Good day and thank you for standing by. Welcome to the ACM Research First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Gary Dvorchik.
Thank you. Please go ahead.
Good morning, everyone. Thank you for joining us on today's call to discuss Q1 2021 results. We released results after the U. S. Market closed yesterday.
The release is available on our website as well as from newswire services. There is also a supplemental slide deck posted on the investor portion of our website that we'll reference during our prepared remarks. On the call with me today are Our CEO, Doctor. David Wong our CFO, Mark McKechnie and Lisa Fong, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to Slide 2.
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 the change in fair value of a financial liability and an unrealized gain in trading securities. For our GAAP results and reconciliations And with that, let me now turn
the call over to David Wong, who will begin with Slide 3. David? Thanks, Gary, and good day, and welcome to today's call. We are off to a great start with solid results. For the Q1, we delivered strong revenue growth, record shipments and excellent profitability.
1st quarter results demonstrate the competitive strength of our technical expertise, breadth of our product portfolio and our growing production scale. Revenue grew to RMB 43,700,000, Up 80% year over year. Shipment were RMB74 1,000,000, up from RMB67 1,000,000 last quarter And up from RMB 12,000,000 in the Q1 of 2020. We delivered a good balance of growth And profitability with a 41.4% gross margin and 11% operating margin, we are committed to Deliver profitable growth as we continue to invest in R and D for new products and global sales and marketing. On the bottom line, we report 35% of net income per diluted share, outperformed $0.11 in the same quarter last year.
We ended the quarter with $79,000,000 of cash. We also hold SMSC stock market share worth US27 $1,000,000 equivalent as of quarter end. I will now discuss recent operation highlights on Slide 4. First, our Q1 revenue growth Was a broader basis driven by current and new products and customers. Our wet cleaning and other front end process tool represent 73% of total sales in Q1 and grew by 42%.
Our advanced packaging and other process tool and service and spare business accounted for remaining 27%, with revenue up more than 6 times year over year. As highlighted on the Slide 5, we have 5 major front end customer In foundry, 3 d NAND and DRAM, we also have several back end wafer packaging and assembly customers. Our newer customers manufacture power and analog devices. As we discussed on our last call, we had penetrated 2 of the 5 key trading edge nodes are analog power IC and the CIS manufacturing in China. I'm excited to share with you that during the Q1, we received orders From additional one of the 5 key trading edge node customers, we are actively engaged With the remaining 2 players with the goal of receiving orders from 1 or both of them later this year.
On top of that, during the Q1, we also penetrate 2 additional advanced packaging houses and 1 compound semiconductor IC manufacturer. Looking forward, we believe our existing Front end and back end customer alone represent a significant opportunity for ACM. Most of them are still in early Our middle stage of multiyear capacity expansions, and we expect to continue adding more new customer As we believe, every major semiconductor manufacturer can benefit from all technology. 2nd, We delivered total shipments of 74,000,000 in the Q1, another record for the company. This is a major accomplishment, especially during the Lunar New Year holiday period.
It is a strong testament to our production team, which has been Aggressively adding capacity to meet a strong customer demand. As shown on Slide 6, our original facility in Zhangjiang includes Our R and D, SG and A and prototyping and production of newer products. During the Q1, we expanded production capacity We are leasing a second building at our factory in Shenzhen. This will provide us with enough floor space To gradually increase our production capacity to more than 500,000,000, upper from current level of 350,000,000. Our long term plan is to build a production and army center in the Lingang region of Shanghai.
The 1,000,000 square feet of the floor space will enable us to increase our annual production capacity to $1,500,000,000 We expect additional architectural and design work to be completed this quarter with initial production target by the end of 20 22nd. 3rd, we invested in our global sales team. Since hiring James Strong to head our U. S. And in Europe's sales effort last year, we have added several other senior employee in the business Development and the service team.
Yesterday, we announced the addition of Eli Larder, A 21 year veteran of major U. S. Semicap equipment makers. Yilan We'll lead our U. S.
Service and delivering team. We now have a seasoned team of world class industry to drive our effort to expand our business to additional major customer beyond our Our team remains deeply engaged in technology discussions and evaluation With the U. S. And Taiwan based semiconductor manufacturers, we are making good progress and are confident that we can secure 1 or more 1st year customer during 2021. 4th, We continue to gain traction with our ECP tools.
