Kulicke and Soffa Industries Inc

NASDAQ:KLIC

Earnings Call Transcript 2024-Q4

[Operator]

Greetings, and welcome to Kulicke and Soffa's 2024 Fourth Quarter Results Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Joe Elgindy, Senior Director, Investor Relations. Thank you. You may begin.

[Joseph Elgindy, executive]

Thank you. Welcome, everyone, to Kulicke and Soffa's Fiscal Fourth Quarter 2024 Conference Call. Fusen 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 the latest earnings release and earnings presentation, 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 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 results and financial conditions to differ materially from the statements made today. For a complete discussion of the risks associated with Kulicke and Soffa that could affect our future results and financial condition, please refer to our recent and upcoming SEC filings, specifically the latest Form 10-K as well as the 8-K filed today.

With that said, I will now turn the call over Fusen Chen for the business overview. Please go ahead, Fusen.

[Fusen Chen, executive]

Thank you, Joe. Good afternoon, everyone. Although some of our core market remain in a state of transition, we continue to anticipate a return to capacity growth in the core, both edge and the APS segment, through our fiscal 2025 as we continue to expand shares through technology transitions in advanced packaging and dispense.

Yesterday, we made several announcements regarding a high potential foundry win. Our Copper First Hybrid Bonding Process, which we expect will reach 3-micron pitch and also an expansion of shareholders' return initiatives. Our leadership in fluxless thermo-compression, FTC, continue to grow. The collective effort by our advanced solutions' team and the [indiscernible] across many parallel customer development program allow us to drive market adoption of this innovative process.

This recent win represents significant milestone, which highlights market potentials or system-level competitiveness and [indiscernible] broader reach that CHIPS and advanced packaging have on high volume more mature portion of semiconductor [indiscernible]. First, this milestone highlight that our FTC is a very competitive and compelling industry solution which is capable of directly supporting many different applications, including the world's most advanced logic and memory production, but also within other high-volume logic market, which are transitioning from the mature 3-chip process.

We are very proud of our innovations within TCB technology and also our strong foundational base of leading customers, which illustrate the current market need and the longer-term potential of this competitive technology. Secondly, our current win and innovation highlights our leadership position in a technology transition. K&S is the first and the only provider fluxless system which are proven in the production event.

Today, we have a global TCB installed base of over [ 100 ] system and are approaching $200 million cumulative TCB sales. Of this installed base opportunity service systems are loaning FTC in either development or production environment across 5 major IDM, OSAT and foundry customers. Maintaining this level of support across different emerging applications and customer location continue to be accomplished by our dedicated advanced solutions team.

Cross-customer engagement have been essential in the development of our FTC platform [indiscernible] and provide the critical market insights which enable us to develop a very flexible and capable system architectures which can support a broad range of new patent format.

While there are many different marketing economies to explain the growing mix of advanced packaging offering, such as on wafer, on substrate, on interposer, on IC, we have built a system which supports a wide variety of material handling configuration and is very capable of supporting the most advanced TCB requirement, whether chip-to-chip or chip-to-wafer. As a need for advanced 5-pitch FTC and the copper first hybrid growth, we expect our competitive position wanting to improve across high-performance applications.

Finally, these announcements serve as a reminder that the future of semiconductor assembly will require new and increasingly more complex assembly solution that can provide greater transistor density at the package level. This growing need extends well beyond the most advanced process node.

Emerging packaging technology provides a new level value increasingly necessary to offset the limitation of 2-dimensional node shrink. Today, our new product portfolio, including vertical wire, HPI, FTC and Copper First, provide capable solution, well positioned to support packaging label transistor density across end markets. We have been focusing extensively on this transition for years. I'm pleased with our recent progress and look forward to additional adoption.

Turning to the fourth quarter's results. We delivered revenue of $181.3 million and a non-GAAP EPS of $0.34. From an end market standpoint, this portion of general semiconductor, automotive, industrial and memory have improved as expected, while LED demand remained very soft. We continue to anticipate coordinate recovery of our 2 most significant end markets, general semiconductor and automotive industrial, through fiscal 2025.

