Ladies and gentlemen, welcome to the first half 2021 results conference call and live webcast. I am Alice, the conference call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions in writing by the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Ulrich Steiner, Head of Investor Relations. Please go ahead, sir.
Good morning, ladies and gentlemen. Welcome to Comet's 2021 half year results presentation also from our side. With me today are our CEO, Kevin Crofton, and our CFO, Lisa Pataki. The presentation that Kevin and Lisa will be giving shortly can be found on our website, along with the media release and the half year report. Before I hand over to Kevin, I would like to draw your attention to the disclaimer at the beginning of our presentation. With that, I'd like to turn the floor now over to Kevin. Kevin, please.
Okay, Ulrich. Thanks very much. First of all, I'd like to say good morning to all of you and say thank you for joining our session today. Before I get into my formal comments, I would really like to make sure that I acknowledge the Comet team. They've done an incredibly good job meeting our customers' needs. They've worked relentlessly to support our customers, and they've worked extremely hard to generate the results that you've seen today. Thanks to the team, and thanks for what they've done. Can you go to the next slide, please? You've already seen our first half results. They represent the best half performance that the company's seen in our history. Lisa is going to go through all the details of that soon. I just want to comment on the left-hand side of this page.
First of all, it's quite clear that our performance has been driven by the boom in the semi cycle. This is as we anticipated at the start of the year, and we can confirm that this will continue into the second half. I have more comments on that in just a few minutes. I can also confirm that as we had projected, we have seen the bottom of the aerospace and automotive industries, and this has obviously affected positively both of our X-ray Systems businesses. The divisions are positioned to capitalize on their new opportunities that are out there. We've had good acceptance of the new products that we've launched in 2020 and the new applications that we've launched earlier this year. Again, kudos to the supply chain management team. They've done an excellent job managing our exposure that would potentially exist in the supply chain.
They've done an outstanding job. Yes, we have taken some inventory positions, as we said at our AGM. We said we were going to do that. We've done that. We have done everything we can to protect our customers as well as to protect our revenue expectations for the year. In the third, we progressed quite well in our programs designed to improve our organizational effectiveness, to improve our overall infrastructure, and continue that whole cultural change that we embarked on a year and a half ago. Of course, we've already initiated a formal ESG program. Go to the next slide, please. It's quite clear, all of the market analysts in the semiconductor space continue to upgrade their view of the wafer fab equipment spending.
Even last week, VLSI, one of the most well-recognized market analytic firms in the industry, upgraded their view of wafer fab equipment spending from 32%. Now they're projecting somewhere between 35% and 36%. Other forecasters, our customers, our customers' customers, they all expect a continued growth in the semi cycle. Of course, this is important for us because this pulls our PCT business, our Plasma Control Technologies business, substantially. Also it has immediate effect on our X-ray Systems business in Hamburg. In the automotive and aerospace sector, we see a good, stable recovery from the bottoms that we had in 2020. Don't want everybody to get too excited. It's not like we're seeing a V-shaped recovery. It's the bathtub recovery that we anticipated and we expected. In fact, we do see a recovery in both of those markets.
As you know, that drives our IXS and our IXM businesses. I would say that on the security side, we do see some very modest growth in that area. This is going to be driven by air passenger mile increase, as well as the increase in global trade as we come out of the pandemic. We do see that as an opportunity on the horizon, but there's been some opportunity that we did capitalize on in H1. If you go to the next slide, please, Ines. I would have to say we've seen excellent progress across all three businesses. This slide highlights some of those key wins in a half one. Probably the most important item that I should note is the design wins and the application wins that have occurred in all three divisions.
These are, of course, important for the first half. They actually come to fruition in the second half. As you all know, when you have design wins, you actually start to see that materialize in subsequent years. That design win focus continues on within the company, and I'm proud to say that the company's executed quite well in that respect. Second, as you see on this slide, you can see that the Penang, Malaysia facility has been qualified for high volume manufacturing, particularly from our most important key customers. We are doing that transition into high volume manufacturing, and you'll see an impact of that during the second half of this year. Third, we're really focused on the return on our R&D money that we spend. It's important that we see that these programs yield results.
The beta site program for the RF generator in PCT is going as expected. We do have momentum in our tier 1 and tier 2 customers, and we are on track to deliver to the expectations that we've set. Some revenue in 2021, more revenue in 2022, with significant revenues we expect in 2023 and 2024. In addition, we've seen the adoption of the MesoFocus product line that was launched, or the items that were launched, in IXS, primarily the MesoFocus product. That continues to be strongly adopted by our customers. Finally, I would say that we have successfully launched a very new and novel application within the IXS division that has direct impact and adoption in the semi space. All in all, execution has been quite good across all of the divisions. The team is relentlessly focused on what we have to go accomplish.
