Good morning, good afternoon. Welcome to the ASMPT Conference Call. Mr. Leonard Lee, please be on hold and I'll be standing by. Just a reminder, during the Q&A session, please limit your question to one. Thank you.
Good morning, good afternoon, ladies and gentlemen. Welcome to the ASM Pacific Technology 2019 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 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 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 Ng, CFO of ASM Pacific Technology. Our CFO, Robin, who is also our CEO designate, will start with a brief discussion about our 2019 annual results, followed by a Q&A session.
Without further ado, let me hand this over to Robin, please.
Thank you, Leonard. Good morning and good evening, ladies and gentlemen. We appreciate you joining us for our 2019 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&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 2019 fourth quarter numbers, followed by the full year. During the fourth quarter, the group achieved $568 million in revenue, an increase of 7% over the preceding quarter, and a decrease of 6.7% over the fourth quarter of 2018. For group bookings, we recorded $445.2 million, a decrease of 13.3% and 6.1% over the preceding quarter and the fourth quarter of 2018 respectively.
In terms of net profit, excluding restructuring costs and related tax effect of HKD 106.9 million, we achieved net profit of HKD 328.7 million, an increase of 47.9% over the preceding quarter, and an increase of 44.4% over the fourth quarter of 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, ASMPT made good progress during the year as a result of successfully implementing a range of initiatives, such as focusing on higher growth markets and realigning operations to reduce costs. For 2019, group revenue came in at $2.03 billion, a decrease of 18.8% over 2018. New order bookings came in at $2.02 billion, a decrease of 21.5% over 2018.
Net profit came in at HKD 729.2 million, excluding restructuring costs and related tax effect, representing a decrease of 67.3% over 2018. Before I go through the summary results, let me provide you with a quick overview. During the fourth quarter, both the Back-end Equipment segment and the SMT 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 SMT 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 the guidance. In 2019, Back-end 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 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 manufacturing capacity utilization. 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 revenue, 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. Billings for CIS and advanced packaging grew year-on-year despite the soft market condition in 2019. CIS billings continued its momentum in 2019, brought about by the rising adoption of smartphones with higher resolution cameras, multi-camera features, 3D sensing, ToF, wide field of view, and periscope lens features. In fact, full-year billings for CIS grew year-on-year, while billings for IC and discrete and LED declined. ASMPT NEXX made a significant contribution to the bookings and billings of the IC and discrete business in 2019. It has also strengthened ASMPT'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 2020, we will rename the Back-end Equipment segment to Semiconductor Solutions segment.
This is to better reflect the inclusion of the ASMPT NEXX 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 Material 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 the 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 2020 and is expected to be fully completed by the mid of 2021. The Group also decided to discontinue the molded interconnect substrate or short name MIS business in Q1 2020 after an extensive evaluation of the competitive landscape of this business. The Group is of the opinion that the conventional substrate has an edge over MIS in terms of price and technical features like finer line spacing and higher I/O capabilities. Discontinuation is expected to have minimal impact on the Group's revenue. These two initiatives that we have undertaken will have a positive impact on the segment 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 SMT Solutions segment benefited from the increase in 5G infrastructure-related investment. The higher revenue contribution from China and the slowdown of the automotive industry adversely impacted the gross margin of the segment on a full-year basis. To mitigate this segment has looked at ways to lower its cost of operation. One initiative was to increase the volume of assembly 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 tools sold were reliable and thus less warranty claims are needed. There was also a one-off charge in Q4 2018 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 material sales are expected to stage a 2020 recovery and set a new high in 2021. There are several other factors contributing to this optimism.
Pick up in demand from Chinese manufacturers to localize the supply chain, the accelerated deployment of 5G infrastructure, the rollout of 5G handsets, and the progress the Group is making in capturing new market opportunities such as advanced packaging, silicon photonics, IIoT, mini and micro LED solutions, power semiconductors, Industry 4.0 solutions, and AOI. It stands for Automatic Optical Inspection. The rapidly escalating COVID-19 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 had lost around one-third of its production capacity in China in Q1 2020.
