Good day, ladies and gentlemen. Thank you for standing by, and welcome to the ACM Research Fourth Quarter 2021 Earnings Conference Call. Currently, all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Gary Dvorchak, Managing Director of the Blueshirt Group. Mr. Dvorchak, please go ahead.
Good morning, everyone. Thank you for joining us on today's call to discuss fourth quarter 2021 results. We released results before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There is also a supplemental slide deck posted to the investor portion of our website that we'll reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang, our CFO, Mark McKechnie, and Lisa Feng, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to slide two. Let me remind you that remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially.
Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation, a loss relating to a change in fair value of a financial liability and an unrealized gain in trading securities. For our GAAP results and reconciliations between GAAP and non-GAAP accounts, you should refer to our earnings release, which is posted on the IR section of our website and slides 12 and 13 in the supplemental deck.
With that, let me now turn the call over to David Wang, who will begin with slide three. David?
Thanks, Gary. Good afternoon, everyone, and welcome to ACM Research fourth quarter and full year 2021 results conference call. 2021 was a transformative year for ACM. We expanded our customer base, ramped the production of new product, and secured orders for evaluation tools from several major semiconductor manufacturers, including a top global player in the U.S. I will now provide the 2021 financial results. Please turn to slide three. Our financial results demonstrated the power of ACM's expanding customer base, our differentiated multi-product solution, our product cycle, and our growing production scale. 2021 revenue was $259.8 million, up 60%, and the shipment was $372 million, up 104%.
In the fourth quarter, we had a record revenue of $95.1 million and shipment of $1.7 million for the first time in ACM history. Revenue growth was driven by both new products and new-
Ladies and gentlemen, please stand by. Please continue to stand by. Your conference call will resume momentarily. Thank you for your patience. Please continue to stand by.
Hey, operator. It sounds like you're trying to dial David back in. I know we had a couple people that got dropped off the call. Are the participants all still on the call?
Yes, sir. I'm still trying to reach out to David.
Okay. I think what we'll do is, I'm gonna continue with the prepared remarks section that David was gonna say, and then when you get David, please just announce him to the group.
Yes, sir. Thank you.
Okay. I'm gonna continue. Thanks for the patience, everyone, but we'll have David back soon. Revenue growth was driven by both new products and new customers. We had solid growth from cleaning, 2.5 x growth in ECP, furnace, and other product, and more than 3 x growth in advanced packaging and wafer manufacturing products. We benefited as our front-end customers continued to scale their production capacity, and we saw incremental contributions from new customers, including second- and third-tier players. We also maintained a good balance of growth and profitability, with 44.4% non-GAAP gross margin, 16.9% non-GAAP operating margin.
With the $545 million raised in the Star Market IPO, we now have a strong balance sheet to fund and accelerate our vision to become a global player in the semiconductor equipment industry. In products, we are now a world-class multi-product company. Over a decade ago, we were positioned as a one-product company with our single-wafer cleaning SAPS tools. Over the years, ACM's commitment to R&D and innovation has enabled us to grow into a multi-product business that could penetrate adjacent markets. Following the introduction of our SAPS technology, we have expanded our cleaning portfolio with TEBO, Tahoe, and semi-critical tools. ACM now offers a complete range of cleaning products that covers more than 80% of all cleaning processes.
Building on our core market position in cleaning, we have achieved significant traction for our plating and advanced packaging products, and our furnace product cycle is soon to follow. We expect to continue to build on our momentum by introducing two major new product categories in 2022. In production, we demonstrated the ability to deliver world-class production tools in volume to many of the largest and most innovative fabs on the planet. Starting with our first factory in Zhangjiang, Shanghai, we now have two buildings with considerable capacity in Chuansha, Shanghai, and a third facility in South Korea. We are now preparing for significant growth with our new factory and R&D facility under construction in Lingang. In marketing, we have expanded our sales effort, and we are now knocking on the doors of major industry-leading IC makers around the world.
We are also adding services personnel to support recent evaluation orders, and we believe success with a major customer could attract even more customers outside of Mainland China. Putting it all together with products, people, and capital, we've built a strong foundation for robust growth in the years ahead. Today, I'm happy to share that we have established a longer-term and internal target to reach more than $1 billion in annual revenue. We plan to achieve this by adding new products, new customers, and new production tech capacity in the coming years. I will now provide detail on our 2021 results. Please turn to slide four. First, our 2021 cleaning results demonstrate the strength of ACM's multi-product strategy. Cleaning grew by 44% to $189.2 million. This includes our flagship SAPS, Tahoe, and TEBO products. It also includes our recently introduced semi-critical tools.
Cleaning was 73% of sales in 2021 versus 84% in 2020, reflecting rapid growth in our other new product groups. We expect solid growth from our flagship cleaning and semi-critical cleaning products in 2022, with good support from a recent order for 29 AutoBench tools. We recently announced our ultra-low pressure dry, ULD, technology, which is now being qualified in a major customer, and it expands our AutoBench portfolio to cover nearly all of the cleaning steps performed by the AutoBench tools. We are in development of a few new dry methods for advanced memory and logic applications, such as the super critical CO₂ dry and advanced high temperature IPA dry technologies, which will further increase our cleaning product portfolio coverage from 80% of the process steps to 90% of the process steps.
