Kulicke and Soffa Industries Q2 2025 Earnings Call Transcript

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Provided by Quartr
May 7, 2025

There are 9 speakers on the call.

Operator

Greetings, and welcome to the CULIC and Sulfa twenty twenty five Second Quarter Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Ellicande, Senior Director, Investor Relations.

Operator

Thank you, sir. You may begin.

Speaker 1

Thank you. Welcome everyone to Gilken's Office Fiscal Second Quarter twenty twenty five Conference Call. Susan Chen, President and Chief Executive Officer and Lester Wong, Chief Financial Officer are also joining on today's call. Non GAAP financial measures referenced today should be considered in addition to, not as a substitute for or in isolation from our GAAP financial information. GAAP to non GAAP reconciliation tables are included within our latest earnings release and earnings presentation.

Speaker 1

Both are available at investor.kns.com along with prepared remarks for today's call. 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 and are subject to risks and uncertainties that may cause our actual results and financial condition to differ materially from the statements made today. For a complete discussion of the risks associated with Kuala Kinsalpha that could affect our future results and financial condition, please refer to our recent and upcoming SEC filings, specifically our latest Form 10 ks as well as the eight ks filed last night. With that said, I would now like to turn the call over to Fusen Chen for the business overview.

Speaker 1

Please go ahead, Fusen.

Speaker 2

Good morning, everyone. Last month, we announced the intent to discontinue the electronics assembly or EA equipment business subject to local regulatory approval. We acquired this business in 2015 and it is currently a component within the all other category. We intend to fully support and serve our customers with equipment purchase requirement over the coming quarters. We will also continue to retain EA equipment technology as well as the related aftermarket parts and the service business to support the existing installed base and our customers' operational needs.

Speaker 2

We believe this decision is not difficult, was critically essential to ensure our underlying business are competitive and are properly aligned with beneficial long term technology trend. Looking ahead, we intend to prioritize development and further leverage our dominant boat, wage and the thermal conversion position, where we have demonstrated clear technology leadership to address fundamental assembly transition within high volume, leading edge and the power semiconductor market. Additionally, our APS business, which provide revenue consistency, as well as our emerging advanced dispense portfolio, extend our technology leadership and provide additional growth path throughout this evolving core market opportunity. This restructuring effort is also intended to enhance our long term financial with anticipated improvement in gross margin and the through cycle improvement. At a macro level, the ongoing trade situation has increased level of uncertainty throughout global market and the supply chain.

Speaker 2

This level of macro and the industry uncertainty has created hesitation and a more defensive capacity plan approach throughout our served market. Sequentially, this hesitation was most evident in the Southeast Asia automotive and the industrial market, which had the effect of limiting the seasonal momentum previously anticipated for the June. Interestingly, over the same periods, we saw inhalation improvement in other Asia regions. While we are not immune from this macro near term dynamic, semiconductor unit growth as well as the increased complexity of semiconductor packaging are expected to expand our served market. We remain confident in the industry's resilience and also remain confident that our global business, supply chain and the development paths are best optimized as we look ahead.

Speaker 2

Over the near term, we intend to further strengthen our growth prospect with a focus on vertical wire, power semiconductor, advanced dispense and the thermal compression, which I will discuss in more detail shortly. During the March, the general semiconductor end market supported by improving ball bonding utilization rate experienced a 38% sequential increase due to improved demand for from both Wage and the TCB stemming from U. S. And the China. In view of the changes surrounding the EA equipment business, we decided it was appropriate to simplify our end market disclosure and consolidate LED within automotive and industrial starting in the current quarter as well as within comparable period.

Speaker 2

This change is aligned with the external semiconductor marketing forecast, where LED is generally subcomponent of the industry market. With that said, automotive and industrial was sequentially down in the March over the December, largely due to the final Project W related LED sales, which were recognized in the December. Automotive and industrial, excluding LED, was down approximately 7% sequentially, but was still up nearly 14% from the same period last year due to ongoing demand improvement of our Astellian and the power g solutions. Within memory, software NAND system demand was the primary driver for our sequential reduction in the March. Today, our current memory exposure is centered on NAND, but we remain focused to diversify into dynamic memory through the fundamental advanced packaging transition affecting HBM four d NAND edge memory and also driving momentum for our emerging vertical wire solution for high volume memory.

