Greetings, and welcome to the Kulik and Sofa 2018 Analyst Day and Conference Call. At this time, all participants are in a listen only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Elguindy, Director of Investor Relations and Strategic Initiatives for Kulicke and Sofa. Joseph, you may begin.
Thanks, Brock. Welcome, everyone, to Kulicke and Sofa's 2018 Analyst Day. This will be audio broadcast. For those dialing in, presentation materials can be found at investor. Kns.com under Events and Presentations.
This event provides a unique opportunity to participate in discussions from several key members of the company's executive leadership team, who are critical in driving and achieving our long term objectives. In addition to historical statements, today's remarks will contain statements relating to future events and our future results. These statements are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in these forward looking statements. For a complete discussion of the risks associated with JUULAC and Sulfa that could affect our future results and financial condition, please refer to our recent SEC filings, specifically the 10 ks for the year ended September 30, 2017.
Joining us today are several members of the senior K and S executive team. Fusen Chen, our President and CEO, will provide a high level introduction to the company's strategy and positioning. The next three speakers will provide insight and overview to 3 fundamentally different end markets that we serve: General Semiconductor and LED, Automotive and Industrial and Advanced Packaging. Huang Huang is our Senior Vice President of Sales and Advanced Aftermarket Products and Services, and he'll cover general semi LED piece. Changpin Chong, the company's Senior Vice President of Wedgebond and APMR Equipment will cover the automotive market trends and Shneesh Bhatra, our Vice President of Advanced Packaging will cover some higher growth areas within assembly.
The last two presentations will discuss how we can drive value and deliver value within these trends. Nelson Wong, our Senior Vice President of Ball Bonding will connect our end markets to our products and services portfolio And Lester Wong, our Senior Vice President, Interim CFO and General Counsel will tie this back into our long term financial model with some key financial KPIs. From a timing standpoint, presentations will be approximately 15 to 20 minutes long. Directly after the financials, Susan will cover with a brief summary. Lastly, we've designated about 30 minutes for Q and A session after the presentation, and we'll prioritize questions from our covering analysts first.
As a reminder, we're broadcasting audio. Please remember to use a microphone when asking questions, and I'll run them around. It's now my pleasure to introduce our first speaker, Fusen Chen, JUULKINS Office President and Chief Executive Officer. Fruzan joined K&S in October 2016 after driving fundamental business improvement as the Chief Executive Officer and President of Maxon Technologies. He previously held positions in Business Unit Management, Operations and ultimately Chief Technology Officer of Novelis Systems.
Prior to joining Novelis, Susan was Group Vice President and General Manager for the copper physical vapor deposition, PVD and Interconnect Product Business Group at Applied Materials. Susan holds over 60 U. S. Patents and earned his Ph. D.
Degree in Material Sciences and Engineering from the State University of New York. Since joining K and S in October of 2016, he has driven fundamental improvements in organizational design, has redefined corporate priorities, has identified and targeted new market opportunities and continues to serve as a shareholder advocate through a more aggressive share repurchase program and also by championing our recently introduced quarterly dividend. Susan will provide a high level overview to strategy and key market drivers.
Please go ahead, Susan. Thank you, Joe. Well, good afternoon and I would like to thank all the support from you in the past years and that we are making a difference in the company. And I would like to show you some of the strategy we have. Okay.
So I joined company later part of 2016, so it's less than 2 years. Before that, I was in the front end for more than 25 years and working on a lot of development and also general management of the company. When we look back in the past 10 years, we see fundamentally this industry changing. Number 1, Maestro is slowing down. So what does this means?
When Maestro slows down, people need to figure out another way to carry to improve Maestro. So we see a phenomena that this trigger a lot of innovation and investment coming to our backend because most of the slowdown means every technology know advancement is more and more expensive, right? That's one of the reasons I joined Kines. Kines has a strong fundamental, and I'd like to take this opportunity, allow investment, allow innovation is in the backend. I think we will have an opportunity to view Canon as a very successful, a strong leading back end company because of this opportunity.
So definition of a successful company in my way, in my own definition is we have a strong core business and we can leverage this business and even grow bigger. I'll give you an example. BowBow, we are number 1 in the industry. Not only bow bounder, we are number 1, which bounder, we are also number 1, right? You probably don't know, 2018, there are 1,000,000,000,000 of semiconductor devices, finished products.
And when they finished product, they need a home. They need to be packaged. 70% to 80% of finished semiconductor devices choose bow bounder as interconnect solution. So 70% of market shares for packaging is a bow bonger. We are number 1 in the industry.
We are also number 1 in the wedge bonger. So I'd like to make this core business become grow bigger. So within the 1st 2 months, when I joined the company, I made a strategy. We want to grow wirebond even bigger, although we are number 1. So we decided to expand to LED market.
12 months after we make this strategy, we grew LED business 3x compared to previous years. So by doing that, I think we achieved 3 things. Number 1, we gain additional market shares in Bobonga. We generate additional profit in ball bounder. Number 2, we not only optimize the cost structure for the low cost LED bonder, we also optimized the whole cost structures for the whole bonders.
We can use our knowledge in the LED bonder, which is price sensitive, improved gross margin for the whole bonder. And number 3, more importantly, why we want to get into LED market? It's because of by getting into our price sensitive market, we eliminate majority of our future competitor in China. If we can compete in China, we can compete everywhere. So we have both high end and also low end.
So I can tell you, I think in terms of bonder, we are stronger than ever. And 80% of our finished IC product use broadband as interconnect solution. So that's how we leverage our core business. And number 2, how we leverage it is we form a business we call APS. We put a service, spares and a consumer together.
And we are gentlemen, Huang Huang, on the back. And currently, I think this APS account for 20% of our revenue. But in the next 4, 5 years, this will be 30% of our revenue. So we leverage our core business and grow it bigger. The second, we extend our product to next market.
Currently, we have multiple programs in advanced packaging. It's called More Than Moslow. Like, Moslow is slowing down. Everybody comes to more than most of them. And we have many programs and even some programs we did not announce yet.
And we believe during the technology interception, this product is going to grow market to next level. We also have several joint projects with our partner. Recently, we announced we have a joint development program with Loheenie. This is a microLED company, and we believe this is a technology, the most imminent to the production technology. And we also believe the microLED miniLED will be the next big wave of growth.
So we believe the MiniLED will be the next step for backlighting compete with OLED and it will take part of market share from OLED And generalizing for the microLED will come in in next couple of years. So we believe microLED, miniLED, will be a big way of growth for the industry and hopefully it will be for us. We also not exclude the possibility to do M and A activity. We are looking any possibility, any suitable partner, we are not excluding the possibility for the M and A. So we have meant to make our core business even stronger.
We are preparing many projects when the technology inception comes through, we are going to grow our company with new products and we have new partnership. Therefore, we have meant to return the value to shareholder, right? So we are in the middle of second stock buyback program. The first buyback, dollars 100,000,000 is down. The second buyback we announced last August up to date, we spent approximately $85,000,000 This morning, we announced additional $100,000,000 to buy back our stock.
In June 4, about a month ago, we also declared dividend program. It's $0.40 per quarter, so roughly it's about 2% over the year. So this is the way we put shareholder return as our top priority. Okay. So when I joined the company, the first step, I look at organization.
Actually, last year, we fine tuned our organization. There are a few areas we have fine tuned. Number 1, we decentralized our R and D engineering. So we deploy roughly half of our engineering resources to business units. Therefore, they can move faster, come to market and respond to customers' needs.
So another half, we continue to stay in the center of engineering. They look ahead to look for the future potential growth and mega products and mega concept participate in mega industrial 4, so on and so forth. They are very focused for the future and current business unit, they are focused on current revenue. Therefore, they are clear the responsibility and also they are empowered to do what they need to do in terms of growth of revenue. As I mentioned, we also found a business unit and Hong Kong is going to be putting on this business unit, APS.
It's a service, It's a consumable. It's also spares. And in the future, it will be refurbished. And put all this to become a focused business unit. We will grow this business unit at the current of 20% of total revenue to 30% of total revenue next 4, 5 years.
So organization is a better ownership and also a better efficiency to move forward. So this chart shows quarter to quarter revenue variation. So this chart makes two conclusions. Number 1, our revenue is in uptrend. Number 2, I think the range is tightening.
Right, due to diversification of our product and nature of our semiconductor business. In 1980 to 1990, I think this industry was driven by a single product, it's called personal computer. It's by corporate spending. But right now, there are many, many affordable electronics and the customer base is global customers. So basically, this business should be driven by GDP.
It's more stabilized business and plus additional growth because communication not only happen between the people to people. People to people, you see is like Facebook, like WeChat, a lot of people to people communication, right? And you also see Amazon, Alibaba, it's the people to object, like you purchase stuff, there's a lot of communication, people to object. And you also see object to object communication, You see a big factory, Foxconn, it's people communicate to robot, robot communicate to. So it's a whole total new evolution and I think the demand over IC and the communication device is continuing to grow.
We will not make our industry less cyclical and also sustainable. Industry evolution, I think industry is changing, but growing. And our actually current product is very aligned with the fast growing of industry trend. You will see our fuel segment right now actually grow very fast, automobile, IoT, LED and the memory. And this is the first time in Canon's history we have all the solution for the interconnect process.
And I also mentioned, I think this industry is more less seasonal and also with less cyclicality. It's because our customer base is a burden. It's no longer corporate spending, right? It's everybody can buy affordable electronics. And this industry will continue to grow with additional new master, new capability to make a packaging for us.
For example, new way of LED, I talk about the micro LED and mini LED. And there will be a lot of new method for more and more so. Industry 4 is coming. We'll connect people to people and we'll connect actually maturity Industry IV is object to object and people to object. In the tuning process, we will come up a very wide portfolio of advanced packaging portfolios.