For the September quarter, general semiconductor reduced sequentially primarily due to strong June quarter TCB revenue stemming from shipment schedules and the revenue cognition time line, which we are quarter-to-quarter variability. Excluding TCB, general semiconductor increased by 11% sequentially, driven by capacity position and returning demand from global OSAT, as anticipated. Lower December quarter trend to be seasonally suffered, averaging 10% sequential reduction over the prior 3 years. We are confident rather more demand will improve further through fiscal 2025 due to renewable unit growth combined with higher fee utilization rate.

For automotive and industrial, we are seeing demand improvement after any year. As we explained last year, last quarter, the demand improvement in general semiconductor, driven by bold bonding were completely offset by the challenge within automotive and industrial during fiscal 2024. At this point, we believe both critical markets are passed off and expect coordinate recovery to accelerate in fiscal 2025.

Despite this recent period of capacity petition, we continue to participate in emerging transition driven by secular growth in electronics, in electrical vehicle and the sustainability trends. We have a strong network of global customers who are truly enabling these transitions, which we continue to support. Over the past 4 years, many countries in addition to European Union have implemented targets or policies to incentivize EV adoption. Just last month, the International Energy Agency, IEA, reported 7 million EVs were sold globally in the first half of calendar 2024, representing a 25% year-over-year increase.

While our core wedge SMT and the battery assembly solutions are directly enabling this critical transition within the automotive market, we continue to seek our new solution which can expand our market access. During the recent September quarters, we recognized revenue for an advanced expense system positioned to support a solid state EV manufacturing. This represents a new market for our advanced expense business but also diversify our growing base of EV-related opportunity in the U.S. Europe and Asia. We anticipate follow-up orders in the coming quarters to support these customers' production rep.

[indiscernible] overall remains soft within ball bonding and continue to be in a state of attrition across the traditional wire bonded high brand market. While this current level of demand will likely persist over the coming quarters, we remain focused on driving adoption of our LUMINEX laser-based mini LED placement systems, which is positioned for a direct initiative and advanced lighting adoption over the coming quarters.

During the September quarter, we booked revenue for 1 LUMINEX system, which is in late-stage development and production readiness. We look forward to qualifying additional customers who [indiscernible] LED placement through 2025.

Lastly, we see ongoing strength related to both capacity addition and the technology change within the memory market. In addition to the improving capacity need for traditional stack NAND application, we are working with key memory customers to leverage vertical-wide application in next-generation, low-power DRAM package as previously explained, but also within NAND application.

Initial vertical wire, ALP EDR solution, leveraging a vertical configuration are currently running at 2 key memory customers in which we anticipate will move into low-volume production environment next year. That ALP EDR, memory customers are also seeking new stack packaging format for NAND memory, which also utilize our unique set of vertical wire solutions. Both approach offers smaller package footprint and performance benefit related to an improved layout, low-pivot capacitance and also lower [indiscernible] resistance.

This unique vertical wire solution are competing of how new packaging formats are mitigating no-shrink challenges. We expect similar approach to extend the young memory into higher-volume general semiconductor applications over the coming years.

We are pleased with our recent progress and emerging position supporting advanced packaging applications serving the compute market. This leading edge market is now being enabled by chiplets and heterogeneous packaging technique. And once previously excluded from our served market despite our dominant [indiscernible] and [indiscernible] shares and has been a key target of our advance solution strategy.

We are proud to demonstrate our strength, progress and the potential with this long-term advanced solution strategy, low additional technology change are providing opportunity in several other areas as well. While the current TCB win for foundry, IDM and wholesale customers, who are supporting media edge applications is expanding our market potentials, we want to remind investors that leading-edge applications are not the only opportunity for advanced packaging.

Besides Copper First Hybrid and the FTC, our production-ready assembly technique, including vertical wire, are providing new solution for memory in high-volume general semiconductor. Additionally, high-power interconnect API is enhancing power semiconductor and battery assembly approach. This all represents critical technology transition, which are enhancing the value of our respective assembly processes. We are well prepared for this transition and have multiple market-ready solutions to support our extensive customer base.

Consol participation, modeling market engagement, take adoption and a comprehensive set of advanced packaging solutions highlight our readiness to address next set of industry challenges. After an extended period of capacity transition, we also expect ongoing improvement and the cyclical recovery across key end markets, most notably general semiconductor, automotive and industrial.

