Good morning and good evening, ladies and gentlemen. My name is Romil. I'm the IR consultant for the company, and I will be the moderator for today's call. On behalf of the management of ASM Pacific Technology, I would like to welcome all of you to the company's first quarter FY 2022 investor conference call. We would like to thank you all for your interest and your continued support in the company. 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, www.asmpt.com.
With us this morning are Mr. Robin Ng, the Group Chief Executive Officer, and Mr. Justin Tham, the Director of Investor Relations. Robin will begin a brief discussion and key highlights about our latest results, and then will provide color to the financial performance. This will be followed by an update on the prospects and outlook, and then we will open the floor for Q&A session. Without further ado, let me hand the time over to Robin, please.
Thank you, Rom. Good morning, everyone, and thank you for joining us today. I trust that all of you are keeping as safe and well as you can during these times. Even as the world emerges more fully from the shadow of the pandemic, we continue to live in a new normal marked by increased uncertainty and volatility. Despite this, I am pleased to say that our remarkable performance in 2021. We continue to be laser focused on delivering a strong performance while navigating the challenging supply chain and geopolitical landscape. We managed to achieve this through a combination of our adaptive operational capabilities and some key competitive advantages afforded by our unique and broad portfolio, which featured prominently in this quarter. These have collectively enabled us to continue meeting customer demands, especially for our key advanced packaging and automotive tools.
As always, I am grateful to our global team who are executing well, both operationally and strategically. Our position as a leading global supplier of hardware and software solutions for semiconductor and electronics manufacturing cannot ever be taken for granted. Let me now share some of the highlights that shape our business in the first quarter of this year. This slide gives an overview of our first quarter performance. Notably, we hit a first quarter revenue record despite continuing and well-documented supply chain challenges. This result is at the high end of our guidance and demonstrate a very healthy performance. Facing challenges like many others over the availability of certain silicon components needed for our product subsystem, we had to pull out all stops to continue serving our broad customer pool as well as possible. First, we shifted to just in case inventory management for these critical silicon components.
This helped partly alleviate supply constraints, albeit resulting in slightly elevated inventory levels. Second, we proactively redesigned some subsystems in order to enable more silicon component options when we assemble our products. Third, we made strategic investment in our external manufacturing capabilities to ensure our deliveries would not be overly constrained by capacity availability. Overall, we continue to work closely with our suppliers worldwide to overcome immediate component shortages. Let me give some color to how our advanced packaging solutions have contributed to our strong booking performance. This quarter, they accounted for some 35% of our total bookings. Such strong bookings development signals our competitiveness in many AP solutions domain. The breadth of our AP solutions is unique in the marketplace, and you can see this in this slide, the strong orders that we received for many of our AP solutions.
Most of them at record levels for their respective categories. What is noteworthy about these AP bookings is that while they tend to be more lumpy compared with mainstream bookings, they are fueled by long-term capability requirements, as you can see in this slide. Demand from high-performance computing applications and the increasingly demanding advanced display and system-in-package or SIP applications are all secular trends that are less susceptible to the short-term capacities cyclicality that we have observed of our customers' typical capability investment. Over the longer term, we are confident about capturing a considerable share of the expanding AP addressable market, which is expected to hit about $2.7 billion by 2026. The other significant factor anchoring our bookings for this quarter has been a strong demand for automotive solutions, which grew about 49% Q-on-Q.
This demand was all encompassing, expanding our automotive solutions across both Semi and SMT segments. Here you can see some of the solutions we offer, addressing a wide range of application areas across power devices, displays, as well as cameras. Global momentum for automotive electrification is gathering pace, and it's expected to be one of the sustained drivers for our business. In the longer term, we are also confident about taking a significant share of the automotive addressable market, which should hit about $2.9 billion by 2026. Next, our unique and broad-based portfolio provides some competitive advantages. Let me recap a little bit about what we believe sets us apart. In essence, we provide a wide range of solutions that truly link the entire semiconductor packaging and assembly value chain. Our broad portfolio has two main areas.
Mainstream tools providing both volume leverage and cash generation from a large installed base, where the high growth and the high margin advanced packaging tools business addresses more complex packaging requirements. The interplay between the various businesses basically enables a virtuous cycle where the volume business and the higher growth and margin business complement and support each other well. This ultimately helps drive our long-term performance more sustainably as we reduce cyclical revenue and profitability trends and create the conditions for robust structural revenue growth and margin expansion. This next slide discusses how the competitive advantage of a unique broad-based portfolio came into focus this quarter with effects on our overall performance. This came from two areas. First, our SMT segment bookings increased Q-on-Q for two consecutive quarters, and its revenue grew Q-on-Q, bucking our usual Q4 to Q1 revenue trend.
This is due to the fact that SMT segment activity typically picks up several quarters after the Semi segment, and in this quarter, it helped smoothen cyclical effects on the overall group revenue between quarters. Second, there was a strong demand for advanced packaging tools this quarter, as I have shared earlier. This strong demand for higher growth, higher margin capability-driven tools within both Semi and SMT segments provided strong support for our overall group bookings momentum. This slide gives a more visual comparison of this quarter performance versus QOQ and year-on-year. I have already spoken about our first quarter record revenue. For bookings, while we experienced a year-on-year dip of 10%, this must be placed in the context of the extremely high base effect from the first quarter of 2021, which was our all-time quarterly record.
Q-on-Q bookings increased 34.2% and was largely supported by the momentum from our advanced packaging and automotive solutions. This solid booking performance led to a strong backlog of $1.52 billion with a book-to-bill ratio of 1.34. Group gross margin improvement was primarily influenced by both our Semi and SMT segment's stronger gross margin, despite cost pressures from key material cost increases, particularly silicon components and higher logistics costs from the constrained global supply chain environment. Our group operating margin year-on-year growth was mainly due to the record Q1 revenue. Overall, our strong margin performance helped us to achieve a healthy operating profit of slightly over HKD 1 billion. Net profit was HKD 830 million, which is a noteworthy increase of 57.1% year-on-year. Let me share about the Semi segment.
