8:31. Good morning and good evening, ladies and gentlemen. My name is Romil, the group's Head of Investor Relations, and I will be the moderator for today's call. On behalf of ASMPT Limited, I would like to welcome all of you to the group's fourth quarter and full year 2022 investor conference call. I would like to thank you for your interest and your continued support in the company. Please note that all participants will be on listen-only mode when the management is presenting. We will start the Q&A only after the management has gone through the entire presentation. We endeavor to answer all questions during the Q&A session, but due to time constraint, priority will be given to the covering analysts. I will highlight the instructions for asking questions just before the Q&A session. Before we start, let me quickly go through the disclaimer.
Please do note that during this conference call, there may be forward-looking statements with respect to the company's business and financial conditions. Such forward-looking statements could involve known and unknown uncertainties and risks that could cause actual results, performance and events to differ materially from those expressed or implied during this conference call. For your reference, the investor relations presentation related to our recent results can be downloaded from our website. For the call, we have our Group CEO, Robin, and our Group CFO, Katie, on this call. Robin will begin with a brief discussion and group key highlights, then Katie will provide color on the financial performance. This will be followed by an update on the guidance and outlook, then we will open the floor for Q&A. Without further ado, let me hand the time over to Robin now.
Thank you, Rom. Good morning and good evening, everyone. Let me thank all of you for joining our earnings conference call for the fourth quarter and financial year of 2022. I trust that all of you are keeping safe and well. Before I give an update on our performance of 2022, let me share some reflections on this past year from our perspective. We had an industry super cycle the previous year in 2021. Thus, we began 2022 optimistically, buoyed by an unusually strong post-pandemic sentiment with most of the world seeming to return towards normalcy. However, this optimism quickly faded away as developments arose that impacted the entire world. The Russian-Ukraine conflict, coupled with the ongoing trade tensions, persistent inflation and lingering effects from the pandemic, created challenges for global economies. Their collective consequence was far-reaching for our industry.
As consumer sentiment weakened, our industry also entered a semiconductor down cycle. We are still grappling with the collective effects of these developments. Nevertheless, I'm pleased to share that the group delivered a resilient performance for the fourth quarter and the whole year in 2022. These results are no mean feat. In fact, the group's performance for 2022 has surpassed pre-pandemic levels, recording its second-highest annual revenue and bookings. This performance also comes right on the heels of the super cycle year of 2021, with its record revenue and bookings. In this regard, the board and the management team and I are deeply indebted to the collective efforts of our more than 12,000 staff worldwide.
Let me share that part of our success in navigating a challenging 2022 was our ability to effectively tap the competitive advantages of our unique and broad-based portfolio of semiconductor and electronics manufacturing solutions. This spanned mainstream applicative and advanced packaging tools and served various end market applications across a global pool of customers. We truly believe our solutions portfolio continues to be a differentiator for us and help underpin our performance in various ways. I will touch on key elements of this during this call. Let me now take you through today's presentation. Our first highlight is that the group performed better than the guidance we gave last quarter. For the fourth quarter of 2022, revenue exceeded the top end of our guidance and also delivered gross margin above 40% for seven consecutive quarters, even through a down cycle.
Let me give you some color on how our unique and broad-based portfolio came into play for our overall 2022 performance. Basically, even though 2022 was a semiconductor down cycle year, the group's SMT segment delivered record revenue in 2022, fueled by strong demand from the automotive and industrial end markets. The SMT segment also recorded its highest ever share of contribution to group bookings in 2022. These developments clearly reflect the resilience of our business model, even in the semiconductor down cycle. Let me now mention briefly our end markets. With the macroeconomic uncertainties and dampened consumer sentiments. Our Consumer, Communication, and Computers end markets are what we call the CCC end markets, were weak in 2022. However, our automotive and advanced packaging end markets helped underpin the performance for 2022.
Both automotive and advanced packaging combined delivered about 40% of the group revenue for 2022. I will provide more color on these end markets later. Before going deeper into the business highlight slides, I want to make a bold statement regarding our ESG efforts. I'm proud to highlight that the group has dedicated itself to becoming an ESG leader in the semiconductor industry. We have crafted a comprehensive ESG framework and an action plan has been implemented throughout our global operations. An immediate key environmental focus is on eliminating our emissions footprint. In this regard, ASMPT has committed to reducing its Scope 1 and 2 emissions to net zero by 2035. We know that this is an aggressive target, we are fully dedicated towards achieving this.
We are also privileged to become a leadership level, founding member of the inaugural Semiconductor Climate Consortium that was launched in late 2022. With fellow consortium members, ASMPT will jointly address climate change issues across the entire semiconductor value chain and help accelerate solutions to address climate problems through the pooling of industry resources. For more details about ESG efforts, please refer to our upcoming ESG 2022 report, which will be released along with our 2022 annual report in about a month's time. This slide gives a quick summary of some of the group's key financial metrics for 2022. The positive impact of our unique broad-based portfolio was apparent as the 11.8% year-on-year decline in group revenue, mainly due to the SEMI segment, was partially mitigated by revenue growth from the SMT segment.
As our two segments follow different business cycles, while the group had witnessed a 25.2% year-on-year decline in SEMI segment revenue, there was a growth of 9.8% in SMT revenues. Group bookings declined 29.4% year-on-year in 2022 due to a record base effect for 2021. SEMI registered a sharp decline of 44.4% year-on-year due to the semiconductor down cycle and weak consumer sentiments. However, our SMT segment was relatively less affected and experienced only a 5.9% year-on-year reduction in bookings due to strength in its industrial and automotive end markets. Overall, our advanced packaging, automotive, and industrial end markets combined make up the majority of the group bookings for 2022. The group ended 2022 with a strong backlog of $1.15 billion.