ECP, furnace, and other products grew by 149% to $33 million and represented about 13% of sales. We delivered 20 ECP tools in 2021, with about 1/3 front-end or ECP MAP, and about 2/3 for advanced packaging or ECP AP. Last week, we announced orders for 21 ECP tools. These orders include ACM's first volume purchase order of 10 tools to our front-end ECP MAP tools, which came from a top-tier China foundry. The order followed successful first tool evaluations in which the customer qualified our tool for 65 nm down to 28 nm processes. Meanwhile, we delivered seven furnace tools in 2021. These were mostly demo tools, and we expect the furnace contribute more meaningfully to revenue in 2022 as its product cycle commences.
We continue to refine our ECP technologies to meet our customers' increasing needs in advanced nodes and develop furnace ALD technologies that are critical for advanced nodes in both memory and logic applications. Advanced packaging, not including ECP, services and spares, and other processing tools, grew to $37 million or about 14% of sales, up more than three times from 2020 levels. This group includes a range of packaging tools, including coater, developer, scrubber, PR stripper, and wet etchers. It also includes our services and spare parts. ACM has a broad offering of wet tools to support advanced packaging, and we're the only company that offers both the full set of wet tools and the advanced plating tools. A global IDM with a China-based assembly facility is evaluating our tools with good progress so far.
We are hopeful we can secure meaningful repeat orders for additional PR strippers and other products from this IDM and other customers. Advanced packaging is becoming more important as the industry looks for packaging innovation to drive higher performance. We expect advanced packaging to be a solid contributor to revenue for 2022 and beyond. As discussed in previous calls, we believe that the TAM of plating tools will be driven significantly by advanced package applications, from $700 million in 2021 to more than $1.5 billion market opportunity in the coming years. Second, we diversified our customer base in 2021. Please turn to slide five. Our first customer group is the major front-end manufacturers. We have five customers in this group encompassing foundry, 3D NAND, and DRAM. 2021, we had two greater than 10% customers, both from this group.
Shanghai Huali, together with Hua Hong Semiconductor, as a group known as the Hua Hong Group, was our top customer at 28% of sales. They are a leading foundry in China that is in the middle of a multi-year expansion project in Shanghai and Wuxi for trailing edge and 28 nm products. We supply the Hua Hong Group with nearly all of our products. Being close to our Shanghai engineering team, they are often among the first to try out our new tools. YMTC was our second largest customer at 21% of sales. We have been working closely with YMTC since the early days of their first fab in Wuhan. That fab is now ramped to scale, close to full capacity. ACM was the top cleaning tool supplier to YMTC in 2021.
We experienced good growth from sales of our flagship products and semi-critical tools to YMTC. Public reports have indicated that YMTC has completed the construction of the shell of its second fab building in Wuhan and will soon begin to install tools to ramp production of its advanced 3D NAND product. We are working to win additional share of YMTC's cleaning business, and we also believe we are well positioned to participate with our ECP furnace and other new tools in development. Other key front-end customers are SMIC, CXMT, and SK Hynix. Each of these were mid to upper single-digit revenue contributors in 2021. We are expecting more contribution from these three customers going forward. Our second customer group consists of emerging China-based semiconductor customers who manufacture power, analog, CMOS, image sensors, compound semiconductors, and other devices.
This group includes five second-tier players, a handful of new third-tier companies, and others. While revenue from each of these customers alone was relatively small, the group in total contributed about 10% of our 2021 revenue. These customers are investing in new capacities to support the growth of 5G, IoT, EV, artificial intelligence, and other emerging technologies. ACM has a good presence with these customers, supplying a broad range of tools, including SAPS, semi-critical cleaning, ECP, and furnace products. We expect strong growth for this group in 2022. Our third customer group is advanced packaging and wafer manufacturing. Top customers here have included JCET, Tongfu, Zhonghuan Semi, and Wafer Works. This group is reflected in our advanced packaging, other processing, service and spare parts, which is about 14% of 2021 revenue.
We see major investment in advanced packaging technology as the industry shifts spending to this area, seeking new sources of performance gains versus more traditional node shrinks. China has an active ecosystem of emerging advanced packaging and wafer manufacturing startup companies, which provide additional opportunity for our products. Third, we continue to make great progress with additional major customers. Semiconductors are a global market, and we intend to extend our participation from China to the rest of Asia, the U.S., and Europe. During the fourth quarter, we announced four positive developments. I'll start with the U.S.-based major global player who placed an evaluation tool order and a production order for our Ultra C SAPS 512-chamber cleaning tool. We plan to deliver both in the first half of this year for installation in their U.S. fabs for use in advanced processes.
We have begun to scale up our U.S.-based services team to support this important evaluation. We believe a successful evaluation could lead to larger business opportunities with this and other major customers in the region. Second, received orders for two Ultra C PR stripping systems from a leading global IDM. This customer has a China-based advanced packaging manufacturing facility. The first tool was delivered in Q4 of last year, and the second one is scheduled for delivery this quarter. Our third was an Ultra C SAPS 512-chamber cleaning tool evaluation order from a global semiconductor manufacturer with a China fab. And lastly, we received an order for an Ultra ECP MAP copper plating tool from a regional Asia-based semiconductor manufacturer. This is on track to be delivered early this year.
ACM's progress with these major players is a testament to our technology leadership, the strength of our regional support teams, and our ability to produce at scale. We are confident that successful qualification can result in larger business opportunities, and we continue to build our sales pipeline with other top-tier players. Next, I'd like to provide an update on our production capacity. Slide six. We achieved a key milestone with our record $117 million of shipments in the fourth quarter. This is our first full quarter of more than $100 million of production. We exited the year with nearly $500 million of annualized production capacity despite the industry-wide supply chain challenges. Confidence in our production capacity is a critical factor to attract additional major players as future customers.