More noteworthy here will be our QoQ and year-on-year gross margin growth, as you can see to the bottom right of this slide. This was largely due to a favorable product mix, which included a relatively higher proportion of our automotive application tools. Segment bookings at $527.4 million were a 47.7% growth QoQ, but 22.5% decline year-on-year. Drivers for the segment's sequential booking growth are consistent to what I've been sharing. These are from advanced packaging and automotive tools. Note that our record high base effect for the first quarter of 2021 is the key context behind the dip year-on-year. Our advanced packaging and automotive tools, along with the mainstream die bonders and wire bonders, dominated bookings.
Revenue was strong on the whole to the tune of $377 million, accounting for 55.9% of quarterly group revenue. This growth of 8.88% year-over-year and decline of 28.2% QoQ. Revenue performance was largely influenced by the following factors, as you can see here. Notably, the IC/Discrete business unit achieved record first quarter revenue with die bonders, wire bonders and encapsulation tools dominating deliveries. Segment profit was HKD 624.7 million, representing 13.2% year-over-year growth and 37.2% QoQ decline. Our SMT segment's Q1 2022 performance was characterized by record segment first quarter bookings. This $375.2 million booking level represented growth of 16.3% year-over-year and 18.9% QoQ.
Notably, both its advanced packaging and automotive bookings grew year-over-year and quarter-over-quarter as well. The segment revenue was a robust $297.8 million, representing 44.1% of group revenue and strong growth of 42.4% year-over-year and 10.5% quarter-over-quarter. Sequential growth bucked typical revenue trends as well. Both mainstream high-end printing and placement tools grew year-over-year and quarter-over-quarter were the segments AP tools, particularly its SiP placement tools delivered year-over-year growth. Segment gross margin was 35.5%, representing 331 basis points growth year-over-year, but 125 basis points decline quarter-over-quarter. Year-over-year improvement was mainly due to relatively higher volume effects and a more favorable product mix.
Segment profit was HKD 437.8 million, representing a strong 165.1% year-over-year and 34.4% QoQ increase. While we have taken steps to convert our strong order backlog at a faster pace, we continue to grapple, as do many others, with the effects of sporadic COVID-19 measures and continuing supply chain constraints. Such dynamic uncertainty can also influence our near-term deliveries. Based on this, we expect Q2 2022 revenue to be between $670 million and $740 million, representing growth of 5.8% year-over-year and 4.5% QoQ at the midpoint of the guidance. However, we remain confident about the future.
Looking ahead, strong industrial tailwinds and secular growth trends from increasing semiconductor content, density and complexity in devices are powering profound and long-term structural growth in semiconductor device unit volumes. In tandem, we have also seen leading semiconductor companies announcing bullish multi-year capital investment to ride this growth wave. In our last earnings calls in February, I shared some aspects of a compelling value proposition, and these bear repeating. First, we have and continue to be able to generate strong and sustainable cash flow from our mainstream and advanced tools. Second, our margin expansion continues as a result of a consistent and significant investment in R&D for both high growth and high margin advanced packaging and automotive segments, funded by the strong cash flows. Third, I cannot overemphasize how our unique and broad-based portfolio is a key competitive advantage.
It has enabled us to achieve a leadership position in key electronics sectors from the mid-end to the back-end to SMT. This cushions us from the cyclicality and volatility and helps us to underpin through-cycle revenue and profitability growth. Anchored by these key competitive advantages, I believe we are well positioned to capture a substantial share of our customer investment in both capacity and capability requirements over the longer term. Thank you. We are now ready for Q&A.
Thank you, Robin. Let me highlight again that, for the Q&A session, please either use the raise hand function, and we will allow you to unmute yourself for you to ask your question, or please type your question in the chat to ASMPT-Q&A, and we will read out the question on your behalf. When asking questions, please limit to two questions at your turn and ask your questions one by one for the management to answer properly. You may join the queue again in case you have more questions. Let me highlight again, on one thing, that, we will give priority to the covering analysts. With that, let us kick off the Q&A session officially. Can I first, request, Donnie to unmute yourself and ask your questions? Thank you.
Hi. Hello. Thank you, management, for taking my question. Can you hear me clearly?
Yes.
Thank you, Robin. I just have two quick questions. The first one is, first quarter booking looks like to be very strong. I think it's related to the TCB orders you just mentioned in the first quarter.
Donnie, you broke off. Donnie, we can't hear you.
Donnie, I think your line got cut off. Can you unmute yourself again and ask your questions?
Sorry. Can you hear me now?
We can hear you.
Yes.
Okay. Thank you. Sorry. First question is regarding our very strong booking in the first quarter. I think that's related to maybe the TCB orders you've just mentioned last quarter. Due to a very high base in the first quarter, could you kindly give us some colors on the booking trend into the second quarter by different business segment? Second question is regarding the recent lockdown in China. Previously, some leading Chinese OSAT companies mentioned that their CapEx plan will grow this year, but I'm not sure if you have ever seen that they are starting to review their CapEx plan after the severe lockdown in China, which may significantly hit certain end demand. Thank you.
Thanks, Donnie. I think, let me repeat your questions. Your first question is, you did highlight about our strong 1Q bookings, and, you did mention that may be because of the, you know, TCB orders, which, Robin mentioned previously. And you would want to know that, you know, since coming from a high base in, 1Q, what is the second quarter outlook for the bookings? And, if Robin can give more flavor, on that, you know, depending on the segments.
Yes. Thank you.
