Good morning, ladies and gentlemen. thank you for joining webcast for Q2 and first half 2020 results. I'll start with an overview of the second -quarter and first -half highlights. Then Stephan, the CFO, will go into the results and a bit more of the financials. I'll conclude with a look ahead. Then we'll move into our usual Q&A. Moving on to the next slide, you can see VAT reported a very solid top-line increase in both the second quarter and the first half, thanks to the ongoing recovery in the semiconductor sector, which, of course, is our biggest market. In June, we also started seeing a recovery in our service business, which was impacted by the COVID pandemic. Overall, I think we successfully mitigated the impacts of the pandemic. We limited supply chain interruptions.
Hold on a second. Sorry, we had another microphone on. We successfully mitigated the impacts of the COVID pandemic, limiting supply chain interruptions and keeping operations running to meet our customers' needs. Our production plant in Penang, in Malaysia, proved to be very beneficial to our business continuity efforts at our major OEM customers, and they got firsthand experience of VAT being able to deliver through two supply routes, even during such challenging times. As I mentioned to you before, this is a really key differentiator for VAT and one of the core reasons that's driving our market share gains. Once again, we were able to rely on a fully engaged workforce, who's dealing with many of the changes and uncertainties during this pandemic, and they did that in a really exemplary way. My sincere thanks to all of them for the huge efforts.
There's real evidence of one of our core values here at VAT, which is One VAT. We're continuing to invest in technology innovation, which is really the lifeblood of VAT. As a result, we increased our market share across all segments up to 52%. That was an increase in three points. You'll see that in the following slides. More specifically, in Semi, we increased four points of share, as we also took advantage of some of the supply challenges from our competitors. Our solid EBITDA margin reflects both higher volumes and better cost absorption, as well as measures to take out cost and make the company faster and more flexible. The demand outlook for the rest of the year remains positive as semiconductor recovery is expected to continue.
Obviously, the strength of that recovery will ultimately depend on the pandemic and how that plays out and what longer -term macroeconomic impacts it might have. We'll discuss that in a bit more detail later. Moving on to the next chart. This gives you an overview of the six-month key figures by segment. In the valve segment, our biggest business and one of the most exposed to the semiconductor equipment market, sales were up by almost 30%. That helped drive an almost 600 basis point increase in EBITDA margin compared with the same period a year ago. We also generated a solid pipeline of spec wins for new products during the half, which gives us even greater confidence for the coming quarters. Our service business was impacted by COVID-19 from our ability to visit customers, but we saw that trend reversing as global measures relaxed.
We had record orders and sales in May and June. We see this continuing into Q3. The EBITDA margin, while lower than a year ago in service, is still an attractive level. Also, as the upgrade business starts to come back, we should see that EBITDA margin increasing again. We continue to introduce new service products. We really do see plenty of opportunities to grow this business over the next years in upgrades, repairs, and spares. Industry remains the smallest piece of the company and mainly serves the automotive industry with precision membranes used in the manufacture of fuel injection systems. Net sales were down in the first half, as expected. We increased the EBITDA margin by more than 600 basis points. The next slide gives you an overview of recent trends in our major markets.
I've already described the positive situation in the semiconductor market. Memory, foundry, and advanced logic applications all contributed to the growth. The industry continues to strive for even smaller and higher performance nodes, which is driving our main customers to develop new fabrication equipment. Demand in the display sector remained positive in the first half, driven mostly by the growing use of OLED screens in mobile applications and the start of a rollout of flexible screens into the smartphone segment. We do expect the OLED investments to moderate in the second half. There is some overcapacity there. We also expect to see a highly reduced LCD spending in the second half. In solar, technology innovations are driving the demand for new vacuum processes. There was a definite slowdown in the first half, especially as the pandemic challenges in China. We also saw some overcapacity there.
Signs look positive in the second half, and we're starting to see a new investment cycle there with the latest heterojunction technologies. Our long-term growth prospects for expanding the use of vacuum in industry remain positive. The government research in large R&D establishments is positive, and that gives us optimism for the full year. Next slide: our market share. As I mentioned earlier, we're continuing to grow share across all our segments. We're up to 69% in semiconductors, a four-point increase, and up to 52% across all the markets. This is preliminary data, and we'll get better visibility on this as we go through the year. Early indications are we're making great progress. The three key reasons for our success in this area.