There's been no deviation, and we're staying the course. If you go to the slide that says summary. I guess this really basically says it all. Our strategic growth targets have resulted in exceptionally good first half results. PCT enjoys a position in the semiconductor industry right now that helps drive the company, obviously, but we do see an upward trend in our served markets for our X-ray divisions. We do see that that climb out is occurring. Market conditions are quite solid, particularly in the semi space. I think that the team has done a great job managing the global supply chain. In our case, we see no material impact into our first half results, and we know it's going to be successfully managed in the second half. Those are my opening comments.
With that, I'd like to turn it over to Lisa and have her walk you through the financial results. Thank you.
Thanks, Kevin. Good morning to all of you. Comet produced outstanding results in the first half of 2021 and achieved the highest sales and EBITDA over a six-month period in the company's history. The company achieved sales of CHF 248.3 million, an increase of 36.2% compared to the first half of 2020. This strong top-line performance was driven by several factors. As Kevin mentioned in his opening remarks, the demand for semiconductor chips has triggered a significant growth cycle in Comet's primary end market. Furthermore, as expected going into 2021, the automotive, aerospace, and security markets began to show signs of recovery after a sluggish 2020. These general market trends drove demand in all three of our divisions. Notably, Comet leveraged its geographic footprint, achieving 51% sales growth in Asia and 38% growth in North America compared to the same period last year.
Finally, Comet's innovative solutions and customer focus led to market share gains through design and spec wins, along with continued adoption of new products launched last year. Gross margin improved by 510 basis points compared to the first half of 2020. Gross margin fluctuates based on volume and product mix. In the first half, margin expansion resulted from growth of the semi and electronics markets, as well as cross-divisional focus on streamlining and automating operational processes. Operating expenses in the first half of 2021 were higher than in the same period last year due to investments in growing the company. These investments include ramp-up of our team in Penang, onboarding of new management, and continued focus on research and development.
R&D represents roughly 11.5% sales in the first half of 2021 and remains a foundational focus area for the group, with investments focused on medium and long-term strategic projects targeting the semi and electronics markets. It should be noted that net operating expenses as a percentage of sales decreased from 32.7% in H1 2020 to 28.7% in H1 2021. The company more than doubled its profitability, as measured by EBITDA, to CHF 44.3 million, compared to CHF 18.8 million in the first half of 2020. This represents an EBITDA margin of 17.8%, compared to 10.3% at the same period last year. Strong sales growth, product mix, and operational efficiencies were the primary factors influencing the 750 basis point margin improvement on a year-over-year basis. The divestiture of the E-beam segment resulted in a 60 basis point improvement on EBITDA margin.
As a reminder, Comet recorded a CHF 4 million pre-tax gain in net operating expenses in the second half of fiscal year 2020 related to the divestiture of the E-beam business. As a result of our solid operating results, Comet achieved a net income of CHF 27.8 million, representing a net income margin of 11.2% for the first half of 2021. This has led to a CHF 2.74 earnings per share improvement compared to first half 2020. Finally, one note just regarding the company's effective tax rate. The effective tax rate for the first half of 2021 was 20.9%, 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 related to the new administration in the U.S.
Now let's turn to the division results for the first half of 2021. As previously mentioned, strong demand from wafer fab equipment customers in the semiconductor chip manufacturing sector, as well as demand from our targeted electronics fabrication customers, drove the growth in sales. The aerospace, automotive, and security markets started the slow climb out from the pandemic bottom of 2020. All three divisions achieved sales and EBITDA growth compared to the same period last year. Plasma Control Technologies division, or PCT, contributed the largest share of the group's sales. PCT sales increased 50.1%, from CHF 96.9 million in the first half of 2020 to CHF 145.4 million in the first half of 2021. PCT achieved sales growth across key geographic markets and with all major customers.
PCT expanded EBITDA margins by 470 basis points compared to the same period last year, ending the first half of 2021 with a margin of 23.9% due to strong demand and production efficiency. Division results for the two X-ray businesses reflect signs of improving market conditions and the proceeds of strategic repositioning, productivity improvement actions, and new product launches. The X-ray Systems business, IXS, accounted for approximately 28% of the group's sales. IXS contributed CHF 70.2 million in sales, an improvement of 30.8% versus the first half of the prior year. IXS sales growth was complemented by competitive wins with newly introduced X-ray systems pointed towards the semiconductor and electronics markets. In 2020, the IXS business implemented countermeasures to realign its cost structure.