Thanks, Donnie, for asking the question. Now, on the first quarter booking, yes, indeed, as we have shared, our strong booking in Q1, HKD 903 million. If you look at the last four quarters before Q1 2022, you know, Q1 last year was a very high HKD 1 billion, and then it started to calm down, moderate. Now, to a certain extent, the QoQ growth of 34% over two percent, you know, is very, it broke a cycle, actually. You know, so we have very strong Q1 booking that broke the cycle, fueled by, you're right, really very strong advanced packaging tools as well as, I would say automotive. It's not just, Donnie, due to just the TCB.
We announced the TCB in our quarter four ending in February that we won a sizable order, $100 million order. On top of that, in the course of Q1, you know, we also booked a lot of advanced packaging tools relating to mid-end deposition tools. It came in at a record level as well. SMT XRP tools were also at a very high level. We also got a substantial order, you know, for advanced display for Mini LED placement tool. As you can recall, you know, we in Q4 earnings call said that our LED, Mini LED as a business is probably an inflection point, you know.
I think this win really solidified that statement that you know we have a substantial win in terms of the Mini LED tools in quarter one. On top of that, you know, to cap it off, you know, we also received very good order for laser dicing and grooving tools, which are really mid-end tools as well, and also our photonics placement tools. All this cumulative you know give us a very strong start you know to Q1 bookings you know of HKD 903 million. Now, as to the outlook for Q2, now, of course, from a very high base, we you know expect our bookings to also moderate from the Q1 high base.
Also on a year-on-year basis, we also saw a very high base. Q2 last year was also a very high base. We expect this booking to moderate. SMT, we view the momentum will continue to be strong. As I mentioned in the opening remarks, SMT is experiencing, at this moment, a high cycle. We won't be surprised SMT booking will continue to be strong into Q2, barring, of course, all this, there's really no further deterioration in terms of the macroeconomic picture like the COVID situation and the geopolitical tension that we're all experiencing at this point in time. Barring all this getting worse, I think SMT will continue to be strong.
Now, having said that, although Q2, we expect Q2 to moderate, the booking to moderate down from Q1 because of the very high base, we expect Q2 booking also to be not too low compared to prior Q2 quarters before 2021. It will be still a relatively high level compared to prior Q2 levels before 2021. I should say that this is not a guidance. As I always say, we don't give guidance for Q2. We just wanna give the investors a base, you know, some color on a Q2 booking. I think you also asked for, you know, what kind of—What do we expect in terms of mix for Q2? As I also said in my opening remark, advanced packaging tools demand tend to be lumpy.
We had a very good strong start to advanced packaging tool demand in Q1 to the tune of $315 million. Because the base, the customer base for advanced packaging are much smaller than the mainstream tools. Therefore we, on a quarter-to-quarter basis, we don't expect, you know, advanced packaging tools demand to continue in that fashion, you know. But overall for the full year and going forward in the long term, you know, we are still very confident, you know, that we will continue to gain more and more traction in terms of advanced packaging tools into the future. I hope answers the question for the first question. Yeah. Next question please, Rom.
Yeah. Thanks, Robin, for that. Donnie, let me repeat your second question. Your second question is more regarding the lockdowns in certain parts of China. You did mention that many of the players and companies initially were going ahead with their CapEx plans and they were expected to grow. But you would want to know what the current situation is and whether these CapEx plans are under review and what Robin's opinion about all this is?
Yes.
The way we see it, Donnie, is that certainly I think the uncertainty surrounding the COVID situation, you know, the sporadic COVID-19 measures, you know, that are undertaken, the geopolitical tension, I think all these will affect sentiments in the near term. However, if you look into the longer term picture, we think the semiconductor outlook still remain very much intact. You know, still very much intact. In fact, if you look at certain research houses like BSR or Semi, up to now they have not revised their forecast, you know, for our industry. So far they're still maintaining a growth, you know, ranging from a low percentage year-on-year growth to around mid-teens kind of percentage growth for industry.
We also take reference from a research for the sectors. On our own, looking at the situation, doing our channel checking with customers, I think it's probably macro that is affecting the sentiment.
In the long run, if the COVID situation can be under control, you know, which we believe we will in time to come, and the geopolitical tension can be a little bit more positive going forward, I think with the long-term semiconductor growth outlook intact, I think this short-term blip, you know, will turn positive, you know, once this situation, the macro situation and the uncertainty become a little bit less pronounced going forward. Yeah.
Thank you, Robin. Next, can I request, Gokul from J.P. Morgan to unmute yourself and ask your questions?
Yeah. Hi. Morning. Thanks for taking my question. My first question, we are starting to see end market weakness in many of the consumer tech applications, PC, smartphone, Wi-Fi. Many companies are starting to kind of tone down their expectations. At the same time, you're also seeing lead times for your subsystems and components expanding. I think several companies have missed numbers on the equipment side because of supply mismatches. Could you talk a little bit about what you're seeing from your customers? Are you seeing any cancellations at all in terms of orders? I think you had talked about lead times coming in a little bit for some of the more legacy equipment like bonders.
Could you talk a little bit about what is happening on lead time for equipment as well, given these two variables? That's my first question.
Thanks, Gokul. I think let me repeat the question for everyone's you know understanding. You did highlight that you know the confidence consumer confidence and especially on the tech cap side and those kinds is toning down. The lead time expectation is also sort of going up and you want to know that you know you know on the equipment side whether you know people are missing on the orders and you know that kind of scenario.
You want to know from Robin that, you know, for ASMPT side, what is happening with the customer side and, you know, you want to know the lead times and also for our legacy equipment and Robin's view on all this.
Okay, thanks. Let me try to answer the question, yeah. On cancellation of orders, at the moment we don't see cancellation, but more push outs. Now, I think this is also a signal. If customers don't cancel orders, it's also a signal that they are kind of confident about the longer term outlook for their businesses. Because the consequences of them canceling orders is that, if they come back again, you know, when they reorder, they will be placed at the bottom of the queue again. So if they don't cancel, it shows that they are, you know, they still want to take the equipment some time later once the picture or the sentiment becomes better on the macro front.
