Good day, ladies and gentlemen. Thank you for standing by. Welcome to the ACM Research second quarter 2026 earnings conference call. Currently, all participants on a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Steven Pelayo, Managing Director of The Blueshirt Group. Steven, please go ahead.
Good day, everyone. Thank you for joining us to discuss second quarter 2026 results, which we released before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the investor section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang, our CFO, Mark McKechnie, and Lisa Feng, our CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide two . Let me remind you that remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially.
Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and unrealized gains and losses on short-term investments. For our GAAP results and reconciliation between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website and to slide 13. Also, unless otherwise noted, the following figures refer to second quarter 2026 and comparisons are with the second quarter 2025. With that, I will now turn the call over to David Wang. Dave?
Thanks, Steven. Hello, everyone, and welcome to ACM's second quarter 2026 earnings conference call. The June quarter marked another period of strong execution for ACM Research. Revenue and shipment increased 36% year-over-year. Revenue growth was led by our ECP and advanced packaging product category, both of which increased more than 150% year-over-year. This strong performance reflects the progress we are making in transforming ACM into a broader multi-product semiconductor equipment company. In June of this year, third-party research, Frost & Sullivan, published a report called the Global and China Semiconductor Equipment Market Research. They now estimate the global semiconductor equipment market exceeded CNY 140 billion in 2025 and will grow to more than CNY 200 billion by 2029. They also estimate the Mainland China market exceeding CNY 50 billion in 2025 and will grow to more than CNY 80 billion in 2029.
To fund our global operation, we have recently strengthened our balance sheet. ACM now has more than CNY 1 billion of net cash globally. This includes approximately $300 million in the U.S. following our $150 million, which is the direct offering completed this past May. This financial strength provides a solid foundation to support our mission to become a key supplier of world-class capital equipment for the top major product of semiconductors. We believe AI is driving one of the most significant technology transitions the semiconductor industry has experienced in many years. As chip complexity and chip size continue to increase, traditional wafer level packaging approaching are reaching practical limit, creating demand for entire new manufacturing technology across advanced packaging.
ACM predicted a shift from wafer level to panel level packaging more than five years ago and began investing early in horizontal panel level plating and other panel level wire process technology. We believe the market is now coming to us and has begun to validate those investments. Today, I'm pleased to announce that we have received order from two advanced packaging customers for our panel level horizontal plating tool, addressing both 510 by 550 mm and the 310 by 310 mm panel size. One is a production order from existing customer in Mainland China, and the second one is the evaluation system for a new customer in Asia. We believe ACM will be among the first company to deliver horizontal panel level plating system to multiple customers across multiple regions.
Our proprietary horizontal plating architecture is a key differentiator, delivering strong, superior plating uniformity while addressing the demand process requirement of a next generation AI packaging. This order is important milestone for what we believe could become a significant long-term growth opportunity. I'm pleased to report today that our order book has been quite strong. For the first half of 2026, orders increased 105% year-over-year. This is a mix across all product categories with a heavier emphasis on some of our new products. As with the prior years, ACM Shanghai plans to release backlog figure as of the September 30 in early October. Thanks to good execution by our operation team, we continue to expect shipment across each of our categories to grow faster than revenue. We remain confident in our growth target for 2026 and beyond.
For 2026, we see a healthy backdrop for China WFE as our customers continue to scale their production capacity. We expect an extra boost for our business from a few product cycles, including our SPM and the furnaces to enable us to outgrow the China WFE. Beyond this year, we estimate that our newer platform, including Track PECVD and horizontal panel level plating, will proceed for evaluation phase into a commercialization phase, resulting in production orders and drive our growth for years to come. In summary, we see 2026 as a big year for new products and another year of a solid growth for ACM. Now on to our business results. Please turn to slide three . Revenue for the second quarter was CNY 293 million, up 36%. Shipment for the second quarter was CNY 282 million, up 36%. Gross margin was 46% and operating profit margin was about 19%.
We ended the quarter with a gross cash of CNY 1.4 billion and a net cash of CNY 1.0 billion. I will provide detail on product. Please turn to slide four . Revenue from single wafer cleaning, Tahoe and semicritical cleaning tool was CNY 133 million, down 14%, represent 45% of revenue. We believe ACM has built industrial broadest cleaning product portfolio. Our product in this category, including SAPS, TEBO, Tahoe, backside clean, solvent clean, bevel clean, scrubber, and wet etcher, and our proprietary single wafer hot SPM technology. In May, we present our proprietary hot SPM clean technology at 2026 Surface Preparation and Cleaning Conference. This system demonstrates fewer than 15 particles performance at a 15-nanometer particle size. Our proprietary nanodesign prevents acid mist and the chemical splashing outside chamber during the hot SPM process. This, therefore, does not require periodic DI water chamber outside clean.
