VECO - Earnings call transcript Q4 2017

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Operator

Good day and welcome to today’s Veeco Instruments Fourth Quarter and Full Year 2017 Earnings Call.

As a reminder, today's conference is being recorded. And at this time, I would like to turn the floor over to Mr. Sam Maheshwari. Please go ahead.

Sam Maheshwari

to conference quarter call. welcome XXXX full and results financial you, our and fourth year Thank I’m on is CEO. the Maheshwari, call Sam and today John presenting Peeler, with me our

Schmidt Investor introduce the finance on our and board providing have capacity. and and has for for new new to I comes Veeco team pleased I at in to years. her I’m Bencivenga. Anthony wish this this addition, best. head In thank during also Anthony of interim seven Relations, been are Anthony from to Suzanne our help want John excited period all

As Safe of I’ll Harbor over call our first order turn Anthony the statement. read business, to to

Anthony Bencivenga

you, with slide very encourage today's note express website. is Instruments everyone. slides Good the on Please afternoon follow veeco.com. material. release Veeco or presentation copyrighted webcast. without we the to Thanks thank It recorded Today's We call prepared by have and to being Veeco be rebroadcast Sam, that you recorded much, along accompany is This permission. a cannot Suzanne. is and earnings available on Veeco's

are our circumstances update statements, undertake reports the X-K, on Form press Report consent to after disclosures, implies report any or Form Analysis makes this future market subsequent those of the of in and extent products, market our discusses expectations, company's expectations not or participation date reflect Your to obligation Annual does Form Management's made forward-looking the differ on about and future such to XX-K materially recording. of and Discussion number call conditions, Business and company's on are any the events about sales on future and acceptance, to XX-Q, in uncertainties quarterly reports Veeco and statements. statements forward-looking sections future, Description to earnings cause future such made. actual results To that the to from factors and otherwise a this call, current that These shareholders, subject including are discussed statements of statements could the releases. risks and the

may regarding I'll During opening is to GAAP Information measures. the management our With for John that, measures call non-GAAP this measures, call, reconciliation Peeler address over remarks. financial financial to of website. performance, turn available including non-GAAP on such his

John Peeler

guided We at million, the Thank the and you, quarter of and of sequentially end Anthony. results. with reach earnings million. fourth completed to with per our executed momentum. $XXX we're well $XX.X non-GAAP strong in competitive XXXX entering by a represented $XXX increased high came share grew the range. positive the consecutive million, XXXX quarter operating revenue in strongest to income Bookings Non-GAAP year, We quarter and above third for of $X.XX, X% environment,

completed which expected. for stream, and integration We Turning synergies transformational greater to was a the originally well a truly is with whole, the year with XXXX the us more is than acquisition a Veeco. of providing Ultratech, we as year diversified revenue proceeding

healthy financials. call generating give serve, markets bookings ability also let our leading in lastly, in Jersey And We into go Sam over end these the markets, growth. me and us on each a detail but confidence to for accelerate turn in profitable of review of We’ll first the our to margins the nearly good we XX% facility, annual gross demonstrate New the manufacturing completed our consolidation delivered we and non-GAAP savings. our position

Sam Maheshwari

Thanks, performance. John. our non-GAAP I financial will discussing Today be

GAAP the non-GAAP and find reconciliation and results press a our between website. can detailed release on You in

beginning UBM RF received orders growth quarter Focus then revenue to with of as multiple multi-tool we Packaging. and Packaging, and let etch such MEMS markets than on front-end our in Advanced QX orders for RDL another order give were you see most bookings Filter compound semi up customers large XX% provide QX booked Advanced tools multi-system and doubled The and more our display In I'll $XXX First, represented Lighting December. order for public details. markets, were color bookings bookings we as markets, from One are in semi me supporting and In million well tools, and bookings, sequentially some wet in us. QX. was China. PSP a in recovery Lithography a etch multiple as made etching. We lighting, solid from

diodes, addition, and PSP bookings was capacity received for products orders front-end production semi, ROY LEDS, we and orders for to MOCVD growth driven VCSELs. LSA several In by support of In two systems. laser

lighting this Now revenue The in of display, distribution high of to showed was Veeco and China in moving XX% details. revenues at a represented QX. QX Taiwan. revenue of Blue Malaysia, semi LED and LED shipments Korea, QX compound concentration for XX% revenue. sales to revenue of total majority customers

