Inficon Holding AG

SIX:IFCN

Earnings Call Transcript 2018-Q2

[Operator]

Ladies and gentlemen, good morning or good afternoon. Welcome to the INFICON Second Quarter 2018 Results Conference Call. I am Alice, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Mr. Lukas Winkler, Chief Executive Officer of INFICON. Please go ahead, sir.

[Lukas Winkler, President & CEO]

Thank you, Alice. [Foreign Language] and good morning, everyone. Thanks for joining us today to review our results for the second quarter 2018.After a very good start into 2018 with a record first quarter, we had a pleasant second quarter with increased sales in all markets and regions compared to the same period a year ago. You can find, as always, the PowerPoint presentation on the Investor Relations tab on our website where you can see some graphs and a little bit more information about our performance in the second quarter.Please go to Slide #4 where we start with the key figures for the reporting quarter. In total, our revenues were 11% above last year's second quarter but close to 6% below the first quarter of this year, and we finished with sales of USD 104.2 million. If you adjust those figures for foreign exchange currency fluctuations, the organic growth was actually 8.5%.With gross profit margin clearly above 50% sales and higher operating expenses, we finished the second quarter with operating income of $22 million or 21.1% of sales compared to $18.4 million or 19.7% of sales a year ago. Net income after taxes was USD 17.1 million or 16.5% of sales. The detailed figures will be reviewed by Matthias Tröndle later on anyway. And now I go through some important highlights on our target markets first.So please turn to the next slide, which is Slide #5, where you'll see the sales breakdown into the 4 key markets that we serve. On the left-hand side, the pie chart shows an unchanged contribution from the different markets that we serve, again, compared to the same quarter a year ago. The graph on the right-hand side shows the increased importance of the Asian market over the last couple of years, but also you see a much more severe reduction of the operating -- for the reporting quarter, sorry, where our sales to the European and American customers have been more stable but also at a much lower level.Now let's do a quick analysis market by market, starting with the smallest one. In the Security & Energy market, which is represented on Slide #6, sales increased more than 50% year-over-year and 8% sequentially, reached USD 7.2 million. The HAPSITE, this is the man-portable, on-site detection instrument, represents the majority of sales in this market. The 2 largest customers remain the U.S. and Chinese government agencies.Although we had a much better start in 2018 compared to a year ago, the market trend is still hard to predict and did not become easier within the current geopolitical uncertainties. Nevertheless, we continue to develop the next generation of products to remain the preferred supplier for portable, battery-powered laboratories in the security market.On the energy side in this market, which represents the smaller part of our business, we see an increasing interest in new green energy technologies such as biomethane gas applications, especially in Europe, whereas in the U.S., focus is still on fracking technologies, where one of our products is used during the drilling process for mud logging analysis.Now moving on to the second market, the Refrigeration, Air Conditioning & Automotive market on Slide #7, where we experienced a sales increase of 3% year-over-year and a small increase of 0.6% sequentially, mainly driven by higher sales to European and Asian customers. Majority of sales increase can be allocated to the automotive and after-sales service market. While we have been able to defend our high market share in the refrigeration and air conditioning device manufacturers market, we continue to be the preferred #1 supplier in that market. The automotive market has been showing increased sales primarily due to an ongoing heavy [ investments ] in lithium-ion battery manufacturing capacities, mainly in China but also now with plans to invest in Europe as well.With our full line of helium, hydrogen refrigerant and multi-gas leak detection instruments and sensors and modules, we can fulfill almost all customer needs for their quality inspection, safety and leak tightness applications. This very stable market, we expect that the trend will remain positive for the coming months.Now let's go to the Semi & Vacuum Coating market, which includes solar, display, optics and semiconductor applications on Slide #8, where sales increased 10% year-over-year to $47.5 million but decreased 9% compared to the record first quarter of this year. The 2 main pillars remain the semi and OLED investments. In both markets, we have been able to maintain a high level of sales to the OEMs or equipment manufacturers as well as to the end users. Majority of the