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SUESS MicroTec SE
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Welcome, everybody, and thank you for taking the time to join the SÜSS MicroTec Earnings Call for the First 9 Months. It's my pleasure to share results with you, give you an update and impressions on where we see the business today. And as far as we can tell at this point, also give you an outlook for the coming -- for the rest of the year, but also for next year.At a glance, we've had what I think is somewhere between a good and a very good quarter. Of course, the headline is order entry, which was large enough that we had to ad hoc publish it at the beginning of October. It is the first quarter in the company's history there we have received orders of more than EUR 100 million. That's -- I mean, that's a big achievement in my view. It reflects a number of things. It reflects a continuously strong demand for our solutions. I think that's maybe not a surprise. That's consistent with the industry, which is going at least in the -- this year and for the foreseeable time probably as well going from strength to strength.At the same time, I think it's also clear, and you'll see this in one of the next slides that order entry varies from quarter-to-quarter. I pointed that out 3 months ago, when order entry was not as high as I would have -- I might have hoped at that time. Now it is higher than we all expected. This does not mean we will have EUR 100 million order entry in every quarter going down the road for sure.At the same time, if I look at what's behind the EUR 100 million, there is enough of what I would call indicator for sustained growth that this leads me to be quite optimistic, not just for the rest of this year, but also for next year and the time beyond. Growth drivers are largely unchanged in lithography. I think the EUV demand and the associated demand for photomask cleaning equipment that then comes from us, most of you will be aware that the EUV lithography come mostly from ASML and associated with that is usually a demand for mass cleaning equipment, which usually comes from us.That demand has indeed picked up. I think that's something that we appreciate, something that we also see as not just be a fluke. We do see there is a strengthening demand in that space. The main growth driver for MicroOptics is automotive. I think that's also something that's not specific to this 1 quarter. That's something that we believe is sustained and will be a significant growth driver for the company as well going forward.Revenue is also up, obviously not quite as much as order entry. For the 9 months, we are just shy of EUR 190 million. That's little over 8% more than last year, that's quite positive. Same is true for the EBIT margin, of course, also for the EBIT in million euros. That's something that we had set ourselves as a target for the year that we would have a meaningfully higher EBIT margin than last year. And it looks like we're well on track for that. You remember the guidance, 9% to 11% for the year. We are now at 9.4% and we are, if you look at our revenue guidance, expecting a strong fourth quarter, should be the quarter with the most revenue in the year. So this is not just consistent with that guidance, but I would say, it's well in line with that guidance.2 events happens or 2 things that I want to share with the group. We did sign a partnership with SET. SET is a company we've known for a very long time. Somebody active in the bonding and more recent hybrid bonding space. The partnership will allow us to offer to customers a fully automatic die-to-wafer hybrid bonding solution. And then together the wafer-to-wafer hybrid bonding solution that we are already -- that we have already developed that's currently being qualified, we will have a comprehensive suite of hybrid bonding solutions that we can offer to customers, which we believe is necessary to be successful in that space.The other thing is it's more of a reputational thing, but actually quite meaningful. Our subsidiary in Switzerland SÜSS MicroOptics has won the 2021 Swiss Manufacturing Award. Now for those of you who may not be familiar with the Swiss base, this thing is given by University of St. Gallen, which is pretty well known, based in Switzerland, and it's given to one company each year for innovation in manufacturing in Switzerland. This is quite a big deal for our colleagues there. And my congratulation went out to them when they got it in October, and I want to repeat that here. I think this is something that's -- I think it reflects the quality of our colleagues. It reflects the passion and the drive, what they have built with comparatively little resources, fuel resources in the past in Switzerland to drive our MicroOptics business forward.Positive business outlook for the fourth quarter. Yes, I mentioned this to the outset, it's certainly true. We believe we're going to have a strong fourth quarter and we are confirming our guidance, I'll show this at the very end, in spite of some challenges that we have.Before I look at the numbers, I think it's worth pointing out that if you look at the overall situation, not just in the economy, but in societies. COVID obviously has not gone away, I mean, far from it and supply chain challenges abound. Now our supply chain, of course, is different from, let's say, that of a carmaker, but it is extremely global and it is very complex. So in that sense, it is, to some extent, comparable.And so one question I've been asked in the past weeks and months as to what extent we are subject to that. And the answer is, yes, we see it. We feel it, and it is causing a fair amount of extra work to put it mildly. I mean people are working long hours to compensate for the impact because what we want to be able to achieve and for the very most what have been able to achieve is that we deliver tools to our customers when they need them, when they expect them, regardless of whatever challenges and hurdles we have to overcome to do so and that simply means extra work.Sometimes it's trivial parts, small relatively low-tech parts that have been available for many years without ever there being a hitch, and now suddenly there is a problem. And you can find another part, but you have to do some level of construction to introduce it and integrate it into the product. So it's not -- these parts are not plug-and-play, do