Earnings Call: Q1 2019

Apr 25, 2019

Good morning, good afternoon, ladies and gentlemen. Welcome to the conference call. Let us please ring the call and I'll be standing by. Thank you. Thank you. Good morning and good evening, ladies and gentlemen. Welcome to the ASM Pacific RG twenty nineteen First Quarter Results 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 Q1 results can be downloaded from our website, www.asmpacific.com. With us this morning are Mr. W. Kelly, CEO of ASM Pacific Technology and Mr. Yong Lin, CFO of ASM Pacific Technology. We will start with a brief discussion about our twenty nineteen first quarter results, followed by a Q and A session. Without further ado, let me hand this over to Mr. W. JD. Mr. Li Ke. Thank you, Heng Anong. Good morning and good evening, ladies and gentlemen. We appreciate you are joining us for our quarterly results for the three months ended March 3139, investor conference call today. I will first provide you with a summary of the company's performance, followed by the Q and A section. As the group expected, the semiconductor market was in a period of excess mark during the past quarter. However, there was stable signs of recovery as footprint booking, which has served as a leading indicator of the market, started to rebound. ASMPG achieved a billing of 466,600,000.0 in Q1 this year. The group's consolidated profit after taxation for the period was million. Gross margin of the group was 33.9% in Q1 this year, representing improvement of 93 basis points over the preceding quarter and reduction of three sixty nine basis points against the same period last year, respectively. The year on year reduction of gross margin was mainly related to product mix, lower sales volume and lower production capacity utilization during the quarter. It's expected to bounce back to a high level in the coming quarters. Group bookings amounted to 460,300,000.0. Book to view ratio was 0.99. Backlog as of end Q1 twenty nineteen was USD 6 and 52,100,000.0. Booking of the mature segment rebounded 15.2% quarter on quarter, while booking of the back end premium segment and the S and P Solutions segment experienced small Q on Q contracts of 4.25.1%, respectively. Our bag and equipment segment billing contracted 15.9% quarter on quarter and 13.4% year on year, respectively, to 195,900,000,000.0. Gross margin reduced five zero eight basis points year on year and three eighty three basis points quarter on quarter to 39.2%, mainly due to lower sales volume and underutilization of installed professional capacity. As a result, the segment's profit reduced by 89.5% year on year and 60% quarter on quarter, respectively. Materials revenue was million dollars representing decreases of 15.532.3% over the preceding three months and the same period of last year, respectively. Gross margin reduced two seventy one basis points year on year, but improved two seventy five basis points total on quarter to 10.4%. Profit of the segment reduced 73.3% year on year but improved 214.2% quarter on quarter. During the first quarter, billing of the S and P segment amounted to 220,200,000.0, representing a growth of 11.4% year on year for the contraction of 30.1% compared to the preceding quarter. Gross margin reduced to two sixty nine basis points year on year but improved to four twenty three basis points quarter on quarter to 34.5%. Segment profit improved by 6.4% year on year but reduced 28.5% when compared against the last quarter. Due to the low level of bookings received in Q1 this year, we anticipate that group billing in Q2 will be in the range of USD $4.90 to USD $540,000,000, with group gross margin in the range of 24% to 36%. The end business is expected to lead the Q on Q improvement. In terms of booking, we expect the market to continue to improve. Gross booking is expected to show a double digit improvement for the Q1 this year. However, we expect it would still be significantly lower than the 14% period last year. While it's still too early to predict, we shouldn't do that. The market will recover at the later part of the year. Many of our customers believe that at the moment, the chance of a market improvement is significantly higher than the chance of further market deterioration. With this, we thank you for your attention, and we are ready to take your questions. Thank you, sir. Are you ready to take questions? Yes, please. Thank you. Our first question comes from Kana Wong from Credit Suisse in Hong Kong. Thank you. So my first question is about the booking trend by segment in the second quarter because you expect about double digit growth quarter over quarter and that's still down year over year? And the second question is about the back end result in the first quarter. Because there are previous expectations about flat to slightly dip quarter over quarter. But at the end, it drops by double digit quarter over quarter decline. So what's the miss here? What's the gap between your power expectation and the results? And the third question is about the inventory adjustment you mentioned in the fourth quarter earnings. So will you continue this inventory adjustment in the second quarter? Or you think that it's ready to prepare for second half rebound? Okay. Morning. Thank you. Talking about the booking trend by segment for Q2, we expect this