Looking into fiscal 2025, we remain optimistic due to the recent technology win, but also due to underlying market conditions. The relatively high global ball bonding iteration rate, combined with the reasonable semiconductor unit growth, is expected to trigger additional growth in our core market during fiscal 2025. In addition, the expectation of a broader automotive and industrial recovery are also supported with our results this quarter. Finally, broader macroeconomic improvement are also expected to stimulate global semiconductor unit growth through fiscal 2025.

I will now turn the call over to Lester for the financial date. Lester?

[Lester Wong, executive]

Thank you, Fusen. My remarks today will refer to [indiscernible] results unless noted. As we anticipate a broader cyclical recovery for our ball and wedge businesses, we remain focused on supporting many different customer engagements and new technology requirements to expand market access further into fiscal 2025. We continue to execute our broad growth strategy intended to expand our market competencies and market share in support of emerging technology transitions.

This has been demonstrated in many different markets and applications over the years, including stack wire bonding, battery assembly, display and, most notably, fluxless thermo-compression today. The success of this strategy relies on our technology, strength, close collaboration and also our ability to hedge customer and project-related risk where possible.

Considering the extent of the Project W-related charges booked during the March quarter of our fiscal 2024, we are pleased to announce we reached a customer agreement for reimbursement of a significant portion of our product impairment charges. We intend to book the benefit within the current December quarter.

Looking back at our September quarter results, we generated $181.3 million of revenue and a 48.3% gross margin, largely due to an improving mix of higher performance ball and wedge systems. Non-GAAP operating expenses came in above our expectations due primarily to foreign exchange and end of the year adjustments. During the September quarter, we booked a net income tax benefit of $2 million, primarily due to a $6.5 million tax benefit from a U.S. tax court case, which reduced our time transition tax.

Prior to today's call, we also announced several updates to our capital allocation program. First, we received approval of our fifth consecutive dividend raise. We continue to appreciate the consistency and continuity of dividend program, which allows us to provide our long-term holders with a competitive dividend yield and income stream for their support.

Secondly, we announced the authorization of a new repurchase program, which we anticipate will seamlessly transition as we complete the existing program. Finally, we want to remind investors we have repurchased 10.3 million shares over the prior 3 fiscal years and continue to maintain a consistent and fairly aggressive repurchase cadence. Over the long term, growing our market access through the organic and inorganic activities remain our priority, although we expect to further enhance long-term EPS growth for investors by continuing our proven repurchase strategy.

For the December quarter, we expect revenues of approximately $165 million, plus or minus, with gross margin of 47%. Non-GAAP operating expenses are anticipated to be $70.5 million, plus or minus 2%. Collectively, we expect GAAP EPS of $1.45 per share and non-GAAP EPS of $0.28 per share. This outlook includes customer reimbursement associated with the March 11, 2024 cancellation of Project W.

As Fusen mentioned, we remain very focused on many different customer engagements and also very focused to drive market adoption of our growing portfolio of solutions. We look forward to announcing additional product successes as we prepare for the broader core market recovery in fiscal 2025.

This concludes our prepared comments. Operator, please open the call for questions.

[Operator]

[Operator Instructions] Today's first question is coming from Krish Sankar of TD Cowen.

[Kinney Chin, analyst]

This is Steven calling on behalf of Chris. I guess the first one for Fusen, in terms of your general semiconductor end market. It's nice to see the sequential growth during the September quarter. But just kind of curious, like if we were to dig in a little bit further in terms of the, I guess, utilization rates at your OSAT customers. I think last quarter, you mentioned it would have -- you will be reaching the high 70% range during the September quarter. Did you reach that or exceed that? And I'm just kind of curious like do you still think 80% utilization rates are still the right threshold to think about for when your customers will add capacity? Or the more historic 90% utilization rate still the great sort of threshold?

[Lester Wong, executive]

So Steven, it's Lester. Let me answer the question on utilization. So I think -- for the September quarter, the utilization rate in -- differs in different regions, right, as well as in different end markets. So for example, in China, utilization rate is over 80%, while for the rest of the world is probably in the mid-70s, but it is -- every last couple of quarters, it's been going up. So I think for now utilization rate is also going up. And I think 80% is sort of the threshold we've always said where people start doing more capacity wise.

[Kinney Chin, analyst]

Okay. Great. And then just for my follow-up, in regards to the foundry summer win for the TCP RAPID Pro, congratulations on that announcement. I'm just kind of curious, like, is that at a major timeline foundry? And also, can you give us a sense for the longer term or the opportunity for the aftersales next year and longer term for the time horizon for that?

