I'm pleased to welcome you to the Annual Media and Investors Conference of the Comet Group. Today's presentation will start with a broad view assessment of 2022, followed by a more detailed look at the figures by our CFO, Lisa Pataki. Before closing today, obviously, we will share with you our view on 2023 and go into a Q&A. With that, let me jump-start the presentation. 2022 was another great year for Comet with record results despite a lot of global turbulence. Regardless of trade conflicts, inflationary pressure, armed conflicts, we were able to further increase both sales and profitability. We also achieved significant milestones for Comet in 2022.
We brought key innovations to market in all divisions, innovations that will help us grow stronger and faster than our markets in the coming years. We have improved our manufacturing footprint by moving volume matchbox production from San Jose in the U.S. to Penang, Malaysia. This has increased our flexibility and enabled us to reduce pressure on margins. Our existing production in Malaysia was already running at almost 100% capacity in late 2022. That is why we have decided to further expand in Penang. Expanding in Penang does not mean that we will stop manufacturing in San Jose, not at all. To be close to our most important customers in the valley and to work even closer with them, we decided to consolidate our four locations in San Jose into one new modern location, providing an attractive workplace for our employees.
In terms of sustainability, we have made further progress by issuing climate targets for the first time, setting up an efficient internal organization, and also incorporating non-financial KPIs into management compensation starting in 2023. This is our clear commitment to grow our company sustainably. As mentioned, initially, we struggled in many areas due to global turbulences, but we have accepted and successfully navigated these challenges. Although the situation has improved post-pandemic, partially, the supply chain remains strained. We will continue to manage them proactively and if needed, also aggressively. As far as the latest U.S. export restrictions on China are concerned, we have been able to continue to supply our Chinese customers with matchboxes without requiring a license. However, there is a need, clearly, to continue to monitor the situation very closely, adapting to changes in the business landscape in a timely manner and when needed.
Inflation has also been an issue in our division, PCT. We were able to implement price increases, fully compensating inflation-related cost increases. The X-ray divisions were partly successful in passing on higher input costs via price increases. However, we are confident that we will be able to catch up and absorb inflation in 2023. Let's assess our four target markets. In our focus market, semi, accounting for almost 100% of PCT sales and increasing importance for both of the X-ray divisions, we have seen a continuation of the boom in the first three quarters of 2022. In Q4, the tide turned, and the semi business entered a correction. Nevertheless, sales of equipment for the semi industry rose, grew by almost 9% in 2022, although this is far less than the approximately 40% growth from 2020 to 2021.
Overall, volume growth contributed a significant part to our good results. With the beginning of the correction, chip makers and their suppliers have quickly and significantly reduced their capital spending. I will comment in my outlook, the significance for Comet in 2023. In the automotive industry, the recovery continued in 2022, even though the industry had to cope with persistent supply chain bottlenecks for microchips and sensors. Sales of electric vehicles, which offer major opportunities for Comet, thanks to higher proportion of microchips and batteries, rose by more than a third in 2022 and reached record levels worldwide. The aviation industry has benefited from the lifting of pandemic-related travel restrictions.
Travel has increased significantly, although passenger air miles have not yet reached pre-pandemic levels. Finally, demand in our market segment security remained high due to a general increase in need for security, but also due to the upturn in air traffic. In the division IXM, there is a very close correlation between the volume of air traffic and the demand for X-ray components, X-ray modules. Overall, our markets, they're favorable in 2022, enabling a good performance. Let's move on. Let's cast a view on key milestones and achievements in 2022. High demand for products from PCT required us to profitably expand production capacity. The transfer of matchbox production from the U.S. to Malaysia is complete, and planning the next two expansion phases until 2025, and then later 2030, have been initiated. In parallel, we significantly expanded our capacity for vacuum capacitors in Switzerland.
We have expanded our general presence in the Asian growth region. The fact that we generated around half of our sales in Asia in 2022, up from around 40% in 2021, shows that this is a recipe that works. Obviously, a geographic expansion only works with a good product portfolio creating value for the customer. We have therefore further strengthened our product offering by launching new innovative products in all three divisions. A good example, obviously, is the Synertia RF Power Delivery Platform launched last year in July. With our new products in the X-Ray divisions, we have made a very strong entry into the battery market, which offers great growth potential for both X-Ray divisions, IXS and IXM.
Moreover, we have pursued our expansion with nondestructive testing solutions into the semiconductor and electronics inspection market segments, which promise higher profitability compared to the traditional volume markets. Finally, as part of our Boost program, we have taken more measures to develop Comet into a high-performing and scalable organization. This includes cultural aspects by promoting our brand identity, values, and attractiveness as an employer. What has been achieved at group level is underlined by the developments in the division. Let me elaborate on this. With the market entry of Synertia in the division PCT, we have reached one of the most important milestones in Comet's history. In 2023, we expect to generate sales in the high single-digit millions with this product family.