Our backlog has remained at a reasonably high level with a higher proportion of automotive and advanced packaging tools in the mix. The book-to-bill ratio was 0.95 for 2022. Group gross margin improved year-on-year, even in the down cycle years, as both segments contributed to overall margin enhancement. The group delivered net profit of HKD 2.62 billion for 2022, and earnings per share was at HKD 6.36 for the same period. I mentioned the stellar performance of our end SMT business earlier, let me just add a couple more points here. The segment's automotive and industrial end markets contributed close to half of the segment revenue for 2022. This was due to strong demand for its high-end placement and printing tools, mostly coming from Europe and Americas.
This sturdy performance give us confidence that our SMT business gain market share and surpass its competitors in 2022. Let me now share about the automotive end market, which has experienced strong growth, delivering a record performance for that year in tandem with intensifying automotive electrification trends. This end market enjoyed 20% year-on-year growth in revenue, achieving its highest level of about $515 million. Automotive also had the highest weightage of group re-revenue at about 21%. The group has a comprehensive range of automotive solutions and those are highlighted on the right side of this slide. Looking in particular at the group's laser singulation, sintering, and SMT business solutions, this witnessed demand growth with the addition of more top-tier customers globally. It is worth also noting that our laser singulation and sintering solutions are the Process of Record for fast-growing silicon carbide-related applications.
Furthermore, in addition to customers for conventional and hybrid vehicles, our solutions have also been increasingly serving pure electric vehicle or EV players, including fast-growing Chinese EV players. Based on these points, the group's estimated addressable market for the automotive end market will grow from approximately $2 billion in 2023 to $2.9 billion in 2027 at a compounded annual growth rate of about 10%. The group is confident of having the industry's most comprehensive suite of advanced packaging solutions across our SEMI and SMT segments. The range of tools are shown at the bottom of this slide. The group's advanced packaging solutions contributed roughly $500 million in revenue for 2022, or about 20% of the total group revenue. Advanced packaging's weightage in terms of percentage of group re-revenue has also remained stable year-on-year.
The addressable market for advanced packaging solution is estimated to progressively expand from approximately $1.5 billion in 2023 to $2.5 billion in 2027 at a compounded annual growth rate of about 13%. The group is confident of gradually growing its market share here. Amongst our advanced packaging solutions, some have dominant market shares, while others are primed for growth. Let me touch on this in the next few slides. These are our market leading advanced packaging solutions. First, Thermo-Compression Bonding, or TCB. We are an established market leader with the largest in-stock tool base. Backup for TCB tool is over $100 million, a significant portion of this will be delivered in 2023. We have also received repeat TCB orders for High Bandwidth Memory, the demand forecast remains healthy.
There is also good progress on the next generation of TCB tools with environmentally friendlier ultra-fine pitch chip-to-wafer capabilities. We expect these advanced TCB tools to be delivered starting from the first quarter of 2023 for our customers' qualification. These advanced T-TCB tools will overlap the domain being served by the nascent hybrid bonding technology, and they have a better total cost of ownership than hybrid bonding in many niche applications. In terms of competitive edge, the group's TCB solution can achieve high placement accuracy below one micron. Let me give a quick update on our hybrid bonding or HB side as well. Based on the industry's application and process learning so far, the market demand and requirements for HB tools are still evolving, with more stringent requirements for higher yields, throughput, and placement accuracy.
The group's HB development roadmap is factoring these evolving dynamics to develop and deliver leading-edge solutions that are aligned with our customers' high-volume manufacturing ramp-up. Bearing this in mind, the group's HB tools remain on track to deliver qualification tools to leading customers in Asia and U.S. for logic and other types of applications. Next, for Panel Electrochemical Deposition or panel ECD tools. The group has a dominant market share with worldwide deployment of multiple tools in several high-volume manufacturing sites, driven primarily by High-Performance Computing needs. These solutions are also well-placed to meet the growing need for panel-level packaging and panel plating for heterogeneous integration packaging, as these tools have below 10-micron line or space capabilities. To be closer to its customers in Asia, the group's Malaysian operation have also started shipping modules for panel ECD tools, and this reflects our supply chain resiliency.
SMT's market-leading system-in-package or SIP placement tools experience robust demand fueled by proliferation of 5G, smartphones, and high-end wearables. Taking into account customer requirements for high-speed and high-accuracy die placement solutions, the new chip assembly solution will be introduced in 2023. This slide showcases our advanced packaging solutions that are primed for growth. For advanced displays, as demand grows for seamless large size display, the potential for Mini LED and Micro LED is evident. We believe that our Mini LED solutions have helped speed up mass market penetration for advanced display, while our Micro LED solutions are aging closer to eventual mass market adoption. Promising new areas of opportunity, including AR, VR, and near-eye displays also bode well for our solutions. On the whole, we believe we are well positioned to gain market share in advanced display.
For laser simulation, the group has been gaining market share, fueled by accelerating demand for more complex chip architectures with challenging requirements. The group's product and technology roadmap for laser simulation is also closely aligned with leading IDMs, and we believe our next generation laser simulation tools will deliver long-term revenue contribution of at least $100 million annually. In line with strong market demand signals, we have ramped up production capacity to deliver tools from our Singapore operations, helping bring production closer to many of our key customers. Silicon Photonics is another area gaining traction. Silicon Photonics solutions enable high data rate and power effectiveness for cloud computing using laser optical fibers. For such applications, the group's AMICRA tools are the market leading system with very high accuracy of 0.2 micron placement capability.