We are working to increase production capacity to 625 million by the end of 2022. We are also on track with our plan to build a production and R&D center in the Lingang region of Shanghai, where one million sq ft of floor space could enable us to increase our annual production capacity to 1.5 billion in the coming years. The facility will be used to support advanced R&D with the world-class clean room and metrology tools and will help to speed up our internal R&D and demo activities. We plan for initial production at Lingang in the middle of 2023. Please turn to slide seven for an update on ACM's SAM. ACM has become a trusted supplier to some of the biggest and most innovative semiconductor producers in Asia.
We have scaled our business alongside these giants, and many of them now look to ACM to work together to solve some of the more challenging issues that they face. This provides ACM a ready testing ground with beta customers to develop our ideas into products. We have the opportunity to deploy our newest differentiated technologies at leading manufacturers for just a short flight or a drive from our Shanghai factory. We seek to first develop our technology, scale it with our local partners, and then, when ready, leverage ACM's global presence, to expand our business to international markets. With this operating environment, we have grown our product offering substantially over the past several years. We now estimate ACM's current product portfolio addresses an $8 billion market opportunity.
The increase from our previous estimate of $5 billion SAM is based on much higher third-party estimates for the 2021 WFE market, which now stands at about $88 billion. By product line, we estimate a contribution of $3.7 billion from cleaning, $2.9 billion from furnace, $732 million from ECP, and $650 million from stress-free polishing, advanced packaging, wafer processing, and other processing equipment. We are committed to our goal to double our SAM to more than $16 billion in the next several years with the addition of or the introduction of two major new product categories. We plan to do this with the level of innovation that our customers have come to expect from ACM.
We expect that we can deliver these first tools for each of the major new product categories in the second half of this year. As I've noted in prior calls, we plan to enter these categories at leading-edge nodes, and we have built an innovative and a differentiated technology roadmap to address the requirements for the next generation nodes. Turning to slide eight, we are tremendously excited about the growth opportunities in front of us. Our expanding product line, our global sales effort, and production capacity, combined with the capital raised from the ACM Shanghai Star Market IPO, provides us with a great opportunity to accelerate our penetration of our SAM, both with our current customer base in Mainland China, and the ramp of other new customers in other regions. This chart offers some more detail around our $1 billion revenue target.
We are proud of what we have achieved since our U.S. IPO in 2017, with our 2021 revenue up 7x versus our 2017 revenue, and we are committed to continue on this growth path. Given that many of our customers are still in the early stages of multi-year capacity expansion, we believe we can achieve our $1 billion revenue target largely from Mainland China alone. Our model assumes that China maintains about a 20%-25% share of the global CapEx with modest growth, and that ACM achieves a target of 50% share in cleaning tools, 50% of ECP tools, 40% of furnace tools, and another incremental $100 million from advanced packaging, wafer manufacturing, services, and spare parts.
While we're not setting a specific timeline to achieve this target, we think that one or several major customer wins outside of Mainland China could help us to achieve the target, sooner rather than later. I also note that our model doesn't include contribution from our two new product categories. We look for these products to provide another major driver of growth, beyond the $1 billion target, with the initial ramp expected in the 2024 timeframe. Operator, any sign, have we connected with David yet?
We have not connected with him yet.
Okay. I'll keep going, and let's keep trying to get him on the call. Now, let's move to our 2022 outlook on slide nine. Our guidance reflects optimism about our growth opportunities for 2022. We have increased our revenue guidance to a range of $365 million-$405 million. This represents 48% projected annual growth at the midpoint. Our outlook for 2022 is based on several key assumptions. First, stability regarding the global COVID-19 pandemic. Second, stability in the U.S.-China trade situation. Third, a range of spending scenarios for the production ramps of key customers. Fourth, management of ACM's supply chain. Finally, a range of timing of customer acceptances of first tools. Our results and outlook demonstrate successful execution of our strategy.
Our strong growth is supporting additional R&D spending on new products. We are building our global sales and marketing resources to penetrate new customers in new regions, and we are scaling production capacity to support our long-term growth plan. We believe we are on track to achieve our mission to become a major equipment supplier to the global semiconductor industry. To conclude, we are extremely proud of these results. We wanna thank our customers, business partners, and shareholders for their support and confidence in ACM Research. I also want to acknowledge our employees for an outstanding job and for staying focused and engaged with our customers. I am now going to move on to the CFO section to discuss the financial results here in more detail. We delivered record financial results in the fourth quarter and for the full year of 2021.
Unless I note otherwise, I'll refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized gains in trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Now, the fourth quarter shown on slide nine. Revenue for the fourth quarter of 2021 was $95.1 million, up 108.8%. Revenue for single wafer cleaning tools, which includes SAPS, TEBO, Tahoe, and semi-critical cleaning, was $61.9 million, up 68.3% from $36.8 million. Revenue for ECP, furnace, and other technologies was $19.5 million, up from $4 million. Revenue for advanced packaging, excluding ECP, services, and spares, was $13.8 million, up 2.8 x from $4.8 million.
Total shipments for the quarter were 117 million versus 67 million in the fourth quarter of 2020 and 99 million in the third quarter of 2020. Hello?
Go ahead. Continue. Can you hear me, Mark?
