BE Semiconductor Industries NV

AEX:BESI

Earnings Call Analysis

Rising Q4 Profits Amid Annual Declines

In Q4 2023, revenue climbed to EUR 159.6 million, up 29.4% from Q3 and 15.9% from Q4 2022, fueled by higher shipments for hybrid bonding, photonics, and other AI-related 2.5D applications. Notably, the company shipped its first in-line flip chip system for 2.5D HBM logic applications. Orders rose to EUR 166.4 million, a 30.7% increase compared to Q3 of the previous year, and gross margins grew to 65.1%, leading to net margins of 34.4%. Contrarily, annual figures saw a decline, with revenue, orders, and net income dropping by 19.9%, 17.4%, and 26.4%, respectively. Nevertheless, operating and net margins stood strong at 36.9% and 30.6%, with gross margins up to 64.9%. A new EUR 60 million share repurchase program was initiated following the completion of a EUR 300 million program, and a EUR 215 per share cash dividend is proposed. The Q1 2024 outlook expects a revenue decrease of 5-15% from Q4 2023 and operating expenses to rise by up to 50% due to increased share-based incentives.

Significant Improvement in Q4 Performance Despite Year-Over-Year Decline

Q4 2023 marked an impressive recovery for the company, showcasing operating results significantly better than both Q3 2023 and Q4 2022, driven by its strategic positioning in the market. The quarter saw revenue climb by 29.4% and 15.9% compared to Q3 2023 and Q4 2022, respectively, reaching EUR 159.6 million. This uplift was fueled by increased shipments in areas like hybrid bonding, photonics, and AI-related 2.5D applications. Notably, the company successfully delivered its first in-line flip chip system for 2.5D high bandwidth memory (HBM) logic applications to tackle a growing market demand. The quarterly orders also reflected a positive trend, jumping to EUR 166.4 million, which suggests further revenue in subsequent quarters.

Annual Figures Reflect a Downward Trend with Silver Linings

On an annual basis, revenue, orders, and net income witnessed a downturn, decreasing by 19.9%, 17.4%, and 26.4%, respectively, as compared to the prior year. Revenue and orders suffered primarily due to a slump in mainstream computing applications and, to a lesser extent, a dip in automotive applications after two years of robust growth. Yet, there were areas of resilience, notably in silicon photonics, hybrid bonding and 2.5D logic memory applications, where demand rose as customers invested in AI and high-performance computing capacities. Specifically, orders for hybrid bonding and the year-end backlog doubled compared to the end of 2022.

Profit Margins and Shareholder Returns

The company's efforts in cost control and product mix, along with favorable foreign exchange impacts, boosted gross margins to 65.1% and net margins to 34.4%. This performance reflects Besi's ability to navigate through a challenging downturn with enviable operating and net margins of 36.9% and 30.6% throughout the year. In response to these healthy margins, a substantial dividend of EUR 2.15 per share has been proposed, which, if approved, will result in the company returning approximately EUR 1.9 billion to shareholders since 2011.

Positive Outlook for the Assembly Equipment Market Rebound

The company is optimistic about the next assembly upturn, expecting the market to bounce back with a potential growth of 78% between 2023 and 2026. This projected upswing is to be driven by an anticipated recovery in mainstream assembly equipment demand, a rise in Chinese market activity, and new wafer fab projects that will necessitate advanced packaging capabilities.

Q1 Revenue Projections Indicate a Short-term Decline

Looking ahead to Q1 2024, the company foresees a revenue decrease of between 5% to 15% against Q4 2023 figures. However, it expects to maintain strong gross margins in the ballpark of 64% to 66%. Operating expenses are projected to remain stable or increase modestly by up to 5%.

Recovery to Pre-COVID Operations and Emerging Demand

The company indicated a return to pre-COVID operational patterns, particularly in the context of supply chain dynamics and order timings for high-end smartphone applications. Additionally, there has been a surge in demand for photonics, with a twelve-year history in the field and order intake continuing into the first quarter, suggesting further sustained demand in this segment moving into the first half of the year.

Earnings Call Transcript 2023-Q4

[Operator]

Good morning, good afternoon, ladies and gentlemen, and welcome to the business quarterly conference call and audio webcast to discuss the company's 2023 fourth quarter and full year results.[Operator Instructions]. Joining us today are Mr. Richard Blickman, Chief Executive Officer; and Mr. Lian Servian, Senior Vice President, Finance. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded and cannot be reproduced in whole or in part without written permission from the company. I would like to now turn the call over to Mr. Richard Blickman.