These measures included implementation of operational cost reduction programs, conducting virtual equipment installations, shifting our emphasis to more profitable market sectors, reduction of the product portfolio, and discontinuation of low-margin custom products. As a result, IXS successfully returned CHF 4.5 million in EBITDA, compared to a loss of CHF 2.1 million recorded in the first half of 2020. The X-ray Modules division, IXM, achieved first-half sales of CHF 37.3 million, a 23.4% increase compared to the first half of 2020. EBITDA margins improved by 180 basis points to 15.8% in the first half of 2021. The IXM core markets of nondestructive inspection solutions in automotive, aerospace, and security gained momentum in all regions. The division also benefited from commercial success with its new products, IXM modules for security applications, and the MesoFocus product line targeting the semiconductor and electronics markets.
In summary, focus on strategic objectives, targeted product development, and improved productivity measures in all three divisions set the stage for a solid second half. Next, I'd like to provide a few comments on the balance sheet and cash flow metrics. The solid performance of the group has continued to allow for healthy balance sheet position at June end 2021, with a cash position of CHF 76.4 million. Comet generated CHF 15.3 million in free cash flow through strong operating cash performance in the first half of 2021. Operating activities generated CHF 21.8 million in net cash, an improvement of CHF 14 million compared to the first half of 2020. Networking capital management continues to be a focus. Comet has prioritized actions to mitigate potential supply chain disruptions and protect the company's ability to meet customer demand expectations, as well as our own projected revenue streams.
These actions will likely result in higher networking capital balances in the second half of 2021. Capital expenditures totaled CHF 6.2 million and represented 2.5% sales in the first half. Investments increased by CHF 2.7 million compared to the same time last year, when spending was curtailed due to the uncertainty of the pandemic. First half 2021 expenditures reflect investments in our strategic growth, production capacity, and IT infrastructure, and digitalization efforts. For the full- year, we still expect CapEx to be in a range of 3%-5% of sales, probably closer to the lower end of that range. Finally, with respect to our capital return to investors, equity as a percent of total assets increased from 50.1% in December 2020 to 52.6% at June period end. Our net debt balance of CHF 6.1 million also remains in line with our expectations.
This represents a solid foundation for the growth of the company. In summary, the company demonstrated strong strategic focus and operational performance in the first half and is well-positioned to capitalize on the increased demand in the semiconductor market expected in the second half of 2021. From my side, I'd like to thank our teams, suppliers, customers, and investors for enabling us to achieve these excellent results. Additional details of Comet's first half performance can be found in the half-year report published on our company website this morning. Now back over to Kevin to provide context for our 2021 second half outlook.
Great, Lisa. Thanks. Let's go to the next slide, please. Before I go into our full-year forecast, I just feel like it's important that I give you a bit of the fabric behind the macro environment that's driving our business and really the business of our customers and our customer's customer. I don't mean it to be a tutorial, but I think it's important for us to really be on the same page when I talk about what's happening in the industry and the go-forward look for Comet. We all show some variation of this slide, and hopefully the message is quite clear. From that dotted line looking to the right, you can see that we've entered the data age, the data age of artificial intelligence and visual computing. I'd like to attempt to put this into context.
Everything we do online and offline leaves some sort of data trace. Recently, Cisco published a report stating that in 2016, the world processed 1 zettabyte of internet traffic in that year. That means all data, whether it's email, whether it's file sharing, whether it's video streaming, whether it's music streaming, et cetera, all of that happened in 2016. That's the entire world's generation of data on the worldwide web in the previous 40 years. By the end of this year, that will be a minimum of 10 zettabytes of data. Minimum. Cisco projects it's going to be somewhere between 13 and 15 zettabytes. By 2025, four years from now, we're going to be processing 150 zettabytes of data just in that year alone. This digitization of society is driving demand for chips, for packaged chips, et cetera, across the world and across society.
When I talked about the super cycle, well, I guess a year ago, or maybe a little less than a year ago, this is the super cycle that we're trying to deal with, and I'm not really sure if we understand what that is. If you go to the next slide. What that means to me, if I look on the left-hand side of this page, is that the semi industry is in this super cycle, or perhaps it's a hyper cycle. I can say it's probably one that we don't fully understand and we don't fully appreciate at this point in time in our industry. This sector or these changes drive incredible demand for data processing speeds, faster and faster data processing speeds, more and more data storage, more and more data mining.