Speaker 2

Finally, within APS, we continue to enjoy a relatively stable base of part, service and support revenue. Through this dynamic market environment, while there may be some fluctuation over the coming months, we anticipate overall installed base and the utilization trend will continue to improve, supporting a relatively stable level of APS revenue. At this point, we anticipate the majority of our business has gone through a long term period of capacity digestion and remain very well positioned for the next set of both wage advanced dispense and the thermal completion opportunities. Within VoLangdin, our ongoing pace of customer engagement as well as a new product development remain on track with our vertical wire solution, which continue to gain momentum. Last month, we officially announced the launch of our latest wafer level packaging solution, AT Premium, NAND plus which is a specially optimized for stack DRAM opportunity.

Speaker 2

This high potential new memory packaging approach is driving significant interest with the leading customers, some of which are accelerating their transition and may initiate new stack DRAM production by 2026. Additionally, this vertical wire capability is also compatible with non memory Fan Out devices, which is support high volume general semiconductor applications. As explained on prior calls, similar to leading edge application, sensitive wire bonding application are also aggressively demanding new transistor dense packaging solution And our vertical wire technology is very well positioned to effectively address both high volume logic and the memory transition. In addition to vertical wire, the pace of our level of development initiative remain on track. We continue to prepare for new solution to this highly volume market over the coming quarters.

Speaker 2

Next, within westbounding, the power semiconductor opportunity continue to demand higher current, higher reliability and higher efficiency devices. A few years ago, this power semiconductor application was some of the most cost sensitive and competitive semiconductor assembly market. The growth in electric vehicle and the sustainable energy has caused these basic power control application to become increasingly complex, requiring better materials, more robust interconnect and the more advanced equipment. In April, we proudly announced the launch of our newest Sonoctort enabled pin weighting system for power semiconductor application. This new system, which leverage our leading Australian platform, extend our market reach while enhancing alignment with the growing and evolving global demand for electric vehicle and a sustainable energy.

Speaker 2

The use of our PIN within this market is rapidly growing, which support better inductance and the better flexibility as they improve power monitoring and sensing to support higher efficiency applications. Additionally, within this emerging high performance power module market, there is an increase in new semiconductor materials such as silicon carbide, but also an increase in the use of copper materials and interconnects. Copper interconnects are a core competency for KNX, which we intend to fully leverage as this long term market evolution continues. Next, within the advanced dispense business, we continue to build out our portfolio of solution as well as our customer facing engagement. We continue to grow our customer base and the recently received an order from a high volume U.

Speaker 2

S. Based integrated devices manufacturers. Additionally, our recently qualified solid state battery opportunity has been performing well and we anticipate a potential production ramp to begin over the coming quarters. Over the coming years, we are also focused to expand our advanced dispense market presence. This effort will combine our unique dispense capability with our existing market leading core system technology.

Speaker 2

Turning to thermal completion, our advanced solution team continue to actively support logic and the memory customers in production and development. We remain well positioned and are continuing to take the shares in advanced logic application as the market transition to next generation chip on wafer and also wafer on substrate applications. Larger and the more complex multi chip processor for data center and the AI application are expected to drive the next wave of leading edge customer capacity. We have worked very closely with many customers over the recent years and remain well positioned for leading edge, but also higher volume opportunities as mobility devices begin transitioning to chipset and the heterogeneous applications. Finally, for TCB memory, we continue to anticipate our unique Fraccess solution, which provide direct copper, zero by gap and ultra fine pitch capability will be a key contender for future HBM opportunities.