shipments went to customers located in Asia, with an increasing China contribution. Investments into the new OLED flat-panel display technology might peak this year since the installed capacity will soon be able to cover the current needs for new displays. But further enhancements such as flexible and stretchable displays will trigger the second wave of investments once those new applications will be commercially available.The demand in the semiconductor market on the other hand side are more driven by clear applications such as Big Data, artificial intelligence, Internet of Things, autonomous driving, smart cars, smart sensors and industry 4.0 and so on and so on as well as new materials and more sophisticated processes but still based on the relatively old silicon wafer technology and therefore become less cyclical than it used to be.Nevertheless, for the coming 3 to 6 months, we expect a temporarily weak demand compared to the first half year 2018. And finally, we had a positive quarter in the General Vacuum market on Slide #9 with sales of $26.1 million, which results in a year-over-year increase of 12% but 8% lower than in the first quarter this year, mainly due to a product shift for a large product family in Europe that basically replaced an older generation with the new generation. So some of the volume went more into the first quarter and a little bit less into the second quarter.As you know, we sell analysis measurement and control products for many different industry applications through private-label partners, in this case, primarily vacuum pump manufacturers as well as direct sales to industrial OEMs and distributors. We gained market share with our direct sales channels, and they have been able to maintain our private-label products and even get into new applications such as sterilization and life science market.Last but not least, sales of the Contura S400 leak detector for food packaging applications increased, and we have now follow-up orders from large European food companies and therefore decided to expand our market reach into the U.S. actually earlier than originally planned.Before I turn over to Matthias, I'd like to close my part of the presentation with an outlook on Slide #10. There are no dramatic changes in the view of how we see the next 6 months for most of our markets compared to our view 3 months ago. The only exception is the semiconductor vacuum coating market where we expect a weak -- a weaker second half year of 2018. So we confirm our existing 2018 guidance of sales around USD 400 million and an operating income above 19% of sales.With that, I'd like to turn over to Matthias, 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 second quarter call. I will cover second quarter results and also our half-year financial results and then comment quickly our guidance for 2018. My commentary starts with Slide #12 on the PowerPoint. As you all saw in our press release this morning, revenues for the second quarter of 2018 came out at $104.2 million compared with $93.6 million in the second quarter of 2017. Total sales increased by USD 10.6 million or 11.3%. We had positive exchange rate effects of 2.8%, which means we had an organic sales increase of 8.5%. Looking at the end-market developments, all markets increased, and the Refrigeration, Air Conditioning and Automotive market reached a new record level. The Semi & Vacuum coating market did grow by approximately 10%, but General Vacuum market showed growth of 12%. And the Security & Energy market had a clearly better Q2 than last year and increased by approximately 58%. On a sequential basis, sales in the second quarter were lower by minus 5.9% compared with the record sales level in the previous quarter of Q1. This was driven by lower sales to the General Vacuum and also to the Semi & Vacuum Coating market while sales to the Security & Energy and Refrigeration, Air Conditioning & Automotive markets did grow. How does the regional sales performance look like? On a geographic basis, Europe reached 28%, North America, 26%, and Asia Pacific ended with 43% of total second quarter sales. As you can see from the chart, Asia sales did increase by 4.9%, Europe did grow by 23% and North America did grow by approximately 3%. Let's go to the next slide.The gross margin for the second quarter of 2018 reached 51% compared to 50.4% in the same quarter of last year. The margin percentage increased slightly by 65 basis points, and the absolute margin increased by $6 million or 12.7%.Moving on to our operating expenses. R&D expense in the second quarter reached $7.8 million, an increase by 14.2%. As a percent of sales, this represents 7.5% after 7.3% last year. SG&A expense in the first quarter (sic) [ second ] was $23.3 million or 22.4% of sales, an increase of $1.4 million or 8.3%. The increase in both R&D and SG&A expense was influenced by some unfavorable foreign currency impacts. Further, it was also driven by development projects, headcount additions in