ACLS Q3 2024: China revenue share to normalize at 40–60%
- Strong Position in Silicon Carbide: The executives emphasized the long‐term secular growth of the silicon carbide market—with significant opportunities driven by EV applications and process maturation—even as a temporary digestion phase is underway in China.
- Attractive Upgrade & Aftermarket Opportunities: The planned transition from 150mm to 200mm tools represents a robust upgrade opportunity, as existing tools are upgradable and can drive recurring revenue through aftermarket sales.
- Resilient Supply Chain Management: The company is actively optimizing its supply chain, including increasing localization and low-cost second-sourcing, which helps mitigate risks from cross-border issues and supports margin stability.
- Soft order activity and low bookings: Executives highlighted softness in the general mature and power segments—especially in China—where customers are digesting prior capacity investments, indicating a potential near-term revenue slowdown.
- Declining revenue share in China: While China was strong in Q3, guidance suggests that, post-normalization, Chinese revenue may decline both in percentage and dollar terms, which could weigh on overall growth.
- Delayed customer capital expenditure: The ongoing "digestion phase" has pushed out purchase orders and delivery dates, suggesting that customers are postponing new orders until existing investments mature, which may lead to diminished near-term demand.
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China Revenue Outlook
Q: What are the future China revenue percentages?
A: Management expects China’s share to normalize from 71% in Q3 to around 40–60% in Q4 and early 2025, with lower overall dollar values as the mix reverts. -
SiC China Outlook
Q: Will SiC revenue in China be lower next year?
A: They expect silicon carbide revenue in China to be down in H1 2025 compared to late 2024 due to a needed digestion phase as customers mature their processes. -
Order Activity Trends
Q: How is order activity evolving?
A: Orders in the mature and power segments remain soft, with postponed bookings leading to a lower outlook for early 2025. -
Margin Contraction
Q: Why did margins contract by 150bps?
A: The 150 basis point decline was driven by overhead absorption, changes in product mix, and lower CS&I volumes, not significant pricing pressure. -
Memory Demand
Q: What is driving DRAM demand?
A: There is optimism around DRAM as customers optimize existing capacity and new fabs ramp up, with more activity anticipated in Q4. -
SiC Transition Opportunity
Q: What’s the 150-to-200 wafer transition opportunity?
A: Fabs are gradually moving from 150mm to 200mm wafers, creating opportunities both in retrofits and new tool sales as capacity upgrades occur. -
Supply Chain Localization
Q: Are you reducing reliance on Chinese suppliers?
A: The company is actively managing its supply chain by localizing and second-sourcing from regions outside China to cut costs and tariffs. -
GaN Opportunity
Q: How is the GaN business progressing?
A: The GaN segment remains a niche application with limited implant intensity, and management is treating it as a small, customer-specific issue. -
Tool Utilization Rates
Q: What are the current utilization trends?
A: Overall tool utilization is down as new system sales slow, although some memory HBM applications show a slight uptick. -
China Backlog Details
Q: How concentrated is the China backlog?
A: While detailed figures aren’t provided, softness in China has led to pushouts in backlog and a lower booking rate as orders are delayed. -
Power Capacity in China
Q: How is capacity developing in China’s power market?
A: Tier 2 companies are gradually ramping up mini-lines as they work to improve yields and reliability in the domestic silicon carbide market, indicating a careful digestion phase.
Research analysts covering AXCELIS TECHNOLOGIES.