For customer, this means less maintenance, better uptime, and a more stable particle performance. We believe this represent the best performance in the industry. Our SPM platform is well-suited for the advanced logic and memory, where cleaning requirement are becoming more demanding. Today, we also announce new capability for Ultra C Tahoe, expanding it into a broader wet process platform. Tahoe is built on our patented hybrid architecture that combine batch SPM process and a single wafer cleaning. We have added wet etching and the monitor wafer reclaim application to the Tahoe platform. This integrates multiple process that had previously required a separate standalone tool into one Tahoe platform. The expanded platform has been adopted by multiple leading semiconductor manufacturers. ACM will continue to drive world-class process performance with a focus on ESG benefit to helping make advanced semiconductor manufacture more efficient and more stable, sustainable.
We have shipped a handful of single wafer SPM tool in the first half of this year, we are on track to ship more than, in the second half of this year, for more than 20 by end of this year. A reminder, we estimate that SPM represent about 1/3 of the total cleaning market. We have had a very little revenue to date for the SPM tool, with this major product cycle, we expect our overall cleaning revenue to rebound as our customer qualify the first tool, and we grow our repeat shipment. Revenue for ECP, furnace, and other technology grow 168% represent 44% of the revenue mix. Growth was driven by momentum on both front and back-end plating tool. In logical device, we are benefit from larger die size and the steady increase from higher interconnect layer counts.
In memory device, we are benefit as HBM packaging demands higher level of DRAM stacking, thus, more copper process steps. During the quarter, we shipped our 2,000th electroplating chamber. This follows our 500th chamber shipment in 2022 and our 1,500th chamber shipment in 2025. This shows how quickly our installed base has grown and how broadly customers are adopting our technology in volume production. We had a larger contribution from furnace in the quarter; it's still just a small part of our overall revenue mix. We continue to improve the technology breakthrough across key applications, including LPCVD, oxidation, thermal ALD, PALD, and ultra-high temperature anneal. Revenue from advanced packaging, which excludes ECP, including service and parts, was up 253%. This including coater developer, etcher, stripper, scrubber, and the vacuum-cleaning tool, supporting a broad range of our advanced packaging applications.
We are particularly pleased with our global progress here, with active deployment in Singapore and North America across a range of these tools. We are making good progress with our new Track and PECVD platform. We remain confident that we have the right approach for our PECVD and Track platform, and we have made significant progress in 2026. Our proprietary one chamber, three tracks architecture for PECVD performed well in our Lingang mini lab early this year. We shipped their secondary tool to our new customer in Q1, and we anticipate this qualification by year-end. The story is similar to our Track platform. Indeed, our high throughput KrF Track tool is progressing through customer evaluation, and we anticipate production qualification by year-end. We see strong interest in both standalone tools and configured to integrate with the scanners.
For both PECVD and Track, we are hard at work with the development effort with several key customers. We are optimistic that our tool performance can meet or exceed our customer requirements and result in production order in the near future. Please turn to slide five . In the quarter, we have updated our market assumption with the latest WFE data from the report I mentioned earlier. This result in a CNY 1 billion increase to ACM, the global SAM about CNY 22 billion. Please turn to slide six. There are no changing to our long-term revenue target of CNY 4 billion. This is still based on market share assumption for each of our product category, which gets us to about CNY 2.5 billion from mainland China and CNY 1.5 billion from the global market. We adjusted some our assumption based on China WFE now and about CNY 50 billion.
We continue to assuming a robust WFE environment over the next several year for the global market. The magnitude and the timing of our growth will be impacted by the overall spending trajectory of our customer and our market share gains. Next, let me providing update on our production facility. First, on Lingang. Please turn to slide eight. The first building is in volume production, and we plan to open the second building later this year. Together, the two facilities can support up to CNY 3 billion in annual output. With our strong order book, we are fortunately to be ready to scale the second facility. Next, our Oregon facility. Please turn to slide nine. In Oregon, we remain on track for a U.S.-based demo center with multiple tools in world-class cleaning room environment starting later this year.