[Richard Blickman, executive]

Thank you all for joining us today. We will begin by making a few comments in connection with the press release issued earlier today and then take your questions. I would like to remind you that some of the comments made during this call and some of the answers in response to your questions may contain forward-looking statements. Such statements may involve uncertainties and risks as described in the earnings release and other reports filed with the AFM. For today's call, we'd like to review the key highlights for the fourth quarter and year ended December 31, 2023, and update you on the market, our strategy and the outlook. First, some overall thoughts on our performance. Q4 '23 operating results were significantly better than both Q3 and Q4 2022 as our favorable market positioning offset continued weakness in demand for mainstream assembly equipment. For the quarter, revenue of EUR 159.6 million was up 29.4% and 15.9% versus Q3 '23 and Q4 '22, respectively. The increase was due to higher shipments for hybrid bonding, photonics and other AI-related 2.5D applications, continuing trends we saw last quarter. Of note, we shipped our first in-line flip chip system for 2.5D HBM logic applications to address the needs of this growing market. Orders of EUR 166.4 million were up 30.7% versus the third quarter last year, of which a portion is anticipated to be shipped in Q2 and Q3 of this year. Operating profit also improved versus prior guidance as gross margins increased to 65.1% due to a favorable advanced packaging product mix and net ForEx benefits as well as cost control efforts, which kept over levels relatively constant versus the fourth quarter of '22. As such, net margins rose to 34.4% versus the 28.4% in the third quarter of last year and 29.2% in the fourth quarter of 2022. Overall, we are encouraged by our performance this year as Besi's leadership position in advanced packaging lessened the adverse effects of an industry downturn as severe as the 2017 till 2019 period. For the year, revenue, orders and net income, EUR 578.9 million and EUR 548.3 million and EUR 177.1 million declined by 19.9%, 17.4% and 26.4%, respectively, versus 2022. Revenue and order weakness reflected significantly reduced demand for mainstream computing applications by both IDMs and Asian subcontractors and, to a lesser extent, reduced demand for automotive applications following strong growth over the past 2 years. Such weakness was partially offset by increased demand in the second half of the year for silicon photonics, hybrid bonding and 2.5D logic memory applications as customers began to build out their AI and high-performance computing capacities. In particular, hybrid bonding orders and year-end backlog approximately doubled versus year-end 2022. Of note, approximately half of Q4, hybrid funding orders were represented by our most advanced 10-nanometer degeneration 1+ accuracy hybrid bonding systems. We achieved peer-leading operating and net margins of 36.9% and 30.6% in 2023 due to the alignment of Besi's operating model to difficult market realities. In fact, gross margins increased to 64.9% versus 61.3% in 2022, due to successful product introductions supported by a keen focus on cost control efforts, effective supply chain management and net ForEx benefits. From an end-user perspective, Besi's 2023, revenue decrease was primarily focused on mainstream computing applications as well as ongoing weakness in Chinese demand for mobile handsets. As a result, computing decreased by 24% of our end-user mix versus 30% in 2022, while mobile and automotive, each rose 2 points to 30% and 18%, respectively. Besi's revenue and profitability has increased significantly since the last industry downturn. As seen in this next chart, revenue, orders and operating income in trough year 2023 grew by 62.5%, 57.2% and 132.2%, respectively, versus 2019, with operating margins up by 11.1 points. Besi ended the year with a solid liquidity base consisting of cash, cash equivalents and deposits aggregating to EUR 413.5 million. Of note, we completed the EUR 300 million share repurchase program in October 23' and launched a new EUR 60 million program due for completion in October 2024. As such, share repurchases increased by 45.4% to EUR 213.4 million last year or 2.6 million shares. In addition, we proposed to pay a cash dividend of EUR 215 per share for approval by Basis 2024 AGM, which represents a payout ratio of 94%, including such a dividend, we will have returned approximately EUR 1.9 billion to shareholders since 2011 or approximately 30% of cumulative revenue during this period. Next, I'd like to speak a little bit about the current market environment and our strategy. We believe we are in the early phase of the next assembly upturn after a 40% market decline from 2021. Industry analysts anticipate a rebound 2024, '26, driven primarily by recovery in mainstream assembly equipment demand and Chinese markets, additional capacity needed for next-generation AI, logic and memory applications and new wafer fab facilities coming online, requiring advanced packaging capacity. TechInsights estimates market growth of 78% between 23' and 2026, reaching a new peak of USD 7.3 billion. However, the slope of the recovery in 2024 is uncertain given the restrained demand for mainstream applications and weakness in particular in automotive markets currently. We made significant progress from a strategic perspective this year. Besi maintained attractive levels of revenue and profitability relative to peers due to our significant R&D investment in next-generation advanced packaging systems and rapid alignment of production and overhead levels to difficult market conditions. In addition, we completed an in-depth strategic review to better position Besi, for growth over the next decade and industry after. We also expanded our operational footprint in Malaysia, in Singapore, and also in Vietnam in response to customer reallocation of certain production outside of China and in anticipation of the growth of hybrid bonding and other advanced packaging technologies. Significant progress was also made achieved on our ESG agenda. As we made advances in the sustainable design of our platforms, positioned ourselves to meet and exceed challenging targets set for 2024 and launched many new initiatives to further reduce Besi's environmental footprint. In addition, we formed a technology advisory board with leading industry experts to advance our core technology, competitive position and growth prospects. Our leading position in advanced packaging was on display this year. We introduced new products as planned, both for 2.5D and 3D assembly, including our TCB next in line flip-chip system and the next-generation 100-nanometer accuracy hybrid bonder. Our installed base grew to over 40 hybrid bonding systems at year-end with adoption increasing from 3 to 9 customers, encompassing North America, European, Taiwanese and Korean IDMs, foundries, subcontractors and research institutes for both logic and memory applications. Now a few words about the guidance. For the first quarter this year, we expect revenue to decrease between 5% and 15% versus the fourth quarter and for gross margins to range between 64% and 66% due to a favorable and found packaging product mix. Baseline operating expenses are forecasted to increase by 0% to 5% versus Q4 last year, with total operating expenses increasing by approximately 50% due to a EUR 15 million increase in share-based incentive compensation expense. That ends my prepared remarks. I would like to open the call for questions.