We're seeing these start to play out in technology changes that occurred, really announcements that have occurred late last year and in this year. For example, last year, you may recall I mentioned that Micron had shown a 179-layer NAND device, NAND memory device. Just two weeks ago, Samsung announced a 200-layer NAND device. In addition, in the first half of this year, you've seen that TSMC and IBM have been going head-to-head on who's going to have the fastest microprocessor at the smallest design rule, two nanometer design rule. That's 10 atoms that we're talking about here. This is important for Comet for really two reasons. Being able to deliver chips that function at these design levels requires more and more precise control of plasma. That's really the real mission of our Plasma Control Technologies team.
Small perturbations in plasma can lead to yield problems for our customers' customers. The second reason these trends are important in the semiconductor space is that these devices have to be packaged, and they have to be packaged in architectures that allow for speed. Traditional packaging methods are becoming obviated, and they require unconventional means of inspection. Traditional means of inspection don't necessarily provide the data necessary to understand yield results. This means that IXS, for example, the use of X-ray technology to look for design defects or to look for device defects, is critically important, particularly at these package device scales. That's pulling our X-ray IXS business into the semi space. Now, in the middle of this page, we talk about the automotive and the aerospace sector. I'll just reemphasize, we are experiencing a steady, slow but steady recovery in those industries.
There is the demand for electric vehicles, of course, and everything associated with them, batteries, for example. We're also seeing domestic car production, even in combustion engines, start to move, particularly in China and in Japan. We can see that also occurring in the U.S. and in Europe. That drives our IXM and our IXS businesses. In the aerospace sector, again, slow, steady climb-out, as Lisa Pataki already mentioned. We do see a return in the passenger air miles, which is important particularly for the IXM portion of the business. We also see an increase in global trade, which will also drive IXM because the ports of the world are looking for inspection techniques that rely on X-ray. We're starting to see that pick up in the global economy, particularly in goods trade that is pulling the security sector along.
For the second half of this year, we expect the momentum to continue. We see strengthening areas in the automotive, aerospace, and security sector, and we're going to have to ride the semiconductor sector in every way we possibly can. If you go to the next slide, please. What this frames link to is really captured in the headline here. We have to be relentlessly focused on execution. That's our mission. We have to drive for share gains. We have to continue to increase our operational excellence. Some of that is starting to manifest itself. You've seen that in the numbers that we presented earlier. That trend is going to have to continue, and we need to be absolutely focused on it. Now, within each of the divisions, you can see some of the primary objectives here.
Obviously, for PCT, it's still Penang as fast as we possibly can. Make sure that we execute on the beta program for the new RF generator. In IXS, it's continue to gain market share, particularly in the semi space, in 3D packaging applications, but also in our traditional sort of markets. To continue to streamline our product portfolio. On IXM, nice little business. We need to continue to harvest the fruits of the investment that we made last year in R&D and get these products continuously embraced by our customers. We can say with confidence that that's happening at this point. We do have an initiative to look at best cost regions of supply for that division. That's also an area of focus to improve our overall profitability within IXM. We've got a lot of work to do.
It's not over yet, but we do have a lot of work to do, and you can see the major initiatives that are here on this slide. With that, I'll move into the outlook. We've already published the outlook that you see here on this page. We do expect sales to improve such that we will deliver between CHF 480 million and CHF 500 million in total revenue and an improved EBITDA margin that ranges between 18% and 20%. The most important thing for us is that we prioritize the safety of our employees and that of our customers. We know the pandemic isn't over. We need to make sure that we manage that situation accordingly. That's an obvious. We will do that even at the risk of revenue if it ever came down to it.
We have to continue to work on our growth strategies, our cultural change, and continue to ride the semi cycle as it moves, and the recovery of our industrial end markets. Lastly, the last one, maybe probably one is, and we'll probably get some questions on that I imagine, is that we need to make sure that we continue to focus on our supply chain, continue to manage the supply chain effectively, and make sure that we are able to protect our revenue line and our customers' needs. We're going to be running that fine line between balances of what's our inventory tolerance, what's the impact on net working capital, our cash flow generation, and the assurances to make sure that we make our revenue line. Personally, I know that's under control, but it's something that we continuously monitor.
I would say outlook for the second half is quite positive, and you should expect a really good result from the Comet team by the end of the year. With that, I'll open it up for questions and answers.
We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only handsets and eventually turn off the volume from the webcast. Webcast viewers may submit their questions or comments in writing via the relative field. Anyone who has a question may press star and one at this time. The first question comes from the line of Michael Foeth with Vontobel. Please go ahead.
