Earnings Call: Q3 2019

Oct 31, 2019

Good morning, good afternoon, good evening, ladies and gentlemen. Welcome to the ASM Battery Technology twenty nineteen Third 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 Q3 results can be downloaded from our website, www.asmpacific.com. With us this morning are Mr. W. K. Li, CEO of ASM Pacific Technology and Mr. Robin Ng, CFO of AISM Pacific Technology. Our CFO, Robin, who is also our CEO, Gasinet, will start with a brief discussion about our twenty nineteen Q3 results, followed by a Q and A session. Without further ado, let me hand this over to Robin, please. Thank you, Naila. Good morning, and good evening, ladies and gentlemen. We appreciate you joining us for our twenty nineteen third quarter investor conference call today. I will first provide you with a summary of the company's performance, followed by the Q and A session. All three business segments increased their revenue in Q3 compared with the preceding quarter. These were in line with our projections. SMT Solutions segment's revenue at million dollars saw the biggest increase at 19% compared with the preceding quarter, while revenue of the back end equipment segment achieved 12.8% quarter on quarter growth at US232.9 dollars The Materials segment revenue continued its upgrade, achieving Q on Q increase of 9.8% with US62.8 million dollars The group revenue for the quarter was million dollars which was an increase of 15.1% over the preceding quarter. This was slightly below the low end of our revenue guidance, primarily due to the revenue recognition of some tools being deferred to Q4 this year. During the period, bookings for the back end equipment and the materials segment increased 6.27.6% during the preceding quarter, respectively. These were more than offset by a reduction of 36.5% Q o Q in the S and D Solutions booking segment, but this was because in the preceding quarter, bookings of the S and D Solutions segment were at a high level, close to the record quarterly bookings set in Q3 twenty eighteen. The group bookings at US513.8 million was an moderate decline in Q on Q of 14.6% over the preceding quarter. This was partly seasonal and partly a reflection of market sentiment given the uncertainty of the continuing global trade discussions and the world economy at large. However, we noted that customers in China seem to be once again leading in a market recovery. By geographical distribution, China, inclusive of Hong Kong, Europe, Malaysia, The Americas and Japan, were the top five markets for AS and G in the current quarter. The back end equipment segment in the current quarter maintained a steady growth from the last quarter with billings of US232.9 million dollars representing a growth of 12.8% against the preceding quarter. The segment achieved a gross margin of 43.4% in the current quarter, representing an improvement of two sixty seven bps Q on Q. As a result of the aggressive cost reduction efforts carried over the past twelve months, gross margin in the current quarter only declined by 0.1% year on year, while revenue for the segment declined to 23.2%. The back end equipment segment achieved a profit growth of 168.9% Q on Q. At the product level, revenue for advanced packaging and CBOS image sensor equipment together contributed to over 50% of the revenue. Demand for bonders, both die attach and wire bonders, also shows signs of stabilization after a long period of contraction. In terms of application segment, five gs infrastructure, high end computing, mini and microLED and multicam modules continue to drive customer demand across the IC discrete, opto and CIS business segment. China contributed to a significant increase of the back end orders the back end equipment orders in the current quarter. This could be due in part to the localization of supply chain within China in response to the imposition of trade tariffs and restriction by its trading partners. Bookings for the Materials segment have grown consecutively for three quarters. It has reached a level similar to that achieved in 2016 and 2017. The segment also saw a 9.8% increase Q o Q in its current quarter billings to US62.8 million The lithium market is clearly on track for a recovery. The segment achieved segment profit margin of 3.7% in the quarter. The FMC Solutions segment achieved billings of US235.6 million which was a 19% increase from the preceding quarter. The order book of SMT Solutions segment continues to be underpinned by the five gs infrastructure demand but was offset by a weaker automotive application market. The segment achieved a segment profit margin of 12.3% in the current quarter. The segment achieved a gross margin of 32.7%, which was lower than expected due to our sustained efforts in penetrating the Asian customer base, which has a relatively lower margin. Despite the uncertain market sentiment, ASMPT is still on track to realize revenue resulting from substantial orders for the advanced packaging, panel and acquisition tools for high volume production of high end computing devices. Also, our best in class packaging and assembly solutions for mini and micro LED has been well accepted by leading players