Good day, ladies and gentlemen, and thank you for standing by. Welcome to the ACM Research first quarter 2022 earnings conference call. Currently, all participants are in a 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'd like to 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 first quarter 2022 results. We released results before the U.S. market opened today. The release is available on our website as well as through newswire services. There's also a supplemental slide deck posted to the investor portion of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang, our CFO, Mark McKechnie, and Lisa Feng, 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. Also, certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized gain or loss in trading securities. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on our IR section of our website and on slide eight. With that, let me now turn the call over to Dr. David Wang, who will begin with slide three. David?
Thanks, Gary. Good afternoon, everyone, and welcome to ACM Research first quarter 2022 earnings conference call. I'd like to start today by reviewing our Q1 results, and then provide an update on latest status of our Shanghai operation. Please turn to slide three. As we mentioned in our business update prior to this call, late in the first quarter, our operations were impacted by a citywide lockdown in Shanghai. Our hearts go out to all those affected, including our employees, business partners, and customers. The government is working diligently to bring the outbreak under control, and we fully support their efforts. We also thank our dedicated and hardworking team, some of whom have literally lived at our facility. Our team has kept ACM operating as best as we could under these challenging circumstances.
Q1 revenue was $42.2 million, shipments were $67 million, and non-GAAP earnings per share was a $0.01 loss. We ended the quarter with $533 million of cash and time deposits. Revenue and shipments were significantly below plan as the lockdown limited our ability to ship finished products, process the final acceptance, and produce new tools. As an example, we had 30 completed tools that could not be shipped in Q1 due to logistical issues. We expect to deliver all of these tools in the second quarter. We expect the Shanghai lockdown to be temporary, and we have begun to increase the level of our operations. At end of April, Shanghai government put ACM on the white list of essential businesses. This enabled us to increase production and restore logistics to our facility.
We started closed loop production at our Changzhou facilities, also known as two spots one line. This is where workers travel as a group between our factory and their hotel or dorm on a dedicated bus. We have started receiving incoming supplier and shipping products, and we are bringing back more people to work every day. Demand remains very strong. We are in constant contact with our customers, and we are committed to deliver tools to support their capacity expansion plans. As of today, we have not seen any changes to our order book, which remain full through Q2 and Q3, and is building into Q4. We expect solid growth in 2022 from our core cleaning products, the significant ramp of ECP tool, and increased shipment of our furnace products.
The main obstacles to achieve our plan are the pace of reopening of the city of Shanghai and in turn, our ability to scale production. We have been able to partly offset the lockdown by having our Shanghai R&D and management team working from home. Our team is focused on expanding our current portfolio and is introducing two new platforms later this year. Please keep in mind that our R&D center and their production facility in South Korea are unaffected by the Shanghai lockdown and are assisting with the recovery. Meanwhile, our global sales team in the rest of Asia and in U.S. and in Europe are pursuing potential new customer in those regions. We are committed to gaining additional share of the $8 billion market addressed by our current products.
We are on track to double our addressable market opportunity by year-end with introduction and initial shipments of two new product category. Q1 R&D expense increases significantly due to the increased manpower and was also elevated for the quarter due to the cost of building development tools. We are committed to investing in new product, but do expect our R&D spend to moderate to a run rate level in Q2 and beyond. I will now highlight new product development and recent announcements. Our ECP product cycle remaining strong. Q1 revenue for ECP furnace and other product was at $12.2 million or 29% of the sale. We shipped 20 tools in 2021, and anticipate significant growth for 2022.
We are gaining market share with our proprietary ECP technologies in China market for both the front end with our ECP MAP, and in advanced packaging with the ECP AP products. Long term, our goal is to achieve a 50% market share of China plating market, and a 25% share of the global plating market. Today, we announced new volume purchasing contract for 10 Ultra ECP AP high-speed plating tools from leading China-based OSAT customer. Our ECP AP was previously qualified by multiple China-based OSAT customers for advanced WLP application. We expect to deliver some of those tools in the later 2022, and majority in 2023. Also, on February 17, we announced order for 21 ECP tools. Those orders were split between 13 Ultra ECP MAP and 8 Ultra ECP AP copper plating systems.