Yes, thank you. Good morning, everyone. three questions from my side. You were talking about market share gains in semiconductors, and I was wondering if you could be a bit more specific in terms of in which applications you are seeing market share gains, and also if you can eventually quantify those comments and tell us what sort of market share levels in semi we're talking about. The second question would be regarding the margins. We see a nice development in EBITDA margins, but we're still quite far away, especially in PCT and IXM from the historical EBITDA margin levels, although revenues are at very high levels. I was wondering what needs to happen for those margins to go back into, let's say, the 25%+ area. The final question is on IXS. You're talking about the sort of beyond inspection, and AI applications there.
If you could give us an update on the roadmap, what's the current status there on those programs, and then what milestones should we be looking for in the coming 12 months? Thank you.
Great. Thank you, Michael. This is Kevin. I'll take on three out of your four questions. I'll turn the gross margin one over, or the margin one over to Lisa, and maybe I'll kick in with some comments. Thank you for your question, though. Relative to market share gains, most in terms of PCT, I think is what the context of your question was. We continue to win in RF match applications with really the tier 1 and tier 2 customers. It's kind of across the board. You may recall that last year we indicated that we had won, I think, 26 design and specification wins last year. We're on track, we believe, to do something quite similar, at the same level, I would say. Primarily, this comment is in the RF match space. We continue to maintain our share in the vacuum cap market.
We know that we've taken share as well within IXM, particularly because of the MesoFocus product launch. If you were to look at the report generated by VLSI for component market share, Comet was attributed with 36% share in the RF match space. That's a number one position relative to our nearest competitor, which had 31% share. Hopefully, that answers that part of your question, Michael.
Yes. Very well. Thank you.
The second question, I think, I missed my notes here. You said to quantify. Maybe it was actually part of the same quantify.
Yeah, that was what you just said, the 36% RF match.
Okay, thank you.
I'll take on the IXS question, where you asked about beyond inspection and artificial intelligence applications. Actually, the application win that I referred to has much to do with the use of AI or machine learning applications to look at yield and yield enhancement possibilities. It's early days, but I can say that activity is going forward. We launched our first joint workflow between ORS, the Object Research Systems group that we bought in Canada. We launched that first workflow with the IXS team in June. It's had incredible interest from customers as well. I guess my comment would be steady as she goes, and as we've said before, we don't really expect to see that compendium to actually yield real tangible results until next year. We can say that we've got the first pathfinding activity going on at the moment.
Now, I'll turn your margin question over to Lisa, and I'll chime in if I have anything to add.
Okay, perfect. Just to provide a little bit of color on the margin development for PCT. I think there's a few factors that we just need to make sure that all of us kind of keep an eye on as we execute going into the second half. The first one is that we expect to see contribution from our Penang facility really in that second half. That's a lower cost in manufacturing environment that should provide some lift to the PCT business going into the second half. Obviously there's a product mix element, and then the production volume with our RF matches are going to be critical for us in order to achieve the numbers that we hope to achieve with PCT.
Ultimately, the other thing I think to say, too, is that, just generally speaking, if we look at the history of PCT and then even in context of some of our strategic focus, we did divest that E-beam business last year. It has provided us an opportunity to focus more on what our strategic objectives are. Some of our major objectives in PCT from an investment standpoint are with respect to the RF generator and the RF match. We'll continue to invest in this business, but we have a fairly positive outlook going into the second half for PCT.
I'll maybe make a comment or two there as well. Remember also, Michael, that we invested quite significantly in creating manufacturing capability for the RF generator in Aachen, as well as setting up the new Penang facility. I think that if you think about historical performance of the organization, PCT specifically, we should be demonstrating in the second half a significant improvement half-over-half. Lisa just mentioned that, and I think you'll say, "Okay, maybe they're going to be in a position later to exceed historical highs and maybe look a bit different in the future." Second thing I would say relative to IXS. We will demonstrate good performance this year. As you know, that's been a reorganization that's gone on. I think we've got another year before you'll see us operating at the historical levels, and I would say that that's still not good enough by a long shot.
We got work to do. That involves changing the served markets, changing the product mix continuously, and keeping an absolute dead focus on operating expenses.
Okay. Thank you. Thank you very much.
Thank you for the question, Michael.
The next question comes from the line of Serge Rotzer with Credit Suisse. Please go ahead.
Yes, good morning, everybody, and many thanks for taking my questions. I have several ones, and I will ask them one by one. The first one is, based on your guidance, let's take the upper range, it's CHF 500 million. You already achieved half of that. This tells me that there is no growth half-over-half. Now you also have been guiding for a steady recovery in the X-ray business. This would tell me that then sales in PCT business would be probably even lower than in the first six months. Is this correct? Can you explain me that? In general, the seasonality of the different businesses, probably also in relation to the margin, as you already answered Michael's questions about PCT margin. This would be the first one.
Do you want to take the sales question or I can?