These advanced tools cater to all high-end manufacturing needs for both Silicon Photonics and co- packaged optics devices, are utilized by leading tier one players for optical communication. Let me now hand over the time to Katie, our Group CFO, who will share our financial performance. Katie?
Thank you, Robin. Good morning and good evening, everyone. This slide shows our key financial metrics for financial year 2022. As Robin has shared, the group delivered a resilient performance in 2022, following the super cycle year of 2021, with revenue and bookings for 2022, the second-highest ever, despite industry down cycle and weak consumer sentiments. The group delivered revenue of $2.47 billion, a year-on-year decline of 11.8%. Our Semi and SMT segments follow different business cycles, that shielded our revenue performance as revenue decline in Semi was partially offset by growth from SMT. In terms of contribution from end markets, automotive and industrial drove strong year-on-year revenue growth of 20% and 32% respectively. Our CCC end markets combined witnessed a slowdown due to a weak market sentiment.
Bookings for the group declined 29.4% year-on-year to $2.36 billion, mainly due to a high base effect in 2021. The effect of the group's unique broad-based portfolio was seen here as the Semi segment registered a sharp decline of 44.4% year-on-year, while the SMT segment declined only 5.9%. It is noteworthy that from an end market perspective, advanced packaging, automotive and industrial combined contributed about 60% of group bookings. The group was able to deliver gross margin expansion during the down cycle year as our gross margin improved by 55 basis points to 41.1%. Both Semi and SMT segments drove this due to a favorable product mix, targeted pricing adjustments, and the effect of ongoing strategic initiatives.
For the fourth quarter of 2022, the group exceeded the top end of the revenue guidance of between $455 million-$525 million. Fourth quarter revenue was $553.1 million, which was a decline of just 5.1% quarter-on-quarter. Robust performance from the SMT segment contributed 56.5% of the group's revenue, which helped mitigate a decline in revenue from SEMI. Group bookings came in at $398.0 million, a decline of 14.6% year-on-year due to a high base effect in 2021. Bookings declined 14% quarter-on-quarter, mainly due to seasonality. The group has held its gross margin consistently over 40% for seven straight quarters, right through the super cycle year and an industry down cycle.
The group's gross margin was 41.4% in the fourth quarter, an improvement of 55 basis points quarter-on-quarter, coming mostly from the SMT segment. SEMI registered a decline in revenue for the fourth quarter due to semiconductor down cycle and weak consumer sentiments. Revenue was at $240.6 million, a decline of 14.7% quarter-on-quarter. The IC & Discrete business unit continued to experience weak demand for its mainstream tools, but its tools serving the automotive and advanced packaging markets largely witnessed growth. Revenue for the optoelectronics business unit was driven by demand for more advanced tools, serving ultra-fine pitch Mini LED displays and in silicon photonics applications. Lastly, while the CIS business unit continued to be impacted by ongoing softness in the global smartphone market, the group won some orders for its active alignment solution for high-end smartphone applications.
Segment bookings were at $143.6 million, a decline of 59.6% year-on-year due to a high base effect. Bookings were down 24.4% quarter-on-quarter due to the ongoing down cycle and seasonality. On a year-on-year basis, the segment registered an increase of 74 basis points in gross margin to 44.4% due to both increased revenue contributions from automotive and advanced packaging end markets and the effect of ongoing cost control measures. The SMT segment continued stellar performance and contributed the majority of group revenue for a second consecutive quarter. Fourth quarter revenue of $312.5 million was an increase of 16.4% year-on-year and a 4.0% quarter-on-quarter.
Revenue grew due to strong contributions from the segment's high-end placement and printing tools for mainly industrial and automotive applications. Industrial and automotive end markets combined contributed more than half of the segment's revenue. The bookings from industrial and automotive end markets continued a strong contributions to the segment. SMT's overall bookings of $254.4 million declined 19.1% year-on-year and 6.8% quarter-on-quarter. This was mainly due to seasonality and a continued weakness in the triple C end markets. Segment's gross margin for fourth quarter came in strong at 39.1%. This was an increase of 235 basis points year-on-year and 171 basis points quarter-on-quarter. The gross margin improvement was mainly due to a favorable product mix.
This slide shows another aspect of our broad-based portfolio. We serve diverse end market applications and then provides necessary resilience to our business. This was evident in 2022 as we witnessed a slowdown in the CCC end markets, partly mitigated by strong year-on-year growth in the automotive and industrial end markets. Another dimension of our unique broad-based portfolio is that we serve a global base of industry-leading semiconductor and electronics manufacturers. Our diverse customer base includes IDMs, OSATs, fabless foundries, high-density substrate manufacturers, EMS players, and others. This has enabled the group to continue experiencing a low degree of customer revenue concentration, with the group's top five customers accounting for only about 12.8% of its total revenue in 2022. With our customer base truly global, the group also enjoys resilience when it comes to revenue contribution by geography.
Mainland China, including Hong Kong, witnessed a decline in revenue year-on-year, and its shares of group revenue reduced from 52%- 42% year-on-year. However, this was compensated by revenue growth from Europe, the Americas, and Malaysia. The existing dividend policy is to maintain payouts of about 50% of group's profits on an annual basis. For 2022, the board proposed a final dividend of HKD 1.9 per share, including the interim dividend of HKD 1.3 per share. The total payout for 2022 is HKD 3.2 per share. With that, I will hand the time back to Robin for Q1 revenue guidance and the 2023 prospects.