some qualification, some testing. And that is the extra work I referred to that our colleagues do and have been doing. And that in a nutshell has allowed us to deliver revenue in this quarter more or less or very close to our own internal expectations upfront. And that, I think, is -- that to me as a CEO is probably as meaningful, maybe even more meaningful in terms of good news as the very high order entry.With that, I would like to go through some numbers. Any of you will have seen these numbers in the quarterly report when we published it in the morning. Order entry, obviously very high this quarter, but also very high for the 9 months. So if you take the longer view 9 months, the 3 quarters in the current business here were up by almost 23%. That's a significant increase and if you recall even last year the numbers were up significantly over the year before. Our order backlog, I have not actually made the effort to confirm whether it's the highest ever in the history of the company. But if it isn't, it's the highest for a long time. My colleague, Tobias Nottelmann, who is the Head of Controlling here, he nods his head. So I think what -- he has been with the company much longer than me. He says, yes, this is the highest order backlog we've ever had.Revenue has also gone up, has gone up by less. And as I mentioned earlier, if supply chain challenges did not exist, that number would have been a little bit higher. But not tremendously higher. So I think overall, this is well within the plan that we have had internally for months in terms of how the revenue should develop, how deliveries -- what is the timing for deliveries and have deliveries actually occurred at the expected time. For the most part they have.Gross profit has gone up. That, of course, was something that the company had planned for the current year. Now 9 months in, we are up by a little over 3 percentage points. That's I would say well within the range of what we wanted to accomplish for the year. And of course, for the third quarter, it's even higher.But as you see, when you look at Q3 2020, which had relatively little revenue, but of that revenue, a very high share of systems that are high-margin traditionally, just the type of machine, you see that when you look at the 9 months last year, it was a different picture. So for -- my advice would be whether it's a great quarter or a not so great quarter, it always makes sense to look at more than one quarter's figures to judge SÜSS and probably most toolmakers in this industry because we have large orders, individual orders can be large. One tool moves its delivery date by a week, it can affect the quarterly numbers. And one can spend a lot of time reading into tea leaves there, but sometimes it's just that something moved in or out by a week here or there and that's it.So if you look at the longer period, you get, in my view, a slightly more accurate and meaningful picture. Speaking of better picture, you look at EBIT. EBIT has increased by almost half from EUR 12.2 million to EUR 17.7 million for the 9 months. That's a solid increase, 2.4 percentage points. And again, even though our revenue for the 9 months, if you were to take a very simplistic view, multiply by 4, divide by 3, you would get a number that's below our guidance.Now I've said earlier, we fully intend to hit our guidance. But even if you did, you would have annualized -- on an annualized basis, our EBIT is within the guided range, our revenue is not yet. So that's a positive sign to me. And it's an indication that we are looking at -- in spite of all the challenges we have, we are looking at good -- at least good profitability. I think that's how I'll put it.I think those are the core points that I want to make of the overall numbers, we look at the segments in a moment. I do believe that the margin improvement can be sustained. I would probably not go quite as far as saying that specific measures we've taken in the last 6 months or so since I was there already have a meaningful impact.I do think that the awareness and the focus on cost, the awareness on focus on hitting numbers in terms of revenue, which means making sure deliveries occur as expected, the stringency, I think, of how we look at these, how we manage it and how we communicate it within the company, I think that's changed. And it's changed for the better, whether -- how much of the EBIT increase or the gross profit increase is that I would not dare to speculate. But overall, I feel that the company is certainly on the right track and will remain on the right track, which means that going forward, we expect to see the performance improvements that, frankly, I came on board for to deliver.Again, if you look at the numbers, top line is up, bottom line is up. No matter if you look at EBIT dollars, euros margin or net results after taxes. And of course, the nice order entry bump that we've received this quarter helps us believe that we will not just grow this year, but we will certainly also grow next year. I'll say a few more words about that at the end.Let's see and go to the next page. I just wanted to share this order entry over quarters, over a number of quarters with you, just so that you see how much this can vary. And if you look at this, quarter to quarter really is not the way to look at it because there was a down quarter in terms of order entry in 2019. There was a down quarter in 2020, a dramatic one, by the way, cut in half from one quarter to the other. And there was a down quarter last quarter, which, as I mentioned at the very beginning of the call, at the time, we were not all that happy about.Now some of the -- a couple of orders we thought we would get in Q2, we got in Q3 and then we got some orders we didn't quite expect for Q3. And again, a couple of orders that we fully expected to get, but maybe in October or November, we got them in September. And yes, a couple of orders we were not sure that we would get. So I think our success rate in third quarter has also been a little bit higher than what we anticipated. So it's always a combination of these things. The other message from this, and I think this is something that I think most of you know, but it's worth reiterating.By far, our main market is Asia and Asia, of course, means essentially East Asia. This is basically China, Korea, Taiwan, Japan. Yes, Southeast Asia is included in that figure, but it's very