Good morning, good afternoon, good evening, ladies and gentlemen. Welcome to the conference call. Mr. Leonard Lee, please begin the call and I'll be standing by. Thank you.
Good morning and good evening, ladies and gentlemen. Welcome to the ASM Pacific Technology 2020 second quarter results announcement investor conference call. Before we proceed, I would like to note that during this conference call, there may be certain forward-looking statements with respect to ASM Pacific Technology's business and financial conditions. Such forward-looking statements may involve known and unknown uncertainties and risks which could cause actual results, performance, and events to differ materially from those expressed or implied during this conference call. For your reference, the IR presentation related to our 2020 second-quarter results can be downloaded from our website, www.asmpacific.com. With us this morning are Mr. Robin Ng, CEO of ASM Pacific Technology, and Miss Patricia Chou Pei-Fen , CFO of ASM Pacific Technology. Robin will start with a brief discussion about our 2020 second-quarter results, followed by a Q&A session.
Without further ado, let me hand this over to Robin, please.
Thank you, Leonard. It was a challenging first half of 2020, with the global economy's steep economic downturn triggered by the COVID-19 pandemic and lockdowns in multiple countries. The net effect dampened shipments to our customers serving the automotive and industrial sectors, especially in the U.S. and the Eurozone, and also for the CMOS image sensor or CIS market. Nevertheless, I'm pleased to report that we have stayed resilient and able to achieve year-on-year growth in revenue and profits. Multiple factors such as 5G infrastructure build-up, the localization of China's semiconductor supply chains, and a strong position in advanced packaging were contributing factors driving our first half revenue performance. Overall, group bookings for the first half of 2020 were $1.14 billion. This is an increase of 7.4% compared to the first half of 2019.
Notably, net profit HKD 390.8 million grew by 119.2% over the same period last year. Quarterly performance. Second-quarter performance was relatively good. For example, all three business segments delivered both Q-on-Q and year-on-year revenue growth. Our second quarter billings of $557.4 million came in slightly above the midpoint of our revenue guidance issued at our first quarter 2020 results announcement. We also delivered close to the midpoint of our second quarter gross margin guidance given during our first quarter 2020 results announcement. Notably, our net profit HKD 365.4 million in Q2, was a healthy 421.8% increase over the same period last year. Revenue for both Semiconductor Solutions and Materials segments recorded double-digit year-on-year growth and while second quarter group bookings decreased 29.4% QoQ and 21.6% year-on-year respectively.
This was in line with the previous guidance and a reflection of the overall dampened business sentiments due to the COVID-19 pandemic. Let me now provide some highlights about our segment performance. First, the semiconductor solution segment. Our second quarter billing for semiconductor solution was $279 million, an increase of 43% QoQ and 33.8% year-on-year. Strong year-on-year billings growth was underpinned by advanced packaging, optoelectronics, and IC discrete segments. Notably, advanced packaging deposition tools for RDL or redistribution layer and copper build-up application from NEXX delivered strong billings growth compared to Q2 2019. The ongoing market trend for high-performance computing application continues to drive strong performance from our NEXX pieces. While the traditional wire bonders and the die bonders still delivered relatively strong year-on-year Q2 revenue growth despite a challenging business environment.
Six-month billings $473.3 million increased by 16.6% when new order bookings of $536.5 million increased by 14.2% versus the first half of 2019. While Q2 segment bookings decreased slightly by 8.1% on a year-on-year basis, this was due to a confluence of the pandemic and the U.S.-China trade tension dampening overall business sentiment. Gross margin of 42.9% in this quarter and 42.2% for the first half of 2020 were mainly driven by higher volume effect, positive results from our productivity initiative, a good product mix, and continuous cost reduction efforts in our manufacturing operations. On to highlights for our SMT Solutions segment. While new order bookings for SMT Solutions of $166.6 million this quarter fell by 38.4% Q2 and 43.7% year-on-year respectively.
New order bookings for the first half 2020 of $437.1 million represented an increase of 13.7% as compared to the last six months of 2019 although still less than the first half of 2019. As expected, bookings for SMT Solutions had decreased from the high levels we achieved in the preceding quarter. The 6.9% decrease in six-month billings of our SMT Solutions business of $392.6 million year-on-year and gross margins of 31.3% for the second quarter and 31.8% for the first half of 2020 were impacted by an overall market weakness in automotive and industrial application market and the relatively larger customer base that the group served this year compared to last year. Nevertheless, SMT Solutions benefited from the 5G-related investment in China in the first half of 2020.