On April 21, we announced that our 18-chamber 300 mm Ultra C SAPS VI single wafer tool was qualified for mass production by a mainstream memory chip manufacturer in China. This tool provides 50% more throughput than our 12-chamber tool, but with a similar footprint and is an important tool for supporting high volume production line and one of our key memory customers. We expect the 18-chamber cleaning platform to play an important role with this customer and others for 3D NAND, DRAM, and advanced logic production. On February 13, we also announced volume purchase order of 29 Ultra C WB wet-in-wet bench tools for 300 mm wafer applications from several China-based customers.
While these are semi-critical tools, we believe our newly developed low pressure dry technology allows us to gain wet bench market share from a majority or from our major international competitors and give us a strong advantage over the small local competition. I will now provide an update on our major customer initiatives. First, for our major U.S. customer, our U.S. service team is staffed and is engaged in daily sessions to prepare for the delivery of the tool for Ultra C SAPS V 12-chamber cleaning tool. The evaluation tool is in final assembly, and we remain on track to deliver it later this quarter, and production tool shipment is soon to follow. We believe a successful evaluation could lead to a larger opportunity with this and other major customer in the region.
Second, for the global IDM with a China-based packaging facility, we delivered first Ultra C PR wet stripping system in Q4 2021, followed by a second tool in Q1. We have also received orders for two additional system to be delivered in Q3. We are hopeful that success with our first product can lead to a broader adoption of other WLP tools, including ECP ap at this important customer. Third, for the major global semiconductor manufacturer with a China fab, they order Ultra C SAPS V 12-chamber cleaning tool to evaluate in their China facility, and we are on track to deliver the tool in Q2. Finally, we received a order for Ultra ECP map copper plating tool for regional Asia-based semiconductor manufacturer.
This tool was delivered in Q1, and the customer has begun his evaluation with our service and process team. We are confident that a successful qualification of this opportunity can result in larger business opportunities, and we continue to build our sales pipeline with other top-tier players. We continue to move forward with our Ningbo construction, and plan to complete the first production building in the beginning of 2023, with the production commence in the middle of the year. We are also planning R&D centers in Wuxi and Beijing to support the several key mainland China customers. We are considering a more meaningful investment in South Korea. We currently have more than 100 R&D engineers and supporting staffers and two leased production facilities.
In addition, we're actively evaluate land in South Korea and build our own facility and to further establish a local footprint near two additional major player, and to provide customer with a secondary production center to ensure robust supply chain and production continuity. Now let me discuss our outlook. Since we have been added to their white list, and we are increasing our production and logistical activities, we feel that the worst impact of the lockdown could be behind us. While there is some uncertainty on the pace of the city of Shanghai reopening, our order book remain intact, and we believe we can make up lost ground for the full year, starting with the second quarter. As such, we are maintaining our full year guidance for revenue in the range of $365 million-$405 million.
Among other factors, we're assuming a timely return to scale of ACM production and shipping operation in Shanghai, the absence of unexpected interruption of our supply chain, and continued demand by our customers. Before I turn the call over to Mark, I want to update you on auditor situations. As we have previously discussed, in early March, we were included on SEC list of a non-compliant company due to our use of China-based auditing firm for 2021. As indicated in our prior press release, we have begun to interview potential U.S. auditors and it would allow us to comply with the PCAOB inspections. Although the current SEC guidance allows us until the 2023 fiscal year to transition, we are in the advanced stage of evaluating potential auditors, and we are committed to engage PCAOB compliant auditor firm for our 2022 fiscal year.
Now let me turn the call over to Mark, who will reveal detail on first quarter results. Mark.