small comparison. That has been the case for a while now. That will continue to be the case. It reflects overall investment in the semiconductor industry, maybe not exactly, but directionally, it does reflect it. And so one key success factor for us as a company is our teams in those countries I mentioned, their ability to sell and in the case of Taiwan also to produce and contribute to developing systems.Look at the segments for a few minutes. When you look at this, you see on the order entry side, revenue -- not revenue, order entry went up in every segment. The largest increase in percentage for the 9 months was in the large [indiscernible] is -- before I say something wrong, it is photomask. If you look at the quarter, it's bonder, by the way. You may remember that the order entry for bonder was really not all that great in the first and second quarter. That has really picked up. And what's especially meaningful for bonders is that a lot of this order entry that came in the third quarter was for permanent bonders.Permanent bonders, of course, something that we have been meaning to grow for a while. It's the -- one of the growth levers for the bonder segment. But if I go through them, just say a few words about each business unit, litho -- lithography, of course, our largest business unit has 2 main parts. One is exposure, which is essentially the mask aligner business and also the scanner business, which, of course, is still small.And the other part is the [ coder ] business. Order entry growth comes from both, and I think that's also nice. The coder, especially on the coder side, we had a very strong business last year as well. So we're very happy that that's continuing. And this goes through to the bottom line. Part of it is internal efforts, part of it is product mix. And maybe I should say the other way around, I think, a fair amount of it is product mix. But of course, also, we are always seeking with each individual negotiation with each individual contract we are seeking to manage gross profit in a positive way.At the same time, I am probably not saying anything that's new to most of you, especially in the mask aligner coder space, this is not an area where we have no competition. So we always have to earn our keep. We have to earn our growth. We have to earn our margin. And I'm quite happy that our colleagues have been able to do that. Well, they've been able to do that, of course, always, but they've been able to do more of that this quarter.Photomask equipment, I think that's something that we have been seeing on the horizon, and we had been hoping/expecting and now we are seeing it. We're seeing orders. The -- yes, the margin, of course, the margin last year for Photomask was very high. Now that's -- the margin in Photomask varies from quarter-to-quarter and even year-to-year, more than in any other business unit. And a couple of reasons for that.One, the number of data points, the number of tools that's within that for the 9 months, EUR 33 million of revenue, the number of tools in there is very low. These are big expensive tools and of course, there is not too many of them. So it really depends from customer to customer what level of customization does a customer need and how much additional revenue are we able to realize for this, this does vary from situation to situation. So this has -- it's been below today's figure, it's been above today's figure. We expect it to continue to fluctuate in the future.What we do see is that order entry, and if you look at the orders at hand as well, that has increased significantly. And so from that, I think it's probably not a wild guess to infer that this will be a business that if you look at revenue will grow quite a bit next year.[Technical Difficulty] about bonder, the main thing to me is that if we look at our bonder business, of course, the bonder business has a long history, not all of it positive at SÜSS. It is, for me, for us, for the leadership of the company, one of the main growth areas of the company. And right now a fair amount of the revenue is still -- not still, we have revenue in manual bonders and in temporary bonders where we are quite successful. We are now beginning to see an increase -- sustained increase, I believe, for automated permanent bonders.And of course, in addition to that, the other main growth area for bonders is the hybrid bonding. I mentioned this in the context of the partnership with SET. I said -- or rather wrote this in the press release then when we announced the partnership. I believe that, and I may have mentioned in last quarter's earnings call as well, I believe that in order to be really successful in the hybrid bonding space, anybody who wants to do that needs to be able to offer to a customer as complete as possible, at least a comprehensive suite of hybrid bonding solutions. Because at the end of the day, what we see a lot of customers, they don't necessarily know which tool solution they need. They understand very well which problem they have. So specifically, whether a particular problem, a particular application is best served by a die-to-wafer or by a wafer-to-wafer or maybe by a reconstituted wafer-to-wafer, which is the same as a collective die-to-wafer solution and that is not necessarily clear upfront.And if the customer can only talk to us, if they already know that they want one and not the other because we don't offer the other, that's not exactly helpful. So for us, it's quite important that we will be able to offer die-to-wafer, collective die-to-wafer, which is the same as reconstituted wafer-to-wafer and real wafer-to-wafer and we will be able to do that. And that's an important message, I think, for our customers and of course for the public as well.Last not least, and really not least, MicroOptics. Now MicroOptics, when you look at order entry, order entry and sales are often identical. This particular 9-months period, they are not. But in -- for a lot of the volume where you -- especially in the automotive space, where you have a situation where you start with the nomination letter, then eventually you get a forecast and eventually you get a firm forecast, which is a binding forecast, which commits -- well, actually, even earlier, we are usually committed to certain capacity.And then none of this is, of course, order entry in the account [Technical Difficulty], so in most cases, the order entry comes when the