Thank you, Katie. Let me provide some color on the 2023 outlook before touching on our first quarter guidance. Based on feedback from our customers and insight from industry watchers, indications seek to point towards the beginning of a recovery in the second half for the semiconductor sector. Analyzing internally, we see some encouraging factors. Our backlog remains sizable at $1.15 billion as of end December 2022. We expect the majority of this backlog to be delivered in 2023. As we highlighted earlier, the automotive, industrial, and advanced packaging end markets combined make a robust contribution to the group's 2022 bookings, and we continue to see strength in these end markets that are supported by long-term secular trends. Lastly, our unique broad-based portfolio continues to provide the group with a strong foundation and competitive edge.
These factors combined should help drive the group performance in 2023. Looking at the current quarter, we continue to face the semiconductor down cycle and macroeconomic uncertainties. The group expects revenue for the first quarter of 2023 to be between $455 million-$525 million. At the midpoint of this guidance, this will be a decline of 11.4% quarter-over-quarter. We have highlighted this slide before in previous earnings call. It comprehensively sums up our unique broad-based portfolio that provides the group with competitive advantage and resilience to industry cycles.
We have explained the aspects of our unique broad-based portfolio throughout today's presentation, so let me just highlight here that our unique broad-based portfolio is not only defensive during turbulent and uncertain times, but also position us well for growth when the opportunity arrives. For this last slide, I just want to highlight that the group's ability to scale up its revenue through industry cycles. You will see from the bold red columns that the group's average revenue for the last three years is more than 20% above the average of the preceding three year period. With this, let me conclude our presentation. Thank you, and we are now ready for Q&A. Let me pass back the time to Rom to facilitate.
Thank you, Robin and Katie, for taking us through the presentation. For asking questions, please either use the Raise Hand function or type your questions in the chat to ASMPT Q&A. Please ask your questions one by one and limit them to two questions at each time. Feel free to join the queue again if you have more questions. With that, can I request Gokul from JP Morgan to unmute yourself and ask your questions?
Yeah. Hi. Thanks for the presentation. Thanks for some of the increased transparency as well in terms of the numbers. My first question, Robin and Katie, is on the Semiconductor Solutions. Are you starting to see any kind of recovery in terms of bookings in the current quarter for the Semiconductor Solutions? We have seen the bookings decline substantially over the last several quarters. Could you talk a little bit about what you're seeing in terms of bookings? Is Q4 or Q1 going to be the bottom? Are you seeing some encouraging signs from the customers that Q1 is likely to be the bottom for the Semiconductor Solutions business?
Also maybe, related to the SEMI business itself, could you also talk a little bit about any pricing dynamics? I think, you had seen some encouraging pricing dynamics in 2021 during the super cycle. Are we seeing any of that getting reversed right now, given you've been able to hold your gross margins pretty steady, even while bookings and revenues have declined more than 50% the peak levels? That's my first question.
Thanks, Gokul, for that. Maybe I will request Robin to answer your first question. In terms of the breakdown, I'll request Robin to maybe give a bit of color on when he expects the down cycle, or rather the bottom to be in terms of the bookings. Part two of that question will be guidance of Q1 2023 bookings. With that, Robin, can you help with that answer?
Okay. Thanks, Gokul, for the question. I think your question is pretty long, so let me try to recap, whether I can answer all your questions in one go. Now, I think your first part probably refers to some kind of color for Q1 bookings. Let me start with maybe some color first. Now, as usual, we, you know, we don't guide. We don't provide a quantitative guidance for NEXX quarter bookings. But we can certainly give you some color the way we see it. Now, we expect the group Q-on-Q bookings to increase by maybe between 10%-20%. So Q1 will be higher than Q4 by, say, 10%-20%. We believe this is largely in line with a seasonality trend. Q1 bookings tend to be higher than Q4.
Right.
Now, we see strength still in certain segments, like automotive. I think automotive will continue to be strong. Likewise, I think for industrial segment and the advanced packaging, I think the momentum are also pretty stable over for industrial as well as advanced packaging. Now, I think the whole industry is hopeful that, you know, China will start to recover after lifting its COVID-19 restriction. We do see some pockets, you know, of buying interest from Q1 from certain China customer base. A little bit color, you know, for high ends, high-end applications and also automotive. But we would say that this is not a sign of a broad-based China recovery yet. As I said, we are just seeing some pockets of buying interest from the Chinese customer base.
I think the other part of your question is relating to whether, you know, when do we see the semiconductor down cycle. We of course do a lot of China check-ins, you know, with our customer base and also looking at how the industrial watches or independent research house look at, you know, where the semiconductor, you know, industry will go from here. Feedback from our customers and generally industry view is that the recovery could begin in the second half of 2023. Many customers of ours who have announced the result also cited that one possible tailwind, you know, for this, for this to happen is that the positive effect of the Chinese economy from the lifting of the COVID-19 restrictions. I think this is so far my answer for your question.
Gokul, the last part of your question, I will request Katie to answer. Basically, you talked about any pricing dynamics in 2021 that are being reversed now since our GM has held steady despite the revenue decline. Can I request Katie to comment on that?
Yeah, Gokul, thanks for your question on pricing. As we have communicated in previous quarters and as you pointed out, that we have Increased our price during the super cycle years in a very sensible way, in a very targeted way. So far, by and large, we are able to sustain that pricing level. Now, of course, it's a competitive market, and especially for our orders that have been quoted in U.S. dollars. Because of US dollar strengthening last year, we had some headwind on the FX side. For equipment sale, pricing is determined by many factors, right? Customers do consider our solutions, our strong relationship, our leading technology, and our after-sales services, right, in a combined way. Just the short answer to your, to your question is that from the gross margin performance, you can tell that we have been able to sustain the pricing level.