And we have ability to have major share gain and this is going to be in TCB, right, to gain a major market share gain in the advanced DRAM and the advanced logic. Okay, opportunity for us. So the vertical is the number of IC produced and the package in particular year. In 2018, it's close to $1,000,000,000,000 and continue growing because of all the communication, all the connectivity between various objects. And horizontal is revenue for assembly equipment or bonding equipment.
So few conclusion. These 1,000,000,000,000 devices in 2018, 80% usable bonder to be a packaging solution. In next 5 years, we don't see that will be changed. And the next conclusion is the revenue for the assembly equipment. Compound annual growth of KJU is about 7%, pretty fast growing.
And of course, we like to grow faster than that. Okay. The third conclusion is in 2018, people think we are a wide bound company. At that time, we have 5 products in our portfolio. In 2018, at this moment, we have 21 products in our product portfolio.
And Nelson will talk about it in more detail later. Okay. Our market, how do you see our market? It's very difficult. So we summarize.
I think we align our business into our 3 segments end market. 1 is general semiconductor and LED. 1 is auto. And finally, I think the third one is advanced packaging. So we align our business in 3 areas, and you will see a detailed presentation in these
3 areas,
right? So we are number 1 in the wirebonder, as I mentioned. We are significant in store base, and there are many, many diversified products come to market. So for this market, mean to us is really capacity expansion. There will be more and more affordable device.
There will be more and more population. There will be more and more connectivity. That drives capacity expansion, that drives growth for us. For auto, we also see a fundamental revolution for the auto industry. The acceleration in the hybrid, EV card and eventually autonomous card need additional reliability and the capability inside the car, not drive additional reliability and capability for our equipment, but drive the growth.
Together, we're working with 150 dedicated auto customers. Together, we will drive this industry to continue to grow. So this industry is not only capacity related, it's also capability. So for us, we are going to grow according to capability and capacity. So the 3rd area is advanced packaging.
This is more than most low and this is a new way to make microLED. This is a new way to do many new auto advanced packaging method. But we will have a portfolio and we'll come to a growth when this industry needs. So this is really our capability related. Okay.
In terms of 3 areas, before 2015, auto and advanced packaging occupied less portion of our revenue. You see 2014, the automobile and the advanced packaging is about 28%. But 2018, for the first half, 60% roughly is our general semiconductor. And roughly, auto and the other lines packaging occupied about 40%. So we are seeing diversification of our business from this job.
So we are seeing more diversification and this industry, I think there's more driver. That's why we believe I think this industry is more stable. The up and down is going to be less. The overcapacity is going to be less because it's more consumer related. Okay.
So look ahead. How do I expect K and S and how should investor expect us? So 2017 is a very, very high year. KNS grew 30%. So you also look at this industry, the bundling industry, assembly industry, grow compound annual growth rate is about 7%.
So we are not excluding possibility that we can grow higher, but realistically, we like to come a model for people understand us a little bit better. So assume 2017 is a very high level. We don't want to put a number, it's a high cost Cisco number that we never can achieve. So we assume 10% is attributable for next couple of years. For 2017, we achieved $809,000,000 and the analysts, I think, have expectation this year we will do $900,000,000 So assume we start $900,000,000 for 2018 and with a 10% compound annual growth rate, we see it's a higher than compound annual growth rate for the assembly company like our industry.
So what does this mean to us? I think 10% is doable. We want to do better than the market, but it's not too high we cannot achieve. But if the market, I think, is friendly, we should be able to do more than that. But anyway, we like to come out a model for people to understand us.
Assume 10% from here. 10% we believe is doable. Half of that is going to come from capacity expansion from auto and general semi as I just described. Half of that is going to come from capability add to this industry that enable us to grow and enable therefore enable the industry to grow, right? So 10%, what does this mean?
So this number close to $1,200,000,000 I think Lester is going to give us a follow through model after my presentation at the end. And also after me, there will be several presenters talk about this market, general semi, auto and advanced packaging in more detail. So I'd like to thank everyone for your support. And again, I want to assure you shareholder is our top priority. I'd like to get back to Joe for the next section.
Thank you, Fusen. Our next speaker is Huang Hue Huang, the Senior Vice President of Global Sales and Aftermarket Products and Services at Kulicke and Soffa. He is responsible for driving operational excellence through the company's global sales and service organizations. In addition, he is also leading our aftermarket products and services business. Guang was most recently the Executive Vice President of Global Business Operations and Office of the CEO at Matson Technology.
He was responsible for the global sales, marketing, business and also the support service legacy organizations. He grew the company's revenue by 50% after the 1st year and helped to achieve a spectacular corporate turnaround. After 22 consecutive quarters of losses, the company has achieved 10 consecutive profitable quarters. Before Matson Technology, he was Vice President of Sales and Business Development at Novelis Systems. Huang's career spans more than 30 years at leading semiconductor and semiconductor capital equipment companies, including Applied Materials, STMicroelectronics and Texas Instruments.
Wong received his Bachelor of Science degree in Chemistry and Master's of Science degree in Materials Engineering. He holds 2 granted patents, has authored several publications and has chaired several international technology focused conferences. Wang's presentation will provide a background to our broad opportunities covering our general semiconductor and LED applications. Go ahead, Juan.
Thank you, Joe. That sounds pretty good. I have to turn around and look for who that guy is. A very good afternoon to each and every one of you. I know it's a very exciting opportunity to be here once a year and meet some of your old friends.
There's a lot of exciting activities out there. And but we are you are very smart today because you attended the most exciting event of this event, the Analyst Day of Colligan so far. So like Fusheng, I joined this company for a little bit over a year, about a year 3 months. Although I've been in the industry for over 30 years, as Joe mentioned, the thing is that I've been attending this event for like over 30 times already. It seems like either I'm getting older or you're getting younger.
The group is getting younger and younger every year. Okay. So I'm going to spend the next 20 minutes or so to give you a feel of why KNS is the right place to place your capital. It's an exciting time and it's an exciting company and that's why I'm here at this company. To me, my experience working in the industry for 30 years or so more than 30 years or so for any organization is only as good as the people behind it.
As good as people behind it. And I'm not going to talk about the path of KNS. We look forward to the future. And we have the right team. We have the right leadership.
One thing that you have not heard about the background of Fushin Chen is that he managed he grew one of the most successful product at Applied Materials. And it's not just for Applied Materials, for the whole industry. That is the PVD Endura platform. Over a period of 10 years, he grew the business from about US2 $1,000,000 to US50 $1,000,000 And when he left, it was about US3 $1,000,000,000 That's phenomenal. Okay.
And when I joined the back end industry, I realized that, hey, wait a minute, there's in the front end world, there's a big guy called Applied Materials in the back end world. So there's no Applied Materials yet. So my personal goal is that we're going to break this up more than the black company for the back end. That's the hinge guys. Okay.
You have heard the story from Fusheng already. In 2017, right here, we achieved $809,000,000 and that's a phenomenal year already. And that brings us very close to the historical high of this company. The historical high revenue of this company was $8.99 We're going to exceed that easily
very soon.
Okay. So for the next 3 or 4 years here, by 2021, 2021, we have a clear plan, very clear and very executable plan to achieve around $1,200,000,000 That's come out to about 10% to 12% growth rate annually. Now the incremental part of it is going to be about US400 dollars That's this gap right here. That's about 50% growth from what we did in 2017. That's phenomenal, 50%.
And for the general semi or I call it the consumer electronics part and LED account for about 42% of that incremental growth. Even in the past, this company, the significant part of this bar right here is Bold Bonder. We can repeatedly remind you that we are the number one company in volt bonder. We commend about 70% to 80% of all the products out there in both bundles. So pretty much everything you see, everything you use, all the electronics with devices that you see around you have 70% to 80% of our products in it.
And so we cannot be accountable for the consumer market and also the LED combined together is going to be accounted for about 42% of the total incremental growth in within the next 3 years or so. And our strategy is very clear, okay, that is efficient business optimization and leveraging on the industry trends. Our core competency is on the bolt bonder. Bolt bonder has been phenomenally strong for the core markets such as the consumer electronics market, the smartphones, PC, IoT connected devices or smart devices in the call center time and also LED. LED has been a phenomenal market for us.
We have grown for almost 200% the last year or 2. And in terms of the industry trend, we see that more and more semiconductor unit count it has the growth rate has been going from 3.9% to about 6.8%. And LED continue to have more and more penetration with a much bigger, bigger market share. Last but not least is China factor. China is a huge market and I'm going to talk more about it.
China represents about 40% of our total revenue last year. That went up from about 25%. And after my talk, my 2 other colleagues will talk about the other two bar, that is the autonomous driving and industrial and then also advanced packaging. So in a way, like very much like the Applied Materials story, Applied started out with a single product, which was what? That was the Etcher.
There was very strong in Etch in the beginning and then they grew out from that. They grew the portfolio. They get into PVD, they get into CMP, they get into ACP. We are very much on the same path. We have a strong interval bonder, but we're going to proliferate.
We're going to grow from there to increase our portfolio to include autonomous driving market and also advanced packaging market. Okay. So the mobile phone market has been good for us for the last 10 years or so. And the market size still continues to be big, but the problem is that it's worth the growth. Mobile phone is not that great anymore.
And you'll see this in the chart later. So what's the next major area for growth? Smart devices. Smart pickers, smart TVs, smart wearables, consumers, each and every one of you are very familiar with those products. And very soon, in next few years, we're going to have smart robots also, I'm sure, that's AI stuff.
All right. The exciting things about these emerging products or these emerging markets, okay, is that look at the volume, look at the units sold, it's HILOU. And this is pretty much just U. S.-centric. And so far, these devices mainly for the U.
S. Market, we have the global market has not really penetrated yet. And the other thing that stand out is the general the semi content of it. 90% of these semicomponent devices are used ball bonders, the product that we're in the commanding lead, 70%, 80% market share. That's pretty exciting.