product gets shipped because it gets called off. There are some exceptions, as you see in this year. Last year, there were essentially no exceptions to that. But for the most part, the business is order entry date equals revenue date. That's worth bearing in mind.So when we look at order backlog, for the very most part, this actually has nothing to do with MicroOptics. The business is growing, that's important, order entry, but also especially sales. Margin also, we are not quite there yet where we want to be. But for me as well, and I've been there, the location, of course, is in Neuchatel in Switzerland. I've been there quite a few number of times in the last 6 months, probably almost once a month really. It's an important part of our growth story as SÜSS. I think we have a team there, we have USPs there. We have been able to accomplish something that's above and beyond what competitors can offer to customers at this time. And I want to leverage this and realize that potential, and we will do that.So overall, if you look at this, we have 4 business units that are somewhat disparate. And sometimes you have a quarterly report, you say, well, 1 or 2 or 3 are great and then 1 or maybe 2 or maybe even 3, hopefully not 3, didn't do so well, but it somehow all averages out. This time, it's a little bit different. I think all 4 business units have been doing somewhere between well and extremely well, at least meeting my expectations and some of them exceeding, well exceeding them, quite happy with this. So I'm -- this is probably the, I mean, this is the third call I do, it's the one I enjoy most. I'm looking forward to questions that you have also for the future. But if you look at the 4 segments, I think all of them are developing in the way we want them to develop. And that's something that I'm quite happy about.I mentioned the guidance at the beginning, no change here. This is the exact same slide that you've seen last quarter and the quarter before that and probably even when the annual report for 2020 was published by my predecessor, still 270 to 290, we will hit that number. And if you look at this, this means we're going to have a strong fourth quarter. And of course, I'm looking at this quite closely, I have no intention of having egg on my face come January. 9 to 11 percentage points EBIT margin after 9 months, we're already above 9%. So that's -- doesn't look like something that's unrealistic at this point, of course, cash flow in a reasonable range, lower than last year by the way.Now before we move on to questions, I have with me not only Tobias, who's our Head of Controlling, to answer any questions that I detailed out that I might not be able to answer them, but we also have on this call, Thomas Rohe, our COO and I would like him to share some insights he has on our operational situations, commenting a little bit on the supply chain challenges we see and how we overcome them. And after that, we will then proceed and move towards questions. Thomas?
Yes. Okay. Thank you for your questions -- all your introduction, Gotz. Well, for sure Gotz, only a short remark because I think the supply chain issues are worldwide really in everybody's mouth and head. So for sure, also, we are facing some challenges in our supply chain. Nevertheless, as Gotz already mentioned before, the complete team here at SÜSS is eager and really highly committed to really solve those problems, also solve those challenges. And really, up to now, we see that we really are able to overcome these challenges and that we are still committing to our delivery promises to our customers so that we are looking not, I would say, overoptimistic, but optimistic into the last quarter of this year and also dealing with our suppliers and really finding solutions to overcome these challenges.So this is a very short comment also on this, and we are also for sure also working on our manufacturing concepts, what they're doing there. And -- sorry for that, I think we also will see in the future some really improvements also in our supply, not only in the supply chain, but also in our productions. And -- but it's, at the moment, a little bit too early to talk about. So for this short comment, I would really keep it as this and looking for questions from your side.
Thank you so much, Thomas. One sentence from my side. I thought about when I wrote the letter to the shareholder for the quarter, do I mention this at all, right? I mean, the numbers are up. So I don't need to talk about this to explain any numbers. At the same time, we all read the newspapers, we all -- everybody knows, this is something that's happening in the world. I think it doesn't make sense for us to pretend that it doesn't affect us at all. I think what I really wanted to share is that we spend a lot of time and effort in dealing with it, and we've been actually doing quite well. And I think that's one of the major success stories of the last quarter, quarter-and-a-half and how the company is coping with this. And this is something I'm grateful for all of our colleagues to do that.So with that, I would like to move on to questions.
[Operator Instructions]
Now I was told that it's going to take about 30 seconds or so before -- for technical reasons questions can be asked, so I want to use that time. [ Juan ] or Franka, if you have any questions after this call. I also want to share our financial calendar for the next year. I think those dates are new. Nothing particularly unusual there, March 31 for the annual report. Once again, I want to thank you for taking the time to listen to me and Thomas. Looking forward to your questions and continuing this conversation. Are we ready for questions?
[Operator Instructions] And the first question is from the line of Jurgen Wagner from Stifel.
I have 2 questions on hybrid bonding. You mentioned in your introductory remarks about your cooperation with SET. We heard from Besi of the Belgium back end company I think it was 2 weeks ago with their results that they announced first orders for hybrid bonders. How are you positioned versus Besi and is that a competitor at all? I think they have also cooperations. And the second question, last quarter, you highlighted market share losses on longer lead time versus peers. Now you emphasize your -- the progress you made on supply chain. Is that a topic at all anymore or has it -- was it just in Q2 and now it's all on track again?