That's a good sign. We view this sign positively. Sure, certainly they'll push out. Fortunately for ASMPT, because we serve a very broad customer base, and we have solutions for almost the entire value chain, you know. You're right, Gokul. Certain segments we see some weaknesses. Those segments are typically relating to the consumer segment. We see consumer segments are relatively weaker going into Q1. However, because of our strength in the automotive segment, the power devices segment, we manage to readjust our delivery without affecting the revenue guidance that we have given for Q1.
We managed to shift around, you know, the orders. Because certain segments like the power devices, the automotive segments, they still want the equipment. If we can deliver to them earlier, they still want to take the equipment earlier. I think that's really one of our advantages of ASMPT, because we serve a broad base, so we could offset and readjust our delivery based on certain demand scenario. Now, as to lead time, you asked a question about lead time. Yes, I think the continuous supply chain constraint certainly is still placing a lot of pressure on our lead time. Typically for mainstream tools, we're talking about across the board, maybe 3-4 months, typically.
Orders that we receive in this quarter typically can be fulfilled in the next quarter. Because of the constraint in the supply chain, and also because of the COVID measures, it does extend our lead time slightly to maybe a month or so, depending on the tools. Orders received today would still be able to be delivered in the next quarter, but maybe delayed by a month or so. That's the kind of scenario we are facing right now. Yeah. Next question, please.
Okay. That's very helpful. Thank you. My next question is a little bit more long-term. I think you talked about advanced packaging reaching $2.7 billion, probably the fastest growth within the pie in terms of addressable market. Could you talk, give us a little bit more color on how does it break down? What are the bigger pieces of advanced packaging that are more important for ASMPT when you think about growth, thinking about TCB, Micro LED and Mini LED, SIP? Like could you at least give us a rank order in terms of which are the more important pieces when you think about ASMPT taking a big share of this advanced packaging part?
Okay. Let me repeat the question. I think you highlighted that we did mention on AP reaching $4.7 billion for the addressable market. You would want to know from Robin a bit more color on how does this AP potential sort of break down, which side of the AP is more lucrative for growth. You know what can be the bigger, say, pieces of AP going forward for growth, whether TCB, Micro LED, Mini LED and others. How does Robin can break it down in a sort of a pecking order for you to understand better.
Thanks, Ron. On the AP, in the longer term, we are very bullish about our advanced packaging business because we probably have the most comprehensive suite of advanced packaging tools to cater to various requirements in the advanced packaging tool mainstream. Now, this quarter booking will probably give you a glimpse, you know, of the relative positioning of our advanced packaging tool business going forward.
Now, because of HPC, high performance computing, because of AI, because of 5G, you know, we see advanced packaging tools will be in more and more high demand because as we go into those kind of packages, whereby the pitch between die, the accuracy that's required, you know, only advanced packaging tools can effectively package these devices. Not forgetting, you know, devices are also getting smaller. They're also requiring a SIP kind of application or HI kind of application. All these also demand a lot of precision, a lot of accuracy, a lot of speed at the same time. These are all very highly demanding requirements on the advanced packaging side.
We have the technology, we have the breadth of solution to provide for such application, to satisfy all these applications. I know we have mid-end tools, like for example NEXX tools, they are helping to actually alleviate as we speak some of these shortages in terms of high-density substrate demand, you know, for HPC, for AI requirement. What our tool do is really to deposit, you know, interconnect layers, layer by layer on the substrate, you know, so that the, you know, the chips when placed on the substrate, they can talk to each other in a more efficient, in a more faster way. So these tools are in high demand right now. TCB tools for sure, because if we go into more precise review, let's.
For example, if you need heterogeneous integration, which is getting more popular, our tools, the orders that we won recently are actually used for Chip-to-Wafer. They are principally used to place different kind of logic chip, DRAM chip, onto a wafer, you know. Those require very high precision TCB tools, which we are, you know, really dominant in that particular space. Going forward, we'll also continue to see our SMT SiP tools gaining a lot of traction. It started probably a year ago. These tools are used to package very tiny components into very small real estate, you know. A PCB that goes into our earbuds, that goes into wearables, like watches, you know, mobile applications. They require speed as well as accuracy.
Our SMT tools serve that requirement very well. Besides these three tools, we also think Mini LED, as we said before, has really reached an inflection point. The orders that we have received is probably at the tip of the iceberg. We expect more such orders to come in a couple of quarters to come. We will announce this good news in due course. We're also very confident about our Mini LED position for advanced display going forward. Last but not least, I also want to mention our laser dicing and grooving tools are also gaining a lot of traction.
Our tools are now being recognized as being highly capable to perform a lot of applications, you know, including memory, including power devices, logic. We're making also very good advancement in those laser dicing and grooving tools. I think this will give you a sense of what is to come in the next couple of years. Last, actually last but not least, you know, Hybrid Bonding. We are on track to deliver several tools this year, you know, for customer evaluation, for key customer evaluation. As we mentioned many times in many quarters, you know, we believe Hybrid Bonding will be also one of the key growth driver starting perhaps 2023 onwards.
I think this probably give you a landscape of our advanced packaging, you know, a landscape for the next, in the longer term. Yeah.
Thank you, Robin. Next, can I request Leping to unmute yourself and ask your questions? Hi, Leping, can you hear us? You are unmuted, but we can't hear you.
Leping, we can't hear you.
Leping, I think something wrong on your side. We see you unmuted, but we can't hear you. I'm going to give the queue to Kyna and request Kyna to unmute herself and ask her questions. Leping, maybe you can join back the queue or just type the questions in the chat to me. I will read it out on your behalf. Thank you. Kyna, hi, you can unmute yourself and ask your questions.
Hello?
Hey, Kyna, we can hear you.
Now we can. Yep.
