Thomas Diffely • D.A. Davidson & Co.

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Executive Jeffrey Andreson confirmed the long-term incremental margin view has not changed, though the company is still on a learning curve. He stated the plan is to globalize the operation, with significant CapEx for a new machining facility in Malaysia. Executives Greg Swyt and Jeffrey Andreson explained the steel tariff impact is not significant, as it mainly affects certain U.S. inbound materials, while their largest weldment facility is in Malaysia and their Mexico operation is exempt.

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Executive Jeffrey Andreson stated that Ichor expects to outgrow its large OEM customers, who are themselves poised to outgrow the overall WFE market. He noted the NAND recovery is significant but still represents a smaller portion of revenue (growing from ~5% to ~7%) compared to DRAM and foundry logic. Andreson confirmed the company's physical plant has capacity for quarterly revenue well north of $400 million, with headcount being the primary variable managed against demand.

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Executive Jeffrey Andreson stated that DRAM demand remains strong, driven by HBM, and sees no pullback. He confirmed that qualified fittings can be used broadly. For longer-lead products, he noted progress but sees a major inflection in 2026. Executive Greg Swyt added that as the mix of next-gen gas panels increases, it is realistic to expect upside to the 25% incremental margin goal.

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CFO Lester Wong provided specifics on the EA business, stating it had an annual revenue of $25-$30 million, gross profit of $7-$11 million, and operating expenses of $20-$25 million. He clarified that residual wind-down expenses would be under $15 million in total, spread over the next few quarters and into fiscal 2026. President and CEO Fusen Chen added that the power semiconductor market is growing rapidly, with new products for power modules expected to contribute to revenue in 2026.

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CEO Fusen Chen identified China as leading the recovery in auto and general semiconductor, driven by legacy node expansion. He noted KLIC's dominant NAND market share positions it to benefit when packaging investment follows front-end builds. CFO Lester Wong reaffirmed the 50% gross margin target, expecting margins to improve with higher volumes, new products, and cost reductions.

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CEO Fusen Chen detailed the fiscal 2025 outlook, expecting a strong second half driven by capacity additions in China, with ball bonder run rates potentially returning to the pre-COVID $500-$600 million range. CFO Lester Wong explained that the company will recognize a $75 million reimbursement for Project W in Q1, which represents a significant portion of the original $105 million impairment charge taken in Q2 2024.

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CEO Russell Low expressed optimism about Japan, noting that initial tool placements for silicon carbide and general mature are in place, and he anticipates repeat orders as utilization increases. He explained that the transition to trench and super junction architectures increases demand for high-energy implant, a core strength for Axcelis, driving opportunities for both new tools and CS&I upgrades. He sees these transitions occurring in both new systems and aftermarket upgrades.

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President and CEO Russell Low explained that Japan is a significant opportunity where Axcelis is gaining a beachhead in power applications and recently shipped an advanced logic system. He confirmed that Japan and advanced logic are expected to be modest contributors building towards the long-term $1.6B model, positioning them as a 2026-2027 story. EVP and CFO James Coogan noted that some customer pushouts have occurred, extending the backlog's duration, with some orders now scheduled into early 2026.

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CEO Russell Low explained that customers are adding new 200mm capacity rather than immediately converting 150mm lines, creating opportunities for new tool sales. He also noted that existing tools are field-upgradable, which presents a future aftermarket opportunity. CFO James Coogan attributed the margin decline to a combination of lower overhead absorption, unfavorable systems mix, and slightly lower CS&I revenue, confirming no unusual pricing pressure.

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CEO Mike Slessor explained that HBM growth will be driven by continued HBM3E volumes, with a crossover to HBM4 expected late in 2H 2025, alongside growing contributions from a second HBM customer. He noted minimal margin difference between HBM3 and HBM4. CFO Shai Shahar stated that reaching the target model requires not just higher volume but also a better product mix and ongoing internal cost programs.