Thank you, David. Good day, everyone. Please turn to slide five. Before I begin, keep in mind that unless I note otherwise, I will refer to non-GAAP financial measures, which excludes stock-based compensation and unrealized loss in trading securities. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. As David noted, our Q1 results were impacted by the lockdown in Shanghai, with revenue and shipments below plan, and we had 13 completed tools that could not be shipped in Q1 due to logistical issues. To be clear, these tools were included in both repeat shipments and first tool shipments. As I review our results, keep in mind that we believe year-over-year comparisons are less meaningful due to the circumstances created by the lockdown. Revenue for the first quarter of 2022 was $42.2 million, down 3.5%.
Revenue for single wafer cleaning tools, which includes SAPS, TEBO, Tahoe, and supercritical cleaning, was $26 million, down 19.7%. Cleaning was 62% of sales in Q1 2022 versus 74%. Revenue for ECP furnace and other technologies was $12.2 million, up 120.7%. This category represented about 29% of sales, reflecting growth in our new product group. Revenue for advanced packaging, excluding ECP, services and spares was $3.9 million, down 32.3%. This category was about 9% of sales. Total shipments of the quarter were $67 million versus $74 million in the first quarter of 2021. Gross margin was 46.9%, up from 41.4%. This was higher than our normal expected range of 40%-45%, reflecting 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 $27.7 million versus $13.5 million. The majority of the year-on-year increase was from R&D, with modest growth in sales and marketing and G&A expenses. As David noted, Q1 R&D expense grew significantly due to higher personnel, and also in the first quarter, it was particularly elevated due to the cost of building development tools. For the full year, we now expect about 16% R&D intensity at the midpoint of our outlook range.
Operating loss was $7.9 million versus operating income of $4.7 million in the year-ago period. Unrealized loss on trading securities was $3.9 million in the first quarter of 2022, versus an unrealized loss of $1 million a year ago quarter. This non-cash item is excluded from our non-GAAP results. Income tax benefit was $4 million versus the benefit of $2.8 million in a year-ago period. As described in our earnings release, change in the U.S. Internal Revenue Code Section 174 that went into effect on January 1st, 2022, has caused potential increase in ACM's effective tax rate for the full year. We are still evaluating the impact to the 2022 tax provision, and we note that Congress is considering legislation to defer the capitalization requirement to later years.
Net loss attributable to ACM Research was $0.6 million versus net income of $7.7 million in the year ago period. Net loss per diluted share was one cent compared to net income per diluted share of $0.12 in Q1 of 2021. I'll now review selected balance sheet items. Cash, cash equivalents and time deposits is $533 million, $63 million at the end of the fourth quarter of 2021. Total inventory was $271.5 million at quarter end, up from $218.1 million at the end of the last quarter. This included finished goods inventory of $106.6 million, work in process of $56.8 million, and raw material of $108.2 million.
These items were above normal levels at quarter end due to the impact of lockdown. The 13 tools that we could not ship in the first quarter were reflected both in finished goods inventory and in work in process inventory. In closing, as David noted, we believe the effects of the Shanghai lockdown will be temporary, and we are making steady progress for a gradual return to small-scale production. Demand for our tools remains solid, and we have several strong product cycles ahead. We will continue our investments in new products, new customers and capacity as we look through the lockdown and drive forward with our mission to become a major player in the global semiconductor industry. Now, let's open the call for any questions that you may have. Operator, please go ahead.
Thank you. To ask a question, you'll need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Again, that's star one to ask your question. Our first question comes from Suji Desilva with Roth Capital. Your line is open.
Hi, David. Hi, Mark. A couple of questions. First of all, on the white list activity that called you essential business, how soon does that imply you can get back up to full production, full shipment?
Great. That's a good question. Yeah, actually, as I mentioned, we already have our two points one line and closed loop production, and we're adding the people, you know, to our facility. Well, at current pace, we calculate, right, probably, you know, take a few weeks, and we'll gradually add more people. Hopefully, you know, really by end of this month, we can have our other, you know, employee or worker and start getting them to our Zhangjiang factory, right? Meanwhile, also we're starting to send people into our Zhangjiang office, which is for design, you know, engineering site. You know, hopefully also we can gather our, you know, engineering worker, engineering design engineer, back to Zhangjiang office too.