brand agreement and mature segment, they both should show a strong double digit kind of booking improvement. That's what we are anticipating at this point of time. I would say up to now, this recovery of the lithium market seems to be quite obvious. The movement is really pointing to a healthy direction. Whereas the spare equipment market compared to a year ago still shows at a very pretty short stage. I would say, probably, hopefully, in Q2, during Q2, we will see a much more clear side, the bank given market also going to recover. So typically, in the past, we noticed that the lead frame booking will be lifting the bank given booking by one quarter. So we are hoping to see this continue. However, based on this past experience, we do not expect a significant order pickup for SMT solutions in Q2 yet. It will typically be will be another quarter delay. So that's what we see as of this point of time. And when it goes down into more of the products, see CIS actually is generating a lot more momentum. As we shared with you during our December last month, during the first quarter, CIS booking actually experienced more than double Q on Q improvement. The total is still 20 below the Q1 level last year. However, Q1 level last year was pretty high level. So I will say we are happy to see the CIS bounce back. And recently, they're surprised that due to some probably successful launch of some handphones in the market, we are seeing an increased booking for CIS. We expect this trend will continue. Yes, for the back end results, originally, we are expecting flat to a small dip, but at the end, it's slightly larger than what we expect, mainly due to the development in China is lower than what we have expected, partly also due to change of the VAT in China. Then we suddenly see customers are quite reluctant to receive a shipment before the new VAT rules are coming in. So other than this, I will say we don't see any significant deviation from what we have projected. So however, in terms of the market as we have reported, what continue to concern us will be we don't see a significant order pickup of momentum after Chinese New Year that used to be there. So although kind of we expect it to be the case, but when it really happened, we are disappointed also. So in terms of inventory adjustment, we expect the effort will continue, but at reduce as way in Q2 because we are also at this point, I am as we shared, our customers seem chance of market pickup is higher than a fair deterioration. So today, we are internal for internal planning purposes. We are also seeing our the result not able to satisfy market demand when there's a market pickup is higher than a continued inventory buildup. So we are also adjusting ourselves at this point in time. So I would say probably we'll still control our production run rate to keep inventory level at the level we delighted to see. But at the same time, we are also prepared to turn on more conversion capacity, like I said, at any time that we see a much more clear market. So I would say expect some continue some inventory adjustment exercise in Q2, but it also can be reversed anytime soon, yes. Thank you. Our next question comes from Johnny Chen from Nomura. Thank you. Good morning, management. My first question is regarding to your first quarter bookings. So your first quarter bookings slightly declined quarter on quarter in terms of the back end segment. But if I look into your announcement, it's like your booking for ICT Discrete increased 30% Q o Q, excluding NEX. And your CIS booking increased more than double Q o Q. So I'm just wondering what's the reason behind the overall back end booking to slightly decline if you have very strong ICT screen and CIS booking in first quarter? And secondly is that I did not hear very clear on Tina's questions. So in terms of second quarter booking, you are expecting a double digit Q o Q increase. If we separate into a different business unit, IC discrete, CIS, LED, S and P, and which segment will increase, which will be still sluggish? And the third question is regarding to the gross margin in the second quarter. How should we expect the gross margin in OpEx in the second quarter? Okay. Well, in Q1, the booking is relating to the bad improvement compared to Q4. The LED was still too low. So that is one of the reasons. In Q4 last year, we received record booking for advanced packaging, packaging improvement. However, as you can expect, this level of booking cannot be consistently Q on Q. So in Q1 this year, while we shipped more of the end equipment to our customers, but compared to Q4 last year, we see less new order bookings for the end user. So I would say, as I mentioned, the leading was the CIS followed by the ICT script. However, it was offset by this LED booking and also airlines packaging. So this is for the Q1, okay? For the trend in Q2, which seven will see or two will see a sluggish? And I we we believe the LED will continue to be low Probably, LED will start to pick up the momentum in the second half of the year, but probably not at q two late q two yet. So this will be the the major area. Similarly, we also because combining although I mentioned about Q1, the advanced packaging booking has come down compared to Q4 last year, but it was still at a pretty good level. So we have two