in this space. As the dominant tools supplier for camera modules, we are also poised to benefit from the ongoing migration to multi cameras and the relentless innovation in camera differentiation features. We are positively optimistic of the longer term growth potential in advanced packaging, CMOS image sensors, five gs related applications, IoT, automotive electrification, silicon photonics, mini and micro LED displays, which are expected to accelerate chip demand. And this will in turn broaden our market outreach. With this, we thank you for your attention, and we are ready to take your questions. Questions? Yes. Thank you. Are Our first question comes from Donnie Zhang from Nomura. My first question is regarding to your guidance. So are seeing a sales volume. But for booking momentum, could you elaborate more on different business segments, including IP discrete, LED, for the fourth quarter and probably And my second question is regarding to the gross margin. So S and P gross margin has declined to low 30% level. So when should we see the recovery? Or what kind of products or application can drive gross margin to be higher? And my third question is regarding to WK's retirement. So I think because investors are curious about when have we thought this kind of preparation for retirement and whether the company's strategy or future direction will be a little bit different after Robin takeover? Thank you so much. Okay. First question on your booking. Yes, we guided double digit in Q2 decline in terms of good booking. Now this is if you look at the past pattern, this is really seasonal from Q3 to Q4. Typically, the segment, the equipment segment, the SME segment, typically, we'll see double digit Q on Q drop. So it's nothing really exceptional for this coming quarter. Now in terms of the I think the second question, you talked about the SMT low margin. As I explained or highlighted in our in the announcement as well, now see, we you probably know that we have been making good inroads into the Asian customer base. And typically, for those machines that we ship to the Asian, especially for China and in the rest of Asia, they command a relatively low margin compared to those equipment that we shipped to The U. S. And the European segment. So we see that as really the main reason why the margin for Q3 for SMT has come down by two percentage points compared to last quarter. Now as to your question whether how we foresee SMT margin going forward, Surely, think continuing cost, but a cost reduction is definitely on the cost. So one way to really mitigate this low margin that we sell to Asian customer is to really improve on the cost. And this is already efforts are ongoing. So this is really something that we will end up. And hopefully, in the future, we see gross margin also improving. Now we're also making some structural change in terms of increasing going to increase our production in Malaysia. By the way, our Malaysian additional plant, as you know, we have highlighted a couple of years ago, just recently been completed. So we are tooling up the factory. But of course, this will take a period of time for the one, two point five years before we are fully operational. So I think with the completion of this facility in Malaysia, we will take advantage of the relatively low cost location in Malaysia to do production not just for SMT, but also for the rest of the business segment and materials as well as for the battery equipment. So I think with this plan in mind, we will also should be able to see progressively the S and P margin improving. Now another initiative that we have undertaken for S and P to try to improve the gross margin going forward is we also have extended a small site in Hungary to support our production in Munich. As you know, in the Eastern European country, it's also relatively low cost compared to Munich. So I think with this initiative, also see gross margin for the SMT will continue to improve going forward. Well, Westfall might be high, man. By next year, I will be 66 years old. So actually, it's it's a it's a electrical. I have been working the board for almost two years to prepare for this transition. So the board also went through a Google search, you know, considering both of the internal and external candidates. So finally, we came down to the the board came down to the conclusion, what we missed the right choice, you know, to take. And actually, it's not only what we this time. The whole idea we have is that what we do together with three other senior executives, COO, Stanley Choi our CTO, Ryan Wong and also Gundalawa. He's currently the CEO of this SMT business. So together, they will form executive office. So what it will be supported backed up by all these three gentlemen, They all have a very long and good knowledge in the area they have been they're strong with their shares of good. So I'm very confident, you know, this gentleman will be able to lead the company to, a new height. Now this is for your question of whether there will be any future change into the balance sheet. I think I'll leave this question to Bobby. Now certainly, there will be a continuity. I mean, there's four