We are especially bullish On our opportunity for our ECP product line. In the front end, smaller geometry require advanced plating solution. Meanwhile, Back end and advanced packaging has become more important as investors shift to packaging innovation to drive higher performance As industry moving to post Moisture, our ECP product line includes The MAP for dimethylene copper interconnections, the Tier III for through silicon via for front end and AP For advanced packaging, ACM's ECP MAP product presents our alternative Differentiated solution that can provide a uniform plating ultra thin C layer. During the Q1, We introduced a proprietary high speed copper plating technology that can deliver improved uniformity At the high throughput is essentially important for advanced tagging customers. The high speed capability Combined with our proprietary technology to improve uniformity at a large area give our ECP AP system A strong competitive position to win the market.
The tool supports copper pillar bump For copper, nickel and pink silver, thin plating and high density fan out The CCP AP with a high speed plating rig, together with our SiP cover publishing tool, Position us to grow and become an important provider in 3 d advanced packaging. According to development status of Advanced Packaging Industry 2020 report, The market size of 3 d stacking and fan out will increase annually by 16% to 21% over the next 4 years. We believe the total global market for ECP will expand faster by up to 3x from the present $5,000,000 to up to $1,500,000,000 in the near future. 5th, we recently Broaden our UltraFN furnace dry plastic tool portfolio. We added different semiconductor manufacturing process, including undoped poly low pressure chemical vapor deposition or LPCVD and DostoPoly LPCVD.
This new capability built on the configurable systems Previously announced oxide, silicon nitride LPCVD and high vacuum alloy annealing process capability. The UltraFN furnace platform was the design from the ground up to meet customer Best in class requirements as devices continue to shrink and increasing complexity because today's devices Our design was a complex fine geometry providing consistent and stable heat control is paramount In maintaining wafer integrity, to meet this demand, the UltraFn heater features Proprietary control algorithm, which provides stable temporary control. We delivered several first tool Supporting this new application in Q1 and expect to deliver additional units as we progress through the year. We also plan to add a high temperature oxidation and a neonic capability to our furnace product line In the Q3, the next major development in our furnace roadmap is a batch atomic layered operation All ALD process, which we view as the most challenging and promising product for advanced manufacturing nodes. Putting it all together, we are making great progress, growing our business with new product line.
Please turn to Slide 7. As noted in the prior year course, our current products address a Market more than $5,000,000,000 ACM is committed to become a multi product company. We are positive on the growing opportunity from our core cleaning tools, including SAPS, DEBO, Tahoe and our semi critical cleaning tools. We are also beginning to see meaningful contribution from newer product Offering starting with ECP, which you will expect to ramp in 2021 and beyond, followed by our furnace product, We expect a ramp in 2022 and beyond. As we mentioned last quarter, We have begun significant R and D investments in 2 major new product categories to achieve our long term goal to double The total addressable market of our product from $5,000,000,000 today to more than $10,000,000,000 As the ACM as is ACM policy, we will provide more detail on this new product categories after we secure custom orders for 1st tour delivery.
Before I provide an updated 2021 outlook, Let's discuss the status of the stock market IPO of ACM Shanghai. We continue to make progress. Our team submitted a second verification report for the Shanghai Stock Exchanging Commission or SEC in later March. This report explains the class action lawsuit that was filed in the U. S.
Last year related to their short seller report published on October 8, 2020. We are responding to other important We remain confident that we will receive approving from SSEC and then move into The SRC registration process to complete IPO, but consistent with its practice, The SEC has now provided us with a timetable that would enable us to predict the precise timing of IPO. Now let's move into our 2021 outlook on Page 8. Our guidance reflects optimism about our growth opportunity for 2021. We are reaffirming our guidance of revenue in a range of $205,000,000 to $230,000,000 representing 39,000,000 39 percent annual growth at the middle point.
Our outlook for 2021 is based on several key assumptions. First, the global COVID-nineteen situation continued to improve. 2nd, stability in the U. S.-China trade policy. 3rd, a range of spending scenario for the production ramp of key customers both variance in the trajectory of DRAM recover and Finally, a range of outcome for timing of customer acceptance of First Rule.
Our results and outlook demonstrate a successful execution of our strategies. Our stronger growth is supporting acceleration in R and D spending and new product. We are building our global sales and marketing resource to penetrate new customer in new region. And we are Scaling production capacity to support our long term growth plan. Our mission to become a major equipment supplier for the global semiconductor industry remains on track.
To conclude, I would like to thank our employees for their hard work and dedication. I also want to thank our customers, partners and shareholders for their continued support and confidence in ACM Research. I will now turn the call over to Mark to discuss the financial results in more detail.
Mark? Thank you, David. Good day to everyone. As David indicated, we're up Starting 2021. Unless I note otherwise, I'll refer to non GAAP financial measures, which exclude stock based compensation and unrealized gain in trading A reconciliation of these non GAAP measures to comparable GAAP measures is included in our earnings release.
