Good morning and good evening ladies and gentlemen. This is Leonard Lee from the ASMPT IR team and I'll be moderating today's call on behalf of ASMPT. Welcome to our 2025 second quarter investor conference call. Thank you all for your interest and continued support. Please note that all participants will be in listen-only mode while the management is presenting. We will start the Q&A session after the presentation. During the Q&A session, priority will be given to the covering analysts. Before we start, let me go through our disclaimer. Please do note that there may be forward-looking statements about the company's business and finances during this call. 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 a reference to investor relations presentation for our recent results, please note it is available on our website. On today's call we have our Group CEO Mr. Robin Ng and our Group CFO Ms. Katie Xu . Robin will cover the group's highlights, outlook, and next quarter's performance while Katie will provide details on the financial performance. With this, let me now hand this over to Robin.
Thank you, Leonard. Good morning and good evening to everyone today. It is a pleasure to have you all on our earnings conference call for the second quarter and the first half of 2025. Now let's start with the key highlights of the first half. Let me begin by saying that the strong demand continues to be driven by the AI tailwinds across our AP and increasingly the mainstream as well. For the first half of 2025, we achieved better than expected bookings and our revenue guidance for Q3 is above market consensus. The group's Advanced Packaging continued to grow with AP revenue contributing significantly to group revenue in the first half of 2025. This growth was primarily driven by the ongoing demand for Thermo-Compression Bonding or TCB tools.
In the first half, the group secured repeat orders for TCB tools in both memory and logic applications, maintaining the largest TCB in-stock base by surpassing 500 tools worldwide. In the mainstream business, the group is beginning to benefit from AI tailwinds. AI data center demand has driven bookings growth on new power management capabilities. The group also experienced strong booking growth in China driven by electric vehicles and consumer end markets. I'm also pleased to say that we have maintained gross margin above 40% despite foreign exchange headwinds in the first half of 2025. With that overview, let me go into more detail about Advanced Packaging, a business that is growing and we remain confident will continue to do so. In the first half, our AP business increased its revenue contribution to around 39% of the group's revenue or approximately $326 million.
Driven by strong AI tailwinds, TCB has continued to be the largest AP revenue contributor and remain a key growth driver. Orders in the first half were up 50% year-on-year. As it gained further traction with customers including major AI players, the group's leadership position in TCB across both logic and High Bandwidth Memory or HBM supply chains continued to strengthen, supported by the expansion of our AP customer base. During the first half, the group secured TCB orders from various HBM players, further reinforcing our leadership position in this market. The group successfully installed the top order of TCB tools for the leading HBM customer, fully meeting their high volume manufacturing requirements for HBM3E12 high. These tools have demonstrated outstanding performance, delivering industry-leading production yields and exceptional interconnect quality. Additionally, another key HBM customer began low volume manufacturing for HBM4 12-high before TCB.
In the HBM4 market and beyond, the Group continues to maintain its technological advantage due to its active Oxide Removal or AOR technology. These innovative capabilities enable us to support customers as they transition to next generation HBM and beyond. AOR is a key differentiator, facilitating the demanding requirements of HBM4 and beyond. This includes higher input/output connections, more challenging die bump layouts with finer bump pitches, thinner dies, and a high number of die stacks. Promisingly, the Group is currently engaged in HBM4 AOR sampling builds for multiple customers. Turning now to chip-to-substrate or C2S TCB, the Group secured additional orders in the first half of 2025 for C2S solutions at the leading foundries OSAT partner. The Group also delivered several high volume shipments of these TCB tools in the first half of 2025, serving as the sole supplier for chip-to-substrate.
Meanwhile, our joint development of ultra-fine pitch chip-to-wafer or C2W logic applications for next generation AOR TCB with the leading foundry is progressing from pilot production to volume production. Moving on to hybrid bonding, the Group expects hybrid bonding to coexist with other packaging technologies and its adoption will be gradual. We continue to see progress with both our first and second generation hybrid bonding tools, with various customers actively engaged at different stages of setup, qualification, and shipment. Notably, our second generation hybrid bonding tools feature competitive capabilities in terms of alignment and bonding accuracy, footprint, and UPH. As previously announced, we expect to ship this second generation tool to an HBM customer in Q3. In addition, there is also continued collaboration with a leading IDM, a leading research institution, and the leading foundry on our tool capabilities. Now turning to photonics and co-packaged optics or CPO.
Rapid AI growth continues to increase data center bandwidth requirements and boost demand for high bandwidth optical transceivers and co-packaged optics CPU applications. Our photonic tools are able to package these high bandwidth transceivers, especially 800G and above. Due to our clear market leadership, we expect continued order momentum from global transceivers market serving all major AI players. While the CPO market is still in an early phase, we are actively working closely with leading CPO players around the world. In the first half of 2025, we had a major win with a leading IDM and are well positioned to grow our market share. Finally, the System-in-Package or SiP business within AP SMT won orders in the first half of the year from the leading global high-end smartphone players for radio frequency modules and wearables.
