Earnings Call: Q4 2019

Feb 26, 2020

Good morning, good afternoon. Welcome to the ASM conference call. Mr. Leonard Lee, please be in call and I'll be standing by. Thank you. Good morning, good afternoon, ladies and gentlemen. Welcome to the ASM Pacific Technology twenty nineteen Annual 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 Technologies' 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 reference, the IR presentation related to our 2019 annual results can be downloaded from our website, www.asmpacific.com. With us this morning are Mr. W. K. Lee, CEO of ASM Pacific Technology and Mr. Robin Heng, CFO of ASM Pacific Technology. Our CFO, Robin, who is also our CEO, Bassinet, will start with a brief discussion about our 2019 annual results followed by a Q and A session. Without further ado, let me hand this over to Rodden, please. Thank you, Alain. Good morning, and good evening, ladies and gentlemen. We appreciate you joining us for our twenty nineteen fourth quarter and annual results investor conference call today. I will first provide you with a summary of the company's performance, followed by the Q and A session. In 2019, the semiconductor industry went through a slowdown, largely due to global economic uncertainties amid the trade war and weaker demand from some end markets such as optoelectronics and automotive. Let me first give you some highlights to the twenty nineteen fourth quarter numbers followed by the full year. During the fourth quarter, the group achieved million dollars in revenue, an increase of 7% over the preceding quarter and a decrease of 6.7% over the 2018. For booked bookings, we recorded US445.2 million dollars a decrease of 13.36.1% over the preceding quarter and the 2018 respectively. In terms of net profit, excluding restructuring costs and related tax effect of HKD106.9 million, we achieved net profit of HKD328.7 million, an increase of 47.9% over the preceding quarter and an increase of 44.4 over the 2018. As such, the group managed to reestablish momentum in its business in the second half of the year with a strong 18.3% revenue growth and 149.1% improvement in net profits over the first half of the year. For the full results, despite the challenging economic conditions, ASMT made good progress during the year as a result of successfully implementing a range of initiatives, such as focusing on higher growth markets and realign operations to reduce costs. For 2019, group revenue came in at billion dollars a decrease of 18.8% over 2018. New order bookings came in at dollars a decrease of 21.5% over 2018. Net profit came in at HKD729.2 million, excluding restructuring costs and related tax effect, representing a decrease of 67.3% over 2018. Before I go to the Cement results, let me provide you with a quick overview. During the fourth quarter, both the back end equipment segment and the S and T Solutions segment achieved revenue which was better than our guidance. The back end equipment segment revenue achieved both Q on Q and year on year growth, while the S and P Solutions segment revenue achieved Q on Q growth, but on a year on year basis declined as guided. Materials segment performed in line with guidance with revenue growth for both Q on Q and year on year. Group bookings declined 13.3% Q on Q due to seasonal pattern and in line with our guidance. In 2019, Tech and Equipment segment contributed 44.1%, In 2018, it was 47.4% of the group's total revenue. It continued to hold the number one position in the global market, a position it first attained in 02/2002. It has also further widened the revenue gap with the closest rival. On a full year basis, gross margin of this segment was adversely impacted because of lower revenue and lower master sheet capacity utilization. However, demand momentum for traditional tools, in particular wire bonders, started to pick up in the second half of the year. Traditional tools like wire bonders typically have lower margin compared with advanced packaging and CIS tools. This coupled with higher IC and LED but lower CIS mix revenues pulled down the gross margin for the fourth quarter. The group continued to make progress in its Advanced Packaging business. Revenue from Advanced Packaging contributed to more than 20% of the revenue of the back end equipment segment. CIS and Advanced Packaging tools collectively contributed to more than 50% of the segment's revenue. Billing for CIS and Advanced Packaging grew year on year despite the soft market conditions in 2019. TIS billings continued its momentum in 2019 brought about by the rising adoption of smartphones with higher resolution cameras, multi camera features, three d sensing, POS, wide field of view and helical speed lens features. In fact, full year billings for CIS grew year on year, while billings for IC and discrete and LED declined. ASM NEX made a significant contribution to the bookings and billings of the IC and Discrete business in 2019. It has also strengthened ASMPD's position in the advanced packaging market. The group remains confident that its investment in advanced packaging over the past few