Another bright spot in this segment is System-in-Package or SiP, which is expected to deliver sustained and long-term returns to the group. On to highlights for the Materials segment. This quarter, Materials segment booking remained at a high level, although QoQ bookings declined by 11.8%. After five consecutive quarters of QoQ booking growth, an indicator that the demand for semiconductor devices remain healthy. On a year-over-year basis, our Q2 Materials segment booking rose by 32.7% and the first half booking achieved a record for the Materials segment of $167.3 million, registering an improvement of 25.2% versus second half of 2019 and 59.3% versus first half of 2019. In the second quarter, billings of our Materials segment of $74.2 million remained healthy, representing increases of 43.2% QoQ and 28.2% year-over-year. The Materials segment contributed 13.3% to our group billings for the second quarter.
Billings of the Materials segment for the six-month period amounted to $125.7 million, representing a decrease of 3.2% against the preceding six months, but an increase of 15.6% comparing to the first half of 2019. Gross margins was 16.9% for second quarter and 13.5% for the first half of this year. This segment achieved a healthy profit of HKD 58.1 million in the second quarter. This represented a 193.7% year-on-year increase, while the segment profit of HKD 73.9 million for the first half of 2020 represented an increase of 144.4% year- on- year. Gross margin improvement this year compared to last year for the Materials segment was underpinned by a higher volume effect and the discontinuation of the loss-making molded interconnect substrate business in the early part of 2020. Taking the material business forward.
Our material business is healthy, and our Materials segment is consistently among the top global leadframe manufacturers. This is a strong business in tandem with the growth of the global semiconductor market. However, the leadframe business is extremely competitive and requires economies of scale in order to be sustainably successful. We have been closely monitoring leadframe market trends for some years and observe industry consolidation amongst its market participants. This is why we have reached an agreement to form a strategic joint venture involving our material business segment with key partners. We have undertaken a rigorous process to identify suitable strategic partners to help accelerate the business growth of its Materials segment. Our partners are Wise Road Capital Ltd and Asia-IO Capital Management Limited, and together with them, we will collectively guide the management and development of this strategic joint venture.
We expect the strategic joint venture to begin operating by the end of 2020. In the meantime, our Materials segment will continue its business with the management team, operation, expansion plans, and product developments unchanged. When the strategic joint venture begins operation, we will operate as an independent business headquartered in Hong Kong under the auspices of the SJV partners, tapping the deep and complementary network and market experience of Wise Road and Asia-IO to help expand and solidify its leadership position in the leadframe market. ASMPT will hold a minority equity interest in strategic joint venture, while our partners will collectively hold a controlling interest through their designated investment vehicles. The financials of the SJV will be equity accounted for by the group once the SJV begins operating.
I'm confident that the excellent track record, financial strength, and the collective attributes of the partners in this strategic joint venture form a very strong and capable foundation to fully actualize the immense potential inherent in the leadframe business. This will in turn benefit all stakeholders in ASMPT's Materials segment and give our customers the assurance that their needs and their future requirements are well looked after. Let me now give my comments on our business outlook. While we seem to have navigated global economic headwinds relatively well, with the COVID-19 pandemic and the ongoing geopolitical tensions, uncertainty remains. The IMF or International Monetary Fund revised their global full-year 2020 growth projection downwards during their June 2020 review from -3% to -4.9%.
For the second half of 2020, the threat of another wave of COVID-19 infections and the continuing fallout from the worsening U.S.-China tension will remain major concerns globally. For revenue, we anticipate this to be in the range of $480 million-$560 million for Q3 to 2020. That takes into account the subdued demand for automotive solutions and the weakness in the Eurozone demand. Despite these uncertainties, one thing is clear, the rapid transformation of global workforce and industry norms have added to overall trends that point toward a future increasingly in need of more digital capabilities and features. This include increased telecommuting use, a huge thirst for high-performance computing and data centers, 5G infrastructure build-up, localization of China's semiconductor supply chain, and an increasingly wider and more complex range of requirements for digitally driven capabilities across multiple industries
ASM is well-placed to help meet these growing and evolving requirements. Our diverse customer base remains one of the key competitive advantages as we make good progress in capturing new market opportunities in advanced packaging, silicon photonics, Industrial Internet of Things, Mini-LED and micro-LED solutions, power semiconductors, and Industry 4.0 solutions. We are also preparing our business for the future, such as the formation of a strategic joint venture to take our material business forward. I'm confident that we were even stronger, relative to the competition. With that, we are ready to take some Q&A questions.
Thank you, sir. We will now move to Q&A session. If you'd like to register for a question, please press star one. Please remind that, maximize your question to two. Thank you. Our first question comes from Donnie Teng from Nomura. Thank you.