In addition, SMT has been gaining traction with its next generation chip SMT tool in several areas, including AI-related applications with shipments leading to leading foundry and OSAT players. Next, I will turn to our mainstream business during the first half of 2025. As I mentioned earlier, AI tailwinds are beginning to benefit the group's mainstream business. Demand for AI data centers has driven increased needs for new power management capabilities among all major AI players. AI growth requires more power efficient data center racks to meet the shift towards 800V high voltage DC power distribution architecture. This has driven increased demand for semi wire and die bonders and SMT placement tools. In addition, in the first half, the group achieved a strong half-on-half and year-on-year bookings growth in China.
For SMT, the growth was primarily supported by AI and EVs where we continue to be the leading EV player in China. Meanwhile, Semi saw increased utilization across OSAT providers serving both consumer and EVN markets. With that, let me now pass the time over to Katie who will talk about our group and segment financial performance.
Thank you, Robin. Good morning and good evening, everyone. This slide covers the Group's key financial metrics. For the first half of 2025, the Group delivered revenue of $837.6 million. Semi delivered strong revenue growth, 31.7% year-on-year and 6.1% half-on-half, while SMT experienced revenue declines year-on-year and half-on-half. Group's bookings reached $912.8 million, which was better than expected, showing 10.5% growth half-on-half and 12.4% growth year-on-year. The Group continues to build backlog with two out of four quarters of book to bill above 1 in the first half. The Group's gross margin was 40.3%, up 121 basis points half-on-half but down 65 basis points year-on-year. The half-on-half improvement was primarily due to segment mix, while the year-on-year decline was mainly due to an unfavorable product mix in SMT.
The Group's operating expenses reduced by 6.3% half-on-half but went up 1% year-on-year. The half-on-half OpEx reduction was due to the Group's prudent spending controls and restructuring benefits. Despite strategic R&D and IT infrastructure investments, the Group's operating profit reached HKD 329.3 million, showing 79.5% half-on-half growth but a 12.2% year-on-year decline. The half-on-half improvement was driven by gross margin improvements and OpEx reduction. As a result, adjusted net profit was HKD 218.1 million, up 95.7% half-on-half. Our half-on-half improvements were driven by tax credits from R&D centers in Europe and Asia, but partially offset by unfavorable foreign exchange translation from a weakened U.S. dollar despite the Group's hedging facilities. Similarly, the year-on-year decline was also due to this unfavorable foreign exchange translation, partially mitigated by favorable tax credits.
We have an existing dividend policy of distributing about 50% of the annual profits as dividends. Therefore, for the first half of 2025, with EPS at HKD $0.52, the board has recommended a dividend of HKD $0.26 per share. In line with this policy, our business remains focused on increasing shareholder value and continually evaluates options to return excess capital to shareholders. Most of the financials on this slide are covered on the previous page. I will not go into the details, but I will touch on revenue by end markets. Computers became the largest contributor to the Group's revenue, supported by strong growth driven by AI. Automotive is the second largest contributor, supported by EV demand in China. The next contributor is communication, supported by demand from photonic solutions and high-end smartphones. This is followed by consumer and industrial end markets.
Now let me move on to Group's Q2 financial results. We delivered revenue at approximately the midpoint of the revenue guidance totaling $436.1 million, an increase of 8.9% quarter on quarter and 1.8% year-on-year. The quarter on quarter improvement was mainly due to growth in SMT placement tools while semi remained flat. The Group's bookings reached $481.6 million, which was better than expected for the second quarter in a row, showing 11.9% growth quarter on quarter and a 20.2% growth year-on-year. These increases were mainly due to the growth in SMT placement tools. Future book to bill ratio was 1.1 and, as I mentioned earlier, has now been above 1 for 2 quarters. In the second quarter, the Group's gross margin was 39.7%, down 119 basis points quarter on quarter and 30 basis points year-on-year.
The quarter on quarter decline was mainly due to a decline of 161 basis points in semi while SMT placement tools improved by 108 basis points. However, Q2 gross margin would have been above 40% using Q1 2025 foreign exchange rates. The Group's operating expenditure was HKD 1.18 billion, indicating a 5.7% quarter on quarter increase and a 1.8% year-on-year reduction. This was largely due to strategic R&D and IT infrastructure investments and the foreign exchange impact, although partially mitigated by prudent spending control and restructuring benefits. The Group's operating profit reached HKD 1,694 million, showing 5.9% growth quarter on quarter and a year-on-year. Quarter on quarter was mainly due to volume effects while year-on-year improvements were due to OpEx reduction and higher volume effects.
As a result, adjusted net profit was HKD 134.9 million, up 62.1% quarter on quarter but declined 1.6% year-on-year. The quarter on quarter improvements were mainly driven by better operating profit and tax credits mentioned earlier. Moving on to the Semiconductor solutions segment performance for the second quarter of 2025, semi revenue grew to $257.6 million, up 1% quarter on quarter and at 20.9% year-on-year. This segment contributed about 59% of Group's revenue. TCB tools, photonic solutions, and memory solutions were our largest revenue drivers. In Q2, wire bonders and die bonders showed quarter on quarter and year-on-year growth. This was supported by shipments to major IDMs focused on AI-related power management solutions as well as to China customers, especially OSATs. Semi bookings were $212.5 million, down 4.5% quarter on quarter and 4.6% year-on-year.