years has put ASMPT well ahead of its peers. With effect from fiscal year twenty twenty, we will rename the back end equipment segment to Semiconductor Solutions segment. This is to better reflect the inclusion of the ASM NEXT business acquired in October 2018, which served the mid end deposition tools market and has grown to become a significant part of the business as well as the group's transition to an integrated hardware and software solution provider for the semiconductor packaging market. In 2019, the Materials segment contributed 11.7%. For 2018, it was 11.5% of the group's total revenue. The segment recorded four consecutive quarters of Q on Q growth in bookings. The Semiconductor is clearly on the path of recovery. Gross margin in the fourth quarter was adversely impacted by the increase in commodity price, in particular copper and palladium. On a full year basis, gross margin declined largely due to the drop in revenue. As part of our ongoing effort to drive for greater efficiencies and to reduce costs, the group decided to relocate the lead frame operations in Singapore to the newly expanded Malaysian plant. The relocation to the Malaysian plant starts in Q1 twenty twenty and is expected to be fully completed by the 2021. The group also decided to discontinue the Modot Interconnect Substrate or short name MIS business in Q1 twenty twenty after an extensive evaluation of the competitive landscape of this business. The group is of the opinion that the congressional subject has an edge over MIS in terms of price and technical features like final line spacing and higher IO capabilities. This continuation is expected to have minimal impact on the gross revenue. These two initiatives that we have undertaken will have a positive impact on the segment's gross margin and profitability going forward. The SMT Solutions segment contributed 44.2% in 2018 was 41.1% to the group's revenue in 2019. Despite the headwinds of weak economic conditions and the slowdown in the automotive demand, the S and P Solutions segment benefited from the increase in five gs infrastructure related investment. However, the higher revenue contribution from China and the slowdown in the automotive industry adversely impacted the gross margin segment on a full year basis. To mitigate this, this segment has looked at ways to lower its cost of operation. One initiative was to increase the volume of incentive work done in Malaysia after the group has expanded the plant there. The other was to deploy a satellite operation in Hungary to support the assembly operation in Munich, Germany. This segment recorded an improvement in gross margin Q on Q and year on year for the fourth quarter due partly to the warranty provision write back indicating that the two sold were reliable and thus less warranty claims are needed. There was also a one off charge in Q4 twenty eighteen relating to the discontinuation of the solar business, which pulled down the gross margin in that particular quarter. Looking ahead, the group ended the year with an increased optimism that the global semiconductor manufacturing equipment and materials sales are expected to stage a 2020 recovery and set a new high in 2021. There are several other factors contributing to this optimism. Pickup in demand from Chinese manufacturers to localize the supply chain, the accelerated deployment of five gs infrastructure, the rollout of five gs handsets and the progress the group is making in capturing new market opportunities such as advanced packaging, silicon photonics, IIoT, mini and microLED solutions, power semiconductors, Industry four point zero solutions and AOI, which stands for Automatic Optical Inspection. The rapidly escalating COVID-nineteen outbreak has struck China at a time when its economy has grown larger and established greater connections with the rest of the world. Given the widespread nature of the outbreak and the fact that it's still evolving, the impact to the group is unclear and difficult to estimate at this point in time. Due to the extended shutdown in China during and after the Chinese New Year, the group has lost around one third of its production capacity in China in Q1 twenty twenty. On a full year basis, we estimate the impact to be less than 10%. While the booking momentum was certainly tempered by the COVID-nineteen outbreak, we are cautiously optimistic that Q1 twenty twenty group booking will achieve a year on year growth. Based on our estimate at the time of this announcement, we anticipate that Q1 twenty twenty group revenue will be in the range of between million dollars to US450 million dollars and more than likely the group will record a loss for Q1 twenty twenty. With this, we thank you for your attention, and we are ready to take your questions. Thank you. Thank you for taking my question. I have two questions. The first one is about your first quarter guidance. Can you show us some colors on this uncertainty of the guidance, which is mainly coming from the Chinese customer or which type of the product you are affected or which type of the customer you are affected? Thank