ACM Research Inc

NASDAQ:ACMR

Earnings Call Analysis

ACM Research Upgrades 2023 Revenue Forecast

ACM Research's third-quarter earnings highlighted a period of strong growth amidst a declining global WFE (wafer fabrication equipment) market, with revenue up by 26% to $168.6 million and a record $213 million in shipments. This reflects a year-to-date revenue growth of 38%. Success was attributed to market share gains, new products, and robust demand for mature semiconductor nodes in China. The company is aligning with China's strategy to boost domestic semiconductor capacity, evidenced by demand for 28-nanometer and 45-nanometer technologies and power devices for the electric vehicle market. Product lines such as single-wafer cleaning and advanced packaging are showing significant sales growth, contributing to a broad portfolio addressing nearly 90% of all cleaning processes. Expansion in China, Korea, and the U.S. continues, with new customer gains internationally. For 2023, ACM Research updated its revenue outlook to range between $520 million and $540 million, adjusting prior forecasts to consider trade policies and other factors.

ACM Research Reports Significant Revenue and Shipment Growth in Q3 2023

ACM Research presented a solid financial performance in the third quarter of 2023, with revenues jumping to $168.6 million, marking a notable 26% increase from the same quarter of the previous year. Record shipments reached $213 million, demonstrating a growth of 31%. The company's focus on profitability is reflected in strong gross and operating margins of 52.9% and 26%, respectively.

Expansion in China Drives ACM Research's Market Share and Product Penetration

ACM Research's strategic expansion within China is a testament to their growth strategy, as they gain market share and introduce new products and customers to their portfolio. With China investing heavily in semiconductor manufacturing, particularly for mature nodes used in applications like electric vehicles, ACM Research is capitalizing on this trend. Their suite of products for 28-nanometer to 45-nanometer processes and power devices is addressing the burgeoning demand in this sector.

Innovations in Cleaning Technology Propel Product Line Growth

The introduction of innovative technologies has spurred growth in ACM Research's product lines. Notably, their single-wafer cleaning, Tahoe, and semi-critical cleaning segment saw a 33% increase in Q3 and a 42% uptick year-to-date. New additions like the supercritical CO2 dry cleaning tool and the Ultra C v vacuum cleaning tool reflect the company's commitment to advancing its product offerings to meet the needs of cutting-edge chip manufacturing processes.

Diverse Product Offering Fosters Standout Performance in ECP, Furnace, and Advanced Packaging Sectors

ACM Research has diversified its product offerings, expanding beyond traditional cleaning solutions. The ECP, furnace, and other technology domain grew by 4% in Q3 and 24% cumulatively. The company's advances in high-temperature anneal and LPCVD furnaces, along with their positioning in the advanced packaging market, are substantial as industry trends shift towards more sophisticated techniques like 2.5D and 3D packaging technologies. These areas saw a 12% growth in Q3 and an impressive 40% year-to-date.

ACM Research Continues to Forge Strong Relationships with Key Customers

Relationships with key customers remain a priority for ACM Research. Their ongoing discussions with primary consumers of their products reflect a proactive approach to sales and customer engagement. Not only is ACM Research showing promise with its new Track and PECVD platforms, but it has nearly achieved complete market penetration in China, with nearly all domestic semiconductor manufacturers using ACM's tools. This bodes well for future customer acquisition and retention efforts.

International Growth Showcases Market Expansion and Product Adoption

ACM Research's international growth is marked by significant developments such as a new purchase order from a large U.S. manufacturer for a state-of-the-art cleaning tool, set to be shipped in the second quarter of 2024. Meanwhile, in Europe, ACM has started the installation process for an evaluation tool ordered by a major global semiconductor manufacturer, further extending the company's global footprint and reinforcing its reputation in the international market.

Investment in Global Operations to Strengthen ACM's Position in the Market

ACM Research is poised to drive its operational capabilities with investments in strategic locations. The construction of the Lingang Production and R&D center in China is nearly complete, with initial production expected to start as early as 2024. Similarly, their commitment to the market in Korea is underscored by the promise of a new factory and the deployment of more than 150 employees across multiple facilities, signaling strong intentions to tap into global demand effectively.