gentlemen that WK mentioned. We have been working together for a long time, and we have been part of the senior management team that, together with WK, formulated the long term strategy of AFNPD. So as to your question whether there will be changes, I think the strategy is in place. So I think there will be continuity. So I don't think there should be any concern about that in terms of our strategy going forward. Thank you. Our next question comes from Lu Penghwa from CICC Hong Kong. Thank you. Thank you for taking my question. So my first question is that the how you look the China opportunity. So I think you also know in 2019 that you see a surge on the better equipment order from China. Do you think how you will capture this business opportunity? It seems to be your growth is not so strong versus what we only do you see any other markets declining or because it seems your back end is coming back, but it's not as strong as the Chinese customers. Certainly. Think we highlighted that we definitely see the localization effect of the China supply chain because of the ongoing trade tension. So as you're aware, we our Asian market is very the Chinese market is very strong. And so I think we will we should be able to capture opportunities that come along in that respect. Now what we see in the other market, I think it's also probably timely to give you a sort of a glimpse. Besides China, we also see, in particular, in Malaysia, closing the gap in terms of catching up in terms of the booking momentum. So of course, the other areas are still relatively weak, for example, Taiwan, Korea, the other markets are still weak. But however, it could be a sign if Malaysia is closing like that, and there could be a sign that if the other market start to pick up the momentum, and then that will be probably a sign of a recovery. But we don't see that in the other market yet. So far, the only relation with them is really reflecting this trend. Thank you. Next question comes from Mr. Apar Lal from Citigroup. Thank you. Hi, good morning, WK, Robin and Raymond. Thanks for taking my question. So I will focus my question on the advanced packaging. So can you elaborate how much advanced packaging we have of the total IC again. The reason I ask is because we understand there's still a lot of wild bounder or traditional the the IC again equipment and investor want to, you know, separate to lost two parts. So that's my question number one. And number two is, I think last time management talked about there is a significantly backlog on the Nexus back end sorry, mid end equipment, and then we expect to deliver in at the end of this year. Can you share with us what's the current progress? Is those equipment will be bidding or installed at the end of this year? Thank you. Okay. Now for your first question, Arthur, the in terms of AP contribution, we also have highlighted that the AP contribution plus the CIS contribution are more than 50% of our third quarter billing. And AP, I would let you know, roughly around 20%. So AP contribution to our debt and equipment is roughly around 20%. Now in terms of your second question on MAX, yes, we are on track to realize a substantial portion of the booking that we have in the backlog in the Q4. So that on the Q1, basically, we will see next contributing more than Q3 and Q4. Maybe I'll supplement a bit. Actually, most of it or I would say, a number of those tools actually has already been delivered, okay? However, because of these tools are relatively new, so one of the factor contribute to our slightly below our guidance, revenue guidance in Q3, as highlighted by what we earlier, was some of these tools, revenue recognition has been delayed. But these tools are already delivered to customer, already been installed. So we are in the stage of getting those tools by all. So before visually by all, we can't recognize those revenue. So I think the the the delay is mainly of this kind of nature. So the delivery is on track. And actually, continue the parents continue to deliver these tools in Q4 and also beyond 2019. So we are strong back up for all these tools. Our next question comes from Kiana Wong from Credit Suisse. So I have a follow-up questions on top of Alfred's questions. So in terms of the delayed tours, the revenue recognition in the tours, so it also caused the gross margin to miss I mean, to to decline more, right, in the third quarter. But and supposedly, like, advanced packaging will have, like, higher gross margin, then why we should expect, like, fourth quarter continue to have, like, decline in the gross margin if, like, some of these tours up with a higher gross margin to support in the fourth quarter? So of course, maybe there's some other reason from the other product mix. But this is the first question in terms of this related revenue. The second question is about the the outlook and trend in the mini LED and also micro LED because it's also one of the driver. But what do you see about the your new machine being recognized by the customer and how much it will actually contribute to the growth next year? And do you see that the mini LED will soon to pick up from what you from your