you. Yes. And the sorry. I and the second question maybe I I just say for the two questions. So the second question is that you we see that you have stated you have to introduce new regulation on Huawei, and the some of the if you have some American materials, you cannot supply to Huawei. So can you share that do you have any U. S. Material because most of your operation in Asia, do you put any regulation is introduced, will you be affected? Thank you. Me answer the first question first. For Q1 guidance, I would say as of this point of time, we have received very strong booking for Chinese New Year. So that's why booking wise, we are still cautiously optimistic that. Unless customers start to hold back and push back. Otherwise, it's very likely we will achieve a year on year growth for Q1 bookings. After the Chinese New Year, when factories in China, our customers in China start to resume their operations, we have extensively checked the customer. As of today, we don't see any significant cancellation, almost zero. Small push out, that's reasonable because of their factories reopening has been delayed. But most customers are indicating for the orders they have placed to us, they still want it to be delivered in March, April time frame. So the push out will be in a month maximum payment time. So at this point in time, you can see definitely it will affect our Q1 billing because our own production capacity has been affected. Our suppliers in China also have been stalled, so they have interrupted our supply chain. However, there has less impact on the SMT because SMT mainly the decision location for us are in Munich and Malaysia. However, they also face some high supply issues because the supply chain in China has been stopped. It has bigger impact on the brand equipment as well as the materials. So I would say this is the picture. So if China the activity in China can be resumed very quickly. Actually, we are pretty optimistic about that. However, with the development for the last few days in Korea, in Europe, in Middle East, I would say that caused more uncertainty looking forward, okay? Therefore, The U. S. Regulation changes, I will say this is still a new market for our time. We don't know the content of the changes. So it's difficult for us to comment. In general, I would say for high-tech products, high-tech equipment, like what we are producing, it's difficult not to have U. S. Contents over there, okay? So I would say only until we know more about whether that's really such a restriction, what is the scope of the restriction, I think at this point, it's difficult for us to comment. Okay? Thank you very much. Our next question comes from China Wong from Credit Suisse. Thank you. Thank you. So my first question is about the fourth quarter back end equipment revenue and also the branded gross margin for the group is actually better than guidance. Where is the upside come from? Is this because of the mobile or like five gs infrastructure continue to drive the upside? The second question is about looking into the advanced packaging. We see the mix that there's a new customer base. So I just wonder if like it is actually from Japan customer because we noticed that the Japan revenue the revenue from Japan has actually achieved year over year growth in 2019. Is this due to Advanced Packaging? Tina. This is Robin. On the gross margin development for Q4, yes, indeed, it came in better than what we had guided. We guided slightly down. However, it was aided also by the top line. So our top line increased for back end. So that also helped to push out the margin. Now the other factor affecting the blended margin is S and P. S and P, as I read out the conference call just now, you noticed that we have to true up our warranty claim provision because of better performance in the field in terms of quality. So by training up, that also helped the gross margin of SMP. So as to your second question in terms of customer mix, yes, you can see Japan has now become the number five major location for us. So indeed, we said in fact the announcement as well that right now, we have leading high density Foxtrot makers in the Japan area. Our next question comes from Sebastian Ho from CLSA. If I look at the gross margin, the profile in the past few years, I know it's been declining. So my question is that how do you what happened in the past few years regarding your product mix or price erosion, competition driven back? And also from this point onwards, what's your outlook down the road? Whether we have some visibility to recover gross margin by 30s or even 40%? And under what kind of the revenue scale or what kind of the product mix? Also some of the exciting new products on advanced packaging side, do you see that could be the game changer to inflection point to drive your margin upward again? That's my first question. Now in terms of your first question, the GM trending down over the years, I think one of the factors that you should note is also volume does play a big part. To a certain extent, we have internal manufacturing. Internal manufacturing comes with