various functions and higher variable compensation and commission spend.Turning to the bottom line. For the second quarter of 2018, we achieved income from operations of $22 million or 21.1% of sales. This compares with income from operation of $18.4 million or 19.7% in last year's second quarter, which means the result did improve by roughly $3.6 million or 19.6% compared to last year. Increase is driven by the higher sales volume, a solid gross margin, while cost did increase under-proportionallyLet's go to the next slide. In the second quarter of 2018, we recorded tax expenses of $4.6 million, which represents an average tax rate of about 21.1% due to our profit mix slightly lower than the 22.2% recorded in the 2017 period. And the tax rate is lower due to taxable income mix of our various entities in the different jurisdictions.Finally, net income for this year's first quarter reached $17.1 million or 16.5% of sales compared to a $13.8 million or 14.8% in the same quarter last year. The increase of close to 24% compared to last year is driven by the higher operating income with a slightly lower tax rate. Thus, for the second quarter, net income equates to earnings of $7.09 (sic) [$7.05] per diluted share compared with net income of $5.72 per diluted share in the same period last year. This represents an increase of 23.2%, which is in line with the net income development.Now let's move on to the balance sheet highlights on the next slide. Our net cash position was $45.7 million, which represents roughly 17% of our total assets. This compares with $85 million at the end of last year, which means we see a decrease of about $39 million. The cash position did mainly decrease due to the close to $50 million dividend payout in April this year, which is partially compensated, of course by new cash flow generation.Operating cash flow, which you can also see on that slight, it increased from previous levels and reached $21.7 million. For second quarter, our day sales outstanding, DSO, slightly increased and reached 50.9 days compared to 50.3 days at the end of last year. Inventory levels did increase, partly reflecting strategically higher inventory levels and therefore, the turns decreased to [ 3.9 ], and as a consequence, working capital ratio did slightly increase to 25.1%.On the balance sheet graph on the left side, you see the structure and composition of assets and liabilities. The equity ratio reached 21% -- 71.2% in Q2 after 77.1% in Q4. No material long-term liabilities and the gross cash position of $66 million confirm the solid balance sheet structure.With that, I covered our current quarter results. Now I wanted to give some comments regarding our half-year performance. Net sales for the first 6 months of 2018 reached $214.9 million compared with $182.1 million in the same period of last year. This represents an 80% increase and includes positive 4.2% impact of -- from foreign currencies. With that, sales increased organically by 13.8%.In the first half of 2018, sales to all end markets and also in all regions did increase. Refrigeration, Air Conditioning & Automotive sales reached $41.7 million and increased by 7.5%, mainly due to higher sales to customers in Asia. The sales in the Semi & Vacuum Coating market increased by 19% due to an increased demand from OLED displays and semiconductor and equipment makers in Europe and in Asia.Sales in the General Vacuum markets increased to $95 million or 19.7%, reflecting a more favorable economic blend in Europe and Asia. The Security & Energy market, where we had a more long-term and project business-related environment, the sales surged 43% or $4.2 million, primarily due to higher sales to the U.S. military and government customers. From a regional point of view, the majority of sales did go to Asia, where we reached $97 million of sales and approximately 45% of our worldwide sales. Second-largest region is Europe, where we had $59 million of sales and 29% growth, and the Americas had a 13% growth and a 26% share of the worldwide sales. We reached, for the first half of 2018, operating income of $46.6 million or 21.7% after $36.2 million or 19.9% last year. This is an increase of 29%.Higher sales and stronger gross margin percentage and higher but controlled operating expense did drive this improved result. Our balance sheet continues to show a strong structure with approximately 71% equity ratio, and we have no long-term borrowings.As mentioned earlier, the complete half-year report 2018 is available now in the investor section of our INFICON website. I'll conclude my portion of today's call with our guidance, very short. After this good start into the new year, we can confirm and reconfirm our guidance for the full year 2018. Sales are expected around USD 400 million, and the operating income margin should exceed 19%. The last slide shows our corporate calendar and the upcoming dates. This concludes now my part of the presentation, and we are ready to take your questions.