Looking forward, like I mentioned earlier, the bulk of the mobile phones stayed pretty flat on the bottom there. That's the low bar on the chart there. And then take a look at the growth, the forecast for the smart devices. Increased drastically, dramatically. And this is estimated that by 2025, the ratio of the smart devices versus the smartphone is 7 to 1.
7 to 1, gentlemen, that's huge. And we're at the heart of we're right at the heart of
it.
Okay. Let me switch gears and talk about LED. Do you want me to switch back to the new tech forum? Okay. All right.
It's solid state LED. Now you look around here, the last CES show in Vegas, what was the biggest item there? That was the wall, the LED, the micro LED, the TV by Samsung. You notice that they put like 100 of 1,000 or even 1000000 of those tiny little microLEDs. It's not going to be cost effective to pick and place each of those.
It's not going to be cost effective. And so this is exactly what Fusheng talked about earlier that we are we get into that market, but we're going to do this in partnership with our strategic partner. Hence, what is the name? And it's a breakthrough technology. It's a mass transfer mechanism to transfer 50, 100 of the LED DIPs per second.
That would drive down the cost significantly. Why is it so important to drive the cost of lumen cost per lumen? Because as the cost drops, the devices, the component will be more affordable and therefore more and more people will buy the product and therefore we're going to get more business, more market share. Okay. So and currently and in the future, LED is the way to go, especially microLED.
We have shipped the 1st LED platform almost 10 years or 9 years ago to be exact, but not until last year where we've placed focused emphasis on that market, especially for China market. We have grown significantly in that market finality. Of course, we are in the commanding position with as many of our leading customers globally. Okay. China, the big China, my favorite topic and also Donald Trump favorite topic too.
They want to be self sufficient. They want to be independent from the rest of the world. They want to build up their own electronic industry, period. And they have a lot of cash to do that, okay, as long as we have that imbalance rate. So and so far, we are they are nowhere near the domestic production versus the domestic consumption is nowhere equal.
So what does that mean? That means that the front end will continue to be very aggressive to build up the capacity and the back end will pretty soon catching up, and we're there. We have a huge resource in China. We have over 1200 employees in China. We have a demo center in China, right?
And we have engineering center in China. So we're there. We're going to capture that the lion's share of that emerging market. And since this already almost half of the global IC consumption is in China. And for our K and S solution, last year, it was about 40% of our revenue come from China market, and that number is only going to go up.
And as I mentioned earlier, the our market share at the key leading company in China is key. So at some of the customer sites, we commend 100% market share, especially for the mobile business market. Last but not least is the strategic aligned partnership. Why we're using that model? Because it's more cost effective.
It's more cost effective, right? And if you do good, we buy them out, right? It's like try it before you buy it. Okay. So that brings me to the final slide.
The takeaway from my assessment here. So who are we? We are not just the leading, we are the number one company in the back end providing the interconnect solution with the product exposure to the consumer electronic market. We're number 1 in low borders and we can expand that into the autonomous, in the power market and also advanced packaging. Technology continues to evolve and we continue to evolve with it, okay.
This is beyond what the ongoing industry capacity expansion, that is the 7% that is the 7% the boring 7% growth that Fusheng mentioned earlier. Then as I talked about this earlier, the connected devices or the smart devices and LED will just continue to fuel the growth of this industry. China will continue to be a major source of revenue for us, right, and we're there, right, as I mentioned already. And we continue to build more and more alliance partnership with key partners globally. Okay.
So again, congratulations that you're taking your time off to be here with us today, to share with us as far as to share with you this exciting story of how KNF is doing of our vision and 50% growth by 2021. That's come out to be like 10% to 12% annual growth. Okay. With that, I'm going to turn it back to Joe.
Thank you, Huang. Our next speaker is, Jonpin Chong. Jonpin brings over 25 years of experience in the semiconductor and electronics industries and has held engineering and operational roles early in his career. Over the prior 15 years, his focus has been on sales, business unit management and executive management. A significant portion of his experience was at KLA Tencor, where he served positions in general management and as a Senior Technical Director.
More recently, he served as Vice President of Sales and General Management of FormFactor. Later, he served as Global President and Chief Executive Officer of Everett Charles Technologies. John Pin earned undergraduate a tremendous impact by driving share gains in consumables, executing on our new battery assembly initiatives and in general driving profitability across K and S. Chon Pin currently manages several business units at K and S including wedge bonding and the complete line of APMR equipment, covering opportunities in automotive, power storage, advanced packaging, micro and mini LED and also electronics assembly. John Pin will provide some insight into our position and opportunities within the automotive and industrial space.
Thank you, John Pin.
Thank you, Joe. Thank you, Walt. My section is about an exciting growth in Automotive and Industrials. As you know, the car has become more like the iPhone or the iPad. If you just walk in any Model 3 right now, it looks exactly like an iPad.
And you basically touch control
of the entire car using a touchscreen. So let me talk to you about what happens behind that bonnet, right, that whole mechanics of driving autonomous vehicle at automotive in the next industrial sector section. So you can see in this slide here that there's 3 incremental growth that our CEO, Fusenix explained. One of them is the general semiconductor growth and the second area is the automotive growth and of course the 3rd area is advanced packaging. In the section I'm covering today, it's about the Automotive and Industrial section, about the next section of growth in K and This is going to contribute in the next 5 years from 2017 to 2021.
And this chart shows it's a 25% of the incremental growth coming specifically from Automotive and Industrials. And what's the strategy? The strategy is engagements. We have very close engagements with our customers, collaboration partners. And the second important thing is we have the breadth of products to cover all solutions to the market.
So one of the stories and I always read this, several years ago, I was being caught into a customer situation and they said that we need to make many battery packs for cars. And we need to have a interconnect solutions to basically chain up all the batteries to drive cars to very high current dissipation to get speed and distance. So it was a team that we worked with. Basically it's our development team, R and D team and the marketing team. So we spent several occasions trying to understand what they need, what they require and what's essentials.
And I think in the course of 3 to 4 months, we were able to develop prototype solutions for them. And I think in this market, speed and time in the market is super, super essential in the whole world of electronics and semiconductors about speed execution and of course, time in the market. So we were able to make a machine to interconnect all those batteries together. And as a result, we were able to sell many multiple machines into those electric vehicles. And I'm sure if you walk out the street at Marcus Street, you see at least 1 out of 4 cars are electric cars today.
And leave me under that, below that chassis is one of those battery packs, wired bonded by K and S. So remember that, right? It's going to be wired bonded by K and S. It's a story that started 3 to 4 years ago that we did it. So that's what I call collaboration, right?
Because when you start with a customer problem, you develop an application and you work towards driving a solution towards applications and you are able to develop a product and a solution and they are able to bring it to the market. And when they are successful, supplier of choice like us will be successful. That's a story about collaboration. So that story was about power storage. And I think there are other examples even in power control.
And power controls are things that drive the car, right? It could be the steering or it could be some kind of things that drive the engine. 2nd area is safety and sensors. As you know, that car has a high reliability and high requirements of quality. So safety is an important part and includes the airbags and all the sensors around the car for safety and making sure that you do not hit something you're not supposed to hit or gives you some warning.
Today, if you go into any rental car today, you'll be surprised to see how much sensors there is on the dashboard, right? The left and the right and the back and the front, right? And it just could be a Nissan, right? It doesn't even have to be a very luxurious car, but sensors is becoming a very central part of safety in every automobile. Infotainment, I think everybody is very proud, every car manufacturer is very proud to see the whole dashboard from the left all the way to the center of the car with all different kinds of pictures and graphics and statistics and stuff, right?
And that's all about infotainment, right, giving you data, giving you information to be able to drive and experience a very different experience in today's drive. I think as I travel a lot and I get into many rental cars. I think the most time I spend is trying to figure out the infotainment, right? Where is the charging area? Where is the GPS?
And where is the Bluetooth and all this stuff, right? You know what I'm talking about, right? Okay. So that's what you because I think today, it used to be about the gas, it's about how the mileage and now it's like where's the Bluetooth, where's the USB charging, okay? How do I get my phone to sync?
Isn't that those things you think about when you rent a car? I think we are lying. Next thing, automotive lighting. So back in those days of halogen lights, days are over. And I think we have exciting projects to work on very specific lighting for cars.
And I think it's
the very same story, right? A German company came to us and said, we want matrix lighting in a high beam LED so that it can project far, it can project close, it can project in a curve, it can project corners, and it's able to turn off and turn on with intelligence. So automotive lighting has become smart lighting because it's able to detect curves, corners, pedestrians and danger areas. So that's also becoming a core trend in terms of anomalies. So these are the 4 areas, right?
Control power control storage, safety sensors, infotainment and automotive lighting. So I think in line with the CEO and Wang, everybody is driving at more semiconductor content in the car, And that drives electronics, that drives software, that drives more control. Electrification in the hybrid, I think I don't have explain more about it. Like I said, 1 in 4 cars in the road is either electric or hybrid and you see more of that also in Asia and especially in China. That same story that Huang has mentioned that electrification and the support from the central government is driving a lot of electrification.
Right, so we talk about Level 1, the Level 5 autonomous driving, getting connected to infrastructure. So I think it's becoming more and more and you see more and more autonomous car, especially in the Bay Area. And there's a lot of campuses here that's trying it up. Same thing also in China, we see a lot of campuses driving, testing autonomous cars. And of course, one charge, 300 miles, hopefully go 400 miles and 500 miles and 600 miles, right?
It's all about efficiency, right? Getting more efficient on the car so that you can expand and you don't have to worry about running out of power, right? So common discussions, if you drive up the Tahoe, how many hours is that? How many kilometers or how many miles is that? Can a single charge take you all the way to Tahoe and back?
Today, it's a little bit of an iffy situation, right? Maybe, maybe not, right? If you go at 60 miles for the next 4 hours, maybe. If you go at 80, I'm not sure, right? And then where's the next charging station, you could have figured that out.