This is important for our global customer, and we believe it will help us to secure production orders. Our global business is beginning to scale. As we said last quarter, we expect to have more than 20 tools installed at a customer site outside mainland China by the end of this 2026. This includes about 10 customers in five countries. It is clear that leading global chip makers can benefit from our innovative product. Although it is still early day for our global deployment, our engagements are growing, and we are confident that our global sales and the service team will deliver good results. Now I will providing our outlook for full year 2026. Please turn to Slide 10. Based on our first half performance and the improved visibility, we have raised the middle point of our full year revenue guidance.
We now expect a full year 2026 revenue of CNY 1.125 billion to CNY 1.175 billion, versus the prior range of CNY 1.08 billion to CNY 1.175 billion. This new range implies 25%-30% year-over-year growth. We also expect the shipment growth to outpace revenue growth in 2026. Let me turn the call over to our CFO, Mark, who will review details of our second quarter results.
Thank you, David, and good day everyone. Please turn to slide 11. Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation, unrealized gain, loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Unless otherwise noted, the following figures refer to the second quarter of 2026, and comparisons are with the second quarter of 2025. I'll provide financial highlights. Revenue was CNY 292.9 million, up 36%. Revenue for single wafer cleaning, Tahoe and semi-critical cleaning was CNY 133.0 million, down 14.2% and represented 45.4% of sales. David noted this included very little contribution for some of our newer products. As normal, SPM will be reflected first in our shipments, followed by revenue contribution in later quarters. Revenue for ECP, front-end and packaging, furnace and other technologies was CNY 128.5 million, up 167.7% and represented 43.9% of sales.
Revenue for advanced packaging, excluding ECP, services and spares was CNY 31.4 million, up 153.3% and represented 10.7% of sales. We saw a good improvement in our customer concentration. During the first half of 2026, our 10% customer mix has improved to just one customer at 12.7% of our revenue mix. This compares to three 10% customers representing 49.9% of our mix for the first half of 2025. This can vary by period, we consider the reduced concentration as positive as it represents a broadening of our customer base. Total shipments were CNY 281.5 million, up 36.4%. In 2026, we expect shipment growth to outpace revenue growth. Gross margin was 46.0% versus 48.7%. Gross margin was above the midpoint of our long-term target model. We maintain our 42%-48% long-term target range, and product mix can cause fluctuations on a quarterly basis. Operating expenses were CNY 78.5 million, up 23.9%.
R&D was 13.9% of sales and marketing was 7.7%, and G&A was 5.2%. For 2026, we plan for R&D in the 16%-18% range, sales and marketing in the 8% range, and G&A in the 5%-6% range. Operating income was CNY 56.3 million versus CNY 41.5 million. Operating margin was 19.2% as compared to 19.3%. Income tax expense was CNY 13.5 million versus CNY 1.9 million. For 2026, we expect our effective tax range in the 10%-12% range. Net income attributable to ACM Research was CNY 44.5 million versus CNY 37.3 million. Non-GAAP net income excluded CNY 6.6 million in stock-based compensation expense and the CNY 69.6 million of unrealized gain on short-term investments and its effect on non-controlling interests. Net income per diluted share was CNY 0.61 versus CNY 0.55. Onto the balance sheet and cash flow items.
Cash, cash equivalents, restricted cash and time deposits were CNY 1.36 billion at the end of the second quarter. Net cash, which excludes short-term and long-term debt, was CNY 1.0 billion. This includes about $300 million of net cash on our U.S. balance sheet. Total inventory net was CNY 783.1 million. This consisted of raw materials net at CNY 406.1 million, work in progress net at CNY 89.0 million, finished goods inventory net at CNY 287.9 million, which primarily consists of first tools under evaluation at our customer sites, along with finished goods located at ACM's facilities. Cash used by operations was CNY 6.4 million, and capital expenditures were CNY 65.4 million. For the full year 2026, we continue to expect capital expenditures of about CNY 175 million. That concludes our prepared remarks. Let's open the call for any questions that you may have. Operator, please go ahead.
Thank you. Ladies and gentlemen, to ask a question at this time, you will need to press star one one on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. First question coming from the line of Suji Desilva with Roth Capital. Your line is open.
Hi, David. Hi, Mark. Hi, Lisa. Congratulations on the progress here. A great diversification going on, it's really good to see.