While Synertia is on track to become the fastest-growing pro-product in the coming years, we also achieved further design wins in matchboxes and very good growth in vacuum capacitors, underlying our market-leading position in these two product families or product groups. Towards the end of the year, of course, momentum cooled. Order intake and order backlog came under considerable pressure in late 2022 due to the market slowdown in semi. In the area of X-Ray Systems, we completed the streamlining of our product portfolio while launching new hard and software. These enable our customers to produce better images faster, improving customer productivity. After a difficult, very difficult first half, heavily impacted by COVID-related shutdowns in China, the division recovered in the second half, increased sales, and achieved a positive EBITDA margin for the full year.
Last but not least, in our division IXM, we witnessed very strong demand for our newly launched products. In 2022, 13% of the division sales were generated with brand-new products. IXM's result would have been even better, especially the margin, if supply chain bottlenecks had not impacted growth. To summarize, we are satisfied with the development of our business in the year under review. The good results show that we are on the right track with our strategy. PCT achieved another record result but was hit with the correction in the semi industry at the end of the year. The repositioning of the IXS portfolio is now complete, and we are focusing on growing profitably by concentrating on the semiconductor and electronics inspection markets.
Thanks to its new products, but also due to its strong market position, IXM performed exceptionally well, despite very unfavorable impacts by supply chain challenges. There were more positives than negatives in 2022, we experienced growth challenges towards year-end. We responded to this by initiating measures to defend our margins. Overall, we have already significantly reduced the number of temporary employees and cut back on non-essential expenses. In this way, we have proactively prepared for a weaker demand environment. I will now hand over to our CFO, Lisa Pataki . She will lead you in much more detail through the numbers. Lisa, take it away. You need this one?
Yes, I do.
There you go. Don't push that button.
Got it. On it. Thank you. All right. Good afternoon, everybody. Again, it's great to do this presentation today live from Zurich. Thank you to those of you who are listening on the webcast today. I am proud to report that Comet's results in sales and EBITDA have reached historical highs. This outstanding result comes on the cusp of the company's 75th anniversary year. In 2022, demand for Comet's technologies continued to expand, especially in the semiconductor and electronics market. We showed growth in this area in each of our divisions. We achieved double-digit growth in revenue compared to the same period last year, while managing through an environment with even more uncertainty. Supply chains remained acutely challenging. COVID and COVID-related lockdowns affected the timing of revenue recognition in our PCT and X-ray divisions. Inflationary pressures peaked.
Energy prices in Europe increased as concerns mounted with the conflict in Ukraine. We executed exceptionally well and expanded margins amidst all of these challenges. In the fourth quarter, we navigated through headwinds caused by the start of the semi-cycle correction and new U.S. trade restrictions with China. Despite challenges, our sales results were well within the guided range. Our book-to-bill as of fiscal year-end was 0.92, reflecting the stark drop in order intake in the fourth quarter from semi customers. Accordingly, we converted backlog into sales in the fourth quarter, with ending backlog at CHF 200 million, 22% lower than versus the same period last year. Overall, we're very pleased with our performance in 2022, which represents the third consecutive year of record highs for Comet.
Our cash position and balance sheet are strong and will enable us to fund growth initiatives and pay out dividends to our investors as we enter a substantially weaker demand environment in 2023. Given that context, let's take a look at the results for 2022. The company achieved sales of CHF 586.4 million, an increase of 14.1% compared to the same period last year. Sales in the second half of 2022 were 20% higher than the first half sales, reflecting our ability to burn down backlogs to meet customer demands. As Stephan already mentioned, the underlying market demand in the semiconductor industry continued to drive sales in 2022. Group sales to semi and electronics customers is roughly 70%. We saw our strongest growth in Asia.
Sales in Asia rose 40% and now account for 50% of the group, compared to 41% of group sales at the same period last year. The lion share of growth in Asia is to customers in Malaysia. Sales in Malaysia were 6 x higher in 2022 than in 2021, reflecting our ability to significantly ramp up our production in Penang and to service our customers in that region throughout the fiscal year. Furthermore, our strategic investment in Taiwan, targeting the semi opportunity for our X-Ray Systems business, has paid off. Sales in Taiwan have almost doubled compared to the prior year. Gross margin is improved by 120 basis points to 44.6%, compared to 43.4% in 2021.