ACM Research Adjusts Full Year 2023 Revenue Outlook with a Focused Range

ACM Research has revised its revenue outlook for the full year 2023, narrowing the range to between $520 million and $540 million, from an earlier forecasted range. This adjustment takes into account various dynamics, including international trade policies, customer spending scenarios, supply chain constraints, and the timing of acceptance for evaluation tools in the field.

Earnings Call Transcript 2023-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the ACM Research Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gary Dvorchak. Please go ahead.

[Gary Thomas Dvorchak]

Thank you, Operator, and good day, everyone. Thank you for joining us to discuss third quarter 2023 results, which we released before the U.S. market opened today. The release is available on our website as well as from Newswire Services. There's also a supplemental slide deck posted in the Investor section of our website that we will reference during our prepared remarks. On the call with me today are our CEO, Dr. David Wang; our CFO, Mark McKechnie; and Lisa Feng, the CFO of our operating subsidiary, ACM Shanghai. Before we continue, please turn to Slide 2. Remarks made during this call may include predictions, estimates or other information that might be considered forward-looking. These forward-looking statements represent ACM's current judgment for the future. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of the financial results that we provide on this call will be on a non-GAAP basis, which excludes stock-based compensation and an unrealized loss on short-term investments. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release, which is posted on the IR section of our website, and to Slide 12. With that, let me now turn the call over to David Wang, who will begin with Slide 3. David, go ahead.

[David Wang, executive]