understanding? Yes. First question, Tina. Thank you. Yes, I think for Q4, we guided the margin to be slightly lower than Q3. Now primarily, as you know, volume is also a factor in terms of margin because we also have fixed cost to cover. So if the volume comes down, typically, the margin will come down. And yes, you're right. I think for next tools, being an advanced packaging tool, typically, the margins are better than the traditional tools. So that's the reason why on a group basis, if we recognize more advanced packaging tools, typically, we will give the group margin a lift. But however, because of the volume effect of Q4, we are guiding slightly down in terms of gross margin for the group. Thank you. We have our following question come from Alpha Life from Citigroup. Thank you. Thank you for taking my follow-up question. So on the Nexus equipment, can you share with us which country, you know, the clients take this machine? Is it Malaysia, Japan, Taiwan or or others? And second small question, recall several years ago, management told us that material is a leading indicator of back end equipment orders. And this time, we see the quarter four actually material getting stronger. So is any, like, upside potential of our current booking number? Thank you. Arthur, now in terms of geographical distribution contribution, now if you if we look at on the nine months basically on year, all countries were down, except for Vietnam and Japan. So these two were the only countries that showed increase in terms of contribution on the year on year basis on the nine month period. The second question is Arthur, what's your second question? Just give me a second. I'll get back, Arthur. Do you have do you Afa, please go ahead. Yeah. So the I'm asking about the upside potential of the current booking because we already see the material the momentum is really getting stronger. And I think previously, talked about material is a leading indicator of the back end equipment. So I'm asking any upside risk of your current forecast. No. You're right. We have been saying the recent bookings in Q1. So it's telling me because you can see for the past three quarters, our booking for recent has been growing. So I think that it's an indicator that the market is recovering. But however, having said that, against the backdrop of the current macro environment and uncertainty, so it's kind of difficult, okay, to predict when the recovery will really kick in. So we are vigilant and constantly looking at demand signals. So I think we also highlighted that when you look at China, China seems to be leading the recovery. Majority of bookings in Q3 actually came from the China booking. So that could be also another signal. Now the other signal that we are working carefully is that, as you are aware, our dine and die attaches quite long have contracted for a period of time. But in Q3, we see stabilization in terms of these two particular tools. So potentially, that could also be an indicator that the market could be stabilizing employees for recovery. And as I mentioned just now, we're also looking at geographical contribution. So Malaysia seems to be picking up a little bit compared relatively speaking compared to the other region. So I think all in, I think we are looking at all these demand signals. We are cautiously optimistic. But however, as I say, against the backdrop of this macro uncertainty, we can't really tell. Our next question comes from Sebastian Hou from CLSA. So my first question is I want to ask about the delayed revenue recognition. So can you are you seeing any abnormal behavior? Sorry, you speak a bit louder? You're breaking up. Yes. Can you hear me better? Yes, yes, yes. Okay. So my question is regarding the delayed revenue recognition in SMT tool in the third quarter. So is it are you seeing any abnormal behavior at your customers? Or this is you see this pretty normal? By the way, it's not the SMT tool, it's the next two that we talk about, the advanced packaging tool. So Q4 revenue was down slightly because of the delayed revenue recognition of advanced packaging panel deposition. Q3, yes. Q3 revenue, yes, slightly lower than guidance. Okay. And also we saw the SMT, the booking also come down quite a bit. So can we attribute the second quarter update to be pretty abnormal and now it's just back to the very normal situation? Yes. I think, yes, on Q2 booking was high, relatively high in this current environment. So if you look at the overall, we expected this year SMT also to come down. Q2 in a sense, a little bit on the high side. So Q3 and I think Q3 will be kind of normal looking for us. Our next question comes from Chris Yim from BoCom. I just have a couple First one is on mini LED. I was just wondering if you can tell us when mini LED start to ramp up, what type of equipment we see increase Is it the upgrade in wire bonders? Or are there any other equipment that we should see a stronger growth? My second question is on the CIS. I just want to know if you can give us an update on how the CIS related orders are looking over the next couple of quarters. Thank you. Your first question on mini and micro. Now typically for mini