[Operator]

Thank you.[Operator Instructions] Our first question comes from the line of Charles Shi from Needham & Company.

[Yu Shi, analyst]

Richard, I think you've said for quite a while that Intel is going to put hybrid funding into the forest and the lags, I mean the code names for the data center and the client CPUs. Yesterday, they did have announced the first 3 or 4 clear water forest, which is the first and forest have hybrid bonding. My question is, do you still expect that hybrid bonding will come to the lakes, Presumably, the forest, those data center products that probably high value, but probably a little bit low volume, but the client and CPU side probably will drive a lot more meaningful volume for you. Do you see any ordering activities in preparation for that ramp hybrid funding in the likes.

[Richard Blickman, executive]

We see ongoing development process qualifications for many applications. And as I said in previous calls, the industry is evaluating in more than only Intel, where hybrid bonding is advantageous compared to, for instance, TCB interconnect solution. So over time, we will understand ever better where which applications are being chosen to use the hybrid bonding. What is important with the message of Wintel yesterday is that this is a very clear signal confirming the establishing of the main volume capacity onshore in the U.S., fully focused on using hybrid bonding. So a benchmark in that sense, which is critical for further adoption of this technology...

[Yu Shi, analyst]

Got it. So I asked a little bit longer, your largest end market. I mean at least for now, the mobile side, the mobile revenue seems to be down a little bit last year. And you also mentioned it seems like in last quarter, you did not see pulling orders from your high-end smartphone customers. I wonder what's your view on 2024, first, on the overall mobile revenue and the high-end smartphone revenue for you this year? And is the lack of the Boeing orders from that high-end smartphone customers last quarter a reflection of a potentially lower demand this year or maybe just a reflection of maybe the supply chain has really returned to normal, so that customer doesn't really need to do any of the pull forward this time...