On a full-year basis, we estimate the impact to be less than 10%. While the booking momentum was certainly tempered by the COVID-19 outbreak, we are cautiously optimistic that Q1 2020 group booking will achieve a year-on-year growth. Based on our estimate at the time of this announcement, we anticipate that Q1 2020 group revenue will be in the range of between $370 million-$450 million, and more than likely, the group will record a loss for Q1 2020. With this, we thank you for your attention, and we are ready to take your questions.
Thank you, sir. We will now poll for questions. If you'd like to register for questions, please press star one on your telephone. Ladies and gentlemen, that is star one to register for questions. Thank you. Our first question comes from Leping Huang from CICC. 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, the uncertainty of the guidance, which mainly comes from the Chinese customer? Or which type of the product you are affected, or which type of the customer you are affecting? Thank you. Sorry, the second question. The second question is that we see the news say the U.S. may introduce new regulation on Huawei, that some of the, if you have some American materials, you cannot supply to Huawei. Can you share that, do you have any U.S. materials because most of your operations in Asia do. If any of the regulation is introduced, will you be affected? Thank you.
Let me answer the first question first. For the Q1 guidance, I will say as of this point in time, we have received very strong booking before Chinese New Year. That's why, booking-wise, we are still cautiously optimistic there. Unless customers start to hold back and push back. Otherwise, it's very likely we will achieve a year-on-year growth for Q1 booking. After the Chinese New Year, when factories in China, our customers in China, start to resume their operations, we have extensively checked with customers. As of today, we don't see any significant cancellations. Almost zero. Small pushback, push out that's reasonable because of their factories reopening has been delayed. Most customers are indicating for the orders they have placed with us, they still want it to be delivered in March, April timeframe. The push out will be in one month, maximum two months time.
As of 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, they have interrupted our supply chain. There has less impact on the SMT, because SMT mainly manufacturing location for us are in Munich and Malaysia. They also face some high supply issues because the supply chain in China has been stopped. It has bigger impact on the Back-end Equipment as well as the materials. I would say this is the picture. If the activity in China can resume very quickly, actually, we are pretty optimistic about that. With the development for the last few days in Korea, in Europe, in Middle East, I would say that casts more uncertainty looking forward. Okay.
As for the U.S. regulation changes, I will say this is still a rumor at this point in 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? I would say only until we know more about whether there's really such a restriction, what is the scope of the restriction, I think at this point in time, it's difficult for us to comment. Thank you.
Thank you very much.
Our next question comes from Kyna Wong from Credit Suisse. Thank you.
Thank you. 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 came from? Is this because of the mobile or 5G 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. I just wonder if it is actually from Japan customer because we noticed that the revenue from Japan has actually achieved a year-over-year growth in 2019. Is this due to advanced packaging? Thanks.
Hi, Kyna. 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. It was aided also by the top line. Our top line increased for Back-end, so that also helped to push up the margin. The other factor affecting the blended margin is SMT. SMT, as I read out the conference call just now, you'll notice that we had to true up our warranty claim provision because of better performance in the field in terms of our quality. By trueing up, that also helped the gross margin of SMT. 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.
Indeed, we said inside the announcement as well that right now we have leading high-density substrate makers in the Japan area.
Thank you. Our next question comes from Sebastian Hou from CLSA. Thank you.
Hey, thank you. If I look at gross margin, the profile in the past few years, I know it's been declining. My question is that, what happened in the past few years regarding your product mix or price erosion compensation, which can have driven back? Also from this point onwards, what's your outlook down the road? Whether we could have some visibility to recover gross margin, high 30% 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.
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 a fixed cost element. Imagine if the volume comes down, our margin tends to be lower. I think that's a fact that I think we should know. Let me comment a little bit more on SMT. SMT margin has indeed come down in the recent quarters. We have explained in a couple of quarters already, that on one hand, we make good progress in terms of penetration into the Chinese branded smartphone arena. On the other hand, typically for China mix, they typically have a lower margin compared to European or American mix.
As a result of our sustained penetration into the Chinese market for SMT smartphone, we have to trade off the gross margin.
Got it. Thank you. Just to follow on that. I understand the revenue scale, that yes, revenue come down, your average fixed cost is higher, so margins are lower. Even we compare your current revenue scale at, for example, right now let's spell HKD 4 billion, this level of HKD 4.5 billion, this dollar level compared to the past few years, the margin is still lower. Used to be at high 30%, now it's low 20%, 30%. Maybe you already answered that because some of the SMT margin is lower. The second follow on that is, I think in the prepared remark that you mentioned, you were pretty positive about the recovery in 2020 and also the new high in 2021. The first reason you mentioned is driven by the China localizing the supply chain.