[Operator]

[Operator Instructions] Our first question comes from Jörn Iffert, UBS.

[Jörn Iffert, Director and Analyst]

The first couple of questions is linked to the semi end market. Yesterday, your peer, MKS, was saying to expect quarterly revenues to decline by around 15% in Q3. This implies, for semi, this can be down up to 30%, the decline quarter-on-quarter for Q3. Is there any reason why we should see a different dynamic on your side? Second question would be, please, again, on semi, do you see any particular weakness at end users or OEM? And is this due to one customer, or is this broad based? Third question, again to semi. And I know it's early and visibility is limited, but do you have signs that Q4 already can accelerate versus a weak Q3? Or would you expect that Q3, Q4 is roughly similar? And then the last 2 questions, and sorry for the amount of questions, for general vacuum, do we have any signs for a macro slowdown, for macro weaknesses, tangible signs? And the last question is on gross profit margin. Will the gross profit margin remain above 50% according to expectations in the second half?

[Lukas Winkler, President & CEO]

Quite a lot of questions. I'm not sure if I can remember all of them, but I'll try. First, on the semi side, do we expect a 15% -- 50% decline just in one quarter? Not necessarily. Now why should we be a little bit different than MKS? There are 2 reasons. The first reason is that our market share at the OEM side is not as high as they are. We are only #2. And we are mostly on newer tools, not necessarily in older ones. And obviously, most customers still -- usually, they sell -- even the big OEMs try to sell the newer tools first before they sell the old one, so we do not expect such a sharp decline. Secondly, they have about the same amount of business that goes to the end users, which has usually a time lag between the OEMs and the end user anyway of between 3 to 6 months. And the third reason, and this is not necessarily exactly what you have asked for, but we show Semi & Vacuum Coating as one market, and we have a larger contribution coming from OLED investments than MKS has because we have a product line which we own and have limited competition there. And so therefore, that part of the business will not be detrimental compared to some of the semi. So...

[Jörn Iffert, Director and Analyst]

Sorry, Lukas, just to interrupt here. I was thinking about a decline of 15%. 1-5, not 5-0, 15% to 30%. Okay, so -- and you were saying the 15% at MKS, this could be a tick more softer for INFICON. But not 15% but then maybe...

[Lukas Winkler, President & CEO]

If you would just look at the pure semi numbers, there might be a similar figure. But we also have some mixed in with some solid investments, so it might not be dramatic. And secondly, we're working on some newer applications, which only go into really new stuff, and they will not be affected by the CapEx cycle. It's more a consumption-driven part of the business. Now is it related to specific customers? Well, no secret that at least one customer in Korea and one in Taiwan, they basically talked about some pushouts. One is more driven, I would say, economically. The other one is more driven from a technology base because it's not that simple to make 7-nanometer structures. So therefore, they are struggling from the technology side, and the other is clearly pushed out based on some economic reasons. What we don't see yet is a slowdown in the Chinese market. So obviously, they just stick to their plans and continue to invest. Now if you ask me how do -- how far do we see further out in Q4? Here, I have to really rely on what we hear from our direct customers on the OEM side. And they predict a already better Q4 than a Q3, a little bit. So Q3 might be the low point, and Q4 might go up a little bit. But that's based on information. And as you know, and as Matthias mentioned it in his call, we invested strategically -- a little bit in inventory just to make sure that we have the shortest lead time in the market, and the customers take benefit out of the short lead times. They actually order pretty late, so we have no orders yet that would be shipped into Q4 for -- into that market. So the information that I gave you is based on some forecast but not on real orders. Now in the General Vacuum market, we do not see any slowdown. There might be some slowdown which -- if there is one, there might be more in China, not necessarily in Europe, but they have no indications yet. Because China -- and if you look at our chart, there was a sharp decline in Q2 in Asia. But that's not China. That's Taiwan and Korea. So China continued to grow even in Q2 versus Q1, and if we would see some macroeconomic slow down, it might come from China, not necessarily from Europe. On the gross profit margin, that really depends on the product mix. I do not expect to go below 50% based on what we see as of today. And I'm pretty optimistic that we can keep the 50-plus percent gross profit margin, even if there is some weakening over the next 3 to 6 months.

[Operator]

The next question comes from Reto Amstalden, Baader-Helvea.

[Reto Amstalden, Analyst]

A few question from my side. First, on your guidance for the full year, implying that the second half is about 10% to 15% lower in terms of sales compared to the first half, can you give here a bit maybe -- even a bit more detailed indication, what could be the quarterly sales run rate going into the third quarter? Are we [ here ] closer to $90 million or $100 million? You also indicated a book-to-bill ratio close to 1, but maybe you can give here some more insights. Then the second question or topic on the slowing semiconductor cycle. In the second quarter, semi-related sales declined 9%. But can you give here some indication which business segment has driven this? Is it more the display overall, or is it more the semi-related business related to OEM and end user? And how do you see the slowdown for the second half? What is the main factor for this slowdown? Is it display or the semi part or actually, rather both have yielded the same negative trend here.