Yes, thank you for your questions. Let me answer the second question first. So if I recall right, we did mention that long lead times are beginning to be a problem. We didn't talk about market share losses because of it. But clearly, if we had shorter lead times, we could potentially sell a few more tools, no question about it. So what Thomas hinted at but did not go into any detail because I think it's -- we think it's too soon to go and share details, but an end-to-end performance transformation of the company is something that we have started, and I don't mean yesterday.And one of the main things we are looking at is to make the company, to create the capability within the company to shorten lead times, ideally shorten lead time significantly. I will not be able to give you numbers of where we are and where we want to be today, but we're not talking about an incremental -- in terms of the goal, we are not talking about an incremental change. That's something that's ongoing. But that is unrelated to the, I would say, current and shortage-driven supply chain challenges. I think those are 2 different things. If you look at the numbers and the publications of the company back to before I even joined last year, what you will see that lead time topic is not new, it's not new at all. When the company started growing about 2 year -- growing significantly about 2, 2.5 years ago, this started to become an issue.And by the way, we are far from alone in that issues. It's not that everybody else has much shorter lead times. That's not the case. It's a challenge for the industry overall. But I would like us to get to a point where we are better than most competitors, meaning faster, more agile, rather than being in the middle of the pack or in some areas, chasing the middle of the pack, right, which is where frankly the company has been. So in terms of lead time, your question was, is that not a topic at all. I mean, of course, this is a topic, right? And an end-to-end performance center is not something that happens very quickly. What I meant and what I spoke about a little bit today in the call is the tactical measures we take to address what comes our way.This is really about reacting to shortages, reacting to problems, reacting to anything from here, this is not just parts, it's sometimes it's logistics, right? The customer wants a tool, but the airport in China, most recently was Shanghai, that the tool is supposed to be delivered is closed. And because of the paperwork, it was filed, you can't really just trip it to another airport as you would maybe in the U.S. So you have a problem, now you try to solve this problem.Some things -- and ultimately some things can't be eliminated as a problem. But that is what I was talking about. The need to improve to sustain -- in a sustained fashion, improve operating performance, that need obviously has not gone away in 3 months. That's the topic, the story of the next, I don't know, 1.5, 2 years. And you will hear more about this as time goes by and as we can talk more about things we've done as opposed to things we like to do. That would be my answer to your second question.First question, hybrid bonding. Besi is a competitor, clearly. Besi, of course, has made its move for die-to-wafer bonding, not wafer-to-wafer, but die-to-wafer bonding before we did. And again, before we signed the cooperation with SET, we did not have an offering, something that we could offer to customers. And that's something that we will have now but of course, a month or so, month, month and a half, whatever it was after we signed the cooperation. We are not talking about orders that are in our order book.But it is something that has gathered significant interest among customers and potential customers, no question about it. We do believe that this is a very attractive market and one that customers -- the customers will need hybrid solutions, hybrid bonding solutions. And we believe that we can offer them, I'm hesitating to say any, but I mean "any" hybrid bonding solution they need, meaning die-to-wafer, collective die-to-wafer, wafer-to-wafer, whichever one it is. And that is going to be the way how we grow this business, right?So it won't only be this cooperation, but that will be one part of it. But in addition, we have other solutions that don't require this cooperation that we can also offer. But yes, Besi is a competitor, and we are very aware of them, and we follow them. No question.
I mean, initial customers would be -- sorry, follow-up, sorry, last question. Initial customers will then be TSMC and Intel or kind of [indiscernible]?
Can't comment on individual customer names, okay? Can't comment on individual customer names. But I would say the -- I mean, I think it's well known who are semiconductor players, who are interested in hybrid bonding and who have a need for that. And those customers would be the ones we're interested in. And of course, some of them we know quite well because they have been customers for other solutions already. In some cases, for a very long time and then others, we have less longstanding connection with, yes.
The next question is from the line of Johannes Ries from Apus Capital.
Yes. A couple of questions from me. Maybe first, again, to the bonding solution, you just mentioned the cooperation with SET is not the only solution. Maybe first to detail questions. So for -- there could be other partners and if I look to Besi, they are cooperating with a large front end company to have a combined solution. Is it necessary to have also maybe a closer -- maybe work together with the front end guys because to my knowledge, there will even be an integrated machine with front and back end solutions from Applied, which is a partner at the front end side for Besi and Besi? And second question, when is the combined solution of SET, and you will be available? I heard from former calls that it could be maybe already at the end of this year, beginning of next year.
No, not the end of this year. I don't know where you heard that. That would be -- I mean, to develop this in 3 months, I think nobody would believe me.
I would be surprised. Okay. Okay.
I don't think -- I surely hope this didn't come from anybody at SÜSS. No, but then for your first question, so of course, this is an interesting question. And ultimately, nobody will know which solution will ultimately carry the day. That said, my view is the semiconductor industry has always been, and I believe will continue to be best-of-breed, sort of, complete line solutions, if you will, for various reasons, have never really been successful in this space, even in the back end, yes, even in the advanced back end, and certainly not in the front end.So what you -- the way the industry looks like is for each key process step, you have 1, 2 or 3 depending on the process step leaders that provide most of the tools to everybody and anybody who wants to start up a fab, as some companies, for example, in China do from scratch, they go to the usual suspects and for the process steps where we have a compelling offering that others are using, they will then come to us.And then for the stepper, of course, they go to ASML, right? And so on. Now you asked the question is an integrated tool between frontend and backend. I've read what you've read. I think the market will be the judge of that. We wouldn't be investing in this space if we didn't believe that our approach is promising. My sense is that the customer has a problem that certain -- that the bonding requirements are going up, going up, meaning less spatial resolution. Obviously, the integration of the electrical mechanical definition of hybrid bonding. So that's -- then each application is somehow different, right? Different materials, different geometries, different environmental requirements, how much pressure, how much -- which chemicals you can use and so.Now I want us to be able to look at the problem like this and tell the customer, yes, we can find a solution for you. It could be this, it could be that. It could be that, but we will have the solution for you. I think that to me is the first step to being successful. And of course, that solution has to be then compelling -- excuse me, it has to be qualified and then eventually, it has to be at a -- cost per performance has to be in the right range. And of course, we will have to deliver that and we will deliver that. That's the plan.