[Richard Blickman, executive]

It's the latter. So from supply chain constraints, especially in 2022, '21. It has come back more to the normal pattern. Although your statement is not 100% correct that we did receive orders for applications in high-end smartphone in the fourth quarter. But it's more according to the model before COVID, where we will understand in the next couple of weeks, how much and for which applications, new features will be added with then orders delivered in the later part of the second quarter, early part of the third quarter. So that is very much tied to anticipated market demand over the next generation. On the other hand, overall, what we read in the general press, the expectation is not that, let's say, huge in volume as we had in 2022, also driven by COVID. So on the one hand, it is back to sort of a normal pattern. But on the other hand, when you read, again, the general information, whether it be a very strong high-end smartphone year is still to be seen.

[Yu Shi, analyst]

Richard. Maybe lastly, I want to ask you about this in-line flip chip to ship into the 2.5G application. So I was kind of surprised that this is the first tool, and I don't fully understand what that's in line here is what is the significance of this tool? And what kind of incumbent do you're replacing? And can you give a little bit more color?

[Richard Blickman, executive]

These 2 builds simply 2.5D modules. You could say in the 2.5D family like Kolon and it's a complete line of placing devices with a flip chip technology in particular, and also the final mounting onto a substrate. And we have received, yes, very important first automated lines for these modules, 2.5D. It's in Korea. We have already delivered similar concepts to Chinese high-end smartphone manufacturers, by the way. But this is mostly for computing devices. So in that turn-off the family, you have, on the one hand, to Kolon and then you have several other devices with a similar architecture.

[Yu Shi, analyst]

So maybe a quick follow-up. Speaking of EWOS, does this mean this tool can not only do the OS part but also the entire EWOS.

[Richard Blickman, executive]

Yes... Exactly.

[Operator]

The next question comes from the line of Madeleine Jenkins from UBS.

[Madeleine Jenkins, analyst]

My first is just on a comment you made in your release around the hybrid order bonding orders in any 3 being double for the comparable levels of last year. I just wondered if you could give us some EWOS on this. On my numbers, I would imply a big hybrid bond in order in Q4, but I just wanted to check if that was right and also spent multiple customers or just one?

[Richard Blickman, executive]

Well, first of all, as we also mentioned in '23, we went from 3 customers to 9. That's already a major step. And it is for multiple customer orders. And the interesting thing is, of course, it is a mix between the first generation, which is 150 to 200-nanometer accuracy to now the 100-nanometer accurate system, which we call Generation 1. If you remember, we shipped the first system end of Q2, and that has been qualified and that resulted in additional orders in Q4. So that is also our statement that the mix of generation 1 and 1 is about 50-50 in orders for Q4. From a number of customers, we received orders in Q4 from 4 customers, 4 distinct customers, being IDMs and foundries.

[Madeleine Jenkins, analyst]

Okay. And just my next one is just on the photonics demand you saw last quarter. I was just wondering if this has been kind of sustainable or be seeing more orders? And what you sort of expect going forward into 2024?

[Richard Blickman, executive]

Well, that's all of a sudden, and we mentioned that also in the call end of October. We have been active in photonics for a long time. It goes back 12 years. And that has suddenly increased in demand quite significantly, multiple customers, 5 customers. We mentioned at end of October. Order intake is continuing also in the first quarter. We also categorized that under advanced packaging. So advanced packaging is not only have doing. And so to answer your question, that is not a onetime event that could lead to, let's say, continued demand certainly in the first half of this year?

[Operator]

The next question comes from the line of Robert Sanders from Deutsche Bank.

[Robert Sanders, analyst]

My first question is just on HBM. I was just wondering if you still maintained that hybrid bonding adoption would be likely on the second generation of HBM 4? Or do you think there are customers that are considering introducing hybrid bonding for the first generation of HBM 4? And the second question would just be around Intel Fabros. It looks like they're using TCB for substrate and hybrid bonding for die-to-die, and on the TCB side, do you see yourself potentially becoming a preferred supplier at Intel? Or is that a little bit of an ambitious hope?

[Richard Blickman, executive]

We're always ambitious. Your first question whether it's generation 1 or 2 is not yet clear. But if you ask me, I would guess more generation 2. Although there is an enormous amount of testing going on, both at the center of excellence in Singapore, the combined centers of excellence of Amet and Bazin. And then with 2 major memory customers. We mentioned earlier, Micron. We've also shipped the first system into a Korean customer. So that's also good news. And that's all in qualification mode. Your second question, the key answer to that or what we hear is that as long as the bond pitch is above 25-micron, that customer continues with its suite of TCB tools currently stopped. Once it goes below that, and that's why we have shipped also a system to that customer ordered by that customer. That's all for development, let's say, below 20-micron bone. There's a similar opportunity and demand, and we will ship a system at the end of this quarter to another customer, also for tighter Bonach dimensions. So, it's not a question whether we will have an opportunity, we have opportunities. It's a question of whether the design of those devices move to dimensions, which require a more accurate GC NXT solution by the way, also a die-to-wafer solution that's not tied to substrate. So one should bear mind that, that is for die-to-wafer applications.