fixed cost element. Imagine if the volume comes down, our margin tends to be lower. So I think that's a fact that I think we should know. Now let me comment a little bit more on SMT. Now SMT margin has indeed come down in the recent quarters. We have explained in a couple of quarters already that on one hand, we made good progress in terms of penetration into the Chinese branded smartphone arena. But on the other hand, typically for China mix, they typically have a lower margin compared to European or American mix. So as a result of our sustained penetration into the Chinese market for FMT smartphone, we have to trade off the gross margin. Got it. Thank you. Just to follow-up on that. I saw the I understand the revenue scale that, yes, revenue come down, your average fixed cost is higher, margin is lower. But even we compare your current revenue still at like, for example, right now it's about 4,000,000,000 this level or HKD 4,500,000,000.0 this level compared to the past few years. The margin is still lower. It used to be the high 30s, but now it's like low 20s. That's my but maybe you already answered that because some of the FMC margins are lower. The second follow-up on that is the I think in the earlier, I think in the prepared remarks that you mentioned you're pretty positive about the recovery in 2020 and also the set new high in 2021. And the first reason you mentioned is driven by the China localizing the supply chain. So if I put it into context, that which means the China may potentially be one of the many drivers next year. And localization of the manufacturing, which I will assume that maybe a large part of it, but not all, will still be relatively require low end low end technology equipment. Correct me if I'm wrong, but if that should be the case, which means that your margin recovery may not be that strong down the road if China continue to be is that the right way to think about? This is Bobby K. Well, actually, you will be surprised to see that actually the China localization actually is more of meeting that low end. They are not having the highest, I would say, the most advanced packaging equipment yet. But actually, because you know the driver behind all this demand is high end smartphones, infrastructure equipment. So actually, those semiconductor chips are quite advanced. So probably from the media report, we also know those chips are fabricated with almost the most advanced available technology. So that's why from a packaging point of view, it's also quite advanced. So I will not consider this localization necessarily drive down our gross margin. Okay. My second question, and after this, I'll go back to the queue, is that how is the overall outlook on the OSAT market? And also the follow on this one is that you mentioned that the pre virus outlook before Chinese New Year, the booking was very strong. And what has been most which segment has been most impacted on the booking side after Chinese New Year? Is it OSAT or S and P? And how's your overall outlook for the OSAT market for this year? Well, actually, we don't know yet the answer to your question because, as you see, the Chinese customer only started to issue in the last two weeks gradually. And I think probably everybody assessing the situation, solving the manpower supply issue because the transportation system in China has target volume has reduced significantly. So I think people are coping with all these changes. So far, Huawei has elaborate, last year, we see communication mobile segment is a stronger segment for us. While overall, this is a combined, but this particular segment actually we make the number one and actually performing quite good. So we expect this will be still the segment to drive the business. In particularly, the size of the five gs infrastructure, we also see five gs handset devices come on board strongly in this year. So I think this will still be one of the major segment driving the business. Thank you. Our next question comes from Johnny Tang from Nomura. Thank you. Hi, good morning, management. Thank you for taking my question. My first question is to have a follow-up from Levin and Sebastian's question. So it's breakdown into a different business segment, I. E. This IC display, CIS, LED, SMT. So do you have any idea about what's the outlook changed before and after coronavirus outbreak? Because I was thinking that maybe CIS and SMT will be hammered much more than other business because they are more leaning power to module and assemblers. And could you also elaborate more what kind of booking momentum we used to have before Chinese New Year? Because our guidance right now is like the bookings still growing year on year. But I just I'm just curious about if we just look at January, what kind of booking momentum in terms of year on year and month on month magnitude would be? And my second question is regarding to our capacity. So for ASM Pacific, how much percentage of capacity is now in China? And what kind of equipment is now is made in China's factories? And lastly, as a housekeeping question, so the OpEx was still pretty high