In Q2, both quarter on quarter and year-on-year experienced wire bonder, die bonder growth while TCB orders were down due to uneven AP order flow. Semi's gross margin of 44.7% for Q2 2025 was down 161 basis points quarter on quarter and up 19 basis points year-on-year. The quarter on quarter decline was mainly driven by product mix. Lastly, Semi's profit was $174.9 million HKD in Q2 2025, a decline of 25.9% quarter on quarter but up 99.8% year-on-year. The quarter on quarter decline was mainly due to lower gross margin and higher operating expenses arising from strategic R&D investments. Year on year improvement was driven largely by volume effects. Next, on to SMT Solutions segment. SMT delivered revenue of $178.5 million in the second quarter of 2025, an increase of 22.6% quarter on quarter but a decline of 17.2% year-on-year.
The growth was mainly due to stronger revenue in China and AP, partially offset by continued softness in overall automotive and industrial end markets. SMT bookings of $269.1 million were up 29.4% quarter on quarter, largely driven by a bulk order to meet the supply chain diversification needs of a leading smartphone end customer as well as order wins in the AI server market. Additionally, SMT's gross margin of 32.5% for the quarter improved by 108 basis points quarter on quarter but declined by 311 basis points year-on-year. The quarter on quarter improvement was due to higher volume effects, partially offset by product mix and foreign exchange impact. Year on year decline was largely due to lower volume and product mix. This slide highlights ASMPT management's best estimates of revenue breakdown by end markets for the first half of 2025 compared with the first half of 2024.
This highlights our exposure to diverse end markets. The computer end market was the highest contributor to group revenue, accounting for 30%. Strong revenue growth was mainly driven by continued demand for AI-related applications in both memory and logic. The automotive end market was the second highest contributor at 15%, supported by EV demand in China. The communication end market contributed 13% to group revenue, with demand in photonics and high-end smartphone-related applications continuing to support this end market. The consumer end market contributed 12% of group revenue, driven by semi mainstream solutions, particularly for China. Lastly, the industrial end market contributed 8% of group revenue in line with soft market conditions. As you can see from this slide, we are a truly global business, partnering with customers around the world. China registered year-on-year revenue growth, increasing to 36.7% of group revenue.
AI demand supported the growth in revenue from Korea to 13.6% and Taiwan to 10.6%. Revenue share from Europe and Americas declined year-on-year, mainly due to market softness in SMT, with Europe's share down to 11.4% and America's to 12.3%. The group maintained a diversified customer base, with the top five customers accounting for approximately 24.8% of total revenue in the first half of 2025. I will now pass the time back to Robin.
Thank you, Katie. Looking ahead to Q3 2025, the Group expects revenue to be between $445 million and $505 million, up 10.8% year-on-year and up 8.9% quarter on quarter. At midpoint, which is above market consensus, we are confident of sustained AP revenue and expect SMT revenue to improve. The Group remains confident that AP will continue to grow, benefiting from the strong AI tailwinds and our technological leadership in the market. We reiterate our TCB total addressable market projection of $1 billion in 2027 and remain focused on solidifying our TCB market leadership in both memory and logic applications. The Group's mainstream business will be supported by momentum in China and opportunities driven by the emerging demand for AI data centers. However, the automotive and industrial end markets will remain soft in the near term.
While the Group has not experienced negative impact from tariff policies, it acknowledges that uncertainties remain. The Group's global presence provides flexibility to navigate any potential impact, and we will continue to monitor the situation closely and adapt as needed. This concludes our second quarter and the first half of 2025 presentation. Thank you, and we are now ready for Q&A. Let me pass the time back to Leonard to facilitate it.
Thank you, Robin. We will now proceed with the Q and A section. If you would like to pose any questions, please raise your hand and we will unmute you. Please be reminded that we can take a maximum of two questions each. Hi Donnie, please unmute yourself and go ahead with your question.
Thank you, Leonard. Thank you, Robin. Thank you, Katie, for taking my question. My first question is, as usual, the housekeeping question. I'm wondering if you could kindly give us some colors on the booking trend into the third quarter across the different businesses. Secondly, is the SMT bookings been recovering strongly in the second quarter and as you just mentioned, is part of the reason driven by leading smartphone vendors' capacity diversification across the world. Just wondering, will this trend continue into the second half driven by the tariff uncertainty or has the majority happened in the first half already. Thank you.
Yeah, thank you. I'll take your question. Your first question is on the booking color for Q3. I think the way we look at Q3 booking quarter-on-quarter for Q3 versus Q2, we think it's going to be slightly down by, say, single digit %.
