Tom Diffely

Tom Diffely's representative inquired about Photronics' market share relative to its largest public competitor, Texan, specifically comparing their sizes and trends in IC and FPD segments, and the overall health of the competitive environment, including the impact of U.S. reshoring and the mainstream business's softness and stabilization.

Answer

Eric Rivera, CFO, clarified that Texan has a larger market share in IC, but when Photronics' FPD business (where Texan does not participate) is included, both companies are roughly the same size. Frank Lee, Head of Asia Operations, and Chris Progler, CTO, emphasized Photronics' unique position as the only high-end merchant mask supplier in the U.S. and anticipated increased market share due to growing high-end demand and investments in the Allen facility. Regarding the mainstream business, Frank Lee noted softness primarily in China due to geopolitical issues and local competition, but stated Photronics focuses on higher-value product mixes (e.g., 22nm and 28nm technologies) with better ASPs to optimize capacity and margins.

Tom Diffely inquired about the expected revenue mix for the fourth quarter, the direct and indirect impacts of tariffs and trade restrictions on operations, the target customers for the new high-end multi-beam writer, and any regulatory hurdles for expanding to 6-8 nanometer node production in Asia.

Answer

CFO Eric Rivera confirmed that the Q4 revenue mix would be similar to Q3. He explained that trade restrictions primarily impact customers but also affect Photronics through tariffs on material purchases from regions like Japan. Rivera clarified that the multi-beam writer serves high-end node customers like Samsung and that the planned 6-8nm expansion in Asia would occur in a non-China location, such as Taiwan or Korea, thus avoiding specific restrictions.

Tom Diffely of D.A. Davidson & Co. asked for details on the mainstream business, including the causes of its continued softness, the current supply-demand balance for mask making capacity, and the impact on margins and capital spending. He also inquired about the geographic nature of the weakness, the year-over-year earnings drivers, and the initial priorities for newly appointed CEO George Macricostas.

Answer

CEO Frank Lee attributed mainstream weakness to low wafer fab utilization among customers in the power, industrial, and consumer sectors, but noted that long-term agreements help stabilize pricing. CTO Christopher Progler added that while end-of-life tool replacements initially constrained supply, new capacity has since been added globally, creating a temporarily unfavorable supply-demand balance amid muted demand. He clarified the weakness is broad-based, not confined to Asia. CFO Eric Rivera mentioned the company is using product mix to offset pricing pressure. Incoming CEO George Macricostas stated his initial focus will be on learning the Asia operations from Frank Lee and managing administrative functions, while pursuing a dual strategy of cost containment and market share growth.

Tom Diffely inquired about the strength and improvements Kulicke & Soffa is observing in the NAND market, noting that this contrasts with broader industry discussions. He also asked if the company anticipates a typical post-Chinese New Year ramp in incoming new orders, despite expectations of less seasonality.

Answer

Lester Wong, Interim CEO and CFO, highlighted very high utilization rates in memory, exceeding 80%, and increasing purchase orders, particularly in China where utilization is near 90%. Regarding seasonality, Mr. Wong mentioned already seeing orders into Q2 and expects fiscal year 2026 to exhibit more linearity throughout the year, not anticipating a significant uptick after Chinese New Year.

Tom Diffely from D.A. Davidson Companies inquired about the current utilization rates at core customers and the key drivers for the sequential growth forecasted for the fiscal fourth quarter. He also requested a deeper dive into the thermal compression (TCB) business, asking about its historical size, future potential, and whether its primary advantage is cost or technology.

Answer

CFO Lester Wong reported that overall utilization rates are around 81%, with general semiconductor at 83% and memory at 80%, identifying these two segments as the main drivers for sequential revenue growth. President & CEO Fusen Chen added that the TCB business is targeting $60-70 million this year with a goal of reaching $250-300 million by 2028. He stressed that the company's advantage is technology-driven, as its chemical-based fluxless solution is currently the only one in high-volume production.