in the fourth quarter. What kind of expectation for OpEx into 2020? Thank you. I think regarding the question on comparing the demand impact before and after the COVID-nineteen outbreak, Actually, I would say today is very difficult to really have an under discussion. Most customers really give us an indication that after the this shutdown, they want to push back significantly. They want to cancel. As I mentioned earlier, there's no almost no cancellation. The pushback is more because of their delay in this reopening of the delivery, Okay? So today, our headache is to struggle our our production capacity to satisfy the delivery demand by our customer rather than to deal with the delay, recycle rescheduling of their their delivery. When they when they told us when they tell us, they want to delay it Actually, strictly speaking, at this point, five is a relief for them for us rather than rather than a headache. So we can't think the booking momentum before trying to do here. The booking was received only for three weeks. The first three weeks of January, but it was a very strong number. You can imagine there's so much uncertainty around this COVID-nineteen outbreak, but we feel cautiously optimistic about a year on year booking growth for Q1. So if there's no good confidence, we won't dare comment on this one, okay? So I would say that is the situation. In terms of our third party in China, as I mentioned earlier, it affect our back end equipment and materials business model. China contribute to a very significant part of our capacity for back end equipment and also materials more than 50%. So even our factory in Malaysia and Singapore, we also depend on supply, material supply, module supply from China. So when China was shut down, so it affected us quite fast. Okay? So first, FNC, the assembly locations mainly in Munich and also Malaysia. But however, once again, when it comes to material supply, module supply is still from China. On the OpEx side, actually, if you compare on a full year basis, we the growth actually has come down. The office has come down. If we take away the acquisition because in 2018, we had three acquisitions. Amica was effective in April and this critical manufacturing in August and this mix in October. So in when you compare the 2018 OpEx, so it's not an apple to apple comparison. So that's why when you compare to this, you still see a high time. However, on your ten thirty, you can make the assumption that we will do very good effort to maintain the 2020 OpEx at a similar level, a slightly low single digit higher than 2019. That's our target. Thank you. Our next question comes from Mr. Afa Lai from Citigroup. Thank you. Arthur, please go ahead with your questions. Thank you, David and Robin and Ruth Taylor. I want to ask a next question. You just mentioned this business create significant booking and bidding in 2019. And we also recall last time, clients had qualification timing situation. Can you elaborate what is the current corporate? And also, in your long term view, is that a multiyear growth category in your business? That's my first question. Thank you. Arthur, we can't really hear you, but I suppose you are referring to the revenue recognition that we mentioned in Q3, right? So let me answer that question first. Yes. So yes, indeed, we told you that in Q3, we had to defer a certain amount of revenue recognition for the next tools to Q4. Yes, indeed, we have realized those revenue already in Q4. And that's so partly why Q4 billing was better than expected. So we resolved that. But however, next, we're supplying typically new tools. So there are still some tools that are still subject to a certain condition, which is basically have to be accepted by customer before they can recognize. But we don't at this point in time, we don't see a major issue in recognizing those new tools as well. Thank you. And second question is from your presentation, you highlight that CIA plus advanced packaging may come over 60% of the second revenue. Can you give us more color about the growth momentum of this 60%? Is very strong or you think some pent up demand in the second half of this year? And how is the margin assumption compared to the other businesses such as SMT or such as the material? Arthur, I think you're right. You made the statement that for 2019, the contribution by Advanced Packaging and CIS are more than 50% and AP, Advanced Packaging is more than 20% of the back end revenue segment. Now we mentioned before, typically for these two segments, they command a better margin than the traditional tools. Now as to your forecast, as I said earlier, because of this situation, the current situation, it's really difficult to forecast too long down the road for this particular segment as well. Thank you. Our next question comes from Hana Wong from Credit Suisse. Thank you. Thank you for taking my question again. So I wanted to follow-up about the CIS because we see that AOI business actually grow at four times in last year. And is this also booked in the CIS? And is this also the driver of the CIS at the end of year over