My NEXX question, I'll just reference the SMT Solutions, given it has been very resilient. The auto and industrial mix, being greater than 50% at Q4, could you talk a little bit about the history of that? Is that a very recent thing, or it's something that has evolved over a period of time? People are expecting a major smartphone model upgrade cycle in second half. There is also some supply chain relocation happening for some of your key SMT customers. How do you expect these to also affect? Is that a positive tailwind that you're already seeing into some of the bookings and revenues coming through for SMT? Thank you.
Gokul, for your first part of this question, maybe, let me request Katie to just give a brief on our recent SMT's performance in relation to auto and industrial. A bit more color on that, I will request Robin to take over from there.
Yeah. Just from historical perspective in terms of auto industrial, definitely the percentage of its contribution to the overall business has grown significantly. The automotive portion of the business was historical, and the percentage of its weightage probably in teens and now it's actually going up, even reach very high teens. The same thing for industrial. It's actually more than double or triple. They're actually in different quarters for industrial. It's a pretty steady increase for both end markets for SMT. I'll pass it to Robin.
I'll just add a little bit more color to what Katie said. I think all along, our SMT solution has been always very strong in terms of the automotive, catering to the automotive and industrial segment because of our solutions, you know, in comparison to our peers. As we all know, for 2022, these two segments market-wise are very strong. We benefited from the very strong market demand in these two particular areas. You know, because of our tools capability, you know, we really benefited from that two segments in 2022. I think, hopefully that give you some color why, you know, SMT performed so well in 2022.
I believe, we also believe that these two segments. The momentum will continue to be strong, going forward because of, you know, because of electrification trends in automotive, ADAS demand, for example. For industrial, we believe a lot of these devices actually go into factory automation, smart solutions, green infrastructure, and also a lot of demands are coming from that kind of applications for industrial. Next, please.
Next, can I request Donnie from Nomura to unmute yourself and ask your questions?
Hi. Good morning, management team. Can you hear me?
Yes, Donnie, go ahead. Thank you.
Yeah. Thank you for taking my question. I think my first question just to follow Gokul's first question. You mentioned about first quarter booking may sequentially in first quarter and looks like semiconductor solution is improving. Wondering if you could give us some more detail about like IC & Discrete, CIS, LED, and SMT separately for the booking momentum in the first quarter. Also, in terms of the IC & Discrete, I think OSAT companies are still conservative on their CapEx outlook this year. Looks like automotive electron is particularly driven by IDM companies are like, as you just mentioned, is like still very strong. Wondering if you could also comment on that, like, some, how much bookings are like driven by the IDM companies or their capacity reallocation in the Southeast Asia. Thank you.
Okay. Gokul, you have two parts of the question. Sorry. Donnie, you have two parts of the question. The first is on 1Q bookings, in relation to some color, if broken down from perspective of ICD or SMT. I think, I'll request Robin to answer that question first.
Yeah. I think as far as Q1 bookings is concerned, we believe the SMT will continue to be at a high level. We also expect SEMI to recover from a low level in Q4 2022. In terms of a little bit more color, we see advanced packaging, automotive, industrial, I think the momentum will continue, as I said earlier. You mentioned whether the split between IDM and OSAT. I think so far, we still see IDMs are still more active on the SEMI side compared to the OSAT side. You also asked whether you see any kind of expansion out in Southeast Asia. I think the answer is yes.
I think in the if you recall, Donnie, the last couple of earnings call, we have already started to see this trend. Especially the IDMs, they are expanding more in Southeast Asia. When we visit just these customers in this part of the world, we can literally see, you know, new buildings, you know, being built, you know, for expansion. I think this capacity will probably come on stream in later part of this year or towards the beginning of next year. Certainly, the IDMs are definitely more active during this down cycle compared to the OSATs. Typically that's a trend.
You know, during the down cycle, it's the IDM that are more active than the OSATs because the IDMs are not just buying for capacity needs, but they're also buying for capability. They are preparing for the uptick to come. Next question, please.
Donnie, do you have a follow-up question?
Yes, yes. Thank you, Robin. My second question is to have a follow-up on my first question. For IDM's order outlook, how sustainable do you think it would be? Because IDM looks like to be react to the cycle correction normally later than, you know, OSAT companies. I'm not sure how sustainable you are seeing the momentum would be into the second half. Another one is like you mentioned about TCB, right? Some like High Bandwidth Memory progress. If I recall correctly, we used to have quite low sales exposure to memory. Wondering what kind of sales exposure we will have in the memory market going forward in the future. Would that be a very long tail market for us? Thank you.
Yeah. I think in general, Donnie, I think your first question is the basically alluding to the outlook, right? I mean, when we're checking with customers whether they are, you know, IDMs or OSATs, I think the general view is that they are more optimistic about the second half compared to the first half, right? We hope, you know, they are all right. I think the semiconductor industry will look brighter in the second half of this year compared to the first half. Now, good question on memory. I think we have been very upfront, very transparent that ASMPT is not strong in memory market historically. I think we see things are starting to change because of a strong of a suite of solutions that are quite suited actually for the memory market, take TCB for one.
I think in our announcement we also said that, you know, our tools, you know, have been used by a leading memory maker, the TCB tool, you know, for a stacking of memory die for HBM, right? This is a significant breakthrough, you know, for ASMPT into the memory market. Looking at that customer, I think, you know, the forecast so far looks healthy. I think, for the memory market, we have made a significant breakthrough in terms of advanced packaging. Now, if you think about it, we have been talking about, our TCB being used for heterogeneous integration.
