Inficon Holding AG

SIX:IFCN

Earnings Call Transcript 2020-Q1

[Operator]

Ladies and gentlemen, welcome to the INFICON First Quarter Results Conference Call. I'm Myrtle, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Lukas Winkler, Chief Executive Officer of INFICON. Mr. Winkler, you may now proceed.

[Lukas Winkler, President & CEO]

Thank you, Myrtle. [Foreign Language], and good morning, everyone, and thanks for joining us today to review our results for the first quarter of 2020. Besides the COVID-19 crisis, I have 3 more main key points that I'd like to start with. First, on the positive side, I'd like to highlight the very high order intake coming from the semiconductor market. OEM as well as end-user customers contributed equally to this upswing. Secondly, again, on the positive side, I have to mention the strong rebound in the Asian market after the COVID-19 lockdown. And my last point refers to the security market, where we experienced the expected weak start into 2020. Overall, it was an unexpected challenging first quarter with a very strong semiconductor market. You can find a PowerPoint presentation on the Investor Relations tab on our website that supports our conference call.Please turn to the Slide #4 (sic) [ Slide #3 ], where we start with the key figures for the reporting quarter. In total, our revenues were almost 3% below last year's first quarter organically, and we finished with sales close to USD 93 million. Sequentially, that represents a decrease of 3.8% compared to the last year's fourth quarter, primarily due to a very weak February in Asia. I already highlighted the high order intake driven by large orders from semiconductor customers around the world. With decreased sales, somewhat lower gross profit margins and stable operating expenses, we finished the quarter with operating income of USD 14 million, slightly above 50% of sales compared to USD 16.7 million or 17.5% of sales for the same quarter a year ago. Sequentially, the operating income decreased by 12.6%. With a relatively low tax expenses, net income reached USD 11.4 million or 12.3% of sales. Matthias Tröndle will review the detailed numbers with you later, while I now highlight some important developments in our target markets first.Please turn to the next Slide #5 (sic) [ Slide #4 ], where you see the sales breakdown into our served 4 key markets as well as the regional sales trends. The pie chart shows an increased contribution from the Semi & Vacuum Coating market, primarily at the expense of an expected reduction from the Security & Energy market. The trend chart on the right-hand side indicates increased sales to European customers, a stable contribution from Americas and a slowdown from Asia. But considering that we had only 2 months in Asia, the result was remarkable stable.Now let's do a quick analysis market by market, starting with the smallest one. In the Security & Energy market, on Slide #6 (sic) [ Slide #5 ], sales decreased 39.7% year-over-year and more than 55% sequentially and reached USD 3.5 million only. We had an expected very weak start into 2020. For the first time in a single quarter, we had the majority of sales to customers in the energy market driven by investments in an environmental-friendly biomethane applications in Europe as well as gas monitoring activities in the U.S. Sales of our flagship products, the HAPSITE, used for security applications were very low, and we did not book any large order from a government agency such as the U.S. Department of Defense. Looking ahead for the full year 2020, we do not forecast on getting larger government orders either, but expect successful first tests with a new generation of the HAPSITE, which will be available for sales in 2021.On the energy side, we foresee a growing demand from green energy initiatives as well as an increased demand for environmental and gas leaking applications in Europe and the U.S. Overall, we expect a weak 2020 in the Security & Energy market.Moving to the Refrigeration, Air Conditioning & Automotive market on Slide #7 (sic) [ Slide #6 ], where sales decreased 6.5% year-over-year, but increased 2% compared to the last quarter in 2019. The first quarter sales analysis showed a very inhomogeneous picture. First of all, sales to Asian customers in February were close to 0 due to the known reasons. Secondly, the RAC manufacturers market, we experienced a kind of stagnating or rather hesitant investment pattern in the new manufacturing capacity. On the other hand side, sales of our handheld products for service technicians in the aftersales market increased. And third, in the automotive market, sales to traditional car manufacturers crashed, but we continue to increase our exposure in the e-car business with new applications in the lithium-ion battery market all over the world.We expect a flat sales development in 2020, assuming a recovery in the automotive market in the second half year as well as continued investments in e-car battery manufacturing capacities.Now let's go to the Semi & Vacuum Coating market, which includes solar, display, optics and semiconductor applications on Slide #8 (sic) [ Slide #7 ], where sales increased over 8% year-over-year to USD 42.5 million, which is almost at the same level as the fourth quarter 2019 despite a missing month in Asia. A breakdown into the 2 main applications showed a huge increase to pure semiconductor customers, while sales to