Thank you.
You got it. Yep. David, the global tools shipped to 200, it's a great number. What geographies are you seeing the largest shipments today in? Maybe what geographies do you expect the best growth opportunity near-term in as you scale out beyond China?
Actually, we see there, especially I want to say first half of this year, we have almost close to a thousand tools go to Singapore, right? One of their packaging house there. Also have a tool, they're running one of their foundry in Singapore, too. We do see Singapore as the opportunity for front-end tool and also packaging tool there. Of course, we do have a customer continuing in the U.S. As I mentioned, we're going to finish the building of our demo lab in Oregon. With that demo lab started using, we're going to attract more of interest and also attention into our differential technology. This way, we can provide more of a demo capability for customer in the global.
Great. My second question is, given that you now have a significant amount of cash in the U.S., $300 million, maybe if you, David, or perhaps Mark, what are some of the planned uses of those proceeds? Is it expanding capacity? Which regions and perhaps even inorganic activity? Any color would be helpful there.
Obviously, with this cash preparation, it'll show our determination, also our confidence, right? Expanding the sales activity outside Mainland China. As I mentioned, our long-term goal is still $1.5 billion for the revenue outside China. That's exactly for that goal; we prepare our funding and also our activity. This funding basically supporting our activity, definitely U.S. and also Taiwan and Singapore, Asia, also the Europe. It's a bigger opportunity. We see a lot of demand come out for those, especially for our differential technology, cleaning, plating, and also, we're R&D for the even new PECVD and the furnace. It's really exciting. As I mentioned, AI really driving a lot of new demand for the innovation technology. We believe whatever developer in Shanghai can be really spread out to benefit for all the customer globally, right? It's our goal here.
Okay, that's very helpful. My last question. I know you guys are diversifying your customer base, and you have 110% customer and focusing on global, but I'm curious, in China, how levered are you to what's going on with CXMT and the DRAM market? Understanding AI is a plating play for you in other areas where you're very strong, but the DRAM effort there is growing very strongly. I'm curious how much leverage you have to that opportunity.
I really cannot comment too much detail with any each customer, right? By looking at overall, you look in the Frost & Sullivan, their report, right? Show the very strong demand and WFE market grow in China. Right? First of all, I want to say China is a bigger market, right, for the oldest application, AI including. It's a huge market there, and therefore they can supporting a lot of cheap manufacturers in here. In the same way, they demand a lot of WFE equipment, right? We see opportunity here. With the ACM, I say we have a real multiple products in the timeline, especially this year, we call our 2026 as a big year for product, new product come out to the market. All our PECVD furnace and Track system, we started development from 2000 or 2001 on 2019.
In those timelines , we are really focused on the technology, focused on differentiation. Through the four or five year, our R&D team hard working. We got some real exciting result, and some of them obviously, very approaching to the top tier and performance. Something we see even better than top tier performance, right? That's really our confidence. With this new product come out, we can further sustaining or increase our high growth rate. For our revenue in the market, China, of course, those new products , after qualify in the China market, will be also eventually will sell to the global market. It's a lot of exciting for next few year. Our revenue will be not only come from cleaning and the copper plating anymore. New product will join our revenue growth. This will be a very exciting year for next several year.
That's very helpful color, David. Thank you, and congratulations to you and the team on the strong execution here. Thanks.
Thank you, Suji.
Thanks, Suji.
Thank you. Our next question in queue coming from the line of Charles Shi with Needham & Company. Your line is now open.
Hi. Thanks for taking my question. Maybe the first one, I know that you don't really guide the quarter, but can you walk us through how the Q3, Q4 is shaping up? You have probably a very big beat in Q1 and then now in Q2. I think if I look at the consensus estimates for Q3, Q4, those numbers probably need to come down a little bit. Wondering if the revenue timing or shipment timing has some change over the course of the last 90 days. Maybe I'll have a follow-up on the PM now related items. Thank you.
Yeah. As I mentioned in our script, right? We do have our, the first half year, our PO receiving, there has been increased 100%, more than 100%, right? It's real indication, have real demand and also a large backlog. Some of those too, obviously, we try to deliver Q3, Q4, and some of the too probably we're waiting for probably deliver later. Now we really try to increase our capacity and, obviously now the components has been, I want to say everybody demand for components, right? There's little bit constraint for supply there. We're looking at Q3, Q4 revenue. I think really how we execution our order manufacturing and also how we qualify, ship the deferred revenue or the tool. I want to say we're still very positive about our projection for whole year.