Okay, thanks. Yeah, we can hear you okay, David. It's good to have you back. I finished reading your introductory comments, and I'm on the CFO section.
Okay.
I'll keep moving on.
Good to go.
Yep.
Okay, please.
Total shipments for the quarter are $117 million versus $67 million in the fourth quarter of 2020 and $99 million in the third quarter of 2021. This includes deliveries for revenue in the quarter, deliveries of systems awaiting customer acceptance for potential revenue in future quarters, and deliveries of evaluation tools. This represents another quarter of record shipments, which we consider a remarkable accomplishment by our production team, given industry-wide supply constraints. Gross margin was 47.9% in the fourth quarter versus 43.3%. This was higher than our normal expected range of 40%-45%, reflective of a favorable product mix. We expect gross margin to continue to vary on a quarterly basis due to a variety of factors, including product mix and manufacturing utilization.
Operating expenses were $25 million versus $13 million. The increase in operating expenses reflected higher R&D and new products, our expanded U.S. sales team, and other costs. R&D expenses grew to $12.6 million or 13.7% of sales, more than double the level from the year ago quarter. The doubling of our R&D spending reflects ACM's commitment to new products and innovation. We expect to continue to increase the intensity of R&D spending to the 17% level in 2022. Operating income was $20.4 million, up from $6.7 million. Operating margin was 21.5% versus 14.8%.
Unrealized loss on trading securities related to the change in market value of our SMIC investment was $1.2 million in the fourth quarter of 2021 versus an unrealized gain of $3.6 million in the year ago quarter. Note that we exclude this non-cash item from our non-GAAP results. We had a tax expense of $3.2 million versus a tax benefit of $2.8 million in the year ago period. Net income attributable to ACM Research was $18.1 million versus $6.2 million in the year ago period. Net income per diluted share was $0.81 compared to $0.29 in Q4 of 2020. I'd like to point out a few below-the-line items.
Equity income and net income of affiliates contributed $3.6 million in the fourth quarter of 2021 as compared to $0.1 million in 2020. I reference this item in this quarter's report as it was higher than normal, due in part to an investment-related gain from ACM Shanghai's participation in a limited partnership. Tax-related items compared to a normalized tax rate and the effects of foreign exchange fluctuations on operating results provided a net headwind of $0.2 million or $0.01 per share, and a net benefit of $0.9 million or $0.04 per share in the fourth quarter of 2021 and 2020, respectively. I will now review selected balance sheet items.
Our cash balance was $563 million at the end of the fourth quarter versus $65 million at the start of the third quarter. This obviously included the net proceeds of our Star Market IPO of $545 million during the fourth quarter. In addition to the cash balance, we also had trading securities, $29.5 million related to our SMIC investments, which includes an unrealized gain of approximately $14.5 million versus our original purchase price. Total inventory was $218.1 million at the end of the quarter, up from $176.6 million at the end of the last quarter. The $41.5 million quarter-to-quarter increase was driven by two items.
First, finished goods inventory grew by $9.8 million to $91.7 million. As you know, this item, it represents the balance of first tools that have been delivered to customers for evaluation and are carried on our balance sheet at cost, pending potential transfer of ownership. The second item is work in process and raw materials, which in total grew by $31.7 million from the prior quarter. We are pleased to be able to secure this inventory for our planned shipment growth in 2022. At quarter end, short-term borrowings, including a current portion of long-term debt, was $12 million, down from $17.6 million at the end of the third quarter. Non-current long-term borrowings were $23 million, essentially flat with the end of last quarter.
Cash flow used by operations was approximately $36 million for the fourth quarter and approximately $40 million for the full year. As I discussed above, this was to support the growth of our finished goods inventory, which is a good indicator of evaluation tools at our customer and our future production needs. In sum, we are successfully executing our strategy. We're participating in the growth of major new IC fabs. We are ramping production, and we are developing and delivering new products to a growing list of customers. We are positive about our opportunities in mainland China and the expansion outside of China. Let's open the call for any questions that you may have. Operator, please go ahead.
Our first question comes from Patrick Ho with Stifel. Your line is open.
Thank you very much, and congrats on the nice year. Maybe first off for you, Mark, in terms of the supply chain, you guys managed it very well based on the results and the outlook. Can you, one, describe some of the issues that you're facing and some of the challenges? Secondly, what are you doing specifically to try and mitigate the situation?
Mark wants me to answer, right?
Yeah, go ahead, David, please. You can start. Yep.
Yes, this is a shortage of the supply chain I think everybody is facing right now, ACM facing also, right? Last year, we do have usually some long-lead items, and on average, they used to be two months, three months. They're pushing, you know, quite far away, like five, six months. So, as we're approaching greenfield in the last year, we're working very closely with our supply chain, and also, we give them more of a heads-up on long-lead item orders, right? And also asking to secure delivery, right? That's the way we're doing. Second thing, we're also looking for a secondary vendor, which is, you know, hopefully something like a third vendor, you know, not the best.
That's what the end of our reviews are leading to or the non-lead time. When it comes to this year, again, we'll do the same approach, and again, we'll give as much as we can the long-lead item order to the strategic supplier. At the same time, we're also actively looking for secondary, even third-party supply, right, to rebalance our risk with the constrained supply chain. Hopefully, you know, this year we can see better. We also see our supply chain did a lot of good job expanding their capacity. You know, they hire more people, and we do see that the capacity increased. Anyway, hopefully, I think this year will get smooth, and we'll be in better control than last year.