If I put it to context, that which means the drive China may potentially be one of the many drivers next year. Localization of the manufacturing, which I will assume that maybe a large part of it, but not all, could still be relatively require low-end, feature 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 it?
This is W.K. Lee. Well, actually, you'll be surprised to see that actually the China localization actually is not really that low-end. They are not having the highest, I would say the most advanced packaging equipment there. Actually, because you know the driver behind all this demand, through the high-end smartphones, infrastructure equipment. Actually, those semiconductor chips Quite advanced. Probably from the media report, we also know those chips are fabricated with almost the most advanced wafer technology. That's why from a packaging point of view, it's also quite advanced. I will not consider this localization will necessarily drive down our gross margin.
Okay. My second question, and after this I will go back to the queue, is that how is the overall outlook on the OSAT market? Also the follow on this one is that you mentioned that the pre-virus outlook before Chinese New Year, the booking was very strong. Which segment has been most impacted on the booking side after Chinese New Year? Is it OSAT or SMT, and how is your overall outlook for the OSAT market for this year?
Well, actually, we don't know yet the answer to your question. As you see, the Chinese customer only start to resume work in the last two weeks, gradually. I think probably everybody assessing the situation, solving the manpower supply issue, because the transportation system in China has the traffic volumes reduced significantly. I think people are coping with all these changes. So far, as Robin has elaborated, last year we see, I think the communication, the mobile segment is the strongest segment for us. While overall, this is a combined, but this particular segment, actually we make the number one and actually performing quite good. We expect this will be still the segment to drive the business. In particularly beside of the 5G infrastructure, we also see 5G handset devices will come on board strongly in this year.
I think this will still be one of the major sector driving the business.
Thank you. Our next question come from Donnie Teng from Nomura. Thank you.
Hi, good morning, everyone. Thank you for taking my question. My first question is to have a follow-up from Leping and Sebastian's question. If breakdown into a different business segment, IC discrete, CIS, LED, SMT, do you have any idea about what's the outlook change 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. 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 booking still growing year-on-year. I'm just curious about if we just look at January, what kind of a booking momentum in terms of year-on-year and month-on-month magnitude would be?
My second question is regarding to our capacity. For ASMPT how much percentage of capacity is now in China, and what kind of equipment is now is made in China's factories? Lastly is a housekeeping question. 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, the impact before and after the COVID-19 outbreak, actually, I would say to date it's very difficult to really have an answer to this question. No customer really give us an indication that after this shutdown, they want to push back significantly. They want to cancel. As I mentioned earlier, there's almost no cancellation. The pushback is more because of their delay in this reopening of the factory. The indication still talking about one to two months. Actually, I also forgot to mention just now, on the other hand, there are also some customer actually pull up their delivery. Okay. Today, our headache is to struggle our production capacity to satisfy the delivery demand by our customer, rather than to deal with the delay, rescheduling of their delivery.
When they tell us they want to delay it by a few weeks, actually, strictly speaking, at this point in time, it's a relief for us, rather than a headache. Regarding the booking momentum before Chinese New Year. 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-19 outbreak, but we still cautiously optimistic about a year-on-year booking growth for Q1. If there's no good confidence, we won't dare to come back on this one. Okay. I would say that is the situation. In terms of our capacity in China, as I mentioned earlier, it affect our back-end equipment and materials business more. China contribute to a very significant part of our capacity for back-end equipment and also materials, more than 50%.
Even for our factory in Malaysia and Singapore, we also depend on material supply, module supply from China. When China was shut down, it affected us quite bad. Okay. First, SMT assembly locations mainly in Munich and also Malaysia. 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, the cost actually has come down. The OpEx has come down. If we take away the acquisition, because in 2018, we had three acquisitions. AMICRA was de facto in April, then Critical Manufacturing in August, and then NEXX in October. When you compare the 2018 OpEx, it's not an apple-to-apple comparison. That's why when you compare to this, you still see a high time.
On 2020, you can make the assumption that we will do a 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. Arthur Lai from Citigroup. Thank you. Arthur, please go ahead with your questions.