First, I think the obvious one: we are the clear technology leader in our industry, and in an industry where rapid innovation is absolutely critical to success. Second, we have a long track record of working in partnership with our customers to develop the leading-edge products they need. We continually demonstrate that we're a reliable partner in this capital-intensive business where there's little room for error. In the last year, we have added key account teams to three more major accounts, and we continue to see spec wins and market share gains within these accounts. The third point is our increasing global footprint and value chain make us faster, more flexible, and a more reliable supplier.
As I mentioned earlier, I think our customers saw firsthand VAT's ability to perform in a very strong manner through this pandemic, is giving them tremendous confidence in awarding us this increase in market share, even in such an unpredictable business environment. With that, let me turn the microphone over to Stephan, who'll give you an update on our financials.
Thanks, Mike, and welcome to all of you who are joining us on the webcast today. Let's start on chart eight with a look at the key figures. Mike has already touched on the good top -line and EBITDA development, and I will show you a bit more detail on that in a moment. Free cash flow was lower in the first half of the year compared with the first half of 2019 as a result of the higher levels of working capital needed to ramp up production to satisfy the growing demand. That, of course, had knock-on effects on free cash flow margin and conversion rates. Last 12 months, net debt over EBITDA amounted to 1.3 times at the half -year, which is above our target but typical for mid-year after we have paid our annual dividend in May.
We expect this leverage to fall back to normal levels for the full year. The next slide shows development of orders in the second quarter and first half, which reflects the market recovery in the semiconductor business that Mike described earlier. Q2 orders are up 32% versus the same quarter in 2019, and half-year orders are 37% higher. The solid growth in order backlog, up 38%, plus the continuing market share gains that Mike showed you, will support near-term sales growth. Turning to the next chart. Here we see the development of orders and sales over the latest cycle. We reached the bottom of the cycle in the first half a year ago. Since then, we have seen a steady trend of order recovery. That also makes six quarters in a row of a book-to-bill ratio above one time.
Combined with our increasing market share, these numbers give us some additional confidence that sales will continue to grow in the short term. The next slide gives you an overview of some measures of return on investment. It shows clearly that we have a solid track record in delivering sustainable returns in terms of return on invested capital and cash return on invested capital, well above our weighted average cost of capital of 10.4%. Return on invested capital was 32.7% in the first half -year. We have been consistent in delivering those returns since the IPO and through the cycle, even as we have invested significantly in expanding our footprint. The next chart shows the development of net sales and EBITDA.
First half sales are up more than 20%, which was the major driver for an EBITDA margin expansion of 4.6 percentage points on improved absorption of fixed costs. At the same time, we were able to capture additional margin gains thanks to increasing flexibility of our operating model. Making internal processes faster and more efficient means we can adapt to changing market conditions more quickly, avoiding the higher costs additionally associated with rapid adjustments of production volumes. This is allowing us to make a very substantial investment in our future. For example, the implementation of new ERP system, increases in research and development spending, and even more critical to make the people investment in Malaysia without negatively impacting EBITDA. For VAT, perfect execution of the Malaysia ramp with high quality and high predictability is essential in making this transition successful.
These are the key competitive advantages that we have compared with other players in the market, and which will help explain our steadily growing market share. The next chart shows our EBITDA margin development relative to sales through the recent down cycle and the COVID-19 pandemic so far. As you can see, profitability has come back quite strongly, and we are not far off the high level we saw in the second half of 2018. COVID-19 has not yet had a significant impact on our business, either from a demand perspective or in terms of production continuity. We believe our global setup puts us in a good position to maintain production at good margin levels over the coming quarters. The question remains what the longer-term macro impacts will be on end user demand. Let's now turn to some of the other financials on chart 14.
Depreciation and amortization are down in the first half, primarily reflecting the reduced CapEx in 2019. The combination of lower depreciation and amortization with higher EBITDA means EBIT is up more than 70% in the first six months of 2020. Net finance cost amounted to CHF 10 million for the first six months, about twice as much as last year, reflecting foreign exchange losses on the reporting of loans and bank balances. The effective tax rate for the first six months of 2020 was 14%, compared to 35% a year earlier, when we were required to book additional deferred tax liabilities following the introduction of the new tax regulations in Switzerland. The effective tax rate was also positively affected by some recognized loss carryforwards outside of Switzerland. For the full year, we continue to expect the tax rate to normalize towards the long-term level of 18%-20%.