On a year-on-year basis, we expect the bookings in Q3 to be up double digit %. That's the kind of range we are expecting for bookings in Q3. Now, if you drill down a little bit more, quarter-on-quarter declined largely due to SMT because of the absence of a big order that we had in Q2 SMT. That caused the Q2 SMT booking to come down. For semi, in terms of the AI, we continue to be strong. We believe the momentum is there for AI in Q3, so that would drive TCB bookings as well. As we have said earlier in our MD as well, we see emerging opportunities in terms of AI data center, the build of AI data center increasing our semi mainstream demand as well as SMT placement tools. The semi demand will come mostly from the normal die bonders and the wire bonders.
Probably last thing to note about year-on-year group bookings of Q3, we see that the momentum will continue. If we look back, our year-on-year bookings have been on the rise for six quarters already. I think this is something probably worth noting. That will answer your question number one. Now, in question number two, you're asking about SMT booking recovery strong in Q2. Yes, indeed. We won this bulk order from two customers. This is part of our end customer. We suspect it's part of the ultimate end customer's diversification drive to have manufacturing capacity diversified outside in other parts of Asia. You're asking whether this will repeat in the second half? We can't exactly tell but we're hopeful that there will be another order coming in the second half. Even if that happens, it will not be as material as the one that we have got in Q2.
I hope I answered your question, Tom.
Thank you, Robin. Just a quick follow up. You mentioned about the semi bookings into third quarter should be improving and you mentioned about die bonders, wire bonders recovery driven by maybe AI related applications. Just want to clarify. For third quarter outlook, it's like conventional packaging like die bonders, wire bonders may be growing faster than Advanced Packaging.
Not really.
As I said earlier, the Q3 booking, we see PCB booking should increase Q on Q. I don't have the rate of growth, but I would say AP will continue. The momentum will be there for the semi tools at the die bonders and the wire bonders. Yes, indeed, we are seeing growth driven by two factors. One is the AI data center because of new power management requirement, and two, also driven by China, we see increasingly the momentum in China mainstream for both mainstream semi and SMT is on a good track.
Okay, understood. Thank you, Robin.
Thank you.
Thank you, Donnie. May I now ask Sunny to unmute yourself?
Hi Leonard, could you hear me okay?
Yes, yes, we can go ahead.
Thank you very much. My first question is on TCB. If we could start from HBM, how should we think about maybe in the coming 12 to 18 months your order opportunities within these players? Competition seems to be intensifying, and earlier in the year you mentioned that you would expect maybe a second batch of orders to come through at some point, second half or in early 2026. Any update there, and how should we think about the competitions into 2026?
Thanks, Sunny. I will answer the question. Sunny, the first part is how do we view the 12 to 18 months or the opportunity for HBM? Maybe let me start by recapping where we are right now. In terms of HBM, as you are probably aware, we have shipped already and installed the bulk order that we received last year for a leading HBM player, that is for HBM3, 3, E12, 5 that has gone into volume production using our tools. We are pleased to announce that we have been performing very well in terms of the tools and definitely meeting customer expectations in terms of our technology, in particular our yield and also our core quality of an interconnect. I think that gives probably the confidence that we will continue to garner more shares of the HBM market going forward.
In particular, we are confident of our next generation TCB tool technology for HBM, in particular for HBM4 and beyond. As we have been saying for many quarters right now, we have this AOR technology, active offset removal technology, that can truly differentiate us from our competitors. I think with the advent of the new AI chip coming to the market, HBM4 will be put to use, the devices HBM4 will be put to use. Since we are the first mover for HBM4, we remain confident that going forward we will continue to win orders for HBM4 using our tools and in the future also using our AOR technology. This is how we see the HBM market going forward, Sunny.
A quick follow up is earlier you mentioned QCTCB bookings should continue to grow. Is that driven by HBM or Logic?
Both, Sunny. I would say both. In fact, on that note, probably worth to mention that we also in the meantime expanding our customer base as well, globally, worldwide. We have TCB tools for both Logic and HBM ship on a global basis. We're spreading out, diversifying our customer base.
Got it. Thank you very much. My second question is on your TCB engagement with the leading foundry. Could you share a bit more color on the progress that you have moved to volume production, and would you be able to get the bulk orders maybe through the second half of the year or early 2026, since they should be ramping up the next generation AI accelerators into the second half of 2026? Are you the sole supplier for these maybe AOR type of TCBs for chip-bound wafer in 2026?
Yes, again, yes, you are right. We have moved from, I would say, progress from pilot production to volume production at the leading foundry for this very advanced ultra fine pitch AORTCP for chip-to-wafer. There is competition, we have a competitor over there. As far as we are concerned, I think our technology puts us at an advantage. We believe, and in terms of order, we mentioned many times, Sunny, that even if we win this particular battle, you know, with a competitor over there, the volume this year for chip-to-wafer was not material. Probably a couple of tools for 2025, but we believe that 2026, that's where the volume production will start for chip-to-wafer tools at the leading foundry. Back to you, Sunny.