This is why we increased our low side, now we're expecting our whole year revenue, 25% to 30% range. I think we're pretty confident for this forecast.
Yeah. Thanks. Maybe another question for Mark. Mark, I noticed that the range for SG&A, as a percent of revenue, kind of revised that down a little bit compared with the last quarter. I guess, based on your midpoint of your guidance, your overall OpEx may actually come in a little bit lighter than you previously expected. I'm wondering what is the reason for the slight OpEx cut for this year? Because if I recall correctly, one of the reasons you raised the OpEx range, I think at the beginning of the year, was related to the build-out of the R&D lab, R&D center in Lingang. Wondering, the OpEx savings relative to what you previously thought, is it related to some of the timing of that R&D center? Any color would be great. Thank you.
Yeah, Charles, there's not a lot to read into that. R&D, we're looking 16% to 18%. G&A, I said 5% to 6%, and sales and marketing around 8%. It's really just tightening up of the estimates now that we're halfway through the year. Not a meaningful change from where we were at the beginning of the year.
All right. Thank you.
Yeah.
Thank you.
Thank you. Our next question coming from the line of Jimmy Huang with JP Morgan. Your line is now open.
Yeah. Hi, David, Mark. Congrats for the results. Can you hear me?
Yes, Jimmy.
Yes.
Yeah.
We can hear you.
Sure. Obvious, China's advanced packaging capacity build is very robust and structural. You also have a very solid product portfolio for WLP and PLP. Do we have any guidance or expectations for advanced packaging equipment shipment growth rate for this year and next year?
We do not put a number for the shipment of this year. Definitely, because of strong, I want to say the backlog. Our shipment definitely will outgrow our revenue. It will be a very strong shipment this year. Again, as I mentioned, we see the shortage all industry for some components. Used to be you can buy four months, sometimes you have to get probably longer delivery. Anyway, we're trying to manage those supply chain and make sure those components come in on time. That's maybe the one thing I want to say might impact our whole year shipment. I still feel this year's shipment is still pretty good.
Yeah, I see. Do you have any guide on the impact expectations for your advanced packaging equipment for this year? Another question is that for OSAT every 10K wafer capacity build for 2.5D wafer-level packaging, what ACMR content value based on your product offerings at this moment? I think some equipment companies, they could have this kind of sharing for investors to understand your progress.
Yeah, I don't quite understand. Maybe ask that again.
Can you say your question again? I get lost there. Can you repeat again?
Yeah, sure. I mean for the advanced packaging capacity build, such as 2.5D, on their every 10K capacity build, what's the potential contribution to ACMR based on your product offering? Do we have any sharing on that?
Yeah, he's just looking at kind of the intensity of when our customers spend on 10,000 wafers per month, how much will that drive our equipment sales? I don't think we're really.
I couldn't say there, depend on which line you build, right? Maybe let's put it this way. The cleaning market, you can see that, I want to say, cover SAM. Cleaning market today, probably in the whole fab spending occupy 5% to 7%, depends on advanced fab or mature fab.
You're looking really for the future, I want to say, advanced fab going on, cleaning become more and more important. Some people even projecting cleaning continue market need to grow. It might be even come to 10% eventually. Cleaning become more and more difficult and the more of material loss control, particle size get smaller. Also, the drying method become maybe from the IPA to the supercritical CO2 drying. Anyway, I see that market grow, number one. Second one is copper plating. Actually, four or five years ago, we said copper plating to be the CNY 1.5 billion. That time, nobody will believe it. Now it's almost at CNY 1.5 billion already. With all the future backside of their power and HBM layer of their DRAM stacking going on, there's a lot of plating tool demand come out.
More important, this panel market also demand a lot of plating tool too. ACM is really pioneer in their panel level electroplating. This is probably, I want to say, this is the first time ACM really stand in the top for their horizontal plating technology and market there, I want to say, offering. That really give us a bigger growth potential for this existing market. Further than that is the furnace and PECVD Track. We see also big potential there, too. That's why I want to say ACM is in a real good, exciting period, and we're expecting continued growth for cleaning and copper plating. Also with our new product, furnace, PECVD Track come out, will further reinforce our revenue growth. That's why I said the next few years, really exciting year for our growth.