Thanks, Gary. Hello, everyone, and welcome to ACM Research Third Quarter 2023 Earnings Conference Call. Please turn to Slide 3. For the third quarter, revenue was $168.6 million, up 26% from the same quarter last year. Shipments were a record $213 million, up 31%. Gross margin was 52.9% and operating margin was 26%. For the first 9 months, we grew revenue by 38%. This is in light of a decline in global WFE spending. We attribute our outperformance to market share gain and the penetration of new products and new customers and the general healthy market for mature nodes in China. Let me touch on each of these, beginning with the mature node investment in China. China domestic mature nodes, WFE investment remains solid. We believe due to China's goal to reduce the gap between its domestic mature nodes capacity and end market consumption of semiconductor chips. We see continued investment in 28-nanometer, 45-nanometer, and power devices for EV market. The ramp of EV production in China is a driver for capacity investment in power devices and other trading etch devices. This creates a pair win for us, and we believe we are still in early stage of China's semiconductor capacity expansion plan, which we believe will continue to be a growth driver for us as China intensifies effort to boost its domestic semiconductor capability. We believe we are well positioned to benefit and further increase our market share due to our strong market position, differentiated technology, and multiproduct portfolio. Moving to products, please turn to Slide 4. Single-wafer cleaning, Tahoe and semi-critical cleaning grew 33% in Q3 and 42% year-to-date. In the last few years, we introduced and began ramping our semi-critical product line, including auto bench and then last year, we introduced advanced and high temperature SBM tools. In Q2, we introduced our supercritical CO2 dry and cleaning tool. This quarter, we introduced our Ultra C v vacuum cleaning tool to meet the flux removal requirements for chiplets and other advanced 3D packaging structures. We have already received our first order for the new tool from our major Chinese manufacturer, which we expect to be delivered in the first quarter of 2024. ACM has one of the broadest cleaning product portfolios in the industry, covering nearly 90% of all cleaning process step in both memory and logic devices applications. We believe this product portfolio will play a key role among mature node development in China and advanced nodes in our international effort going forward. ECP, furnace and other technology grew 4% in Q3 and 24% year-to-date. Growth in this category was driven primarily by ECP product cycle with some contribution from furnace. Our high-temperature anneal and LPCVD furnace, including silicon nitride and poly, are in production at key customers, and ALD furnace is under evaluation on multiple customer sites. Advanced packaging, excluding ECB, but including service and spare grew 12% in Q3 and 40% year-to-date. This category includes a range of packaging tools, including coder, developer, scrubber, PR stripper and wet etchers, and services and spare parts. ACM is only customer that offers both a full set of wet tool and advanced plating tool. We believe that advanced packaging will become more important as the industry looks for packaging innovations such as 2.5D and 3D in the proposal and fan-out to drive higher performance for new applications such as AI and GPT. Finishing up on product, we continue to make good progress on sales effort with our new Track and PECVD platforms. We are in active discussions with our key customer, and we plan to deliver more evaluation tools this year. Similar to our cleaning, plating, and furnace product line, our Track and PECVD platforms have proprietary technology that we believe will make them winner with a major customer, both in China and outside China. I'm pleased to report good progress with our Track tool evaluation at customer site. We believe our Track tool with the new proprietary architecture design will meet the requirements of higher throughput of the next-generation lithography tool. Moving on the customer, please turn to Slide 5. We continue to make progress on customers, both inside China and internationally. In China, we believe ACM tools are now used by near all the semiconductor manufacturers. Our sales and service teams are working to expand the deployment of each of our major product lines across our growing customer base. In addition to our current customers, we are also seeing a good number of full funded new entrants. Our team has done a good job of gaining traction for our products with these customers. As these are the new customers, this will be reflecting our shipments this year until customer acceptance at a later date. In the U.S. we announced this morning a purchase order for another product from a large U.S. manufacturer Ultra C b backside cleaning and bevel etcher tool. This tool combines backside cleaning and a bevel etch function. The tool is expected to be shipped to their U.S. facility in the second quarter of 2024. And as to this customer's ongoing evaluation of 2 SAPS cleaning tools, we believe this demonstrates a deepening relationship, which we hope will result in demand for additional ACM tools. Furthermore, we believe this enhances ACM's brand and positions us to attract new opportunities with other major global customers. In Europe, early this year we announced an order for our first evaluation tool, the Ultra C SAPS SI cleaning tool from a major European-based global semiconductor manufacturer. We delivered the tool about 4 weeks ago, and our teams have already started installation process. To support our growth initiatives, we continue to make progress on our facility expansion in China other regions. Please turn to Slide 6. In China, construction of Lingang Production and R&D center is nearly complete and is expected to begin initial production early 2024. In Korea, as noted in the prior calls, we have increased our commitment to support our objective to address the global market. We now have more than 150 employees in Korea with the 3 facilities, including sales and administration, development labs, small scale production, and the clean rooms to support the wafer tests for customer evaluation. And we are making plans to build a new factory on the land we purchased early this year. We believe a strong commitment to Korea will improve our relationships with our key customers, key Korean customers. Our resource in Korea will also offer another base to support international customers in U.S., Europe, and other parts of Asia. In the U.S., we leased the facility in Oregon early this year to add to our service support and the demonstration capability for R&D and customer activity in the region. As a reminder, for 2023, we expect to spend about $75 million CapEx. This includes continued investment in our Lingang facility, remodeling for our new headquarters for ACM Shanghai, and our investment in Korea and the U.S. I will now provide our outlook for the full year 2023. Please turn to Slide 9. We are updating our 2023 revenue outlook to be in the range of $520 million to $540 million versus our prior range of $515 million to $585 million. The range of our outlook reflects, among other things, management's current assessment of the continued impact from international trade policy together with various expected spending scenario of key customers, supply chain constraints, and the timing of acceptance for first tools under evaluation in the field. Now let me turn the call over to our CFO, Mark, who will review details of our third quarter results. Mark, please?

[Mark McKechnie, executive]