[Matthias Tröndle, VP & CFO]

Thank you, Reto. Now we do not disclose quarterly forecast figures. So if you ask about Q3, Q4, the indication that I would rather give you today, which is not an exact figure, but based on what we hear and what we see, the Q3 might be weaker than Q4. How weak? Hard to say. But as I said, we have a close to one book-to-bill ratio, but our backlog is not huge. Especially in certain areas that are OEM-related products, the backlog is actually rather small. So we basically ship usually within weeks. And therefore, the backlog would not be enough yet to exactly precise give you a number about Q3, how is it, $100 million or $90 million? I don't know. Most likely something in between. But Q3 might be weaker than Q4. That's what we expect. Now is it more semi? If you look at the development between Q1 and Q2, what caused some of the decrease. I'd like to go back to what I told you 3 months ago that we had some pretty quarter end shipment in Q1. And I mentioned at the conference call that they could have gone into Q2, but they happened to be in Q1. Therefore, you should not read too much into the decline because it was basically a timing issue, not necessarily a pure business issue. But what we clearly see, if you look in the overall trend, then it is right now currently more semi-driven than OLED-driven. So if you ask for which one declined more, it's -- clearly semi declined more than the OLED currently. But that is for 2018. If I look further out, and I expect then that semi will come back, whereas OLED might then go down eventually. But it did not happen in Q2 yet. That explained your questions?

[Operator]

The next question comes from Michael Foeth from Vontobel.

[Michael Foeth, Head of Industrials Team]

Obviously, most of the semi questions already addressed. My question is, you were mentioning that you see a peak in the OLED investments for the current needs. Do you already have any indications for sort of next investment cycle in OLED flexible displays and so on, or is that really much too early to say? That would be my first question. And then the second question is, you mentioned that you would enter the U.S. market with the food packaging applications earlier than expected initially. My question is, can you tell us a bit how you are going to address the U.S. market, and how fast do you expect this market then to develop?

[Lukas Winkler, President & CEO]

Okay. Now the -- your first question was referring to the semi and the next OLED kind of wave. Do I have any indication? I would say there are 2 indications that we have. One is more end-user driven. We know that some of the Korean OLED manufacturer are already investing in preproduction tools for the next generation of flexible displays. And the second indication that we get is from OEM. There are more OEMs actually now considering entering the OLED market than probably 2 years ago, which is an indication that everybody expects a second wave. Now will it come next year? I don't think so. Might it be more in the 2020, but -- and that's why, therefore, the current needs, I believe, we probably will see the peak this year and then having a weaker 2019, and then going back up in 2020 because I don't think they are ready for commercial products yet. Now on the food side, first of all, the reason why we decided to go to the U.S. is that we believe now that we have reached a level of confidence in Europe within those customers that we serve that, that technology is now accepted. If people start to book follow-up orders, that's a clear indication now that the technology works, they believe in the technology. Now they're going to the next phase of moving from just doing some sample testing, going to more sample testing and then eventually go to some inline testing. Therefore, we decided to go -- to expand our distribution network in the U.S. Now how do we do that? We probably -- the plan is to use the same approach that we did in Europe. We hired 3 guys in those areas where we have the highest density of food companies in the U.S. and do the same type of missionary work that we did in Europe, really just going from customer to customer, do presentations, do tests and convince them that this technology actually is much better than the water bubble tests. That's -- the real competition is not a real competitor. The real competition is a technology. In that case, it's the water bubble test. And it will take probably same -- similar timing as in Europe, 2 years before we can see the first real -- I mean, we will get some onesies and twosies, but before we actually convince customers to do follow-up orders, it will take at least 2 years.

[Michael Foeth, Head of Industrials Team]

Okay, excellent. Maybe just follow-up here on the food packaging. Are you still only addressing the food companies, or are you also starting to address the basically machinery companies, food packaging machinery guys?

[Lukas Winkler, President & CEO]

Only indirectly. We don't address them directly, but we get referred from the food companies to their preferred equipment manufacturers. But we don't read directly, only indirectly.

[Operator]

The next question comes from Philip Saliba, HSBC.

[Philip Saliba, Analyst]

I was wondering, you mentioned China a couple of times. In general, how would you describe your exposure to the local producers when it comes to the semiconductor production, your exposure to the local [ steps ]? And then also, my understanding is that in H2 '18, we should see more OLED projects from Chinese producers, so maybe some idea on that? Then secondly, you had mentioned signs for a recovery of photovoltaic solar in your report. Any indication where this would come from? My understanding is that China, after the subsidy cuts, is rather sluggish for the next -- for the time being. And then thirdly, also, we're talking about the CapEx, what are your plans for the full year?