Great. Thank you. Yeah, I also have two questions. The first one is a follow-up question on this question on the COVID lockdown impact. I wanted to ask you more about the impact that related to your 2Q guidance. How much, how does it impact your original expectation on the 2Q revenue? Like, what should we expect, the delivery issue or you cannot send engineer to your customer site, et cetera, how does it impact? And then another one is about the gross margin outlook as well. Because, we think perhaps utilization, you are still keeping at a certain level, but perhaps efficiency also suffer from the lockdown, in different type, different area of your factory.
the supply constraint. Could we also have any idea if there's any impact to the gross margin in 2Q as well? That is the first question. The second one is that because I also see the material business showing sequential improvement in their share results and is that a good indicator for the semi business or you see some different indication from that? Thank you.
Thank you, Kyna. I think you want to know more from Robin's point of view, keeping in mind the ongoing pandemic and its impact. So you wanted to know that, you know, especially in terms of the 2Q guidance, you know, how does the ongoing pandemic situation, supply constraints, impact it? And whether our expectation on 2Q revenue, all this is still intact or does it shift because of the ongoing pandemic?
Also, you want to know whether you know any issue on the delivery, you know, to the customers and all, or whether, you know, if customers need some, say, help, and we need to send engineers, whether all these things because of the ongoing pandemic is an issue, and you would want to. I think let Robin highlight this, then maybe second part of your first question, we go on the margins next.
Thanks, Rom. Yes, Kyna, to answer your question, you know, our Q2 revenue guidance has indeed, you know, taken into account some of these factors like COVID-19 measures, you know, that may happen. Of course, we can't predict everything to be very honest, you know, but let's put it that way. If there were no COVID-19 situation, you know, our guidance for Q2 would have been higher. Let's put it that way. Okay? Definitely we have factored in some of these challenges that I think we'll face, we anticipate to face in the coming Q2. If Q2 turn out, if the COVID situation turn out to be better, I think we look forward to that.
I think, as I said earlier, hopefully this situation will go away soon so that, you know, the long-term growth for this whole semiconductor industry can come back again. Now, certainly, because of COVID-19 measures, you're absolutely right. It caused a lot of disruptions, not just factory shutdown for itself, as you're probably aware in the middle of March, you know, we also had to, because our factory was located in Shenzhen, you know, we also had to shut down our factory for one week. So that caused a capacity loss as well, and also a lot of disruption to productivity.
Now, however, we do what we can, you know, as a company with multiple production sites, three in China, one in Malaysia. We have built in some redundancy. Yeah, we have built in some redundancy, but in a major lockdown, this redundancy would not be sufficient to offset any significant loss of capacity, you know, if our plants will have to be shut down for a longer period. One week is still manageable. We do what we can to manage all these contingencies, you know.
That's why we are also diversifying, you know, our suppliers, not just within China itself, but also diversifying to, you know, outside China, so that we are not too reliant on a few suppliers. If they face a COVID situation or measures, we will not be severely affected. We do what we can to improve our supply chain resilience. Now, I think I can follow on to the second part of the first question, which is the margin part.
Yes, sir. Kyna highlighted that, you know, I think you did touch on it, but let me repeat the second part of the first question. That, you know, utilization for ASMPT might be at a certain level, but she highlighted that, you know, the efficiency might suffer because of the supply constraint and the ongoing pandemic and this kind of scenario.
Mm-hmm.
I think she just wants a bit more guidance on the impact of all this on the GP margin.
Sure. Thanks, Kyna. I think you know us very well. We still have a substantial production capacity in-house, although we have-
Mm-hmm.
Over the years, we have continued to have more and more outsourced, you know, to balance out the production mix between in-house and outsource. Because we have still in-house production, yes, any shutdown, you know, of the operation will certainly affect our margin because our margin is also dependent on capacity utilization. You know, the higher the capacity utilization, the better will be our margin. But that's just one component of the gross margin. On the tool level, we are confident. At the tool level margin, what I mean by tool level margin, that means, you know, whether it's automotive tools or advanced packaging tool for that matter.
At the tool level or mainstream tool for that matter, at the tool level because of our strength, you know, in getting more and more advanced packaging business into our mix, getting more automotive business into our mix. At the tool level, we are confident that the margin expansion will continue, okay? But this is just one component. You know, the overall gross margin is still dependent on tool level margin, capacity utilization. So all these are, and also cost, inflationary costs on our production, capacity production, cost base. So these three factors, tool level margin, capacity utilization, costs will have an impact on our gross margin.
In the longer term, if you put aside COVID-19 impact, in the longer term, we strongly believe that with more AP and automotive, you know, business in our mix, at the two level margin, we will continue to improve our margin going forward. I hope I give you a picture for the short term as well as in the longer term. Yeah.
Thanks, Robin. Kyna, let me repeat your second question. You highlighted that the material business is showing sequential improvement, and you would want to know whether that's a good indicator for the semi business and what is Robin's view on that and probably a bit more details on the semi business outlook.
Yes. I think that's also a very insightful observation by Kyna. Yes, indeed, you know, our share of the Leadframe JV profit has been increasing. This is really a demonstration that the Leadframe, our Leadframe joint venture has indeed been performing above expectations. That also was the reason in Q4, if you recall, you know, we had to book an extraordinary gain, you know, because we are on track.
You know, based on the performance, you know, we are on track to increase our share of the JV from 44.44% - 49% in about two years time when, you know, as part of the agreement, you know, that we can increase our shareholding in three years after we acquire the Leadframe if they perform up to a certain level. There is a clear indication that the Leadframe business was very healthy. Now, in the recent quarter, because of the COVID-19 situation, the bookings initially came down. But however, we are starting to see some green shoots in terms of demand for Leadframe.
This could also be another sign that the inventory level for Leadframe at some of the customer base are still not too high. We are all, in fact, Leadframe are all looking forward to see how Q2 Leadframe demand will continue. If it continues to increase, then it's a sign that the you know the recovery may be in sight. Yeah.