Speaker 2

Based on traction from the prior quarters, we expect to ship additional tool to our leading memory customers toward the end of the fiscal years. As a reminder, our innovation in thermal compression and the vertical wire have unlocked new market access to logic and the memory opportunity, which our company was previously excluded from. Today, as a world take a next step to transitioning single die semiconductor package to multi die and the heterogeneous chip deck packaging format, thermal compression is rapidly become the incumbent technology for high performance application. While our vertical wire solution are increasingly well positioned to address a wide portion of the high volume market over the long term. As a reminder, we remain the only flux less DCB supplier who has been qualified for higher volume manufacturing with some of the world's most advanced semiconductor company, and we are nearly fully booked for fiscal twenty twenty five.

Speaker 2

More broadly, we have nearly 120 system installed base across 10 different highly engaged customers. This helped to demonstrate our track record for winning as this installed base capture a wider portion of the market than any of our competitor have been able to address. In closing, we have worked hard to ensure our business is based on life with critical technology change, such as a vertical wire in memory, TCV in leading edge logic and our increasingly capable assembly solution in power semiconductor. Additionally, our growing advanced dispense portfolio of solution increase our potential across all of these long term technology transitions. While recent cold market utilization rates are promising, we remain in an unprecedented state of macro uncertainty, although remain confident in our technology and the market positions and are prepared to overcome near term challenges.

Speaker 2

At this point, our cost structures, existing product portfolio and the through cycle performance are optimized, and we will continue to enable fundamental technology change throughout our submarket. As we have done for seven decades, we will continue to closely support our customers and emerge a stronger, more profitable and a more growth centric company. I will now turn the call over to Lester to cover the financial overview. Lester?

Speaker 3

Thank you, Tusen. My remarks today will refer to GAAP results unless noted. I would first like to provide some additional details regarding our intent to discontinue the EA Equipment business. As Prussen explained, this was a difficult but necessary step to ensure our overall business remain competitive, aligned with long term technology trends and it is optimized for through cycle performance. We remain closely engaged with all key stakeholders as we plan for this intended wind down.

Speaker 3

We are currently seeking feedback regarding customers' orders and remain in close discussions with local stakeholders. During the March, we accounted for the majority of wind down related expenses, which represented total EA related charges of $86,600,000 These charges were primarily related to inventory write down, supply chain, asset impairment and restructuring related charges. Dependent on local stakeholder feedback and in alignment with our March 31 disclosure, we anticipate residual non GAAP expenses to be below $15,000,000 and be accrual for in the first fiscal half of twenty twenty six. Turning to the March financial results, we booked revenue of $162,000,000 and gross margins of 24.9, which included EA related inventory and supply chain charges of $38,600,000 Total operating expenses came in at $125,100,000 which included restructuring charges of $8,800,000 and impairment charges of $39,800,000 Excluding these charges, operating expenses would have been $76,500,000 Tax expense came in at $5,400,000 related to our mix of profit and loss across entities during the quarter. We continue to anticipate our effective tax rate will remain above 20% over the coming year.

Speaker 3

We completed our previous and also initiated our latest repurchase program with a $300,000,000 authorization during our first fiscal quarter of twenty twenty five. During the second fiscal quarter, we repurchased over 500,000 shares for $21,300,000 While we do not anticipate current tariff announcements to have a direct impact on our ability to manufacture and sell our products and services to our global base of customers, unique geopolitical and trade dynamics have created near term order hesitation in certain capital equipment markets. Looking into the June, sequential order activity decreased in Southeast Asia, while order activity increased in China and Taiwan, which was aligned with our utilization data. We have also begun to see global customers begin reallocating equipment across manufacturing sites, which highlights our industry's ability to flex around trade dynamics. With that said, we anticipate semiconductor unit growth will continue to improve through fiscal twenty twenty five.

Speaker 3

While some customers may delay capital expenditures until critically necessary, we expect continued capacity digestion supported by improving utilization rates with ball and wedge bonder to continue over the near term. Looking into the June, we announced a revenue outlook of $145,000,000 plus or minus $10,000,000 with gross margins of 46.5%. We anticipate non GAAP operating expenses to be $68,000,000 plus or minus 2%, a GAAP EPS loss of $09 and a non GAAP EPS gain of $05 per share. Although the near term market dynamics are challenging, we continue to anticipate an eventual return to incremental capacity growth in core ball and wedge bonding markets and continue to see ongoing capacity digestion and field utilization improvements. Incremental opportunities in work supplier, advanced dispense and thermal compression are in addition to this anticipated improvement.