Thank you, Robin and [Leonard], for taking my question. I have two questions. First is regarding to your outlook. Despite of you are not providing any booking outlook for third quarter, just wondering whether if you can guide us the direction of your different businesses. This is the first question. Thank you.
Thank you. Yeah, because of the, really, the uncertainty still remaining in the market. It's kind of difficult to really give some kind of definitive kind of outlook for booking, especially. Now, if you look back in our trend for many years, typically, the trend is that the second half booking will be lower than the first half booking. That seems to activate, especially for the Semicon Solutions segment. For materials, kind of inconsistent, sometimes higher, sometimes lower. For SMT, the second half tends also to be lower than the first half in terms of booking.
Thank you. A quick follow-up regarding your first question is your announcement on selling some stakes of your material business. I think Wise Road Capital is one of important China fund. It used to invest in Nexperia before. Just wondering if you can elaborate more on whether ASMPT in the future will continue searching for a strategic investor, particularly from China.
Yeah. I think so far this is the first time in our history whereby we form a strategic joint venture with a partner. At this point in time, we have no plan for any future joint venture with any other party.
Thank you. Our next question comes from Kyna Wong from Credit Suisse.
Thanks for taking my question. I want to have a follow-up question on the divestiture of materials business. As of right now, one of the key benefits is actually to accelerate the growth. I think from my understanding is it actually could capture more different customers, diversified customer in the future, and especially when we can also pursue the growth in the China semiconductor industry, then this divestiture of materials business could be one of the advantage. May I know if there's any future plan for this subsidiary that is working with, I mean, getting any other business structure that could be changed in the future? If this is also something that is a direction you are working with the strategic PE investors? This is the first question.
Okay. To answer your first question. As I've mentioned in my opening remarks, we have gone through this very rigorous process to identify a suitable joint venture partners for our material business. We are very pleased to have found a very strong partners in Wise Road and in Asia-IO. As Lee said just now, Wise Road is known in the market. They have acquired an experience. Both these companies, in our opinion, have very deep connections and experience in the semiconductor market, in particular in the Chinese semiconductor market. As we have mentioned earlier, China is definitely a high-growth region also for the leadframe semiconductor market. I think with the combination of their experience, and expertise, and also financial expertise, and also coupled with our experience in managing the leadframe operation, I think it's a marriage of strength.
I think we are very confident that this marriage or this JV will further enhance the growth of the different business in the years to come.
Thank you. Our next question comes from Arthur Lai from Citigroup. Thank you.
Hi. Thank you. Good morning, Robin, and Leonard, and new management. I have two questions. One is a follow-up question, as to Donnie.
Sorry, Arthur. We can't really hear you. Sorry, Arthur. Can you speak a little bit closer to the mic?
Yes. Sorry, is it better?
Yes.
The first question is a follow-up question on the quarter three revenues. How we think of the composition of the semi solution in SMT? We want to know that, given this guidance, the breakdown. Thank you.
Yeah, I think the main drivers are still there. We mentioned about 5G. I think 5G-related investments are driving demand across both the ICD, and NEXX, as well as SMT segment. It's a common broad theme, propping up the demand for the semiconductor market. That applies, as I said, across to both segments. Now, for the China localization effect, definitely it's taking hold. We have been saying that. The drivers remain the same. Actually, the same from Q1 going into Q2. We see these drivers will also continue to be there for a period of time. Now, for SMT, I think, as I said, the outlook for Q3 in my statement. We see a weakness in automotive. Also, in terms of region, we see that Europe and America are slowing down.
As a result, that tempers our guidance a little bit, in terms of revenue guidance for Q3.
Understand. Given the Europe and U.S., they have a higher tax rate. How we think of the tax rate going forward?
Yeah. I think you can see our tax rate this quarter has come down to a much lower level compared to Q1. Primarily because of, if you guys have been following our results, so the profit mix between the semi side and the SMT side does play a big part. In terms of determining the overall group tax rate. For Q2, because of the higher profit generated by the semi segment, we see the tax rate coming down to around 14%. On the first half basis, to around 18%. If this profit mix remains the same going forward, we can expect to see that kind of ETR or estimated tax rates for the rest of the quarter.
Thank you. Our next question comes from Wu Liu Yang from Everbright. Thank you.
Hi, ASMPT management. I'm Wu Liu Yang, overseas FMC analyst from Everbright Securities. I have two questions. The first is, I'm really curious about the opportunity for SMT business for next year. Which area of demand will rebound to drive the whole business grow up?
Yeah.
This is my first question.