and micro LED, we can't we we cannot use the normal packaging tool. You know, it's just too too too slow, you know. So so what we have developed is really a best in class mass bonding tool, you know. So typically, these two high price will also command a better margin than the traditional tie in wire bonder. Now the CIS the question on CIS, yes, typically, the first three the first half of the year, typically, we see a higher CIS booking. However, this year, we see Q3 booking are also particularly strong. But however, in Q4, it will also come down. Now in terms of CIS momentum, I think we would like to also probably share with you that looking at the momentum in terms of shipment and billing, we may even of course, depending on Q4 performance in terms of CAS, we may even, on a full year basis, be very close to last year billing or maybe even to profit a little bit. So this is to give you an indication that this year's CIS business is pretty strong compared to the other business segments. Our next question comes from China Wong from Credit Suisse. Sorry, our line got disconnected. Can we move on to the next one? Sunny Wang from UBS in Taiwan. Thank you. Sunny, please go ahead. Hi. This is Bill Lu from UBS. Back to the deferred revenues, I'm wondering if you can give me some color on the mechanics of how that works. Do you have to meet certain benchmarks? Or what how do you get to the revenue recognition? Typically, according to accounting standards, you have to meet certain criteria. Now for new tool, typically for new tool, customer acceptance, you know, is the threshold. So next being a panel deposition tool being a new tool. So we have to meet that criteria. So as a result, in Q3, we only managed to recognize some of it. Some tools were deferred because those tools that were deferred have not been bought off yet. Although the ones that we just mentioned earlier, those tools were already shipped to the customer. So typically, that's pattern in terms of recognition. Maybe I'll supplement a little bit. Those are revenue recognition delay. That's not the fact and the market sentiment is more customer business environment has changed. They they wanna push back the the the the delivery of those machine. It's not of that nature. It's more what we just mentioned, those are new tools. So by the accounting standard, we cannot really recognize the revenue upon shipment. We have to recognize the revenue upon customer acceptance. And those situations also not be in a in a benchmarking exercise competing with our company, no. We have only two over there. But just we have to go through this process. As a new tool, sometimes there are bound to be some unexpected issues coming up. So customers and us have to get out to clean it up. So we are very confident those revenue recognition will take place in Q4. If it takes place faster earlier and then we pass pass the the threshold criteria of the new tool, that the subsequent tools will no longer need to be I mean, the level of this is level of recognition no longer need to weigh and do the acceptance. So once we pass through that threshold, then you will see higher contribution from next in our unit. So we are expecting, hopefully, this can happen in Q4, then this will become a upside in both. So it will take place in Q1 next year. Our next question comes from Johnny Geng from Nomura. Thank you management for taking my question again. My first question is a follow-up to Q4 booking guidance. We are expecting booking to decline in 4Q, but if we break down into back end and F and P, which one would decline more? And my second question is also a follow-up on the China localization policy. So I have seen that some China wholesale companies are starting to add CapEx or maybe have some CapEx expansion next year. So I'm wondering when will we see some booking from, you know, wholesale companies, particularly China wholesale company next year? And my third question is regarding to S and P. So we have seen quite strong five gs infrastructure demand this year. So we provide SMT for five gs base station as well. But can we say that the five gs infrastructure will continue into next year or probably at least a multiple year trend. But at the same time, are those SMTs for five gs infrastructure carry lower gross margin as well? Because in your presentation remarks, you also mentioned about that the customers in China normally have lower than corporate average margin. Let me take this question. First of all, on the booking trend, actually, Q4, typically, is a low season. So booking can booking comes down is fairly normal, except in the year when customers have a fairly high expectation on the following year, then they will take advantage and try to order equipment in advance. So this will be the, I would say, where years we will see a very strong footprint in Q4. You probably can understand at this point, right, while generally people start to become a little more optimistic about 2020, but cannot be too bullish about it yet. So we have not seen that kind of booking momentum trend. So as a result, we are forecasting booking will come down to Q4. We do not see a significant difference in