Taking that all together, net income more than doubled to CHF 56 million. Our free cash flow generation is shown on the next slide. As I said at the beginning of my remarks, free cash flow has been impacted by the need of additional working capital as we ramp up production to meet growing demand. As a result, trade working capital as a percentage of the last 12-month sales rose to 27% in the first half. While that is substantially above our long-term target of 20%, we see this as a short-term development as the business cycle shifts, and we maintain our 20% midterm goal. This also impacted the conversion of EBITDA to free cash flow in the first half -year, which amounted to 42%, similar to the 39% in first half -year of 2018, when we also were in a strong growth phase.
When it comes to the leverage, on the next chart, there's not much change in net debt compared with 2019. We have significant liquidity available, which gives us additional financial flexibility during uncertain times. Our leverage of 1.3 times net debt to EBITDA is typically higher at this time of the year following payment of our annual dividend, and we expect it to be back below one time by the end of the year. Overall, I think we have a very strong financial position to support our aim of generating sustainable, profitable growth through the cycle. Let me conclude with a summary of our first -half financial results and priorities for the rest of the year. We continue to expand our EBITDA margin as semiconductor demand continues its recovery, despite the impact of COVID-19 pandemic.
In addition to the benefits of higher volumes, we captured additional margin through cost and operational improvements, including our project to optimize our ERP system across all locations and businesses. Free cash flow is in line with expectations, given the working capital needs to support higher sales and higher CapEx in both Malaysia and Switzerland. Looking at the rest of the year, cost and productivity will continue to be our top priorities. We aim to keep trade working capital in line with production growth with our midterm target of 20% of sales firmly in place. We forecast CapEx of about CHF 30 million, tightly focused on high -return investment, such as ramp-up of the Malaysia plant. Finally, we will continue to drive our ERP improvement project, which includes substantial re-engineering of all VAT processes, so that we can continue to capture more value as we grow the business even further.
With that, I will turn it back to Mike for a wrap-up.
Thank you, Stephan. Looking at our medium-term growth prospects now. First of all, I mention our end market. This continues to look very promising. We see no slowing of global digitalization, and these trends continue to require an increasing number of semiconductors, high-end displays, and other technologies based on high vacuum manufacturing. The second dimension, equipment growth. This also looks strong. OEMs are seeing a higher demand for fabrication equipment as memory supply and demand balance stabilizing during 2020. In addition, the next generation of chips at smaller node sizes are driving new equipment designs, including new vacuum solutions. The third dimension, which is vacuum valve and vacuum component growth. Here, we are seeing the number of new vacuum equipment platforms under development continuing to grow. Extreme ultraviolet lithography, EUV, is also now established in the industry and requires even greater process and vacuum purity.
What we also see is the growing need for zero -particle environment. This provides VAT with a huge opportunity to deliver more value through adjacencies like motion components and modules. Next slide. This gives you a view on the short-term market forecast based on some external sources. Overall, we expect high single-digit growth in the semiconductor equipment sector. About 6% growth in integrated circuits and 9% growth in wafer fab equipment, driven by logic foundry and NAND, as well as we start to see a pickup in DRAM activity. The biggest risk to this forecast is the macroeconomic impact of the COVID pandemic. First indications of 2021 are also around the 9% to 10% level. I think it's a bit early to fully predict this for next year.
Display investments show strong growth in 2020, led by demand for OLED, as I mentioned earlier, especially in mobile applications and the increasing use of flexible screens, while LCD applications continue to slow. In the display area, VAT benefits early in the cycle, as lead times in these projects tend to be longer. We would see a decline generally ahead of the general equipment market there. Solar had a slow start in 2020; we expect to see China investments increasing in the second half, driven by the new technology advancements. Looking at the next slide, this explains our spec wins so far for the year. One of our main competitive advantages are our innovation capabilities and close customer relationships, which allow us to develop new vacuum solutions together with our customers. Our success in this area can be measured by the number of spec wins we generate.