quarters of very strong booking for advanced packaging in Q4 and Q1. So we do not expect this momentum necessarily to continue in Q2, okay? So Q2 probably, we are focusing more delivering for those backlog order or pay equipment to our customer, one of them taking in more new order and increasing our backlog. So that will be booking trend in Q2 by business. Gross margin wise, we expect a better a slightly higher capacity utilization in Q4, and we also expect a higher billing in Q2 sorry, capacitance in Q2 and also billing in Q2. So that probably will lead to improvement for us in terms of gross margin. In terms of this headcount control, we expect there will be slightly a little bit more flexible workforce reduction in Q2, but the magnitude will be probably very small compared to the past two quarters. Past two quarters combined together, we have trimmed down our manufacturing workforce in China by 1,000 people already. So we expect this magnitude to be slightly smaller in Q2. So overall, we do expect the manufacturing expense, our manufacturing cost to come up. On the other hand, as I mentioned, the sales level should go up, the factory sizes and rates should go up. So it should carry out our gross margin. The only factor will hold back our gross margin improvement, we expect some advanced packaging equipment to be delivered to customers. The cost will be incurred in this quarter and even in Q1. However, billings only expected to be in Q3. So that this slight time effect, I mean, it may affect the number a little bit, but we don't really expect it to be big. So other than that, we expect gross margin improvement for that improvement in Q2. Our next question comes from Emily Chong from Citigroup. So just following up with last gentleman's question. For the gross margin in the second quarter, can we expect like the slightly recovery or it is still in line with the Q1 margin? Well, I think it's still probably in line with the Q1 margin with some small upside potential. So we are giving out the range of 34% to 36%, okay, while Q1 is 50.9%. So Q1 was on the low side of this guidance range. We are expecting a 1% to 2% potentially 1% to 2% improvement in Q2, yes. Okay. And also, I think so based on your company business nature, I think the gross margin is more driven by the product mix rather than the revenue scale. Is this the right way to think about that? So that's all my questions. Okay. Revenue mix definitely has a contribution to our gross margin. If you look at our Q1, actually, we shipped less to China in Q1 and shipped more to the rest of the region. So actually, strictly speaking, if you go to individual business segment, there was a favorable contribution to the gross margin. But unfortunately, when you compare Q1 this year to Q1 last year, a little higher portion of SMT billing compared to a certain lower portion of the payment billing. So that this segment mix dragged down the gross margin. So that's one of it. However, in Q1, I think that the other two factors, a relatively low sales volume to jack down the gross margin and also intention to be controlled and low utilization of a certain capacity also cut down the gross margin. So I think in Q1, the capacity utilization and sales volume are the key factors pulling down the gross margin. Thank you. Okay. Thank you, management. Thank you. Thank you. Our next question comes from Li Ping Huang from CICC. Thank you. Thank you for taking my question. The first question is about your full year guidance. So in the previous quarter, you mentioned that you expect 2019 to be a challenging year and that you expect the revenue year over year decline and the Advanced Packaging revenue to be improved. What's What's your latest view on this 2019 full year guidance? And do you expect some revision on either the total revenue or because you see the advanced packaging start to show some weakness in Q1? Do you also change your view on advanced packaging, yes? Well, we do not expect or do not see any reason to change the guidance. Maybe let me clarify on the advanced packaging booking trend. The Q1, we received less booking compared to q four last year has been expected because q four last year was exceptionally strong. Okay? Mhmm. While advanced packaging features at this point in time, the customer base is relatively lower than the other products. So because of that, actually, we do not expect a very consistent pattern of booking top on the quarter. So I would say there was no unexpected weakness of the advanced packaging equipment market in Q1. On a two year basis, we still hold on to our earlier forecast. We still expect it to come down. On the other hand, we still expect the advanced packaging equipment to contribute more in 2019. As you probably can recall, advanced packaging, even without counting in the one quarter contribution from ASM mix, already account for contributing to more than 10% of our entertainment revenue in 2018. So we are expecting this contribution will go up significantly in 2019. So as of this small time, I will say we don't see any reason we changed this forecast yet. Okay. Okay. The second question is about the geographical change. So I remember last few quarters, you mentioned that the because of the trade tension between China and The U. S, you see the customer are slowing down the CapEx