year growth last year? And the second thing is about the outlook this year because we also see more upgrades in the smartphone side this year. And what kind of like growth momentum we should expect? Could we, like, see, like, there's another, like, kind of, like, major upgrade at the back for three d and also for those, like, AR feature could drive the momentum like '20 maybe kind of 2017 or And is this a contributor from the new machine that you provide to the dedicated customer? So they are part of the CIS business. We expect for your second question, we expect more smartphone upgrade. So however, whether this COVID-nineteen outbreak will push back if we don't know because I think it really depends on the COVID-nineteen outbreak, how much it will damage the global economy, how much it will damage this consumer demand. So at this point in time, a little bit too early for us to comment on this one. Assuming this outbreak is not going to have a serious effect on the global economy, so actually, we are expecting or we do expect this will be a good year for the smartphone infrastructure related area. Our next question comes from Flora Lai from Hengsheng Bank. I got three questions down the road. The first question is that I just want to confirm that there are actually four main manufacturing arms in China, including Weichao, Lungang and then Fuzhou and then Chengdu. Is it all four of them is already operating now? This is my first question. And the second question is about SMT. I saw that in the presentation, SMT has been a little bit going down because of there is a weakness in automotive, especially in Europe. Do you expect that this sluggish demand will continue in 2020? And my last question will be about the outlook. I saw that in the presentation that ASMPT is going to experience loss making in the first Q more than likely. So do you expect that this will be turnaround in the 2020? Thank you for taking my questions. This is Patrick here. I think for the your question on the first one, actually, we have three manufacturing plants in China. In Weichiang, in Longgang and in Fudou. The facility in Chengdu, the allergy center, yes, they are all four of them has already through operation. For the three medication plants in the southern part of China, this week, we are already reaching around 70% to 80% of workforce already working in the past. So we are expecting by end of this week, we should be able to achieve slightly more than 50% workforce working in the past. We still have ranging depends on the plant, ranging from 10% to 20% people has not been able to come back to these facilities yet. They were either trapped in the Hubei or or other audience ID just outside Hubei because of these these traffic restriction or or traffic arrangement. So we are working out to get these people back, okay? For the SMT, actually, for the whole year in 2019, actually, yes, it was fine, but it was better than expected. So because 2018, it was a record year for the SMT, we already expect it to come down. But as a result of very strong demand from five gs infrastructure build up and also, generally, the demand for SMT equipment in China. So we turn out to be better than expected. The Q4 Canton is more seasonal and also comparing to the very strong Q4 a year ago. Automotive was up last year. However, we expect it probably it will still be weak in 2020. That's what we expect. Hopefully, 2021, it bounce back. But we expect five gs infrastructure and smartphone segment application markets continue to drive our SMT business demand, okay? Yes, for the protection of loss making in Q1, mainly because of a very low revenue forecast at this point in time, USD $370,000,000 to USD $450,000,000 for Q1. And also, we also expect we are incurring additional expenses in Q1 to deal with this COVID-nineteen outbreak because the Chinese government are very demanding on the conditions to allow factories to resume well. So we also expect we will incur higher G and A expenses related to this area. However, we don't expect this to continue in Q2. And I think if the global economy is not going to be damaged too much, there's a good chance we will turn around this loss in Q2. Even hopefully, we may report a positive 2020, but this is still subject to the development of the COVID-nineteen outbreak in the rest of the world. Thank you. Sebastian Hou from CRSA. On the I a I think, very simple thumb questions on the S and P tool. I think the company is pretty optimistic about the five gs infrastructure in smartphones to drive the investment cycle. But just a very simple question on the whether or not the five gs smartphone will require a newer or more advanced with a better precision SMP tool for the four gs? Yes. I think to answer your question, for five gs, certainly, I think the requirement for higher quality tool, higher throughput, for example, definitely is there. So I think for SMC being the leading toolmaker in the SMC segment, we will tend to benefit when customers require higher quality tools. Okay. What is the difference between like the flagship smartphone and the mid to low end