vacuum coating customers, primarily OLED display and optical coating manufacturers decreased. Successful design wins at equipment manufacturers, or OEM as we call them, over the last few years now pay off, and we enjoyed nice increased orders during the reporting quarter. Sales of new innovative products that have been developed together with key customers start to contribute to the top line as well. About half of the orders came from device manufacturers or end users in Asia and the U.S. for advanced process monitoring applications, including larger contributions from pure software applications. Our software package is modular and gets sold more and more as a service package, software-as-a-service. The modules are either tool-based for process monitoring or sold per fab line for scheduling and maintenance purposes. Modules are linked to each other and enable better tool utilization and increased fab productivity. The investments are driven by applications such as 5G, Internet of Things, Big Data, artificial intelligence and home office computer and communication appliances. And the other driver is the technology, smaller, faster, less energy consumption and so on. Recently, one of the large memory chip manufacturer just announced the first shipment of a 10-nanometer NAND chip made with the new EUV lithography technology that will push other memory chip makers to invest in EUV technology as well.The China semi initiative continues despite some negative impact from COVID-19 and some threats from the U.S. trade barriers. We just started to continue to work in Wuhan again at one of the largest new Chinese semiconductor companies. Looking ahead long term, semiconductor market will remain the most attractive growth opportunity for INFICON. New chip designs, new material and manufacturing processes are asking for more accurate process control and monitoring. We continue to work very closely with OEMs and end users to develop new sensors, solutions and methods to assure high-quality mass production of new chips. So we expect 2020 to be a good semiconductor year. Investments in OLED display remained flat, and the optical coating market seems to be more challenging than originally anticipated.Finally, we had a mixed first quarter in 2020 in the General Vacuum market on Slide #9 (sic) [ Slide #8 ], with sales of USD 26.6 million, which results in a year-over-year decrease of 9.2%, mainly due to the missing months in Asia. But sales was a little bit better than in the last quarter of 2019. As you know, we sell analysis, measurement and controlled products for many different industrial applications through private-label partners, primarily vacuum pump manufacturers and via direct sales channels to industrial OEMs and distributors. In Europe, we had a good start into 2020, but sales to Chinese customers fell sharply both compared to last year's first quarter as well as sequentially. The last month of the quarter, on the other hand side, showed a sharp increase in China, indicating a positive general market rebound after the COVID-19 lockdown. Looking ahead, we expect a difficult second quarter in Europe and Americas, but eventually a mild rebound in the second half year 2020.Before I close my part of the presentations with a 2020 outlook description, let me give you an update on where we are in regards to the COVID-19 measures. I start with Asia. We are back to almost normal operation in China, Korea and Japan for sales and service activities with some domestic travel restrictions, of course. Our Taiwan business never had seriously negative impact. Only our Southeast Asia activities suffered from shutdowns in Malaysia, Indonesia and India. Luckily, the Singapore-based business is our smallest one in Asia.Our manufacturing company in Shanghai is running at almost 100% again. The main production sites in the U.S., Germany and Liechtenstein are fully operational and are, thus, able to meet the customers' high demand. They are operating partly on the grounds of special permits, complying with strict measures, employing special shift schemes and working from remote offices. Nobody traveled internationally, and we experienced outbound logistics issues and start to have some supply shortages for certain electronic components. Overall, we have been always up for business and supported our customers without any interruptions.Now to our outlook 2020 on Slide #9, that the uncertainty has not changed since we presented the full year 2019 figures at the beginning of the March. In the meantime, it became obvious that everybody underestimated the short-term impact of the COVID-19 pandemic. Therefore, INFICON continues to refrain from issuing the official guidance for the business year 2020. Anyway, overall, we remain cautiously optimistic for the coming 9 months, mainly due to the strong semiconductor market. As I mentioned before, the growing investments in new equipment are driven by new technologies and advanced IT applications. With new product ideas and an excellent customer reputation, INFICON is well positioned to expand within the semiconductor business. All other non-semiconductor-based activities remain more challenging, with a few exceptions, such as the lithium-ion battery activities or new applications in the energy and food packaging market.With that, I'd like to turn over to Matthias Tröndle, who will give you more details about our financial performance. Matthias, please?