Yeah. We still believe 5G infrastructure build-up will be a multi-year program. We are confident that our SMT segment will continue to benefit from this particular segment because our superior capability in handling more advanced devices in terms of accuracy, in terms of flexibility, in terms of speed as well. I think 5G will continue to drive it. Now, I also mentioned in our announcement that SiP or system-in-packages, this demand has been around for a couple of quarters already. We see customers using our SMT tools to assemble devices onto SiP packages. They like our tools because of the speed and the accuracy. Most of these devices or modules actually go into consumables like, for example, the wireless ear pods, they're kind of very popular now among all of us, and also smart watches and so forth.
We see this tool demand will continue for a period of time. Of course, looking at the smartphone market, if the smartphone market starts to pick up, in the later part of this year, hopefully, our SMT segment, we believe, will also stand to benefit from this demand in smartphones.
Yeah, I understand. The second question is more detail. We can see the demand from the base station and the light module have released this year. Will this kind of demand decrease in next year?
I hope I got your question correct. As I said, the 5G infrastructure base station build-out is, in our opinion, a multi-year driver. It will also continue into 2021.
I'm wondering about the equipment and demand. Will the customer release in the end of this year, but not next year? Will this happen this year?
Sorry, can you repeat your question one more time? Sorry.
I'm wondering about the customers will build up their capacity in this year, at the end of this year, but not next year. The demand for us is released the most in this year, but not next year. Will this circumstance happen?
Yeah. As I said, for 5G, we still believe that it's a multi-year driver for the industry. As long as countries all over the world continue to build up their 5G infrastructure, I think the demand will continue for a period of time.
Thank you. Our next question come from Leping Huang from CICC. Thank you.
Thank you for taking my question. Three questions. The first question is, what's your exit strategy for the material business? How this, you think, will benefit the ASMPT's shareholder, because you consider the good track record of the Wise Road Capital or they cover the ASMPT and to the sell, finally go to the Asian market, which has a very large valuation gap. How you look, because you still keep above 40% stake in this material base. What's your plan for this material base exit plan?
Thank you for your question. The reason that we hold still a significant percentage, 44.44% of shareholding in the joint venture, it's an indicator, it's a strong signal that ASMPT is fully committed to this strategic investment and fully committed together with our partners to further grow this investment and bring this JV to a new height. We believe, as I mentioned earlier, the leadframe market is primed for growth. Looking at the past trend, the consolidation trend among the market participants, we believe that it's an opportunity for us, together as a JV, to capitalize in this current macro environment to bring this joint venture to a much higher growth than if we were to remain as 100% owned business under ASMPT group.
As I've said earlier, I think the complementary strength of partners will able to deliver on a superior growth return for both shareholders in this particular joint venture. Now, we just mentioned about this joint venture today. Absolutely, we have no plan. There's no divesting plan at this point in time. Of course, looking at the profile of the investors that we have partnered with, they're very strong in terms of financial expertise. Of course, we can't rule out that going IPO is one of the routes that we will take eventually.
Okay. The second question is about your SMT business's margin. Your SMT business margin keep going down in last few quarters, and now roughly it's around, I think, 31%. What we should model your SMT's business margin in long-term? I think you explained in previous quarter, you have a larger exposure in Chinese customer and you are gaining market share, but how we should look this business in terms of margin in long-term? Yeah. Thank you.
If you look at the SMT margin, we have been saying that, on one hand, we are happy that we have been able to penetrate into the Chinese market in a very sustainable manner. On the other hand, typically this market has a lower margin compared to if we sell to the European and American market. This year in particular, we see the China mix are much higher than the European and American mix because of the slowdown in Europe and in America. If the economy or the demand in Europe and America start to pick up again, the gross margin of the SMT segment will also start to improve. I think primarily it's driven by the geographical mix of this SMT segment.
However, of course, having said that, we are, of course, looking into measures and initiatives to continually to bring down the cost of the SMT tools. As I mentioned, or we have mentioned some quarter back, our Malaysia factory should be fully operational probably in the early part or mid of next year. If that comes into force, I think we can expect our SMT margin to continue to improve from there.
Thank you. We have another following question come from Donnie Teng from Nomura.
Thank you, Robin and management, for taking my question again. I would like to discuss maybe a long-term or midterm trend. As you know, advanced packaging has been an important driver for ASMPT in the past one to two years. I'm seeing there is a new trend called chiplet. I also read some of your presentation showing that you have some equipment on the stage for this kind of chiplet assembly. Just wondering if you could give us some more color on progress and the future market opportunity from this kind of new chiplet design ICs in the future. Maybe it would be better if you could comment on the competition landscape within this new chiplet design. Thank you.