Okay. So it's not necessary to work closely together with the front end guys?
We don't believe so. I'm not saying it -- might it be helpful, who knows? But I have heard nothing that says, if you don't do this, you cannot possibly succeed in this space. And by the way, we are at only one who doesn't do exactly that, right, what you just mentioned.
Okay. Then on the -- another question on your MicroOptics business. Your predecessor maybe discussed in former calls that maybe it makes sense to move maybe, yes, if it makes sense to be a producer of MicroOptics in the longer term and more to focus on the imprint solutions in retail side, which is also -- you deliver also automations to your user and maybe it could maybe a reason for other competitors of you not to buy this imprint machines. You sounds like you maybe want definitely to go on with the production. And do you also believe that you can sell your imprint machines also to competitors or to other players in this case? You see the point where there was some thoughts maybe it makes sense because you have a channel conflict maybe with your customers.
Yes. I am aware of the history for sure. From my side, the answer is pretty clear. I believe this is a growth opportunity that the company would be ill advised not to pursue, number one. Number 2, what are we in the business of? We are in the business of providing solutions for technologically difficult problems to customers. Not every customer of the world, not every problem in the world, of course, but the kind of problems that are in or near the semiconductor industry. I mean, if you think of MicroOptics, it's somehow a semiconductor like process, but obviously, it is not an actual semiconductor device we're talking about.So this move from -- or an expansion of our business base from outside strictly the semiconductor space, that's something that happened many years ago for SÜSS and something that I see as positive. We should be solving the problems that we are predestined to solve the problems to solve, meaning problems where our capabilities position us well to solve the problem better than others. We should try not to solve problems, too many problems that anybody can solve. And the only way you can actually get the business by being the cheapest rate. And frankly, I don't think we have much of that business -- such business right now.So back to MicroOptics. If you look at my history rather than the company's history, you will see that the logic of lowering entry barriers to customers by providing a product rather than the machine to produce the product where that makes sense is something that I believe in. I have believed in before I came to SÜSS, and I fully believe in for SÜSS for MicroOptics right now. Now obviously, you have to specify this, and you can't say, well, why don't you guys build a foundry to compete with, I don't know, TSMC, obviously, never going to happen. So the framework or the guidelines for this would be, obviously, it has to be something that we as a company can afford. You can talk about what that means, but a large-scale CMOS fab would probably -- not probably, it would be out of the question, for sure.For MicroOptics, this is not a limitation. Then it would have to be clear that we would be, if not the best, then at least a good operator of such a fab that the expertise we have would allow us to do it better than anybody, than others, and I believe that's the case. The team we have, the operational team we have there is extremely good in providing throughput and providing yield to a level that automotive customers accept it. And this is not new. We've been doing this for years.We are growing with this, but the automotive business is not new for SÜSS MicroOptics, it's about 3 years old give or take. I hope 3 years is roughly right. I mean, give or take a year, but it's not something that we started this year or last year. And for that reason, I believe this -- there's no reason why we shouldn't do this.Now you mentioned conflict, you said in one sentence others and competitors. Not every other player who wants to buy imprint tools is necessarily competitive. It is not the -- sorry, this my computer here, I tried to switch this off, it wouldn't work. Not every competitor -- not every other player in the industry who is interested in buying imprint tools from us or others is necessarily a competitor for SMO. In fact, the vast majority do not compete. We -- the imprint space is humongous, it's extremely broad. SMO, SÜSS MicroOptics, never in the past and have the ambition to do every imprint solution in the world, and it won't have that ambition in the future. The applications we want to do, where we have a specific USP that makes us well-positioned to provide the product.
Okay. Also other applications are virtual reality is clear. Maybe 2 follow-on questions, and I speed up. First, on the scanner, an update because we know we have this LEO from TSMC for 40 machines or so, how you proceed? And when we will see -- how we see maybe [ UCs ] so rampant for revenues from this time?
Yes. I need to confirm very quickly if I can say something before I say it. Give me about 10 seconds. Okay. So to answer your question, we have delivered the first of this new machine scanner to a customer. So this is no longer in the future in this past -- hello? Can people still hear me?
Yes. Can hear you, yes. Yes.