Scientific of X% to end XXXX, storage each in sales Packaging, from MOCVD Industrial the first of Advanced due and the Systems XX% revenue, $XX Geographically, XX%, from Veeco year full and blue revenue. from to of the half sales of SPECTOR of quarters. shipments up For At million quarter. increased total China total China was in strength visibility MEMS semi, by were the into and driven at it Korea to the driven previous Taiwan. tools XX% beam QX industry coatings US LED by for was and a XX% us XX% front-end the was of filter XXXX. those was prior gives and world Backlog market. XX% optical of $XXX Rest to good Revenue up was Malaysia, million, orders in data revenue. softness ion markets, as revenues, as total well businesses in by made of RF EMEA

in of growth front-end with RF We for strong a to semi expect market. us, XXXX growth and stronger be Advanced and MEMS Packaging, year Filter

diversified As expect than a to more XXXX. result, be we XXXX

Now turning highlights. P&L to

revenue the range. sequentially was from at million, On end solid, Our fourth non-GAAP coming revenue near above high year income up efforts. XX.X%. non-GAAP non-GAAP of with Full of our reduction all gross was guidance non-GAAP million. margin a and $XXX,XXX. X% midpoint or basis, QX $XX and margin QX guided benefit XXXX in non-GAAP taxes ongoing operating was QX. million. $XXX was cost was line OpEx a gross XX.X%, the a were revenue reflecting EPS year $XXX favorable at mix our QX quarter full performance of was guidance with margin, product and in QX gross

given saw no we With new we of see tax the are amount XXXX law, and NOLs carrying. the US we XXXX non-GAAP changes to material taxes, no taxes, significant to impact

million we $XXX As of in year-end, NOLs. have approximately

XX share Finally, QX non-GAAP EPS of count million was on a diluted shares. based $X.XX

and $XXX of $X increase to from investments, cash million balance flow Now an We QX, short sheet. the term of QX moving ended by operations cash million million. driven $XX with in from

tax. US to year-end, of earnings As approximately Veeco’s $XXX million, were of foreign subject repatriation

burden However, no obligation the tax tax able US were utilize cash income and new tax the credits with US foreseeable foreign and credits we our future. expect to to tax law, in R&D eliminate

our result, US a offshore the no side. tax As longer is cash subject repatriation to from

for on we the announced $XXX of at $X the still the to up the few countries. on million in the was in in total of million amount million. getting However, December last December, And the Inventories debt quarter, share XX. a of growth $XXX Long certain notes. it $XXX value would as program weeks taxes in were withholding XXXX. million, repurchase bought And term convertible sheet subject carrying be finally, representing in shares are recorded balance for we ready we for

and are million Now between $X Non-GAAP between XX% share. Non-GAAP in is expected revenue are is positive $XX XX%. expected expected Non-GAAP turning million. margin $XXX $X.X and beyond Overall, is $X.XX million. is between income is expected between sales expected $X QX and to between GAAP Non-GAAP And expenses operating diluted color for tax QX loss $X.XX guidance. diluted per negative between and some and gross million. $X.XX million. EPS million expecting million strong $XX growth over QX. $XX Non-GAAP expected we expense per XXXX. million $XXX between XXXX expected operating share. and additional now is $X.XX and

end margin XX% the towards at we first to of margin, gross range. guided gross previously XX% time For half in the this coming higher see

Additionally, be with tax half non-GAAP that, with we update. to With the tax to back expect million, the expect around turn first some we half. quarterly And variation to annual I’ll than second to a John margin gross be call it. continue business expense $X new higher law, for

John Peeler

RF begin like portion $X.X filters, and billion Advanced MEMS the display I'd areas, reviewing semi, end Sam. markets, encompass this Packaging, Scientific to four by key Industrial. total and of and currently lighting, and semi, front-end LED Thanks, the and following our in call approximately which compound size

these autonomous along We’re can to the XX% packaging, very and are growth are well this of Driving you billion. micro estimated key XD leading of vehicles, $X.X markets. which including LEDS, sensing, level leverage multitude about reach into bottom edge intelligence, all growth RF. wafer drivers, technologies, and to grow our XXXX, by see of the a of Markets slide positioned four artificial XG