Hi. Thank you, Alicia and Robin Ng, and Leonard Lee. I want to ask a next question. You just mentioned this business created a significant booking and billing in 2019. We also recall last time, clients had the qualification timing situation. Can you elaborate what is the current progress? Also, in your long-term view, is that a multi-year 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? Let me answer the question first. Yeah. Yes, indeed, we told you that in Q3 we had to defer a certain amount of revenue recognition for the NEXX tools to Q4. Yes, indeed, we have realized those revenue already in Q4, and that is also partly why the Q4 billing was better than expected. We resolved that. However, NEXX, we're supplying typically new tools, so there are still some tools that are still subject to a certain condition, which is basically they have to be accepted by customer before they can recognize. At this point in time, we don't see a major issue in recognizing those new tools as well.
Thank you. Second question is, from your presentation, you highlight that CIS product, advanced packaging make up over 60% of back-end 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? How is the margin assumption compared to the other key businesses such as SMT or such as material? Thank you.
Yeah. Arthur, I think you're right. We made a 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. We mentioned before, typically for these two segments, they command a better margin than the traditional tools. 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 Kyna Wong from Credit Suisse. Thank you.
Thank you for taking my question again. I wanted to follow up about the CIS, because we see that AOI business actually grew four times in last year. Is this also booked in the CIS? Is this also the driver, the CIS, at the end, achieves a year-over-year growth last year? The second thing is about the outlook this year, because we also see more upgrades in the smartphone side this year. What kind of growth momentum we should expect? Could we see there's another major upgrade at the back for 3D and also for those AR features could drive the momentum, maybe kind of 2017 or something? Is this contributed from the new machine that you provide to the dedicated customer? Thanks.
This is here. For the AOI business, we recognize the revenue according to the business application. For the CIS part, they are grouped under CIS. For the IC discrete area, they will group under the IC discrete. Okay? As Robin just mentioned, last year, most of business relating to AOI came from CIS, so they are part of the CIS business revenue. Yes, for your second question, we expect more smartphone upgrade. However, whether this COVID-19 outbreak will push back this, we don't know, because I think it really depends on the COVID-19 outbreak, how much it will damage the global economy, how much it will damage this consumer demand. At this point in time, I think it'd be too early for us to comment on this one.
Assuming this outbreak is not going to have a serious effect on the global economy, actually, we are expecting, our original expectation, this will be a good year for the smartphone infrastructure-related area.
Thank you. Our next question comes from Flora Lai from Hang Seng Bank. Thank you.
Morning, management. Thank you for taking my questions. 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 Huizhou, Longgang, and then Fuqiao, and then Chengdu. Is it all four of them is already operating now? This is my first question. 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 weakest demand will continue in 2020? My last question will be about the outlook. I saw that in the presentation that ASMPT is going to experience loss-making in the 1 Q more than likely. Do you expect that this will be turn around in the second quarter of 2020?
Thank you for taking my questions.
This is here. I think for your question on the first one, actually we have three manufacturing plants in China, in Huizhou, in Longgang, and in Fuqiao. The facility in Chengdu is our R&D center. Yes, all four of them has already resumed operation. For the three manufacturing plants in the southern part of China, this week we are already reaching around 70%-80% of workforce already working in the plant. We are expecting by end of this week, we should be able to achieve slightly more than 80% workforce working in the plant. We still have, it depends on the plant, ranging from 10%-20% people has not been able to come back to these facilities yet. They were either trapped in visit Hubei or other provinces and regions outside Hubei because of these traffic restriction or traffic arrangement.
We are working now to get these people back. Okay. For the SMT, actually, for the whole year in 2019, actually, yes, it was down, but it was better than expected. Because 2018, it was a record year for the SMT, we originally expect it to come down more. As a result of the very strong demand from 5G infrastructure build-up and also generally the demand for SMT equipment in China, so we turn out to be better than expected. The Q4 countdown is more seasonal and also comparing to the very strong Q4 a year ago. Automotive was down last year. However, we expect it probably it will still be weak in 2020. That's what we expect. Hopefully, 2021, it will bounce back. We expect the 5G infrastructure and the smartphone segment application markets continue to drive our SMT business going forward.
demand. Okay. Yes, for the projection of loss-making in Q1 is mainly because of a very low revenue forecast at this point in time, $370 million-$450 million for Q1. Also we expect we are incurring additional expenses in Q1, to deal with this COVID-19 outbreak. The Chinese government are very demanding on the conditions to allow factories to resume work. We also expect we will incur higher G&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 first half of 2020, but this is still subject to the development of the COVID-19 outbreak in the rest of the world. Thank you.