Okay. No, that was a sound of either somebody hung up or [indiscernible]. Yes. So we have delivered machine. We have orders for these machines. As you correctly noted, that was said in the past, again, we don't speak about the customer identity. But your guess is as good as anybody's probably. I have consciously not really talked a lot about the scanner business today because it doesn't represent much of the present as you know, that's not a surprise.Of course, the scanner is an asset, and we want to look very carefully at how valuable an asset we can make this. This means we are right now looking very carefully at what would be a path to really grow this business in a comprehensive way, in a meaningful way. At the same time, today, it's too soon for me to say, yes, I believe this is a significant growth area for the company. It might be, but I don't believe it to the extent I believe it with the bonder, to the extent I believe it with the MicroOptics. And I differentiate this, I make this difference consciously.It doesn't mean we have lost interest, not at all. We are going full steam ahead internally for this. I believe that the team we have in Taiwan and without, unfortunately, being able to go into the details, what they have accomplished in setting this up, this production and getting the first tool out to anybody who will buy a scanner is a demanding customer. So this is also a demanding customer. That's a major achievement. And I'm very happy, quite proud of what the team did and grateful that they accomplished this. So yes, we are pushing forward full speed with this business. If you're going to have a follow-up question, how much revenue you expect in 2023 from this, I cannot answer yet.
Okay. But you definitely will launch more machines in the coming maybe 12 months or so. So you have orders for definitely more and more of the...
Yes. We do. We do. Yes, yes, no change there.
Okay. So more revenue next year. I had very -- 2 quick questions and I make the line free. First, is the margin of bonders and MicroOptics are still comparably low. What target margins you have, it must be clear double-digit in [indiscernible] and MicroOptics had much better margins in the past, but now you have this underutilization of this new fab, but it must be better?
It must be better. Yes, I will confirm that. I don't think I want to say numbers here, but clearly, it needs to become better. I mean if you look at -- if you look at, I mean double-digits. If I look at -- well, okay. If I look at -- yes, if I look at the 9 months, then, of course, we are quite far from that, yes.
But in the past, it was a margin of 20% as well, if you remember [indiscernible].
I think there are some reasons why those figures from years past are not 100% comparable. But what is clear, and again, I have to choose my words a little bit carefully here. But if you look at the overall company, we've said, meaning I've said after I came onboard as well, 15%. And I know -- and I know that that's something -- I'm convinced that's something that the company will accomplish, right? We are -- I can see the path to this right now. I can't share everything of it with you, but that's for the overall company. Now mind you, that also means if you look at last year, the entire company was below -- was not true digits, right, for the whole company.If you bring it back to SMO for a second, I think those ancient numbers that you looked at, where you said 20% or whatever, those were much smaller revenues, it was a much more niche business, and none of that was automotive. Now I'm a little bit careful there because the implication could be the automotive business isn't profitable. I don't see that. I think there is some element of that growth you've described where there's a lot of costs that are against revenue that's actually future revenue, today's revenue, some of that is the case. But we wouldn't be investing and pushing this business forward if I didn't believe that this has a potential for an attractive profit.
Very clear. Final question. You mentioned customers or customers -- interesting customers outside of the traditional semiconductor space emerging. Is that still the case? Yes. And that's certain opportunity going forward.
Yes, I believe that. But like with many other things, it's something I would be much more ready to speak about when we have something we can talk about that we have done rather than just the opportunity, which, of course, exists.
Okay. Because you didn't mention it again, I want to hear this.
Fair enough, yes. My view on that has not changed.
The next question is from the line of Malte Schaumann from Warburg Research.
First one is a follow-up on the scanner, just a clarification. What makes you a bit hesitant to see that kind of the business to be less of a growth driver for the company in comparison to the others, just pure size because obviously the opportunity in bonders is much larger than it probably isn't scanners and maybe the same is true for MicroOptics? Or is anything changed from the market side based on your talks with potential clients?
No, it's not primarily the size. Obviously, there is a size difference, but that's not primarily it. I am simply hesitant, and I'm hesitant not about the direction we want to go, I'm hesitant about sharing it in public on this call, right? Because what -- there's a number of things we don't know yet. We don't know how broad -- I mean, let me back up. So there's proximity lithography, which has been around forever, which has a broad set of applications. There are literally dozens of customers in the world who use it, and it's extremely established.And then there are steppers. There are steppers from the low end to the high end. High end, of course, is ASML. That's a space that we don't even come near. But if you look at the low end, there's a number -- not a handful, but there's a few companies that offer them, plus you can buy used ASML equipment. So you have a number of choices for equipment. Again, many people use it.The scanner is something that combines some of the benefits of both, but it's not like there's half a dozen companies that make scanners, and it's not like scanners are used anywhere near as widely in the industry. We obviously have one very big customers, plus, of course, we have the history of having the whole thing shut down and very publicly shut down and then resuscitate it and rebuilt, except no longer in the U.S., but in Taiwan.Against that history, it's simply my point of view that we should be a little bit further in terms of orders, in terms of delivery. I mean we've now delivered one machine, right, out of Taiwan before I talk about in public how great a growth driver this is for the company. It does not mean that we have lost interest. It does not mean that we do any less internally. But if I write down today, how am I get to 400, I'm hesitant to put a very large number or any large number for the scanners. It doesn't mean if we don't -- if we make it, that's great, it'll be on top, but it's not something that I view as something that's a given. Does that make sense?