These are basically innovations agreed with the customer in advance, securing us as a trusted supplier and giving us better visibility in future sales. OEMs typically use down cycles to develop new platforms for fabricating the coming generation of chips. As the cycle turns back towards growth, OEMs generally shift the emphasis more towards production capacity, which is roughly where we are right now in the cycle. As you see the results in the graph, in 2019, at the bottom of the cycle, the number of spec wins went up significantly as OEMs ramped up the development of new platforms. By comparison, the number of spec wins so far this year looks quite a bit lower. Also, in the first six months of 2019, that number was small and even below the first half 2020 levels. We picked up steam in the second half of 2019.
Overall, if you compare with full -year totals, I think we're on a very solid trajectory for strong wins in 2020 and probably close to a similar level as 2019. This also compares very well to the high -growth years of 2016 and 2017. Overall here, I think we're in a very strong position. To accelerate this, we've increased spending in our business units and R&D. They're up about 22% since 2018. Over the same period, we've also increased our channel and key account spending by 13%. This is clearly driving results as you saw in the market share data. This chart, let me summarize VAT's view of the market for the rest of the year and our management priorities. The sentiment in the semiconductor market remains positive, and early indications are that this should continue into 2021.
Our service business had a very strong May and June, as many of our customers returned to the upgrade business to support their increasing production requirements. COVID-19 remains the big question mark. Far, we've been able to mitigate its impacts, thanks to the system-critical status of the semiconductor sector, as well as our internal efforts to increase both production and supply flexibility. Once again, I'd like to call out the great efforts of our people to adhere to all the health and safety regulations, which resulted in only two confirmed cases of the infection among our global staff. Our priorities over the rest of the year will be to maintain our sharp focus on technology innovation, which lies at the heart of our long-term business success, and to keep driving operational improvements aimed at making us faster, more flexible, and more efficient.
Looking now at the outlook for Q3, we expect net sales, EBITDA, and EBITDA margin all to be substantially higher for the full year 2020 than they were the year before. We have confirmed our midterm EBITDA margin target of 33% and reiterate that free cash flow will be influenced by our working capital needs as we ramp up production. This may be lower than at 2019, which was a very strong result. Lastly, for Q3, we expect next net sales of between CHF 175 million and CHF 190 million. With that, I'd like to conclude the presentation and thank you for your attention and open the Q&A session.
The first question comes from Jörn Iffert from UBS. Please go ahead.
Good morning, Mike. Good morning, Stephan. Thanks for taking my questions. The first one would be you mentioned you have won a couple of new customers, and you have allocated some resources regarding sales and account managers on these customers. Can you give us a little more clarity? What kind of sales potential you're seeing with the new customers, and also, how many headcounts you have allocated here? The second question would be, please, you made already some statements regarding M21; fully aware visibility is low. Can you tell us regarding the second half, would you say that order intake can trend towards CHF 200 million, giving us confidence for the first half, M21 at least? Also, on DRAM, are you seeing already projects really ramping up on the customer side? Thank you.
Let me start. I'm just noting your needs here. First of all, new accounts. As we've grown the business, we've put key account structures around our largest customers. These are fairly large investments. They include salespeople, applications people, quality people, and engineering. It's been one of the strengths that's allowed us to gain market share at our key large OEMs. As the market consolidates, the next level of OEMs starts to grow; they become a significant size. At that point, we make the decision to put the same type of key account team around there. Again, it's a significant early investment; we have seen that this incredibly close technology tie-in and close working relationship gives us a strong insight into their future needs and helps us drive market share in the long term.
This year, we put three major key account teams in place, probably adding around about 10-12 headcounts. I don't know the exact number. That is now helping us develop future share gains within those three accounts. Some of them are technology leaders in their segments, which gives us also a lot of early understanding of the technology trends within these unique segments. It's a model we will continue. As our customers get larger and we see more consolidation, we will keep increasing the number of key account teams. For the rest of the customers, we still have a global team that has applications and design people, but they're not necessarily co-located with those OEMs. I think this is a winning formula we've got for our market.
We're also starting to deploy a similar market into our general vacuum business, where we have large OEMs in things like the mass spec businesses and coating businesses. We'll consider putting small key account teams there to ensure we can grow in the non-semiconductor areas. Your second question was around the second half. There's still a lot of uncertainties there. You've seen our guidance for the third quarter, and I'm not willing to give any further guidance into the fourth quarter at this point until we see how the third quarter works out. I think there's just too many uncertainties in the market. DRAM is looking more positive. The pricing has definitely stabilized. I think we're also seeing a lot of positive momentum in the drivers of DRAM. Micron stated recently, the PC growth driven by work from home looks positive and also the 5G rollout should yield good results.