Now the Q1 shown on Slide 8. Revenue was $43,700,000 up 79.6%. You may have noticed more detailed reporting of our revenue in yesterday's earnings release. Revenue for single wafer cleaning tools, which includes SAPS, Thibault Tahoe and our semi critical cleaning was $32,400,000 up 42% from 22,800,000 Revenue for ECP, Furnace and Other Technologies was $5,600,000 versus 0 in the Q1 of 2020. Revenue for Advanced Packaging, excluding ECP, services and spares was $5,800,000 versus $1,600,000 in 2020.
Total shipments were $74,000,000 versus $12,000,000 in the Q1 of 2020 $67,000,000 in the Q4 of 2020. This includes delivery for revenue in the quarter and delivery to systems awaiting customer acceptance for potential revenue in the future quarters. As David mentioned, this was another quarter of record shipments. This was a great accomplishment by our production team during the holiday shortened lunar New Year period. Gross margin was 41.4% versus 42.2%.
This is in our normal expectation of 40% to 45%. 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 $13,500,000 versus 8 point $4,000,000 The increase in operating expenses reflected higher R and D on new products, sales related activity and preparations for the China STAR Market IPO. Operating income was $4,700,000 up from $1,900,000 Operating margin was 10.7% 7.8%. Unrealized loss on trading securities related to the change in market value of our SMIC investment was $1,000,000 in the Q1 of 2021.
Note that we exclude this non cash item from our non GAAP results. Tax benefit was $2,800,000 versus a tax expense of $304,000 in the year ago period. The benefit was because of stock options that were exercised during the quarter. Net income attributable to ATM Research was $7,700,000 versus $2,400,000 in the year ago period. Net income per diluted share was $0.35 compared to $0.11 in Q1 of 2020.
Tax items and the effect of foreign exchange fluctuations on operating results provided a net benefit of $3,800,000.17 per share in the Q1 of 2021 versus a net benefit of $600,000 or $0.03 per share in the Q1 of 2020. Now I'll review selected balance sheet items. Our cash balance was $78,800,000 at the end of the first quarter, up from $71,800,000 at the end of 2020. In addition to the cash balance, we also had trading securities of $27,000,000 related to our SMIC investment. Short term borrowings at quarter end were $23,500,000 down from $26,100,000 at the end of the Q4 of 2020.
Long term borrowings were $17,400,000 Total inventory was $103,200,000 atquarterend versus $88,600,000 in the prior quarter. The quarter on quarter increase in inventory was driven primarily by growth in finished goods inventory. This represents first tools that have been delivered to customers for evaluation and are pending acceptance and which grew to $47,100,000 at the end of Q1, up from $32,400,000 at the end of Q4. The combined balance of work in process of raw materials For 2021, our base case for capital spending is $10,000,000 to $15,000,000 Our 2021 investments will be focused on capacity increases at our tranche of factories, investments to support our R and D programs as well as the planning of some initial spending on Lingaf. In summary, we continue to execute on our strategy.
We are participating in the growth of major new IC fabs. We are ramping production. We continue to develop and deliver innovative products to a broadening array of customers. We We're positive on our opportunities in China and expansion outside of China. We remain committed to achieving our mission to becoming a major player in the semiconductor Equipment Market.
Now let's open the call for any questions that you may have. Operator, please go ahead.
Your first question comes from the line of Patrick Ho.
Thank you very much and congrats on
a nice quarter. Maybe first off, in terms of the increase in inventories and the increase in shipments, maybe Mark, if you can just give a little bit of Detail whether you experienced any component shortages or any supply constraints. Given that your revenue levels were very healthy, it doesn't seem like there were any issues, but if you could detail some of the issues you may have had
Great. Maybe I'll let David go ahead and start. Yes. Go ahead, David.
Yes. Okay. Patrick, good question. Actually, we see the demand is higher, Right. We got a lot of demand from our customer, either existing customers or new customer.
We do feel pressure in our supply chain. Our components are leading time, getting longer. So in other sense is, we're actively Project a PO and therefore we'll propose to do some long leading item At the moment, the purchase is purchasing from our lender, try to managing their delivery time. But again, this supply chain is real dynamic changing, right? And we sometimes see some surprise come out And because of a vendor has been loaded up or because there are too many order coming.
So I should say, yes, this is definitely one challenge we're facing right now. And I should say also maybe there Especially in the middle and end of this year, we see that probably there delay or this trend will continue. So anyway, it's good to highlight, but we try to manage as we can. Also expanding our capacity, hire more people And do their good quality work and also do the successful installation. So it will be very, very busy year.