Our margin expansion resulted from higher volumes and our ability to improve our operational efficiency and drive actions to combat inflationary pressures and acute supply chain issues. We also successfully executed commercial agreements to pass through material cost increases related to part shortages. These measures contributed 90 basis points to the gross margin improvement compared to the prior year. In addition, we achieved margin improvement in all three divisions in the second half. Second half margins were 47.3% versus 41.4% in the first half. This half-over-half improvement occurred as planned as the headwinds related to higher input costs eased and were partially offset by price increases. Operating expenses were almost CHF 24 million higher than in the same period last year. CHF 9 million of this increase was related to trial expenses incurred in the first half of 2022.
As a reminder, Comet won a trade secret misappropriation lawsuit against XP Power in Q1 2022. XP was found guilty of improperly acquiring and using Comet's stolen trade secrets to develop its next-generation RF generator and RF match network products. Excluding the one-time effects of the trial costs, operating expenses on an adjusted basis were 26.2% of 2022 sales. Compared to 27% in 2021. Inflationary effects on employee costs and third-party services accounted for CHF 8 million of the increase in operating expenses. The remaining balance of the increase in operating expenses supplemented our research and development and sales and marketing resources. R&D represents roughly 11% of sales, which is in line with the prior year. Investments remain largely focused on medium and long-term technologies supporting the semi and electronics markets.
Comet earned 15.7% more in EBITDA, growing earnings from CHF 102.7 in 2021 to CHF 118.9 million in 2022, with unadjusted margin expansion of 30 basis points. Mentioned before, Comet's operating leverage expanded by 90 basis points due to our ability to execute on actions offsetting the multitude of challenges faced during the year, stemming from supply chain shortages, inflationary pressures, longer lead times, COVID-related lockdowns in China, and fluid trade restrictions. Our margins were predominantly impacted by our trial expenses. We believe that looking at EBITDA on an adjusted basis provides more valuable insight into the operating performance of the group in 2022. Adjusted EBITDA, excluding the one-time trial impact, results in EBITDA earnings of CHF 127.9 million and 21.8% margin.
This means that through our operating performance, we have expanded our EBITDA margin by 180 basis points on a comparable basis. Additionally, EBITDA margin was positively affected by the strength of the U.S. dollar, resulting in a 90 basis point margin contribution compared to the same period last year. The effective tax rate in 2022 was 18.1%, driven by the taxable profit mix generated from our international subsidiaries. We will continue to monitor the potential local tax changes of our subsidiaries, especially changes in corporate income tax in the U.S. and within the OECD. On a net income basis, Comet generated CHF 78.1 million, representing a net income margin of 13.3%. Free cash flow decreased to CHF 42.2 million in 2022 due to an increase in net working capital and capital expenditures.
Our operating performance resulted in a return on capital employed of 26.3%. Let's turn to the division results for the full year 2022. The Plasma Control Technologies division, PCT, has once again achieved record performance in sales, capitalizing on the continued strength and demand within the semiconductor industry. Sales increased 24.6% from CHF 306.1 million in 2021 to CHF 381.4 million in 2022. PCT sales to Asia region increased close to 70%, highlighting the regional shift of our key U.S.-based customers to Malaysia and Southeast Asia. This growth underpins our strategy to be close to our customers. PCT executed well in a challenging environment.
The Penang, Malaysia, production site was ramped close to 100% during the year to meet customer demand and to supplement deliveries intended for Chinese customers during COVID-related lockdowns. On an Adjusted EBITDA margin basis, PCT achieved close to 30% margins versus 26.3% last year. Note that the one-time effect of the trial fees is taken into account in the PCT results, lowering actual margins to 27.5%. The PCT business will absorb the lion's share of the effect of the semi-cyclical correction in 2023. The division is structured better today than in prior downturns, with the best cost facility in Penang, coupled with temporary and permanent actions that will take effect in 2023. These actions include reallocation of temporary labor, short-term factory shutdowns, and final ramp down of production resources in San Jose, California.
Investments will continue in our Synertia and advanced technology matchboxes, in addition to capacity and operational efficiency projects. These investments are critical for our roadmap and for our ability to manage the demand in the upturn. Let's turn to the X-ray divisions. Both businesses achieved positive results in penetrating the semi and electronics markets. Growth in this area is partially offset by lower volumes sold to traditional end-market customers in automotive due to supply chain-related constraints. Let's first address the X-ray systems business, IXS. IXS continued to focus on its realignment strategy, achieving sales growth from the semi and electronics markets while also returning to profitability in the second half of 2022. IXS achieved sales of CHF 130.4 million, a 6.2% drop from the prior year.