Thank you, David. Good day, everyone. Please turn to Slide 10. Unless I note otherwise, I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized loss on short-term investments. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the third quarter of 2023 and comparisons are with the third quarter of 2022. I'll now provide financial highlights for the third quarter. Revenue was $168.6 million, up 26.1%. Total shipments were $213 million, up 31%. Revenue for single-wafer cleaning, Tahoe, and semi-critical cleaning was $132.4 million, up 32.8%. For the first 9 months of 2023, this category grew by 42.0% versus the prior year period. Revenue for ECP furnace and other technologies was $25.5 million, up 4.0% for the first 9 months of 2023. This category grew by 24.4% versus the prior year period. Revenue for advanced packaging, excluding ECP, services, and spares was $10.6 million, up 12.4%. For the first 9 months of 2023, this category grew by 40.2% versus the prior year period. Gross margin was 52.9%, up from 49.4%. This exceeded our normal expected range of 40% to 45%. The increase in gross margin was primarily due to a favorable product mix, improved gross margins for specific product lines, and a favorable impact from fluctuations in the renminbi to U.S. dollar exchange rate. We expect gross margins to continue to vary from period-to-period due to a variety of factors such as sales volume, product mix and currency impacts. Operating expenses were $45.3 million, up from $32.6 million. The increase was due to higher R&D, sales and marketing, and G&A costs in support of new customer and new product activities and a boost in post-COVID travel activities. Operating income was $43.8 million, up from $33.5 million. Operating margin was 26.0%, up from 25.1%. We recorded a realized gain of $0.7 million from the sale of short-term investments for the quarter. Recall that realized gains are included in non-GAAP earnings. Income tax expense was $0.7 million, down from $10.5 million. This was driven by onetime items for the third quarter, but we still expect the full year tax rate to be in the 20% range. Recall that as a result of a change in Section 174 of the U.S. Internal Revenue Code, our effective tax rate for the full year remains elevated. Net income attributable to ACM Research was $37.6 million, up from $28.2 million. Net income per diluted share was $0.57, up from $0.42. I'll now review selected balance sheet items. Cash, cash equivalents, restricted cash, and time deposits were $326.5 million versus $376.1 million at the end of the second quarter. Total inventory was $507.4 million versus $471.1 million at the end of the second quarter, and it was split between raw materials, $202.0 million, work in process, $83.4 million, finished goods inventory at $223 million. Capital expenditures were $26.2 million for the quarter. Year-to-date capital expenditures were $49.5 million. That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

[Operator]

[Operator Instructions] We will take our first question -- the first question comes from the line of Charles Shi from Needham & Company.

[Yu Shi, analyst]

Congrats on the strong Q3 results. I have a first question on shipment. The shipment figure you posted for Q3 looks like you'll make a new record here. I just really want to understand what you see in terms of shipment going into Q4. Do you largely see the number going to be flat Q-on-Q or for Q4? Or what's the dynamics behind the very strong shipment figures? Thanks. That's my first question.

[David Wang, executive]

Okay, Charles. And actually, the shipment is really number indicated we have got a new customer. And also, have our product now and with the cleaning, cover plating, and also our latest new product in the furnace. I think that's the reason driving the shipment. And also, we think Q4 shipments continue in our timeline. And I will say, obviously, there's certain components. And also, there also some maybe customers, their production line, there may be some I call it the policy may impact our shipments. But anyway, we think the whole year and our shipment will be still a very good number for supporting growth. Mark, anything you want to add on this statement?

[Mark McKechnie, executive]

Yes. No, thanks, David. Yes. I mean shipments, I think as David noted, it's repeat shipments for revenue, and it's also the first tool. Yes, we're certainly pleased with the shipments in the quarter. We don't guide specifically by quarter on shipments, but we're not anticipating a big increase sequentially in Q4.

[Yu Shi, analyst]

Thanks. Also thinking about it, I just want to have a follow-up because I think I heard you mention certain customers may be pausing, which may have an impact on shipment. Did I hear you correct? Is that the Q3 comment or Q4 comment? Thanks.

[David Wang, executive]

Yes. Well, I just said I'm not specifically certain for the quarter, right, and looking the whole year, right? We do see some -- I mean customers, their production line is not on a phased delivery, and they don't have a Phase I/Phase II deliver. That's something we can field there for center ready, and that caused our shipment delay.

[Yu Shi, analyst]

Okay, so I just want to make sure -- so it's not anything related to export controls, etc.?

[David Wang, executive]

No. Actually, at this moment, our product, we follow order I call it export control rule there. Whatever we receive order, all the follow there, other I call it restriction, and also for the rule, right, both in the U.S. And there's also component selection. Anyway, so far, we do not have any because of our export control we cannot ship.

[Yu Shi, analyst]

Got it. Thanks. Maybe a second question from me. Congrats on shipping, receiving a PO from the other -- from the U.S. semiconductor manufacturer for another set evaluation I believe. I wonder, can you remind us what was the first evaluation that you shipped to this customer? What application was that for? Or what's the status of that first evaluation? Thanks.

[David Wang, executive]

Great. Actually, we do have 2 orders, right? We receive order, we delivered last year. Actually, we made quite a progress even this is our first tool to ship to this new customer. And we make a lot of progress and we are making their product grow and the customer happy with the performance. And obviously, we're looking for future repeat order and because R&D does offer a measure requirement, especially using megasonic cleaning, they offer a much better cleaning efficiency and also diluted chemistry. You can see the consumption chemical. They are looking for this tool to make a bigger contribution for their process.