Yeah. I'll start with that. I think there's a couple of comments that I would make there. First of all, I don't want to be accused of saying. There is the potential of potentially exceeding that range, but I also have to make sure that we communicate clearly that we are taking into account our supply chain situation, which we know is managed, but more importantly, what our customer's supply chain looks like. If there's a risk at all that our bigger customers are not going to be able to ship because of other issues in their supply chain, we need to be cautious about that. It's more of a second-order effect, what's happening with our customer situation.
That's maybe the area that I would say we're being a little bit cautious on, and we wanted to make sure that that was factored into our thinking first half to second half. We will see some incremental growth in PCT. We will see growth in IXM. We'll have to see how we're able to manage our IXS revenue because of the need for deploying field service engineers to actually be able to do installations. That might be a more of a flattish looking business, half over half. Order book will be there. Question is revenue generation, and as you know, IXS has a roughly 10-
Generators has a certain correlation. Can you give us an update? Would you believe in what kind of market share you can build up going into 2022, 2023, 2024?
Okay. First of all, I have to say from your lips to God's ears, so as long as we continue to gain RF match shares, then perhaps that'll be the footprint to allow us, or the foothold to allow us to move into a generator relationship as well. Unfortunately, in this industry, that doesn't always happen. It does sometimes, but not as a norm. I'll ride that comment and say, "Yes, please, let's make that be the case." The generator market, or I should say the RF systems market, is growing really as currently as you see the wafer fab equipment market grow. In fact, it probably grows a little bit in excess of that.
Our challenge at Comet is to make sure that these beta sites that we have ongoing and the future beta sites that we put in play, that this generator does what we say it's going to do as advertised. Currently, I can say that the generator is working. It is doing what we say it's going to do, but we're still quite a ways out of getting qualified. If this product does perform as we think it will, and as we've demonstrated so far, then our 10% market share target for 2025 probably is an understated goal. We're not prepared to go and revise that yet until we see first revenue and see all of the qualification acceptances occurring as we see fit and as we expect. I think the bottom line on that is we're confident of the generator.
It is performing to our expectation and more importantly, to our customers' expectations. We're not viable in that marketplace yet. If it works, then that 10% goal is more than achievable in terms of share. Hopefully that helps.
That helps, yes. Many thanks. Probably the last one now. It's about, you mentioned some important design wins. Can you tell us a little bit more about that? Is it on new products, existing products, so from the application or new customers?
Oh, gosh. That's a little bit of a follow-up question to Michael's, and that's great. I would start off.
We are good friends, so don't.
Yeah. No, I appreciate it. I'd say that first of all, the design wins are actually, yes, with new customers. Primarily customers that would classically be referred to as Tier 2 customers. By the way, Tier 1 and Tier 2 only has to do with how big are these customers, what's their revenue line? If they're in that CHF 500 to CHF 1 or CHF 1.5 billion, they're typically classified as Tier 2. For us, that's a very big customer. Of course, the other customers of Tier 1s are in multi-billions to even multiple double-digits billions. We've had design wins and RF matches in Tier 2 customers. I won't go into specifics there, because of course that's competitive information that we just don't want to divulge. We also have recorded design wins within our top Tier 1 customers. That is clear.
These are RF match design wins. We expect that to continue during the second half of the year, into the future of course. I mean, that's our bread and butter as a company or as a division within PCT. There are multiple wins. I think the last one I remember, the number is 10. I believe it's 10 new customers for the MesoFocus products from IXS. I'd have to go and confirm that number. I think it's in that range. Most of that's in the security sector, if I remember correctly. Within the IXS business, there has been one significant brand new customer in the packaging space that we have recorded our first hard copy PO with. We are engaged with that same customer on multiple other opportunities. In fact, they've been influencing other companies in the outsource assembly and test arena.
That's sort of a watch this space, but we've proven first principles that we can be successful in that market sector.
Probably a follow-up question, but what does this tell me about the competitive situation? Because you are in oligopolistic or duopolistic market, like in RF matches, you and Advanced Energy cover 80% of the total market. Do they step back? Do they have a problem with the product? Is your product much better? Will they strike back? How can I put this in relation?
It'd be interesting to hear AE's perspective on this as well, of course. First of all, we're in the situation where if we get a design win, we expect to keep that design win. I cannot imagine a situation where we'd be kicked out. We're doing our best to either win head-to-head on new product designs with our customers or, in a few cases, displace our number one competitor and the other competitors in their existing customers. I think you'd have to address the question to them. We do watch our competitors, of course, but really we need to keep our head down, our butt up. We got to keep moving and just keep focused on what we need to accomplish as an organization.