in China. I need to look and see what's where to put their new capacity. But when today, when you last few months, when you discuss with your customers, and has they fixed their mind where to increase capacity? Or they are still watching look on the features? Yes. Okay. Well, as you can see when we report the numbers, actually, by geographical distribution, I would say the drop the the biggest drop is from China. So China actually contribute contribution to our to our revenue has come down significantly. It's really reflecting the major OSATs in China, our video holding back, okay, in the Q1, while the smaller payers in China market continue to expand. So our order in China, China is still the biggest market for us in Q1 this year. However, it has come down significantly compared to the past. People are talking about many talks in the market, talking about they have to make some adjustment outside China. But as of this moment or up to Q1, we don't really see a lot of new action being taken. One of the American IDMs even told us, while they expect their CapEx in 2019 will be at a pretty low level. But on the other hand, they are telling us they plan to expand one of their factory in China will continue and expect to that there will be a major CapEx installation in 2020. So I will say today, these are the picture. While we in our announcement, we mentioned how it now will become the number four market for us in Q1 this year. But when we carefully look at the the order pattern, you know, the it I will say there's probably nothing to do with trade war mainly because customer, you know, in CIS, they adopt active alignment solution. The other major reason is relating advanced packaging. So advanced packaging and CIS solution, the reason why Vietnam has gone up by to the level position by geographic distribution for S and P in Q1, but not so much related to trade war. So I think up to this point, we don't see a very obvious trade war effect leading to a significant investment of by our customers in the Southeast Asian countries yet. Our next question comes from Chris Yim from BoCom International in Hong Kong. Just a couple of quick follow ups for me. You just mentioned that China is the biggest drop in 1Q. I was wondering if you can if you're seeing billing improvement in billings not in bookings, I'm sorry, improvement in bookings from China recently because perhaps the economy is improving and perhaps the trade tension is easing. My second question is on the SMT. I was wondering if you can give us a if we look at SMT demand this year, if you can talk to us about the demand you're seeing both from the automobile side as well as the smartphone side? Because last year was a high base, it was very strong year. So I wondering if you can give us an update on that. Okay. For the booking in China, as I mentioned earlier, we've seen some increased booking activity coming from the CIS business. While in Q1 this year, a quite certain part of the CIS billing was delivered to Vietnam. This is not relating to Chinese supply chain. But on the booking side, we start to see increased booking order momentum from Chinese supply chain for the smartphone for the CIS application. We believe it's partly also driven by one of the successful introduction of one of the latest phone. So we noticed that customers are excited about it, but we'll talk about they see an increase of loading and depending for this increased capacity to cope with this demand. In terms of SMT demand, I would say the booking level in Q1 actually was not bad. This is more single digit kind of Q on Q reduction. So typical practice of Q1 is a slow quarter for SMT in terms of booking. So I will consider the bookings we have received in Q1 this year for SMT at a pretty healthy level. And this continue to, I would say, caught us by a little bit surprised. We still continue to see a very strong momentum in S and P market compared to the semiconductor market. Talking to customer, some automotive customer find a little bit, I will say, conservative on one hand and also optimistic on the other. They are concerned they they become they are concerned about the slowdown of the automotive shipment they're seeing today happening in China and also in the Western part of the world. They do not expect the automotive shipment volume will see a significant pickup anytime soon. However, they are optimistic on the other side because of they are seeing a lot of the new design has been designed into the new models. So the semiconductor content of the car actually will surely increase. While they are concerned, supported by the quantity, but they are kind of relieved and even excited about it will be compensated by the dollar value by semiconductor content. So overall, this is the situation. So with that, you can expect more SMP equipment continue related for the automotive industry to place the component into all those electronic modules. So today, we are seeing market in terms of SMT is healthy in this export time. We're also seeing more activities related to five gs infrastructure build up rather than the handset. We don't expect a similar investment for smartphones for this Indian market at this point, right? Because India, last year, put out a significant capacity. We expect that there could be a drive for the additional