technical let market markets. into detail significant of filter etch pillar top level and we saw Advanced and Ultratech We issues, include market, with the coupled OSATs packaging call end on of the business, we will a have market. and believe penetration Advanced each serving acquired of me from IDMs Packaging business have applications. four our in level pickup demand tier that key Now wafer as Lithography RF Businesses into our and wafer Furthermore, from these smartphone PSP. resolved our strengthening copper a more go Packaging, mid-level a the by packaging both we MEMS for mainly the wet clean and stronger driven see we applications fan-out business

annual business revenue in at leader, to both and from of to capacity address wafer The XXXX. market added Ultratech strongest and broadened demand. Lithography the XXXX we volumes mass RF has PSP, our is compound also see a providing years. our critical grow substantial in increasing selling combination seeing increased had MEMS, filter demand packaging sensors to According from PSP directions. reports, two rate the synergy We're expected is level a and opportunities almost offering, is of and to pickup and product this As cross expect manufacturers, XX% to industry growth as quarter

For by data the growth automotive, from a demand and longer infrastructure. underpinned mobile of markets devices, term, XG big is these range in applications, including wide

our market lighting, to in We LED compound according semi share in LED in for to was And remain turning IHS, the leadership and XXXX. the GaN position Now XX% MOCVD. market. display

market remain utilizations reporting Additionally, robust. and are expect XX%, over most we regions of fab the to

cost increasing seeing RF strength general we're platform excellent. in greater of Outside customers lighting, such devices. our ownership. and from quarter, photonics has order as we shipped to large introduced systems since orders XXX last XXX the Chinese customers, multiple Lighting. And EPIK EPIK we've we for September, several and During an been from areas productivity and MOCVD received Feedback enables of Focus lower as the China

has another Propel Just OSRAM month, for LEDS. MOCVD our diodes, These systems RF production volume systems. power laser we devices, traction. are last area KXXXi and announced VCSELs high that is and follow placed semiconductor electronics, we're of where gaining for photonics within orders designed

manufacturing. systems, sensors for opportunity the in drivers about excited in vehicles, autonomous used addition and driven high in are to PSP us unfolds. for speed the grow Our our in include And transmission data by for centers. year data XD we're Growth very MOCVD smartphones, this as to LiDAR systems, market requirements VCSEL meaningfully sensing,

confident in as such are as LEDS, applications smartphones, share performance in needed augmented in meaningful areas such capture TVs we're VCSELs, our to advantages where and in Beyond devices. ability efficiencies market reality power micro

devices areas semi and such We’re as XG compound also power RF electronics. driven well in positioned

merits into Before pull segment, the patent business. customers to XXXX. I'm and captured successful that the that regard to with pleased and we're to made from technology market announcement LSA industry dispute, approximately in customer in in our for leaders look Carbon, to we're next our of to have share in Thursday. market With happy I We SGL for with have we to and we resolution we last products, the that, turn business report MOCVD demand tools. the serving class China, our as forward equipment in our on best the semi. litigation strong I service. competing and front-end AMEC settled want turn back front-end LSA let's our continue and to reiterate business, With and and leader remain in usual Taiwan saw China, and XX% market semi the

nanometers working X Our new nanometer nodes. tools integrate X and to process customers their are our into (mill)

customer working process distinct remain unique We’re foundry with has also forward business our that about meeting We large tool other very in our third our with architecture and requirements. prospects customers in advantages a optimistic the engaged for regarding a evaluation this and technology facility. numerous believe going

semi EUV customers. we’re Beyond market, launch tool to with adopted customers the And three at blank lastly, development etch Seeing for next EUV industry for mask XD interest year. evaluate manufacturing. device memory working ion DRAM them of as laser for from for inspection anneal, XD our they we're closely their applications good working STT-MRAM in tool also our system. for seeing as have manufacturers fabs for embedded with deposition MRAM. with the volume who interest leading we we're very defect-free, applications. great strong system currently In STT-MRAM of looking photomask beam wafer record NAND, actively are logic and XD And we're high inspection And tools our in our the patterning traction becomes

revenue X% our growth. Turning a market, and year, with was to industrial scientific XXXX strong

tied strong annual Bookings optical for applications. fill components It technology were requirements drive to and good systems laser, storage and with hard telecom year disk coating based year manufacturers was a bookings. Our data continue the ion systems. in optical broad and specific with also beam R&D good as to momentum ended capacity

also to XXXX, new generation’s and beams closing, beam R&D In got clear we a address as magnetic Lancer, look next Finally, we've sensor we etch objectives. to system ahead applications. launched ion