the Qingtang way for between the brand agreement and also the SMT. I think it's probably low, no pattern in our opinion, Whereas materials probably will be very stable, can't exactly predict whether the momentum will show a very low single digit, two on two booking growth or flat or slightly down. Think our prediction for the midterm booking will be fairly stable. So that is the Q4 effect. Now for China, all the you see that some customers in China start to increase their CapEx. Actually, we do see that. And actually, in Q2, we already reported to do. So we see some of those orders start to come in. It's much more obvious in Q3. However, as Robin also had point out, unfortunately, other territories start continue to show a contraction, except Malaysia established to closing the gap. So that's why this kind of book effect also, there's a strong growth in China, contractual in the aftermarket, so they offset a little bit from each other. Even in Q1, we continue to see customers in China, I will say, different customer, they continue to give us indication and some of them continue all the new equipment. So we see some costly momentum in the market in China. Okay? So however, we are very eager to see a similar pattern happening overseas market, but that's not obvious yet. First of all, five gs infrastructure, we believe this will be a multiple year of demand for our SMT because five gs infrastructure will take quite a number of years. But however, we also expect the five gs handset start to come you know, in 2020. So that should be another factor driving our business. With on your question on the margin for the S and P for the five gs infrastructure, so far, those equipments are very high end demand. So because of this very advanced equipment, so the the margin was not slow. Okay? So but however, when we in the China market, when we are selling to a more general market, that those requirement, those product track down our margin and not so much on the five gs infrastructure. Our next question comes from Kana Wong from Credit Suisse. Can you hear me? Yes. So I just wanted to follow-up the last question I asked is about the the time for I just asked to see mini LED and also micro LED to get in the contributions in the LED segment. I think we what is that? Like, when to see the market to pick up because, like, this is kind of a trend, a lot of difficult and challenge in in the equipment or, like, in the manufacturing process. So this is the first question that if you see or when we could expect that the demand to come. When could we see the importance, I mean, more mature in the market? Well, I think this is a very interesting market. We have some very good solutions that what we have is a a a mass phone solution. We have delivered quite a number of tools to a number of customers. These customers are building their prototypes from what they have produced as a prototype, very exciting. This customer confirmed, you know, our solution are very interesting. So at least one customer is giving us an indication. They are trying to to secure their own business. So if that's the case, that will the secular revenue contribution to us could happen anytime. Of course, that part we can't control is on the customer side. So whether they are able to really show a very convenient solution to their customer. But in our opinion, probably not too far away because it's not just one customer working on it, so many customers working on it. So we see even people having a bigger solutions using our equipment. So I think, well, it will be in the near future, not too far away from now. So when to when could we expect? I can't Which which which application? That mean, like, it's more on the web browser or, like, mobile device or, like, TV, etcetera. Looking at our customers' first application, we believe wearable is the is the first application, easier to to success to to be successful with them. Customers also aiming at the mobile phone, but in our opinion, the challenge for mobile phones still be the calls. Are they able to produce the micro LED display at competitive cost. So but available, we think will be the first application to develop. Got you. Thanks. Thank you. Our next question comes from Mr. Lee Meyer from WorldEBIT. Thank you. Yes. Hi. My question has to do with your SMT business as it relates to the auto OEMs. You mentioned that in the third quarter, shipments to the auto OEMs may have been a little bit weaker than expected. What's your outlook for S and P to the auto OEMs? And how is that affecting the gross margin on the S and P business right now and in the future? Just to clarify, we didn't mention OEM. What we mentioned is more geographical. So if we ship more to Asian based customer, China, rest of Asia, typically, this margin will be lower than those that we shipped to Europe and America. Okay. Well, but is there was there a mix shift away from auto more towards smartphone? And has that impacted your margin? And do you have an outlook as it relates the use of S and P in the auto business and what your outlook is there? Typically, we are very strong in automotive. But unfortunately, for this year, as you're probably