[Operator]

Our next question comes from the line of Didier BofA Securities.

[Didier Scemama, analyst]

I just wanted to clarify a couple of things. On the press release, you mentioned that your installed base of hybrid bonding systems was just over 40. I could be wrong, but I thought you said your installed base was around 28% or at least you should 28 in '22. Does that mean you shipped about maybe 13 or so hybrid bonding system in '23? Or do you not include maybe the one you're selling for R&D? Just trying to clarify that...

[Richard Blickman, executive]

Those are revenue recognized systems to 40, 41, then we have development systems. So test machines which may end up in orders or may be exchanged for high-volume production versions. So to clarify the question, how many bonders are up and running. That is the answer. So we made significant progress last year...

[Didier Scemama, analyst]

Right. But I think at the end of the , you were hoping to be flat on hybrid bonding system shipments in '23. Did you achieve that if you take into account also the sort of systems and for R&D, et cetera?

[Richard Blickman, executive]

Well it's probably flat, maybe even some less because don't forget we shipped in '22 quite a number of machines, but which then were producing or let's say, they were showing yields of only, let's say, below 50% even at the beginning, 20%. And once that yield moved up, capacity simply was added through system performance. Last year, that continued significantly. So these machines are pretty real hit as they are, and they are simply following the demand. So when there's more demand, more bonus will be added. And that's also the guidance for Q1, but multiple customers and as we said earlier, the backlog end of '22, was half of the backlog which we have at 23%. And that's also confirming further adoption and others.

[Didier Scemama, analyst]

Can you say how many systems are in the backlog end of '23?

[Richard Blickman, executive]

No. We haven't mentioned that. And also, we said that already earlier because it doesn't help. I think it's more important that on a regular basis, we inform those numbers of machines which are revenue recognized and which you can see in our revenue.

[Didier Scemama, analyst]

Understood. And then for this year, I mean, I think market expectations are for hybrid bonding system shipments of, I don't know, around mid-40s, something. Is that something you're comfortable with? When you look at the adoption of Harris-bonding at your main foundry customer, but also North American customer. And obviously, now the Korean memory makers and U.S. sumary-makers also trying to work on high-bandwidth memory. Is that something you're comfortable you would like to underwrite at this stage? Or is it a bit too early in the year?

[Richard Blickman, executive]

It's too early in the year. We don't guide further than one quarter simply because there are many factors influencing this further preparation. The first question also alluded to that, what's very fascinating customers are way and they also explained that to us in a phase where they decide, will they use hybrid booming or still a flipped type of process like TCB or even flip chip. And that can lead to many more systems or less systems. But the adoption at 9 customers is very important, and that means that the drive to adopt hybrid bonding has increased quarter-by-quarter and to how many bundles that will lead is hard to tell. So we will update quarter-by-quarter things are going. But with the orders in Q4, things went definitely in a positive direction.

[Didier Scemama, analyst]

ASML on the last earnings call, they effectively said that demand from high-bandwidth memory is driving demand for EUV systems. And in the medium term, there could be upside to their 2030 capacity of the UV systems to address not only the doubling in die size of high-bandwidth memory DRAM chips but also the layer count. And I think in the past, you also mentioned that HBM was probably a much larger opportunity for Besi than perhaps the logic accelerator market. So, has your view changed, are you even more bullish on HBM than you were before? And then related to that, do you see an avenue to penetrate the main sort of AI accelerator player that you don't have yet?

[Richard Blickman, executive]

So a very good questions. Number one, we maintained a few that the volume in HBM is potentially significant larger than for logic. Maybe a ratio 1 to 4, 1 to 6, is what is often used. It can even be more than that. If you look at the designs 12 stacks, 16 stacks, so that view has not changed. On the other question, yes, how should I answer that, well, I can't share more detail in that sense to that question. These are all forward-looking or, let's say, very much in the past. What I can say, we did update our model in a sense to beam count again, low case and medium and a high case. And it's definitely intact. If you look also, again, the announcement yesterday of Intel, which we see as a major confirmation that definitely the world is going in that direction. So yes, that's how we view the longer-term future.