They also said that the leading nodes, which are the very latest generation of DRAM, are already making up 50% of the volume. I think that's a good indicator that it's the advanced compute applications that are driving, which should also be positive from an ASP standpoint and driver profitability. Another key driver in the second half we'll see is the next generation gaming platforms. There's a lot of new consoles being delivered to the market, and they've got about a 40% increase in DRAM content. I think, yes, DRAM pricing dropped about 50% from the last peak, but it's definitely stabilized, and from what I can tell, the large DRAM producers are starting to see positive trends there.
Many thanks.
Thank you.
The next question comes from Robert Sanders from Deutsche Bank. Please go ahead.
Yeah, good morning. Hi, gentlemen. My question is just really on the outlook. You're sounding quite optimistic given the backlog but a bit uncertain on Q4. If you contrast your statements with what Western Digital and Simco were saying overnight, which is Simco saying less wafer starts in Q3 from memory, Western Digital saying big inventory correction in SSDs. It sounds like you don't have a lot of visibility into Q4. Is it fair to say that the uncertainty into Q4 is above normal? Or is it that, perhaps with the next generation of NAND, there is a much greater increase in valve intensity versus the last upgrade of NAND when it comes to layers?
I know Western Digital, although they were very cautious, they actually have kept CapEx quite high, which suggests that perhaps even in the face of lower pricing, they need to even move faster to the bleeding edge across their whole footprint. Thanks.
Yeah, I think you've almost answered the question yourself. There is macroeconomic uncertainty out there, which we all know. I think the pure volume of wafer start is a little bit disconnected to the capital cycle, like you hinted at there. I think our visibility is actually pretty good right now. If you look into the main OEMs, into their announcements, they've all given pretty strong guidance for the second half of the year and made statements that their order book looks pretty solid for the second half. I think we've got confidence in the second half. The previous question asked me, were we going to hit a CHF 200 million quarter, and I don't have visibility to that, but I do have visibility that the second half will be positive.
I also mentioned that the chip demand is very much biased towards the latest generation, so our customers are having to make those capital investments to ensure a strong supply at those leading-edge nodes. I think that's what's driving the CapEx right now. It's more technology upgrades and being ready for demand increases rather than a perfect economy. I think also in the second half, we'll start to see a boost in smartphone demand when Apple eventually gets their new products to market. I think overall, we've got good visibility. I think it will be a strong second half, and initial signs for 2021 look quite okay at this point.
Got it. Just last question would just be on the valve inventory you see at OEMs. Obviously, as is normal at the beginning of these cycles, your orders are growing faster than your OEMs, so they must be building inventory. Have you stress-tested how much inventory is sitting at OEMs, whether it's at their ERP or on-hand, just to kind of double-check that there's not a sort of buildup, an excess buildup? Thanks.
Yeah, I think there's definitely some level of overstocking. I'm not sure if that's entirely due to where we are in the cycle, or is it just a safety net for the potential of a second wave of the pandemic. I think we can see our consigned inventories for our key customers, and I'd say they're within classical levels or historical levels. I don't see anything too difficult there. What I can't see exactly is how much stock our customers are keeping within their internal stocks. When I look at the share gains we've made, when I look at our customer growth, I'd say there's maybe a couple of percent potential of overstocking within the market, but not at a worrying level at this point. It is quite complicated, though, as I mentioned, due to the fact we're gaining share at the same time.
We're also seeing transition in regional shipments. For example, the products that go to China tend to be sometimes lower -spec products than the ones going to the most advanced logic nodes. There's quite a mix element here that we're trying to understand as well. In fact, that was one of the reasons why our ramp in Malaysia was a little bit slower than we expected because there was a much higher percent of shipments going into China, which I would say are less leading edge than the products going into advanced logic and advanced DRAM, which has meant we've had to ramp up Haag here in Switzerland a little bit more than we had originally planned for. That's more of a timing issue. It gives you an idea of some of the challenges we have to predict things like overstocking.
That's helpful. Thank you.
The next question comes from Michael Foeth, from Vontobel. Please go ahead.