Let's not forget that when it comes to heterogeneous integration, we are also talking about placement, very high precision placement of both logic and memory die onto a wafer. From that perspective, you know, since we won the big order in the beginning of last year for TCB, we won about $100 million, if you recall. That order is being used, you know, for heterogeneous integration, you know. From that perspective, we are also participating in terms of memory packaging from the advanced packaging arena. I think in short, also let's not also forget about our laser singulation as well.
We are also our tools are being in qualification phase with a key memory makers as well, because our laser singulation tool are pretty suited, you know, for memory packages because of our laser process capability. Also memory has, you know, stacks of memory, layers of memory stacked together. Our laser is very well suited, you know, to dice, you know, memory wafer from that perspective. From the so in terms of memory market, I think we are making quite good inroads into the memory market for more of the advanced packaging arena at this point in time. Next question, please.
Next, can I request Tina to unmute yourself and ask your questions?
Yes. Good morning, ladies and gentlemen, thanks for taking my questions. I have two questions. One is actually a follow-up on the advanced packaging question that Donnie has just did. First, wanted to check, like, the company has received the repeated order for the High Bandwidth Memory. I understood that the company, yeah, actually has continuous progress with this leading memory customer. Also, wanted to hear on more progress from the other customer, than any, like, indication actually, from the previous, like, geographic tension that we see, and, or you believe that there will be more opportunity, going forward in the second half from other customer, after the a lot of, like, volatility in the first half?
We also see some progress in the other advanced packaging, including the panel level, like ECD, and because that is for the heterogeneous integration. Wanted to know more about the progress and also at your different customer, like both IDM or foundry. One more is about the SiP that you have addressed in new chips assembly solutions to be introduced in 2023. Can we know more about application and also when should be the solution to ship, likely in second half or other studies time frame? That's for the advanced packaging. Thank you.
Okay, Tina. I think your question on advanced packaging is basically on some details, color, and outlook on three different arenas. Starting with TCB, Panel ECD, and also for the SiP.
Yes.
Okay. Maybe let me request Robin to touch more on TCB first, because you did mention on the repeated orders for HVM, but you want to know also outlook on other customers, especially going into second half of 2023.
Yeah. Yeah.
Hi, Tina. I think if you refer to page 11 and 12 of our presentation this morning, we give a little bit more color as to our advanced packaging solution. I probably make some reference to the slide to answer your question. Now, in terms of advanced packaging, we laid out two parts. One part is we are already a market leader, and the other part is, we think that, you know, we are gaining traction and because it's also a high growth area. Now, the first part, where are we in terms of leadership for advanced packaging?
Certainly TCB, we believe, you know, we have a leadership position because of our very large install base at this point in time, close to 286 maybe, right? Now, our TCB has also been making a very good progress in terms of not just logic application, but also, as I alluded earlier, also for memory applications. We are also enlarging our customer base. You know, we don't just have one logic customer. We have foundry, we have OSATs as well as IDMs. Now, now we believe also, together with our customers, key customers, are really pushing the boundary of TCB towards the arena of Hybrid Bonding.
Now, we are pushing out a NEXX generation of green ultra-fine pitch, chip-to-wafer TCB that can address a pitch requirement of slightly above maybe 10- 20 micron pitch size. This is a very 10- 20 micron pitch capability. This tool is very precise. We believe that in terms of accuracy, we can go down to below one micron. We are very confident that our TCB will continue to do well, you know, in the years to come, because also driven by a HPC requirement, High-Performance Computing requirement. Now, similarly for also our Panel ECD tools. These tools, the NEXX tools are also enabler for heterogeneous integration.
These tools are used differently. They're being used to lay connecting layers of RDL, you know, onto a panel substrate. Eventually this panel substrate will be populated, you know, with divided chips, using our TCB. Both TCB and, you know, NEXX, really enablers for High-Performance Computing. We believe this High-Performance Computing, you know, will continue to grow in the future. I think we're pretty well positioned, you know, from this two angle. Now, on page 11, you can also see SiP, right? This is our SMT placement tools. We had good year in 2021 as well as in 2022. These are really driven by 5G and in future 6G, RF front-end modules packaging for smartphones and high-end wearables.
These tools are not only fast, you know, the UPH can go up to what? 70,000, 80,000 per hour. Right? Depending also on the package configuration, but they can also handle very fine, very small, passive devices. You can imagine in the real estate of 5 by 5 mm PCB that goes into phones or into your ear buds. These tools can pack many components inside the small real estate. These tools are not only fast, but very precise. Now, page 12 of our advanced packaging arsenal of tools, also, we also lay out three tools which we believe will gain traction in the years to come. One is our Mini LED tools as well as the Micro LED tools.
These tools are being used for advanced, especially for Mini LED tools, are being used for advanced displays right now. In terms of demand, we have doubled our demand, you know, from year 2022 compared to year 2021. I think in the last quarter or two, we mentioned that Mini LED solution has reached an inflection point. We are clearly seeing that right now. For Micro LED, it's still a little bit early days, but we are seeing Micro LED edging closer towards high volume manufacturing. We are also, you know, confident that these tools will also do well for us in the years to come. Laser singulation is also a success story for ASMPT in terms of advanced packaging.
As I mentioned earlier, laser singulation, our laser singulation tool has good capability and is well suited for memory as well as silicon carbide applications because of our laser process capability. These tools are also highly accurate, you know, down to about 1.5 micron kind of accuracy. Last but not least, I don't want to take up too much time over here, for silicon photonics, we also have a solution for that. As you know, this will, demanding more bandwidth and faster transfer rate between chips and between a data center. Our tools are pretty well-suited also for that kind of application. I stop here for the question relating to Tina. Please.