[Yu Shi, analyst]

Yes. Any expected timeline for the closure of the first evaluation since you already shipped the second? Thanks.

[David Wang, executive]

Yes. I mean -- well, I think we're close to it. There are 2 things, right? One is R&D or evaluation to another one is just like repeat the order tool. For the R&D tool it's 2 years. We can 2-year finish. But the second tool, I think we are very close to final qualification and we call it the sign-off for our revenue. We are very close.

[Operator]

[Operator Instructions] We will take our next question -- and the question comes from the line of Suji Desilva of ROTH Capital.

[Sujeeva De Silva, analyst]

Congrats on the progress here. Mark, on the gross margin, you said something about improving gross margin for specific product lines. Any color there? It seems like you were trending above the target consistently. Just wanted to get any update there.

[Mark McKechnie, executive]

Yes. Suji, we won't really break it out by product line. But there were -- kind of we had a good mix of differentiated products and some cost downs. We also got a little bit of tailwind from foreign exchange. Obviously, we're pleased with that level, but we're not changing our 40% to 45% target at this point.

[Sujeeva De Silva, analyst]

And then I noticed you mentioned AI GPT chips in the prepared remarks, David. Clearly, there's import/export controls on some of those products for U.S. semis vendors. Is there a burgeoning China AI chip market that the foundries are servicing there? Can you give us a sense of how big that might be versus the global AI chip market? Because that could be a very exciting opportunity for you guys.

[David Wang, executive]

Yes. Well, I really mean that in advanced packaging, most for copper plating, right? I mean this is a real product we're talking. And we talking about not only China market, but also talk about in the global market, too. In general, we see that. And in China, we still say mostly our tool is for mature products and there's this moment for the packaging. As I said, we're looking for our tool to be spread out not only in China market, which is a more mature node, also looking for copper plating to be sales in the global market which is more for more advanced AI and also GPT.

[Sujeeva De Silva, analyst]

Okay. Appreciate that color, David. And last question I have is on the vacuum cleaning tool. You mentioned chiplets. That's the first time I've heard you guys talk about chiplets. Is that a new growth driver area? Or is that really just an element of the advanced packaging functionality that you have? I was curious there if that's an incremental opportunity.

[David Wang, executive]

Yes. We see that our new product, new requirements come out. You look at this other, advanced packaging, all the chip labs. When they have package finishing, there's also flux inside the gap. Those kinds of gaps are hard to clean and those are flux. With our vacuum time of the commitment, you can really have other chemical or water getting to cause more gap because of vacuum status. That's really a major flux clean very well. We see that market grow, and again, there's a lot of -- there's the chiplet going on in the whole industry and for both are selling mature nodes or the advanced nodes. We're looking for this product to add another I call it revenue booster for our product portfolio.

[Operator]

[Operator Instructions] We will take our next question, and the question comes from the line of Christian Schwab from Craig-Hallum Capital.

[Christian Schwab, analyst]

Mark, can you just walk us through the puts and takes on your original topline revenue guidance on why your guidance for the year is near the low end versus the high end?

[Mark McKechnie, executive]

Yes. Actually, David, do you want to take that? And I can probably --

[David Wang, executive]

You are pure first. You can take it first. I will answer that.

[Mark McKechnie, executive]

Okay. Yes, I'll go ahead and take that then. Christian, thanks for the question. I think there's a couple of things here kind of from the beginning of the year. I'd say first is, if you just think about the overall China market, we're not necessarily market readers, but based on some third-party data, it does sound like the China market as a whole is down year-on-year versus our expected flat. Still great spending on mature nodes, but the market may be a little less strong than we had anticipated. I would say despite that, our year-to-date revenue was up 37%. Our midpoint of our outlook is up 36%. Our product cycles and our new customer activity is contributing. The third point is we did, I think David talked about a little bit certain customers we saw maybe a slight delay, a 1 to 2-quarter delay. Either due to their facilities, just kind of a timing thing for them to get their tools installed, or just almost a digestion where some of our bigger customers may have seen a large number of tools shipped and they're just kind of working to get those deployed. The last thing I'd say on that is also, Christian, a lot of our shipments this year have been first tools to new customers or newer products. And for those, we'll get more revenue next year. Kind of a combination of things there. I mean we're still pleased with the growth. We would have liked obviously to be at the higher end, but this is where things stand right now. David, anything to add?