Yes. You're absolutely right. We all know about the limitations of Moore's law, right? I think with the limitation of Moore's law, I think the shift is now towards the advanced packaging. That's the area that the back-end guys like ourself and our competitors play in this field. Yes, I think there's a tremendous growth opportunity for everyone who are participating in this particular arena. You're talking about chiplets. That's exactly the trend that we are seeing as well. Basically, in terms of technical terminology, we call it heterogeneous integration. Basically placing different chips, whether it's memory chip, logic chips, or other kind of chips into a package, trying to mimic the SoC, the system on chip fabricated at the front end.
Instead of fabricating this chip in the modem, the GPU, and the CPU in one chip in the front end, the trend is moving towards using advanced packaging tools to package individual of these chiplets into a package and try to mimic the function of a SoC. For that to really materialize, I think we need advanced packaging tool set. For example, we have been advocating that for ASMPT, we believe we are a premier interconnect technology player. We have a whole range of advanced packaging tools to facilitate this HI process. For example, we have been advocating we have very accurate and very precise pick-and-place tool called the NUCLEUS. You guys are also now very familiar with our TCB, Thermocompression bonding as well. In our announcement, we have also mentioned that we believe we have the largest install base of TCB for CPU applications.
Since the acquisition of NEXX back in 2018, now we extended another area where we can play in advanced packaging area, that is for the deposition tools for RDL and for copper buildup. We have been also very successful in this particular area, especially for panel deposition tools. Which we have been saying, NEXX, has been performing very well this year compared to last year. The landscape is that we see advanced packaging will continue to grow. Let's also be frank. Advanced packaging as a whole in terms of market size, is still smaller than traditional wire bonders. The traditional die wire bonders. It's still a small market, although growing at a faster rate, compared to this particular segment.
In terms of competition landscape now, of course, because these tools are highly advanced and highly precise, there are not many competitors in this particular area. Not many competitors have the technology in order to enter this space. The entry barrier is very high, for this particular space that we play in. Typically also, from the customer's perspective, such tools are new tools, we call it a technology buy. When it comes to technology buy, customers tend to be also very selective. They want to look at the company profile, does the company have the breadth and the depth in terms of technology and the resources to deliver these advanced packaging tools alongside with the customer.
They tend also to choose a customer with a lot of financial strength and a lot of technological resources, in order to carry this program through multi-year. Sometimes it can be a multi-year kind of program together with their customers. As a result, in terms of competition landscape, there are not many players who can play in this particular area.
Got it. A quick follow-up is on, you mentioned about the high-precision bonder. Can we assume that, besides the new bonders that you are currently under R&D stage, maybe AMICRA can be part of this high-precision bonder supplier for the potential new chiplet design ICs in the future? Another small question is that you have talked about SiP growth momentum has been pretty strong this year. Maybe next year also pretty strong driven by premium smartphone company. Could you give us a little bit idea about how much sales contribution is from SiP right now under your SMT Solutions business? Thank you.
Certainly. Answer your first question first. AMICRA is also advanced packaging tool, very precise, down to submicron precision. AMICRA is a well-placed and positioned to benefit from the silicon photonics area. As we all know, as we demand more and more faster data, the bandwidth will keep on increasing. Silicon photonics is not exactly a new technology, but it's a technology that's coming up very strongly because, as we all know in all this space, cost consideration is one factor. The industry believes that silicon photonics is a much lower cost alternative compared to the conventional photonics. However, it requires very high-precision tools in order to do the packaging. AMICRA is a premier tool supplier for this particular space.
We are very confident that in the years to come, with the growth in terms of data center, growth in terms of telecommunication, bandwidth, all these bodes well for the AMICRA business. In terms of SiP, yes. I think this growth started a couple of quarters back, and as I said, driven by the consumables like the wireless headphones and so forth. We believe with the 5G phones come on board, I think this also will underpin this particular business in terms of SiP. For the SMT business. Yeah. As to your question, we don't really reveal how much is the contribution from the SiP segment for the SMT business. I can only say that this is one of the fast-growing segment within the SMT business.
Thank you. Our next question come from Chris Yim from BOCOM. Thank you.
Oh, good morning. Just a few quick questions from my end. The first one is, I was wondering if you can give us a update on Mini-LED, maybe revenue contribution and adoption from your customers. My second question is regarding the next year's growth. I saw in your presentation that your billing in 2Q grew 100% year-on-year. I was wondering if you can give us a Q-on-Q trend of this business. My third question is on SMT front. I was wondering if you can tell us what is the geographical mix now for your SMT business, say, for China versus Europe? Also, how big the automobile and industrial business is now to your SMT business? Thank you.