[Didier Scemama, analyst]

On the high-end smartphone adoption, are we still at sort of around 2026 for the sort of main player? And then let's say, the Android camp, high-end Android moving in 27' by IS is that your way of thinking at this stage?

[Richard Blickman, executive]

That is our thinking, although comments from, for instance, Kolon, they are more aggressive on that adoption for chiplets. As we have said also in the previous call, we are now already in '24. So they have to hurry up to include that in a 25' model. So in our view, it's more likely 26' but it's certainly being developed, and it's developed on our equipment. So, what the timing will be precisely. As you know well, I'm always a bit conservative in that sense. Customers are maybe somewhat more, let's say, aggressive in how that adoption will happen? Time will tell. But for us, the key, again, is are we involved in that development? And the answer is yes. Wonderful.

[Operator]

The next question comes from the line of Ruben Devos from Kepler Several...

[Ruben Devos, analyst]

Just a clarity question on the memory and HBM. I think the leader in HPM, they've been recently talking about 16-layer DRAM stack with the help of hybrid bonding technology, which they were quite explicit on. It could be helpful if you would help us understand where you are today in terms of engagements with them. Did I understand correctly that they are not included yet in the 9 customers?

[Richard Blickman, executive]

No, they are not yet included in the customers, but they are equally testing, evaluating to use the hybrid bonding technology for various HBM generations. It also has to do with and you may have read that about the thickness JDE standards if they are not raised, they are forced to go to hybrid bonding, but some arguing that, that thickness will be raised or that limitation and that will allow TCB to be used for a next generation. So there are many technical or technology considerations. But your question, are we involved in that? And the answer is definitely yes.

[Ruben Devos, analyst]

Great. And then with respect to the subcontractors, I think in a prior call, it was mentioned, a major subcontractor had placed an order, and now it's suggesting multiple have ordered. I believe you indicated before that the OSATs are sort of expected to be the late adopters, but it seems they are relatively early at this stage. I was curious to hear your thoughts on how significant these orders are to you and how that reads for a potential acceleration of adoption.

[Richard Blickman, executive]

No, no. Then I have not been clear enough. We still have only one subcontractor. The others are foundries and institutes and of course, the big IDMs. But on the subcontractor front, there's, of course, a lot of interest. There's a lot of ongoing exchange and test information with the big ones. And I can name them. We have, of course, ASE, as we mentioned in the order. Amcor is also actively looking at it driven by an end customer. Those 2 are most advanced in the OSAT, let's say, environment. So I don't know where we have given this information. But it's only one so far.

[Ruben Devos, analyst]

I guess it was just interpretation. Just the press release was saying plural subcontractors when referring to the 9 customers, but okay, that's clear. I would say a final question just on the gross margins. They've gone again up well ahead of your own guidance and partly helped by a better mix, including more advanced packaging sales. I was curious, could you give some indications how the 2.5D assembly 3D hybrid bonding tools and the rest of your equipment basically relate to each other in terms of gross margin contribution and maybe relative to group average, which is now at 65%...

[Richard Blickman, executive]

Well, we have always sort of guided that the more new technology, the higher the margins. It's as a note, very important to understand that these margins even in the early phase of this hybrid dome, but the same is for 2.5. That means that the gross margin potential is still higher than what we accomplished today. We have also guided for a somewhat higher margin in Q1, simply because of the order mix. And as soon as the overall, the conventional business comes back, you will have a slightly different mix, but this between the low 60s and, let's say, the higher 60s is where the margins are currently. It also depends on ForEx. We have had a favorable ForEx relationship in Q4, second half last year, also with a very low Malaysian ringgit and that helps in the cost. So on the one hand, strong product position. On the other hand, favorable cost. I should also mention here that one of the self aligning of this whole COVID constraint in supply chain is that we have many more suppliers developed in that time, and it helps to negotiate also better pricing at this point in time. Also a favorable effect, in this mix for unique solutions in this 2.5D with the multi-module attach platform. So it's not just one product. It's a broad advanced packaging product range. And then you have more of the conventional products. And that mix will determine going forward, how those margins will develop. But as we guide right now for the first quarter, it looks positive.