Yes. Good morning, gentlemen. Two questions from my side. I was wondering if you see opportunities to actually grow in adjacent applications or expand your offering into your existing markets. You have obviously mentioned the motion components in your presentation, and I was wondering if you could provide some more detail on that and maybe give an indication of the potential you're seeing with such applications. As a second question and adding to the first one, if you can maybe give us an update on your thinking about M&A in the current context Thank you.
Okay. Yeah, I think our primary focus definitely remains in our core. I think you can see from our share gains that the focus we're putting into key account teams and growing our valve content is still the most lucrative way for VAT to grow its business. That is our core focus without a question of a doubt. The adjacencies is the next opportunity. We've really focused them in three or four areas. One is our modules business, our motion components. We've developed a range of ALD valves, which are actually not vacuum valves. They're actually flow valves and slightly departing from the vacuum component. We have a few other things like that to drive adjacencies. We're also looking at adjacencies in our general vacuum business.
For example, in one of the scientific instrument makers, we don't just produce the valve now; we produce sample loaders for them. We're looking anywhere there's opportunities to take VAT's experience in design, machining, things like material handling, how we can use that to grow the share of wallet at any OEM that requires precision components. Some of these businesses are sizable. The motion components business, we've had a lot of spec wins in the last one to two years. As those platforms proliferate in the market, we'll see our motion components business get above CHF 20 million and then continually grow up towards a CHF 50 million level. That depends on the proliferation of these new platforms. It's very interesting because there's no major player in that area. These motion components in the past were either done by build -to-print manufacturers or maybe small local suppliers.
The same with advanced modules. They, again, were done mostly build to print. As we can add content and value into these components, we should be able to grow our share. I think so far all of these have been organic. We've seen enough organic opportunity to focus predominantly on that. We continue to look for technology opportunities from an M&A perspective. I have now competence internally to both evaluate the market and do a deal if we wanted to do it. I think in the short term, that would be targeted more about technology tuck-ins. We continue to evaluate a lot of small opportunities. We've got to choose the right ones. We've got to choose technologies that will add to our core and grow from our core. At the moment, I'm entirely focused on things either connected to valves or enabling the performance of valves.
I think there's still a long list of opportunities before we have to talk about pure adjacencies or far adjacencies. At the moment, focus is all around about expanding the core.
Very helpful. Thank you.
The next question comes from Marta Bruska from Berenberg. Please go ahead.
Hello. Good morning. Thank you. I have two questions. Firstly, please, could you clarify on the outlook and your 2020 guidance? How does it reflect your positive comments on the huge opportunity in motion components that you have been just discussing? If you could quantify that, please. The second one is on the run rates. If you could update us on the current utilization of all your three manufacturing sites and when, if at all, you will move back some of the capacity that you relocated from Malaysia back to Switzerland, if you're going to move it back to Malaysia. Thank you.
The first question: I think that was maybe a misinterpretation. The motion component is having a fairly minimal impact in this year. It's probably around the CHF 10 million level. The motion component will grow over the next three to five years, up towards that CHF 50 million level. These are new products which we've developed, and we have in many new industry platforms. Many of these platforms are being piloted in things like five nanometers and three nanometers. As those platforms grow, we will see the volume of these motion components grow. These are long-term growth drivers for the company, not short-term drivers. In terms of the utilization of our factories, the way we manage the growth of our factory, we can't move our products very easily from factory to factory. We tend to build our products for factory-specific for a given technology.
Because of the complexity of moving from factory to factory, we decided that we'd bring up Malaysia with all the latest semiconductor products. The ramp-up of that factory depends on the migration in semiconductor to the next-generation products and next-generation nodes. That's a little bit unpredictable. What we saw in this ramp, we expected to see faster transition to leading-edge DRAM and leading-edge NAND. That was delayed a little bit. It's delayed the ramp-up of the factory in Malaysia. We're currently at a run rate of about CHF 120 million. That factory was designed for CHF 400 million, so somewhere around about the 25%-30%. We expect Malaysia to grow up towards the CHF 170 million in 2021, and then heading towards CHF 250 million, CHF 300 million the following year. The ramp-up will be quite fast when it starts really gathering pace and when these new platforms come to market.