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CFO Shai Shahar reiterated the 47% gross margin target, noting initiatives like a new lower-cost DRAM architecture are underway to mitigate the current DRAM-rich mix. CEO Mike Slessor clarified the FICT investment is a strategic partnership to accelerate joint product roadmaps for high-performance compute, not for supply exclusivity, with collaboration on customer designs happening on tight cycles.

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CEO Mike Slessor stated that while share is strong with the leading HBM customer, he doesn't expect the same level of concentration at the other two makers. He highlighted surprising strength in DDR5, which helped drive record Q3 DRAM revenue. CFO Shai Shahar clarified that the Q3 Systems segment cost issues were one-time warranty and scrap charges, and the segment's high-40s to low-50s margin target remains intact.

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CEO Giel Rutten responded that AI will likely enter premium-tier smartphones first, which benefits Amkor, but it is difficult to forecast if it will drive unit upside this year given market uncertainties. CFO Megan Faust clarified the COGS question, explaining that the primary driver was the inclusion of production costs from the new Vietnam factory in Q1 2025, which were not present in Q1 2024 and impacted margins by approximately 100 basis points.

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CEO Giel Rutten explained that recent investments were in fungible capacity, allowing them to support 2.5D, RDL, and future technologies, and that the 2025 CapEx will increase overall capacity for a broadening pipeline including data center CPUs and networking. CFO Megan Faust attributed the effective tax rate increase to around 20% to the adoption of Pillar Two global tax regulations in certain jurisdictions.

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CEO Giel Rutten clarified that the unusual seasonality (stronger H1, weaker H2) was observed in both the iOS and Android ecosystems and he could only speculate on the cause. He corrected that the Q4 weakness was due to this seasonality (75%) and a device changeover (25%), not a substrate issue. CFO Megan Faust explained the Vietnam margin impact was about 50 basis points in Q3, will step up to a peak of about 100 basis points in Q4, and then taper off through 2025 as the facility scales.

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CEO KangJyh Lee attributed the flat guidance to persistent weakness in the low-end mainstream market (6-inch and 8-inch fabs), particularly in Asia and Europe, but affirmed that pricing remains firm. He noted that while Chinese competition exists in the low-end, Photronics focuses on higher-value nodes. CTO Christopher Progler detailed the technical hurdles of scaling specifications for G8.6 AMOLED masks. CFO Eric Rivera reiterated the capital allocation strategy, prioritizing CapEx followed by M&A or share repurchases, confirming a $100 million buyback authorization and a cautious stance due to the macro environment.

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Executive Eric Rivera explained that increased SG&A and R&D drove operating expenses, with about half the SG&A increase being non-recurring, and expects OpEx to return to 10% of revenue. Rivera and executive Christopher Progler clarified the $200 million CapEx is mostly for new capacity in the U.S. to support regionalization, not new facilities. Progler and executive KangJyh Lee described the mainstream business as healthy and growing. Lee projected continued industry growth over the next three years, driven by AI and regionalization. Progler specified that AI-related demand comes from peripheral circuitry, edge chips, memory, and ASICs, rather than primary GPUs.

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CFO Eric Rivera explained that a favorable jurisdictional mix of earnings drove tax benefits and that stronger performance in wholly-owned subsidiaries offset weaker results from joint ventures. He attributed higher SG&A to professional services fees and stated there was no update on the General Counsel matter. CEO Frank Lee confirmed that the mainstream business pricing is stable due to limited industry capacity. CTO Christopher Progler noted that Apple's decision on micro displays has minimal impact and highlighted the significant opportunity in high-ASP Gen 8.6 OLED masks, where the company holds a technology advantage.

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Executive Gayn Erickson stated Aehr remains competitive in China regardless of the lawsuit's outcome due to superior technology. He clarified that the main risk to orders is push-outs from market softness and trade uncertainties, not competitive losses. For flash memory, he identified the key drivers as the need for cost-effective testing and solving the high-power thermal challenges created by high-layer-count 3D NAND technology.

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