[Operator]

Our next question comes from the line of Rolf Bulk from New Street Research...

[Rolf Bulk, analyst]

You mentioned that around half of your hybrid bonding orders in the fourth quarter were for the leading-edge 100-nanometer accuracy tools. Can I ask, are all of these orders still for stand-alone bonded tools? Or are you seeing an increased interest and perhaps orders for the integrated tools what you refer to as a cluster tool solution?

[Richard Blickman, executive]

That's a perfect question. And as we have shared in previous calls, the 2 major customers right now in 1 in Taiwan and 1 in the U.S., they have a different philosophy. So in Taiwan and probably because they have a foundry concept, they are still expanding stand-alone dollars and now also the 1. In the U.S., it's very much focused on integrated lines. So that is that is a conceptual choice. For us, it doesn't matter that much because the bone is the bonder. The interface is, of course, different. Software is slightly different, of course. So we've had now quite some time to design the interface between the Bulmer and an automated line. For the future, we expect that high-volume manufacturing will most likely use these integrated lines because they have a big advantage in terms of cleanliness. We need zero particles for a reliable hybrid bonding process. And that automation leads simply to higher yields. But on the other hand, it is less flexible as a stand-alone setup. But your question in Q4, it was a mix. We said that also that we expected these orders in the U.S. to happen in Q4, and that has happened and some more stand-alone for Taiwan and also for others. So yes, that's the current situation.

[Rolf Bulk, analyst]

It's very clear. Maybe a quick follow-up. Could you remind us what kind of ASPs we should model for the 100-nanometer accuracy to versus previous generations?

[Richard Blickman, executive]

The first generation, generation 1, the 150 to 200 nanometer is between EUR 1.5 million and EUR 2.5 million and the generation 1, so the 100-nanometer is between EUR 2 million and EUR 3 million.

[Rolf Bulk, analyst]

And when you move to 50%? There is still early days. We are now reaching 80% in the laboratory consistently, and we have to move down to 50%. Yes, that will be more expensive. That will probably be somewhere between $3 million and $4 million, but that's too early to tell.

[Operator]

Next question comes from the line of Timm Schulze from Redburn Atlantic...

[Timm Schulze-Melander, analyst]

A clarification and then a lot of stuff has already been asked. I just had a couple of housekeeping questions. Just on the bonder side, the non-hybrid bonders, but the TCB side, you began talking about applications potentially or indicating chip on wafer on substrates. So would it be reasonable for investors to conclude that you are going to be exposed to growth in AI accelerators over the course of '24? And then I had a couple of quick follow-ups.

[Richard Blickman, executive]

Yes. That assumption is a reasonable one. But again, as I tried to explain earlier, our system is developed in particular, for dimensions below. So the bond pad pitch below 20-micron. And that is where our system has a great benefit over the other systems.

[Timm Schulze-Melander, analyst]

And maybe, so that's just a function of time and node shift and, therefore, transistor density.

[Richard Blickman, executive]

Yes. Exactly.

[Timm Schulze-Melander, analyst]

Got it. Okay. Very clear. Maybe to housekeeping questions. You referenced the FX benefit a couple of times. Could you maybe just help us give us some kind of quantification for the 4Q gross margin impact?

[Richard Blickman, executive]

Well, we don't or let me first explain we are in a dollar market. We have cost in euros. We have costs in Swiss francs. We have cost in Malaysian ringgit, Singapore dollar and Chinese renminbi. So it's a mixed, I wanted to say back, but it's a mixed pattern. And we have this overall reporting in euros. So what was favorable in Q4 is still a strong dollar, a weak euro. There was a weak Malaysian ringgit, which also helped. The Swiss franc remained strong. So that the cost in Swiss francs is negatively influenced, but in total, you're talking about maybe one gross margin point. So it's not that spectacular, but still, it is a point, but the best to watch is always the dollar-euro relationship as soon as the dollar is weak and the euro would be strong. That has a negative impact overall because our business is in dollars for 80%.