Great. That's helpful. Maybe as my follow-up question, it's very encouraging to hear about your $1 billion annual revenue target. Can you discuss a little bit about your capacity need and how you'll be able to flex capacity depending on, you know, kind of the product strength? Are you going to be able to flex from, say, you know, your clean products or advanced packaging as that market grows? Give me a little bit of color, I guess, in terms of one, the potential capacity increases and how you can flex from product to product depending on customer demand.
Great. Actually, Patrick, if you wanna go, can you go to slide eight, where I've listed in a model, kind of supporting what you were projecting here, right? Page eight. Basically, I think with our broader process coverage for cleaning tool, and, we believe, you know, by end of this year, we'll have about 90% that coverage with additional CO₂ supercritical, and the advanced IPA dry. With that broader technology, we have confidence for probably catching 50% of the local mainland China market, right? You can see that is, we're kind of half of that, almost close to $0.5 billion. Then follow that is real copper plating, right? The same thing again, with our broader plating technology, including we mentioned about the thin seed, you know, can plating as thin as the 50 Å.
We can handle the most advanced technology nodes, we believe. That in United States will cover thin film processing and also TSV and also advanced packaging tool. That give us, you know, roughly, I said 50% of that. It's about basically in ECP, China about $0.3 billion, right? Then about the United States, about close to $0.2 billion as our market here. Next in front-end big one, right? That's a huge market there, too. We're talking about probably to capture 30% of the global market. With that additional packaging, we talk about $100 million. With that all together, it goes to $1 billion. However, this is really, I think, a conservative estimate.
The reason I say that is, we're actively looking at markets outside of mainland China, as we progress. I mentioned we secured the one, you know, top-tier customer in the U.S.-based. We're continuously exploring, customer in Taiwan and in Singapore, South Asia and even Europe, right? With that additional global customer, main-- outside mainland China, you know, as we progress, I think it will speed up even there, you know, our speed reaching $1 billion revenue, right? That's probably major. We're thinking today's our product, which is a leading market. As I mentioned also in our, news release, we are also working on the two additional, new products, which is, will double our, addressable market, you know, from $8 billion-$16 billion.
Obviously, those products will not get the revenue probably until 2024 and even beyond, right? That will be further adding additional driving force and to help ACM, you know, grow to billion, even exceeding, you know, billion over. That's our strategy we're talking right now. Anything else, Mark, you want to add to that?
Yeah, you bet. No, I think it sounded like Patrick had a little side question about our ability to produce it, too. Patrick, one thing to be clear, you know, our production facilities, it's pretty fungible between our different product lines, Patrick, and so really our capacity is about the floor space we have. You know, we've given you the plans on that. It's our team, and of course, it's the supply chain. You know, those are kind of the big drivers. I mean, of course, we've got plans in place, you know, to support from a production standpoint to support those targets.
Great. Thank you very much, and congrats again.
Thank you.
Thanks, Patrick.
Our next question comes from Donnie Teng with Nomura Securities. Your line is open.
Hi, David and Mark. Can you hear me?
Yes, Donnie, I can hear you very well.
Yeah. Great. Congrats on the good results. Maybe my first question is regarding to your 2022 guidance. Looks like we revised up a little bit just from the guidance we have given out in the past one to two months. Just curious, what's the reason behind the better guidance this year? Also, considering that we are expanding our like non-wafer cleaning equipment much quicker in 2021. The question frequently asked by investors is how can we grow this non-wafer cleaning towards much faster? What kind of investment we have been done in these new areas? This is my first question. Thank you.
Okay. Actually, like you said, in the you know January timeline, it will be our first full-year guidance, right? You know, since then until now, almost like you know two months passed. We do see some more visibility, you know, compared with the you know January timeline. We see that they're more visible and also therefore, for that reason, we made the, you know slight adjustment of a $20 million more increase for the whole year guidance. All right? You look at this year's revenue growth; I think we still see a very strong growth in our main continuing product.
We also just recently announced we do have this AutoBench , you know, big order come in, and we see that there are also very strong demand in also our AutoBench product, which is more add on there, you know, single wafer. I can say in China, second-tier and including SMIC, also they're expanding, you know, 45 nm a lot in this production line. We see that their AutoBench will be real critical and for those, you know, trailing-edge product. Also as we announced, we have this low-pressure dry technology has been qualifying, and that's really make our AutoBench product a real standout in China for the domestic player. We can almost cover most of their AutoBench process.
Obviously, our SAPS, you know, Tahoe and the top one continue to grow, right? Also other, you know, scrubbers, backside cleaning will continue to grow too. I think still driving force are continuing major. More than that is that we see this year, we can see the copper plating will play a real, you know, more of a revenue, in the increasement, right? We'll see that will continue to grow as we announced recent, you know, more big order, for the copper plating tool. I see that continue driving our revenue. Another one really are furnace, right? As we announced last year, we have about seven tools I think has been ship out, you know, cover LPCVD, high temperature anneal, and also, you know, a vacuum, a anneal.
It's quite a those tools have been running very well. Looking for this year repeat order and also new customer base add on. We'll see also the furnace will add a revenue for our 2022 revenue growth. More than that is again, and this also we talk about is the amount of packaging, right? It's still growing in that portion. We'll say this year will be another exciting year. As I said, you know, our existing product on the market further, you know, make our revenue grow. Other side I should say are, you know, existing customer and also second-tier, third-tier customer and also packaging, also wafer manufacturer customers still in their multi expanding, right?
