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Tower Semiconductor Ltd (NASDAQ:TSEM)
Q2 2021 Earnings Call
Aug 2, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Tower Semiconductor Second Quarter 2021 Results Conference call. [Operator Instructions] Joining us today are Mr. Russell Ellwanger, Tower's CEO; and Mr. Oren Shirazi, CFO.

I would now like to turn the conference over to Ms. Noit Levy, Senior Vice President of Investor Relations and Corporate Communications. Ms. Levy, please go ahead.

Noit Levy -- Senior Vice President of Investor Relations & Public Communications

Thank you and welcome to Tower Semiconductor's financial results conference call for the second quarter of 2021. Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our Form 20-F, F-4, F-3 and 6-K filed with the Securities and Exchange Commission, as well as filings with the Israeli Securities Authority. They also available on our website. Tower assumes no obligation to update any such forward-looking statements.

Please note that the second quarter of 2021 results have been prepared in accordance with US GAAP. The financial tables and data in today's earnings release and in the earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirement is established with the Securities and Exchange Commission. The financial tables include a full explanation of these measures and the reconciliation of these non-GAAP measures to the GAAP financial measures.

Now, I'd like to turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Russell Ellwanger -- Chief Executive Officer

Thank you, Noit. A Pleasure. We're quite excited to share with you our second quarter results and business activities. Our revenue for the second quarter of the year was $362 million, a record for Tower, representing 17% year-over-year total and 26% organic growth. In the order of revenue dollars, the year-over-year organic growth was mainly driven by RFSOI at over 40% year-over-year organic increase, power IC at 35% year-over-year organic increase, image sensors 30% year-over-year organic increase, and power discrete at 23%.

To note, all business segments demonstrated growth in the second quarter. We guide the third quarter of the year to increase to a midrange of $385 million, representing year-over-year 24% total growth and a 38% organic growth and breaking a $1.5 billion annualized revenue run rate. This should be driven by a further and large year-over-year increase in RFSOI and image sensors with all business segments expected to demonstrate growth.

Our customer demand and served markets are strong. Hence, we expect continued top and bottom line growth in the fourth quarter as tools become qualified for production, enabling further increases in high-value flows. To support continued growth, based on our customer demand, we continue to execute the previously announced capacity expansion plans as well are adding 200-millimeter new capacity, which will be addressed with more details by Oren.

Towards specific large 300-millimeter growth, we signed an agreement with ST Microelectronics. In this partnership, we will join forces for an accelerated fab ramp up, a key factor to speedily reach a high utilization level and therefore a competitive wafer cost. The Agrate 300-millimeter manufacturing facility, which Tower will refer to as Fab 10 is currently being facilitized. Tower will install its own equipment in one-third of the total space, which should triple our current 300-millimeter foundry capacity. The fab is expected to be ready for equipment installation later this year and start prototype production in the second half of 2022.

Our strong execution in advanced 65-nanometer, 300 millimeter based analog RF, power platforms, displays and other technologies will be significantly enhanced by this activity in Agrate. The United States Senate passed the Innovation and Competition Act of 2021 and appropriated $52 billion toward US semiconductor growth. The bill is now before the House of Representatives. Providing its passage, our target is to receive funding toward further growth initiatives in the United States, potentially at our beautiful 130-acre campus in our San Antonio, Texas, facility or possibly elsewhere.

Towards this end, during the past quarter, we've been strongly involved in activities related to this act. I have attended three industry leader panels on the subjects of growing and/or securing the US microelectronics supply chain, where I have focused as well on the need for advanced analog semiconductor integrated circuit manufacturing. One such panel was a CEO roundtable hosted by Senator Cornyn and Congressman McCaul, both sponsors of the CHIPS Act in their respective legislative bodies, a visionary activity. And I attended a special session at the Select USA Conference hosted by US Secretary of Commerce, Raimondo.

I spoke of four imperatives that we believe are essential for foreign entities to qualify to receive incentives from the United States for the United States onshore semiconductor manufacturing growth. Firstly, there needs to be US onshore R&D, especially in a foundry model, enabling innovative entrepreneurial ideas to successfully move through concept and feasibility and transition into value-add business. Secondly, all companies need to show a history of strong IP security, both external and internal to the Company. All recipient should have a strong history of supporting US government initiatives. And, lastly, there should be a legislative focus on differentiated analog technology, which addresses 80% to 85% of all system electronics by volume. We continue to work with the Congress of the United States, the Department of Commerce, other US government agencies, as well as other partners.

Moving to our specific businesses. During the second quarter, our RF mobile business was 25% of our revenues and is expected to show strong growth throughout the year. Estimates remain that 5G handsets will double year-over-year 2021 over 2022 to about 550 million handsets out of a total of about 1.3 billion. This shift, combined with the high content increase of 5G and our strong position in this market, fuels our continued growth.