Okay. We'll leave it there. Thank you so much.
Thank you. Thanks for the question, by the way. The next question comes from the line of Michael Inauen with Stifel. Please go ahead.
Yeah. Good morning, everyone. I have also two questions, just one short one. I'll have actually three and a half, I would call it. The first one is a follow-up on Serge, on Advanced Energy, and MKS is the other one, actually. They are both not doing very well, also share price-wise. Is it fair to assume that if you are winning market share from them, or if you would win market share from them, it's actually too early to say, because they have problems in supply chain. They were not able to deliver, they would probably lose their clients, not already now, but potentially later, yeah. It's very difficult to design them out. That's just a follow-up question, maybe as the first one.
I can also give you the other three ones. We can probably take them one by one, if that's okay, Kevin and Lisa.
Yeah.
Yeah, go for it.
Okay, perfect. The next one would be also on the guidance, but on the midterm guidance. Maybe it's a bit more for Kevin, because actually that midterm. Also for Lisa, but that midterm guidance was actually done when you were both not with Comet. Looking at the numbers right now, it looks as it would need a little bit of tweaking, at least in the divisions. Do you think that's something that we could expect there, a fresh look at this midterm guidance going forward? Maybe let me take just one more question that I think would be probably interesting to understand. We hear a lot about new technologies, smaller architectures, the 3D packaging of products, and now the emerging EUV technology also moving into memory production.
I was just wondering, is there any technology somewhere in the near or longer future out there that would actually put the RF power or the plasma-based technologies at risk? That we could, let's say EUV potentially would need less plasma-based products, so is it a problem for Comet? Something like that. I was just wondering if there's anything we have to be worried about technology-wise. Those would be it, actually.
Let's talk about the midterm guidance question first. We're constantly looking at what our guidance is going to look like for the out years. If we're going to update our midterm guidance, you'll see that during our Capital Markets Day . That's really all I can say about that at this point. We're sticking currently today to the 15% compound annual growth, the 25% EBITDA target, and the 30% ROIC. Yes, it's always constantly under review. I can understand the desire for us to update, and we are looking at that on a regular basis. If we choose to, that will be at the Capital Markets Day . That's where we are on midterm guidance. In terms of new technology, basically you're asking about technology threats, and you really mentioned primarily EUV.
In reality, right now, first of all, EUV has no material impact whatsoever on whether you're using an RF-based plasma technology solution or not. It really doesn't have an impact. That's not a technical threat. Even when you look at how the 2 nanometer design rule products from TSMC and from IBM were created, or when you look at the NAND layers coming from Micron and from Samsung, for example, it's a massive use of plasma-based technology. I don't see that need ending anytime in the near future in this industry, not at this point. Even when people start talking about quantum, well, that's still decades away, to be quite frank. I just don't see it. I think you'll get that same answer from just about everybody you talk to.
It was just kind of a confirmation. Thanks so much.
Yeah. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Sebastian Vogel with UBS. Please go ahead.
Hello, can you hear me?
Yes.
Yes.
Perfect. Great. I'm coming back to the RF generator. If I recall correctly, what you initially or during the call today, were sort of alluding to what is the sort of the trajectory for the revenues linked to the RF generator. It seems like pretty much the same sort of trajectory that you have outlined in the past, meaning that you're pretty much exactly on the plan, not much acceleration, but not much on the delay side. Is that true?
That's absolutely accurate. Yes.
Got it. The second question is, if I recall correctly, on the capital markets that you were outlining that with the tier 2 customers, the sort of beta phases are usually lasting between six and nine months, and your beta phase has started in January. That would mean that we are already pretty much in the six- to nine-month period. In that sense, how high are the sort of probability that these qualifications of some tier 2 guys are just around the corner?
Very clearly, we are on track to the plan that we have in place. I think that, Sebastian, maybe it's best to think in a couple different forms. I've said with the tier 2s, it's six to nine months. It can take as long as 12 months, but I think that we're in pretty good shape on that nine-month window, at least for one, if not more than one of the tier 2s to come across. In the tier 1s, I'll reiterate, it takes usually 18 to 24 months for them to actually go through a qualification period. Then, of course, at times that needs to be qualified at their customers as well.
It's a bit of a longer road, which is why we changed the focus to be not just putting all of our eggs in the tier 1 basket, but to actually start really engaging in the tier 2s as well. Again, we're on track to our plan. Our customers need to finish and wrap up their qualification activity. By the way, we're going to ship more beta units late this year and into next year. This is an ongoing process. It's not the work of a moment, and it's not a single product that we're testing here. Remember, this is a platform. It's an RF generator platform that is going to have multiple flavors: power, frequency, et cetera. It's probably more like a multiple set of generators at the end of the day that we're talking about here.