Thank you, Robin. Thanks, Kyna. Let me next read two questions from Liping, which have been posted in the chat. The first question is about your automotive business. What types of customers are expanding their automotive equipment now? Are they a capacity buy or are they buying more advanced equipment which they have not used before?
Thanks, Liping. Now, as far as our customers are concerned, we see automotive customers coming strongly from the IDMs, you know. We have been engaging these IDM for many, many years, you know. Over the years, many of these IDM have shifted, you know, their focus, you know, from other segments to the automotive segments. As a result of our strong engagement with this IDM for so many years, you know, we benefited from this trend. We also were able to provide a very capable automotive solutions that our customer demand, you know, for the next generation of automotive devices. Particularly for new wide bandgap kind of materials like Silicon Carbide, Gallium Nitride. You know, so we are able to...
Our tools are able to package, you know, these devices effectively, you know, for our IDM customers, for automotive customers. We are in a good position. We have a range of solutions, you know. A comprehensive solution. We don't just supply a die attach, for example. You know, we also supply laser cutting tools for the wafers. We also supply what we call on top die attach, also molding equipment, you know. Because of a comprehensive automotive solution, our customers, our automotive customers, you know, like our solution. Okay? Now, as to whether these are capability or capacity, I would say both at this point in time, both. The good thing about IDM business is that they are fairly long-term. They invest for the future.
While, you know, the other segments may be a bit weaker when it comes to automotive, these IDMs are still very bullish, so they will still continue to invest in capabilities. The good thing about investment in capabilities is once our tools are being qualified by these customers, okay, once they're qualified, they will continue to use our tools for high volume in time to come, when these new devices actually go into high volume production. That is the beauty of the automotive business. Once you're in, okay, once you get qualified, you get. You know, you're in for a long time, okay, with them. Ron, thanks.
Thank you, Robin. Liping's second question is about Mini LED. We have been discussing Mini LED for many years. Why do you believe Mini LED will finally come this time? And what are the major applications?
Yes. Now, the major applications for Mini LED, the way we see, are mainly for advanced displays. You know, displays that you see in offices and shopping malls, okay? Also, Mini LED TVs, okay? Increasingly so, because these are true Mini LED TVs. They are not just backlight, but the whole TV are being populated by either Mini LED and in fact, going forward, maybe even Micro LED going forward. This is a trend for Mini LED and Micro LED. We see this is really an inflection point for the industry because the customers are demanding more and more higher resolution displays and TVs, you know.
Consumers like us are being more demanding in terms of higher resolution. The trend towards Mini and Micro LEDs, in our opinion, will continue very strongly into the future.
Thank you, Robin. Next, can I request Frank to unmute yourself and ask your questions?
Okay, great. Thanks, guys. Can you guys hear me?
Yes.
Yes.
Okay, great. Thank you. Just wanted to touch a bit on the bookings you guys saw in the first quarter, the strength. You've highlighted that it's, you know, coming from AP and also auto. I think in 2021 your auto revenues were about maybe 15% of total sales. Can you disclose, I guess, you know, more specifically what AP and auto percentage of revenue looks like in Q1? I guess related to this is the overall booking strength. Can some of it be attributed to some easing in the tool supply chain tightness that largely impacted the industry last year because of the extreme shortages?
Is that kind of leading, as things are easing in some cases, leading companies to be able to fulfill and increase their booking orders?
Okay. Thanks, Frank. Let me repeat your question. You want to know more color on the bookings in 1Q 2022. You'd want to know how the breakdown, if you can provide for AP and auto, because those ones were strong. You did highlight for 2021 the percentage of revenue for AP and auto was about 15%. You know, we want to know more color on that in terms of growth and whether you know on the market outlook and from last year to this year you know what has happened and how has it shifted on the overall booking strength you know in these segments.
You know, whether you know, some easing on the supply chain from last year especially is helping out on this course.
Okay.
Yeah.
Thanks, Frank, for your question. Now, let me give you some color. Now, Frank, we don't disclose the breakdown on a quarterly basis. We will show more details of a breakdown by end market and advanced packaging tools every half yearly. We think that breaking down a quarterly may not be that meaningful for investors, but on a longer term, every half year, I think that'd be more meaningful. But nevertheless, I can give you some color. Now, at least on the booking side first. Now, if you look at the booking, 35% of our booking this quarter was for advanced packaging. Also, we alluded that you know, our auto bookings grew also quarter-on-quarter by 49%.
You can imagine, you know, this will filter down into our backlog. Based on our backlog, we see that the advanced packaging tools mix and the automotive mix are higher than last year. This backlog will eventually be translated into revenue, right? I hope I give you some color that going forward, if this momentum for advanced packaging and automotive continue, we'll see more and more of these two segment or these two areas constituting more and more of our revenue mix going forward. That's good actually, if you think that we have been saying that, you know, AP and automotive, you know, they are a relatively higher margin tools. You know, I talk about tool level margin.
We are confident that with this higher mix of AP and automotive tools, they will continue to uplift our true margin, at least at a tool level, you know. This bodes well for our gross margin going forward.
Okay. I guess as far as some of the improvement, can some of that be attributed to some easing in certain parts of the supply chain, allowing equipment tools to accelerate their momentum?
I think so. We think that's the case. Yeah, because we see a lot of demand coming from automotive side. I think the supply chain constraint on the automotive side seems to be easing already. Yeah.
Okay, great. Sorry, can I ask a second question? It's more on your SMT. That also has been very strong, and you said Q1 looks to be above seasonal. From an end product perspective, can you give us a little bit of clarity? I mean, I know the SMT has some auto and other areas, but there's also a lot of consumer and potentially smartphone, which generally has been weak. Just trying to get a sense of, I guess, what's driving also the much stronger SMT.
Sure. I think across the board, because the SMT, as I say, is experiencing a high cycle right now, so demand across the board generally are very strong. In particular, we see automotive, industrial. We see SiP packages for Q1. Booking was very strong. Those areas are good margin areas for SMT as well. Now, relatively consumer segments, you're right, communication segment, computers relatively are weaker compared to, say, automotive and industrial.