[Matthias Tröndle, VP & CFO]

Thank you, Lukas, and good morning to everyone to our first quarter 2020 conference call. My commentary starts with Slide 11 of the PowerPoint on our website. As always, let me begin with our revenue segmentation. Revenues for the first quarter of 2020 came out at $92.6 million compared with $95.7 million in the same quarter of last year. Total sales decreased by $3.1 million or 3.2%. We had a negative exchange rate effect of 0.3%, which means we had an organic sales decrease of 2.9%. Looking at the end market development, the Semi & Vacuum Coating market had a good performance and increased by approximately $3.3 million or 8.4%, while the sales to the other end markets declined. On a sequential basis, sales in the first quarter decreased by 3.8% compared to the sales level in the previous quarter, Q4. This decrease is almost exclusively driven by lower sales in the Security & Energy market. All other market -- all other end markets showed a stable or slight improvement compared to the previous quarter, Q4.Now let's take a look to the regional sales performance on the next slide. On a geographic basis, Europe reached about 33%; North America, 29%; and Asia Pacific ended with 37% of total first quarter sales. As you can see in that chart, Asia developed overall stable despite several weeks of shutdowns and operational restrictions, with growing sales into the Semi & Vacuum Coating market. Europe had a slight increase, and North America did decline by approximately 10%, mainly due to the lower sales in the Security & Energy market. Compared to previous quarter, Q4, sales did increase in Europe by 10%; North America by 6%; and Asia, which was, of course, as mentioned now several times impacted by the shutdowns, had a decrease of 17%. Let's go to the Slide 13. The gross margin for the first quarter of 2020 reached 49.1% and ended 96 basis points lower than in Q1 last year. Compared to previous quarter, quarter 4 of last year, the margin ended exactly on the same level.Moving on to our operating expenses. R&D expense in the first quarter reached $9.2 million and, as we continue to invest and push ahead with our strategic projects, increased by plus 7%. This represents a 10% of sales. SG&A expense did decline slightly by minus 1%. As a percent of sales, this represents 24% after 23.6% last year.Turning to the bottom line. For the first quarter of 2020, we achieved income from operations of $14 million or 15.1% of sales. This compares with income from operations of $16.7 million or 17.5% in last year's first quarter, which means the result did decline by roughly $2.7 million or 16% compared to last year. Let's go to the next slide. For the first quarter, we recorded tax expense of $1.5 million, which represents an average tax rate of about 11.9%. This is substantially lower than the same period a year ago. This is due to the taxable income mix of our various entities in the different jurisdictions as well as due to some lower accruals and prepayments in some of our subsidiaries. As a result, the net income for this year's first quarter reached $11.4 million or 12.3% compared to $12.8 million or 13.4% in the same quarter last year. The decrease of about 11% for both net income and earnings per share is driven by the operating income development and the lower tax burn.Let's move on to the balance sheet highlights on Slide 15. Our net cash position was $49.8 million, which represents roughly 18% of our total assets. This level is more or less unchanged compared to the end of last year. The operating cash flow, which is in the first quarter of the year, in our case, at least typically very low due to full year performance payouts and other beginning-of-the-year impacts, reached $3.8 million and did decrease from previous year's level due to higher AR, inventory and some lower income tax payables. For the first quarter, our days sales outstanding was 52.2 days, more or less stable. Inventory turns have been unchanged at 2.8 turns, while the working capital level increased driven by higher inventory and AR balances. On the balance sheet graph on the left side, you see a structure composition of assets and liabilities. The equity ratio reached close to high 79% in Q1 after 57.9% (sic) [ 75.9% ] in Q4. We have no material long-term liabilities, and the net cash position of close to $50 million confirmed a solid balance sheet structure.With that, I covered our current quarter result. Finally, one more word or comment regarding our guidance. Mr. Winkler already gave some comments and insights and status where we are. In general, we assess the outlook for the current year cautiously optimistic, mainly due to the strong semi market. The COVID-19 pandemic, however, present ongoing global uncertainties. INFICON, therefore, continues to refrain from issuing a guidance for the business year 2020.And the last slide shows, as usual, our corporate calendar with the upcoming dates. The next date is in July. This concludes now the formal part of the presentation. We are now ready to take your questions.

[Operator]

[Operator Instructions] The first question comes from the line of Iffert, Jörn with UBS.