Understood. Just to be clear, you meant, when you said that you have a couple of smaller clients being potentially quite well in shape to stick to these nine months, that means you're actually sort of for at least one or two close by to finishing the beta phase. Is that the proper understanding of what you just said?
I'll try to make it even more clear. We said consistently, we expect to generate first revenue in this product this year. We will generate first revenue in this product this year.
One follow-up question. How much time you normally have between finishing a beta phase and realizing profit, already realizing orders? Is that really happening on the next day, or does it normally necessarily need to take one or two months or something?
Yeah, Sebastian, normally it depends on the actual terms of the beta agreement that you have in place. In some cases, the beta agreement is if it works, you buy it, and it's an immediate flip to a hard copy PO. In other companies, when you engage with them, they're going to look for a beta unit that works, that gets qualified, and then they return that particular unit and issue purchase orders for follow-on generators or RF matches or what have you. So it just depends upon what customer you're engaging with and what the contractual terms and agreements are in place with them.
Understood.
There's not one thing that fits everybody's business model.
Got it. One just very quick follow-up. I mean, the point was coming up already a little bit earlier in this conversation with regard to some of your peers struggling, in particular, some of the peers that are quite active being on the RF generator side. Do you see that impacting also potentially the demand for your beta phases and the product overall?
In a concrete way, we can't say. We cannot point to this competitor having a delivery problem with this customer, particular generator, resulting in a new opportunity for us. We honestly can't say that. It may have happened, but it wouldn't have happened because we're aware of it. On the other hand, execution typically at the supplier level has to do with, do you have the right quality? Do you have the right performance? Do you provide the right service to our customers? If you miss on any three of those points, and you probably have to miss it a couple of times, that offers an opportunity to go and perhaps open the doors for another competitor to come into play. Of course, there's a fourth possibility, and that is that a supplier takes their product off the market.
They declare end of life, and that ends up creating a problem for their existing customers, which forces those customers to look for an alternate pretty quickly. Any four of those factors could turn into an opportunity for Comet, for RF generators, or for matches, or for the ion modules as well. I can say in that case, yes, we've seen opportunities come across because of that.
Got it. Perfect. Very sorry, one really quick follow-up last question. I got at least as an approximation, the FX impact on PCT being quite massively on the negative side, somewhere around like 5%, 6%, 7%. Is that also something what you have seen?
Yeah. On the FX side, obviously, if you look at our numbers and what we've disclosed, we have a large percentage of our revenue is generated in U.S. dollars. There's a mismatch obviously with the cost base there. What I can say is at the group level, half 1 2020 to half 1 2021, sales impact is about CHF 7.5 million negative at the group level. That represents about 1.1 percentage points in EBITDA margin.
Got it. Many thanks.
Thank you, Sebastian.
There are no more questions from the phone at this time.
Okay. Thank you, Alicia. We have two questions in writing. The first from Jonathan Herbert, Cologny Advisors LLP, has been answered, I think, with tier 1 and tier 2 clients. Yolanda Stoneman at Capital T wants to know a little bit more about the formal ESG program we started, the new formal ESG program.
I can jump in there, and Kevin, if you want to add anything, we'll go for it. We are very excited about the ESG program that we have launched in 2021. We don't have too many details to disseminate to the market at this point. I think that you can expect a bit more of an update on that at our capital markets day. We should be prepared to disclose at least our progress towards certain priorities in the annual report for 2021.
Yeah, Sorry, Lisa. I think that I'll jump in there and say we do expect that we will issue in our report this year, in the GRI format. That's going to happen. It is a formal multi-phase program that we have in place at the moment. We will be coordinating what our KPIs are going to be and what we're going to sign up for. We have to, of course, get that approved by our board of directors. This isn't lip service. We want to make sure that we have clear, measurable, executable KPIs, not fluff, that our teammates, our customers, and our investors can hold us to, because it will have a material impact on the company as well as more than likely on our compensation as well.
This is a really critical program for us, and you'll hear a lot more about it when we get to the end of the year. Hopefully, that answers your question sufficiently, Yolanda. We don't have any questions coming in writing. Alicia, any questions, still follow-up questions from phone?
I remind participants for any further questions on the telephone, that's star and one.
Okay. If there are no questions, then I think we can conclude the call. Thank you for participating in today's webcast and conference call. Whenever you have additional questions, you have the number or the contact of the IR department. Just let us know. Thanks again. Have a good day.
Thank you.
Thank you, everybody. Cheers.
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