capacity for China supply chain related handset business. But at this point, it was not obvious yet. You. Our next question comes from Mr. Eric Choi from Morgan Stanley. Thank you. Hi, good morning guys. Thank you for taking my question. So first of all, can you comment a little bit about the demand in your categorized and application segments like automotive, mobility and others? I haven't seen any demand improvements comparing to one quarter ago. Throughout And the announcement you guys talked about, like the second half recovery, like with all the application segments, do you see any particular segment that you have more visibility or you are more confident that the second half recovery will actually take place beyond regular season fluctuation? Today, I will say that the most obvious area is the CIS. So I will put it this way. At this point in time, the CIS momentum is a bit better than we have expect forecast a quarter ago. So originally, we expect twenty nineteen will be quite slow. However, we in Q1, we will always start to see customer want to continue to order equipment and also, I think, including the Chinese supply chain, excited about it. So today, while we it's still too early to see the actual development of this SIS market, but it's obvious momentum picking up. And among the older data equipment application area, this is the first area showing a very clear sign of picking up of activities at this point. Sorry. I would like to a little bit. So when you're answering the CIS, you were talking about, like, there's this particular China smartphone, a model that has received a lot of excitement from customers. Like, how do you actually track the excitement? Or like, would you be able to know if the customer is just basically building out inventory, additional semi inventory instead of having actual demand? There something this is something you have a concern with? Well, really cannot track this one. Probably you guys will be much better to track this one. For the CIS business, as I mentioned, the shipment in Q1, a larger portion is not related to Chinese supply chain. So as I mentioned, Vietnam is the key destination country of destination for this CIS equipment, while China also taking some of them. So the Vietnam one is a Korean supply chain rather than a Chinese supply chain. However, by booking activity, this in Q1, you start to see the Chinese supply chain, you know, start to place order and come to to this March and April, we are seeing increased the good momentum from this Chinese supply chain for the smartphone. When we talk to the customers, they are thinking about the reason of that. Of course, we can't tell. We talk have we totally have no idea, you know, how much has been sold. Our customers are prepared, you know, and are willing to put in additional capacity to prepare for their anticipated demand. That's what we see today. Thank you. We have a following question come from Johnny Tang from Nomura. So my first question is regarding to my earlier question is that your OpEx ratio, how should we expect the OpEx into the second quarter? Because looking at the first quarter result is like the SG and A was pretty high. So I'm not sure about how should we expect the OpEx into the second quarter, the rest of the year. And secondly is maybe we look beyond the first half. So what businesses are you seeing more growth momentum into second half and next year. In my opinion, it's like you have pretty high base on SMT and probably IC discrete as well because you acquired NEX last year. But you have pretty low base on LED probably as well as CIS this year. So how should we look at the momentum into second half and next year? What kind of growth driver should we expect over time? Regarding your first question on OpEx. Our OpEx was relatively fixed, I would say, less variable. So so as a result, when this sales volume has come down, the OpEx has a ratio to sales revenue will go up. Okay? So at this point in time, I will put less focus on the percentage. On the absolute level, we actually are comparing to the last year. If we take out acquisition effect, actually, there was a small reduction compared to a year ago. So including the acquisition, everything in, so OpEx increased by 6.6 year on year. So as I mentioned, you pick out the acquisition, in fact, you can see actually the actual OpEx for the original business has come back, okay? So comparing the Q2 to Q1 this year, so typically, OpEx in Q2 will go up compared to Q1. So we do expect this to go up. So however, we continue to exercise our cost control effort. So we do not expect a significant change in the OpEx ratio because on one hand, the absolute will go up. On the other hand, these sales revenue also will go up. So probably, in a ratio point of view, there's not too much changes come Q on Q. For the driver, for the rest of this year, SMT will probably continue to play a key role. However, we expect this contribution to the group's revenue will start to come down in Q2 because we expect the other business will start to pick up the momentum. So on a full year basis, probably, it will be similar to 2018. We don't expect it to change significantly from the 2018 level on a full year basis. By application area, advanced packaging definitely will be a similar contributor to the group's revenue as