Okay. That's encouraging to hear. Then, David, perhaps, or Mark, the ECP furnace category is growing here. It's 29% of revenue. You know, what are the subsegments there that are showing the most growth? Is it across the board? How does that mix look like it's gonna look a year out? I know the single wafer cleaning is also growing very well, so curious if that's gonna grow in the mix a year or two out.
Yeah. I think there for this year, this is the copper plating and the furnace will grow, right? The major actually still come from the copper plating. As you see last year, out of 20 tools we shipped, you know, for the copper plating side and seven for the furnace. This year, I would say, you know, revenue-wise, you know, obviously copper plating will be more than furnace. Meanwhile, I can still say our cleaning tool still demand very strong. As you can see that we have a single wafer clean and also have last year introduced the bevel edge clean. Also later this year, we'll probably get into our supercritical CO2 the cleaning tool in the market, right?
Meanwhile, we also have this big order for the AutoBench, and we just got, you know, another order too. By the way, as I mentioned, AutoBench, that's key technology we call low pressure drying, and we developed in last two year and has been qualified. That will become the driving factor, you know, for us to gain the market share from competitors. Also leading the other, you know, small competitor in China. We still maintain very strong leading position in China cleaning market.
Okay, that's great. Lastly, on the tools, the 13 that you're unable to ship, I'm curious what proportion of those roughly is a first tool because I imagine those maybe take a little longer to get in place versus the repeat tools as you kind of recover the shipment process here.
Yeah. I mean, this is a 13 tool is mixing our, you know, our cleaning tool, right, our batch tool and copper plating and also advanced package tool, right? Obviously, the 13 tool, you know, will be shipping in May, right? Some of them actually have been shipping out already. All of the 13 tool can be, you know, ship out probably, you know, by middle of May, will all ship out and, you know, for the logistics.
Okay. One last question if I can sneak it in. Have your customers capacity expansion plans also been impacted? I'd imagine they have. You know, if just if so, are those getting back on track? Because obviously, that's the fuel for your demand to kinda re-achieve your calendar 2022 numbers. What's going on with the customers capacity expansions and their ability to kinda install tools.
Yeah. We're always keeping weekly, you know, dialogue with customer, right? There's some tools supposed to ship in April timeline. We couldn't do that. We try to really quickly ship this tool out. Also, they're also, you know, trying to push us for, you know, April, and so the May and June delivery tool. Our, you know, our engineer working very hard. I think, you know, we try to, you know, catch up the manufacturing scale, and hopefully we can, you know, deliver in Q2 and, you know, based on plan, right? Obviously, Q2 will be better than Q1, obviously.
Okay. Thanks so much for taking all the questions. Thanks.
Thank you.
Thank you.
Our next question comes from Quinn Bolton with Needham & Company. Your line is open.
Hey, guys. Since demand and bookings remain strong, I just wanted to focus more on the production and the lockdown effect. First, David, just wanted to clarify your response to the Shanghai facility getting back up and running at full capacity. Did you say, in response to Suji's question that you would be back up and effectively back to full capacity by the end of May?
Yeah, I think that's, you know, by the plan, we're gradually put the people in the production line, and that's our goal, right? Hopefully, we can go earlier, you know, but that's probably realistic plan. We'll gradually get to, you know, 50%, then eventually they'll get 100%, right? That's, you know, our goal. You know, obviously, you know, our goal is by end of this month. We try to recover 100%.
Got it. Sort of a second question.
Yeah.
Oh, go ahead.
Quinn, just to kinda clarify one thing because what David mentioned is, you know, all of our employees back to the facility is our target by the end of the month. I mean, the logistics will still have to catch up to get our supply chain and, you know, some of those details worked out. You know, we'll gradually get our overall output, you know, to full capacity as we move through the year. In terms of our staffing, we're targeting that by the end of this month.