Let me answer your first question first. Now, in terms of Mini-LED revenue contribution, I think it will continue to increase, because we see that the adoption of this Mini-LED for outdoor, indoor display panel, is a multi-year growth driver. However, I must say that for this year, because of the COVID-19 pandemic situation, the demand for this particular area is kind of subdued. But we strongly believe that once people overcome this pandemic, which one day we will, the demand for the Mini-LED will start to increase again. In any case, we are starting to see more interest from our customers for Mini-LED solutions in Q2, and, hopefully, in Q3, this momentum can continue. Now, in terms of next business, yes, indeed.
I must say that, since we acquired NEXX in 2018, last year, full year, NEXX itself, based on their historical revenue, they've already achieved a hit, a record last year. For this year, barring any adverse impact that we cannot predict, we strongly believe that this year NEXX will again surpass the record billing that we set last year. The Q-on-Q trend is not too meaningful at this point in time. Reason why, because NEXX business are largely contributed by the panel deposition tools. For the current tool, it's a new tool, very new tool that introduced in the market only last year. You can imagine for a new tool, the customer base are pretty small. Q- on- Q trend for that kind of business is really not meaningful. We don't comment on this Q-on-Q trend.
On a year-on-year basis, as I mentioned earlier, we are very confident that on a year-on-year basis, NEXX will continue to show improvement over last year. As for the geographical mix for SMT, we don't really disclose the geographical mix in very granular detail. I can give you some color. This year, China mix larger than years before. That's the reason why that also impact on the gross margin. One more question is about the automotive and the industrial proportion. I believe overall proportion for the SMT business segment. Although we have been saying that the demand for automotive and industrial has come down, we are speaking in relative terms, compared to prior period, compared to prior year. I must say that these two segments, especially for the automotive segment, is still a major segment.
If you look at the application mix, we have a chart in our slide. Automotive is still the number two and number three segment, after the mobility, telecommunications, and IT segments. It's not a small segment by itself.
Thank you, sir. Our next question comes from Kyna Wong from Credit Suisse. Please go ahead.
Thanks for taking my question again. I have two questions. The first one is about the Intel that they are going to also have outsource orders to TSMC. What do you think about the impact to Amkor Technology, especially in the advanced packaging? I think, the CPU, or HPC is one of the key driver for the TCB as well. I'm not sure if that will be a positive or a negative impact in the near term and mid to long term. This is the first question. The second question is, earlier you mentioned about the smartphone side that later this year will also benefit from the 5G smartphone products.
Would like to know about the momentum for this smartphone, because despite the overall smartphone market is kind of weak this year, but this particular 5G smartphone model that will still try to benefit SMT in second half of 2020. This momentum, will it continue in the first half next year?
I'll answer your first question just now. The question about Intel outsourcing to TSMC. The outsourcing part is the wafer fab part. It's an area you probably know we don't play in the area, we play in the advanced packaging area. It all depends on Intel. We can't really speak for Intel. We are not saying Intel is a customer anyway. I'm just commenting in general. It all depends on Intel, whether they will focus more on advanced packaging. It's something that we really cannot comment on behalf of Intel. In terms of smartphone 5G, yes, I think if smartphone 5G pick up in the later part of this year, I think it will benefit not just SMT, but also the ICD segment because 5G phones need more devices.
They pack more devices into a 5G phone for better features. As we mentioned, it did need more devices, the customer will tend to buy more equipment, what we call capacity buy, right? For example, there'll be more antennas, more filters in the 5G phone. This bodes well for the entire packaging industry as a whole. We believe that we also stand to benefit from the packaging side. Now, for 5G smartphone, it all depends how the demand for the 5G high-end smartphones will materialize in the future. It's too early to tell at this point in time.
Thank you. Our next question comes from Leping Huang from CICC. Please go ahead.
Okay. Just one follow-up question. We see the foundry customer, if you look the second quarter result and the third quarter guidance, seems to be most of the foundry are fully utilized now. Can you share some color? Why the foundry customer is so fully utilized, but your second quarter booking guidance is still a double-digit decline? Of course, I understand the CIS, you have some weakness on the smartphone customers. How is your traditional, the back end or front end customer? Thank you.
Yeah. As I mentioned earlier, I think if we look at ASMPT, right? In the semiconductor solution segment, we basically have a few sub-unit in there. One is what we call the IC discrete. The other one is the optoelectronics. Third is the CIS segment. Fourth, we can broadly classify them as advanced packaging, whereby NEXX would be inside there, AMICRA would be inside there as well. Yes, as I mentioned earlier also, our traditional die and wire bonding also see a pickup in terms of demand in this particular period. We believe, of course, we cannot directly associate the loading with the foundry customer, but we believe naturally, very intuitively, right? If the foundry customers, their utilization is high, ultimately all these chips that they manufacture will have to be packaged down the road.