Thank you, Dr. Wang. I think for China, I think they are building a lot of CoWoS- like 2.5D advanced packaging capacity. As far as I know, they probably still use a lot of TSMC baseline tool vendors, including wet processing tools and other stuff. Are we trying to get more market shares, more qualifications here, and also progress in China's CoWoS- like 2.5D capacity build?
If you look in our actually plating growth, 156%, and also our packaging tool growth also. It really shows indication a lot of new demand for 3D packaging. The 3D packaging becomes more and more important, and for all the devices. We see that growth potential here. ACM well-positioned for that, with our cleaning and with our coater developer, with all this, the photoresist stripper, and also copper plating. It's really good, I want to say, growth for the 2.5D or 3D packaging. Also, I want to say Panel-Level Packaging also grow, too. Panel-Level Packaging is another big one. It's very exciting for, I see the 3D packaging going on, which is good for our product.
I think it's quite exciting that we just announced that we have the first PLP ECP tool evaluation system shipped to a customer in Asia. Regarding the progress, when could the evaluation result come out? Any possibility that we could receive the first purchase order from these customers in the next maybe few quarters or the next 6 to 12 months?
Obviously, you mentioned that the panel now is very hot in all Asia, looking at Mainland China, Taiwan, Korea, and even Singapore. It's very, very hot, and everybody believe that will be their ultimate solution for their large AI chip, all this CoWoS, HBM, whatever packaging, in large chip size. We do see that trend. Obviously, where we're positioned for 515x510, which is more large size, as Intel probably pioneer now. Also, we're also positioned for 310x310, which is leading by TSMC approach. There's a lot of exciting, I want to say, we're prepared for both market.
Yeah. I see. Thank you so much. That's all my questions. Thank you.
Thank you.
Thank you. As a reminder, to ask a question, please press star one one. Our next question coming from the line of Christian Schwab with Craig-Hallum Capital. Operator.
Hey, guys, it's Ben Taxdahl on for Christian here. Great quarter. Exciting stuff going on at ACMR. My first question is, what is any commentary, any initial commentary? I know it's kind of early on 2027 visibility. I get new products and strong orders, but anything else, or what exactly should we be thinking about for 2027?
Wow. That's
2026, right? Yeah.
Well, I still see that there a lot of fab we see in the local China is in real, still in the multi-year expansion. Clearly this year, we see many fab open, also we see that there are some fab will definitely be on 2027 and grow. As I said, probably market here is strong, bigger. We're very excited about, even I said this, Frost & Sullivan, they give a report. By year 2029, their Chinese market beyond CNY 80 billion. Well, I'm liking that number, this is exciting. Anyway, I want to say it's growing in next few year in the local market here.
We have, obviously, some of our new platforms that could kick in. I would also say some of the orders we get this year, we're not going to be able to support all those this year, that'll kind of flow into next year as well. Yeah, 2027 is starting to shape up as a good growth year.
Great.
As I mentioned, we made the progress. With all the Track system, PECVD.
Yeah.
We see that those products take off, and obviously we'll become leading supplier, local supplier, and for the Track system. I know the PECVD, quite a bit competitive there. Our one chamber three chuck is real unique platform, and we see there's certain special big market requirement for this PECVD too. Anyway, we're both excited about this new product.
Great. Just one other question. Any update on the Shanghai listing?
Hong Kong , right?
sorry, yes. Yep, sorry.
Yeah.
Well.
No update.
I say, really, we cannot comment too much on Hong Kong listing, right?
Yeah.
I can only tell that April timeline we announced, we can do that, and that's only information I can tell you right now. Eventually, maybe sometime later in the future, we may discuss more.
Perfect. Thanks, guys. That's all I got.
Yes. No, thanks for asking. Yeah.
Okay, thank you.
Thank you. We have a follow-up question from Jimmy Huang with JP Morgan. Your line is open.
Yeah. Thank you, David. Hi, David Mark. We talk about component shortage. There are also a lot of component part types. Will rising component cost impact ACMR's gross margin? If so, on which potential quarters or timelines, and what kind of options does your company have to pass this cost to your customers? Yeah.
Well, probably this is a global point, right? Looking at our supply, probably either honestly, major supply are components from Japan, or some in Korea. Definitely, it's a lot of growing. There's a shortage there. We see that happen. Something we still switching to the local supplier. Here, it looks better. Anyway, I want to say this is still, looking at this year, global component supply is still tight. Even some mechanical parts, some sliders, even robot, for example. The components, they're hard to get on time. We see that they're really booming, right? That's why we have to really manage it well in the second half of the year, make sure our supply catch our demand.