Got it.
Also for them to maybe start using your tools for chip-to-wafer IT to support the key accelerator platform upgrade in the second half of next year. Should we expect if that happens, the order should come through maybe by early 2026?
The latest
possible.
Yes, sounding possible. Definitely, yeah.
Okay, got it. Thank you very much.
Thank you.
Okay, thank you.
Sunny, may I ask Gokul to unmute yourself please?
Hi, good morning Robin and Katie. Thank you. Thanks Leonard for taking my question. My first question is on HBM for TCB. Could you talk a little bit about HBM4? What are you hearing from your customers? Are they basically going to flexless TCB for HBM4 across the board using your AOR or other kind of flexless technologies? Can they still reuse the existing flex based older TCB tools of which they have a pretty large install base of and HBM3E especially at your lead customer looks like very competitive right now, there are three vendors. Do you think that HBM4 also is going to be like that or you think the vendor list will narrow when.
It comes to HBM4?
Thanks, Gokul, I'll take that question now. I would say not across the board. It depends on the customer. One customer still doing a lot of experiment using, not using AOR, and other customers have definitely started using our tool for sampling build for using AOR. As far as we are concerned, as I said earlier, we are the first mover in terms of HBM4, so we are well positioned, you know, to capture the market for HBM4 when that takes off. We believe HBM4 will probably come around sometime in the second half of 2025 in line with the launch of the new AI chip architecture. Now, I think your second question is about HBM3e with a lead customer versus competitors, HBM4, when this big window is going to be narrow.
I think all major players, let me answer from the customer, try to answer you from the customer perspective. The way we see it, I think all major HBM players will have to move to HBM4 to support the new AI architecture. One of them probably a little bit ahead in terms of HBM4 deployment. As I said, we are doing sampling build for all customers, actually two of them, we have many shipment. I think the other leading HBM player, we also engaging them in terms of sample build using their vehicles outside. We have a lot of engagement with all these HBM players.
Just to follow up, Robin, just to clarify this, when it comes to HBM 4 12- high, which is probably the one that's going into production early next year, you think most of your customers, especially the lead customer, will have to use AOR or fluxless TCB, or they can still stick with the older TCB machines.
They will not try to transition to a new as if they can. The way we see, once they start to move into HBM4E where the chip architecture gets a little bit more challenging, we strongly believe that the AOR will be the technology that they have to employ.
Okay, okay, understood.
That's more 4e than 4.
Okay, that's clear.
Just on the logic side for TCB, could you talk a little bit about your chip to substrate shipment run rate? It's been very strong since the second half last year and early part of this year. Do you think it grows into next year, or given the CoBH capacity expansion is kind of decelerating, we should see a little bit of slowdown in the chip to substrate growth next year? Is C2W chip-to-wafer?
Big.
Enough to kind of offset that next year so that your logic TCB growth can still continue at a pretty, pretty good clip even if chip to substrate.
Kind of slows down?
Yeah. On the triple substrate, the way we look at it is the die and the compound die are getting bigger and bigger. In fact, there's really no way except using TCB to package the compound die onto the substrate. I think as we speak, our customer base are already thinking of new tools, new tool architecture to handle larger and larger die. We are already in a lot of engagement with all this customer base to come up with new tools that can handle a larger compound die. I think this trend, this is a multi-year trend, will continue.
As.
Long as data center continue to have this massive build up into the future. Now in terms of C2W, your question is whether it's big enough to offset logic TCB growth even as chip to substrate slows down. I'm not sure whether chip to substrate will slow. As I said, you continue. In fact, the trend will continue. Let me answer the other part. Whether chip-to-wafer is peaking now. I think as I said earlier, I answered the question posed by Sunny, chip-to-wafer TCB tools. I think the demand will pick up in 2026 because right now the POR is still mastery filled. We believe increasingly even at chip wafer level, TCB is needed to package all the various die including HBM. As far as logic die, passive die onto the wafer going forward. Sorry Gokul, back to you.
Yeah, just to then. We're expecting that logic TCB, C2W combined, everything is still going to be growing next year based on the.
Order flow that you've got.
Because the order flow seems to be a little bit up and down.
Right?
You order decline in TCB last quarter, this quarter is kind of growing. Just wanted to understand how logic TCB next year.
Yes, yes. I think Gokul, remember we came up with a kind of a time picture for TCB. The TAM will continue to grow from now to 2027, and we're still confident that by the time we hit 2027, the TAM will be $1 billion for TCB.
Got it. Understood. Maybe one last follow-up for Katie Xu Yifan.
I think.
Could we talk a little bit about the margin leverage from increase in Advanced Packaging? Because when I look at Semi's margins, margins are kind of largely still in the same mid-40% kind of ballpark, even though our Advanced Packaging mix has risen almost to 40% in first half of the year. Looks like Q2 should be even higher than that, even though you don't break it out. We don't seem to be getting that margin uptick on gross margin or operating margin level in a meaningful sense.
When I look at the Semiconductor solutions.