Mark, anything you want to add on that?
No. Actually, David, I think you covered it well, Patrick, if you've got another question.
Yes. My follow-up question, maybe for you, Mark. Most margins came in within the range that you guys have previously targeted between 40% to 45%, But at the same time, a lot of moving pieces, increasing utilization, but you also have startup products, product mix, all of these variables. Over the next several quarters, how do you look at those influences? And which ones are the biggest ones we should be looking out for?
Yes, you bet, Patrick. So on the gross margin side, Q1 We did 41.4 percent in our normal 40% to 45% range. It's going to really it's almost always due to product mix. So in Q1, we had a higher mix of semi critical and back end products. Those carry a lower relative margin.
And these are new early stage products. They haven't necessarily hit volume or we haven't done a significant amount of cost downs on them. So they're newer products. We do expect the margins on those products to improve as they mature. And then you balance that, the other side of the mix is In our flagship cleaning tools and ECP where we get very good margins.
So no change to our target gross margins Range of 40% to 45%. David, did you have anything to add?
Yes. I think, Amol, you covered very well. As you Point out is that clearly there is a mix in between the low margin product or high margin product. And I think as time going on and the volume There's certain semi critical cleaning tool and also some packaging tool as volume increase, we can increase our manufacturing efficiency, Higher quality and therefore increase margin by pricing also reduce the cost in our manufacturing. So I think that this is still within our range of 40%, 45%.
And we have confidence that will continue In our range and as time going on, we'll obviously try to increase the efficiency and also Include the quality and then make a more stable process, and that's our goal and on reasonable gross margin.
Great. Thank you very much.
Thanks, Patrick.
You have a question from the line of Donnie King.
Hi, good evening, David and Mark. Congrats on a good result. The first question is regarding to your shipment and revenue. So it looks We have very strong shipment trends since Q2 2020. But look at our sales trend, it's like our sales Trend was a little bit slower since Q4 last year and the gap between shipment and sales is getting bigger and bigger.
So I understand that we need to shift to customers first and then So just wondering how are we able to resolve this kind of huge Going forward, and is there any if you are seeing any Longer acceptance period by your customers or is there any other issue? Thank you.
Okay. Donnie, thank you. Actually looking at last year or this year, Q1 this year quarter, we see there a new we got an increase in new customer, right? Normally new customer, Even for the, I call it, mature existing product and they are not the regular revenue until they quantify their process in the production line, Right. Also a lot of new customer, there is a new production line.
So they're relatively the longer time to qualify in our mature product. Meanwhile, also we're shipping some new tools to the existing customer, especially like you I mentioned, we have Vertical furnace and also have advanced packaging tool for their copper plating. And also we have a front end copper plating For both mapping and PSV. So those kind of tool, it's new even for new customer or for the existing customer. So also take Take a little bit longer time than normal expectation.
Again, this is a process we have to go through as a matter of the semiconductor business. We're trying to do our best supporting and meet the customer requirement, do our best in supporting and fix Any problem happen in the I mean, evaluation period, that's our goal, right? But I think Looking at history so far, we are very confident in almost every first tool or first customer, new customer, We got our 2 of final qualified. So like you said, it's a matter of timing, but we'll go through that process. Amar, anything you want to add on that?
Yes. No, I think you covered it well. And I don't think we haven't seen any Change in the timing of acceptance rates on a broad level. Part of our outlook, it is tougher to predict When will we get acceptance on those? And so we mentioned that as one of our guidance dependencies.
Got it. So simply say is that we are expanding the new more and more new equipment. So More shipment, but probably longer qualification time. Is that correct?
Really, actually, Don, it depends on the product, right? And some product even new we got acceptance within 6 months, put this way, Right. And I should say regularly say 6 month to 1 year time line. And we do see some difficulty The tool maybe got longer than 1 year, right? So but I say major our tool got to qualify within 6 months to 1 year time line.
I think that time should be no change.
Got it. And my second question is regarding to your full year guidance. So based on the very strong shipment and actually, as you have seen, lots of foundry or memory companies Have started to add CapEx. So just wondering if there is any chance that Our sales momentum in the Q2 or beyond to be stronger than our expected. And also, could you comment on DRAM market outlook because Hynix sales was quite slow last year.
So just wondering when are we seeing D RAN sales from D RAN can start to pick up this year? Thank you.
Okay. Dolly, yes, good question. Actually, we see there like you said, we see the demand become strong, Sean, right. I mean, our Q2 I mean, Q1 is very busy. I can say probably Q2 is even bigger than Q1.