aware, the automotive market in general has come down. So as a result, we ship that for the automotive application. And that also it's also affected in terms of gross margin. Me start with that a little bit. In terms of margin for the SMT equipment, typically, we enjoy a better gross margin for automotive applications, communication infrastructure, servers, high end smartphones. So these are the applications we can enjoy a better margin because this customer will demand a fairly high end machine. Whereas for the mid to lower end smartphone for the general consumer applications, some industrial application, some industrial is high end, but some industrial applications just normal high SMP. So when for that kind of a long demanding active market, So for those equipment, you know, as shipping to Asian region, so then the the gross margin will be lower. Margin Our next question comes from Samsung Hong from HSBC Taiwan. I have a First one is that on your fourth quarter guidance, just wondering have you factored in those Nexus revenue delay recognition? Have you factored that into your Q4 revenue guidance now? Second question is also regarding the mini LED. I'm wondering, can you maybe share some of the thought regarding your solutions versus your competitors' solution. And then whether actually you do have a chance on top of this very strong growth for the industry, can you again further expand your market share in this mini LED equipment space? Thirdly is that, I think yesterday, AC mentioned that for the first quarter next year, they're seeing for the semiconductor space, they're looking for a shallower than normal decline in the first quarter. So yes, just as a whole, do you see similar trend as what you can see right now in terms of your equipment and material trend? Yes. You. I think the first question in terms of whether we have included Max tools in the Q4, certainly, we have. As we also say, we are on track to realize a substantial portion of the deposition to connect in Q4. So we have to come back into that guidance, yes. For the mid to micro LED, I will say today, if you are aware of who are the the people who are the companies of making or showing off the micro or media LED display samples, then I will say a very high chance they were using our equipment to produce those samples. So I think as of this movement, that's what I can share with you. For Q1, we have not really provided any guidance on Q1. However, in our opinion, looking at the future market, we are generally more optimistic about 2020. So we believe the industry cycle has worked its way out. So we should have reached the bottom line. Our booking for the new brand is a key indicator that we grow it consecutively for free quarters. And actually, if you look at our fair end equipment booking in Q3, so actually, we are almost flat year on year. So all this actually gives us confidence. I think the market is turning around. You should have reached the bottom, okay? Now, however, why the guy are booking for q four time, as I mentioned earlier, is the low season, the last quarter of the year. Okay? Now interesting to note is that China's New Year holiday is relatively early in 2020. So from our traditional wisdom, from our experience, customers, in particular customer in China, will be more aggressive in ordering new capacity after Chinese New Year. So if that is the case, that continue to be casing in 2020, well, I would say twenty twenty Q1 may not be like that. But of course, it's a bit too early to mitigate a economy forecast at this long time. Our next question comes from Dominic Dan from Nomura. Thank you management for taking my question again. So my first question is regarding to Mini LED. So could you elaborate more on what kind of sales percentage is from MINI O e premium now? And second question is regarding to the tax rate. So tax rate in third quarter is still, like, 3036% level, I guess. So how should we look at the tax rate going forward? Thank you. So as Pierre mentioned, I think the market for Mini and Micro are still at an infancy stage. So a lot of customers are still doing prototyping. So you can imagine the contribution won't be material at this point in time. Now for the tax rate, unfortunately, yes, unfortunately, it depends how you look at it. Our SMT has been doing well relatively to the back end. As you're aware, the tax rate in S and P are much higher than the back end operation. So as a result, we see tax rate kind of sticky, has not really come down. So we see that the tax rate trending for the whole year will probably be around 30 to 30 mid-30s kind of a percentage, unfortunately, for this year. Thank you. We have another following question come from Kannanza. Thank you. Think Donnie has actually asked about the test rate question, but remember you guided around 20 to 25, right? So yes, I can still assume this range for full year. Maybe not. Looking at the Q3 solar development, the share of the SME profit actually good compared also compared to the back end. In fact, they are in terms of segmental level, they are higher than the back end section. So as a result, unfortunately, we cannot bring the tax rate down for that