Ultratech. First, forward. business we integration Adding goal our to going will instrumental of complete in business diversify to our has our been the Ultratech

we exciting many announcements of launch Second, products growth tuned the focused. where as plan opportunities we're a Stay to to new the year for unfold. address number

in markets. growth four to target plan we our Third, of revenue deliver each

annual solid previewed on board. we positive Sam as in ongoing to dynamics and call. bookings solid exit Fourth, a growth should the end more our a trends, addition In markets of to each healthy revenue backlog across lead earlier diversified XXXX to company, the plan

With balanced operational and With I to than two a Our lastly, faster earnings result in for our the more continued would questions. and focus Packaging, ahead. on and business. can And filters, we’ll mix accelerate happy generate earnings significant should growth, revenue. strongest semi areas be of front-end Advanced year RF your and we excellence, operational grow MEMS leverage Sam that, take in

Operator

[Operator right. Instructions] All

Edwin Needham have & from First we Mok. Company,

Edwin Mok

Good taking for my on side. cost Thanks job question. the

I XXX have, there? have some on guidance, and next the into of follow remember talk then revenue XQ out was there be your I What to question Is happened to year. I ups two guidance about factored need First pushed recognition that please.

Sam Maheshwari

Yes, a so QX, installed demo the QX we is is shipped timeframe, in tools few capability we and This QX guidance and XXX Sure, are Sam. those remember, Edwin. expecting revenues, tools recognize part as you to that are timeframe would planning to had them so we revenue the be and here. of then in provide

Edwin Mok

half pick want things Packaging, near second you Advanced Okay, to is helpful. the that's it up It I also think have on you ’XX, that packaging suggest. still RF year? then of more to you linearity are do starting packaging MEMS I and And the see which and RF see term more understand, is you and from the said starting is before what question great or of guys throughout looks back like advanced business this is pick advanced up MEMS shrink market. I as and how would is guys to

John Peeler

the So MEMS to also Edwin, we And did peak growth. grew Packaging area areas back grew. or and the prior levels pick have we substantial both substantially, up, Advanced anything, RF but saw not

and grew So both both our I of in these grew businesses think bookings. in sides areas major

Operator

anything did Edwin, And have you further?

Edwin Mok

Hey.

There’s Sorry with phone. that. wrong my about something

high guidance - due the first guys still mostly sentiment, there's are about be there's mix gross concern margin you Is going range. end you more front? at think margin I Do in derail And the to the or work of to competition is of in price doing ongoing that So potentially obviously, the half see said MOCVD. you your outlook? with terms margin that

Sam Maheshwari

Sure, Edwin. I’ll that take question.

had of XX%, a in margin terms driven remember would XX%, It end XX%. half to range, around towards in by closer gross the previously and the XX% couple now factors. coming So you for higher in is guided of we our first it's coming range, XX% to the of guided

the mix. is I think one bit a of we little better have first one

Our talked expected, about, bit previously than are particularly stronger front-end Packaging, what a little semi. John other Advanced MEMS, RF and businesses we also like

businesses of us better we consolidation manufacturing completed providing also our efforts some other little mix. these New So in bit then are a And related Jersey.

So that leverage on are providing us good cost some the side.

little proportion terms year, end. both the higher those together And what's in higher then guide bit But bit in to bringing down combining towards low little a look of us what I the say happening the mix at gross QX. mid pick enable from is China the So things and entire in here towards half, margin first are mix up a numbers QX kind these is which of on overall as Edwin, is to you expect them have we of business, of the that actually margin to XXs.

we overall, our target gross the mix gross that be half. remains in towards I target more, the margin favorable so to continue year So and more second XX% or with exiting to margin expect much

that's we as answers the year question. how that shaping your now. see So up Hopefully of

Edwin Mok

I Thank all That’s have. Great. you.