And even looking at Q3, Q4 is Pretty tied up, right? I also want to mention one thing is that because of a new customer, new product come out And we are really balanced between the revenue versus shipment. And if I say for maximum revenue, obviously, I should take all the PO or existing customers' order. However, we also balance the However, we also balance their new customer and a new tool. So it's really kind of It's a little bit of dilemma here, right?
We need to maintain good new customer, future revenue, At the same time, whether we sacrifice some deliver for the existing or repeat the order. So I think we're going to make a regular balance between that And then the media revenue obviously, and then at the same time, we also have new product, new customer, you can take our tool, right? That's what made it for your first question. For the second one, probably you see, we also noticed that there's our customer Hynix and probably they can increase their Spending this year, maybe there's a pool of 20 22nd spending to the 2021. I mean, I think that's very good news.
And maybe some other Vendor feels long leading item, vendor maybe they have some indication. This morning we're still real active working with our customer. And maybe I can report to you an issue later very soon. At this moment, we're still
Okay. Thank you.
You have a question from the line of Suji Desilva.
Hi, David. Hi, Mark. Congratulations on the progress here. Can you talk maybe
Can I talk about the
lead times you are quoting to your customers versus 3 months ago and your ability to meet demand, whether it's surging or whether it's been pretty steady because you control your own
Sure? You're asking our leading time right now, is that correct?
Yes. The lead times you're quoting to your customers, if they're extending at all.
Okay. Well, dependent product, right? I should say, our average normal leading time used to be about 4 months. And obviously, now we're expanding, right? In some product, even go to 5 months and some even go longer.
The reason for that is a certain component or subsystem or subcomponents, we get a longer and longer all the time and only the time there, So which is our vendor supply maker kind of delay. Further, obviously, we have a volume, Manufacturing busy and the manufacturing floor. As I mentioned, we're expanding our manufacturer spacing right now, also hire more people. So that's a secondary factor we consider right now. So to answer your question, yes, we do see our leading time for our product and get it longer.
Average, I should say between 5, 6 months right now.
Okay. Great.
And then you mentioned in the press release Global customers and opportunities there. Can you update us on what the remaining steps might be for additional customers? It sounds like you have Visibility through shipments potentially into qualifications there, but any color there would be helpful.
Yes. Actually, you know that We are actively working with the 1st tier customer. And sorry, I maybe I couldn't mention who it is. And we did 2 months ago, we did a very good demo for 1 1st year customer. And so far, they found the result of they are satisfied.
And we're in the kind of a business agreement negotiation right now. So hopefully, we can win this customer and With the timeline, also working with additional other first tier customers too, right? That's why I mentioned My speaking is we got one this year. Maybe I'll try to even make more. That's our goal.
Okay. I'd like to take in one last question on the IPO. Do you have a sense that the report you filed That you need to have further comments, responses or a second report required. Do you have any sense of what the remaining steps might be? Thanks.
Good question. I think we're actively working last 3 or 4 months, right, working with SCC In China. And the process in China here is not like you submitted, they take it. And they Some reports are early even, I mean, February March timeline and they are asking continue to say add more material, add more of their comments. So we're doing very active dialogue and engagement with SSEC.
So by April 30, you're looking there, I think their report, but I think we report on other requirement. We're almost finished But again, I'm still waiting for them to make a final acceptance. That's where I'm not getting yet. And I should say when they accept all our report with acceptance finish, then I think we're moving to the registration process CSRC, right? So we're now in the final phase of the acceptance for the report.
And then we're pretty close To their registration for the CSRC. That's a standard right now.
Okay, great. Thanks guys.
Thanks, Suji.
Thank you, Suji.
You have a question from the line of Charlie Chan.
Hi, David. Hi, Mark. Congratulations for good results. So just to follow the question from Suji about IPO timing. So When your report gets accepted by SEC, does that mean they need another 60 days to review your documents Or this tends to be quicker?
Well, it's hard to predict, right? I mean, as I said, we did Probably, sales did a 95% of our job already, hopefully 99% or 100%, right? Or it's something maybe add more. But I think this moment, We don't know yet, put it this way. It can be 1 to week, it can be more weak, right?
There's more I should say that's where we're waiting right now. We are finally accepting another it's going to buy SSEC. But we believe we did the most that we can do and we submit whatever they request so far. And our team, our investment banker, our lawyer and also including our new firm, our team did a great job. So this moment, The best way, we're just patient waiting there, right?
Okay. Got it. And I think Donnie also asked the question I tried to ask, meaning you see foundries, I guess, Vanguard, UNC, TSMC, they all revised out their CapEx, right, maybe by 50%, 70%. Do you see a similar above revision of your customers, especially in China over the past 2 months?