[Lukas Winkler, President & CEO]

Okay. First, regarding China. The easiest way to answer that question is that -- it's a very simple one. We -- Our exposure in China, and our position in China is very well, let me say that way. Why? First of all, we have been in China for a very long time, and our brand recognition in China is excellent. And we have been there before the pump companies showed up in China. So therefore, if people talk about vacuum, they think INFICON first before they talk about pumps. Secondly, they are -- the -- since we have a very nice network of sales companies in China, we have a very long-standing staff, we have almost no turnover, our network is excellent. And so China really enjoyed a huge growth over the last 2-3 years. And the size of our revenue going into China almost reached now the level of sales that we have in the U.S. So it will pretty soon be our largest sales territory. Based on the fact that we have been there for a very long time, never disappointed our customers, even in some downturns, having a very loyal staff and employees there. We have people who have been in the company for more than 25 years, and that really helped us put us ahead of the competition primarily because of our brand and image and our reputation. Now -- and therefore, we have an excellent relationship to many, many local OEMs, which actually helps us to gain market share. Those newer type of OEMs, much quicker than at existing OEMs outside of China because they do not have any kind of history, so they usually take what -- where they get the products from the best supplier with the best relationship, and that's what we do. Second question was regarding some solar. And you would be surprised. Most of our renewed solar business is actually coming from China, although they cut back on some subsidies. But the capacity that has been installed in the year 2011 and 2012 to cover the worldwide need for silicon-based solar panels is almost used up. Basically, they have to invest more to just cover the needs from -- for silicon-based wafers around the world. So we mainly ship to manufacturers who are in the silicon-based solar panel manufacturing, not thin film-based solar panel manufacturing. In terms of CapEx, I don't know exactly the figure, but it might be in the neighborhood of a total of $15-plus million for the full year, maybe actually going close to $20 million. The reason is that we are currently working on a new type of product line going into semiconductor market that requires a little bit higher CapEx than our traditional product lines.

[Operator]

[Operator Instructions] Your next question comes from Martin Comtesse from Berenberg.

[Martin Comtesse, European Mid]

With most questions already answered, I just want to briefly touch on the automotive or e-mobility market that you mentioned. Could you give us some more color on where this market is going and what you see in terms of future potential?

[Lukas Winkler, President & CEO]

Sure. And there are 2 directions, and one, currently, is much more dynamic than the other one. The traditional direction is where we actually compete with a -- the #1 there, which are on simple applications that check the leak integrity of any component that [ touches ] kind of fluids or pipelines or containers that need to be perfectly tight. Traditionally talking about airbags, fuel tanks, piston -- injection pistons and fluid containers and so on and so forth. Here, we simply are in a direct competition with a French company, and whenever the requirements are increasing, usually we get the business. If it's a low-end type of application, then there's a few competition. But the real dynamic right now, currently, is in the market for lithium-ion batteries. And driven by the Chinese initiative to really reduce pollution and go whenever they can with e-mobility, that triggered a huge wave of investments into battery manufacturing places to come up with enough battery capacity to cover all the needs of the future e-car volume that the Chinese expect to sell. And as you probably have heard even, they're now thinking of expanding into Europe and starting to build factories in Europe as well. And that this lithium-ion battery production capacity actually opens a lot of business for us for leak detection applications. And since not only cars need lithium-ion batteries but a lot of upper devices such as mobile phones and tablets and so on, they also need lithium-ion batteries, so there is a huge need to cover increased security needs for lithium-ion batteries that now -- all the manufacturers of lithium-ion batteries have to do a certain type of leak checking before they are able to sell those products. And here, we enjoy a very nice #1 position, and we can clearly get the benefit out of being the first or having being the first company in the market to actually realize the needs of leak checking for those batteries.

[Martin Comtesse, European Mid]

Maybe just one quick follow-up question. In the Q1 call, you mentioned that you added a new white label customer to General Vacuum. Could you maybe briefly give us an idea of how this has developed in Q2 and if you see like a stronger order intake from that new customer?

[Lukas Winkler, President & CEO]

No, not yet. It's -- the development is as expected, starting with relatively low figures. But now we see the trend goes in the direction that we expected, starting with 1 to 2 per month, and now we are reaching double-digit figures per month. So it's going nicely, but you don't see millions yet. But the [indiscernible] white label customer is one competitor less.

[Martin Comtesse, European Mid]

So for the General Vacuum, for the next half of the year, for Q3, Q4, is that more numbers in the line of Q1, or would you say it's more towards Q2?

[Lukas Winkler, President & CEO]

Probably you have to make the average out of it, and then you'll see what we have. As I mentioned before, there was some switch from -- with one product change that we had from an older to a newer generation. We had some, last time, all those higher than expected in Q1, which we did not get in Q2. And so therefore, the Q2 number were probably a little bit too low, and the Q1 number is too high. So if you take the average, then you'll probably get a good feeling about where the market should be.