Sebastian Hou from CLSA.
Hey, thank you for taking my follow-up. On this end, I have, I think, maybe very simple, dumb questions on the SMT tool. I think the company is pretty optimistic about the 5G infrastructure and smartphone to drive the investment cycle. Just a very simple question on whether or not a 5G smartphone will require a newer or more advanced, with a better precision, SMT tool to 4G smartphone.
Yes, I think, to answer your question for 5G, certainly, I think the requirement for higher quality tool, higher throughput, for example, definitely is there. I think for SMT, being the leading tool maker in the SMT segment, we will stand to benefit when customers require higher quality tools.
What is the genuine difference between the flagship smartphone and the mid to lower-end smartphone?
This is W.K Lee. I think that typically, I would say the features dictate the complexity of the electronic device. For advanced smartphone, you put in a lot more semiconductor and electronics over there. However, the phone size is still the same. That's why you have to put the components closer to one each other. For the 5G phone, because of in general, it will consume more battery power, so typically, a phone maker will put a larger battery over there. They have to further squeeze the space for the electronics. That's why the components have to be put even closer together. Adopting a fine line spacing substrate. All this demand generates a demand for this high accuracy SMT equipment. Actually, any SMT can produce high accuracy.
To maintain a high accuracy at a high throughput, that's the real challenge, and that is the strength of the better equipment from SMT.
Yeah, thank you.
Thank you. Our next question comes from Simon Woo from BofA. Thank you.
Okay, thank you very much. Well, number one, sorry, let me double-check your guidance for March quarter loss. Usually your gross profit around HKD 1 billion or HKD 2 billion, and the OpEx usually around HKD 1 billion per quarter. To derive the operating loss, we have to assume that the at least HKD 2 billion extra losses, extra expenses. I wonder how you derive the maybe negative gross margin with the HKD 1 billion or HKD 2 billion extra expenses or even operating loss. I will ask some follow-up question. Thank you.
Yes, thank you for your question. In terms of the profitability metrics for Q1, we look at the top line. As W.K. has mentioned, we are guiding a lower range to guideline of between $370 million- $450 million At that kind of range, we expect the gross margin also to come down from the Q4 level because of the volume effect. Also coupled with the fact that because of the COVID-19 outbreak, we had an extended shutdown in our China plant. You can imagine there were loss capacities. I think these two factors, the volume effect as well as the shutdown effect, do contribute to expected lower gross margin in Q1.
Okay. Very clear, sir. Appreciate it. Second follow-up question is, sorry, maybe double-check. Number one, overall your production capacity, mainly for the SMT and the other equipment. What's the China portion versus the Malaysia or ASEAN overseas? Upwardly, what's your overall 2019 revenue mix for the China-based customers versus the non-China-based customers? Thank you.
Simon, we don't really disclose the geographical mix of individual segments. We, however, have disclosed always the geographical mix of the group, the blended one. You can see the China mix typically is around high 40%- 50%. This time around for a full year, it was around 40-plus for China, followed by Europe, America, Malaysia, and Japan. 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 Leping Huang from CICC. Thank you.
The question is about if you look at the Back-end Equipment growth in this year, 2020. If you went by different application like CIS, like the advanced packaging and LED addition, what will be the fast-growing and weakest-growing driver this year? I think I also checked your PPT also show one slide about the LED. It seems to be currently the panel company, it seems their financial are improving as in the share prices with the bonding. Have you seen any recovery of the LED market this year or, I mean, like the slide you show in the mini LED or LED. This application, whether it's really will pick up this year or it's still next year. Thank you.
Yes. The CIS market for the Back-end Equipment, let me talk about the Back-end Equipment first. Among all the Back-end Equipment segments, 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. Within the IC discrete segment, the advanced packaging did well, that's why we highlighted that the advanced packaging now contributed to more than 20% of the Back-end Equipment segment. In short, CIS advanced packaging did well. For advanced packaging, you can also attribute this to also NEXX. NEXX 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 NEXX.