Got it. I guess it was sort of a related question, next, Mark was, obviously you haven't shared the quarterly progression of your annual plan, but you know, through the lockdowns, you had press released that you were gonna come in well below your internal plan. As you sit here today, are you going to be below the internal plan at the beginning of the year in the second quarter and then expect to catch up in Q3 and Q4 such that it's a much, you know, heavier back-end loaded year, or do you think the second quarter can be back in line with the original operating plan?
Let me add something, right? You know, Quinn, what happened is obviously we have ordered those parts, either from the overseas supplier and also, you know, suppliers in China, and which are closest to Shanghai, right? Most of all this, you know, our machine shop in Shanghai, they are now shut down, right? Those parts have been machined, fabricated already, right? Obviously, try to deliver. As I said, we already got this, you know, return production. We have a special permission, and we have, you know, just a car or the truck can load the parts back to, you know, our factory now, right?
As I said, is our appeal still on there and demand still strong and our long-lead items, they're on the line. Of course, some of them waiting for clearance to the customer in the port of Shanghai. That's why I should say probably maybe at Q2 still get some impact. However, those parts, those other thing will be eventually still no delay, right? We'll try to catch up in the Q3, Q4. That's why we put this year's our revenue and also including shipment, probably still in our overall plan.
Of course, we have to do a lot of good work and to manage it well in our workers' efficiency, and we'll probably run more than two shifts, and consider three shift, right? That's all we could consider to catch the demand and also meet the requirement of delivery time for our customer.
Got it. Thank you for that, David. Just lastly, on the two new platforms, since the R&D folks had to work from home, have there been any delays in the intended launch dates of those two new platforms, or do you still expect to introduce one in the first half and one in the second half of 2022?
Yeah. I think that's still actually less impacted. The reason I say that is that platform partially designed is by our Korean team and partially designed by our, you know, Shanghai team, right? Obviously, Korean team has no impact, right? They're working still, you know, pretty, you know, normal. The Shanghai team working at home, and they're still, you know, working very diligently right now. We're not seeing much, you know, impact. For our second year, I mean, second half year deliveries, you know, early first and then later the second, right? That's our plan. I think, you know, we can make it.
Excellent. Thank you, David. Thank you, Mark.
Thank you.
Thank you.
Thank you.
Our next question comes from Charlie Chan with Morgan Stanley. Your line is open.
Hi, David. Hi, Mark. Hey, how are you? Yeah, I know it's.
Hi.
Kind of a tough quarter for you, but seems like full year is still fine. My question is about, you know, first of all, whether, you know, because the other big foundry, like TSMC and UMC, they mentioned about some bottleneck of global equipment. Even you still have the purchase order, but my concern is that, given those, the other equipment have bottleneck, whether your China customer can really build those production line on time. Because even for, you know, TSMC, the equipment delay like three to six months. UMC, their new fab seems to have problem to complete on time. Yeah. Just want to get your thought whether that is going to impact your future order. Thank you.
Yeah. It's a very good question, right? It's very hard for us to comment, you know, whether our customers' production is on time or not. I think this moment, all customers, you know, in China really want us to deliver on time, right? Of course, they want us to deliver ahead of time, but we cannot do that. This moment, our, I say, customers still pursue their full speed and to do their production line installation. You know, this moment, I think we can do our job, assuming, you know, they got other parts, other important equipment from international bigger equipment guy, and then we deliver our portion, right? So far, you know, I didn't see anybody delay, say, you know, push delay, you know, I mean, postpone their delivery.
We've not had any customer in China, you know, told us, you know, postpone their schedule to delay the delivery later, right? That's the status right now.
Okay. Gotcha. Another thing is more about the competing landscape. I was just aware that there's a new competitor in wet cleaning category called IDG Power. It seems like management comes from ex Lam Research. I'm not sure if you are aware of this competition, and what would that change your kind of long-term of market share targets, especially in China. Thank you.