Sales into semi and electronics customers, however, grew by CHF 11 million compared to 2021, reflecting the strategic pivot to focus on this sector. The growth in semi only partially offset the sluggish sales in automotive related to supply chain constraints. In addition, the COVID-related delays to systems installations in Chinese customer sites, which caused delays in the first six months, were not fully compensated for in the second half. IXS performance in the second half, fueled by semi and electronic sales, returned the business to EBITDA profitability of CHF 1.6 million at 1.2% margin in 2022, compared to CHF 8.9 million at 6.4% margin in 2021. The lower volume base, higher input costs, and inflationary pressures contributed to the weaker overall margin performance in 2022.
Price increases and continued focus on profitable growth will improve operating profit performance for IXS in 2023. Turning to the X-ray modules division, IXM. IXM achieved record growth in sales with CHF 88.6 million in 2022, an increase of 12.3% compared to 2021. IXM grew in all key nondestructive testing and safety inspection markets. New product sales account for close to 13% of total sales, with robust adoption of the MesoFocus in Europe and Asia, as well as the ION modules for security inspection. IXM earned CHF 15.7 million in EBITDA in 2022 compared to CHF 15.3 million in 2021. EBITDA margin performance eroded from 19.4% in 2021 to 17.7% in 2022 due to supply chain bottlenecks, leading to longer lead time and lower fixed cost absorption.
In summary, customer demand, especially in the semiconductor and electronics industry, fueled growth in 2022. Our three divisions are well-positioned to execute on plans for 2023, despite a temporary slowdown in our primary end market. Comet's exceptional growth and operating performance has resulted in a very strong balance sheet. Comet ended the year with a cash balance of CHF 125.9 million, an increase of CHF 10.4 million compared to the prior period. The strength of the balance sheet has allowed Comet to take calculated inventory positions to secure component parts necessary to meet customer demands. This is reflected in a 39.6% increase in net working capital in 2022 compared to 2021. Net working capital levels will come down in 2023 with lower inventory levels in our PCT division, which is most heavily impacted by the semi-cycle correction.
Capital expenditures totaled CHF 22.8 million and represented 3.9% of sales in 2022. Capital expenditures increased by CHF 11 million compared to 2021. Investments focused on capacity expansion and digi-digital transformation activities at our Flamatt, Switzerland, and Penang, Malaysia sites. We also initiated our San Jose, California, site consolidation plan. Our footprint in San Jose will reduce from four sites to one. This single site provides an innovative workspace for our employees and offers an efficient and secure collaboration facility for our customers. Most of the build-out activity has occurred in the second half of 2022 and will be completed in the first half of 2023. We expect that our capital expenditures in 2023 will be higher than in 2022, which allows us to focus on growth projects that will ensure readiness for when the semi demand returns.
Comet has a net cash position of CHF 28.2 million as of the December 2022 balance sheet date, compared to CHF 36.1 million in December 2021. The new facility in San Jose has been recorded as a right-of-use asset and a non-current lease liability on the balance sheet for the full amount of CHF 25 million. This is according to lease accounting standards under IFRS. Finally, with respect to our capital return to investors. Earnings per share increased by 15.8% to CHF 10.05 per share, compared to CHF 8.68 per share in 2021. 2022 was another record year for Comet.
The board of directors will recommend at the next annual general meeting a dividend increase to CHF 3.70 per share from CHF 3.50 in 2021, representing a 36.8% payout ratio. This dividend allows Comet ample capital to invest in strategic growth pillars while also allowing shareholders to participate in the success of the company. In summary, Comet executed exceptionally well while diligently managing a variety of challenges. Our divisions performed well in meeting customer demands, growing in semi and electronics, investing in future growth in both R&D and capacity, while actively solving for inflationary pressures and supply chain constraints. Our businesses are well-positioned to exert flexibility and meet customer needs as we go into what will be a weaker demand environment in 2023.
Comet's balance sheet continues to be strong and allows us the levers to invest in our business. We will be financially disciplined, but will invest in strategic projects that drive business growth so that we can capitalize on opportunities in the next semi upturn. Ultimately, our goal is to maintain a healthy and flexible balance sheet that can absorb cyclical market corrections without missing a beat. I would like to take a moment to thank our Comet employees, our customers, and our suppliers for your exceptional efforts to achieve the third consecutive year of record performance for the Comet Group. Additional details of Comet's full year 2022 performance can be found in the annual report that was posted on our website this morning. Thank you for your time today. Now I'll hand it back over to Stephan to give some more visibility and color into 2023.
Thank you, Lisa. Let me turn to the outlook for 2023. From today's perspective, it seems clear that the semiconductor industry will be in full scale correction in 2023. It is unclear when the cycle will turn upward. Again, prediction range from recovery in second half of 2023 to in the course of 2024. Expectations for spending on semi equipment range between $75 billion and $82 billion, representing a decline of 16%-20% compared with 2022. The signs are for a significant decline, although we know from the past that the semi business can pick up quickly and massively. Accordingly, we are closely monitoring further developments so that we are not surprised by a rapid demand recovery and can react accordingly. The outlook for the automotive industry is overall quite robust, despite macroeconomic headwinds.