That's why we give the estimation for this year revenue.
Okay. Thank you. Yes. Thank you, David. My second question is regarding our shipment. We have very strong shipment per quarter. Right now, it's like over $100 million. Wondering if you could quickly comment on the shipment trend this year by each quarter. Is like still trending up both the fourth quarter level or their will be some seasonal drop in the first quarter and then reaccelerate into the rest of the quarters? Also wondering if you have seen like some, for example, like SK Hynix or their DRAM CapEx to pick up more meaningfully from this year, because previously it looks like our momentum has been mainly driven by logic investment and also our Chinese customers. Thank you.
Well, looking at our last year quarter, seasonal, right? Since our manufacturing base mostly in China and, you know, some we're opening in Korea, but both China and Korea, they have this Lunar New Year or Chinese New Year. So that's really the cause because, you know, our employees go back home, take some weeks, sometimes 10 days. That's really, you know, kind of reduces our shipment. So, by looking at last year, Q1, Q2, Q3, you can see that more, right? Always Q1 is lower. Again, you know, this is a seasonality what we think because of manufacturer-wise and also some customer on delivery, you know, end of last year. So, it's all reason behind.
You can see that it is with all its Q1 slightly weak and Q2, Q3 strong and Q4 depends. Sometimes very strong too, like last quarter, very strong. We'll probably see that kind of similar pattern what happened this year. That's our estimate. Looking at regional product-wise, and you just mentioned, SK Hynix. Yes, their capacity in Wuxi pretty much, you know, is kind of full, right? There is not much plan expanding. They are looking really expanding in the carrier side. We are working, you know, closely. We try to also, you know, working very close with our customer, try to, you know, get into their fab, into their current site, right?
Other than that, you know, I can say our memory, you know, our company in Mainland China are very strong, and we see that continue to grow. We're also looking for other international opportunity, right? In both logic and memory too.
Oh, got it. Thank you so much, David.
Thank you, Donnie.
Our next question comes from Suji Desilva with Roth Capital. Your line is open.
Hi, David. Hi, Mark. Congrats on the strong finish in 2021 and the strong growth outlook.
Yeah. Thank you.
Yeah. I'm curious on the calendar 2022, guys, if the sense of your customer concentration will be similar to 2021, would you expect fewer or more 10% customers as you grow your across customer base?
Well, I can talk to that in a moment. Obviously, this year we're not too hot, right? Customer, you know, is still Huawei, Hongfu, and also MPC, right?
Yep.
The rest of the three you can see that is, you know, top five. Additionally, the SMIC, SXMP, and also their, you know, SK Hynix. We see that, probably this year, you know, we see their, kind of a, quite a bigger, I call their, plan increase. And obviously from their, you can see their SMIC, and also we're expecting SXMP continuing investment too, right? We're hoping, you know, those three, you know, of their, customer, probably one at least maybe two will get into the more than 10% this year. That's our expectation, right? So that I see there in top customer. Other small, and the other second tier, third tier, will still continue their expansion and capacity. That may be the standard, I can say.
Okay. That's very helpful, David. The new product categories you get to announce, I'm curious, are these addressing similar size TAMs to what you're offering now, or are you gonna target even larger, more significant TAMs with these new product categories?
Yeah. Actually, as you know, you can look in the slide there. You know, we laid down that they're pretty clear. We're increasing product, right? We're drafting, you know, of the $8 billion, right? Used to be, say $5 billion because the total market can grow. That becomes $8 billion, you know, by 2021's global, I call them, you know, market, calculation. But we do work with additional, two new products, and that has been, we are thinking and planning for about a couple years ago. Also, because of our customer really want us getting into the two new product and to work together, address there, you know, process and advanced nodes need.
The two new products, we believe will come out, you know, probably second half of this year. So far we're running very well. As again, we build a new product, we're still using our innovation idea and differentiate idea. We want to be building products, have certain performance and should be, you know, close to top tier and I think global top tier or even surpassing some performance that we're doing or some potential technology to develop. It can even succeed in those products, other guys' products. Anyway, we're working on this right now, and those two products are about almost double our current TAM, right? Additional $8 billion market together. Again, we're very excited about two new products, and we're doing the same way as we did it before.
We'll, you know, imagine innovative new idea and provide the better solution to the customer to address their technology, you know, even next generation requirement, right? Not just we sell for current requirement, but just for the future requirement too.
That's a great execution on the product roadmap. Congrats, guys.
Thanks, Suji.
Thanks.
Our next question comes from Christian Schwab with Craig-Hallum Capital Group. Your line is open.
Hey, good morning, guys. The U.S.-based major global player, congrats on the evaluation and production orders there. When you guys talked about that successful evaluation could lead to larger opportunities, can you quantify that? Like give us a range of potential outcomes versus, you know, modest, you know, success at that customer to great success at that customer.
Yeah. Actually, you know, you can see that it's the Tool two, right, will be delivered and, you know, we are very, I should say, excited about that. As tools, Tool two will be qualified, we are looking for more opportunity, right? I'm not looking for just this tool. Actually, we have additional other product. As soon as they're qualifying for this tool, they can bring to other new different process fab and also this different application . We have other product, right? Like today, copper plating and also furnace.