Yeah. Okay. You mean the China market slow down, right? That's your question? Is that correct?
Yeah. I'm sorry. I'm talking about a new competitor called IDG Power, and it seems like.
Mm-hmm.
They want to make inroads to the wet cleaning market.
Another company you're talking about?
Yeah.
Well, I mean, they're all competitors, they can all compete international big three. We have also a local player coming. At this moment, I think, we welcome any competitor, right? This is, we started beginning a single-wafer SAPS tool. You know, we got first PO from Korean market, right? You have an international big guy, also Korean local guy competing. I think we're okay with all competition, right? Our goal in China is very clear. With our technology superiority, you know, single-wafer wet bench, you know, SAPS megasonic, also supercritical product. We're definitely leading position, right, in this market. You know, our goal to catch 50% of the market.
The rest of 50%, big three international players and also their new, you know, small, I mean, growing companies in China. That's okay. We like competition and as long as, you know, they're competing products, right? We're okay. I think we're pretty confident and also very strong relationship with the customer like our tools, like our innovation, especially also they like us, we have a, you know, our future solution, right? Not just also cleaning products. We do have a couple cleaning tools, and soon we come with two new platforms, you know, second half of this year. We're really multi-product, you know, platform company. We feel very comfortable about our future growth, right?
Okay. Got you. Just want to make sure you are aware of the new competition.
Yeah.
Lastly, maybe a quick yeah, maybe the last question is to Mark, right? I know you maintain the full year revenue targets, right? From a CFO perspective, if you kind of run through the full year budget for the bottom line, after this lockdown, do you see kind of any downside to your original budget for bottom line for 2022? I just want to make sure whether the following quarter can fully make up the loss in first quarter. Thank you.
Hey, Charlie, we don't guide on the bottom line, but, you know, we certainly talk about the top line, the $365 million-$405 million, we're maintaining that outlook. You know, we would anticipate that, you know, our overall operating model for the year, you know, would probably be not that changed from what we anticipated, you know, before the lockdown, just with the revenue shifted to the back half of the year. We are evaluating, you know, are there gonna be additional costs associated with the lockdown? I mean, at this point, there may be some, but we don't really think they're gonna be that material. We'll have to evaluate that, as we move through the year.
Okay. Yeah. I just want to make sure this is fully temporary. That's why I ask. Thanks for your explanation.
Yep. Thanks, Charlie.
Thank you. Our next question comes from Mark Miller with The Benchmark Company. Your line is open.
Thank you for the questions. 13 tools that could not be shipped in quarter one, can you estimate approximately what revenue this represented?
Yes. David, do you want me to take that first and-
Please. Hey, Mark, please.
Oh, yeah. I can hit that. I mean, David talked a lot about the spot lockdowns that started in mid-March, and then the Pudong five-day lockdown, which was started at the end of March. Of course, we didn't completely shut down. I mean, on the 13 tools, we're not really gonna quantify the exact specifics. But you know, it's you know, there's five cleaning tools, a couple of ECP tools and the remainder were advanced packaging. So we did mention that those tools are reflected both in finished goods inventory and work in process on the balance sheet. You also had some impact from you know, acceptances and qualifications that were delayed, of course, some slowing of production.
I'd also point out, you know, this is typically our seasonally weak quarter, right? Because of the Chinese New Year. You know, a lot of the business would fall in the last month of the quarter. I mean, typically our quarters would be more linear. You know, the overall miss relative to our plan, you know, it doesn't take a lot of tools given the ASPs really to move that. I don't know, David, if you wanted to add any more to that.
Yeah, I think pretty well. I'm fine. Yeah. Yeah. It's pretty good.
Okay. Thanks, Mark.
You're expecting these tools to ship by the middle of May?
Yeah. I think we'll start shipping some of them already, right? We'll probably complete all shipment by middle of the May. Yeah, that's our plan.
You're interviewing auditors. When do you think that process is gonna be complete, and you'll have an auditor selected?