Market experts expect production of passenger cars to increase around 4% in 2023. As in 2022, sales of electric vehicles are expected to outpace the total market. The aviation industry is also poised for further growth, although traffic volumes are unlikely to reach pre-pandemic levels already in 2023. As in recent years, robust growth can be also expected for both private and military aviation. In the security industry, business is being driven by the demand for increased security solutions. Likewise, the expected upswing in the aviation industry is driving this segment, as mentioned earlier. What does this mean for the divisions? Well, the fundamental growth drivers for our served markets remain intact.
It is therefore of highest importance for our divisions to be ready to capitalize on growth opportunities, at the same time, continue to navigate diligently the correction in the semi industry. In PCT, we will continue to flexibly make adjustments to cope with the current market situation, for example, adapting our non-permanent workforce. In any case, we must not overdo these measures. After all, we need to prepare the organization for the next upturn. This means that we must find a balance between measures to defend our margin and the ability to be ready for the next upswing. It is clear to us that such an upswing will come, the question of when it will happen and how strong it will be is still obviously unclear. Regardless of the situation in the semi industry, we are pushing ahead full steam with our Synertia platform.
Several customers have ordered significant numbers of generators for delivery in 2023. We also need to further expand our capacity in Penang. The first step, already announced in September 2022, includes a doubling of production space and hiring an additional 200 employees to meet projected demand until 2025. In order to be prepared, however, beyond 2025, we have started to look at the next investment in the region. In IXS, we are directing our focus on profitable growth in the semi and electronics inspection market. Those markets stand for higher profitability. In the area of advanced packaging inspection, we will continue to intensify the cooperation with a major customer in Asia. In addition, we continue, obviously, to serve our traditional markets with our standard portfolio. Those markets still contribute significantly to the division sales and offer further growth opportunities.
In terms of R&D investments, however, we will direct our resources into the development of products and services for semi and electronics and new markets such as battery inspection. At IXM, we will continue to expand our presence in the high-growth Asian region. We will focus on reaping the benefits of the different product launches of the very recent past. We will continue to invest in technologically leading products, always with a focus, just like at IXS, on the semiconductor electronics and battery inspection end markets. Of course, we must manage the supply chain so that the division can develop its full strength and not be held back by issues related to the supply chain like in 2022. This leads me to the outlook for 2023. To summarize. That was one step too far. Apologies. To summarize, 2023 will be a transition year for Comet.
It will be a transitional year that will only delay our path to new record results and not prevent us from reaching new heights. In the short term, macroeconomic factors currently make it difficult to reliably estimate our path throughout 2023. We are countering the correction by adjusting cost structure, as mentioned before, especially at PCT, emphasized by Lisa just a couple of minutes ago. We're implementing efficiency measures and certainly addressing the impact of rising input costs. This will be achieved mainly through further sales price increases. In 2023, we will also prepare to be ready for the next upturn in the semiconductor industry. To do this, we need to invest selectively in mission-critical R&D and, at this point, ensure our readiness for growth beyond 2025. Such an endeavor must be started now, as investment decisions and ramping up production capacities take time.
To this end, we have, as mentioned before, started to evaluate further expansion projects in Malaysia. Finally, we will selectively strengthen our management team in order to further move towards a scalable, high-performing organization. In addition to these specific points, however, we have to work on driving, continue to drive our Boost program in the cultural dimension. Progress in all those elements will help Comet emerge from the current correction better and stronger. As I said, visibility is low today due to all these mentioned factors. Accordingly, no reasonable and reliable forecast for our 2023 result is possible today. Order intake and order books in the first two months of this year indicate that first quarter earnings will be substantially lower than in the prior year quarter.
We expect to be able to achieve a significantly better margin for the Comet Group for full year 2023 compared to the last downturn in 2019. Our diversified manufacturing footprint with Penang, a renewed and expanded product portfolio, rapidly implemented cost reduction measures, and certainly also the elimination of the negative contribution of the EBT division divested in 2020, will have a favorable effect on our margins. While we do not guide on our expectation today, we will provide more information on the outlook for 2023 in our first quarter trading update in April. With that, I'll close the presentation and open the stage for Q&A. Uli
All right. Thank you.
You're the master of ceremony.
Thank you, Lisa, Stephan. It's now your turn, gentlemen, in the room and also, ladies and gentlemen in the webcast. Before you start asking your question, please state your name and if probably your company, if possible, your company, so that everybody knows who is asking. We start with Michael Foeth here, and then we go to Michalina. Michael.