Importantly, in addition to revenue growth, the shift to more advanced and higher value 5G technology is helping increase the average selling prices in this segment. This trend is expected to continue for at least the next several quarters. Demand is strong in both 200-millimeter and 300-millimeter and the partnership announced with ST will help meet the requirements of our strong 300-millimeter design win pipeline. The RF infrastructure business serving telecom and datacom end markets with our industry-leading silicon germanium technology maintains a high run rate due to data center strains and was about 12% of our corporate revenues.

For datacom, where forecast remain quite strong, we built both high-speed optical transceivers and high-speed hard disk drive preamps for storage. Our power IC business was about 15% of our total revenues with strength in automotive, industrial, and consumer segments. The business is benefiting from a strong market cycle as well as our significant presence in automotive battery management, which is outgrowing the market and provides for long-term growth with the worldwide trend of vehicle electrification. Our power discrete business has more than recovered, representing about 16% of our revenues. Like power ICs, growth was broad-based led by automotive applications. We expect this business to level off over the next few quarters where we focus our capex expansion on other higher margin segments. Our imaging business represented 15% of our revenues with main growing markets being the medical, dental x-ray, and industrial sensors. In addition, we continue to grow in the cinematography and broadcasting market segment being among our highest margin imaging applications.

For the medical market, we see a recovery of the dental segment to levels that are higher than the pre-COVID-19 levels with the present high growth trajectory. The main long-term growth drivers stem predominantly from the transition from traditional amorphous silicon-based flat panel technology to CMOS. Our customers who are either x-ray detectors suppliers or x-ray equipment suppliers, who design with us their own sensors, are gaining more market share and we, as sole supplier in most cases, are growing our share accordingly.

In the industrial market, we see a steep growth in all of its segments, machine vision for factory automation, for traffic control, as well as automatic data collection. On the display side, we continue substantial partnership developments for backplane silicon for micro, OLED, mainly for the VR display, which is a fast-growing market and on silicon wafer-based micro-LED technology for large displays, TV, laptops, tablets, and smartphones. Referring to utilization, starting to this quarter -- starting this quarter, sorry, we will refer to the number of photo layers processed during the quarter per wafer size. Given the fact that we continue to increase the capacity of our manufacturing facilities with changing mix of flows, pure utilization numbers should not represent the Company's operational performance on a time comparative basis.

For the second quarter, foundry layers, all numbers given eight-inch equivalents, for 150-millimeter 451,000 layers were processed as compared to 353,000 in Q2 2020, up 28% year-over-year. 411,000 layers were processed in the previous quarter, Q1 2020. For 200-millimeter, 5.921 million layers were processed as compared to 5.115 million in Q2 2020, up 16% year-over-year, 5.772 million layers were processed in Q1 2021. For 300-millimeter, 1.404 million layers were processed as compared to 903,000 in Q2 2020, up 55% year-over-year. 1.375 million layers were processed in the previous quarter. Excuse me one second.

Moving now to corporate sustainability. We are about to issue our first formal Environmental Social Governance, or ESG, report. However, the core of the ESG has long been embedded in the DNA of the Company. For Tower, ESG is much more than papers listing activities and targets. It is our focus in being a good, even excellent company for our community and our world. It is how we serve our employees, customers, partners, and stakeholders. Various elements of our corporate responsibility, sustainability and ESG efforts will be described in this report and are well aligned into our value vectors with the mindset of excellence at each of the described areas. We are continuously evaluating our activities in order to improve and ensure that our commitment and actions toward a company that betters society and betters the lives around us are achieved, valued and sustainable.

With that, I'd like to turn the call to our CFO, Mr. Oren Shirazi. Oren?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Hi, everyone. We released today our second quarter 2021 results, achieving record revenues of $362 million, reflecting a remarkable 17% year-over-year revenue increase and resulting in significant increases in gross profit, operating profit, and net profit. We are providing our revenue guidance of $385 million for the third quarter of 2021, representing an additional record revenue quarter.

I discussed several times over the last few quarters, we continue to see significant customer demand and demand forecast. Hence, we announced in February 2021 a $150 million capacity expansion plan to increase our capacity in our 8 inch and 12 inch fabs. We now announced an additional capacity investment of $100 million to result in $250 million of total capex purchases, which are expected to be paid over the coming five quarters.

For equipment that begins to provide incremental capacity during the third quarter of 2021 and continuing into 2022. As mentioned by Russell, for enhanced 12-inch capacity on top of our existing [Indecipherable], ST Microelectronics announced it entered into a partnership to accelerate the ramp-up of their Agrate 12-inch factory. We expect minimal capex payments for this project in 2021 and will give details on future schedule and cost during the next quarter.