Operator

Bank. have with Moving Vishal we Deutsche on, Shah

Vishal Shah

into under currently gross that Should your the you Thanks there? do settlement to for some China or is look you are see low XXs margins taking that you do question. expect XX% done, margin, Sam, the what now we or my seeing high just still like? margin look improvement

Sam Maheshwari

Sure.

disclose the or product region perspective, customers. any of margin a gross China I say not customer from Pricing, or to specific equation going any or MOCVD margin that terms think would specific I that continues think balance we of in forward. and average group gross performance we're I to curve say business remain price really a of kind line by our I So do corporate below gross for any remain But the would going to margin. continue competitive. of would overall

business. that’s So how the are we managing

our that higher. if may have average, make mix XX% businesses for corporate it decision than lower businesses low that. than a think I some higher then suggesting, And in that. on some you to just are is or business, And are as remains margin, that we and different target there some extremely

Vishal Shah

Thank your think the great. settlement what assume between in do the you dynamics they their out Okay, of that's start what where the that - then were overall share talk customer you shakes the can about you? you. does? market before? systems doing you two can market So basically terms And of just way competitor to just shipping And the

John Peeler

we of not first disclose So, to agreed settlement all the terms.

I’ll So to carriers to and have AMEC. wafer both provide be will to the that. around SGL market for be cautious able Veeco

We will service compete with and products. our our and our technology

the healthy to remember, only new out. market, product can market competitive marketplace. you go be Clearly back in a and it year. two last in If been we business a market we have launched for specifically and were the think there going the we'll China for where and town. winning we to and company We’ve a orders, win where we're we to player we not the battle going the in were There’s compete

lower approach to deliver and work to cost has ownership, and cost. ultimately that Our better products have our a been of innovate customer's historically better

to back state. more it's think I a So normal

Vishal Shah

strong other last you risk outside of product or of of you still mostly Are as mentioned That's other into China. spreading just think offering, China that I focused risk question. on the know you seeing only past most competitive is do in being your the that regions really this also well? markets the great. some competitive is One

John Peeler

other any in traction any region. seen haven't We

do job we our there great to and So customers. a for continue work

Vishal Shah

John. you, Thank you, Thank Sam.

Operator

Nicolaus, we From Stifel have Ho. on. Patrick Moving

Patrick Ho

your the XX% give overall a Thank different MOCVD Or John, the more You help do you little as about demand the a XXXX guys? will that you more do guess higher. at much. rates, rate tiers? you color Is for which on sustainable fab drive and I those for very tier utilization talked top only see MOCVD utilization you outlook environment? the broadly more And - progresses? see among can

John Peeler

a tier their high China quite rates. little these and we two the a rates expect of in XXs might is XXs. running low being the XXs much their kind XXs pretty this but in high. China, Taiwan's utilization lower. equipment But they're at solid the is tools year full upper upper year. So the the which be in Clearly in Everybody in added, capacity. are marketplace for overall, or in are Korea the

I had number, XXX think XXXX. in think the market maybe number We that we some over significantly even will XXXX. in reactors over that plus grow

are the we're a photonics, RF. the think for come emerging solid growth year the a There looking think technologies here market looking orange, term. at and also market laser growth more applications starting And or good we're it's that So of more the which Veeco. lot have in are whether XG I out red, and VCSELs promise, longer yellow, diodes, to prospects gives over that we for

Patrick Ho

helpful. key follow Was of growth guess briefly you about my and opportunities and the PSP. in of the the we of kind synergy opportunities That’s to past? quarter? MEMS still to growth Or was really of that up some the driver of and And prepared the cross talk the Packaging market RF some you that those in I Great. remarks, with cross haven't yet around synergy did some more Advanced you in seen talk the turn your mention December question in terms starting the about

John Peeler

back, I cross stronger a OSATs Ultratech has the The would Advanced Taiwan. a position Veeco potential and more say us. Sure. Packaging clear in considerably had and position selling think if markets. stronger it’s and a Whereas in stronger area. And in RF the become MEMS we to had position very in

MEMS from and bookings believe. thing. They but penetrate in we real other they in this a while. that those market improvements applications, really of sales those, in most help pan So and the OSATs Taiwan tools Ultratech we're RF accounts deals, seeing helped was of year, take our new you opportunities working similarly, in can places. in And on will sort the growth Lithography and have PSP But QX Ultratech in - to out get and in the people start

there's some - both. So but of

great to the that to see bigger we it's be the think side are selling I going synergies anticipated. than on

Patrick Ho

thank Great much. very you

Operator

We'll move with to Daniel KeyBanc Markets. Baksht on Capital

Daniel Baksht

Question thanks. reason XXX not, is China received MOCVD guys other Lighting? on Focus orders part additional you that Have you Yes, the think why second in of if half the EPIK than business. And margins are looking half? the XXX then EPIK better the really China Are tied point? to outside business. XXX see And demo more or at than question, first orders the of this EPIK separate separately,