Yeah. Mark, on that front, look, we remain committed to the Nasdaq. We're confident we can comply. We've been evaluating auditors, you know, for the past several quarters. As David mentioned, we're in the advanced stage of selection. You know, we're working hard to appoint one for 2022, which would be a year in advance of the mandate. We're not gonna give a lot more detail on that. I mean, when we have something to announce, we'll certainly do so.
Thank you.
Thank you. As a reminder, that's star one to ask your question. Our next question comes from Jolin Chen with Credit Suisse. Your line is open.
Hey, David and Mark. This is Jolin. One very quick question. For the R&D expense on full-year basis, did you mention earlier it will be around 16% for this year?
Yeah. Actually our goal, right? Obviously the whole of this year, we're trying to spend, you know, anywhere between probably 15%-16% range. Obviously higher, you know, a couple points higher than last year. The reason for that is that we're increasing more R&D and for the, you know, existing product line expansion and also add our, you know, this, furnace and including furnace R&D. Plus, we do have two new platform, right? Of the new product. That's all adding to their, you know, engineering and the manpower and also building the development tool, right? Testing, all the stuff. So and R&D, in-house, all the stuff. That's why we're planning to increase a few points and, you know, to R&D for this year's budget. Mark, anything you wanna add on that?
Mm-hmm.
Yeah, I wouldn't add a lot. I mean, our overall operating spending. I mean, there's always a mix between sales and marketing and R&D. You know, we're clearly investing in our new product opportunities, and there was some, you know, elevated costs Q1 because of the development tools.
Thank you. Next question is on the competition side. Just by the way, the new local competitor that Charlie mentioned earlier should be IDG Energy. I think one investor holds that side, and the investor is pitching to different brokers right now. My question is about the Ultra ECP side, because it looks like the company's Ultra ECP is getting pretty good traction with customer orders now and also based on the announcement in February. Do you see any close, strong local competitors in China for our Ultra ECP tool? Another question for Ultra ECP is that I remember back in February, you also mentioned that one of the ECP tool orders is from a top-tier Chinese foundry. Has that top-tier Chinese foundry also ordered the ECP for wafer level packaging application? Thank you.
Okay, let's company first, right? You know, copper plating is a really relatively new technology, right? You're looking at real competitor in the world, right? It's just a few company can do that. The reason is really, you know, difficulty of their technology, number one. Number two, also have IP, you know, I call the barrier, right? And for the people getting into the business. I think ACM is one of the company holding the entire IP for the copper plating technology, you know, both in their dual damascene application, also in advanced packaging too. Regarding the local competitor, I think it's still they have to take a time, right?
I mean, number one, they gotta create a new IP that will make sure now they're stand out from others, including ACM or other big guys, you know, IP number one. Number two, you have to really overcome a few, you know, key technology barrier, right? At this moment, we're pretty confident in our technology and IP. We have, you know, really penetrated very fast for the Chinese local customer, right? Either dual-damascene application or the advanced packaging tool too. With that in hand, we're very strong confidence, right? We're now trying to only capture the local Chinese market and also with our partial plating technology and also high speed, the copper plating for AP. I think we're also, you know, aim to the international market.
Our long-term run, we want to say 50% China and 25% global market, right? That's our goal. On to the second question, yes. All major, you know, top tier customers in China all have operating tools, right? You can say, you know, SMIC, Hua Hong and also YMTC and also CXMT. All have our copper plating tool, right? We're also get our application in the second tier and third tier of the foundry in China. Of course, we're, you know, sell more, just we announced, we are just received very volume first order from one OSAT, you know, advanced packaging company in China. This 10-tool order, right? Is real confident. They show their confidence in our technology and also with our, you know, performance.
Mm-hmm. Thank you. That, that's very clear. Next, David, I want to learn more about the Korea side. Can you share a bit more about the production capacity in Korea and for what type of tools and the ramp-up schedule for this year and next year? For the revenue guidance for this year, how much of that will potentially come from our Korea facility? Thank you.