I will now move to our second quarter P&L highlights and then discuss our balance sheet and cash flow financial statements. Revenue for the second quarter of 2021 was $362 million, $52 million higher year-over-year, reflecting a 17% year-over-year revenue increase. Looking at our organic revenue, which is defined as total revenue, excluding revenue from Nuvoton Japan, previously Panasonic Semiconductor, and revenue from Maxim in our San Antonio fab revenue, in the second quarter of 2021 reflects a 26% year-over-year revenue increase.

Gross and operating profit for the second quarter of 2021 were $74 million and $34 million, respectively. This gross profit is $16 million higher or 28% higher over -- year-over-year. And this operating profit is $12 million higher or 54% higher year-over-year. Net profit for the second quarter of 2021 was $31 million or $0.29 basic earnings per share and $0.28 diluted earnings per share. This net profit is $12 million higher or 62% higher year-over-year.

Looking at the balance sheet, we demonstrated again a strong and stable financial position. A few points to note, our shareholders' equity reached a record of $1.52 billion as of June 30, 2021. Deferred revenue and customers' advances balances under current liabilities and long-term liabilities in the balance sheet have increased by $9.6 million and $6.6 million, respectively, as compared to December 31, 2020, reflecting enhanced receipts from customers that asked to get more capacity reservations to them to address their excess demand, offset by some scheduled repayments.

Current assets ratio defined as current assets divided by short-term liabilities is strong at a value of 3.7x. In regards to our cash and cash equivalents in the second quarter of 2021, cash flow generated from operations was $93 million, investments in fixed assets net mainly for manufacturing equipment were $56 million. We repaid $20 million of our debt during the second quarter of 2021 and invested $17 million in short term bank deposits and marketable securities. Our cap table consists of 108.2 million outstanding ordinary shares and an additional 2.3 million ESOP related shares, resulting in fully diluted share count of 110.5 million.

Looking forward to the second half of the year, following the $385 million record revenue guidance for the third quarter of 2021, during this quarter we expect to see increased margins, a step toward the fourth quarter incremental revenue impact over the margins, which we forecast should exceed the 50% incremental model.

And, now, I would like to turn the call back to the operator.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from Mark Lipacis of Jefferies. Please go ahead.

Russell Ellwanger -- Chief Executive Officer

Hi, Mark.

Operator

The next question is from Rajvindra Gill of Needham & Company. Please go ahead.

Rajvindra Gill -- Needham & Company -- Analyst

Yes. Thank you, and congratulations on the great momentum across all the major business lines. That's great to hear.

Russell Ellwanger -- Chief Executive Officer

Thank you.

Rajvindra Gill -- Needham & Company -- Analyst

Absolutely. So, Oren, just a question on the gross margins as we progress throughout the year. You had mentioned in your prepared remarks that in Q4 that you would expect the model to exceed the 50% gross profit fall through in Q4 as some of those incremental costs related to capacity kit have been absorbed. Wondering how we think about that upside to the 50% gross profit fall through? Without giving any numbers, but just are we seeing a higher margin process flows in Q4 that would give you the confidence to say that we're going to be above the 50% GP profit fall through?

Russell Ellwanger -- Chief Executive Officer

I'll give an answer there. We have seen very, very strong increases in demand and for a variety of the increases in demand in order to be able to cover it, we have worked with customers for increases in ASPs that provide higher margins in order to have a quicker return on the investment itself. So a good portion of what's going on in Q4 is a result of Q3 starts that are now under POs that have a higher selling price than previous quarters and it's driven off of customers that are working toward increasing demand versus previous run rates for the most part.

And yeah, as mentioned during the script itself, as we move more and more into some of the, for example, 5G-driven activities, as we move into higher gigabit per second data center, as we move toward more large digitized wafers, all of that are higher margin flows to begin with. So it's a combination of a richer mix and where we talked about the increase of another $100 million of 200-millimeter investment, that really is for the main part to increase capacity for a richer mix for a higher margin mixes. So Q4 is a combination of both. It's as higher-margin mixes are growing and in instances where we are and have increased capacity that those are coming in at this point or will be coming in offer purchase orders that had an increase in ASP.

Rajvindra Gill -- Needham & Company -- Analyst

Okay. Got it. That's super helpful in terms of the drivers for the margins. And with respect to the ST Micro partnership that you announced a few weeks ago, a very, very interesting announcement, wondering kind of the rationale for both parties, particularly ST Micro, who essentially began construction of this facility in 2018 in Italy and is kind of bearing the bulk of the construction, but is allowing you guys to leverage your expertise and LM 300-millimeter and 200-millimeter to really kind of maximize the foundry. I'm curious kind of what was ST Micro's thinking in terms of partnering with you and the value that you will bring to the table? And then maybe if you could just remind us in terms of how much expected capacity you're kind of targeting in 2024 and beyond, so we get kind of a sense of the potential scale of this partnership? Thank you.