[Operator]

[Operator Instructions] The next question comes from Michael Inauen, Crédit Suisse.

[Michael Inauen, Research Analyst]

Just a couple of questions as well. Of course, many have been answered. But I was just wondering, there is currently, surely, a fear in the market that these pushbacks that we hear, particularly from Samsung or TSMC [ CapEx ] [indiscernible], how big is the risk that a pushback becomes a cancellation, at least for the -- for your clients in the OEM space and then also, of course, for Samsung and TSMC? Then, I was also wondering, now that almost everyone in the chain is suffering a little bit in H2, is there any pricing fight going on? Because I would assume that when you have lower volumes, that some of your competitors would like to try and get maybe in your market space with lower prices. Is that something that we see? And thirdly, on, again, on the semi, the OLED and semi mix, if we look into '19, I think the fab material was pretty negative on the OLED cycle into '19. And on the same [ year ], we see now expectations that say the wafer fab equipment spending might go up slightly in 2019. So if we assume that wafer fab equipment would slightly go up in '19, and OLED would really go heavily down in '19 as AMAT expects, what would that actually mean for your semi and vacuum business for 2019? And maybe just a last one on the channel -- sorry, on the Refrigeration, Air Conditioning and Automotive market, is it fair to assume that the growth that we see there in this business is mainly driven by your automotive products, or is that a wrong assumption?

[Lukas Winkler, President & CEO]

Oh, again, a lot of questions. I made [indiscernible] write notes here. So first question, what is the risk of a pushout going into cancellation? Our experience, looking back at the last close to 10 years, the risk is close to 0 because of 2 reasons. First of all, if it comes from the end user side, and that's where it usually starts, as I mentioned before, the -- one of the pushouts is more economic driven, the other pushout is more technology driven. And there's clearly pushout in the past. They always started then to make the fact, even they had a delay of even up to one year sometimes, but they never really canceled it. And on the OEM side and -- since we are used now to very, very short lead times and are fully integrated in the supply chain kind of scheduling of our OEMs, we haven't seen any cancellations over the last couple of years because everything is so tightly linked to each other that nobody would actually need to cancel any more. They just push it out and wait, and there might be some temporary buildup of inventory, but no real cancellations at all. So I see the risk relatively small because on the overall, unless we don't have another Lehman crisis, but nobody expects that. Now on the -- does that trigger some price fight, the answer again, on the OEM side, no. On the end user side, eventually, there is some, especially since the Chinese government wanted to have some open bidding for most of the critical components for their government-sponsored semi investments. There, there's clearly some price kind of fight, but it has nothing to do with the pushouts or weakening in the demand. It's a thing that happens anyway. On the OEM side, it's relatively small because usually, you work on design wins, and once you already signed in, you have a certain price arrangement, and then everybody sticks to that price arrangement. Now sales, semi mix for 2019, I actually would confirm what you heard from others. We expect OLED being down, and we expect semi coming up. What will be the impact for us, we don't know yet 100% because we also have some consumption-driven business in the OLED market -- luckily, I have to say. So we do not get the full impact. But if worst comes to worst, and I mentioned that in, I think, last call already, the OLED could go down by over $20 million for us. So we need to compensate that by way of increased semi exposure, and I think we can do that. We have a pipeline of new projects, and I'm quite optimistic that we can get there. Now on the RAC side, is it more automotive driven than RAC driven? If you just look at the percentage of revenue, the answer is probably yes. And inside the automotive, it's even more linked to the e-mobility, the lithium-ion battery applications. We did defend nicely our very high market share in the pure RAC manufacturers market, and we have seen some recovery in China, interestingly. And not necessarily a stagnation, but they invested again in additional manufacturing capacity, but the majority was coming from lithium-ion battery applications.

[Operator]

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Winkler and Mr. Tröndle for any closing remarks.

[Lukas Winkler, President & CEO]

Simply, I have to thank you for being that patient. You have many, many, many questions. Obviously, we are living in an interesting time, environment, but I remain quite optimistic about the mid- and long-term perspective. Although we might have some weaker Q3, but if I look beyond 2019, 2020, I'm pretty optimistic, and I'm looking forward to talk to you again once we disclose our Q3 figure end of October. Thank you very much, and have a nice day.

[Matthias Tröndle, VP & CFO]

Thank you.

[Operator]

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