I think we're looking for also future opportunity working with the leading supplier and leading customer in U.S., even evaluate the more of our product, you know, as we have in the pocket copper plating and, you know, our even stress-free polishing and also as I said, the furnace. Even furnace, we're doing LPCVD, but also this year, we also have our ALD furnace come out, right, which you talk about a thermal ALD and a plasma ALD, but it's a vertical furnace type. That's all become there, I call it a big opportunity and can bring us to this, you know, top-tier customer. As time going on, we have successfully in getting the one customer, we did all the volume production and really will bring ACM to additional, you know, second tier a second top-tier customer in the U.S. too.
Also more than that is, you know, when we secure success in the U.S. top-tier customer, will really help us penetrate other region, right? Including Taiwan, including Europe. That's why we're excited about this, and that's why we're put a lot effort and, you know, hire people and doing the service supporting, and we made this project a success. So far so good. We're working very close and, you know, trying to make project, you know, on our big effort, make a success.
Thank you for that color. My last question is just regarding the additional capacity that's coming online and the $1 billion revenue target. As we expand the customer bases as well as expand the number of tools that we're able to sell as we just highlighted to different leading customers. You know, as we look out beyond middle of 2023 when some of that initial production is beginning to ramp, I'm trying to determine, you know, if the gross margin of the company or your expectations for gross margins would be any different than they are today.
Yeah. Okay, let's just talk about gross margin. Great. I think the so far, our gross margin is pretty kind of, you know, stable, right? Between 40%-45%. Sometime quarter-to-quarter, you know, fluctuation, we can see that. It's really, you know, this gross margin really at the future will really depend on two things. Number one is how we develop more innovation product, right? Then those products have more high margin. Also, how we take care of this semi-critical product. We're kind of take a balance, right, in other words. We want to see that as we more progress. For example, in, like, a furnace, you know, if we get a more ALD product come out, and furnace ALD has a higher margin, and LPCVD, you know, relatively low margin, right?
It's really try to balance our advanced innovative technology and product on time, and therefore, we can balance those so-called semi-critical tool and the margin. Our goal still in next few years will still locate our margin between 40%-45%. It's our goal. Maybe after our high-end product to qualify any customer, then hopefully we can have a margin, you know, get higher beyond 45%. That will be in the coming year, you know, a few years later, right? That's our goal.
Great. No other questions. Congrats on the good finish to the year. Thank you.
Thank you.
Thanks, Christian.
Our next question comes from Quinn Bolton with Needham and Company. Your line is open.
Hey, guys. Congrats on the results and outlook. I guess I want to start with that billion-dollar target, longer-term revenue target. Just a couple questions there. In light of that target, can you give us a sense with Lingang starting to ramp in middle of 2023, when do you think you would get to $1 billion of capacity? I know long term, Lingang gets you to $1.5 billion, but how quickly do you get to having the capacity in place to support that target model? Then I've got a follow-up question.
Quinn. Actually, you know that the Zhangjiang area, we do have a tool fab, right? It's about almost 20,000 sq m. That will probably cover, as I mentioned in here, $6.5 million. I call it a runway. Maybe you can stretch even more, but, you know, that's what is the probable capacity. That's why we're kind of, you know, building our Lingang facility, which is about a total of one million sq m, sq ft. I'm sorry. And then in which about the two-manufacturing fab will be, you know, built there. It's about a total probably close to 50,000 sq m with a 0.5 million sq ft of the area. Those two fab build out capacity-wise, space-wise, will talk about $1.5 billion, right?
We have a lot of Fab three building and, in all, we have all automation for their SAPS tech, you know, parts, spare parts, all the, you know, part system there. So we have a, we can say high efficiency. So that will be started using from middle of this year, 2023, and then we're gradually moving capacity from Zhangjiang to the Lingang, right? So eventually, we'll probably, you know, we'll be more of a finally focused on all the two fab in Lingang. That will be, again, it'll be using fully utilized $1.5 billion. And, of course, have a more trained, more people and more engineer, right, to run that fab. That will be the alignment of, our production, you know, capacity running speed.
We see that it will be, you know, it's a pretty good decision and we've also made this happen and make sure our capacity can really meet our requirement for our sales goal, right?
I guess just in terms of that billion-dollar capacity, is that something you think you could hit in 2024? Or is that something that you might not get there until 2025? Again, just from a production perspective.
Sure. Yeah. I think I'm talking about real capacity-wise and space-wise, right? Let's put it this way, right? We have two fab build out, and then two fab will be eventually. We'll finish all construction by 2020, you know, as of this year end, we're completing all the construction. But then you'll have the, you know, moving in all the, you know, arranging all the production and require the, you know, gas system or other thing. It'll take about middle of next year. So eventually we'll start one fab first, then we'll start second fab. So, capacity-wise, I said space-wise, it's $1.5 billion. However, you have to hire the people and train the people, right? That will be according to our sales plan, you know.
We'll hire the people at the pace we need, and eventually reach $1.5 billion. That will really rely on ourselves and also our, you know, R&D and new product qualification will depend on that.
Got it. Okay. And then for Mark, you've talked about a 17% target for R&D as a percent of sales. I think in the fourth quarter, R&D was, you know, below 10%. You know, so getting to 17% seems like a pretty big jump. You know, does that happen in a step function? Can you just give us some sense, you know, how do you ramp up to that 17% sales level? And I guess a related question, SG&A came in pretty heavy at 17% of sales. Where do you see SG&A as a percent of sales in 2022? Thanks.