Yes. Again, obviously, you can see that Intel and the TSMC, they're Make a very fast or and we announced their bigger CapEx expansion, right? Again, I mean, China, our customers in China right now, they have a multi year expanded plan, right? And I don't see that not too much, the dramatic changing. However, the keeper, they are speeding speed up and also they are again, this is a multiyear expansion right now.
So we see more of a demand for existing customer. More than that is also 2nd tier customer, As I mentioned, 5 trading edge customer, they also speed up their plan too. Also additional other maybe more than 5, right, people coming out. So there's a lot of demand had in China. And SMIC, I should mention there probably still I heard somebody say they got some license.
They're still waiting for some license. But rest of other customer in China, they are keeping spending. And also I can see that the demand is stronger. Yes. Like I said, like Intel, Samsung, Samsung announced in a big one, not like that way.
They're more like gradually and keep growing stronger and stronger. That's what I see there
Got you. And then and also good control on OPAC In Q1, I mean, it's a 3% OpEx ratio. So maybe this question is to Mark. So For the coming 2 to 3 years, do you think the OpEx ratio is still to be around 30%, is that Kind of right assumption for the coming 2 to 3 years?
Yes, Charlie, on that front, I mean, obviously, we don't Guide a lot on that area, but this year, we're investing pretty heavily at R and D, sales and marketing, what have you. And so But if you look down a few years, we'd obviously like to see some leverage some better leverage on the top line. Longer term, we would expect to grow our top line faster than our operating expenses.
Yes, maybe Charlie will add one sentence. Obviously, next Charlie, okay, maybe add one sentence there. I think next few years definitely we'll continue to invest in R and D, right? As I mentioned, we do have additional plans or further demand 2 brand new products and that will put more R and D in next few years, obviously. So R and D will be our number one Investment and continue to go in further.
Sales and marketing will continue too as we are very good at our, I call it, sales and marketing In the mainland China, some have in Korea. However, we do think we still need to enhance our margin to sell In the Taiwan, in the U. S, maybe in the future in Europe. So that's a marketing sale of continued investment too, Right. So in the next few years, I think we're really balanced between the profitability versus growth opportunity.
So we'll probably put more effort on their growth opportunity by sales and marketing, new product development. That's our
So David, can you give us some direction or timing about When are you going to add a new product line? And can you update your Tam, I think currently it's like RMB5 1,000,000,000, right? And any Yes, a possibility to expand that trend in the coming year?
Yes, good question. Actually, as I mentioned, given Love earning call. We already are doing 2 new product development actually, right? And there's one maybe earlier And one maybe later. I think probably maybe by beginning next year, we'll introduce our first product.
And then hopefully, we can get a second one come on later next year, right? That's our timeline. We already, I mean, started this initial, I call the feasibility study and initial R and D almost a year ago, right? So it takes time, but with our excellent team and both in Korea And in China, and I think they are very efficient. And also we have a very good sales channel and understand customer requirements And also with our software control and the auto control system, all those kind of things is We are adding our speed from R and D product from the market.
So we'll continue our effort. And as I said, this will be 2 new products. We'll add additional $5,000,000,000 addressable market So add to our existing RMB5 1,000,000,000. So I think the future of product addressable size will be Beyond the RMB10 1,000,000,000, that's our target and goal.
Okay, great. Thanks for your answers. Thank you.
Thank you, Charlie.
You have a question from the line of Quinn Bolton. Quinn, your line is open.
Sorry, guys, I was on mute. Congratulations on the nice results. I wanted to start with the shipments. You guys have Seeing very strong shipments over the past three quarters increasing from $59,000,000 in the Q3 to $74,000,000 here in the Q1. Is there any reason why you would think that trend in shipments would take a big step down over the next
I think our shipment continue will be probably increase, right? That's what happened here. We are packed with the PO, right? However, we're struggling to make our manufacturing capacity increase. And we are also balanced between the PO versus new tool.
And so that's what we're balanced right now. Obviously, there's another A factor, we all know that is the supply chain is very tidy right now and especially some long leading item get longer and longer. That's what we're struggling now. Yes, I mean, we try to do our best managing our supply chain and also manage our manufacturer capacity With good training people, with good quality. And so we see that shipment will continue to increase in next few quarters.
Great. And thanks for the additional disclosure on the revenue breakdown by front end, back end and by tool type. What's pretty impressive is the growth in the advanced packaging or the back end, where revenue was up by about 10x Versus last year and back end now sort of somewhere between 25% 30% of revenue. I guess as you guys look forward, Can you give us some sense of where do you think the split will be for 2021 between the wet cleaning and front end tools versus The advanced packaging and other back end tools?