Thank you. Michael Foeth, from Vontobel. My first question is regarding your outlook in PCT. You mentioned that you see industry decline by 16%-20%. Would you expect your PCT business to decline in line with the market or less or more, from your business mix or your product mix? Assuming that you have, let's say, a 20% decline, could you maybe help us to see where your trough margin could go in such a scenario with the measures that you're taking?
Given the fact that at PCT, we have sort of the assumption that our exposure to memory versus logic is approximately 50/50. As we explained at last year's CMD, we assume, since the correction right now is very heavy on the memory side, that it is probably going to be on the higher side of the estimated range in terms of decline in 2023. More than that, right now it is very difficult to see or estimate.
Yeah. Maybe just to add a little bit more color. I think, you know, when you look at the backlogs from the fourth quarter, it's down 22%. Order intake in the fourth quarter was significantly down in the PCT business. The first half will start burning off more of that backlog from order intake that we had gotten in the second half in 2022, but it's gonna have a significant effect on PCT.
In terms of the trough margin?
Yeah, on the trough margins, it will be better. Well, we're assuming that the actions that we're putting in place will be better margins in 2023 for PCT than it was in 2019. A large reality is that the Penang factory is the best cost factory. To give maybe a little bit more of a feel, it's about 2 percentage points of improvement using Penang versus San Jose.
Okay, thank you. Maybe just one follow-up on the, on your order book or your book-to-bill. The book-to-bill number that you mentioned, 0.92, I'm not sure if that's for the full year?
That's for the full year.
Full year. Could you share with us what it was in Q4?
I don't have it off the top of my head.
More like 0.7 or 0.6?
It was not very good. You know, the reality is that, you know, for the X-ray businesses, things are still pretty good, but for PCT it's a difficult fourth quarter, and specifically in December. We can get a follow-up answer for you through Uli.
Thank you. Michael next. Michael.
Thank you. Yes, it's also Michael from Stifel. I have three questions. The first one, yeah, I try to properly phrase it because I'm more a man of fact and not of rumors. What do you tell people, you know, when it's about your legal case that you won against XP Power, what do you tell about people rumoring in the market that the next target in your legal case could actually be yourself? There are some speculations that the IP that the people from Comet moved over to XP Power was also moved over to Comet in the first instance. Maybe you can give us a bit of a overview actually on that. The second question would be on Synertia. You've launched it last year in summer, so there was a downturn starting already, I would say, end of summer.
You're launching it basically full scale into a downturn. What does that actually mean? Can it still be successful timing-wise? The third question is on IXS. When I read your, at least I read the English press release, the wording that you used was indispensable partner in the semiconductor industry for advanced inspection, which is pretty bullish. Maybe you can give us a bit more color on what makes you so bullish on that case. Yes, that's basically it for me.
Shall we take it in the order of your questions? You wanna start on XP?
Sure, I can start with XP. First of all, there's no lawsuit against Comet at all in the market. That is the fact. Secondly, the RF subsystems space is a very small group of peers and customers, and it is very typical that engineers go from one company to another. At Comet, we have taken very severe measures to ensure that our employees are operating under codes of conduct, that we have confidentiality agreements in place, and that people are briefed on entering the company and also on exiting the company, the severity of what it would mean to take intellectual property from one company to another.
The fact of the matter is that there is no litigation at this point against Comet.
Maybe I can also add some color to that, since I come from R&D in a former life, R&D at Comet. We have very strict policies that every new R&D engineer has to read and sign, pointing him/her to the fact that nothing that they bring from their former employee, whether or not in the industry, can be used. And on the other side, we have invested a lot of time and money over the past years, many years, into the development of the Synertia platform. We are very, very certain and confident that nothing is in Synertia that belongs to Advanced Energy. Bring the rumors. We'll bring you the facts.
Yes.
Your second question was about whether or not it is smart to launch Synertia into a downturn. First of all, we didn't know the downturn was coming. Second of all, it is actually a good thing because usually the customers have more time in a downturn than in a ramp up situation. Just to add a little bit more color on that, we are heavily engaged in qualification across the entire tier landscape. I think it's a good thing that we were able to bring that into the R&D labs at the end of a very furious ramp starting in 2020 and lasting until basically a couple of quarters.
The reason why we are so bullish on IXS and the sort of the emerging 3D advanced packaging inspection market is that IXS was able to develop themselves into the one and only partner for probably the most important player in this arena. Kinda beating out all the other incumbents who are probably more likely to be seen in that arena. That's one thing. The other thing is that the technology developments, including the deployment of the software that was acquired by Comet back in 2020 from Canada, ORS in Montreal, is sort of a sweet spot development where you bring software, visualization software combined with artificial intelligence and the finest X-ray image chain on the hardware side together.