I'm also happy to let you know that in just one year after we acquired them, we have turned in a small profit already for ASMPT.
Okay.
Thank you. Our next question comes from Arthur Lai from Citigroup. Thank you.
Thank you for taking my second question. I think this virus also changed our life, such as using more online education from kids and also cloud computing, working remotely. How do you impact your data center demands? Can you share with us the impact to each product line? Thank you.
Arthur, we are not able to tell at this point in time, it's too early. We do expect after the COVID-19, probably the impact actually should be positive. I would think that more organization, more countries, more society will get more prepared for this kind of online, remote kind of learning, even work from home. This kind of a setup. We do expect it will have a positive impact. I don't think our customer can react so fast yet at this point in time. I would say, if you ask me at this point in time, I can't tell. We don't really see that impact yet, but we do expect it will come. Thank you.
Thank you.
Thank you. Our next question comes from Kyna Wong from Credit Suisse.
Hi, Robin. I just wanted to follow up the question that Leping actually asked because I think you addressed the segment growth, the outlook is more related to 2019 because you mentioned about CIS also advanced packaging and growth where the others don't. I think Leping 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. Thank you.
I think on the LED, yes. I think so far to date, we see the booking for LED has been quite encouraging. It has certainly gone up compared to Q4 as well. I think that's a good sign, a very good start for LED at this point in time.
Thank you. Our next question come from Simon Woo from BofA. Thank you.
Yeah, thank you very much. Just a follow-up question regarding the mini LED or micro LED, which shows very tiny chips per wafer. The question is, LED makers or packaging guys need a new assembly packaging machine of ASMPT, given the fact one unit of the micro LED, even much, much smaller than one square millimeter, or it is micro millimeter in the level. Existing typical LED back-end machine not enough for the micro LED packaging process, or they need a completely brand new ASMPT back-end machine? Thank you.
This is W.K. Lee . Well, for the micro LED, that they definitely need to have a brand new equipment because the chips are so small. Okay? The traditional or conventional packaging equipment are not suitable for them. For the mini LED, technically speaking, 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 4K resolution LED panel, it will consist of 24 million LED. It will take a long time to transfer those LED one by one, to do the wire bonding one by one. Actually, there are sort of, or at least ASMPT is promoting a new way of assembling it. Okay? That's why, today, we are working with many mini and micro LED makers. Not only the LED packaging houses, but also the panel makers together.
We are promoting a new concept of assembling all those equipment. Today, I think ASMPT is almost the only company proposing those effective solutions. In micro LED, I will say we are far ahead of anybody else at this point in time.
Very clear, sir. Lastly, any shareholder return policy for 2020? What are the payout ratio targets? Thank you very much.
We had declared a dividend of second half of 2019 of HKD 0.70. If you take the first half dividend of HKD 1.30, and then you take our earnings per share of HKD 1.52 for the full year, we are talking about a very high payout ratio of 132% for the full year of 2019. On this note, we also want to stress a few things. You know that we have been promoting a sustainable and a gradually increasing policy since 2017. Based on this policy, you probably realize that the second half of 2018, we declared a dividend of HKD 1.40. This time now on the second half of 2019, we are only proposing a half of it. We are fully aware of it.
We want to stress that we are fully committed to continue this sustainable and gradually increasing dividend policy. I think we have to be cognizant of the fact that the COVID-19 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. We're also kind of wary how this will develop in the near term. As a prudent measure, we decided to not to pay out the full dividend of HKD 1.40. We pay half of it, and as you see in our announcement, as soon as the economic condition improve and ASMPT starts to make good profit, we are committed to pay the balance of HKD 0.70 when such condition prevail.
Thank you very much, sir. Appreciate it. Thanks.
Thank you. Ladies and gentlemen, should you have any questions, please press star one on your telephone. Thank you. Ladies and gentlemen, that is star one to register for a question. Thank you.
Wait.
Ladies and gentlemen, that is star one to register for a question. Thank you. 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. We would like to thank you for joining us today, and we'll talk to you again next time. Goodbye.
Thank you. Bye.
Thank you.
For your participation. Let's conclude the conference. Thank you