Yes. And I can give, Tayo, what is really driving force For the advanced packaging ratio go up is our copper advanced packaging plating, right? And obviously, their Have yourself pricing much higher than other colder developer, at your water cleaning. So that's the real major driving force. And we see that trend continue to increase.
That's why I mentioned, cup of Beijing become ramping up this year, revenue will continue ramping next year. And that will be the real driving our packaging revenue continue to go up. And obviously, you also have a front end of a cover creating community growth too, right? So to answer your question, yes, the major driving force for the Advanced agonists reveal our superior advanced copper plating tool and for the Pilar and for the fan application. But David, do you think that
the mix stays roughly 75%, say 25% front end versus Back ended in 2021, is that about the right mix for folks to be thinking about?
Good question. And I couldn't give you that firm answer, right? It really depends how our front end, Slide 2, right? You can see that is our TiVo continue to gather more attraction And our furnace, right, that we'll see the ramping next year, ramping for furnace product. So that's where we add additional revenue going on there.
I'd also say front end of trading keep going too. So maybe that ratio is right, but I don't know how much that would be precisely matching, right? Maybe go Slightly higher, maybe because they're lower. But I can see there both sides will be continued growth, right? Thank you, David.
From the line of Christian Schwab.
Hey, guys. Congratulations on a great start to the year. Most of my questions have been answered. I just have one quick thing. As we look at your guidance for calendar year 2021, to me it appears Kind of conservative given the spending trends with some of the leading customers that you're dealing with.
I understand Your commentary between having to manage new customers versus existing customers. And so If we're having a conversation in December, in my estimation that the expectations look a little conservative, Would that be like greater supply chain management? Or what would be some of the puts and takes to that?
Yes. I think you mentioned a very good point, right? It's really, I should say, looking at our guidance And from year beginning until now, this time, we didn't change it much or it didn't change it. The reason for real that is We got more deals coming, right? We got more of a shipment going on.
And by the same time, we got supply chain real Holding us right now also manufacturing capacity internally, eco expansion too. So I should say, yes, the major is how we're real managing our manufacturing, how we manage our Supply chain is really also how to balance, right, our revenue versus the shipment, right, new customer Versus the existing customers. So that's something we have to really balance out that way. They want to determine what's the revenue, right? In the beginning, it will give us our projection is a shipment.
Then obviously, we're going to change our shipment by now, give you new update. But because of revenue wise and especially we have so many new customer, new tool come out. So we'll see, right? And hopefully, we'll give you more new update on the second quarter earnings call.
Sounds great. Thanks, guys.
Thanks, Christian.
Thank you.
You have a question from the line of Chi
Yes. Hi. Hi, David, Tanwant. Thanks for taking my questions. So my First question is regarding your A share IPO.
So when I look at the Shanghai Stock Exchange website, It says your status is passed by the SEC and is updated on April 30. So could you give us some update on the stages of your IPO and whether we are And the status of waiting for the CSRC already and we expect the Asia IPO to happen in
Okay. So I think you are checking very closely. Yes, you got it. Okay. There's a new update on So basically, the SEC always updating where they're receiving or accepting new material, And which is indicated, we submitted our 2020 revenue, right, financial report.
Also, we submitted our additional verification report, right, for this class action. And also, we submitted our certain shareholder clarification requirement, right? There's a reason required by SEC For any company who are going to file application anyway. So this moment, I think the major three things where I should say, we're free on 95%, 98%, right? And we're waiting for the final acceptance altogether.
So that's why they're updating that so far our status on April 30. If that final acceptance, if they give us, I don't know, maybe a few weeks, maybe within 2 weeks. So it depends on how they process, how fast they go. So after that, then we're moving to the CSRC registration, right? So again, it's really helpful for us to give a precise timing.
And we think maybe that's a few weeks is good timing we're thinking. But again, nobody guarantee that, right? That's so far Our best estimation.
That's very clear, but very happy that we are making Big progress. So I think my second question is regarding the gross margin. So in 1st quarter, Our gross margin was flattish now versus Q1 last year. That product mix has The weather cleaning equipment was 95% last year, but it's down to 75% in the Q1 of this So I'm wondering, does it mean weather cleaning equipment is higher gross margin products than other products? And how should we Do you use this gross margin in this product in the separate products, I mean?
Yes. If you look at the new product we Last year also obviously, this year too, we have a semi clinical product, AM cleaning. And those is, we call the scrubber and also Iber Autobench. And compared to single wafer cleaning, those semiconductor product, Their gross margin is lower than that, right? That's obviously.