Business, is there anything that we should look at or is there any turning point where we could kind of see that we hit that meaningful gross margin leverage or operating margin leverage happening from this mix improvement?
Yes.
Gokul, I think there are a couple of layers of the question. First, maybe just a little bit color on Q2. For semi Q2 gross margin, the mix actually was relatively more favorable towards the mainstream products compared to Q1, which you probably remember where we delivered a bulk TCB order.
Right.
The Q1 margin was very much supported by the bulk order for AP. Now, going forward, like what we've mentioned before, TCB margins are accretive and we do expect that in looking out to future quarters, the margin expansion for Semi will be there. Again, like what we always say, each quarter really depends on the product mix, volume, etc. In the long run for Semi, yes, definitely. We do expect that the margin will expand gradually because of the TCB AP content.
Okay.
All right. Thank you very much.
I'll go back to the queue.
Thank you. Gokul, may I now ask Daisy to unmute yourself please?
Thank you, Leonard, and hello Robin and Katie. Can I go? One question regarding the new power management capability. As you mentioned that AI data center demand has begun to benefit the group's mainstream business, driven by the increased need for new power management capabilities. Could you elaborate more? What other semiconductor components are in these power management? Is it power discrete or with components like PMIC?
Yeah, I think it's a varied range of devices or components that are needed in the AI data center.
Right.
That's why we see that it's driving a demand for mainstream tools like, for example, wire bonders, die bonders, molding equipment, for example, sintering equipment. We see this trend happening in the last two quarters. Daisy.
Okay, so do you think that this trend will benefit all the vendors, or because of ASMPT leadership technology, it will benefit ASMPT more versus your competitors?
I believe so. Pretty standard tools. I think these are more pretty much capacity buy than technology buy, tilted more towards capacity buy than capability buy in our opinion. Yeah.
Okay, thank you Robin. It's clear. Another question is for Katie and you mentioned that Q2 you benefit from the tax credit. Do you think that this is sustainable or is just a one off in Q2?
Yeah Daisy, the short answer is this is a one off tax credit. We have R&D centers in certain jurisdictions where we have tax credits and usually actually tax credits will flow through the P&L. You probably won't even notice it every quarter. For these two specific locations, due to the local practices, the tax credits could only benefit P&L after they filed the audited statutory reports. For these two locations, the 2024 audited statutory reports were filed in Q2 this year and that's why it came through into the Q2 financials. I do not expect them to repeat next quarter for sure.
Thank you Katie. It's clear.
Thank you.
Thank you, Daisy. May I ask Li Ping to unmute yourself and ask your question?
Yeah.
Thank you for taking my question. Here are two questions.
My first question is about the SMT business. You mentioned that the order win in the AI server market. Recently we also see some PCB vendors are ramping up their capacity for the server PCB. Does these two things.
Related, and can you comment on where.
Are the CapEx cycle of this, the PCB's capacity expansion for the server market, and what are the market positioning of your SMT equipment in these markets? Thank you.
Yeah, let me take a question. I think they should be related, of course, without understanding more, you know, where they're coming from, but I think it sounds like they're related, and in terms of CapEx cycle, you know, as far as the AI center continues to build up, I think this could be the trend going forward. In terms of our SMT positioning, I know we are pretty strong in this particular area because of our technology. We are quite pleased that we are capturing this part of the market share.
Okay, the second question is I noticed.
The computer this quarter, quite impressive, accounted for more than 30% of the total sales.
Can you share some color about the.
The breakdown of this year-end, this computer, how much is currently roughly coming from the SMT? It's quite big.
How sustainable do you expect this?
Computer will continue to account for this such high or the 30% market of your total sales looking forward in the second half. Thank you.
Li Ping the Compute. Thanks for noticing that the 30% is very high for the first half of revenue. I just want to call it out that I mentioned a few minutes ago that in Q1 we had a bulk order for TCB. That actually has supported the compute percentage going up. Your question I think specifically is on SMT. We do not break down the end market by these specific segments of ours. Overall, like what Robin mentioned, the SMT side is benefiting and is benefiting from the overall AI server trend and we have a very strong position in that specific sector.
Okay, thank you.
Thank you. May I now ask Alex to unmute yourself and ask your questions please?
Thank you for taking my question. I'm just a little confused about your TCB order trend. In your TPT you mentioned in the second quarter TCB declined, I mean the bookings, TCB declined quarter over year-over-year. However, you also mentioned that the HBM TCB order has been, you know, has been solid and you received various HBM players and we have seen your revenue contribution from Korea jump to 14% in the second quarter. Does this mean that the logic application in the large application TCB order has, you know, has been relatively weak? We need to wait for the C2W application to introduce. Before that we won't see any meaningful rebound for TCB for logic applications.