So I think it's all about efficiency. We can get one charge and get you the power, I think that's perfect, right? And then another charge, it gets you back to there, that will be good. So that's all about energy efficiency. All right, those are all trends in the industry, all right?
Let's see. All right. I think this slide basically talks about the evolution of KAR. You can see the automotive build from Ford in 1920. I think we introduced anti ABS systems in the '80s.
This is the first time electronics has been introduced in ABS brakes, injections, airbags and of course, cruise control. I have a few of those days when you had cruise control, you were so proud of it because you were like, oh, my hand, my foot is off the gas. Remember those days? Yes. And now it's no big deal, right?
And then of course, you have the electronic temperature as well as the clock, right? And then you start to have navigations and of course, and I think when BMW and Mercedes came out with the Park Assist, if you remember those occasions, woah, one button and it passed by. So you're thinking about it, right? And that wasn't too long ago, right? And then you started to have systems to be able to detect emergency braking and so forth.
And I think right now, we are in this era, right? Semi autonomous, autonomous, vehicle to vehicle communications, network roads, right, roads with street lamps with network signals to be able to communicate to your car, know when the school is around, when is the city is around, when it's around And augmented reality, right? The whole dashboard, the heads up display, the display, the whole glass with all the kinds of digital statistics. You want to know about temperature, you want to know about road, you want to know about how far your gas is going to take you or your battery is going to take you and
electrification. That's the whole evolution.
I think we are these exciting days of autonomous driving.
All right, next.
So this slide basically shows that in 2018, and this is the data coming from Gartner, that 9% of any company supplying semiconductor will spend will have a business about 9% of it as a percentage of automotive sales of the total revenue, right? And in our situation, K and S, we are 15%. Why? Because we are addressing a lot more opportunities. And the things I just explained, okay, I talk about the batteries, I talk about the infotainment, I talk about the sensors, I talk about autonomous, that's all driving the incremental opportunities to give a lot more opportunities than our peers at 9%.
So we're proud to be 15% and average of 9%. Why? We have multiple products serving multiple applications, different products and Nelson is going to our portfolio to address. And we have a customer base that's a huge customer base specifically in my heart. To my heart, it's very specific about engaging on customer side.
Every month, somebody is coming to us with a picture, with a sample about a product they need to put in the car. Bonders and pick and place and have a die attached and all the things, right? So this is the higher K and S solutions addressing year. All right. So traditional automotive sensors and electronics, we basically continue to execute multiple platforms, multiple products.
So we have 6 distinct platforms, okay, wedge bonder, ball bonder, a pick and place, a die attach, and in the future, other solutions that have been in the last 12 months, I think we've introduced smart bond that's addressing the automotive industrial area, a factory needs to know 3 to 4 days when it's out and time and power and so forth need traceability and you need to be able to feedback that information back to a central system. So that's something about it because it's all about quality or information that's going to be addressed in Industry 4.0 and all our machines and tools have the capability at some level extent to drive those quality information. Aftermarket, as a result of all these equipments that we have, we have a lot of aftermarket solutions that ties in together equipment as is like I said, trick. This is exactly what event occurred at what time. 10% of our revenue, this is non semi, so automotive is the Q1, okay.
And I think it was an explain over 20 something percent is on first half. So basically, we have a lot of opportunities in some business for non semi, but specifically more on automotive, quite recently platform for an automotive 4 weeks. 8 out of 10 top automotive components suppliers are our customers. Automotive customers. The broad offerings, in 2014, it was pretty much power control and info and sensing.
As you see the years come and the storage came around because of the battery, like I mentioned, under the bar. And you can see the content of infotainment and power storage increasing over the years, not because of all the months. 24% of sales is in the first half is auto and industrials. Multiple platform, we have very diverse end applications, delivering very high performance. So the car drives a huge requirement called safety and reliability.
On 0,000,000, and you can see that if we do not have a machine or a bonder or a machine that drives high reliability, our customers are not going to qualify that product. Every car has at least 10 to 15 either a warranty or some kind of support. If some sensor is failing, that's not going to work. High reliability, high performance is a must have in automotive. So let me kind of wrap up on the key messages for and the strategy for the automotive segment.
I think having a diverse portfolio of solutions addresses the market requirements. So a customer comes to you and says, I have a sample, I have a drawing of a product, and I want you to be able to give me solutions, not sell me a box or sell me 2 boxes, sell me a solution that includes variety of applications. I want to talk about number 1, number 1, number 1, yes, we have the market leadership, okay, and that reinforces our brand and loyalty to our customers. Having a market leadership in automotive is very key because what's the brand is going to take us in the next 10 years in the next quarter. We're very strategic.
Every automotive customer that we engage in, we think about a 10 year plan. We don't think about what drives revenue in this very important. We develop very long term relationships, okay? A lot of our customers have been with us for a long time and we continue to ensure that these relationships are big, high quality and driving forward. I mentioned about 0 tolerance for any problems or defects.
Okay? It's the same like when you buy a car, it's not going to guarantee 5 years, whatever years, x years, the same thing we have to be able to support. And diversification, right, okay. So most recently, I have a camera that's going to sit in front of the car and the back of the car. I need to develop a solution 3 months.
So what do we do? We said, sorry, we don't have the product. No, we said we will figure out what we need to do. To have the product. So over that 3 months, very intensive German automotive customers.
There's a reason why we have been successful. It's about the solutions, it's about applications, it's about Very exciting segment of automotive. Hope every one of you will buy electric car within the next 3 years. Come talk to me, I'll find a way to get you there, right? But you need to get an electric car, right?
Support our wire bonders and also support environment. Hey, come on, we have to be green, right? You guys are writing things to tell the world that we got to live in a green world, right? Thank you very much. We'll be happy to talk more about our solutions later during the
Thanks, Jonathan. Our next speaker is Shneesh Batra, currently serving as our Vice President for the Advanced Packaging Business Unit. He's joined K&S in January of 2017. Shubhnesh has nearly 30 years of combined technology and business industry experience. He started his career in R and D at Micron working on SRAM and DRAM process integration, later served roles in manufacturing and business development.
He later transitioned to business development for Micron CMOS image sensor business and was ultimately responsible for worldwide channel sales before joining KNS. Shubhnesh has published 35 referenced research articles and has patented over 100 conventions. He received his PhD degree in Electrical and Computer Engineering from the University of Texas at Austin and his MBA from the Fuqua School of Business at Duke. He is currently responsible for our APAMA thermal compression and die attach offerings and has steered the development of our recently introduced catalyst high accuracy flip chip bonder. Janish will now cover our broadening opportunities within the advanced packaging market.
Thank you, Joe. Very kind and generous introduction. I had a question before I start, get at the discount. I'll definitely sign up to do that. I'm here I joined K and S in 2017, January 2017, and can't tell you how excited I am because I think we're entering the golden age of packaging and it's also related to the BU I run, which is advanced packaging.
So let me walk you through that. As Fusen mentioned, we're looking at 3 areas. Huang covered general semiconductors, Chun Pin just covered automotive and industrial. I'm going to cover the 3rd leg, advanced packaging, which is part of our plan to go from $9,000,000 to roughly $1,200,000,000 And this is going to contribute about 33% of that. So that's the easy part, which is roughly about $125,000,000 The question is how are we going to do it?
So for it comes down to positioning. So we're going to look at the key customers we want to target because there are not very many customers in advanced packaging. We're going to study the type of applications they're engaged in. And these are the customers you're looking at for like cloud computing, artificial intelligence, autonomous driving, all the buzzwords floating around today. As I walk through my presentation, I'm going to give you a flavor of the technologies underlying the packaging technologies underlying each of these market segments.
Then obviously, we're going to build a portfolio, which we've already halfway through it. We've developed quite a few new tools and we're going to match these portfolios to these end customer applications. And as we go along over the next few years, we're also going to have some more tools in development, which we're going to offer to them as things change. This is still a very nascent and developing area. So the market tends to shift on which technology is going to rely on.
So we have to be agile and adapt to that. And as I said, I've spent almost 30 years in the memory industry. And during my 30 years, there were 2 major packaging technologies in memory. For the 1st 15 years, it was a T cell package, which had to be less than $0.10 And for the next 15 years, there was the BTA package, which again had to be less than $0.10 And you had to get 99.99 percent yield. So that's all you focused on was cost and volume.
Nobody ever cared about what you could do with packaging. So as Moore's Law is slowing down and Fusen kind of pointed that out, you're really looking at advanced packaging as a way of extending Moore's Law. So the same things that Moore's Law was doing, enhancing the performance every 18 months or cutting down the chip size in half if you were in the memory business, the form factor, the power usage in a processor, for example. You're trying to do the same things with advanced packaging today. So let's take a deeper look at that on the next slide.
And this quote on the right is basically saying that Moore's Law is slowing down. It may not be applicable the way it used to be, which was like there was an industry roadmap, it was well established. All the equipment vendors and the front end fab guys, every 18 months, they knew they had to double the performance. So it's very easy. The script was laid out.
Now not so much so, right? But it leads to a lot of opportunity in advanced packaging. Let me give you an example. So when you're looking at doing advanced processor solution for artificial intelligence, whether it's for training or for inference, you don't want to put everything in a 7 nanometer technology. Why?
Because if you look at a 7 nanometer fab, and I think you guys must have seen the announcement from a major company out of Taiwan, they said they're going to invest $25,000,000,000 in a 7 nanometer facility. If you look at a 3 d NAND memory facility today, you're looking at something north of $10,000,000,000 Now does it all need to be done in a 7 nanometer technology? The answer is no, right? So if you look at a high performance computing processor today, the core processor you can do in 7 nanometer technology, right? Then you can bring in memory, which is typically 15 or 18 nanometer, your DRAM in HBM.