Speaker 3

As we remain focused on these strategic opportunities, we are well prepared to navigate near term macro level uncertainty. This concludes our prepared comments. Operator, please open the call for questions.

Operator

Thank you. We will now be conducting a question and answer session. Our first question comes from Krish Sankar with TD Cowen. Please proceed with your question.

Speaker 4

Yes, hi. I have three questions. First one, Susan, just kind of curious, can you give some color on June? What are the dynamics? Is it predominantly general semi and auto industrial that's going to be down quite a bit?

Speaker 4

And how to think about it beyond June? I understand a lot of moving parts, but any color you can give beyond June would also be helpful.

Speaker 2

Okay. So Krish, we have a Q3 slowdown and this slowdown is the most pronounced and the evidence in our Southeast Asia region. I'll give you an example. The Q3 Southeast Asia slowdown account for the majority of our total Q2 to Q3 weakness. So give you a number.

Speaker 2

Our Q2 revenue is $162,000,000 and the Q3 guidance is 145,000,000 The difference over these two number of majority equity is a weakness from Southeast Asia. So therefore, it is really our belief. This near term slowdown was due to a concern regarding the potential and unknown tariff impact for auto and the industrial industry from our customers. So I think in the script, we mentioned, while we see the weaker outlook for the Southeast Asia, we in the meantime, we also see the utilization rate improve in Taiwan, China and other region. And we say utilization rate actually is at or close to a triggering broader capacity addition.

Speaker 2

So we see positive and about we also have actually a very big actually slowdown in Southeast Asia. We believe it's auto industry related and it's because of unknown kind of impact. People hesitate to build a capacity just for the industry. So, the number is a little bit bigger And the reason I think is because of we have a bigger, larger presence auto exposure. And also, our manufacturing concept is flexible manufacturing cycle.

Speaker 2

And we're working with customer in the afternoon and downturn with a shorter cycle time. So I think these two together. I hope I explained your questions.

Speaker 4

Got it. That's very helpful, Fusen. Just to follow-up on that, just any view beyond June? Is it too hard to say today?

Speaker 2

Yes. So June so it's really our belief. Q4 June quarter is Q3, like Q4, we believe it will be better. The feedback from customer and also some of the weakness in Q3 will be renewed in Q4. And we hopefully, this can be a short term phenomenon.

Speaker 2

And it's also supported by utilization rate, actually is in some region, actually already the number can trigger capacity buy. So we think Q4 will be better, but how much better? Actually, this also depend on Mako and some clarity with the tariff. If we have better clarity, I think we should have a sequentially up from Q3.

Speaker 4

Got it. And then just to follow-up on PCB. Your TCB exposure is predominantly Logic, hardly anything in memory. Can you give a color on how it's progressing? I also noticed that your European competitor last week announced five new orders for TCB chip to wafer.

Speaker 4

So I'm kind of curious lay of the land and maybe if you can talk about TCB your TCB exposure today and how do you see it evolving in memory if you have a shot? Thank you.

Speaker 2

Okay. So, basically, our first revenue for the TCV was $20.20, right. So although we don't want to say is a quite large, but I think we make a good progress with a high growth rate. And we actually focus with logical first And we actually confident at this moment. We can grow in both the IDM and also OSAT, also in the foundry side for our logic.

Speaker 2

And this year, we put a lot of effort in the memory. We expect to additional system by end of the month, end of the year. And we won't say this is easy, but I think we're confident on our technology and I hope we can have some result in twenty twenty six. So I think to answer your question sequentially, we got to focus in actually some segment. And from now, I think it's a good time for us to focus on HBM.

Speaker 2

Got it. Thanks a lot, Prudhun. Thank you.