Thank you. Just one more follow-up on the advanced packaging is the Hybrid bonder. Are we seeing timeline for mass high volume adoption pushing out? When do you see it can Also how fast, let's say, ASMPT expect to transition from the qualification stage into the production when? The last question, I mean, the second is actually more about gross margin, because you have mentioned the auto industrial and also the advanced packaging momentum continue to stay steady strong, especially in the auto. Can we also see the gross margin can sustain in, like, 40% above level this year? Thank you.
Let me answer the first part first. Then Katie can give a little bit of color on the gross margin. In terms of Hybrid Bonding, this is our opinion, of course. The technology we believe will take some time to mature. If you look at our TCB experience, right? We, you know, TCB, the world started with TCB, say, seven, eight years ago. It takes the market, you know, seven to eight years to fully mature the TCB solution. You know, we see a big, big jump in order in 2022, after seven or eight years. This is really purely based on our experience with first-of-a-kind tool at that point was TCB. This is a first-of-a-kind tool for Hybrid Bonding.
I think it will take some time, but meanwhile, you know, the expected market demand in terms of capability from the HB solution is constantly evolving, with more and more stringent requirements, you know, for higher yields, higher throughput, and higher placement accuracy. We are factoring all these changing marketing dynamics, you know, from our customer base, and we are determined to provide leading solution to our customer base that is more aligned with the high volume manufacturing roadmap. Certainly for ASMPT, this year is not a year whereby we see a high volume for HB, all right? We are going through a qualification phase with leading customer in this arena. It'll probably take some time before we see some contribution from HB for ASMPT.
Our customer base are not just in U.S., but also in Asia. The application is not just logic. You know, we are also seeing interest in other application area also for Hybrid Bonding. Meanwhile, I must stress that, you know, customer base is also pushing, as I earlier, you know, mentioned, pushing the boundary for TCB solutions while waiting for HB solution to mature. Since we are a strong contender for TCB, you know, I think meanwhile, you know, our TCB will continue to do well, you know, in the years to come.
Thanks, Robin. I think last part of the question is more on the longer term, 2023 GM outlook. You did mention that auto industrial AP momentum has continued to stay strong. How will be the outlook and whether ASMPT can maintain the gross margin at current levels?
Yeah. Let me put a little bit color to it. The group delivered another very solid gross margin quarter, making it a seventh consecutive quarter of margin above 40%. To put things into perspective, in the last down cycle, the group gross margin level was hovering around 35%-38%. We consider, we believe there is a step change. In terms of the sustainability of gross margin, I'd like to kind of look at the drivers of the solid performance so far. There are three layers. One is If you look at our segment, both Semi and SMT gross margins have improved year-over-year. Second, the product mix, like you mentioned, the auto, industrial, and AP momentum have contributed.
The net revenue has become very sizable to the group revenue and margins from those end markets and solutions are relatively accretive to the gross margin of the company. Also, I wanna point out, as we were coming into the downturn, the group has reacted quite timely in terms of cost control measures. You know, cost measures included, especially on the SEMI side, the sensible hiring only for very critical positions, flexible workforce reduction, T&E control, and some prioritization of strategic investments, et cetera. All that, we believe will be sustainable.
Having said that, I want to put a pretty large caveat out there that, as you're aware, the group's margin is influenced definitely by volume, and also the segment mix between SMT and SEMI. Lastly, product mix, if the mainstream products rebounding in a big way. I hope I've given you enough color on the gross margin going forward.
Okay. Thank you. Thanks, management, for the great answer. Thanks.
Thank you.
Thanks, Tina. Next, can I request Freddy to unmute yourself and ask your questions?
Yeah, thank you. Can you hear me?
Yes, go ahead.
Okay. Thanks. I'm calling Robin from KIT, management of ASMPT. I wanna ask a question about developments in India. Late last year, Digital India Corporation has set up a business division, a new one named India Semiconductor Mission, which is mandate to catalyze this India's semiconductor ecosystem to cover manufacturing, packaging, and design. At the same time, we are seeing over the past, like, one or two years, there are more and more electronic goods manufacturers moving operations to India. What's ASMPT's views over such developments? Thank you.
Thanks, Freddy. I think in general, Freddy, whether it's in India or other parts of the world, you know, in general, if we see activities popping up in locations like this, I think in general, not only us, but I think the whole semiconductor supply chain will benefit. It means that if India, you know, is starting out semiconductor industry over there, they will need capacity, they will need tools. You know, certainly we are the biggest player, right, in terms of SEMI as well as SMT. You know, we are very confident that we will benefit from this trend of countries, you know, really growing their semiconductor industry. I think it's a general questions, general answer to your question. You know, not just in India, but in any other location. Thank you.
Freddy, do you have a second question?
Yeah. Thanks, Robin, for that. If I remember correctly on the presentation, page number 19, at the time being, you know, ASMPT's dealing with India is on the low side, if perhaps hiding in others. How's ASMPT going to tap these opportunities going forward?
No. As I mean, we are not that we are not in India. I think especially in SMT, we have been India for quite some time. it's a matter of setting up, you know, the our own infrastructure in India to handle Indian customers. we don't think it's a big hurdle, right. we are fully aware of the opportunities that will come in India. Yeah.
Okay. Thanks, Robin.
Thanks, Freddy. NEXX, can I request Nicholas to unmute yourself and ask your question?
Yes, hello. A question on the margin side for the SEMI Solutions. Gross margin has done very well. I read, you know, change in the mix and so forth, so this I understand. The operating margin or the segment margin for SEMI Solution has declined quite a bit. How do we understand, you know, beyond the volume aspect or beyond the, you know, fixed cost aspect, is there something else that can explain why our SEMI Solution segment margin has declined to 6%?