In this recent ramp-up, we've seen the need to ramp up some of our older products, which were developed in Haag and manufactured here in Switzerland. We expected some of them to have transitioned to Malaysia in the new product. That hasn't happened yet, as I just explained. We've had to spend a bit more ramping the facility here. That's a transitional thing. It's a timing thing. Over the next one to two years, we'll rebalance that again. It's just typical of the high-mix environment we have in semiconductors and the difficulty of predicting exactly when the next-generation products will come to market.
Thank you.
The next question comes from Sandeep Deshpande from JPMorgan. Please go ahead.
Yeah. Hi. Thanks for letting me on. My first question is, maybe could you help us understand how your exposure is in the first half of the year in terms of semiconductors, display, solar, et cetera, given that what you're saying in the second half, that semis remain strong, but display is changing in terms of demand? My second follow-up question is, again, on new products and new markets that you intend to enter. I had originally thought that building this manufacturing facility in Malaysia gave you flexibility but also enabled you to enter lower-end valve markets. Is that not the intention anymore?
I'll start with the last question. I think having a better cost base is an important factor for many of our markets. In semiconductors, there is a wide range of technologies required, from very leading edge down to more commoditized products. If we see opportunities to add some innovation to the lower -valued products, we would do that and manufacture them in Malaysia. There's still enough growth at the, I'd say, the medium to high end that we're utilizing that. I don't think that changes the strategy too much. Exposure to semi, if I include the percent going into services, it's probably about 70% overall. Obviously, semiconductor is the biggest part of our sales. On product sales, probably 55% roughly 55%-60% range going into semiconductors.
What about display?
Display is probably, as a percent of our total revenue, around about the 15% level. We look at solar and displays as one business area. There's quite a changing mix in there right now, where, as I mentioned earlier, we're seeing OLED slowing in the second half, but we're seeing solar increase. The overall mix, compared to the first half, I think will be down a little bit in display solar but compensated by a much stronger semiconductor business. Also, our service business will grow in the second half versus the first, as will our general vacuum business. The service business was impacted by our ability to get on site and fulfill the upgrades that we had already booked. That's now improving. We'll see service and our general vacuum business increase in the second half.
Thank you.
The last question comes from Jürgen Wagner from MainFirst Bank. Please go ahead.
Yeah, good morning. Thank you. Actually, I have two questions. You mentioned the ramp in Malaysia. What will be your margin profile once you have ramped close to CHF 400 million over the long term? The second question would be, how dependent are you on Chinese memory makers? Do you see a risk that over time they can source from local valve manufacturers? Thank you.
Yeah. We don't give detailed margin levels between the plants for obvious reasons. That's a highly competitive data point. Only guidance we give is that we feel comfortable that this will drive our performance to our midterm target of 33%. China, for us, is an interesting area. We have very good market share in the Chinese OEMs and in direct sales to Chinese fabs. We have a very strong presence there. The China memory market, or in fact, all the Chinese chip-making markets, depend on U.S., Japanese, and Korean OEMs. That's not likely to change. It's going to take a long time before the Chinese equipment market can sustain any real capability within chip manufacturing equipment. Our presence and market share amongst the American, Korean, and Japanese OEMs will ensure that we have a tremendous continuity of share within China for the foreseeable future.
I think the other challenge a Chinese valve manufacturer would have is that there's very little chance that a Western OEM would want to work with a Chinese valve supplier because they would be very concerned about IP leakage moving from them to a Chinese supplier. I think the China market, for us, looks quite good. We watch it very closely. We've got a lot of feelers out into the competitive landscape there. I think for us, the bigger challenge will be in the non-semiconductor markets, where there's a growing drive to localize a lot of the supply chain in the industrial markets, for example. At some point, we have to have a clear strategy around some form of, say, assembly or manufacturing within China to ensure that we don't allow Chinese competitors to come into the advanced industrial markets.
I'm more concerned about the advanced industrial markets than I am about semiconductor for China.
Okay.
Does that make sense?
Thank you. Yeah, understood. Thank you.
Thank you. Okay, well, thank you for your questions. I think to conclude, it was a very strong first half of the year, strong performance. We expect that to continue into the second half. The Q3 trading update is planned for Friday, October the 16th. Our Capital Markets Day, we're planning on December 2nd, 2020 in Zurich. We've had challenges scheduling that due to the COVID-19 pandemic. We will do our best to ensure that this takes place on the 2nd of December. Thank you very much for your attendance, and see you at the next call. Thank you.