John Peeler

We have seen additional EPIK orders Lighting. in China beyond Focus

Outside And XXX. the to so the that's to multiple the customers to at business. more to product we're of want how EPIKs tied they EPIK approach winning customers. they than design and how are XXX the - the of target due where needs the of kind And we China, the -

Daniel Baksht

separately, than slide doubling shows helpful. in And then Okay, it revenue more on XXXX. eight, that's front-end

of and Just I outlook, secondly, wanted is that that digit understand mid-single is - think to that pro-forma growth a some kind including of And why Ultratech? based kind here. consensus CapEx showing above is on for - is

John Peeler

Yes, the and it's business I grow. really the business. do expect have we mean new to products emerging traditional applications. LSA We LSA in

in We revenue from would to There new. year, before. those have are get tools those for this melt. and the had was none market some expect We tools out

beam on, STT-MRAM Moving product, we the ion etch. the have

our substantial for super-fast. well. business super-fast finally, inspection been And revenue year. doing not gaining it's and mask for product It’s one plan, and they're a for revenue blanks. customers The then that product. And significant EUV has at in pickup a possibility uptick orders seeing very for the in last momentum and we're possible. activity but in We maybe tool orders product during for been had really the There's year. We’re that that's a expecting

than products, the are other all year revenue gaining in prior acceptance and the small quite So LSA, ramping. and where these all was they're

Daniel Baksht

helpful. very That's Thanks. Great.

John Peeler

beam we technology. maybe applied it to lack that a or in around brought really improved Packaging, technologies compelling of critical similar in on have thing new seeing products very some the had we've to Veeco that. Ultratech mass, technologies we Xsome sides MEMS and was Veeco and which frontend, ion but both to created weak Veeco emerging critical add RF. one our really we we're in for the these mass spots, STT-RAM. account was either mass. opportunities This lacks But acquired had Advanced some just Ultratech coverage that had across on etch, And the putting the accounts. now But them world. And and stronger critical together, And business. by lot geographically and happened really together, improved Both And as companies our reasons

So out very nicely. I is the think front-end panning

Operator

All right.

Moving is on. line Mark, your open. we have And Benchmark, Millar. Mark From

mute. Your phone may be on

you. Steelhead unable Right. to no response, go We’re on. We'll to hear And will hearing instructions]. we David with [Operator and move go ahead Duley Securities.

David Duley

of any bought my that it? the from back has changed to you think structural was reason taking prior you the business I question. there see for when traditional wondering, profitability old as Thanks business is Ultratech ramp up to levels to revenue, of

Sam Maheshwari

Sure.

say last line. good is quarters. the bookings So business on We I beginning compared business Ultratech to that had one or the would two Ultratech recover to the

it it was on I previously. to business where think there is to more needed or effected get Ultratech back ramp up

In in the doing achieving the of business, the we're profitability synergies that of we terms Ultratech overall highlighted. have very well terms towards of tracking

So we I good. would is like had OpEx That looking that to $XX remind cost about in reductions. million

the are - ERP of them. ERP new systems putting We middle for up in

well. on going very that So is

was working material also third that mentioned, costs selling. John cross discounts the on and with area And side supplier bringing some down We’re already then activities those. like through on the

are combined, of true things profitability definitely these potential or profit we the three is Ultratech. that all So it improving

answers begin and flow I think we more need that then some to will see the way. robust up Hopefully to bookings in momentum question, or David. a the pick more order lot your

David Duley

Do I year? you. it And you mentioned that some Thank given share. Did I address? the margin And I previous business what it that the there’s was just your the was think you market you MOCVD market determine - of in XX%? guess Yes. say guess to low is too

John Peeler

Yes.

But mentioned Extron was was market sort off previously remember, or GaN previously I kind And think remaining the coming where it supplier the so. in thing. XX%. blue that market IHS probably of the after out was Veeco of had we and that period share a were - had we XX bailed

we of gone a focusing passing there. the to business us is transition and really strength and value is too There and value, add through that's kind customer on products table. where business on we've the our to have we're and So what margin take that low for bring

every It’s just out every not win deal worth to We’re there at not cost. it.