[Jörn Iffert, Director and Analyst]

The first one would be, please, on the order intake. I mean we are aware you're not showing the exact number. But can you maybe make some comments? I mean how strong the order intake was year-over-year? And is it also fair to assume that the order intake in the division Semi & Vacuum Coating was as high as the record sales in the -- in Q1, Q2 2018?Second question would be, please, you mentioned the memory market is likely recovering. You are seeing first investments. I mean is this something bigger to support whole semi industry over the next 12 to 18 months? Do you really have visibility already on your projects? And third question and fourth question, just technical questions. The third question on R&D. It was up 7% year-over-year. Are you further engaging with clients on new design wins gaining market share? Or is this normal quarterly volatility? And the last question on the gross profit margin, would have expected with the rising share of semi sales that the gross profit margin would be potentially a little bit stronger. And can you maybe just explain what are the negative impacts here?

[Lukas Winkler, President & CEO]

Thank you, Jörn. Let me give you a little bit flavor to the order intake. I think there were 2 surprises on that side. And first, it was pretty high, and if I say pretty high, it's clearly above the net sales. And we usually do not comment on order intake because of 2 reasons. First of all, it fluctuates more than our revenue, due to the nature of some of larger orders that might not be immediately realized as revenue because you have to do installations first and have long lead times. And secondly, because of this timing of revenue recognition on the -- as a challenge for the order intake, we will -- don't like to disclose order intake because it's bookings and not the revenue yet. And as you know, bookings can be canceled, can be pushed out, can be withdrawn. So therefore, we continue to refrain from giving you detailed order intake. But it was unusual high.And you asked the question, was it as high as 2 years ago? I don't know exactly, but you're probably right. It was, I would assume, as high as 2 years ago from the pure semiconductor side.The second thing I'd like to give on, which is kind of a surprise, not necessarily a surprise, but kind of expected, that the uptick came from both sides, from end users as well as from OEMs, which is a good indication for us that the positive trend continues. We started seeing upticks on the OEM side about the middle of last year. And now we see the same pattern as usual with a delay of 6 months also on the end user side, which is a clear indication that they continue to invest in new capacity, not just on foundry and logic side, but now also on the memory side.I wasn't so sure about your second question again. What was it? Can you repeat your second question?

[Jörn Iffert, Director and Analyst]

Yes. It was on the memory project and your visibility you have. If you really think that this is strongly supporting the semi end market over the next 12 to 18 months. Or does it more look for you like some, yes, smaller projects to come up?

[Lukas Winkler, President & CEO]

It's -- we never 100% know exactly when we get orders, especially on the OEM side, are they for memories or not for memories. We only see on the end user side. And on the end user side, you can assume that most of the investments in China are memory fabs. So there is a clear indication they continue to invest in capacity. And the big company that I mentioned before that now ships the first EUV-based memory chips that's outside of China, but that's a clear indication that now also the memory market moved towards EUV, which will certainly trigger another wave of investments because everybody now has to follow, making the next-generation of memory. So I don't see that as just a onetime effect. I think this is the beginning of some of the recovery in the memory market. How long does it last? Hard to say. Right now, we just enjoyed a nice order intake.Now on the R&D side, yes, we did spend more than a year ago, and this is clearly due to the nature of those new projects that we started on mostly on the semiconductor side, with one big exception, actually two, but one is almost done. The one exception is in the HAPSITE business. I mentioned that we are working on next generation. We are almost done. We do now tests. And the second project outside of semi is in the lithium-ion battery market, where we see a nice growth potential. And all the other growth projects are mostly in the semiconductor area, and we continue to believe in those projects, and that's why the R&D expense was higher. And this is basically the groundwork for the revenue in 3 to 5 years, not tomorrow, but in 3 to 5 years. And it's -- especially in the semiconductor and the battery side, the projects are in very close cooperation with key customers, always. We never just do something and then try to sell it. It's always together with 2 or 3 key customers. On the gross profit side, I think that was your last question. I think you have to took into your considerations that the first quarter was a very strange quarter in terms of timing pattern with a very low February. We rebound in March. And so the mixture of products and the legal entity combination with ups and downs made it pretty tough to increase our gross profit margin on overall. And on top of that, we faced logistics problems, so we pay more for transportation. We have more issues with some customs clearance.And last but not least, that we start to see some issues on the supply side, where we have to go into the gray market to get some electronic components, and they're usually more expensive than on the traditional channels. So therefore, the gross profit margin did suffer based on the very strange mix and the very strange behaviors in the market.And sorry, maybe one last comment. Having this new shift patterns with double shifts and no overlap and making sure that people are always having a 2-meter distance between each other and so on and so forth have a not necessarily positive impact on the productivity on the production side. So even there, we might have to face some higher costs.