That's why we are extremely bullish that this pivot of IXS from formerly very focused on automotive and aerospace into the semiconductor and electronics inspection market is going to bear a lot of fruits.
Thank you.
Thank you, Mike, for the question. Who is next? Harold?
Yes, it's Harold from ZKB. When I remember your CMD mid of November, my understanding or interpretation was simply that you would see a sharp downturn, but also a pretty sharp recovery. Now you are not giving a guidance on 2023 and orders in Q4, I mean, depending on what the cancellation were in the backlog, now this might reflect a book-to-bill of 0.25, no? What has changed since the CMD now? Thank you.
I think what has changed since the CMD is that the downturn happened, and yes, it's a sharp downturn, and we believe that when the upturn comes, it will be equally sharp. From that perspective, what we said back then is what we would corroborate today. What we cannot say is what's the duration between the drop and the rise. That is sort of the reason why we're holding back with the guidance and say, this is probably unreasonable.
Thank you, Harold. Are there more questions in the room? Serge, please.
Yes. Serge Rotzer from Credit Suisse. Again, a question on PCT on the margin. I look back in the old days where you had the sales level of CHF 200 million, you know, and sales declined by 30%, close to 30%, margin halved, you know. From 20% to 10% or even you had 26% margin also at CHF 200 million level. When sales now is going down by 20%+, as I understood, as you has explained, still we are talking about 10% less margin. From a level of 30%, is it plausible to go down to 20% or do you believe that you can keep a higher level thanks to Penang, thanks to lower inflation, thanks to whatever you know?
I mean, Penang is a really big part of the story from 2019 to now. Back in 2019 we were producing a large quantity of matchboxes in San Jose. Today in 2023 we've already taken the actions to ramp down the San Jose production to the very minimum level that it needs to operate at to support customers in San Jose. That action's already taken into account. We will see margin improvement vis-à-vis 2019 because of Penang. The other thing that is happening in 2023 is that we should see more meaningful sales for Synertia. That's a difference obviously in 23 versus what we had in 2019.
Does San Jose labor costs still have an impact as well on the margin?
Yeah. I mean, yeah, it always does.
Okay, let's go to Synertia. You said high single-digit growth. Does this include or imply a transition onto the tier one customers, the sales recognition?
You wanna take that one?
Yeah. As I mentioned before, all the qualification work we're heavily engaged in today is across the entire tier landscape.
I understood that they are testing but not sure whether they also will place orders. That's the difference.
Oh, yeah. Yeah.
Ordering?
Yes, orders.
Okay. That's it.
Nothing is for free.
Okay.
You can test one or two but then you pay.
Okay. Hoping in a friendly manner. Nevertheless, let's move to IXM.
Sure.
Here, the old story. Margin has been much, much higher in the past, you know, between 25%-30%, and now we are hovering around levels below 20% despite you said we have a record year, you know? Lisa said, fixed cost absorption. What have you done with your fixed cost then, you know? Have you doubled your fixed costs for same sales volume or how should I understand this?
No. I mean, at IXM, it's a combination of continued high investment in R&D, but IXM of all divisions was penalized the most by not the fixed cost, but the variable cost. Input costs went through the roof.
We also had the longer lead times too.
Mm-hmm.
IXM was the business that actually struggled the most with what we would call the acute supply chain challenges. Having one part one day, not having another part, having 12-month lead times. The factory is planned out obviously to have. We could have done more in IXM had we had the parts.
What does this tell me for next year? I would expect that sales volume can remain on the same level, so we should see then a huge hike in the margin back to old levels or is this too naive?
I would say that's the plan. The way I would kind of like to qualitatively speak about IXM is that we believe that 2022 was a temporary effect. 2023, we are seeing a little bit of easing in the supply chain struggles for IXM. We do continue to see growth in the IXM business. They're not gonna be as impacted by the semi-downturn as obviously PCT is. We do expect growth in both sales and margin in 2023 for IXM.
Okay. Good luck. Those were helpful. Many thanks.
Thank you.
We have, next question from Felix. I'm saying it right this time.
Yes. That's correct. Very quick one. You said, going back to the Synertia platform, heavily engaged in the design and process, you know, confirm or you sound very optimistic that these design in activities will result in orders. Can you describe a bit more where you stand now in the process? Are customers testing two systems and still have to decide which one to go for? Or they already have this actually pretty much decided it's Synertia, but we need to tweak the system for our own demands, or own specifications.
Mm-hmm.
More understanding why you can stand here and be so confident that this will turn into orders.