Operator

Our next question comes from Tom Diffely with D. A. Davidson. Please proceed with your question.

Speaker 5

Yes, good morning. I was curious what was the revenue run rate of the EA business that you're exiting or any kind of metrics around the size and profitability would be very helpful.

Speaker 3

Yes. Hi, Tom, it's Lester. So based on the recent past, the EA revenue was about 25,000,000 to $30,000,000 a year. Gross profit is around 7,000,000 to $11,000,000 and the operating expense is about 20,000,000 to 25,000,000

Speaker 5

Great. Thank you. That's very helpful. And Lester, did you say that there'd be a $15,000,000 per quarter charge through the first half of twenty twenty six?

Speaker 3

No, no, no. Tom, what we said is also consistent with the disclosure on March 31. I said that after this all the write down this quarter, the $86,000,000 we think it will be less than 15,000,000 for the rest of the shutdown and that will probably be a little bit in the next two quarters and then more in the first half of FY twenty twenty six. Subject to our discussions with local stakeholders, we believe that the business other than to support existing customers on warranty and service should be done by the first half of FY twenty twenty six.

Speaker 5

Great. Thank you very much for that. And then maybe just a quick question on the Power Semi side. What are the dynamics you're seeing on the power's front?

Speaker 2

Well, I think the power is going to grow rapidly in terms of volume. And there was a lot of European company actually invest on it. But recently, I think China actually also gained some market shares. So we are very happy. We still have a very high market shares in the power semi and there's a transition to the power semi to be a more effective with higher power, more cost effective.

Speaker 2

So we have a two actually new product. One is a Sonochrom, I actually discussed in my script and this is for the pin welder. The other one actually we call our Everlight, this is CleverPage. So we actually announced these two new product. We believe it's going to be important product start to contribute revenue for us in 2026.

Speaker 5

Great. Thank you, Fusen.

Speaker 2

Thank you.

Operator

Our next question comes from Charles Shai with Needham and Co. Please proceed with your

Speaker 4

Maybe,

Speaker 6

Fusen, the first question is about the market dynamics. Wonder if you can further unpack a little bit more. China ordering activity is up, Southeast Asia is down, that's understandable. But it's a little bit interesting to hear that the Taiwan is also up a little bit. In terms of ordering activity, you would assume Taiwan is subject to the same tariff dynamics as the Southeast Asia.

Speaker 6

Why is there a little bit of bifurcation between those two regions? Is it Southeast Asia more impact on auto industrial side, Taiwan more on the general semi side? Or what's the reason? Yes.

Speaker 2

Okay. So let me explain South Asia First. Southeast Asia, I we believe actually utilization rate still not high enough. I mentioned about Taiwan and China actually is a utilization rate is actually high enough potentially can trigger capacity by, but actually we didn't see that yet maybe it's because of holdback. People for the unknown period of time, they can run actually utilization rate higher than even slightly higher than 80, right.

Speaker 2

So, but Southeast Asia, I think utilization rate is below that. And as you know, the tariff impact to auto is a big deal. And Southeast Asia actually have a lot of actually European investment and also OSAT and create a big base for auto capacity. So and the Southeast Asia, the slowdown actually account for almost a majority of those slowdown sequentially from Q2 to Q3. I hope I answered your questions.

Speaker 6

Yes. That's very, very interesting color. Fusen, maybe another question about the flux less TCB. I think in your prepared remarks, there are some new languages there. You are saying flux less TCB, at least for fiscal twenty twenty five, it's fully booked.

Speaker 6

Wonder if you can provide some color what that means, because I don't think your Flexless TCV revenue forecast was that aggressive. It was I believe you were guiding to like 40% to 50% year on year growth. When you say fully booked, do you mean it's can we even read that as actually a little bit supply constrained at this point or

Speaker 2

yes. Actually, I think it's really limit in our capacity. We have some capacity in U. S. And right now we moved to Asia and we intend to actually increase capacity.

Speaker 2

So I probably can say this a little bit better. I think right now we are capacity constrained right now. And we actually will create more capacity is undergoing.