Okay, great. Thank you.
Thank you. The queue for the Q&A right now is empty, so if you guys, you know, have more questions, you can use the raise hand function. In the meantime, let me read two questions from the chat. The first question is from Daniel, from Overlook. Let me read the question. How much of the order backlog is related to business outside of China? Are you seeing significant business from U.S. and European businesses side, building out supply chains closer to home?
Okay. Let me give you some color. With the very strong advanced packaging booking in Q1, we see geographical locations like the Americas, Europe, you know. I would say maybe even Malaysia, Korea.
You know, these are typically areas where we, you know, advanced packaging tools demand will come from, you know. Those areas are relatively high compared to other areas. The geographical mix has somewhat changed. Let me tell you, China still remain a very important, you know, a location for the semiconductor, at least for the back end. You know, it continues to be a very strong area. The mix, the geographical mix has somewhat changed because of the strong bookings in terms of advanced packaging.
Thanks for that, Robin. Let me read one more question. This is from Yikang, from CICC. My question is that you did mention the utilization of the factories. Can you give us more specific number or percentage in terms of different region and globally? Also, how did this number change during the past few quarters?
I'm not sure whether he's asking us internally or is it, you know.
Asking the management, yeah.
In our internal operation?
Yes.
No, we have only a few locations in China. We have two in Shenzhen, one in Huizhou. I hope I answer your question. I'm not exactly sure, you know, exactly the nuance of your question. In the recent lockdown, it was only in Shenzhen, so we were affected, as I said earlier, one week of shutdown in Shenzhen. The factory in Huizhou was not affected. Yeah.
I think he's asking also for more color in terms of the utilization of the factories in different regions and globally.
Oh, okay. Now, yes, for sure the Shenzhen utilization was affected by one week. Whereas the Huizhou and the Malaysian plant and our Munich plant, you know, they were not actually affected by any COVID-19 measures during Q1. Yeah.
Hi, everyone. The queue is empty right now, so if anyone has questions, please use the raise hand function or type in the chat. Frank, can you please unmute yourself and ask your questions?
Great. Thank you. Just wanted to, I guess, ask a bit on your traditional wire bonding business. We talk a lot about AP outlook and being strong in autos. Can you give us some sort of color indication of how the traditional wire bonding business has looked?
Sure, Frank. Thanks. The traditional wire bond business were very strong last year. This being capacity buy mainly, you know, we have been advocating for many years, you know, such demand will have to take a pause because, you know, with such high demand, you know, there is digestion period, you know, for our customers' sake. We don't see that continue, you know, unrelentingly. Certainly I think, the wire business, the wire bond business has, you know, come down, you know, compared to 2023. Yeah.
Okay. Overall wire bonding is still gonna be down this year versus last year? Is that your outlook?
Frank, you can't say that. Honestly, you can't say that because I would say because the longer-term outlook for the semiconductor is still very much intact. You know? This blip, we call it a blip. This could be a blip. Because once the macro situation, you know, turns around, and because the long-term outlook for semiconductor is still very strong, we won't be surprised, you know, mainstream tools and bounce back.
Okay. Thank you. Sorry, can I just confirm one thing? Earlier in the call you talked about second quarter booking orders to be moderate. But I guess I just wanted to see if we can get some clarity. Does this mean that it will be up on a quarter-on-quarter basis or down on a quarter-on-quarter basis?
You mean the booking, right, Frank?
Yeah. Yeah.
For Q2, right? You're saying.
Yeah. Yeah.
Yeah. I mean, we don't give a quantitative guidance, but.
Right.
Our sense that you will be a Q-on-Q down. Yeah.
Okay, thank you.
Yeah.
Thanks, Frank. Can I next request, Simon to unmute yourself and ask your questions?
Okay, thanks. Hello. Yeah, thank you. Any rough idea of your raw material cost portion versus, you know, the other, you know, fixed cost, et cetera? Because the reason I'm asking is, these days the metal price is getting higher and higher, so I wanna revisit the overall impact from the metal commodity, the inflation impact. Thank you.
Okay. I think your question is quite straightforward. You want to know more on the inflationary pressure, which is going on right now, and especially, you know, how the raw material costs are impacting the cost of production overall, and what's Robin's view on this?
I think if you look at our gross margin, I would say that if not because of the inflationary cost pressures that we face or we had to resolve, our gross margin overall could have been better. You know? Indeed, for sure, I think this inflationary cost has impacted you know, our margin. Although our margin overall at 40.6% for the group is already very credible. If you look back, we have been hovering around 40% thereabout 40, 41% for the last four or five quarters. You know? Despite all these cost pressures that we face since the last four or five quarters, I think our margin development has been really on track. You know?
We have been delivering a good performance in terms of gross margin over the last four or five quarters. Now, we see this cost pressures will continue, so what we can do on our own is really to diversify our source and also to see how we can repackage using other materials or alternative materials so that we also don't face supply chain challenges. All these efforts, what we can do, we'll do internally to alleviate the cost pressures. For sure, cost pressure is here to stay, and we believe this will continue for some time to come because of the tight demand and supply situation.
Yeah. Great answer. Thank you. Very quickly, sir, you said no impact from the China or the lockdown situation, but again, you don't feel any immediate maybe supply chain disruption to get some component or some other resources within China? It will be great if you can recap your overall, you know, the manufacturing activities portion by region. China is still 50%, and ASEAN maybe what percentage? Would you recap roughly your manufacturing activity breakdown by region? Thank you.
Simon, I think let me repeat your first question and maybe I will just rephrase it a bit. I'll request Robin to maybe provide that, you know, what impact or what we are seeing on the China side, especially with the lockdown in certain places. I think Robin did highlight that, but maybe we'll just request Robin to just quickly recap on that, especially in terms of the supply chain constraints.