Yeah. Alex, let me try to make it clearer for you now. I think first and foremost for a TCB market driven by AI, I think it's the nature of the business, right? The customer base in the first place is not very big. Although we have been expanding our customer base, we are talking about 20 to 30 customers compared to, say, on the semi side or SMT side, we're talking about hundreds of customers. You can imagine with that cloud scale at the mainstream side versus the AP side, the order flow for AP and TCB will be uneven quarter to quarter. Of course, it takes a longer period, you know, six months, one year. We can see a better trend. My suggestion, don't read too much into quarter to quarter variation in terms of order flow for AP.
Now, you're talking about whether logic is we need to wait for chip-to-wafer to come back again. It's also related to the fact that, you know, the nature of the business, you can't expect the same customer to continue to place order quarter after quarter. Quarter on quarter, that's not possible. I think in terms of the logic side, chip to substrate I mentioned, I think one of the questions earlier, either by Gokul or somebody else, that we're in a very strong position. We continue to engage our customers in the future generation of the compound die for chip to substrate. You're right, chip-to-wafer will come in in a bigger way in 2026. That will help to add to the order flow level come 2026.
Alex, also Katie, this is Katie. I just want to clarify one thing. You were asking about bookings, which Robin answered, but then also you were kind of observing from the geographic location of the Korea, right? That's actually on revenue. I just want to make sure that this, again, the Korea jump really first happens because of that bulk order that we were referring to earlier. Just be mindful when you look at the order and the revenue for AP orders, TCB orders, there is a longer lead time, typically six to nine months. If you're trying to figure out the timing of those, the quarterly or yearly timing from booking to revenue period, please keep that in mind as well.
Yeah, I understood. I'm just wondering, probably the HBM order you obtained like one or two quarters ago delivered this quarter. I mean for the past two or four logic applications, TCB order was quite weak compared with the HBM application. My follow-up question is about your market share for the HBM customers. Can you give probably some color on your market share with your largest HBM customers or your target market share in the next one to two years? Also, have you shifted the HBM application TCB for Chinese customers?
Yes. Alex, in terms of market share, first of HBM, if you have been following us for a while, we acknowledge that we are not the first mover in terms of HBM. Considering where we come from, from zero base to where we are today, I think we have made a huge improvement in terms of market share for the HBM market. We are confident that with the event of HBM going forward, we certainly have a differentiating technology compared to our competitors. I think that will put us in a good state to continue to kind of demand in the principal space. Now I can't comment in any particular region for TCB customers, but certainly we have been stressing our AP solution or our TCB solution. We have worldwide customer base. Thank you.
Thank you.
Thank you.
Thank you. Alex, may I now ask Catherine to unmute yourself and ask your question, please?
Thank you for taking my question. My first question is regarding the hybrid bonding. How do you see yourself that the key differentiator between your hybrid bonding tools and the leading and the other peers' hybrid bonding tools? How do you think about your market share in the hybrid bonding market? Thanks.
Yeah, for hybrid bonding we have been saying LBG2 Generation 2 hybrid bonding which is going to be shipped sometime. The first two will be shipped sometime soon. Three will be very competitive. We have taken on all the pain points for hybrid bonding over the years, do a lot of channel checking with our customers. What are the pain points? We are addressing those pain points one by one and we believe our Gen 2 machine tool for hybrid bonding will be a very competitive one. We are confident that going forward, if hybrid bonding picks up in terms of demand, we are ready to play in a more active way in the particular market for hybrid bonding. As I said, in terms of features we are very competitive.
Whether it is in terms of bonding accuracy, in terms of new physical, in terms of footprint, and more importantly in terms of total cost of ownership, I think Gen 2 is very competitive too.
Got it, thank you. My second question is regarding your China revenue. Congratulations on your China revenue pickup. With the China localization accelerating, are you seeing any shifts in the customer preference? How is your pricing and margin profile in China evolving versus other regions?
Your first question is for localization accelerating? Yes, certainly I think that's a trend. A lot of localization happening in China as well. The volume in China we have seen, as I said, the momentum in China is pretty good. In the recent quarters we see the demand are coming more and more from the consumer market. Seems that the consumer market are starting to pick up the EV market in China as well. That's also benefiting both our semi as well as SMT mainstream. The Chinese market is obviously very, very common comparative. What is really interesting for the Chinese market is the volume. Right. We all know the semiconductor market is also highly dependent on China for the volume. The Chinese market will give us a volume more than anything else. Back to you, Catherine.
Yeah, yeah. A little bit of follow up on that. How do you think about the pricing and margin of your channel China revenue compared with other regions? Do you think that this pickup in China market is a one off event or will it continue, probably to the next few quarters? Thank you.
Yeah, sometimes it's not exactly comparable depending on the configuration that you want, right. Depending on the application as well, for example, smartphone requirement is totally different from automotive, so the pricing does vary more on the application end market rather than the regional pricing from one region to another region. It all depends also on the application end market. Now, whether it is sustainable, we certainly hope so. We did a lot of channel tracking with our customer base. They seem to be more optimistic than before. Also, looking at the utilization rate across their factories, the momentum seems to be there, picking up in terms of utilization rate. I think that's a good sign. Consumption of lead frame seems to be on the rise as well. That's also a good sign that the factories are working, they're really working. The utilization is up in China.