And then your graphics unit can be 22 or 28 nanometers. So this concept of taking all these different dyes from different fabs and different nodes and technology, putting them on a either on a substrate or a silicon interposer, which is also pretty expensive and combining them into a single package is called heterogeneous packaging or heterogeneous integration. So that's where a lot of the focus in the industry is going and that's also one example of an area we're playing in. If you look at autonomous driving, that's also got a similar requirement. So let's take a look at that on the next slide.
This is sorry, it's a pretty dense slide, but I'll walk you through it. It will be easy, trust me. So let's look at the first couple of slices. You've got cloud computing and artificial intelligence. What does that translate to in terms of KNS doing in there?
So if you look at cloud computing and artificial intelligence, the same thing I just mentioned, you're really looking at thermal compression bonding and you're looking at high accuracy flip chip. The processor, the HBM, you have to place it very, very accurately on the silicon interposer. And then once you place them, reflow them, you have to pick up this very large die and bond it onto a substrate using thermal compression bonding. If you look at autonomous driving and you have a TPU with the memory, it's pretty much the same thing. Mobile, you're looking at wafer level packaging technology.
It helps you reduce the size of your components so you can fit in more battery in a mobile phone and that's the feature that customers want. If you're looking at micro and mini LEDs, I haven't mentioned the technology on this slide, but you're really looking at like mass transfer concepts, as Fusen mentioned once again earlier, and I think Hong and Chen Ping also touched on that. Connected devices, this is related to system and packaging technologies, right? So if you look at each of these market verticals, you've got an underlying advanced packaging technology behind it. Now the question is, this is still pretty, pretty dry.
So let me take you on the slide and I'll give you a visual on the tools and solutions we're offering so it'll become really, really simple. So once again, I'll start off with cloud and artificial intelligence. This tool in the middle, our APAMA tool, is the thermal compression bonding tool. And then today, we announced our Catalyst flip chip high accuracy flip chip tool. That does the high accuracy flip chip placement or we're targeting that portion of the market.
If you look at connected devices in 4 gs, 5 gs, we've got our hybrid dual for doing system and package. We've not shown the tool for micro and mini LED, but that's in development. And if you look at the mobile market, again, this tool is used for placing CMOS image sensors. So this is our portfolio and sorry, I missed this one. This is our LiTec lithography tool.
It's going to be required whenever you have to redistribute the bond pads. So it's a redistribution layer. It does the photolithography, so almost goes into fab like conditions. So we have, as you can see, 1, 2, 3, 4, 5, 6 offerings now in advanced packaging. And we're going to continue investing.
We're investing at a very high rate and we're going to keep building on this. You may ask the question, why do that? Well, as investors and shareholders, you will want to look at, for example, in the NAND market, if you look at the projections on the memory industry, the bit growth rate is 50% over the next 4 years, Definitely going to require more and more packaging tools. If you look at DRAM, same story. You're going to require more packaging because the bit growth rate, although not as fast in the previous years, is still 30%.
Along with that, very, very exciting, they're stacking up DRAM. In the old days, they were all done in single chips. Now they're 8 high stacks. That requires thermal compression bonding. So we see a lot of potential for thermal compression bonding.
And in fact, in our customer engagements, we're trying seeing that this will happen around the 2020 timeframe. It could be a little bit late or a little bit earlier. It's hard to predict, but it's definitely coming in the 2020 time frame. Another very exciting market, 3 d sensing. This is the facial recognition that one of the phone company has and now all the Chinese makers want to do it.
So you can imagine what the volume is and that reflects in the compounded in the 200% CAGR behind that. You're also starting from a very small base, of course. There's only one company doing this and that too in their highest cost model or highest selling the high end model. Then of course, next generation LED. This is again a very, very massive area and a massive opportunity.
And K and S is doing a lot of exciting stuff in this area. We're basically we're developing very innovative approaches as I'll discuss on the next slide, to do enabled mass transfer. And if you do that, then as Fusen mentioned, he has kind of showed you all the revenue potentials in one of his slides, the opportunity is really, really great. It could be in fact, this alone could be equal all the other areas. And I'm going to talk a little bit more about that.
So if you look at the display market, the display market is transitioning from LCD technology to OLED technology or organic LED. And if you look at the last 10 years, the display industry, you could easily say, there's several tens of 1,000,000 of dollars or maybe over $100,000,000,000 invested in assets to build the displays. They don't want to throw that away just because they're moving to organic LEDs, right? So people want to use that investment base and one of the technologies that's being applied for that is mini LEDs. So you can build your phone screens, they can just as bright as organic LED displays.
And that's one of the areas that's of it should be a high growth area in the future in the LED market. Another one is micro LEDs, where people are trying to take these LEDs built and mass place them to build a display instead of having this large factory using large sheets of glass and trying to build an organic LED, right? For this one, of course, you need very, very high speed machines that pick and place or do mass transfer very, very efficiently. So you actually need speeds that are 100x greater than what we have today. So a lot of technology development is required here.
I'm happy to report as the 2 three speakers before me mentioned, we have a partnership with Rohini, and that is going to try and develop very, very innovative technology. And we're also talking to several end customers and trying to develop the channels behind it. So in closing, as I mentioned earlier, I think I'm very excited to be here. You guys should be equally excited to be at this point. I think we're entering the golden age of packaging when it comes to these advanced packaging technologies.
Basically, because you're at extending trying to extend Moore's Law, which is a very, very powerful concept. If you look at the markets, you've got several opportunities out there. You've got autonomous driving, as I mentioned, memory, cloud, artificial intelligence, connected devices and displays, tremendous opportunity. And then how is K and S positioned, the key question. And hopefully, I've described to you in my 20 minutes that we're trying to develop very diversified and comprehensive solutions.
I showed you in the tool charts and hopefully you can relate to it Later as well, you can get a copy of the slides. We have 6 very different technology platforms, which we're developing and trying to do derivatives off of with our technology and we're pursuing that very, very aggressively. And lastly, this allows us to support the industry's requirements by providing solutions and that should translate into returns for your capital invested with us.
Thank you.
Our next speaker is Nelson Wong, a veteran at K and S and currently serves as Senior Vice President of the Ball Bonder Business Unit. Nelson joined K and S in 1997 and previously supported process and packaging engineering at STMicroelectronics. Over nearly 20 years, Nelson has been P and L responsible for our global ball bonding business, further increasing its dominant market share positions. He has been critically involved in supply chain transitions and fundamental and dramatic technology shifts, such as the global adoption of LED, NAND flash and copper wire bonding. He also drove development of our wafer level bonding program and our entry into image and three d sensing markets.
Nelson has earned his MBA degree and also a degree in physics from the National University of Singapore. He has chaired several technical forums at industry trade shows, including Semicon. Nelson's presentation will change to more of a product perspective and highlight how our key offerings connect to our key end markets in general, semiconductor and LED, automotive and industrial and advanced packaging. Thank you, Nelson.
Thank you, Joe. Good afternoon, everyone. I'll try to walk through the portfolio of products that we have in K and S and how is it connect to the various market segments that we have. So let me start with the ball bonder, which is my favorite product because I run it. Ball bonding product is interesting for K and N and it's also been very exciting for us.
But one thing about wirebonding is that you walk into any technical seminar, for example, in semi res, there are hardly 1 or 2 papers about wire bonding. The rest is about advanced packaging or something else. But this is a product that have been driving K and currently as well as moving forward. I myself, we have participated in the technical forums under long speaker talking about bond bonding. Bonding is still exciting, it's still sexy, it's something that everyone should look at.
We basically make wire bonding continue to be relevant and those people who cover semiconductor long enough, you understand what the market says about wire bonding. Right now, we are continuing to move it in different directions, Historically, we are a market leader. We are still a market leader and we continue to be a market leader. So right now, we have 65% market share. And if we are looking at a more aggressive penetration to LED market, I expect the market share to go even further in the next in the coming years.
It's very significant for the K and S to drive about 56% of revenue and over 75% of semiconductors basically are wire bonded. So this gives us an economy of scale, which should drive profitability to enough dollar for us to sustain our R and D investment. So with this sustained R and D investment allow us to move the wire bonder to a different direction. You heard a lot about autonomous car. We're also moving towards a smart bonder as well as autonomous bonder that's going to come in the next few years.
So that's what I say making wire bonding sexy. It's not an old technology. So we just think K and S being in the leadership, we had to push it forward in that particular directions. So the connected devices and the LED are driving a lot of wire bonding because these are the lower end packages and wire bonding is still the most cost effective interconnect technology and it's very flexible. In KNS, we have a term that you draw the wire connection, we will bond it.
No matter how the wire is connected, we will find a way to bond it. NAND flash definitely, NAND flash has a huge growth. Sonesh talked about growing at a 50% bit count increase year on year. And that's how we bond it. We bond up to 32 stack of bonding.
Basically, you have a stack of 36 stack, we bond it. It's pretty challenging. General semiconductor basically cover a lot of space, especially on the lead frame, the QFN packages, mostly wire bonded. In fact, you look at the handphone devices, the low and mid end handphone processor or graph or basebands, they are continuing to be bibonded because they are just flexible. When you put multiple chip together, the fastest way to market is to have it wire bonded rather than other technology.
So that's why wire bonded SIP is still important for wire bonding. 75% to 80% of the SIP packages have at least 1 of the chip is wire bonded. So we continue to invest in wire bonding. We continue to improve our coverage in the 3 segments. Look at here, we have various model to cover various segments.
Why do we want to do that? Because different segments have requirements and the special needs and so on. So we basically optimize each of this model to address that particular segment in terms of technology required, in terms of the cost that the market segment is willing to accept. Next, let's talk about the WETCH bonding. WETCH bonding is mainly on the heavy wire side.
It's basically synonymous to power storage as well as the electrical vehicle. So again, historically, we are market leader. We continue to be a market leader in this segment. It drives about 17% of our revenue in 2018. We have a broad portfolio, which is going to cover in the power storage as well.