In that sense, I think, as I said, our traditional wire and die bonding also benefit from this trend. However, as I mentioned earlier, in view of the very uncertain macroeconomic environment, we tend to be a little bit more cautious in terms of how we look at the demand going forward.
Thank you.
Thank you. Our next question comes from Simon Woo from Bank of America. Please go ahead.
Yeah, thank you very much. A couple of questions very quickly to double-check management's previous comments. Number one, sorry to ask this, but the second quarter bookings are showing quite significant year-on-year decline. Could you recap, this second quarter bookings can represent mostly the Q3 revenue trend, or it will be split into the Q3, Q4, so we don't have to worry too much on the Q3 revenue significant decline? Then I will ask the follow-up question. Thanks.
Let me try, because we can't really hear you, Simon, very clearly. Let me try to answer my answer to your question to see whether it's accurate. Second quarter decline in booking, yes. We guided in Q1. Because we knew because of the pandemic situation, the demand from customers will be tempered. At that point in time, we also had some information. The customers are getting a little bit cautious. That's why they started to push up some of the orders to Q3 and Q4. We were right. We got a double-digit decline, quarter-on-quarter, in terms of booking. Our booking declined by, I think, close to 29% in quarter-on-quarter. I think as for your second part of the question, Simon, can you repeat the second part, please? We can't really hear you.
Yeah. My question is, in the second quarter bookings, which declined significantly quarter-on-quarter and year-on-year, that really means Q3 billings revenue declined significantly, or it will be spread over through the fourth quarter or even early next year?
For Q3, we are guiding a range of HKD 480 million-HKD 560 million. Compared to Q2 guidance of HKD 500 million-HKD 580 million. In essence, we are just getting slightly less than Q2 revenue. Q4, honestly, we have been always saying we cannot really see beyond one quarter. In this environment. There is really not much visibility at all for Q4. I mentioned earlier, the reason why we are guiding that range for Q3 is really due to the very uncertain environment and also looking at past trends. Typically, SMT will tend to be a little bit higher, past trends, Q3 compared to Q2. This time around, because of the subdued demand for automotive and also the weakness in the Eurozone, we do not expect to see that for SMT.
Lastly, if the bookings trend remains volatile and uncertain, but this also means maybe quite strong quarter-on-quarter, year-on-year increase, maybe towards the late this year, once the auto industry becomes normalized. If people buy more electric vehicles and also all the industrial data points becomes better. There's a chance to see unexpected strong ICD bookings or order increase trends? Thank you.
I think it all depends on a few factors. I think the macroeconomic situation, hopefully, can improve. The consumer sentiment should improve. That will give a boost to the electronics and the semiconductor industry as a whole. We're also watching the demand signal for smartphones very carefully. We are watching whether the end consumer demand for smartphones will increase, when new models are launched, probably towards the latter part of Q3 and Q4. Typically, they will launch all these new phones during that period to catch the season, the festive season buying spree. We are also watching this demand signal very carefully. If that happens, I'm confident that we will also stand to benefit from a few angles. One is, of course, our CIS market segment. As I said, this is a relatively weak market segment for ASMPT in this first half.
If that picks up, if the end consumer sentiment towards smartphone demand picks up, I think that we are cautiously optimistic. The CIS market will continue to move higher from where we are today now. Of course, not forgetting SMT itself. SMT will also benefit from this pickup if the end consumer demand for smartphones becomes strong in the latter part of this year.
Yeah. Thank you very much.
Thank you. Our next follow-up question comes from Kyna Wong from Credit Suisse. Please go ahead.
Thanks. I think there's another question about the gross margin. Given we have the revenue guidance for the third quarter, what could we see in terms of quarter gross margin? Just now you mentioned about geographic impact and also some uncertainty. What do you think about, because you also have some expectation in terms of the mix. Can we at least maintain this kind of gross margin? In terms of year-over-year, what do you see the changes in terms of their mix impact? Thanks.
Yeah. I think because of the weakness in automotive, as you are aware, automotive tends to be a higher margin business across the board, especially for SMT. Because of this weakness and also the weakness in the Eurozone and America affecting our SMT, we believe the margin for SMT won't continue to increase. We believe overall because of the lower guidance in terms of revenue range. If the revenue comes in lower than Q2, we believe our margins will also have to be moderated from Q2 downwards because margins are also very much dependent on top line as well.
Thanks.
Thank you. Our next question comes from Marco Long from Citi. Please go ahead.
Hi. I'm trying to ask, just to clarify, what is the percentage of our investment in the new JV partner?