[Operator]

The next question will come from the line of Bruska, Marta with Berenberg.

[Marta Kinga Bruska, Analyst]

I have a couple of them. So firstly, I would like to quickly confirm that I understood correctly that your gross margin issues, so to say, in Q1 are largely temporary, and they should be iron out as soon as we have an improvement with regard to the pandemic going forward perhaps in Q3, Q4 this year, is that correct?

[Lukas Winkler, President & CEO]

That's correct. Yes.

[Marta Kinga Bruska, Analyst]

Okay. Perfect. Then I have 2 questions that are a little bit more basic. So I remembered recently about your consumable business with the coating for aluminum substrates for the wafer production. And I was just wondering if you could update us on how big the sales are currently in this business. And what's the outlook for 2020?

[Lukas Winkler, President & CEO]

It is not just consumable. It's both. It's for initial investment, but all and some consumables. And we do not disclose those figures yet, but it's still a single -- we expect a high single-digit figure for the full year.

[Marta Kinga Bruska, Analyst]

And that is from some mid-single digit in 2019?

[Lukas Winkler, President & CEO]

Yes. No, in 2020, we expect a high single -- or it was a mid-single in last year, and this year, we expect a high single digit. That's correct.

[Marta Kinga Bruska, Analyst]

Then with regards to minitization ongoing -- making small and smaller nodes, basically what I'm referring to, what is the increase in INFICON's content per node with each step, if you could just roughly estimate that for us, please?

[Lukas Winkler, President & CEO]

We don't know, to be honest, and we never really went into the big deep dive and try to figure out exactly how -- what is the increase in INFICON. What we see is that on the OEM side, people tend to have more basic sensors built in to make sure that the basic processes are, how should I say, prepared for those 7- and 5-nanometer process step and especially towards cleanliness and metal free contamination issues. And what we also see is on the end user side that now going into 7- and 5-nanometer applications, people are using more and more ALD processes, with very ALD and high sophisticated CVD and Edge processes, where the gas composition play a dominant role. And having the perfect accurate gas mixture inside the process chamber requires more sensors that they never used with, let's say, 10-nanometer or above. Now they are going to use them for 7- and 5-nanometer applications. But how much more it is, clearly, we don't know. We see it is -- they use more instruments. They use more sensors. They even ask for even more because of the increased cost of one single wafer. But exactly how much, I would have to lie to you if I would give you just a number.

[Marta Kinga Bruska, Analyst]

No problem. And then with regard to this new HAPSITE device to be launched next year, what is the sales potential? Do you expect a significant cannibalization with your previous product? Or would that be some sort of a new revenue driver?

[Lukas Winkler, President & CEO]

I would -- there are 2 elements to it. First of all, we have to defend our market share. So this is clearly a defense mechanism. And recently, we -- at least there was 1 competitor popping up about a little bit more than 1 year ago, so we have to defend our position. And secondly, with this new generation, we expand, of course, the capabilities of the existing product, so it might open the door towards more directly nonmilitary application. Today's product is primarily for military applications, and the next-generation can be used for both military applications, but also for some more police-related security activities. So it can open a little bit the market to more applications, but the primary purpose is to defend our market share in the military space.

[Marta Kinga Bruska, Analyst]

Have you seen a market share erosion over the last year? Or I had an impression that the drop this year in the Security & Energy market sales was mainly due to some cut in the U.S. budgets simply for defense. Or do you see some market share erosion here?

[Lukas Winkler, President & CEO]

No. In our home, let's say, space in the military part, we haven't seen any issues yet, but we see that on the police side, the needs for doing more with, let's say, drug detection and so on is going up. And therefore, we like to expand towards that direction as well. That's where the competitors started to promote the product, which was outside of our home territory, but we see that as an opportunity to grow.

[Marta Kinga Bruska, Analyst]

And that's interesting. And then if I have one more, please, really. Just with regards to the pure software applications from INFICON, how much of your sales are now related to the pure software applications? And how much of the revenue share we see as recurring?

[Lukas Winkler, President & CEO]

It will be -- let's say, it's already double-digit dollar for a full year, but not big double-digit yet. And about 1/4 of it will be subscription-based.

[Operator]

The next question comes from the line of Foeth, Michael with Vontobel.