Okay. Noted on this. Let me request Katie to answer the question related to the segment margin for SEMI.
Nicholas, I think you're referring to the fact that our OPEX, right, is impacting. The OPEX spend is impacting the operating margin. If you look at overall from grand scheme of things for group, right? OPEX actually has been holding relatively steady. In 2022, we did experience certain inflationary pressure, whether it's from the material side or the labor market side. Also at the same time, on the OPEX front, we have made a conscious decision to continue the investment, especially in R&D, for example, in technologies like advanced packaging. Therefore, the OPEX as a fixed cost was relatively steady while the volume was coming down. I think if you look at the percentage, right, that's where really the issue is.
It is people and with the OPEX, development and R&D.
Yeah, that's correct.
Correct. Okay, thank you. within your guidance, you know, your USD guidance basically for 1Q23 is the same as for Q22. Right? You're in terms of guidance, it looks like you're expecting a flat quarter, Of course, you beat your guidance by a big margin in 4Q, right? Does it mean 1Q23 revenue decline Q- on- Q?
Let me request Robin to answer that.
Yeah. I think if you look at our guidance, we are guiding $4.5-$5.5. You hit a big point. Yes, you will decline on a Q- on- Q basis. This is really, if you look at seasonality again, you know, Q1 tends to be lower than Q4. Because of certain factors, we are pretty substantial in terms of revenue in terms of from the China-based customer base. Typically in Q1, we have this Chinese New Year effect. That typically, you know, affect the sales in China. That's why we are guiding that kind of range for Q1.
Okay, Robin. Thank you.
Thank you.
Thank you. Next, can I request Arthur to unmute yourself and ask your question?
Yes. Hi, Arthur Lai here, from the Quotech Global. Thanks, Robin, and company, give us a better visibility. There's two questions on my end. Number one, we understand there is a very, you know, strong, like ChatGPT trend, right now in the same industry. Can Robin share with us how it, you know, how's the company stands from the client side? How the TCB and, you know, HBM, SIP, silicon photonics, to benefit with this trend? This is my first question. Second question, I want to ask maybe Katie about the gross margin side. On the page 19, we see the increase from the Malaysia, EU, U.S. more than offset China weakness. Do we envision this gross margin outside of China is higher than China? That's my two questions. Thank you.
Thanks, Arthur. I think, on your first question, I'll request Robin to answer. Your question is on, you know, the popularity of ChatGPT and, you know, the bandwagon effect when it goes to the AI side.
Yeah.
How can our TCB and other advanced solutions benefit from that?
Yeah. Thanks, Arthur. I think this ChatGPT trend is really hot right now, right? I think in that, I also have what we call the AI chips. AI chips are need not just scaling in terms of wafer pack, but also advanced packaging solutions. I think that will play well into our arena. As you know, Arthur, we have a strong suite of AP solutions ranging from TCB to NEXX, you know, to like what you see even for micro silicon photonics, Co-Packaged Optics. I think all this development in terms of AI will help the industry as a whole. In terms of advanced packaging, definitely, because we can't Advanced packaging definitely will have to be employed, you know, in order to package these chips to make it more effective. We're really looking forward that this kind of AI trend, you know, will continue into the future.
Thanks.
Now back to the GM question?
Thanks, Robin. I think for the GM question, I'll request Katie to answer. Basically, you mentioned about increase in contribution from EU, Malaysia and Americas. Does that help on the GM side if the revenue is higher from these markets compared to decline from China? Katie, thanks.
Yeah. Arthur, hi. From fact perspective, your observation is right. However, our gross margin is not... we don't sell based on the country. It's more actually about the product and solutions that we provide to our customers, the value add and the, you know, the complex or the leading technology we have by product. Again, it's more so the advanced packaging, auto and industrial solutions that actually are more margin creative. It's not specific because of China. I hope my answer is clear.
Thanks, Katie.
Thank you.
Thank you, Arthur. For our last round of question, can I request Gokul to ask your questions?
Yeah, thanks for taking my follow-up. I just have one question. I think it's the first time we are hearing you talk a little bit more positively about the CIS segment in the smartphone market for a while, in terms of new active alignment demand. Could you talk a little bit about what you're seeing here in more detail? Is that something that you're picking up, which is a more sustainable trend that smartphone vendors are starting to start focusing more back on the camera side of things? Feels like we've seen a lot of despec-ing on camera for the last couple of years. So just wanted to understand what you're seeing on the CIS front and the sustainability of it?
Yes. Gokul, very good question. I think, you know, to a certain extent, yes. We see, you know, in the, within the recent days and weeks, we see more interest in terms of the active alignment machine. You know that we are, you know, a leading market player in the space. Naturally, you know, when our customer base need that kind of solution, they will turn towards SMT to provide the kind of solution. I think that we, looking at things how things develop, I think there will be new innovations coming on stream for camera, you know, yes, in this year or maybe even NEXX year. We are doing a lot of, not just capacities, buy from a customer, but also capability.
When we talk about capability, it's a little bit of a longer term, right. This camera modules may not come on stream this year, but maybe the year or two after. We're also seeing some capacity buy recently. Don't get me wrong, these are not high volume, right. These are not high volume yet compared to previous years. At least, we are seeing some interest, you know, in the active alignment tools from this customer base. Yeah.
Thank you, Robin. With that, we will officially end this earnings call. Let me thank all of you again for attending today's call, and we hope to see you during the NEXX quarter's call. Take care and stay safe. Thank you.
Thank you.