I mean, obviously, our customers would not tell what they have in the race. What, we however see is, sort of the latter part of your question. They're already starting to tweak, "Can we have this? Can you add this? Can you modify that slightly?" That tells us they're trending towards a specific application for which they want to use Synertia.
Maybe just one quick follow-up, is that VIT told us that the equipment maker are consolidating their platforms, meaning that if you designed in into a certain platform, ramps could be steeper than in previous years. Do you see that the same, and could, you know, something happen also for the Synertia platform?
There is absolutely a likelihood of that. I mean, we hear the same thing. We talk to the same people. That is absolutely something that could happen.
Good. Before we take the next question here, questions to the operator. Are there any questions from the webcast?
Far, no questions from the phone.
Good. Everything answered already, I heard. Who's taking next question then? Thomas, please.
Thomas Jäger, Mirabaud Asset Management. You've mentioned that we should see higher CapEx this year. Could you give us more flavor about the number of the CapEx and maybe where you wanna allocate the money specifically? Thank you.
Yeah. We are planning that the CapEx will be higher in 2023, but of course, we need to make sure that we fluctuate that based on improving visibility into when the ramp-up will occur. It's hard to really give you a real quantitative number, but I think directionally, it should be a little bit higher. Our plan really kind of remains the same. We know we've got to build out the rest of San Jose. That will complete in the first half of 2023. The second thing is that we do need to work on vacuum capacitor expansion in Flamatt for PCT. We also have a little bit of CapEx that we need to do for our IXM business.
We do wanna get that done this year because it's always easier to do these things when you're not when the factories aren't fully running, so we want to do that this year. We're also evaluating a secondary site for vacuum capacitor production. Today, we only produce vacuum capacitors in Flamatt. From a business continuity perspective, we do need to make sure that we're thinking through a secondary site, so we will commence those studies this year as well.
Thank you, Thomas. Next question. If there is a question in here. That doesn't seem to be the case. I'll speak slowly to see if there is. Yeah, there is one question.
Just one backward looking question. The increase of the gross margin to like 47.3%, can you maybe make kind of a bridge where this comes from compared maybe to the first half or last year or so? Is it largely driven by the build-out of Penang, or is it also driven by price increases which came in in the second half or maybe something like?
Sure. I think, maybe to, maybe to keep it, keep it high, high level, the first thing is that U.S. gross margin, right, not EBITDA. Gross margins. All three divisions performed better in gross margins in the second half than first half. The first thing is that the volumes were higher in all of the divisions in the second half. The second thing is that Penang was ramped at 100%. That, that was a huge margin contribution for the PCT business. The PCT business hit about 50% gross margins in the second half, which is really, really great performance in that business.
In the IXS business, we also saw pretty good margin improvement on the gross margin side in IXS, which is really what we like to see because that does mean that we are targeting our sales to the right customers, that systems are now at the right price point. That was a very good development in the second half for the IXS business. Overall, IXM performed well in the second half as well. I did mention in the prepared remarks that we did have purchase price variances going through in that second half. That was a result of pretty good close collaboration and negotiation, especially with our PCT customers. That offset a lot of the inflationary pressures that we experienced in the first half.
Any further question? Any urgent questions you may ask? If not, I think we can close the session. I see in the back of the room, it seems to be a question from webcast.
Sebastian Kuhl is asking, I take it, now from the last question, about IXS, how much revenues from the Chinese lockdowns are still supposed to be delivered? One question, yeah. Exactly when do you believe IXM will be back to achieve mid-twenty margins again? Well, maybe let's start with this and then there's another one.
Do you mind just repeating the IXS question?
Okay, wait a minute. Go down. IXS, how much revenues from the Chinese lockdowns are still supposed to be delivered?
Yeah, I think I can just quantify that. I think there's probably about CHF 4 million or CHF 5 million that slipped into 2023.
Okay. The second one, when will IXM go back to mid-20% margins?
I would say the current outlook for IXM is that we should have a good, healthy growth year in 2023.
Networking capital normalization by when?
2023, net working capital will go down, but it's really just due to the lower inventory levels that we're going to have in the PCT business. I would say, again, the supply chain situation is easing in 2023, we will of course, continue to take inventory positions that protect our ability to meet customer demands. Again, I think I do expect net working capital to go down in 2023.
Great. Thanks also those questions. I'll take next attempt to close the session if there are no urgent questions anymore. Thanks a lot for your interest. Thank you for seeing us here. Thanks also to the participants in the webcast. Those in the room have the privilege that we can continue the discussion in the back of the room with a quick bite and a coffee or tea, water, whatever you prefer. Thank you for joining us, and talk to you in a minute. Thank you.