[Michael Foeth;Bank Vontobel AG;Analyst]

I have three questions. I was just wondering if considering the strong order intake, if you could give us an indication of your expectations for the second quarter? I know it's difficult to make a quantitative statement, but maybe if you expect your overall result to be above or below the first quarter.Then the second question would be regarding the component shortage. You mentioned the impact on the gross margin. My question is, do you see any sub shortages basically impacting your ability to generate sales at all? I mean are there any critical components that could go into shortage? And then the third question would be, you mentioned that business travel, obviously, is reduced to more or less 0. And my question would be, first of all, what sort of savings are you seeing from that effect? And do you plan any lasting changes to your business model post COVID resulting from the -- from those impacts, basically?

[Lukas Winkler, President & CEO]

Let me start with the -- and I'll leave the third question then to Matthias. But first one, on order intake, yet has been very strong. You're asking for how does it look like in second quarter. I think it depends some more on the development outside of semiconductor business, especially in Europe and the U.S., how strong will be the negative impact on the -- from the COVID-19 in those 2 areas. We don't see that in Asia. But in Europe and in America, we expect a slowdown in some non-semi-related activities. And therefore, it's hard to predict. Will it be better than Q1? It could be. And then that gives me -- leads me to the second question. I think it also depends on will there be a serious impact on our delivery capabilities coming from shortages on the components. It could, unfortunately, I have to say, because we use some components that only one manufacturer makes. And that, especially on the electronics side, some of those components are now under observation from even the U.S. government, and they are U.S. suppliers. And of course, highest priority for them are the medical applications. And although we have been given the -- or we are basically considered being essential in 2 areas for medical applications as well as for communication applications, and therefore, we try to use a little bit our power order in the U.S. to convince those suppliers that they should see us, although we are not located in that special case not in the U.S., that we are a critical supplier to the medical instrument manufacturers. So therefore, they should consider us as essential as other Tier 1 suppliers in the medical market, and we try our best. But it's too early to say if there will be an impact or not, but there is a risk that we might not be able to ship a few products for a few weeks. And that could clearly have a negative impact on our second quarter revenue. That's the -- our main concern there. And the last question maybe on the travel cost side, I don't know. I have to give that back to Matthias. And then the second part of the third question is, will there be a longer-lasting impact based on the experience now with COVID? We don't know yet. Eventually, yes, because we see that some of the home office work actually does work. And so therefore, there might be some models that we have to consider. Even on the long term, if some of those experience, new experiences now that we gain, if they can be used inside INFICON to avoid maybe unnecessary travel that are more costly than video and telephone conferences.Exactly about the cost, maybe Matthias knows a little bit more about this travel cost breakdown.

[Matthias Tröndle, VP & CFO]

Yes, maybe let me try to give some comments. Of course, yes, I agree. There are some savings because more or less, travel is travel and meetings, personal meetings are close to 0, probably like the number of flights in Zurich Airport, which is decreasing more than 90%. So I assume we have the same situation around the world in February, March time frame, but also on the very few travel. So there will be some savings, yes, I agree. How much it will be, it will not be millions in a quarter, but there will be a substantial decrease. That's what I expect. On the other hand, we also had to invest, unfortunately, in a few other things, like this home office work did bring some technical challenges to us. So we invested also there in infrastructure, in getting the equipment out to the employees around because not everybody necessarily has a laptop or has a nice screen or whatever. So here, we had to invest. On the other hand, we also had to invest in systems. We have to communicate whether it's Microsoft Teams or any other thing, right? So we had both, right, savings, but also investments overall. If it continues, I expect there will be some savings, but it will be limited, but will be a positive impact.

[Operator]

The next question comes from the line of Renders, Rolf with Helvea.

[Rolf Renders, Research Analyst]

I have a question on the operating income, which you report was $14 million in the first quarter. And then you have tax of $1.5 million and then you have net income of $11.4 million. What is the other part, which is in between?

[Matthias Tröndle, VP & CFO]

Okay. Let me try to answer this one. There are -- there is -- there are 2 impacts. Basically, one is the foreign exchange gains or losses, which are impacting the line between EBITDA, I would say, or operating income and net income. So it's foreign exchange losses, which did impact. And the other is some losses which occurred from investments -- from money investment we had to cover some work time accounts, right? Because in March, as we know, there have been -- February, March, there have been heavy, heavy decrease in -- on the stock exchanges and which would also impact somehow. So these 2 elements could impact the line in between.