reason. So training wise, I think for the full year, we have unfortunately had to elevate the tax rate to, as I said, 30%, maybe slightly above 30% level for the full year. Okay. 30% or more. Okay. Thanks. Another question comes from Laura Lai from Hengsheng Bank. Thank you. Morning, senior management. Thank you for taking my question. The first question I would like to ask is about the distribution of geographical revenue. I see that there is a growth of revenue in China from 44.8% to 50 something, 50.2% like in this quarter. And while Malaysia and Vietnam has also experienced quite a growth. So do you think that your company has been benefited by the relocation of the production plant of your clients because of the trade tensions between the Sino and U. S? This is my first question. And do you think the trend will be going forward? That's why your margin will be improving in the long run. And the second one is I would like to know the percentage of your revenue that is contributed by the die attach and wire bonders, which is the traditional part of your business. Well, for the geographical distribution, you're right. China is catching up. Although, overall, it's still bad to come under the last year, but it's starting to catch up, followed by Malaysia. Vietnam is because of the in the first half of the year, actually due to some advanced packaging shipment tools relating to advanced packaging and also the CIS, okay? As I have shared with you with investors before, so the Korean customers, they like to have their subcontractors, their outsourced partners So that's the benefit of that. However, whether these are really relating to customers shifting their manufacturing base, their supply base from Thailand to Vietnam or Malaysia because of trade war, we don't really see that, to be honest. So as I mentioned, the customer who installed a lot of advanced packaging tools in Vietnam in the beginning of this year and also second half of last year, it was long handed. Similarly, for the Korean customer, they shipped their supply base in Vietnam also has been started way before the trade war. So it's continuous effort. So we don't really see trade war is trickling on, okay? For the Taiwan percentage, I would say the percentage is not very reliable for the past two, three quarters because while the other application continue to grow, the diamond my bonder has been contracting for a number of projects until what we reported to you earlier, we start to see stabilizing in Q3. So you can easily say that the diamond my bonder contribution to our back end premium revenue was below 50% in QP, okay? But they should be used to be around 50% or slightly above 50% level, let's say. But unfortunately, Q3 has come down. We expect in Q4, it may go up. Of course, it also depends on how quickly we can do the revenue recognition with all those advance that we can do. Thank you. Thank you. We have another question coming from Kainan Wong from Credit Suisse. Just wanted to talk a little more about our CICI outlook next year? Because this year, I think, in the second half, it's actually better than expected. So catching catching up up the revenue and then closing to last year level. But next year, what do you see about the growth momentum? Should we expect that it should be going back to 2017 level or even higher? Well, to be honest, this is difficult question. We see, on one hand, there's a good market trend. This is the multiple camera, three cameras, four cameras. So this positive trend will continue to drive the demand for our CIC equipment, not only the AA machine, but also the assembly equipment. Furthermore, we also anticipating the customer will probably introduce 10x optical cameras. So those will also increase the demand for active alignment requirement. So there are, I would say, there are positive factors driving it. We're also expecting five handsets will start to come to the market. And also, certain customers also are demanding or losing a very high resolution camera sensors, over 100 meg sensors. So all these are positive factors driving the demand for the CIS improvement. So whether we in 02/1930, we will see the demand go back to the 2017 level, we are not sure. We also don't do our we'll continue to grow actually. So 2018 was higher than 2017. If this year, we are very close to 2018. So at this point in time, I will say I do not rule out a possibility if we will go even further. But of course, at the same time, depends on all these new applications, how quickly, how fast our customer able to introduce this new application. So the market acceptance of this of this so I also will walk you out slightly down compared to to 2019. But certainly, we will not see a major adjustment, you know, major correction in the CIS market. So it will be either right to do that or something to go. Mr. Li, there seems to be no further question at this point in time. Okay. Yes, thank you. I think there being no other questions, I think we'd like to thank you for joining us today, and we will talk to you again next time. Thank you very much. Goodbye. Thank you. Thank you for your participation. This concludes your conference. Thank you.