[Fusen Chen, executive]

Okay. The recent win actually with the multiple system PO, this is for the near-term production. Why we believe we actually have upside for the next year and onward? Actually, we have not received a long-term forecast, but we believe it can be significant for the futures. So we probably will give you more update a bit early in next year. But I think this [indiscernible] conclude however actually was a successful to qualify our products. And we believe the long term it will be good. So short term, I think we probably will update you in the next couple of quarters.

[Kinney Chin, analyst]

And Fusen, just a quick follow-up to that, for that FTC. When -- are you guys the sole supplier for that solution? Or are you sharing that business with another industry peer, Fusen?

[Fusen Chen, executive]

Well, I think at the recent moment, we are don't want to receive it. We don't comment in future any possibility, but we are quite confident our capability and also are confident in the opportunity we have for the next couple of years longer term.

[Operator]

The next question is coming from Tom Diffely of D.A. Davidson.

[Thomas Diffely, analyst]

Yes. Curious, just on the general semi business, how much did that recover during your fiscal '24? And then what are your projections for fiscal '25? Maybe you can put it in the context of where that market is kind of on a normal basis.

[Fusen Chen, executive]

In semiconductor, so are you talking about -- I'd like to know general semiconductor in FY '25?

[Thomas Diffely, analyst]

Yes, just kind of where we are in the cycle. I mean, obviously, 2 years ago, there was a trough and then it came up a bit last year, and then your [indiscernible] for growth like again this year.

[Fusen Chen, executive]

Okay. So maybe I can just overview to tell you how market forecast from industry forecasters and also our view. So the Q1, actually, we guided 1 65. I think industry attrition looks like still a little bit longer. But we do see our Q2 actually will be better than Q1. And industry forecast actually believe next year, unit growth will be about 7% to 8% and approximately about 14% of revenue, right, this from Gartner. And the growth in the semiconductor revenue driven by, number one, is AI. Number two is automotive. And a lot of people believe automotive maybe already past the trough.

The third one, maybe I answer your question is a general semi. And general semi, I think, in '25, the growth will be in IoT and also AI devices, which is a communication devices with AI, like AI-capable PC and the smartphone, right? So these few items people believe it's going to be 14% for the semiconductor revenue. So from our point of view, we got 1 65, and we do believe that Q2 will be better. And as your question to Lester, the current generation rate, I think, average, we look at about 77%, really not far away from 80%, which is a trigger capacity addition.

So talking about our products, talk about ball bonder. Our ball bonder peaked at about $1 billion in FY '21. But as you mentioned, I think recovery -- we do see a recovery in the '24 compared to '23, but was wiped out by actually the auto weakness, right? But our ball bonder in '21, '23 and '24, actually is only averaged $300 million, give and take. So we believe our ball bonder have a lot of room to go. So we do expect second half '25 is our strong second half. We expect pre-COVID ball bonder run rate in about 500 to 600, we do believe from the second half of '25, we should lean in towards this number.

So to make the story short, we believe our ball bonder will be up, more significantly in second half, mainly driven by China mature node capacity addition, right? This is a 28-nanometer and above. China is capacity coming up. And also Southeast Asia, particularly in Malaysia, a lot of -- some demand will come to Malaysia is for the China one strategy, right? So ball bonder, we believe, will be up. And wedge bonder, we discussed probably positive trough. We actually are quite optimistic receive order in recent quarters. And we believe our TCB expense will also go up, right? So that's a give and take of our view and industrial forecast view about FY '25?

[Thomas Diffely, analyst]

Yes. No, I appreciate the color. That's very helpful. And then as a follow-up, Lester, if you could just talk a little bit about the recovery from Project W you're getting in the first fiscal quarter here, and how that compares to what the total charge-off was, that would be helpful.

[Lester Wong, executive]

Sure, sure. As you recall, in Q2, Project W was canceled by the customer and we took an impairment in Q2. So as we indicated in our remarks, I'm very pleased that we've reached an agreement with the customer for the customer to reimburse a significant part of our impairment charges as reimbursement for our costs. So -- and this reimbursement will be recognized in Q1 and it's already in our current GAAP and non-GAAP guidance. So we provide -- in our earnings release, Tom, at the back, there's a table that shows our anticipated non-GAAP items included in the outlook. And there's a $75 million item related to discontinued business claims and proceeds in that table, which is overwhelmingly related to Project W.