[Rolf Renders, Research Analyst]

Okay. That's great. And then you mentioned this China semi initiative. And so that is ongoing. But also, of course, the tensions with the U.S. Can you elaborate a bit more to understand what's going on there? Is there difficulties to be expected? Is pre-ordering from the Chinese or what -- how should we...

[Lukas Winkler, President & CEO]

Let me try to answer that question. And I mean, China, obviously, wants to become a -- one of the, let's say, major players in the semiconductor world, because they are also using a lot of semiconductors for their own purpose, but also to make products that get reexported to western world, like mobile phones. And so China decided to invest a lot of money. People talk about 50 billion plus that the government already has invested and to become a serious player in the semiconductor world. And of course, they started with memory fabs, which is a little bit easier than logic and the major new suppliers or customers there are making those memory chips. And what happened in the meantime is that, of course, the U.S. government is afraid that the China steal technology from the western equipment manufacturers. So they put a lot of pressure on suppliers, but also on governments to consider not shipping high-technology equipment to those semiconductor manufacturers in China so that they might be able to copy it. And what actually happened as a real fact is that the government in the Netherlands did issue a export control kind of a limit to the EUV tools of a dominant manufacturer in the Netherlands. So those EUV tools cannot be shipped to China. Under the pressure of the American government, the government in the Netherlands basically decided that the EUV tool is considered a dual-use tools, so therefore, cannot be shipped to China without an official approvement from the government. And this is one example. And they are looking into other examples to avoid that the western technology can get into China. And that's what's going on. So it makes it more difficult for the Chinese manufacturers to actually go ahead and get the latest and greatest equipment to make the chips. On the other hand side, what happens then on the others, of course, typically, that now small Chinese start-up companies try to fill the gap and start to make equipments to make semiconductor chips. And what they do is basically, they look into some existing tools and try to copy it and improve it and then show up as a competitor to the western suppliers of semiconductor equipment.Are they successful? Short term, I would say, not very much, but long term, eventually, yes. So that's the threat to this whole China semiconductor initiative.

[Rolf Renders, Research Analyst]

That's great. And should I then see that this is a temporary additional demand? Or -- and then you basically benefit from it now, but afterwards, when they've built it, this massive capacity, yes, it kind of has cannibalized other parts? Or...

[Matthias Tröndle, VP & CFO]

No, I don't think so. I mean, it's always an opportunity in both -- first of all, the demand for semiconductors is not going down. It's still increasing day-by-day, and Big Data even pushes them to get more memory chips. And there's also always an opportunity because whenever a Chinese supplier starts to make equipment, they need our components as well. So that's an opportunity to grow. And they start to compete with some western suppliers, and we supply both. So from that point of view, our products are not banned from being exported to China. But some of the large equipments will be banned from being exported into China.

[Operator]

The next question comes from the line of Rotzer, Serge with Crédit Suisse.

[Serge Rotzer, Research Analyst]

I think many questions are already answered, but I still have one or two. The first one is, could you please remind me the split -- the sales split of semi and of vacuum coating in the division? This will be the first one. Then the second one is how much -- how big is the share of the order intake coming from canceled orders in Q4 or even before? Third one, did you see any cancellations still in Q1, and in which segment? And the fourth one is, you mentioned that order intake was sound. But has it been small orders, medium orders or large orders? What is about the split of these 3 categories of the order intake in semis in Q1?

[Lukas Winkler, President & CEO]