And also certain, I call it, advanced packaging tool. And also there are certain margin also high either. So as all together, which is really probably putting in the low side of 40% to 45%. However, as I said, as we are volume increase and also with our product quality improved And then our pricing and also our manufacturing efficiency, also our supply chain management will give us Space to increase our gross margin. So again, I think we still see this within trend that we're talking.
And also as we more of advanced High margin tool get a qualified in the customer and that's what bring the higher, I call, average margin higher. So at this moment, I'm not we're not too much of a worry about that. It doesn't match up the product mix. And we're Well, best way is we're going to certify customer and meet the customer requirement and at the same time, Expanding our competitive position and also give the good mixing of our product portfolio. That's what we're trying to manage, right?
So I mean, that's the way we're taking it right now.
Yes. That sounds very Thank you. Thank you for taking my questions.
Thanks. Thank you.
Your final question comes from the line of Mark Miller.
Just wondering with respect to your guidance, do you see any potential upsides? I know Hynix has pulled in some of their Spending plans. Also, could you give us a status? Do you have licenses to ship to SMIC?
Okay. So Let's put it this way, Mark, is for SMIC, right? And I heard some company license already And some companies are still waiting. And this moment, I can tell you is We'll continue shipping their product. And however, I can see that is our product, shipping to SMIC, It's not as volume as other customers at this moment, right?
And so we'll see, right? Maybe they have to Got a lot of other customers give their license and they can really fully expand their capacity. And that moment expecting we're going to move the PO and we're going to ship more tool to SMIC. This moment, we're probably waiting And we're doing very good preparation to. And they need our technology, need our product.
And obviously, they have the balancing and also make sure the timing And what they are going to largely expand in their capacity. So we're waiting right now.
Okay. So you're waiting to ship for SMIC and You'll need to require you need to get a license. Is that what you said?
Let me clear that. And Our cleaning tool mostly were developed, right, in China, right? So this is non U. S. Technology.
So we talked to our expert control lawyer in Washington, D. C. As long as we control our U. S. Components, less than a certain percentage, and we do not need license to ship to the SMIC.
That's our legal recorder, give us advice.
And what about any upside factors You can see in the year ahead, do you think there could be significant upside coming from certain things?
For SMIC? Is that a lot?
No, just in general, in terms of your general market. Okay.
Yes. Actually, I look at the demand here, right, and our product, as I said, our Clinini, Which is our initial saps seabor Tahoe, getting more acceptance in the market today. And also, we have a semi critical product And also we have a couple of painting and for the round packaging, also for their and damaging, also have vertical furniture component. So it's great. We have a new product.
And once we have a new customer come out to buy the tool, It is great. This year, that's why we made it a historical record high shipment in the Q1, And also our Q1 revenue was a record high, by the way. It's also record high in the last of the year. So this year, we see the tremendous opportunity. As I mentioned, we need to manage very well on our supply chain, Managing good quality product in this high capacity expansion.
Also, we are managing Our expectation from customer and also our installation or service supporting too. So it's a lot of challenge we're facing. However, it's a very good headache. It's very good to expanding our capacity or to train our employees, train our So it's a great year. It's a real it's a tremendous opportunity.
And we got a catch. Meanwhile, we also put effort into the new product development and we also consider not just this year, Because even 3, 5 years down the road, ACM continues to grow, right? And ultimately go become the And a world class semiconductor provider. So I think our $10,000,000,000 future Market addressable market and will bring us to the big player in the global market.
Thank you.
Thank you, Mark.
Thanks, Mark.
There are no additional questions at this time. I would like to turn the call over to David Wang for closing remarks.
Okay. Thank you, operator, and thank you all for participating on Before we close, Gary is going to mention some upcoming investor relations events. Gary, please.
Thanks, David. The company has a number of upcoming conference appearances, and we're going to Let you know very quickly, May 12, we're going to present at the Credit Suisse China A Shares Conference on 18th We'll be at the Needham Virtual Technology and Media Conference. On May 26, we'll be at the Goldman Sachs TechNet Virtual Conference in Asia Pacific. We also have coming up the Craig Hallum Conference in Minneapolis on June And the Cowen Virtual Tech Media and Telecom Conference on June 3 and the Stifel Virtual Cross Sector Insight It's on June 10. So all of those conferences or attendances by invitation only for clients of the firm.
So please contact those firms, Your sales representative, if you want to register and sign up for 1 on ones. That concludes the call. So everyone may now disconnect, and have a good day.