Yeah, Simon, I didn't say no impact. I said that, you know, in Q1 we were impacted by one week, although the impact is not significant because it's only one week. If we were locked down for a longer time, you know, the impact can be considerable. This is our position. Now, in terms of the utilization, I mean, the capacity percentage. Yes, China is still a big region for us, Simon, because you can imagine we have three plants in China, only one in Malaysia. As far as internal production is concerned, okay? China is still a big proportion, you know, of our production capacity. Of course, for SMT, they're mainly in Malaysia and Munich and Weymouth.
Their production is not so much in China, but more in Malaysia, outside China, and also in Munich and Weymouth. For the semi side, we have still a substantial production capacity in China. Over the years, Simon, as if you have followed us, you know, we have been diversifying, you know, our production source. We have more and more outsourcing now. We are more and more reliant on outsourcing, so we are not 100% internal anymore.
That will help us cushion any sporadic impact or restrictions on our production in any part of the world, because we are more diversified in terms of production base, using both internal as well as external. I hope I answer your question, Simon.
Yeah. Yeah, very, very clear. It will be great if you can recap what percentage of your capacity based on the outsource versus in-house these days? Thank you.
It depends, Simon, because it depends whether it's machining or assembly. Typically, for machining, we outsource more. For assembly, because a certain IP is required in-house, so we do a little bit more IP, less outsource. For machining, we do a lot outsource, less in-house.
Thank you so much, sir. I really appreciate. Thank you.
Yeah.
Thanks, Simon. I think we are coming close to about 80 minutes into the call. I think Robin is still willing to take one or two questions if there's questions from the floor. I'll give it a minute or so if anyone wants to raise hand and ask question. Hi, Gokul. You can ask your questions. Thank you.
Yeah. Hi. Thanks for taking a couple of questions. A couple of questions from my side. First is, Robin, management team has historically talked about, diversification and, the fact that, you have, very little customer concentration, as an important facet of the business model. Now, if you think about a lot of other semiconductor equipment companies and the semiconductor industry itself, we are starting to see a lot more concentration. I think, if you think about semiconductor manufacturing, let's say TSMC or ASML or even the OSAT side, we are starting to see a lot more consolidation. Do you think that your customer base, and your customer concentration is going to become, more, kind of, narrow and you'll have, more, customer concentration as we go ahead?
I don't think that is a bad thing given the industry is kind of becoming more consolidated. That's my first question, and I have a follow-up question as well.
Okay. Gokul, maybe I'll just quickly repeat your question. I think you did highlight that, you know, we do have a reasonable customer diversification. You know, you want to know that, with the ongoing situation in the industry, there is a certain level of consolidation happening in the industry. With that, you want to know from Robin whether our customer diversification will narrow down? Will it become more concentrated? Or what is Robin's view on this?
No, frankly, Gokul, we don't see, you know, that our customer base is narrowing actually. Actually, we, you know, with the recent acquisitions, you know, like NEXX, you know, Amicra, you know, we actually expanding our customer base. You know, NEXX is a good example. We have never penetrated into high-density substrate manufacturers before we purchased NEXX. Because of NEXX business, you know, high-density substrate makers are now our key customers. In fact, we don't see that happening. Our customer base are still very broad-based, by also by virtue that, you know, we are also offering a very broad-based, portfolio, you know, ranging from advanced packaging tools to mainstream to applicative tools. Honestly, we don't see that happening. I hope I may give a little bit of color on that. Yeah.
Hi, Gokul. Do you want to ask our second question?
Yeah. That's clear. Thanks for that. Corollary to that, if you think about ASM Pacific, could we talk a little bit about which are the key areas where ASM Pacific expects to be number one? Not number one overall, but on individual areas, let's say TCB, let's say maybe LED or Micro LED, maybe SIP packaging, maybe die bonding or wedge bonding, die attach. Could you talk a little bit about areas where ASM is clearly number one versus areas where you think you will be number one in the next three, four years, which are still kind of work in progress?
Because I know that you guys are number one on an overall basis, but investors clearly are looking for some more pure play exposure as you can see from the multiple that ASM is trading compared to some of the pure play companies. Thanks.
Gokul, I think if I will just rephrase a little bit and ask the question again. Maybe we will, on your behalf, we'll ask Robin to highlight a bit on the say, our market positioning in terms of say, market share in some segments of our business like TCB, Mini LED, SIP and those kinds. Maybe Robin can just provide a bit more color in terms of our market share and how does it look like panning out in the future.
I think generally, Gokul, when we enter into whatever business, we want to be a dominant player in the particular field. If you look at TCB, I think clearly we have articulated, I think one year ago, we said that we reached a milestone of 250 tools, and we continue to garner a lot of market share in terms of TCB. TCB, if I may, you know, answer your question specifically, TCB is definitely one area whereby we have a very dominant market share. Another area is Panel-level ECD.
You know, the NEXX tools, you know, as I said earlier, without our NEXX tools, you know, the high-density substrate shortages will be even more severe because they need our tools, you know, to lay those copper wires onto the high-density substrate. So that area is also a very dominant. We also have a very dominant position in NEXX deposition tools. We believe going forward, Mini LED, micro LED will also be an interesting area for ASMPT because we have been in this area for many years. We have a broad customer base. We mentioned in Q4 that we have a 17-customer base for Mini LED. Seven have already gone into high volume production. The recent order that we.
Substantial order that we won for Mini LED is a testimony, you know, that we are very strong in a particular area as well. There are many areas, you know, we are very strong in culminating to be, you know, to become the number one in very broad for semi and number one or number two for SMT. I can give you some, you know, color on this aspect.
Thank you, Robin. If there are more questions, please let us know. We'll wait for one minute before we officially close the call. Hi, everyone. Since there are no further questions, then we would like to officially end this call. We would like to thank all of you for attending today's investor conference call, and we hope to see you during the next quarter's call. Please take care. Stay safe. Thank you.
Thank you so much.