We also cover in the semi as well as the hybrids. And the hybrid means chip that's power and as well as non semiconductor chip. Automotive remains the main driver for this particular product and battery assembly lately have been driving huge growth for this huge demand for this particular product. Our power controls or the mobiles, either is the vehicles or devices that any higher current will require a heavy batch bonded unit, so that will drive a lot of units as well. So like Changping earlier on talked about energy sustainably and efficiencies, this is a product that help to connect those products and to produce the end products.
So here, as being the heavier wire requirement generally addresses a lot of the general semi back in the power amplifiers area and also power IC. So it cover quite a bit. Then definitely very strong in the automotive as well in industrial segments, not so much in the advanced packaging at this moment. Let's talk about the electronic assembly. This is also a very important product.
Every unit that's packaged or every passive that's been produced need to be placed on the board, either on a PCB board or on a flex circuit. So the market size is pretty broad. And so this is key thing, the equipment allowed to place a passive as chips or package on the piece of board. It give us about 9% of our revenue and we have the leading automotive solutions mainly because of historical reasons. The company they acquire traditionally participate in the automotive segment.
So we continue to participate in that and continue to strengthen our position in that segment. So did that being in the leading position in the automotive solution give us opportunity to engage our customer, the close support that we provide customer also help us understand the segment a lot better. So again, the key driver of the automotive market or the high accuracy is semi as well as SMT component placement. This is we participate very heavily in the accurate SMT or high accuracy SMT placement market segments. Bringing in the automotive market, high reliability is the key because once you put something on the chip on the board that put in the car, you have to make sure that it stays there.
Any other chips fall off, it's not a nice picture. So the ability to place large and small component using the same piece of equipment basically drive efficiency for our customers. So the same piece of equipment you can do everything on the board and in one pass. So again, I mentioned that every piece of package that produce need to be placed on the board. So will cover all the market segments that we have defined.
So particularly auto, we are pretty strong in the automotive and industrial segment. Next, we'll talk about our PAMA. Our PAMA is the latest addition. Basically, this one is in the advanced packaging area. It's a thermal compression market.
It's an emerging market. And it's not and also in this particular family, we also have the Dibonder. So it's a very exciting area. It's new packaging. If you go to any seminar, a lot of people talk about advanced packaging and TCB is one of them.
Being in a new packaging technology, we're basically engaging a lot of global customer. Right now at the applications lab, basically we are working with customer to be familiar with this technology or they value this technology to make sure that it's reliable, stable and productive so that they can go into manufacturing. So these are some of the, what we call, the seed that we have sold and We hope that this will grow in the coming years and so on. So while we grow this market, we have to make sure that our wire bonding applications, especially those fine pitch of what I call the flip chip. This will be an area that you would like to go because mass reflow will not able to give you the accuracy that the TCBs is able to give it to you.
Okay. So all those big dice item that requires a lot of interconnect, things like artificial intelligence, big data, cloud computing, autonomous driving and graphic processing. So these are the key market driver that will drive the demand for this particular equipment. Next, we have also other equipment that address the advanced packaging as well. So we have equipment called Light Tech, which is basically a lithography equipment that use on the wafer level packaging.
And the hybrid, which is a mass reflow equipment and basically allowed us to place both active and passive package into the same board. It's including direct die attach as well as the flip chip as well. So we also have a wafer level bonder that's participating in the wafer level packaging area. We do bumping, we do wire bonding and then after that you do a wafer molding. So we are selling this technology is well used in some of the high end smartphone.
So it's a new opportunity, new market opportunity for us, especially to LiTec as well as the hybrid, just a new architecture allow us to participate in this advanced packaging more effectively. And in fact, this will help us to grow our advanced packaging portfolio. Most of the market drivers are mainly on the high end application chips, things like blockchains or cryptocurrency chip, the application processors, image sensor or 3 d sensors, SiPs, the masterful SiP fan out and fan in wafer level package and the high accuracy flip chip. So we just launched a flip chip bond called Catalyst 2 days ago. And so this is a high accuracy flip chip meant for the advanced packaging segment.
So after selling all those equipment to our customers that need services or spare parts, either is help them to improve the equipment efficiency or help them to maintain the machines. So we formed a business unit called the APS, which is the Aftermarket Products and Services. We changed organization slightly and put more emphasis into this business unit. We see that there's a lot of potential in it. It's also a strategic priority for us.
Beside engaging the customer, it also give us recurring revenue. So not just this equipment, this service and the spare parts that can go along. So we have a lot of machine being installed out in the field. So that creates a unique opportunity for us to provide these services. So the increased packaging complexity also drives demand for this for help for servicing our customer.
So this is also good for us. The more we service our customer, the more we understand our customer. So that increase our customer engagement, which in terms also help us to drive our development of our new equipment to address all those things that we see in the field. So again, this services covers all the products in our Canex portfolio, which means we cover all the segments that we had defined. So in all, you can see that we have a broad coverage of equipment in the interconnect as well from the IC to the outside world as well as IC to the board level.
So in some products, for example, the bonder, we are dominant position in it and having the portfolio allow us to participate in diverse end products. One of the key things that the customer look for all these products is high performance. So while they buy the equipment that has expected performance continue to be stated well with equipment life. And we have an engaged sales team that allow us to expand our customer base. So again, the key driver right now is basically the general semi and LED, automotive and industrial.
Yes, advanced packaging is a market that we are developing and we are participating that will help us to go to the next stage of packaging. So overall, engaging our customer is important, understand their need is important, understand where they are going is important for us. So that's all I have.
Great. Thank you, Nelson. Thank you so much. The next question is on financial sort of the punch line to this presentation. Lester Wong, Lester joined the company in September 2011 as Senior Vice President of Legal Affairs and General Counsel.
Prior to joining K&S, Lester served as General Counsel at Giga Media Limited, a U. S. Listed major provider of online software from May 2008 to August 2011. He previously served as senior legal counsel at CDC Corporation, a U. S.
Listed software media company. Lester obtained his JD from the University of British Columbia in Canada. Over the past several years, Lester has been closely involved with business improvement plans, acquisition initiatives, capital allocation discussions, new partnership arrangements and also Investor Relations. Let's resume the role of Interim Chief Financial Officer and Interim Principal Accounting Officer effective November 28, 2017, and continues to serve in its prior capacity as the company's Senior Vice President, Legal Affairs and General Counsel. Lester will spend a few minutes to cover a few slides that tie back these market drivers into a financial model and also go through some of our capital allocation approaches and targets in the long term.
Thanks, Lester.
Thanks, Joe. As I hope you've gotten from our presentation today, K and S has undergone a significant evolution over the last couple of years. We are very, very different company now. We have diversified our revenue significantly and it's closely aligned with some of the fastest growing trends in the industry like IoT as Huang discussed, autonomous automobile as Changping was talking about and also AI cloud as Shubh Nish discussed in his section. This diversification has allowed much great much less volatility in our revenues, less success rate, less seasonality and has allowed us greater confidence to guide over a longer period.
So to get to the target
of $1,200,000 that Fusen has set for us by 2021, we would have focused very closely on growing revenue base. However, we're also focused very closely on driving down costs through efficiency in our supply chain, in manufacturing and as Fusen described, aligning our engineering and R and D teams more closely with the business unit. We have made significant investments over the last couple of years in those growth initiatives that my colleagues discussed today. And this has put us in a great position to have the operating leverage to drive fall through to our gross margin from a healthy 47 percent to an even more attractive 49% to 51%. Our operation efficiency as well as our cost saving efforts will also allow us to improve our operating margin by 400 basis points to 700 basis points by 2021 to 24% to 27%.
This results in an operating income per share of $4 to 4.75 I'll wait as people jot and take pictures. The presentation is also available on our website.
So what does this mean? So our strong
financial performance as well as our growth prospects has allowed us to return much more capital to our investors and shareholders. Year to date, we have repurchased $83,600,000 worth of shares. And as Susan mentioned earlier, in June, we initiated a dividend of $0.12 per quarter, which is a yield of 2%. And today, we announced an addition of another $100,000,000 to our share repurchase program. It is our long term target to return 50% of operating cash flow to our shareholders.
It's an exciting and interesting time for K and S. We have a very strong balance sheet, a robust core business, very exciting growth initiatives that my colleagues discussed, And we believe that this puts us in a very good position to drive an expansion of our share multiple as well as return more capital to our investors. You, Luisa. Luisa will now wrap up for a few comments.
Thank you, Lester. So I think it's an exciting day and we appreciate your presence here. So I'd like to make a few concluding few points in line. Why I joined the industry And I explained to you, Maersk Law actually lower the industry for past 30 years. I think you know Maersk Law very well.
And when Moslow slow down, AAV technology not advancement, we got to pay high price and people can afford it. So therefore, more and more so is more important, right? So next 10 years will be prime year for back end. And you can find a company called KMS. I think we are committed and we have a good opportunity to be very strong and to be very successful and to be a leading company, right.
And why? Okay. You mentioned you remember I mentioned, we have organization change. We have better accountability. We move much faster.
We have a general manager like Chen Ping, I think you heard about him, right? And customer asked him to do something. He said, okay, I will do this in 3 months. And he's aggressive. He will make things sound.
So general manager's job is to grab revenue and develop products and we give him a resource to force to market, right? And not only I think he is a good General Manager for K and S, grow revenue, and he's a colonel in Singapore Army. He's a colonel. So you know how aggressive he is. So that's the criteria we choose as a general manager.
It's really accountable for customers and accountable for revenue growth. So, we have clear accountability and fasten the market. And our products are very important to the industry. We have 1 1,000,000,000,000 of semiconductor devices, finished products, not including LED, in year 2018, And I think right now probably 25 percent more than 1 trillion units. 80% of this unit is outbound.