[David Wang, executive]

Yes. That's fine, I mean perfect. I don't have anything to add on that.

[Christian Schwab, analyst]

And then as you guys look to calendar 2024, would you expect the aggregate TAM in China to be flat, to be up, to be down? And what specifically would cause you to outperform the TAM growth inside of China once again?

[David Wang, executive]

Okay. Good question. Actually, you look at the third-party data and next year China is up, right? And we also feel the good year next year for China. And because I think the China market is still in the early or middle stage of a capacity expansion, especially the mature 28, 45, also EV market, for the power devices continue to grow. And then also, we have a new product, our furnace as I mentioned. End of last year, we had 3 customers. End of this year, we'll probably have 10 customers. Expanding quite rapidly with the customer in the furnace product. We have our LPCVD, high anneal, plus our new ALD product. We'll see their revenue contribution for the year 2024. And plus, also other new cleaning products. We mentioned that there's other equipment for SO2 and also our Tahoe product. I mentioned that is we see next year our multiple repeat orders will come in for our Tahoe tool. Also, Tahoe has 40%, probably to 70%, so free cash saving compared to the single SPM tool. And we see there big traction from not only larger customers, also from their memory customer. Also, not only domestic, I mean only in China. Also we see the customer outside China interest for this Tahoe. We believe this is a real revolutionary cleaning tool offering real environment-friendly process for saving sulfuric acid. Next one, I see that 2024, we see also international market penetration become more materialized. And we see there probably pick up in the international sales. And for our cleaning, our copper plating and those, we are proving, and also advanced product. And as I mentioned, even in the cleaning, I will mention one more, is on the backside cleaning we just announced today and to the same customer we have in the U.S.. From that indication, our backside bevel cleaning tool will be also another booster for our cleaning product, and for the 2024. And last one I still want to mention that we will still continue to grow populating our cleaning Ultra Bench cleaning tool has been growing rapidly. And for a lot of mature products in China, they are using this other bench tool, so that's another growing factor. And further than that is I should say next year, we see our Track system will probably go to model customer and also PECVDs getting to their evaluation with the customer, too. But those 2 moving forward make a contribution for 2025 revenue. I mean that's the general, my view for 2024. Mark, anything you want to add on that?

[Mark McKechnie, executive]

Yes. No, I think you hit it pretty good, David. I mean one thing that it is interesting to talk about, Christian, is we actually had our international sales conference last week here. And post-COVID, it was our first face-to-face conference in a while. We had teams from Korea, U.S., Europe, even Taiwan in here meeting for 3 to 4 days. And I mean, David, you might say a few more things about it, but it's pretty clear to us that the international markets, there's good opportunity. There's a lot of customer activity in these regions. And next year, we do think international can be more meaningful. But we would see next year as a building year. Yes, that's it. Thanks.

[Christian Schwab, analyst]

Thanks for that. It sounds like we have a lot of things going on, on both the product and the customer front. But if we could maybe just ask one more question about the customer front, as you've made a couple of tools with a new customer in the United States in Oregon, can you give us an idea of how substantial that could be over time? Not '24 or '25, but over time. And then in addition to that, I think you mentioned that selling out of the Korean facility to international customers but also expanding opportunities with inside Korea. Now -- do you think you can expand the customer base inside of Korea? Or are you just talking about expansion of opportunities with your historical customer in Korea? That's my last question. Thanks.

[David Wang, executive]

Okay. Thank you. Well, actually, let's -- our customer in U.S. and including our research customers in Europe, right, is really adding our customer base and for international customers. And as we said, we've got repeat order for the same customer, we will show our relationship closer with the customer. Plus, we will offer differentiated I call the product for the customer. And that's really a major attraction to the customer. And regarding to the Korean customer, again, we have our historic customer, we are fully in collaboration with them. And not only we talk about cleaning, but work on our additional new products through collaboration with them. With also almost 90%, the process step we can cover in cleaning side. We have a lot of advanced and also our only ACM-made cleaning products where we are working with the customer in this historic customer. Obviously, we are also working with other customers in Korea and not only for our cleaning took, including copper plating tool and also other products in development right now. And plus, I want to add one more we probably didn't mention already the script. And we are also actively working with customers in Singapore. Again, our goal still, long run goal still remains. We want in the future, or 50% of revenue come from Mainland China and also 50% of revenue come from all segments in China, right? That's our future global strategy.