Speaker 6

So is the 40% to 50% year on year growth you think you can still reach that target for? Yes.

Speaker 2

So for example, I think, we actually right now, give you example, maybe a capacity, we are actually we just start in 2020, right, 2020. We actually have a capacity, a target to reach about 60 system per year. So this is incremental capacity we are undergoing to increase.

Speaker 6

Got it. Maybe last one. Any update on the leading foundry? I believe you shipped a dual head system already. Any expectation repeat orders and the timing of it?

Speaker 2

Okay. Our system actually is a long in high volume production and also multiple system and also a new customer qualification. This year, our TCV only, we expect about $70,000,000 Next year, we actually expect probably $100,000,000 or above 100,000,000 So the difference of 26,000,000 and $25,000,000 part of that actually is growth of foundry, right. But as we qualify more customer and more devices, I think we will have additional upside on top of that. Thank you, Fusen.

Speaker 2

Thank you.

Operator

Our next question comes from Craig Ellis with B. Riley Securities. Please proceed with your question.

Speaker 7

Yes. Thank you for taking the question and good evening, Pewson and Lester. I wanted to start going back to some of the utilization increases you're seeing in China and Taiwan and just try to understand them in a little bit more detail. We've seen pretty visible signs that certain supply chains, PCs since February, March have been tracking well above seasonal. Smartphone seem to be doing that early in 2Q.

Speaker 7

So the question is, that is happening and it seems like it's happening on build aheads given tariff impacts. Is there potential that related demand in the second half of the fiscal fourth quarter or in the fiscal first quarter would be below seasonal because we've already had the utilization benefit early in the year as companies try to best operationalize to mitigate tariff impacts?

Speaker 3

Hi, Craig. It's Lester. No, we don't think so. I mean utilization rate, you're right, as Susan said, is quite high in China and Taiwan and also in General Semi. But what I think as we indicated on the call is in a normal cycle, at these utilization rates, people should start doing capacity buys.

Speaker 3

But we're not really seeing that. And I think what we the reason for that is, again, there's a lot of cautiousness among our customers. They want to see how this tariff thing kind of plays out. So we don't think that there's that's going to the utilization rate is going We think it's already remaining at this level.

Speaker 3

And I think without the tariff uncertainty, we believe that China, Taiwan, North America and Europe, I think the revenues will be much higher in Q3. That's why originally we believe that the second half of the year historically has always been in the first half. I think this is a really been affected by the global trade dynamics as well as the tariffs. I think as we get more clarity on the tariffs, I think then people will start making purchases. I think right now people are doing it just if it's critical necessity.

Speaker 3

So I think also as Susan said in his earlier reply, people are running it at a much higher utilization than they normally would. So we don't think actually it will fall off in Q4 and Q1.

Speaker 7

That's really helpful color, Lester. Thank you. And then the second question is more longer term. So interesting ambition to move into the DRAM HBM market and LPDDR market in fiscal twenty twenty six. The question is, as we think about the memory business now, which is very NAND centric, how material could DRAM be in fiscal twenty twenty six and 2027 relative to the business that you currently have?

Speaker 7

And how broad would you expect your exposure to be across the memory supplier base?

Speaker 2

So I think on NAND, we have a very high market shares. HBM, we actually put a lot of effort. In the meantime, there's also many, many competitor over there. So we will see how well we will do, but I think we work closely actually with one, but also with others. But one actually has a base of focus.

Speaker 2

So in terms of DRAM second die, we actually see this vertical wire is going to be very important for the industry in both logic and memory. The first customer we see is going to go to production. This is for a stack DRAM is going to be in the first half of twenty twenty six, right. So and not only almost every memory customer is working with us and including IDM. So next year will be a transition year and we probably can give you a more update about order maybe years ago, the production for the first half and we will see the order, maybe our fiscal twenty six, maybe Q1 or Q2.

Speaker 2

So we believe the vertical wire will take off and there will be many customers is going to work on this for the first product. First product is going to be DDR, It's going to have a capability to reduce a form factor of our 30%, right? And this is going to be on a mobile. But this is only a first application we believe vertical wire is going to find a home for many other applications in the future.