Yeah. Really, you take a look at it. No change to our gross margin target, 42% to 48%. We're comfortable where we are. We have a good amount of raw materials that we had been purchasing. We stocked up on some raw materials. What we have in stock and our outlook, we don't see any significant impact on gross margin.
Yeah. We prepare certain parts in the end of last year, right? Because we are predicting.
Yeah
This year is a very heavy year; we are certain our vendor did something special for us. That will help us right now.
The demand is very robust, and the supply is quite tight. Is it possible that we could pass through this incremental cost of rising component cost to our customers? It's not a key priority of your business?
It's hard to tell right now. Probably, I tell you, we're not at-risk pricing right now.
Yes.
This moment. Right? I want to say, our vendor supply, not many people raising price. Some are raising, not much. The only thing that is they probably delay the shipment. They cannot tell you, maybe used to be three to four months, maybe they need six months. That does happen. They didn't increase our price. Our key supplier. No.
I see. My second follow-up question is regarding our manufacturing capacity builds outside of Mainland China. Are we going to build more capacity in the U.S. or in other Asia regions if we receive more international orders? Yeah.
Yeah. You know that we do have our manufacturer, I want to say a facility and a capability in Korea, right? That's really start to pay. Some tool we ship to the U.S. will be made there. Actually, now it's made in Korea right now. Some future tool probably shipping to Taiwan and/or Singapore, will be also made probably in Korea, too. Right? I said, as really more of a revenue growing in the U.S. or in other region, we can also probably prepare a secondary manufacturer site, too. We're really in that, I want to say consideration and a direction.
All right. I see. Regarding your further funding for this kind of manufacturing capacity expansion, would you need to dispose some stakes in ACM Shanghai, or you don't consider that option? Yeah.
Yeah. We're pretty comfortable with our balance sheet. David mentioned we have $300 million on our U.S. balance sheet. Part of that was a war chest to show our customers that when we get the production orders, we can support that. We don't have any near-term plans to scale out of any more of our Shanghai shares. No.
Yeah. Thank you so much, David and Mark. It's very clear. Thank you.
Yeah. You bet.
Thank you. Our next question coming from the line of Bintuo Ni with Daiwa Capital Markets. Your line is now open.
Hey. Thank you for letting me on. First is congratulations on your new orders, 100%. It's very impressive. Can I ask in terms of by segment, can you rank which one is the strongest for DRAM, HBM, and the logic? Thank you.
In terms of our order strength, David, you're asking.
Yeah, we didn't break it out, but David, in the prepared remarks, mentioned that they were across all of our customer base and across our products. A little bit stronger in some of our newer products, but we didn't break it out by end markets.
Yeah. Well, obviously, we see they're strong in memory.
Yeah
and also strong in logic, right? Both.
Okay. Thank you, David, Mark. Next question is about our cash flows. It looks like we have a very strong tailwind from the industrial side and also our new product launches going ahead. In terms of operating cash flows and CapEx, how should we think about that? Thank you.
Yeah, I think this year on the cash flow side, we're still obviously heavily in growth mode. We're spending on our CapEx and what have you. The plan is, in growth mode, you make these investments, and then we harvest those over the next several years. This year, we'll probably burn some cash, obviously, putting capital to work on our new production facilities, on our facilities outside in Oregon, and what have you. Longer term, obviously, it's a positive cash flow operation.
Perfect. Thank you.
Thank you. Seeing there are no more questions in the queue, I will now turn the call back over to Steven Pelayo for closing remarks.
Okay, great. Before we conclude, I just want to give everyone a quick reminder of our upcoming investor conferences. On August 20th, we will participate in Needham's 7th Annual Virtual Semiconductor & SemiCap 1x1 Conference. On August 25th, we'll present at the 2026 Jefferies Semiconductor, IT, Hardware, and Communications Technology Conference at the Four Seasons Hotel in Chicago. On October 13th, we will present at the 18th Annual CEO Summit in conjunction with SEMICON West in San Francisco. Attendance at these conferences are by invitation only. For interested investors, please contact your respective sales representatives to register and schedule one-on-one meetings with the management team. With that, this concludes the call, and you may now disconnect.