two applications where the majority of customers and the real strength is located in Europe and in the U.S. With that, we do see the share of China revenue as a percent of overall revenue going down quite strongly. It used to be somewhere 50%-60%.
I think we are now talking 25%, 30%, something on that order. That's due to the shift of end market. Yeah. However, also to be very clear, we have a very good, very strong, also in some segments, very innovative customers in China, which we continue to serve and which we want to continue to serve. I think it's only a question of time, when China is also picking up on these new applications that's currently causing so much growth for us. Operator?
Yes. Thank you. The last questioner is Mr. Johannes Ries of Apus Capital. Please go ahead.
Yes. Hello. Good afternoon. Thanks for giving me the final question. Only maybe coming back on MicroLEDs, only to have a feeling about the size of the opportunity. I think it is unchanged given so maybe technology problems we have now for some time being. Is it still the case that despite silicon carbide and gallium nitride, especially silicon carbide are growing stronger than maybe one or two years back expected, that this is in the longer term for your maybe largest markets opportunity? Is that still right?
I would see that the market opportunity is really quite balanced across all the three material systems that AIXTRON is offering in its portfolio. Again, there may be certain shifts, yeah. But I would say to a very rough order, you could say 1/3 silicon carbide, 1/3 gallium nitride, both power, but also the LED side of the gallium nitride, and 1/3 gallium arsenide, both on the lasers, the VCSELs, which is the established market, as much as the gallium arsenide side, the red MicroLED. Yeah. In individual years from this 1/3 , 1/3 , 1/3 , of course it can deviate. In, you know, a specific year, one of those may be around 40% or even a little higher than 40%.
I would say we have a quite stable basis of all three material systems. Yeah.
MicroLED, it's the largest opportunity here, isn't it?
I wouldn't want to quantify it like that.
Mm-hmm.
I think it's nicely competing with silicon carbide. If we see all the plans for electrification of everything, yeah, and the replacement of all combustion engines and burning of fossil fuels with electric things, yeah.
Okay.
You know, if you look at the big growth driver on everything that needs to be replaced from the fossil economy to an electric economy, you need power electronics. silicon carbide for the very high power, gallium nitride for the lower power. Yeah. If you, I just read a study in 2050, more than 50% of the world's energy will be produced by solar cells, yeah. Not only here in Germany, where we might be pushing this a little faster than others, yeah, but also in developing countries. All these need power converters, yeah, on the roof, so to say, yeah, or on the field, yeah, where the solar cell is attached. All these power converters will be either gallium nitride or silicon carbide. Let's see.
I think the future is uncertain, but for sure growth.
Great answer. Thanks a lot.
Thank you.
Thank you. Thank you for all the questions. This ends today's call. Our next earnings call will be Q1, our Q1 call on April 27th, followed by our annual general meeting on May 17th. We ask you to participate and ideally support us. Until then, I'd say goodbye and see some of you in between. Thank you very much.