I think that helps to give us a little bit more confidence that this time around the momentum in China may be sustainable.
Yeah, got it. Thank you.
Thank you, Catherine. May I ask Simon to unmute yourself?
Okay. Thanks, Leonard. Thank you, Robin.
Yeah.
Today again the overall guidance for the AP broadly optimistic. I want to double check why you think the near term model still volatile for the benefits. I mean the TCB because foundry based on the long term agreement with the U.S. Feminist customers HBM memory also is more annual contract basis. Why you think your customers the TCB order some quarter very strong, the other quarter some sequential decline. Do you see any signs for the little bit, you know, downward trend of the AI theme or what you think the background of the order in an uneven trend? Yeah, yeah.
Simon, I tried to explain. I think someone asked the earlier question as well. I tried to explain when we mentioned an uneven order flow. It's metal timing, right? If you break up, you know, by quarter, bound to have volatility. You use the word volatility. I'm using the same word. We use uneven order flow, bound to have from quarter to quarter. If you take a longer one year versus another year, if you look at first half of 2025, we mentioned our AP, our TCB have grown half and half year-on-year. On a half yearly basis, on a longer term basis, you can see a better trend. On a quarterly basis, because of the nature of the business, as I mentioned earlier, if you talk about AI customer base, we have talked about 20.
Or 30 in the world right now, right?
You compared to the SMT mainstream and some talk with hundreds of customers. You see the sphere is totally different. By nature of the business, there will be uneven order flow from quarter to quarter. Do not look at quarter to quarter to discern the trend. Look at a longer period to discern the trend.
Of course, yeah, yeah. That's why your TEM guidance not really changed. For example, if I make HBM, if I run the HBM memory business or even coax packaging business and then the acumen vendors leading time six to nine months. I think your customers should worry about six to nine months or sometimes one year in the equipment delivery time. How can ASMPT respond to the unexpected washer order if your manufacturing cycle time becomes more like three quarters.
Yeah, I think first of all, once we are trying to cut down internally, make it more efficient in terms of cutting down our lead time. For sure we are working hard on that so that we can respond faster to our customer requirement. Secondly, the other way to mitigate some of these issue is really to have buffer stock. Because of a deep engagement of this customer, we roughly know where their demand roadmap is. We can build buffer stock just in case they want the machine very fast. You know, we are able to supply in a very quick time, but limited quantities. Right. There is always this balance here. This is how we communicate the situation.
Yeah, very clear, sir. Very quickly, we are very impressed on the AP. The Advanced Packaging revenue contributions of first half 39% last year, 30%. That automatically implies more than 30% growth AP. The question is, such a strong growth is more HBM memory driven or loaded or half and half. Any rough idea the contribution mix.
Yeah. Simon, I think first and foremost when we talk about AP, it is actually more than TCB because we have a whole range of AP tools, including TCB. Although TCB is the major revenue contributor. Now within TCB itself, I think going in the longer term, I mentioned before as well, if we look at our TAM, how we arrive at our TAM of $1 billion in the longer term, HBM in terms of ranking in terms of the demand for TCB tools by application, HBM will be the largest, followed by chip-to-wafer tools and then followed by chip to substrate tools. This trend will play out in the long run.
Not now, but in the meantime.
In the meantime, panel frame is still the number one in our opinion, followed by chip to substrate for our case.
Yeah, yeah. One thing. Maybe some investors emailed me the 500 units so far. Would you specify the term? Since when is until the concorder this year. On page six you will slide 500 unit.
Yeah. Since we have been acclimating this information since 2012, I think.
2012, second quarter.
Okay.
2012, second quarter this year.
That's correct. That's correct.
Okay.
All right.
Sorry, last thing. TCB decline quarter. Sorry for the very short term question, but it's more HBM memory related, near term trend. Right. TCB declined, quote, unquote. I mean, the bookings declined, quote, unquote. That's the more HBM memory related rather than logic.
Right. Yes. Yes. Yeah. Okay.
All clear, sir. Thank you very much, Robin.
Thank you, Simon. With that, we now conclude our Q and A session. Before we close the call, I'd like to ask Robin to say a few words.
Thank you, Leonard. Thank you all for your questions and really allow me to quickly highlight some of the key takeaways from today's call. The first, I think, strong demand continues to be driven by AI tailwinds across AP and increasingly in our mainstream solution as well. For the first half of 2025, we had better than expected bookings, something that's probably worth taking away as well. AP continued to grow with AP revenue contributing significantly to growth to group revenue in the first half of 2025. This growth was primarily driven by ongoing demand for TCB tools in the mainstream business. The group is beginning to benefit from AI tailwinds. AI data center demand has driven bookings, growth for new power management capabilities, and we also experienced booking growth in China. Finally, we maintain group gross margin above 40% despite foreign exchange headwinds in the first half of 2025.
With that, it concludes the call. I'll see you all in the next quarter. Thank you very much and take care.