smartphone? Is Patrick here. I think that typically, I would say the features, they pay the complexity of the electronic part. So for advanced smartphone, you put in a lot more semiconductor electronics over there. However, the phones are still the same. So that's why you have to put the components closer to one each other. For the five gs phone, because of in general, it will consume more battery power. So typically, phone maker will put a larger battery over there. So they have to further squeeze the space for the electronics. So that's why the components will be put even closer together. So absorbing finite spacing substrate. So all this demand, the 20% demand for this high accuracy SMT equipment. Actually, every SMT can produce high equity, but to maintain a high equity at a high throughput, that's the real challenge, and that is the strength of the equipment from SMD equipment from ASMT. Thank you. Our next question comes from Simon Wu from DOA. Well, number one sorry, let me double check your guidance for March loss. So usually, gross profit around 1,000,000,000 or $2,000,000,000 and then the operating expense usually around $1,000,000,000 per quarter. So to derive the operating loss, we have to assume that at least $2,000,000,000 extra losses extra expenses. I wonder how you derive the maybe negative gross margin with the 100 expenses or even operating loss? And then I will ask some follow-up question. Thank you. Yes. Thank you for the question. Now in terms of the profitability metrics for Q1, we look at the top line. So as WK has mentioned, we are getting a lower range to kind of between $370,000,000 to $450,000,000 So at account range, we expect the gross margin also to come down from the Q4 level because of the volume effect. And also coupled with the fact that because of the COVID-nineteen outbreak, we had an extended shutdown in our China plant. So you can imagine there were lost capacity. So that I think these two factors, the volume impact as well as the shutdown effect that contribute to expected lower gross margin in Q1. Okay. Very clear, sir. I appreciate. And second follow-up question is sorry, maybe double check. Number one, overall, your production capacity, mainly for the SMT and then the other equipment, what's the China portion versus Malaysia or ASEAN overseas? And then, obviously, what's your overall 2019 revenue mix for the China based customers versus the non China based customers? You. Simon, we don't really disclose the geographical mix of individual segment. We, however, have disclosed always the geographical mix of the group, the blended one. So you can see the China mix typically is around 40% high 40s to 50%. So this time around for full year, it was around 40% plus for China, then followed by Europe, America, Malaysia and Japan. Now I can give you a bit of color. Certainly, SMT also has a substantial shipment to China for sure. However, the European and the American mix are mainly coming from the SMT segment. Thank you. Our next question comes from Leiting Hua from CICC. Thank you. Okay. The question is about the if you look though the back end equipment growth in this year, 02/2020, so if you rent by different application like CI and like advanced packaging and LED, think, what what what will be the fast growing and the weakest growing driver this year? And the the I think I also checked yeah. PPT also show one slide about the LED. So it seems to be currently the the the panel company, it seems we are the financial improvement of future share prices with the bonding. So have you seen any recovery of the LED market this year or any like the, you know, it's like you show the mini LED or LED. So with this application, whether it's really will pick off this year or what what is still next year? You. Yeah. CIS market for the back end equipment, let me talk about the back end equipment. For among all the back end equipment segment, CIS, IC discrete and LED, CIS, it was the only segment that saw bookings and billing grew year on year. IC discrete and LED came down. However, within the IC discrete segment, the advanced packaging developed, so that's why we highlighted that the advanced packaging now contributed to more than 20% of the second equipment segment. So in short, CIS advanced packaging is now. Now for advanced packaging, you can also attribute this to also NEX. NEX has done very well this year since the acquisition. We acquired them in October 2018 for one quarter. This year, we reported a full year result for NEX. And I'm happy to and also happy to let you know that in just one year after we acquired them, we have turned in a small profit already for SMPT. Thank you. Our next question comes from Afua Lai from Citigroup. Thank you. Thank you, Wang, for taking my second question. So I think this virus also create change our life such as using more online education from kids and also cloud computing and remote working remotely. How do you impact your data center demand? So can you share with the impact to each product line? Thank you. Arthur. We are not able to tell at this one time. It's too