Speaker 7

That's a significant form factor reduction, Fusen. And thanks for all the color you two, Lester.

Speaker 3

Thanks.

Operator

Our next question comes from Dave Dooley with Steelhead Securities. Please proceed with your question.

Speaker 8

Yes. Thanks for taking my question. Just a couple of clarifications. You talked about the utilization rates in Taiwan and China being elevated. Could you just give us what those percentages are at this point?

Speaker 8

And then also a bit of a housekeeping question. What is your IC unit volume assumption for calendar twenty twenty five and 2026 if you have them?

Speaker 3

Hi Dave. Utilization this is Lester. Utilization in China is over 80%. In fact, it's almost into the mid-80s. In Taiwan, it's just touching 80% or so.

Speaker 3

Semi revenue growth is we still expect about 10%, a little greater than 10%. In calendar twenty twenty five? Yes.

Speaker 4

Yes. Okay. And then

Speaker 8

as far as the HBM opportunity goes, I think you've made it clear you're working with one specific customer here. And is it fair to assume that HBM4 or HBM4E is the cut in point or usually it's with a new product. Maybe just explain to us what new product you think you'll get cut in at?

Speaker 2

Right now it's high volume is 3E, so we expect will be a future generation. Yes, most specific I think from HBM4.

Speaker 8

So HBM4 would be the target point to try to incorporate yourself into the market,

Speaker 3

so to speak?

Speaker 2

Yes, that's correct.

Speaker 8

Okay. And final question from me is, you've talked about, I guess, hesitation driven by trade policies and tariffs. But could you just talk about any impacts that you might have? I assume that tariffs that you can ship from Asian facilities into China, so there won't be a major tariff impact from doing that? And then maybe just talk about if there are any higher costs from input costs into your products from tariffs?

Speaker 8

Thanks.

Speaker 3

Yes. So Dave, we manufacture our capital equipment here in Singapore. So shipping it into China will not trigger any tariffs, because the tariff right now from China is aimed towards United States and reciprocal basis, right? So we don't think there's any direct impact for us. As we indicated, the impact is more on an indirect basis as our customers and their customers are right now a little bit uncertain about how all this is going to play out.

Speaker 3

So therefore, they're much more conservative in their supply chain, right? So that's I think what we've been talking about earlier. As far as cost is concerned, I think there will be again, there may not be a direct cost, but there's always going to be indirect cost. Tariffs are going to it costs everybody money, right? So I think it's across the board.

Speaker 8

Okay. And one final clarification is you talked about the customer hesitation in Southeast Asia. And I guess you're kind of suggesting that that's an industrial automotive end market driven. And then I think you even mentioned it was European customers. Is that the really way to think about it is European auto and industrial customers are the main customers or the food chain that is in hesitation, so to speak?

Speaker 3

Well, David, I don't think food sense that it was just these people who are in hesitation, right? I think all our customers are in hesitation, those in Taiwan and China, which is why at that high utilization rate, they're not making the orders that they normally would make. I think what Fuso is talking about Southeast Asia in particular is we see Southeast Asia actually drop the most sequentially from Q2 to Q3. And part of that is because we have a large auto industrial client base in Southeast Asia and most of them are, you're right, our audience from Europe. And they are very so they are particularly, I guess, by concerns about the tariffs.

Speaker 3

So we didn't say it's only them that are concerned about the tariff. I think it goes across the board. It's that they particularly have been affected in Q3 when you compare it to Q2.

Speaker 4

Okay. Thank you.

Operator

There are no further questions at this time. I would now like to turn the floor back over to Joe Olingindi for closing comments.

Speaker 1

Thank you, Maria, and thank you all for joining today's call. Over the coming quarter, we'll be presenting at several conferences and roadshows. As always, please feel free to follow-up directly with any additional questions. This concludes today's call. Have a great day, everyone.

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Earnings Conference Call
Kulicke and Soffa Industries Q2 2025
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