well as to the the entertainment segment revenue this year. Then it will be followed by the IC discrete. Other than the advanced packaging, I think the IC discrete will continue. And also, IC discrete also driving for automotive electronics as well as this power management. So these are the key area. We also expect these smartphone five gs related will start to show some momentum. For example, in the RF filters, this will start to show momentum in the coming quarters, okay? As I mentioned earlier, CIS really picking up nicely better than what we expected, although we don't we still don't expect it will be able to surpass 2018. So we still expect on a full year basis, CIS will be lower than 2018, but I think we will pick up its momentum from now on. LED will be the area we are seeing some softness at this point in time, partly due to the market and also partly our key customer has installed so much capacity for the last two years. So they are taking the time to digest the capacity. However, we carefully monitor these customers' capacity utilization. So we expect the customer will be once again on an expansion trend in the second half of this year. So I would say, LGD probably will start to pick up in the second half. So overall, automotive power management then followed by five gs and smartphone CIF, then this will be the drivers for this year. So regarding your five gs smartphone form factor, how should we expect it will change the or improve our equipment exposure to the back end companies or EMS companies? I'm just thinking whether it will benefit more on your back end equipment or SMD equipment because we are seeing more and more space constraint in the smartphone. So probably, it will trigger more SiP usage there. However, SiP is the area in between back end industry and EMS industry. So how should we evaluate this kind of industry dynamic change? And how it will benefit our back end or SMT equipment? Actually, you are seeing the trend in the market very accurately. A little bit difficult for us to quantify whether the benefit will benefit more of the SMT or benefit more of the back end. Actually, it will benefit both. Now as you have told us, space constraint is the biggest challenge for five gs handsets. So we expect there will be increased adoption, maybe for five gs, actually, there's almost a must to adopt the SLP, the substrate, night PCB. That will be in favor of our SMT equipment because our SMT placement machine are capable of proven to be able to handle very small components, placing them closer to one each other, still maintaining a very high productivity, a very stable performance. So this property will be in our favor. We expect that. On the other hand, as we mentioned also, the market is really moving towards the trend of SiP. So we see increased demand, increased capacity installation relating to this SiP. So for this SiP applications, it will benefit both our S and P as well as our back end equipment. So on the back end equipment side, probably, we'll be a little more demanding of those advanced packaging kind of equipment, one of them, the traditional R and Y bonders. On the other hand, there's also a lot of passive component need to be placed in the SiP. So that will demand SMT placement assurance for that. So we are seeing both. And probably, in a slightly medium term, we expect the market will move into more embedded applications. Okay? So this embedded applications, because of space constraint, people, for example, the five g, they even try to inside the antenna into the package. So these are the trend in the market. So this will require all the advanced packaging equipment and even advanced packaging material, fabricating the antennas into the substrate. So this will be the trend. So we expect both the back end equipment and the SMT will benefit. But as I mentioned, at this point, a little bit difficult to quantify which segment will benefit more at this point in time. Then you mentioned about you are seeing more activities on RF filters. So could you elaborate more there? Is is that for, like, chopsticks or or mini wave modules? I'm not sure what the So filters at this point. Right? So so you know, in the five g phone, they they need a lot more SAW filters than in the past. It's a CD because the the DY, these dependent into different segments. So they use the filters to cater for these different frequency range applications. So today, we are seeing the demand for more short features. And last year, we shifted a high number of machines to customer for this application because our machine are capable to offer a very interesting inspection capability, able to detect some very small, we call it micro crack. So that will affect the performance of those features. So because the outstanding performance of this machine, so we are gaining a lot of traction. But the market will continue from short filter to ball filter. So this RF application will be one of the key driver in our business for this five gs and beyond. So we look at that today, customers in the RF business, the radio frequency business, every one of them are preparing for growth. So in our opinion, this will be one of the market driver with this new generation of communication standards. Sorry, a small follow-up. Is the customers are classified as OSAT or IBM companies? And