Thanks, Quinn. I mean, big picture, the R&D was about $13.7, right, in Q4. We kinda stepped up our R&D and you know more than doubled year-over-year. That, you know, we're certainly have a lot of areas and opportunities for investment there. I think, Quinn, you know, but we would anticipate to ramp that up, you know, kinda gradually throughout the year. We've talked a little bit about the seasonality. You know, David mentioned Q1 is gonna be probably the lowest quarter of the year. We'll bring the R&D up, you know, throughout the year.
In general, if you think about our overall operating model for 2022, you know, we're thinking about the gross margin would be the 40%-45% range. The big difference is gonna be in the uptick in the R&D intensity. You would expect a little bit of leverage, you know, for both sales and marketing and G&A, but not dramatic. They'll go down a little bit as a percentage of overall sales, and the R&D will pick up.
Okay. Thank you.
Yeah.
Yeah.
Our next question.
Am I here? Okay. That's okay.
Our next question comes from Edison Lee with Jefferies. Your line is open.
Okay. Thank you. Hi. Congrats on the results. I have two questions, mainly with respect to the 2022 revenue guidance. I wonder, out of the latest guidance, how much of that is gonna come from overseas versus China? And number two is, what do you think will be the breakdown of these three major categories within your revenue guidance, that is, advanced cleaning, ECP, and advanced packaging and other?
Yeah. Okay. Let me cover first and Mark can add more. I think that our revenue this year, our projection is still major comes from. I call it, you know, mainland China, right? Maybe something from our, you know, Singapore too. Not a significant portion from the overseas, right? Even we have this revenue, we sell to the top-tier U.S. customer and possibly about 2% or about a quarter of 5%, I think one or two tools, right? It's not really much volume. As I said, our revenue base is still mainland China base. That's why we see that.
Mm-hmm.
Then the product category, you can see that, you know, I really couldn't tell, you know, what the number was this year. By looking at last year, you can see that our cleaning has been down to 73%, right? We'll see that trend continue because as I said, you know, chemical planar start to play and also our, you know, furnace start to play. The advanced packaging getting close to. We'll see that cleaning percentage will continue to drop, right? Looking at year 2020 is 83.8%, and last year is at 72.8%. As a whole, we see that cleaning even the absolute value will continue to grow, but the relative value percentage will drop, right? We don't know yet.
We cannot, you know, give you a number, but I can just give you trend-wise, and we have more other product will grow, right? That's where we can see that.
Okay. Can I ask a follow-up about this new cleaning product for compound semi? I assume that cleaning product for compound semi is not one of the two new product categories that you're gonna introduce this year, right? Can I assume that you have not yet talked about these two new product categories that you're supposed to introduce this year?
Yeah. I think our two new category product is not for cleaning co-cleaning copper, right? It's still for the cleaning wafer, I make sure, right?
Mm-hmm.
It's three or four inches. That's been what we're planning. I said, you know, a few years ago. We have put a lot of effort in the last two-year , three years. It's really come to our beta time. We're thinking about the second half of this year, we can deliver our beta tool for customer for evaluation, right? Those two-beta new product, as I mentioned, about $8 billion of their addressable market. However, we believe it will take about a year and a half at least in the customer side for evaluation. We're really looking for maybe contribution, and it will be there, you know, come from maybe 2024, and that timeline, we get these two new categories products revenue-wise.
You know, regarding customer wise, I should say, we're also working very closely with Asian customers, including Taiwan and also Singapore and some Southeast Asia too, including also Europe. I think there, this year, we can have additional new customers outside of the mainland China. However, coming revenue-wise, probably will not contribute too much revenue because the first tool you have to get there, you know, first tool is no revenue, right? Until they're qualified, right? There really, if we secure new customers this year, revenue will be driving next year. Will not contribute much to the revenue wise.
Okay, I see. Maybe just one last question. On the cleaning equipment for compound semi, do you think you will contribute to revenue this year?
Oh, yeah. Actually, as you know, compound semi is really new emerging market, right? Obviously, the size-wise, you can see the six inch, eight inch, right? We're working. We have all our, you know, tool, especially our advanced packaging tool, all wet tool. We're using that to the silicon carbide or nitride production. Also we got plating tool, right? Last year, we qualified our copper plating tool for the I call it a GaN nitride and also eventually silicon carbide application too. We have all wet and this is a copper plating. We're aiming for the silicon carbide, you know, and also compound semiconductor application.
These are all in mainland China, is that right?
Well, we also see some requests even from outside mainland China, right? We do have international customer asking our silicon carbide application, both for copper plating and also for their color developer strip, you know, wet etcher and PR stripper. Right.
Okay, that's great. Yeah, that's it for me. Thank you very much, David.
Yeah, thanks.
That's all the time we have today for questions. I'd like to turn the call back over to David Wang for closing remarks.
Okay, again, thank you, operator, and thank you all for participating on today's call and for your support. Sorry, my phone got trouble at, you know, get this, you know, speaking. Also, thanks to Mark for taking all the role from me. Before we close, Gary's going to mention some upcoming investor relation events. Gary, please.
Thanks, David. On March 14 and 15, we will present at the 34th Annual ROTH Conference in Dana Point, California. Then on the March 22nd through 24th, we'll present at the Morgan Stanley Virtual Hong Kong Summit. Attendance at these conferences is by invitation only for clients of each firm. Interested investors, please contact your respective sales representative to register for one-on-one meetings. This concludes the call. Everyone, you can now disconnect. Thank you.