And I'd like to correct a mistake perception in the past 20 months. People feel like Kenneth is a Bovanda company. Bovanda is going to die. No, it's wrong. I'll give you an example.
You remember 10 years ago, people talk about TSB. If you remember TSB, TSB through silicon vial. They are talking about 3 d packaging, right? So 3 d packaging is a way of more and more slow. More and more slow, that means that you can accommodate in a smaller form factor, you stack that together, occupied in a less real estate.
If you do a through silicon layer, you need to make a thin, you need to edge through all these packages 32 die, create aspegarage of wheel 20 to 1. You put a PVD glue layer, you put a CMP, you polish it away, you create another defect. But we have a general manager called Nelson, right? He's very innovative. People think bowhunter is going to die, but he actually invent 3 dimensional bowhunter, right?
You have bowhunter stack 1 layer by 1 layer. You have 32 layer of NAND. So 95% of NAND actually is used on bow bonger, 3 d NAND. So that's the information I want to let you know. Bow bonger no longer a previous bow bonger.
This allows innovation, allows productivity, allows small future within our bow wonder. In next 5 years, I don't see any change. 75% 75% of this RMB1.25 trillion semiconductor devices, When finished product needs a home, they're going to use NIOsens products. They will use a bow wonder. Wonder is going to be from a Nuissence product, right?
So presence of our product, I think, is very important in this industry. A lot of some of the fleet ships come back to the broadband because it's more effective. And we can handle more than 3,000 pins. Used to be why people use a free chip is because of it's much more productive, multiple bump pads. And if you use the ball bonder, it takes a longer time and it's not so effective.
But right now, Nielsen can do 3,000 bump pads. So I would like to correct this misperception. So and number 3, I think not only bolt on the wire bond, we are number 1, right? We have a lot of R and D pipeline. And the technology inception is going to demand you can see demand from memory, big data, cloud, AI this is going to grow.
And we'll have a new advanced packaging measure, new capability, we have majority in our timeline. So when the market needed high volume production, we announced a free chip. We have a TCB. We're working on bi bonding. So it's the first time, I think, in Canada's history we have all the solution in the Connect process.
Okay. Operational focus. We have a very aggressive and very smart general manager. They work with customers to grow this industry. Not only we focus on additional revenue, we focus on cost structures, We focus on quality of our earnings, not only additional revenue.
And so as a result, when we make a profit grow the company and our priority is to return the value to a shareholder. We are in the middle of a second stock purchase. First one, dollars 100,000,000 finish. Last year, August, we announced the second one. From August to today, we spent additional $85,000,000 Today, our Board actually, we have another Board member here they also raised additional $100,000,000 amount through our stock repurchase program.
And we also declared dividend policy, dollars 0.12 per share equivalent to about 2% of revenue. So this is the way. So let me conclude. K and S, I think we have a core, very strong core business. We leverage our core business and make our core business even stronger.
We have a strong R and D pipeline to anticipate the interception of technology change. And when technology is needed, we will provide a solution to grow the company, along with our core business, our very healthy core business, right? And as a result, when we are profitable, getting bigger, we return the value to our shareholders. So that's the takeaway I'd like to give to you. And appreciate your participants, and you can come to us to deliver the shareholder value.
Okay. Thank you. Great. Thank you, Fusen. And that concludes our formal presentation.
We've allocated about 30 minutes for a question and answer session. We'd like to prioritize our recovery analysts first. So take Craig Ellis from B. Riley.
Yes. Craig Ellis, B. Riley FBR. Thanks so much for the presentation and all the financial and other product and strategy details guys. Fusen, the first question I had was made one for you and some of the other group heads.
But as we look at the growth of the business towards $1,200,000,000 over the next 3 to 4 years, Can you talk about the relative growth of the opportunities that you identified, the auto opportunity, general industrial or general, etcetera. Which of those would be the faster growth relative to the midpoint of the 10% CAGR, which a little bit slower? And then I have a follow-up on cash return.
Okay. So the question is, this $1,200,000,000 as a model, where the growth come from, right? So we believe this year, I think, in the sense expectation, about $900,000,000 a little bit more so than. And the reason we pick up 10% was because of I think 2017 is a very big year, right? And it's really very difficult to pick up the growth rate, very difficult.
The reason I think we pick up 10% is because 2017 is a very big year. So anytime you have a very big year of possibility to go or inventory correction, I think possibility is high, right? So we don't exclude the possibility we can grow higher than 10%, really depend on the market.
And just to clarify, so with respect to growth around the 10%, general semi, auto and industrial advanced packaging, which would which of those would be growing above 10%, which floor do you expect all of them would be growing near that 10% level?
Well, this is where I see a low advanced packaging will grow faster. So is our core business, right? And our core business, as I mentioned, is a majority of our solution for the industry. So actually, I would see probably advanced packaging can be higher than 10%. And hopefully, our core business can be 10%.
That's helpful. And then moving on to the cash return expectations and a question on gross margin, I'll just them together first on cash return. You've just initiated a very nice dividend with a goal to return 50 percent of operating cash flow. Do you expect to split that between share buyback and dividend increases? Or how do you look at prioritizing one versus the other?
So,
70 So if you see right now, roughly, we have 70,000,000 shares, a little bit less than that. And you have roughly $0.5 per share per year, right? So that's about $35,000,000 So this year, depending on the model how you look at it, if we say we don't I don't have the number. Assume this year, we make profit after tax, say, dollars 100,000,000 or $150, right? So first priority, you got to take out the dividend because dividends are coming in money, right?
Then we will decide how much is going to be stock buyback. But look at the history, I think from August last year to today, approximately, how many months, 4 months is about 9 months, 10 months, we spend about $85,000,000 So and I think our Board support capital allocation, And we believe so 50% of $150,000,000 $75,000,000 I think that will be minimum we will spend.
Thank you. And then lastly, if Joe will let me have one more. With respect to the target financial model, gross margins moving up very significantly to 49.5 percent, a new midpoint. Can you talk a little bit about the specific drivers to gross margin improvement? And it would be helpful if you could prioritize those in their order of magnitude, whether it's cost, mix, overhead coverage, etcetera?
Thank you.
Actually, I won't go. It will take me forever.
So I think it's a combination of all of them. The mix also, I think, as I said, we've invested significantly over the last couple of years. We think the products are in a very good position. I think they're ready for the market. And I think the spend on the development has the bulk of it has been done already.
So I think we can basically have much more offering leverage on that. As Susan says, we also are very focused on our costs. We drive our supply chain very, very hard. We're always looking for second source. We're always looking at where is the best place globally to develop our products as well as to build our products.
So I think that always will be a driver. And I think also we try to keep a very tight lid on operating costs. We are relatively frugal and we watch the money we spend. We don't always assume it's going to be great days even though we think there will be. So I think it's a combination of supply chain, manufacturing, the OpEx as well as the fact that we think the bulk of the R and D should have been done already.
Our next question comes from Tom Diffely with D. David.
Yes, thank you. Maybe just extending on to the last question, what is the relative margin profile of the 3 main growth drivers that you got lined today?
Yes. I think we have quite a healthy margin profile for general semi, so it's auto. Advanced ticketing right now is volume is low for the industry, also for us, right? So when the volume go up, to answer Craig's question, I think that will be the opportunity we can raise the margin, expand our margin.
And since some of these advanced packaging products are fairly new, do you think that the contribution to that $400,000,000 of growth is more weighted in the back half of that period?
Well, I think you can see roughly ratio would hold. Advanced packaging revenue will grow, so is our core product line. So I really expect this 10% roughly will be in line. Gross advanced packaging may be a little bit more. If it's 10%, I would say maybe 15%, right?
And maybe core business will be 9% and auto probably will be 10%. That would already be like a lot.
Okay. And maybe just a fun question for Lester. If you could put a bow on the recent accounting issue and how you've put that to bed?
That is a fun question. We believe that the restatement and the
press release ratio is basically would
put a bow as good a conclusion to the unfortunate incident. We believe the company is stronger for it. I can't guarantee you, I don't speak for the SEC, I don't speak for litigate litigious claimants, but I think the company is very comfortable with the position we took. We've done a thorough investigation. We work closely with external advisors, and we believe that this is the end of it.
Dave Dooler? Thanks.
I don't really want to ask this question, but I'm going to ask it anyway. So a lot of the upfront wafer fab equipment companies have seen consternation recently or nervousness about Samsung push outs in NAND and DRAM. And I realize that you don't have direct exposure on that side of things. But I'm just wondering how that could potentially impact you if there were an impact?
So I think we all know Samsung delay investment, right? So long term, I am very bullish in this industry. The content of memory, I think, is only continuing. And customer delay the investment with reasons. I don't want to make any hypothesis.
But you see the consumption of the memory in the cloud, in the big data, I think, can only increase. So long term, if we have a setback for the memory, I think it's temporary. You see this many times, the NAND price going down and the next cycle getting bigger is because it's more effective compared to hard disk drive. So long term, I'm very bullish in this industry, but I think we have visibility not very clear for next 6 months. But even with that, the memory is only 20% or even slightly less than 20% of our business.
We are so diversified. We are in auto. We are in industrial. We are in general semi. General semi including IoT, there's a lot of connectivity, right?
And they need to be packaged. So even without memory, the impact to us will be less significant compared to
And just to clarify what you said, so Samsung has delayed some spending in NAND and DRAM, but that has not yet trickled back into the number of units that they're producing as far as what you're that's what you would see is units trajectory change from either one of those businesses. I suspect you haven't seen that yet, but I was just wondering, have you seen the slowdown in units or is this really what they say it is in a cost issue at Samsung?
I think it's not. We're learning information so difficult. I think mobile is a little bit slow down. Memory is a little bit slow down. And this actually already took place, I would say, start from March quarter, right?