Okay, good question. Yeah, as I mentioned, we do have a tool facility, right? In the R&D manufacturing, you know, facility in Korea. That's starting, you know, making our, for example, wet bench, partial wet bench tool, right? Also, part of the furnace tool, right? Also some of them made there also in China as a combination. As time going on also we are saying we want also expanding manufacturing in Korea. We are considering, you know, buying a land and building more of our, bigger space, to take care of our manufacturing R&D, in Korea, right? Because we believe we would want to building R&D manufacturing center close to the customer, right? That's why we told them many times. This is really bigger movement.
We believe we have two manufacturing centers, one in Shanghai, one in Korea. We're really, you know, making a robust supply chain and also keeping, you know, what we call the continuity of the production, right? It's really what we benefit to our customers, both inside China, also, you know, global customers. That's the route we'll keep going. We're not only stopping in Korea as we're building more business in Taiwan or in the U.S. We're also building a center in those regions, now including what I call Europe. You know, as I said, you know, semiconductor is international business, and we want to put our best R&D engineers close to the customer, and therefore they can better serve and support the customer.
Okay. Thank you, David. And David, I mean, one last question for me, if I may, because I hate to ask this question, but this is one of the questions that investor has been asking me from last week, and I couldn't explain well. Some investors are very curious that there are also other semiconductor related equipment makers in Shanghai with the major productions are in Shanghai. But it somehow looks like their revenue didn't get hit as much as ours, I mean, ACM revenue in the first quarter. I'm just curious, why is there any reason, if you have to say, I mean, first employee locked at home or the logistic issue or the customer acceptance issue and the material, raw material issue, what is the biggest factor for our.
Hmm.
Weak revenue performance in the first quarter?
Yeah. I know what you mean here. Obviously, you know, different company. You know, I couldn't comment what their customer combination is, right? Quarter-to-quarter difference. Somehow this quarter we got a combination. Okay, you talk about Chinese revenue recognition, right? China recognition really when you sell the tool, you ship the tool to the customer site. Okay? That's something recognized off the assembly, right? But U.S. recognition upon shipment. For the question here is, yes, we're -- I mean, this is a recognition rule by the U.S. rule that impacts a lot because, you know, if you cannot ship repeat order, your revenue cannot recognize, right?
That's why you can see that our—actually, our China revenue is higher than U.S. revenue, let's put it this way, right? Even if I see that, I'm still not satisfied with the China revenue. Why? We also have some customers delay their production line. I call it facility build-up. We ship out almost 10 tools in their facility, but they cannot install on time, right? Anyway, this one quarter is very strange. It all combined together, right? Chinese New Year and some delayed installation. Also, as I said, this is a shutdown, right? All together. Anyway, I mean, it's the one quarter, right? I mean, I don't think the major impact to our long-term business.
I mean, we have this, you know, probably be careful about this, our future preparation for this kind of shutdown. Now we start, you know, start back to the, we call it two points one line. We'll continue for a while until this whole pandemic completely go away. We're really prepare, you know, from now on, we'll make sure if something happen again, we still maintain healthy production, right? In the hotel and the, you know, factory with a shuttle bus and moving close to production, right? That's our goal. We'll probably go through all this through this year. Even, you know, see if we can get better. We wanna, you know, make sure we got robust and production system and not impact by this COVID-19 spread out, right? From engineering point, I mean, from work point of view.
Of course, you know, expecting they didn't come back again, right? If they come back again, your supply chain got issue. So far so good. We're hoping, you know, everything get better from now on.
Okay. Understand. Thank you, David.
Thank you.
Thank you.
To ask a question, that's star one. At this time, I'm showing no further questions. I'd like to hand the conference over back to Mr. Wang for any closing comments.
Okay. Well, thank you to everyone for participating in our conference call, and we'll report to you know, next earnings. Thank you very much.
Ladies and gentlemen.
Thank you, everyone.
Thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.