[Timm Schulze-Melander, analyst]

Got it. Very clear. And then maybe just one other thing on the operating expense line. Clearly, 4Q orders very solid, very strong. The pace of improvement in the hybrid bonding offering has been very strong. You're working very hard on Version 2.0. Just on the stock-based compensation uplift. I know it's a seasonal pattern, but maybe you could just give us a little bit of color, is that almost all the increase because of a higher share price? Or it is also the share count increasing because certain KPIs were met or exceeded. Maybe just some color around that stock-based comp number would be helpful.

[Richard Blickman, executive]

No. Because of the increase of the share price, that has a negative effect on the number of shares in the compensation in the variable compensation plan. So the answer it's simply because of the higher share price. So compared to last year, and the number of shares have gone down. But anyway, that is in a nutshell explaining the impact.

[Operator]

Next question comes from the line of Johannes Ries from Apus Capital GMBH.

[Johannes Ries, analyst]

Very brief questions very fast. First, you gave the market forecast for this upturn with 78%. Is it right to assume that you are because in the maybe high growth path with these new technologies have some clear leads that you could out maybe close these expectations over this up cycle? Or is it too optimistic to signal this direction?

[Richard Blickman, executive]

Well, if you look at the last cycle, and as we mentioned, the year 2023, the overall market for back-end equipment and our peers, competitors, the impact was more closer to 40% and ours is 20%. So that is because of the focus on the advanced packaging that could have a similar pattern in the next upturn. But the question is, will that 78%, the market forecast is as we know, market forecast. But anyway, so we should do better if that happens based on the current market position and proven strength over the last 12 months.

[Johannes Ries, analyst]

Great. Maybe partly a follow-on, given what all happens to I heard this now for media, this boom we see in HBMs, is it right to see that maybe the market opportunity of hybrid bonding is larger than we maybe have seen this 1 or 2 years ago?

[Richard Blickman, executive]

Well, as I explained to an earlier question, we think based on today's data points that the model, which was developed is more or less intact. It can have some shifts in time, but you may remember that nice graph with the low case, a medium case or high case, depending on whether it only remains logic or logic and memory and then kicking in for high-end smartphones. So that's as it is right now. But also I answered to earlier questions. It's very hard to find definite applications. You can argue below a certain bond at which you must use hybrid bonding. Will that accelerate is always a question. But the bottom line is so far, so good. If we look back to the past 3 years, hybrid bonding has developed beyond expectation. The fact that there are now 9 customers using this technology partly also for mainstream products already for some time. That looks very promising, Johannes.

[Johannes Ries, analyst]

Great. And maybe to another also interesting, promising business line or maybe activity you have photonics. Can you give us more feeling how big this market could be in some years? Maybe is it something between the TCP and hybrid bonding for you only to have a feeling. It's an interesting business. And if AI is growing, you also need faster communication. So for one, maybe you have some ideas about the size of the market, which gives us an orientation for the next years.

[Richard Blickman, executive]

We look at it from, let's say, a simple model. It could reach volumes like flip chip that's the best analogy. The machines are more accurate, so they are slower, so you need more machines. But that is a market potentially which is around EUR 100 million per year and in a peak year going to EUR 200 million, so a bit similar in size to other advanced packaging platforms.

[Johannes Ries, analyst]

Great answer. Totally different question at the end. You formed this technology advisory board. I'll explain a little bit why because you have so far gets the right decisions. But otherwise, you have really put 3 very well-known, great guys from customers and maybe partners in, explain a little bit the logic behind why you're doing this and what you are discussing there.

[Richard Blickman, executive]

The answer is very simple. The risk in choosing the wrong direction is increasing over time because the technology is ever more complex, the R&D spend is increasing year-by-year. And this is not uncommon. There are many technology companies who have this concept of an advisory board. So what you want to achieve is challenges also support in views. And we have developed an agenda of meeting 6 times per year, 3x face-to-face, one meeting in Japan, which is coming up in 3 weeks' time. Next meeting face-to-face in the U.S. in early July around Semicon. And then end of September, the third meeting here in Europe, also meeting Besi Supervisory Board and in between virtual meetings. And the objective is to find out and challenge, are we understanding the directions in the right way? Or is there another way to look at that. So it's testing our own intelligence evermore. So to the end of the call, we have to stop here because we, I have said this for an hour. So if you have any further questions, don't hesitate to contact us directly. You know where to find us, and we'll be happy to have an ongoing dialogue...

[Operator]

Thank you for joining today's call. You may disconnect your lines. Thank you very much. Bye-bye.