early. However, we do expect after the COVID nineteen, probably the the the impact actually should be positive. I think in our opinion, more organization, more countries, more society get more prepared for this kind of online, you know, remote kind of learning, even work from home, you know. So this kind of of a setup. So we do expect it will have a positive impact, you know. But I I don't think our customer can react so far so fast yet at this point of time. So I would say if you ask me at this point of time, I can't tell. We don't really see that impact yet, but we do expect it to come. Thank you. Thank you. Our next question comes from Kenneth Wong from Credit Suisse. Warren, I just wanted to follow-up the question that Le Pen actually asked because I think you addressed the the salmon growth, the outlook. It's more 2019 because you mentioned about CIS as advanced packaging and growth where the other stand. But I think Lupin also wanted to check out the outlook in 2020 and also the LED recovery. I mean, if the LED segment will see the recovery in 2020 driven by mini or micro LEDs. I think on the LED, yes, I think so far today, we see the booking for LED has been quite encouraging. It has certainly gone up compared to Q4 as well. So I think that's a good sign, a very good start for LED at this point in time. Thank you. Our next question comes from Simon Wu from BOA. Thank you. Yes. Thank you very much. Just a follow-up question regarding the Mini MicroLED, which shows very tiny chip or wafer. The question is, you know, LED to make us or packaging guys need a new, you know, assembly packaging machine of the ASMPT. Given the fact that one minute of the, you know, micro LED, even much, much smaller than one millimeter or is micro millimeter with, you know, level. So you could just see typical LED bag and the machine not enough for the micro LED packaging process? Or they need a completely brand new ASMPT back in the machine? Thank you. This is WP here. Well, for the medical LED that they definitely need to have a brand new equipment because the chips are so small, okay? So the traditional or conventional packaging equipment, most of the program. So meaning of the technical seeking, people can use the traditional assembly equipment to do it. However, the throughput, the cost will be very high because an LED panel, you take a four ks resolution LED panel, it will consist of 24 millions of LED. So it will take a long time to transfer those LED one by one to do the wide bonding one by one. So actually, there are for at this stage of this is promoting a new way of assembling it, okay? So that's why today, we are working with many mini and micro LED makers, not only the LED packaging houses, but also the pen makers together. So we are proposing we are promoting a new concept of assembly auto signal. And today, I think, ASAM is almost the only company proposing those effective users. If I call LDI, I will say we are far ahead of anybody else at this point in time. Yes. Very, very clear, sir. Lastly, any shareholder return policy for 2020 who are the payout ratio target? Thank you very much. So we had declared a dividend of 2019 of So if we take the first half dividend of HKD130 and then you take our earnings per share of HKD1.52 for the full year, we are talking about a very high payout ratio of 132% for the full year of 2019. Now on this note, we also want to stress a few things. You know that we have been promoting a sustainable and gradually increasing policy since 2017. Now based on this policy, you probably realize that last the 2018, we declared dividend of 1.4. So this time around, the 2019, we are only proposing a half of it. So we are fully aware of it. We want to stress that we are fully committed to continue this sustainable and gradually increasing dividend policy. However, I think we have to be cognizant of fact the that the COVID-nineteen outbreak is a highly uncertain event, rapidly evolving situation. Things outside China are getting not better. Every day, we see more and more infections outside China, especially in Korea, especially in Europe and The Middle East. So we're also kind of worried how this will develop in the near term. So as prudent measure, we decided to not to pay out the full dividend of $1.4 However, we pay half of it. And as you see in the announcement, as soon as the economic condition improve and ASMPD starts to make a good profit, we are committed to pay the balance of the $70 when such condition appear there. Thank you very much. Appreciate it. Thanks. You. Ladies and gentlemen, that is star one to register for a question. Thank you. Hey, Blake. There seems to be no further questions at this point in time. Mr. Lee, would you like to wrap up the call? Thank you. Well, I think we've had a very good discussion this morning with very good questions. In the interest of time, we would like to conclude this call. And we would like to thank you very much for joining us today, and we'll talk to you again next time. Goodbye. Thank you. Goodbye again. Thank you. For your participation. This concludes your conference. Thank you.