Oh, our percentage, at the start of the JV, will be 44.44%. That's our shareholding percentage. The other percentage, of course, belongs to the two other JV partners.
Okay.
However, as probably you have read in our announcement, we have this earn-out mechanism. Depending on how the JV performs in terms of EBIT values, if it performs beyond a certain threshold, our percentage can increase from 44.44% to around 49%, just below 50%. Likewise, if the JV does not meet those EBIT targets, it can also come down to around 37.5%. However, I think we are very confident based on the performance of the material business in the last few years. If you look at our this year performance for the Materials segment, I think of all the three segments, Materials segment this year performed in terms of metrics very well. We are very confident that this JV performance will continue to grow and surpass this year performance in the future.
Just to clarify, so currently it is not consolidated, but, if in the future, you would like to increase your shareholding in the JV, it might be consolidated to the EBIT perspective?
No. That's why the maximum shareholding that we can go up to based on the earn-out mechanism is 49%. At 49%, we will still be not a subsidiary. We will still be consolidated and the financial of the JV will still be equity accounted for. It's just one line. When we talk about equity accounting, it's just one line. Accounting for our share of the PAT of the JV in our group financials.
Oh, got it. Same question, just a reminder for me, what's the percentage of the ICD and CIS in the semi business?
Sorry, can you repeat the question?
In the last quarter, you mentioned the advanced packaging and CIS account for half of your semi business. Is that still in the first half or in the second quarter?
Yeah, I think we tend to want to look at it more meaningfully from a first-half basis. Together with CIS, they're close to 50% of our semi solution business.
Thank you.
Thank you. Our next question comes from Mr. Simon Woo from Bank of America. Please go ahead.
Sorry again. A very quick question again. Regarding the automotive area, order weakness, could you recap which machine is now suffering? When this can maybe show some recovery? Auto industry has been showing quite long period, struggling, but it is time to see some recovery with the electric vehicle and the auto OEM promotion. Could you recap here which SMT machines are suffering regarding the automotive and the European zone area? Thank you.
I think for automotive, not just the SMT machine we are supplying to the automotive segment, but also the semiconductor ICD segment, we're also supplying tools for the automotive segment, especially for those power packages. As you can imagine, cars need a lot of power to drive the powertrain. A lot of these power packages require different tools to package them. For the semi solution side, we also provide tools for the automotive segment. Of course, to the SMT, the automotive market is, of course, a very prominent market for SMT. We have been saying that we believe in terms of the automotive segment, SMT placement tools for the component onto the PCB board, we are the premier company supplying these placement tools for the automotive segment. Most of these automotive demands actually originate or come from the European and the American region.
That's where we are very strong in those areas.
Yeah. However, let me look at all the European auto OEMs strategies. They are significantly shifting from the traditional ICE car platform to the more hybrid and electric vehicles. In that case, these auto OEM customers, do they need a new chip mounter and also all the packaging solutions? Because of their platform shift to more and more electric vehicles, then maybe why not ASMPT can benefit from this, or it's not much relevant? Thank you.
Yes. Certainly, I think, talking about EV market now, EV market is still a relatively small segment compared to the engine power automotive market, I mean, so the conventional power engine market for automotive. Although the electronic content for EV or hybrid vehicles are higher, compared to the conventional automotive, but it cannot make up for the drop in demand for the overall car market. That's why automotive market this year is down compared to the prior year. Now, in terms of the type of tools, certainly, if the package requirement for factor placement tools for all markets, including automotive, SMT will stand to benefit because we are known for our technological capabilities in terms of placement, in terms of accuracy, and also in terms of flexibility, in the production line. We'll stand to benefit if that happens. Let me also say something.
For the automotive market, once you are supplying to automotive market, they don't change the requirement very often. Once you're in the automotive market, they buy off certain sets of your tools, and they will tend to use these tools for a long period of time because they want stability, they want quality, they don't too many changes in the design. Once you're in, you're in for a long haul. That's the advantage. Being a number one supplier to the automotive market, we tend to be in a very entrenched position, supplying to the industry for a long period of time.
Okay. Thank you very much. Very clear.
Thank you once again, ladies and gentlemen. To register for a question, please press star one. Once again, it's star one to register for a question. Thank you. Leonard, it seems to be no further question at this point in time. Thank you. Leonard, it seems to be no further question at this point.
Sure. Yeah. Well, in that case, I think we have a very good discussion this morning. We have covered a lot of ground, different areas. In the interest of time, I'm afraid we will have to conclude the call. Thank you all for joining us today, and we'll talk to you again next time. Goodbye.
Thank you.
Thank you, everyone.
Thank you.
Thank you.
Goodbye.
Bye.