Lots of questions. Breakdown between sales, semi and OEM, Semi & Vacuum Coating, we never really do it precisely, but I can give you at least an indication that it shifted towards semi. It used to be more in a half and half. Now it's clearly much -- it's a 2/3 semi and 1/3 maximum semi coating and display. And so it shifted towards semi.Now you asked -- we never really had canceled orders. We had pushouts in Q4 that went into Q1, but never canceled. And even in Q1, we never had canceled orders. We just had some delays in installations. We have some pushouts due to some travel restrictions and transportation restrictions, but never had cancellations. And so even now, all the Wuhan installations, of course, they have been pushed into Q2 because Q1, we couldn't do anything there.And I think your last question was regarding the size of large orders. There, you always have to distinguish between kind of more recurring OEM-related business, where we are directly linked to the ERP systems of our OEMs. They basically order piece by piece. It's a online link that whenever they need something, they place a digital order in our system and we ship. So it's -- some of those orders can be as small as $500 or $1,000, so -- but they come by the minute or every day. So there are many, many smaller orders for low-cost items to OEM customers. And then we have some -- then we have some products that are relatively expensive. Those are, for example, instruments that go to the EUV application, which is still OEM business. And there, we are simply linked to these OEM manufacturers' schedule. Whenever they start building a new system, they place an order with INFICON, and we are very, very close contact. We know exactly what they do. They visit us not now anymore, but they used to visit us on a weekly basis.And then on the end-user side, it is different. On the end-user side, we really talk about projects because there, the orders can be as large as 2 million per piece and consisting of software and sensors. And so those are more large orders that come in whenever a chip manufacturer decides to expand the capacity in place in order to -- for advanced process control for a fab -- for a full fab line basically. And as I mentioned, that includes software and instruments.And on the pure software side, we usually talk about large projects. Most of our software projects are not just a per piece, but they also talk about full fab lines or even full fabs be equipped with an additional module or an additional piece of software. So here, we always talk about the size of hundreds of thousands or millions of dollar per order.

[Serge Rotzer, Research Analyst]

Okay. Can I ask again, how big was the share in the order intake of pushed out orders?

[Lukas Winkler, President & CEO]

I have to say...

[Serge Rotzer, Research Analyst]

More or less, but was it material?

[Lukas Winkler, President & CEO]

I would say it's a mid-single-digit figure.

[Operator]

[Operator Instructions] The next question comes from the line of Huber, Reto with Research Partners.

[Reto Huber, Senior Analyst]

I have two questions remaining. The first one is how much revenue did General Vacuum earned in Asia in Q1? It was down, but how much has remained basically? And then the second one, since the EUV lithography is the bottleneck, can your customer that produces those systems, can they increase their production capacity for those systems? Or are they basically running at their full capacity currently or, let's say, in Q4 and maybe also in Q1?

[Lukas Winkler, President & CEO]

Let me start with the second question, and everybody knows who that customer is because there's only one, and they expand their capacity. They made it public how much they like to ship this year and how much they like to ship next year. So I think the official number somehow is between 35 and 40 systems for this year, and next year, they like to go to 50 per year. So they're actually expanding their capacity, and we just have to make sure that we are -- that our expansion is in line with their expectations. And we are, as I mentioned before, very closely linked to them. And we increase our capacity as well to be in line with the needs of our customer, which the figures that they disclosed are for new installations. But on top of that, we also have some replacement and maintenance and repair business.How the -- for the first question, revenue, General Vacuum Asia, we never really disclose those figures in details, but I can maybe highlight you a little bit how much it went down. It's basically -- it's about a reduction of somehow roughly 20% compared with a year ago that the General Vacuum sales went down in Asia.

[Reto Huber, Senior Analyst]

In General Vacuum?

[Lukas Winkler, President & CEO]

Yes.

[Operator]

We have a follow-up question from the line of Bruska, Marta with Berenberg.

[Marta Kinga Bruska, Analyst]

Quickly, just on the 2020 tax guidance. Do you expect the tax rate to remain at such a low level? Or will fortunately more or less count for the full year, please?

[Matthias Tröndle, VP & CFO]

Well, let me try to give you some comments on that one. Yes, the tax rate was really very low this quarter, but also was very low. Maybe you remember in the last quarter of Q4, we had even negative taxes. But overall, last year, we had 15% or 15.5% for the full year, and the year before, 20%. So I still would expect somehow between 16% and 20% as a reasonable tax rate. Under the assumption there are no major profit shifts and business shifts around the world as -- and I always can repeat myself, right? We have 19 different entities in different countries with different tax rates. And we have tax rates from, yes, close to 5% up to 35%, though. There will -- there were always some changes in there. But as an indication, I think, 16% to 20% is a good number.

[Operator]

[Operator Instructions] Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Lukas Winkler for any closing remarks. Thank you.

[Lukas Winkler, President & CEO]

Thank you very much for being patient listening to our call. And obviously, based on the number of questions, the interest is pretty high, and I like to thank you for that. And I will see some of you, hopefully, even in person. Otherwise, we just do it over the phone or video conferencing. And definitely, we will come back to you on July 29 when we disclose our half year figures and the second quarter revenue details. Thank you very much. Have a great day, and stay safe. Thank you.

[Matthias Tröndle, VP & CFO]

Thank you. Bye-bye.

[Operator]

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.