[Thomas Diffely, analyst]

Okay. Great. Can you just remind us what the total impairment charge was in the second quarter?

[Lester Wong, executive]

$105 million.

[Operator]

The next question is coming from Dave Duley of Steelhead Securities.

[David Duley, analyst]

Congratulations on the nice TCB wins. I was curious, you mentioned several applications, I think, in the press release. But as far as your initial read on the situation, do you think you're going to be -- is this when at the foundry going to be more for chip-on-wafer or the wafer on the substrate? I think the chip on the wafer is the kind of the higher value-added step. So I was just kind of curious if you've gotten 1 or 2 of these steps.

[Fusen Chen, executive]

Yes. Actually, to answer your question short, this application, it's a full fluctuate qualification, but it's at the chip-to-wafer level. And this is most advanced, probably, chip-to-wafer application and use our fluxless. And our fluxless actually can qualify process were both chip-to-substrate and chip-to-wafer. But for this case, I think now with chip-to-wafer to qualify fluxless. But I think there will be numerous opportunity and numerous projects.

[David Duley, analyst]

Okay. And as far as -- will these be for mobile applications? Or do you think these are going to be for high-performance compute AI applications?

[Fusen Chen, executive]

So I actually mentioned, I think this probably is the most advanced TCB process for the high-end products.

[David Duley, analyst]

Okay. And then I was curious, you've made comments during your prepared remarks and in the press release about a coordinated recovery in the general semiconductor market. So your -- obviously, your utilization rates have improved. Have you started -- are the customers coming in and asking for slots or asking about availability for large larger orders? What other signs are you seeing in the general semi business that gives you confidence that there's a recovery underway?

[Lester Wong, executive]

Well, Dave, I mean, one -- you've mentioned one, right, utilization rates across the board on the high 70s in most end markets, and then on a regional basis, it's over 80 already in China, and it's, again, growing in the rest of the world. China has been strong actually over the last couple of quarters. And we believe that now the rest of the world is starting to catch up. I think they're starting to -- for all the reasons that Fusen said, right? In terms of -- in China, there's a lot of fabs coming online, which will -- wafers, which obviously needs to be packaged. And again, wire bonding is still the cheapest way of interconnect. I think in addition, we also are seeing macro recovery a little bit in the economy. Obviously, there's still a little bit of volatility out there. So all in all, I think we are seeing a lot more customer interest, both inside and outside of China.

[David Duley, analyst]

Okay. One more question for me is you had a very robust gross margin in the quarter. I think it was just over 48%. And I was kind of curious, I've asked this question on previous conference calls, you've introduced a bunch of new products in the core, wedge and wire bonder business that have higher margin profiles. I'm wondering, as we move into next year, what can we expect for the gross margin profile for the wire and wedge bonder business?

[Lester Wong, executive]

Yes. So for the corporate margin, I mean, we are still aiming towards 50%, right? And then you're right, we have started introducing higher gross margin product in both our ball and wedge bonder businesses, and now they are getting qualified and I think they're becoming a high and high percentage of our overall ball and wedge sales. So I think as we move further into fiscal year '25, I think the margin will start expanding. And also, as we've mentioned many times before, Fusen is very focused on cost reduction efforts, which is still ongoing.

[Operator]

The next question is coming from Mayor Popuri of B. Riley Securities.

[Unknown Analyst]

I'm actually calling on behalf of Craig Ellis. And I wanted to ask about something that you said to Tom earlier, which is that you kind of expect a stronger Q2 than Q1. That's sort of kind of been a theme across the board with selling season. Are there any dynamics that you see that lead you to believe that Q1 might be somewhat depressed unusually?

[Fusen Chen, executive]

Well, Q1, nobody -- most of the weakest ones quarter probably is Q1. Nobody -- I think seasonality happened in Q1. And the past 3 years is about 10% down, right? So this looks like in line with that. Actually, we do have a new customer. Actually, because of our schedule -- because scheduled reason, I think, already have a slot over there. So we do believe Q2 will be better than Q1, that's the number we are seeing now.