Tom Diffely from D.A. Davidson Companies asked for the current utilization rates, the key drivers for the sequential growth in the fourth quarter, and a deeper dive into the thermal compression business, including its potential market size and competitive advantages.

Answer

CFO Lester Wong stated that overall utilization is at 81%, with general semiconductor at 83% and memory at 80%, identifying these two segments as the primary drivers for sequential revenue growth. CEO Fusen Chen elaborated on the thermal compression (TCB) business, projecting it could reach $250-$300 million in revenue by 2028 within a total market of approximately $1 billion. He emphasized that K&S's advantage is technology-driven, with its chemical-based fluxless process being the only one currently in high-volume production.

Tom Diffely from D.A. Davidson Companies inquired about the current utilization rates for core customers, the drivers of sequential growth, the potential size of the thermal compression (TCB) business, and whether its primary advantage is cost or technology.

Answer

CFO Lester Wong stated that overall utilization is about 81%, with general semiconductor at 83% and memory at 80%, which are the primary drivers for sequential revenue growth. President & CEO Fusen Chen elaborated on the TCB business, targeting $60-70 million this year and over $100 million next year, with a long-term goal of $250-300 million by 2028 in a projected $1 billion market. Chen emphasized that the key advantage is technological leadership, particularly with their chemical-based fluxless process, which is the only one currently in high-volume production.

Tom Diffely asked whether the increase in the Arizona facility investment to $7 billion was primarily due to added capacity or rising construction costs. He also inquired about the specific portion of the $950 million 2025 CapEx forecast allocated to the Arizona campus.

Answer

CEO Giel Rutten clarified that the increased investment was exclusively related to planned capacity expansion, including twice the land area and an option for a third facility, and was not due to higher construction costs. CFO Megan Faust stated that the increase in the 2025 CapEx guidance to $950 million was driven by more visibility for 2025 spend, specifically for Arizona, with more details on 2026 CapEx and Arizona timing to be provided at the next earnings call.

Tom Diffely of D.A. Davidson Companies asked if Amkor's long-term view of the automotive and industrial market has changed due to the potential factory closures in Japan, and if the softer mainstream business includes the power segment.

Answer

CEO Giel Rutten affirmed that the long-term view on automotive has not changed, with the trend towards advanced packaging for ADAS driving growth. He clarified that the consolidation in Japan targets mature products, driven by local market difficulties. Regarding the power segment, he noted that while the silicon carbide market growth has moderated from very high expectations due to the EV market, the long-term fundamentals remain strong, and Amkor's investments, like the facility in Portugal, are proceeding.

Tom Diffely of D.A. Davidson Companies asked for an update on the competitive landscape in China and for details on the backlog's composition and shipment timing.

Answer

President & CEO Russell Low described Chinese competitors as still immature and primarily active in accounts unavailable to U.S. firms. EVP & CFO James Coogan confirmed the reported backlog consists only of systems orders, extends into 2026, and provides a solid runway for future revenue.

Tom Diffely asked whether the current hiring and retention issues are a new problem or an ongoing challenge. He also asked about the potential tax implications for Ichor from recent tax legislation that a peer had mentioned.

Answer

CEO Jeffrey Andreson described the current hiring ramp as more challenging than previous ones, particularly for off-shift clean room roles. CFO Greg Swyt stated that due to the company's US tax position and existing NOLs, they do not expect any material near-term benefits from the new tax bill, though they will utilize them in the future.

Tom Diffely from D.A. Davidson Companies asked about the expected P&L impact from the new Texas facility over the next few quarters and its long-term benefit to margins. He also questioned if similar startup costs could be expected when ramping with their third HBM customer.

Answer

CFO Shai Shahar stated that the company is still finalizing plans for the Farmers Branch facility and will provide updates later, but noted its location in a lower-cost region is key to the medium-term margin improvement strategy. CEO Michael Slessor clarified that the Q2 startup cost was a one-off issue related to a single, specific design for one customer and that he does not expect similar issues with other designs or customers, as the root cause has been resolved.