So if you see from I'm sorry, March quarter, but if you see our June quarter, actually it's still quite healthy, right? But if this continues, say, with the trade war, I think what I try to say is we are much more diversified. We cannot control quarter to quarter valuation, But in longer term, I think in yearly basis, I think for us, we feel like this industry is still very healthy. So, Dave, can I answer your question this way? Yes.
Okay.
A follow-up question from Craig Ellis at B. Riley FBR.
Thanks. There's actually 2. The first question is on the target financial model and the earnings per share. Can you just clarify what degree of share repurchases any is included? It seems like there might be about $10,000,000 of shares repurchased that are included in the earnings range of $4 to $4.75 Is that correct?
Approximately. Okay.
And then the
second question is for fusion and it's more of a bigger picture question. I think early in your presentation, you indicated that you would be open and interested in inorganic growth. Can you talk about areas of strategic interest? Houston, you've done some smaller deals and as you talk about areas of either technological or product interest, can you help us understand what your size preference might be if you're hoping to stay smaller, if you'd be comfortable doing a larger size deal? Thanks, guys.
Well, I think M and A is always a good opportunity, but we need to make sure we will do it well. So first priority for me is when I joined the company, I want to make sure we have a culture. The power of organic growth is very powerful. So the first priority I try to set it up is that we have ability to do organic growth. If we only count on inorganic growth, I think you don't probably don't have organization capability to continue to fund a company.
And the possibility for the successful M and A is not 100%, right? So my first priority is always organic. And I think next couple of years, this $1,200,000,000 model is organic growth. So we will do we will not actually the wording I use is we will not exclude a possibility to do M and A, right? If opportunity presents itself in our adjacent industry and we have a cost synergy and it's complementary, I think we will go for it.
And we will present the level and I think our goal will help. So what I try to say is organic growth actually is our first priority, right? And we have set up a strategy. But when the opportunity presents itself, we will look at it, share the same look at it. And if it's good, I think we'll go for it.
We'll open the floor for Q and A to non covering analysts and Our first question comes from Robert Mertens
of Cowen and Company. I work with Krish Sankar at Cowen. I just wanted to get your view on how you're sizing the bonder opportunity within the in terms of EV units or battery capacity build out at auto OEMs and sort of the subsequent spend on your equipment?
So the very simple formula for EV will be look you look at how much watts of energy that you're producing a year in terms of cars. And you take an average of that and then you basically look at the number of cells you need to put in a car for electric cars and then you multiply by basically the number of production lines you need to make to enable the number of cars. Now I cannot get into those formulas because it's going to be specific to a customer, which I'm not supposed to say anything. But you can just see and if some of these are public in terms of how many cars are going to be manufactured per week. And if you look at how many thousands of cells is in the car battery, you can multiply the number of bonders, right?
So we have a formula, but again, I don't want to be too prescriptive about it. But x wanders equal to x batteries equals to x cars equals to x wattage and that's the formula.
Okay.
I hope that answers your questions.
Yes, yes, that's very helpful. Just as a quick follow-up, I think you previously mentioned that the products that you have specifically target cylindrical cells. Is that correct? Is there an opportunity for prismatic or other types of cells? And just as a follow-up there, I know it's too early for a cyclicality in the EV market, but are your orders coming through in bulk or are they sort of linear as the customer or future customers ramp?
Okay. It's a good question. So I'll answer in the most generic format again. So number 1, I think not everybody has adopted the cylindrical cells. There's maybe a couple.
We have one leading guy and you have many followers. And I think that basically, gates our capacity to ramp for that linearity that you just described. Prismatic cells are basically a bigger, bulkier type of pack, we call pouch. And some of these are interconnect using some kind of control, okay? We call BNP, we call many ways of controlling multiple cells that interconnect.
The interconnects are in much lesser quantity than the cylindrical cells. So once it's in 1,000 and one is in maybe up to 100, right? So that kind of magnitude differences and you can see that the adoption of Yboner would be different for prismatic versus cylindrical, probably in the magnitude, like I said, 1,000 versus 100, right? Now there is still no standardization of electrical vehicles yet in terms of cylindrical versus prismatic, but there is a lot of discussions and chapters going on about which is the battery technology. And I think the next 5 years, there's going to be some convergence between prismatic versus cylindrical and we are watching it, okay.
We participate in both, but that's a huge much more wire bond in cylindrical as I described in my presentation today. But both we're participating, one uses less and one uses more.
Great. Thanks. Next question comes from Dan Ramirez at Well Rock Capital.
I was wondering how you as a relatively new management team evaluates the success of prior M and A and prior R and D decisions? And then going forward, as you think about new M and A, new R and D decisions, what kind of metrics do you use? What's your framework for evaluating the attractiveness of those investments in terms of hurdle rates, ROI, returns?
Actually, I spent more time to look at our product portfolio and their competitiveness and also customer engagement. But in terms of M and A, I heard a little bit. Majority of M and A was actually on private company. But when you deal with a private company, I think it was less transparency. You probably don't know the whole story.
So if I have preference, not say next one got to be like this, probably public company will be my preference. Of course, we need to present a target and engage with the Board for a discussion, but that would be my preference. Because I believe organic growth for next couple of years, we already set a strategy. We have a good plan. If we want to have another growth path, it will be complementary to a company, and they will be more transparent and they're subject to SEC regulation, so we know them a little bit more.
I don't know if I answered your questions.
Going forward, what's your process for evaluating new M and A or new product decisions, new product R and D investment decisions? What kind of metrics do you how do you what's your framework for making decisions for future investments?
Well, I think the AVR and D project, we have a code PDP program, right? We actually have an evaluation to look at the market, right? And what will be the return? Actually, every R and D project we have at least in this one, and we just follow through more strictly. We have a call gate A and gate B and gate C and gate E.
So A is to collect information from customer and from the market. And we come back to do analysis, what can be a return rate, so on and so forth.
We have time for probably 2 more questions. Next question comes from Edward de Jong at NIMC.
Thank you, gentlemen. A few questions then. So you are targeting to win market share in the coming years, right? And so you're growing faster than the market. Are you going to take share from the other big competition?
Or are you probably going to take share from smaller companies in the field?
Well, to get a market shares, the easy one is got to be from a big guy. From a small guy, it's not consistent, is not sizable, right? So if you want to get the market shares, preferably is it from big companies?
From bigger companies. And maybe finally on China and the trade war that's probably going to start. Can you
say a little bit on
how this could impact your company because you also have quite a bit of production, I think, in China?
Well, our production is consumable, right? It's a capital rate. It's we sell the bow bounder every day. Every customer needs to have some consumable. So we really don't see at this moment this trade war between China and the U.
S. Directly impaired. We are in headquarters in Singapore. We don't see the effect. But through all this exercise, I personally believe, also a lot of people believe, China is committed to develop semiconductor industry.
They treat this as national security, right? So in longer term and the semiconductor is unlike the solar and also LED. The entrance level is low, right? So, so far, I think China already spent tremendous money in semiconductor. And the result is probably not as good as they expected.
If they continue to commit in the investment of semiconductor, I think Chinese business will continue next 5 to 10 years. I really don't see it. They are going to slow down the investment.
Any more questions?
Thank you. Jesse Johannesen, Cowen Asset Management. The bottom two trends up on the screen there on that Slide 33, 3 d sensing and next gen LED. As you look out at the roadmap from what the leaders in those end markets can see, there seems to be a lot of stopping and starting. There's certainly, it's more of a want than a need in memory.
So how much planning can you do and whether it's Chinese handset makers or cars on 3 d sensing and TV versus phone and LED? How do you see those developing over time?
Okay. So, Shamnish, this is your full year. You want me to answer? Sure. Okay.
So the question is the growth rate, how do we estimate it, right? Well, I think this 2017 to 2021, we already have a historical result, right? The NAND flash, I think it's not difficult. There's a lot of historical results. And the NAND will continue to grow.
There's no doubt, right? And right now, NAND production is with the 64 layer. It's a crossover cost compared to hard disk drive. So there's no doubt, I think, on NAND, we'll continue to grow. And the growth rate, I think, in the past few years already established.
So this 50% unit growth, I think we feel comfortable about it.
The 3 d sensing and next gen LED, that's what I'm
curious about? LED.
The microLED, if you see LED is such a bigger industry. I think energy is a big problem for everybody, right? And people believe the development of the alternative energy is easy, right? But actually, the whole industry put a lot of resource into alternative energy. Another way to deal with alternative energy is energy saving.
So LED is another way for alternative energy. I can tell you the potential is very big. The replacement of energy source, just China itself, I think will achieve this number. There's no doubt. A lot of people believe LED already many, many years, but actually LED, we believe there's a long life.
And it's really a national strategy and big country behind that. And I think they produce so affordable, LED, is going to proliferate to the whole Asian. So I have no doubt I think this forecast is achievable.
Last question comes from Brian Chin at Stifel.
First, I want to thank you for bringing all of you. I was going to say lieutenants, but I should say colonels here to help cement some information to us. One question, piggybacking off the next gen LED, your forecast that goes out to 2021 timeframe, does that include development and then future volume commercial sales of a not yet developed
product that helps the place, I presume
the micro LEDs and the MOCVD tool, that sort of an operation. Is that embedded in your that long term forecast?
Yes, it did.
Our revenues embedded there? Yes, it did.
Just kind of the walk up
to that, when would you expect qualifications to occur And what kind of time frame to monitor?
So I think our qualification probably will start next year. So probably expect a higher volume 2020. And
I anticipate you would expect competitors also in that space?
Yes, of course. Of course. This is a big market. There will be multiple competitors. But we need to make sure we're working on the right technology.
Okay. Great. Thanks so much.
And that concludes the Q and
A session
today. Thank you for the time. And if you have any questions, please feel free to reach out to myself or to Susan and the staff, which can be available and accessible. We appreciate the time. Farak, this concludes our webcast.
Thank you.
Okay. Thank you.