also, is that equipment is classified as IC discrete segment? For those ROF customers, more in the more in the IPM, some folks are also engaging in doing all those. But I would say at this point in time, we are seeing more IBM directly handling their business. Yes, they are classified in our IC to speak business at this point. Our next question comes from Kevin Zhang from JPMorgan. My question is that recently, one of your key advanced packaging customer announced to exit five gs smartphone modem business. Would this impact to your TCB business in 2019 and the future? Well, I'm not able to comment on any customer activities at this point of time. But as of this point of time, what I can share with the investors is that we don't see any of our PCB business being affected. Okay. Thank you. Thank you. Our next question comes from Mr. Chris Yang from Botcom. Thank you. Thanks again. Thanks for taking my follow-up. My follow-up is on Advanced Packaging. I was wondering if you can disclose the Advanced Packaging contribution to your back end business in 1Q twenty nineteen. And also, after a brief slowdown in 2Q, do you expect this Advanced Packaging business to pick up in the second half? I was wondering if you can tell us again what type of equipment or technology is driving defense packaging business right now? Or whether you just or we should just think of it as highly dependent on a couple of customers, including the one you mentioned, which is the Korea supply chain customer? Okay. Advanced packaging contribution in Q1 tracking very well. You can imagine that because overall, Q1 was relatively slow for the other capacity related equipment. So I can share actually advanced testing really contribute very nicely to our billing in Q1 this year. However, I think I should not disclose the number at this point in time because I don't want to mislead the market. I don't think on a full year basis, it will necessarily stay at the level like Q1, okay? Because we are expecting other demand for other equipment will go up in the subsequent quarters. On a full year basis, we still expect this advanced packaging will track nicely because, as I mentioned earlier, last year, we received good orders. Even this first half of this first quarter of this year, we continue to receive orders for advanced packaging equipment. Many of them will be shipped out actually in Q2 and Q3 this year. So this one this two however, when it comes to revenue recognition, it will be in Q3 and Q4. So when we complete all this shipment and also realize all the billing, so it will contribute significantly. Now advanced packaging, actually, in our presentation, we have wide product portfolio ranging from laser sizing, laser grooving. This is one of them. Then we also have a placement machine, including PCB bonder, also placement machine for wafer level fan out as well as panel level fan out. Then we also have this wafer level pack inspect and pack machine. So last year, we also delivered a certificate for our filter applications. Then, of course, Mr. Dewey acquired this from this of this ASM mix. So we also packed into our portfolio the ECD and the PVD machines. So Q1 in Q1, I will say, Crispy made a good contribution to the advanced packaging equipment delivery. We expect in Q2 and Q3 that ECD equipment will increase their contribution to our billing or to our shipment at least this year. You. Thank you. We have another following question come from Hainan Wang from Credit Suisse. Thank you. Hey, hello, management. I just want to check on a how housekeeping purpose, because, the, covered converted the bond, essentially fully redeemed, and there's a syndicated loan of that called back to the Hong Kong dollar. What's the interest rate and what the interest expenses should be as you know, expect to impact in coming, yeah, quarters, years? And and about the cash rate, we also see a pretty high level in first quarter. Is this due to the regional and product mix again? Tina. This is Robin. On the CV, you're right. We have successfully redeemed the CV with a syndicated loan. Now the interest for the syndicated loan compared to the CV is lower. Probably at this point in time, of course, on the interest rate will trend less than half. So we can expect going forward the effective interest rate in the books for this part of the loan will be lower than the CB. Now you also may notice the finance cost in this quarter is much higher than, say, compared to the previous quarter. As a result, the significant loan, we had to book a onetime arrangement fee inside. So that is the major contributor to the difference in terms of the interest or the finance cost Q o Q. As for the tax rate, as I always mentioned, don't look at one quarter. We believe that as we progress through the year, Q2, Q3, cumulatively, the tax rate will trend towards the 20% to 25% region. Thank you. There seem to be no further questions at this point in time, sir. Okay. Yes, thank you very much. And I think we've had a very good discussion this morning, very good questions and also comments. I'm happy to conclude this conference call now. And thank you very much for joining us today, and we will talk to you again next time. Thank you very much. Bye bye. Thank you for your participation. This concludes your conference. Thank you. Bye bye.