[Operator]

[Operator Instructions] We will take our next question -- please stand by. And the question comes from the line of Charlie Chan from Morgan Stanley.

[Charlie Chan, analyst]

First of all, my question is about your potential exposure to the high-end memory. Meaning the (inaudible) with memory. We do know you have some memory customers. Can you explain to us first of all, what kind of tool you potentially can supply to the memory customers for the HBM. And secondly, what is the progress for this adoption for your tool for HBM module? Thanks.

[David Wang, executive]

Yes. Okay, Charlie, I really cannot tell too detail, but we have multiple products working for this customer for the HBM. And it's a real new growing market. And as I said, we have more than 2 products, working with them. Also, we're trying to spread also other products in our portfolio, and they're working more closely with their R&D group and qualify our advanced technology for the cleaning. I'd say we have put all the effort in Korea, and we have now 550 engineers in R&D in Korea. And we have really become local supporting for the customer and get a closer and faster response to the customer. We're building also continuously building our production capacity and to meet the requirements, and not only for the Korean customer, probably also for all the customers internationally. That's the effort we're putting right now.

[Charlie Chan, analyst]

Okay. Understood. Thanks, David. The next question is for Mark. I know you explained the OpEx trend, but it's still a very, very big jump. Even there's a new R&D expense, a lot of customer activity, but still pretty big jump versus the previous quarter. So how much of those increases are like one-off post-COVID travel? And should we use that USD 45 million per quarter as the new norm for the future OpEx?

[Mark McKechnie, executive]

Yes. Thanks for that on the OpEx question. We're obviously investing in the R&D side and our sales and marketing. We've got public companies, 2 public stocks. I think the quick answer to the new level, yes, I mean I would actually expect the OpEx to be maybe even up a little bit next quarter. There is, as you know, a lot of our expenses are in renminbi. Third quarter the renminbi actually strengthened on the quarter, so that moved things a little bit. But in general, we would anticipate the OpEx to be at -- that's about the right new run rate, Charlie.

[Charlie Chan, analyst]

Okay. Can we justify that increased OpEx with the very strong shipments? Because when we calculate the OpEx ratio, it's OpEx by revenue, right? It seems like pretty high OpEx ratio. Is that more like correlates with the shipment because seems like shipment into third quarter, fourth quarter are pretty strong?

[Mark McKechnie, executive]

There's a correlation there, Charlie. I don't -- we don't break it out specifically, but of course there's a correlation to our shipment level and our OpEx. Yes.

[Charlie Chan, analyst]

Okay. And also, associated to the R&D, do you think that the peak spending of your R&D -- I know you already introduced your new (inaudible). How much more AFRS or R&D you need to invest in for the future (inaudible) line or current (inaudible) lines?

[David Wang, executive]

Yes. Let me jump on that and maybe Mark can add more. Our R&D is still a major spending, right? And you look at 2 years ago or 3 years ago, our general R&D spending was about 12%, right? Actually, especially after IPO in China as to market, and so we started boosting our effort. Plus, we have started a good more investment into new products. Furnace is number one. First ALD and plus the PECVD and also Track. And we look at the next 2, 3 years as a very big opportunity for us to grabbing the market in China. And plus, with our new innovation or proprietary technology building to their owners, PECVD and also Track. And we will also get into the market in international. Especially, I want to mention the Track. The Track system is doing very well in the customer qualification and plus our new architecture is really aiming for high throughput of this next-generation tool. People talk about even 400, 450-WPH high-throughput. Our Track system is ready for that market. And we are planning to be the second player in this very I'll call it competitive market. As I see that, I think probably 15%, 16%, that's the range we will be keeping. And with percentage-wise, probably not much changing, but then we have revenue forward. You can see that we still maintain a lot of our R&D money into our existing product and also new products. Especially even for existing products, making copper plating and also their cleaning, we also do put effort in there. In recent years, we see this cleaning product become more and more important for the new advanced technology. Plus, I should say the copper plating market grow rapidly. This is the chiplet, the advanced 3D megasonic cleaning. Copper becomes, copper plating tool becomes very important. We're also putting R&D into both the existing production line.