Yes, it makes sense. So I mean, it's...
It's a communication -- it's a communication, not a lack of confidence.
Yes. That makes sense. And for primary bonding, I think that's a positive thing that finally we are seeing some orders. Is it one customer, is it a multiple of customers? How is the pipeline development? Do you see a breadth of projects coming in that you clearly see broadening of the pipeline? So that kind of supports the future development?
It's a broadening. And that's good. I like that. And then we know that you have to -- in many cases, you have to go through some -- through the typical qualification process, which takes time, right, involves putting a tool there for a certain amount of time, all those great things. So we know who is interested. We know who has which problem. We know where we have machines for evaluation and so on.
Yes. Good. That's already seen in the third quarter, so the order intake in the third quarter is already more than 1 customer for permanent bonding or is that yet to come?
Yes.
Okay. Good. And then the hybrid bonding cooperation with SET. Maybe word on timing, how much time you need to really develop the tool. And then do you need a lead customer for kind of a pilot tool to develop a pilot tool? And then what are your potential competitive advantages you see coming from these or coming from the set you might gain comparing to the other suppliers to the industry?
Okay. So there's a couple of questions on hybrid bonding. So permanent bonding, yes, that's -- I think, actually, I did give you the answer to that question. But for hybrid bonding, yes, we're going to need a lead customer, at least one. Yes, it will take some time. We're not going to have a tool ready at the end of the year. That was kind of, jokes aside, it will take a typical amount of time for integrating this. I don't think I want to share a date. Obviously, we have a date, not just in mind, but something that we have as a plan.In terms of competitive advantages, I mean, it all ties to customer value. On the one hand, it is what precision level, and I hate to use the word precision, it sounds engineery and technical. But in this case, it's actually meaningful because it directly drives the scaling of the solutions that you can process. And this is, in a sense, a little bit new for bonding. Bonding, if you think of bonding, very old school, it's an area-driven process. You have 2 flat areas that you merge together, right? And with hybrid bonding, things like overlay, things that you know more from other process steps in semi become extremely important because you need to -- you have an extremely clean surface. You have to align it extremely well. And that's still way oversimplifying it, but those are the things.On those level, on those levers, we believe that we have -- we can be as good or better as others. That's the basis for the partnership. And then, of course, the questions are throughput cost of ownership yield, uptime, the usual -- ultimately what ties to OEE where we believe we can differentiate. I think that's -- the die placement is what SET brings to the table and automation, metrology, things like that is what we bring to the table and the activation of course, [indiscernible]. So that's in a nutshell why we believe this is going to be a solution that is going to be attractive to customers.
Okay. Quick update on temporary bonding, do you see the pipeline development projects coming into the pipeline? How do you see the dynamics in the market currently?
From what we can see now, we will remain -- I mean, we will retain an attractive market share, high market share, yes.
And from bond...
That said temporary bonding -- sorry, one addition to that. I think that said, temporary bonding, and this is not new, is not a process step that customers love to invest a lot of money in because ultimately, if I say it doesn't add value to the device, that's, of course, also -- it's a little bit of a silliness because the device wouldn't -- if you need temporary bonding, the device wouldn't exist without temporary bonding, but it's a bond that you form and then you dissolve it.So ultimately, it's gone by the -- the bond that you form has gone by the time you're done producing. So it's not something that companies use unless they absolutely have to. So I don't think that market has [indiscernible] growth.
And do you see...
Relative is [indiscernible].
Do you see, I don't know, in the next 12, 18 months an investment cycle upcoming?
Hard to say.
Okay. Fair enough.
Hard to say.
Then the last question on MicroOptics. Profitability decreased in the third quarter. I mean it's always fluctuating a bit, but was that only due to the underutilization of the new [indiscernible] buildup or were there other issues?
No systematic issues. So if you're asking is it because we are -- our prices are dropping rapidly or something like that, no, that's not the case. So I would urge you, especially for MicroOptics not to read too much into quarterly figures. Profitability that is, yes.
We have one last question from the line of Michael Reis from Discover Capital GmbH.
I have maybe just one last question. You have EUR 1.5 million in reversal in the retail segment for the 2 scanners. I just was wondering if it is -- in which quarters the EUR 1.5 million there and how they -- yes, how they're putting on your margin. So it's just...
Sorry, again...
Sorry, a drop-through to the EBIT right now the EUR 1.5 million.
You're talking about the write-up, the -- sorry, you're talking about the write-up on the -- okay.
Yes.
Sorry. And the question was which quarter does this show up?
Yes.
One second. Did that -- this showed up in the third quarter, no? So the 1.5 -- give me 1 second. That was in the third quarter. Thank you.
And it's on litho segment, right?
Yes.
There are no more questions at this time. And I would like to hand back to Dr. Gotz Bendele for closing comments.
Okay. Well, thank you. Again, thank you, everyone, for taking your time to speak to us. I hope I was able to answer most questions. If you have any additional questions, feel free to reach out to Franka. I hope to speak to you again, not in 3 months, actually, but the next call will be in all likelihood for the annual results at the end of March. Thank you, and have a great day.