David Duley

just big you guess of there as perspective, you a should in years? couple the outlook a year you guys’ do expected fan-out the it’s And from bit year. broadening will see give if Good. bit generally And just I'm I flavor wondering, last spending think that growth on, actual next strong the be out a Advanced in kind year. if and was customer calendar been us do calendar one fan-out so, as little I many calendar volumes the you how think more from of and I last there pause think in ’XX? could customers that’s there ramp and production market business, this far And in Packaging lithography

John Peeler

ramping see out. do the business We

devices. moved to people smartphones use it. from But - a of some wafer and a Chip were were longer to that away term, planning moved emerging new variants I think while, packaging level fan-out need We for other meet the performance there is want had in fan-out kind there to of characteristics a meet or some to that and Flip we took that and companies pause. and

more on market not think to customers. here is or as We that's quite this we that lumpy healthy customers working other now. buying what So see And see some make it tools. will a so moving we market other

level on for packaging extra CAGR to that of the meet XX% that. a years, next capacity and at wafer looking will number require We’re

be this think better I a will So market.

David Duley

sort capacity how actually production of So what any next customers many guesses year to might put place from can see? you in

John Peeler

there something new I but on and customers it. working we’ll it's don't And really large a more number, have some handful a approaches. are than hard with do

Sam Maheshwari

the key providers. Yes. David, we are working with OSAT all

we with Of good them. course have relationships very

chain. supply course the are a just we also them. large And then handset in will work one makers, number there So the maker. And of handset of not

is we to will stages. many those in XXXX, working work potential them. many are there exactly but say come and customers are obviously of we definitely These different Hard customers. within with at all how with So different

David Duley

Thank Excellent. you.

Operator

[Operator instructions].

to Mark with we'll Benchmark. back move Next Miller

Mark Miller

a had question. Have Just hi. you -

or Have to sold VCSEL What’s a VCSEL your status you in had question about manufacturers with that? they are the tester? Just reactors opportunity.

John Peeler

to We have we've reactors sold beyond VCSEL that, manufacturers. And sold PSP also products.

we’re manufacturers think to I and two lines VCSEL different work So well us. selling proven into for product that's

products. sell may business, PSP is not that penetrated likely interesting MOCVD is of us the a need almost PSP - and for be customer them wherever we’ve from one buying more things but a On has now, our They we system, more. the

[Operator products those well for go So actually they're not one necessarily combination. one, good instructions]. a but together,

back move Benchmark. to Mark with we'll Miller Next

Mark Miller

of sales Can future, foreseeable you weighted estimate in the it be what will of, least that XX-XX in to your outside percent terms China? heavily more MOCVD China? China versus at reactor or go of towards Will

Sam Maheshwari

blue talking as outside are - are are Malaysia. a So of mentioned, market, good. Mark, and utilization assume or well levels regarding you China, year where in Taiwan in capacity has guess here. been I been XXXX, LED Look, MOCVD XXXX as China, as I market. has Sam John good there the particularly blue expansion Korea, the GaN you And

it country So know orders. a And then various say, of in China we clear countries. timeline. less terms have world not of suffice expect rest it in or the and a see well. to pivots expect grow as towards How we to But we grow China growth bit the is much would until should different to little

John Peeler

Yes.

GaN, I businesses we’ll grow in grow and - think China. with outside of outside sales of those outside of China, see faster we'll the blue

Mark Miller

in Can the what your you of percent final foreseeable least estimate future, Just terms at question. of, the in that

optimistic level wafer fan-out. about You’re

think recently month from suppliers for Now, expecting known sourcing wafer iPhone recent of XX the has this decisions and cut up on that level hiatus then half Apple's it's level? are really back well iPhone But Apple using they a things same I these suppliers on for year. believe several wafer impact you fan-out. in pick the maybe second the the six chips are and Any XX, in

John Peeler

that’s much good pretty were where I there. into visibility we’ve going No. - pretty had things

customers. be Advanced and a our market more of the surprise broader us. has based in to a So that's not goal win to try Packaging area really serve And to

we're very - focused that's So on that.

Mark Miller

you. Thank

Operator

John back for And that over turn conference to presentation. and gentlemen, remarks. like to ladies does CEO I'd closing conclude Peeler, the any today's

John Peeler

you and us look you forward seeing or on the to will and field tonight, today thank Well, we for Thanks. joining will we in the next call.

Sam Maheshwari

Thank you.

Operator

disconnect. Once you earnings today's us joining may We again, appreciate include does ladies and that gentlemen, now call. you

Veeco Instruments (VECO) 13 Feb 182017 Q4 Earnings call transcript