[Mark McKechnie, executive]

Yes. Hey, one last thing I'd say. Charlie, we've said this before, but if you look at, and kind of brass tacks behind what David said, R&D expected around 15% of sales. But we should see some operating leverage on the G&A and the sales and marketing side. We got a little bit this year. And in general, that's the way our operating model is built.

[Charlie Chan, analyst]

Okay, so the R&D intensity will keep at 15% sort of for the coming couple of years? Okay. Fair enough. Thanks for the comments. Thank you.

[Operator]

[Operator Instructions] There seems to be no further questions. Apologies. We have a question that's come through. One moment please. And you have a follow-up question from the line of Charles Shi from Needham & Company.

[Yu Shi, analyst]

Thanks for taking my follow-up question. David and Mark, I just want to go back to your comment, the overall China market. I know you said you're not the market reader here, but can you kind of explain why you're seeing China market down year-on-year as a whole? And what about quarter-on-quarter? What do you see there? I'm just looking at the data and the commentary from your U.S. peers. It seems like they are probably expecting Q4 overall China market to be holding relatively strong. I don't exactly know where you will land Q-on-Q or year-on-year, but I was kind of curious why you think the overall China market was down year-on-year? Thanks.

[David Wang, executive]

Well, let me add on that maybe, Charles. Actually, we don't have whole data, right? We're not the holders of market data. However, you look at other recent reports for the semi or other investment banker published, people talk about probably a few percent I should say, less than 10% down, people see a whole year on a quarterly base. And we see probably -- this year, we see almost like flat and over. But I don't know yet. At this moment I'd say probably flat is what we say here. But the real number was probably end of the last year, somebody published real results. But I won't say even this year flat. We see our customer expansion and we think the next year is still another good year. And everybody is expecting probably '25, '26 the global market is back. But I think China this time, even downturn globally is margin general still what they maintain. And I would say next year we see another good year for us with also our new partners.

[Mark McKechnie, executive]

Yes. And David, if you don't mind, maybe I'll add a little bit on to that. I mean it's -- again, it's hard for us to kind of read the overall market, so we look at third parties. And we look at some of the same public companies you probably look at as well, right? If you look at some of the semi-cap names, our Investor Relations team pulled together some data where Q3 a lot of companies had a pretty big uptick sequentially. Hard to know exactly what that was driven by. But we were encouraged by kind of a big lithography ramp in Q3 for one of the players. And we look at that hopefully as some kind of a leading indicator. But David, I don't know if you wanted to add anything on about that as well. There's a lot of tea leaves that we try to pay attention to and we look at our own business, and this is kind of how we see it.

[David Wang, executive]

Yes. I mean I think you are right that the software tool companies especially, they are this year's revenue China, almost double, right? Look at that. That's really an indication to say normally the software tool is advanced buying, right, or ship. The got right in first. We'll see that those tools are definitely driving another demand for the semiconductor capital spending in China.

[Operator]

Thank you. There seems to be no further questions. I would like to hand back to David Wang for closing remarks.

[David Wang, executive]

Thank you, Operator. Thank you all for participating on today's call and for your supporting. Before we close, Gary is going to mention our upcoming Investor Relations events. Gary, please?

[Gary Thomas Dvorchak]

Thanks, David. Before we conclude, I just want to give everyone a quick reminder on our upcoming investor conferences. On November 15, we'll present at the 12th Annual ROTH Technology Conference in New York City. On November 16, we'll present at the 14th Annual Craig-Hallum Alpha Select Conference, also in New York City. From November 29 to the 30 we'll present at the UBS Global Technology Conference in Scottsdale, Arizona. And finally, on December 12, we'll present at the Annual CEO Summit in New York City. Attendance at the conferences is by invitation only. For interested investors, please contact your respective sales representative to register and schedule one-on-one meetings with our management team. This concludes the call. You may now disconnect.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.