[Unknown Analyst]

Okay. Yes. That makes a lot of sense. And then so another thing, obviously, auto industrial has been picking up for, I guess, 3 consecutive quarters now. Do you kind of expect that linearity to continue into the next year? And do you think that we've sort of seen the trough of the cycle and now entering into a more sustainable expansion?

[Fusen Chen, executive]

Well, I think in terms of us, the most in auto actual product is ball bonder, one is the wedge bonder. So all we can reuse that we have actually believe the wedge bonder is recovering. And so it's ball bonder. So in terms of [indiscernible], some of wedge bonder actually have a big customer, both in the U.S. and also in China ,nright, 2 customers. The PO com actually can be big. And so to achieve [indiscernible] probably is not easy. But we do believe wedge bonder in the auto industry will be doing well for 2025.

[Unknown Analyst]

Okay. Great. And then just one last question. Congrats on the TCB fluxless wins. The way that I'm talking about is that it might relate to these leading-edge advanced packaging uses. Am I thinking about this the right way? And what end markets are carrying this order pickup?

[Fusen Chen, executive]

Well, I mentioned, I don't want to speak about customers' critical information. But we believe this is so critical, it's the most precision and reliability is very important. And it would be -- at this moment, is actually is -- can be for many multiple industries, right? It can be for autonomous in the future, it can be for the high-end high-power computing. So we believe that this is a really typical application. And once qualified, this will long many, many years. of course.

[Operator]

[Operator Instructions] The next question is coming from Charles Shi of Needham.

[Yu Shi, analyst]

Congrats on the TCB announcement. I do have a few follow-up on that. First, it sounds like you're characterizing order as a production order. Can you kind of confirm that? And the second, I do want to ask from the technical perspective, the -- can you kind of speak to why the customer is transitioning to TCB? Because everybody heard about -- the story about the shrinking bump pitch, smaller bumps. But I do think that maybe there is something there regarding the large assembly that may require TB. Can you kind of speak to that and especially the -- on the large angle, is that part of the reason why your tools are getting adopted?

[Fusen Chen, executive]

Okay. I think the qualification I mentioned is for fluxless. So fluxless, as you know, the are 2 technology. We actually believe we have a very strong direction. And actually, you know this is a solar process, this is the process. But anyway, you really need our case make a good contact with [indiscernible], right? So we believe our process fluxless is using actually localized delivery forming assets paper to clean the service at the bonding stage. We believe that this is the right approach. There are no wait time in situ clean, and we do believe the service -- the bonding between a copper is very, really good.

And the other one actually is a use of plasma. So -- and of course, die is always in our road map, right? And we believe we can handle very, very large die because right now, as you know, the die are getting much bigger. And the whole wafer may be only a couple times, right? So it's a critical one. So I just want to let you know, we have a completely ready for a large die. And we are very confident on our technology provide a good ability and good years. That's the reason I think, yes, to answer your question, yes, this is for production.

[Yu Shi, analyst]

Got it. So the current order, is it mostly -- you said there's 2 technologies, right, that the ones that you're seeing plasma, the other one sounds like it's a different technology. Which one is shipping today?

[Fusen Chen, executive]

Okay. Of course, we are the ones shipping and we use chemical clean [indiscernible] assets.

[Yu Shi, analyst]

Got it. Maybe the other question regarding high bandwidth memory, any progress you can update us on the TCB for that particular market?

[Fusen Chen, executive]

Sure. So actually, we are quite excited. For the memory, this is going to be our focus. So we have 2-part focus in memory. One is vertical wire. And as we mentioned this for -- the first one is going to for the low-power DDR. And current indication, preliminarily low volume production will happen probably end of this year -- I'm sorry, end of '25. And with [indiscernible] wire process, you actually can shrink about 35% of the phone sector. So we are quite excited on that.

Yes, next one actually is HBM. So we actually quite used a lot of effort engaging our memory customers and -- to demonstrate our capability. So this is going to be our priority in FY '25. I think I probably in another quarter or 2, I can give you an update. But to tell you, I think we are quite confident in our technical superiority, and we are going to put a good effort. And we have a lot of work to started already, and I'll probably give you more update on this 1 or 2 quarters.

[Operator]

Thank you. At this time, I'd like to turn the floor back over to Mr. Elgindy for closing comments.

[Joseph Elgindy, executive]

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