Russell Ellwanger -- Chief Executive Officer

So the fundamental drives was really stated by ST in the press release itself and that was to drive a faster ramp to high utilizations and a faster ramp of capacity, which obviously then reduces the fixed cost per substrate. So the deal is a very strong, we believe and they believe, win-win for both companies. The specifics of the financial model has not been released and I'm not sure that all the details will ever go out into the public, that's part of the confidentiality that ST and ourselves have. But the model itself is a very good model for both companies for many, many reasons and I believe there is the major driver again from their side was what was stated in the PR and that is a faster ramp to high utilizations, which is the key toward good margins in a manufacturing facility.

Rajvindra Gill -- Needham & Company -- Analyst

Thank you.

Operator

The next question is from Mark Lipacis from Jefferies. Please go ahead.

Russell Ellwanger -- Chief Executive Officer

Hey, Mark.

Mark Lipacis -- Jefferies -- Analyst

Hello. Can you hear me?

Russell Ellwanger -- Chief Executive Officer

Yes. Yes. Now, we can.

Mark Lipacis -- Jefferies -- Analyst

You can. Okay, great. Hi. I don't know what happened there. Thanks for taking my question. Russell, on Agrate, I think you mentioned second half of '22 prototype, I just want to make sure I had that right? When do you think you start shipping production revenues?

Russell Ellwanger -- Chief Executive Officer

Our target would be to start shipping production revenues in the first half of '23.

Mark Lipacis -- Jefferies -- Analyst

Got you. And when you talked about, I think, several capacity expansion plans, I don't think I heard silicon germanium mentioned there, are you -- what is the -- is that included in the capacity additions? Can you talk about what you're doing with silicon germanium from a capacity expansion standpoint?

Russell Ellwanger -- Chief Executive Officer

It is definitely included in it. The infrastructure activities that we're doing, we had mentioned, are very strong. We have growing demand consistently in data center and, yes, so the silicon germanium and silicon photonics are both parts of our expansion plan.

Mark Lipacis -- Jefferies -- Analyst

Got you. And you mentioned [Indecipherable]

Russell Ellwanger -- Chief Executive Officer

...that's where we said out the -- now to invest in 200-millimeter differentiated platforms, so...

Mark Lipacis -- Jefferies -- Analyst

Got you.

Russell Ellwanger -- Chief Executive Officer

[Speech Overlap] those 5G platforms are certainly one of our differentiated platforms.

Mark Lipacis -- Jefferies -- Analyst

Got you. That makes sense. Thanks for that clarification. And then on the CHIPS Act and your view to kind of target San Antonio there, do you have a sense of when you would expect to get visibility on this? And to what extent would you expect this to be direct funding or versus tax credits?

Russell Ellwanger -- Chief Executive Officer

Expectation doesn't necessarily tie into what will happen. Our expectation is direct upfront funding and that's where we'd like to be. I think city, county governments do a lot and have offered a lot in areas of tax abatement and that I think is a very good thing for ongoing margins and reduction of ongoing running costs. But the big issue of any greenfield activity is the upfront investment and the amount of years that it takes to bring that upfront investment into a net profit positive business and upfront grounds are what really enables that.

So, for us, the important thing is to whatever works out or whatever might be worked out with us is then to make sure that it really pencils well for the Company and for our shareholders and that's what our target is, is to have a deal, we'd love to increase capacity in the United States. Again, I think the San Antonio facility is a very beautiful campus to target it within, but certainly it has to be something that pencils and so that would be part of the discussions that we would have at a point that whatever committee would be ultimately used to determine and grant awards would be granting these awards.

Mark Lipacis -- Jefferies -- Analyst

That's very helpful. That's all I had for now. Thank you.

Russell Ellwanger -- Chief Executive Officer

Thank you very much. Good questions. Thank you.

Operator

The next question is from Richard Shannon of Craig-Hallum. Please go ahead.

Russell Ellwanger -- Chief Executive Officer

Hey, Richard.

Richard Shannon -- Craig-Hallum -- Analyst

Good morning, Russell, or I guess good afternoon or evening to you and to Oren. I'm going to follow-up on the gross margin question here. You've talked about some new investment in differentiated flows and at the same time you talked about some of your power discretes may be leveling off here. I'm going to jump to that one in a second, but how do we think about the longer-term gross margin model of the Company as you make all these investments, obviously expecting get a run rate utilization on those? And it'd be interesting to hear that answer in context to your past history in gross margins where you've, three, four years ago, got into the mid-20s level herein and at the low-20s today. I'm more than curious to the degree to which you think you're going to approach those prior high levels?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Yeah. So, hi, Richard. I believe I related to that a little bit in the prepared remarks. So, for Q3, we will see probably gross margin increase and all the margins will increase. However, not to the full 50% incremental model. And from Q4, we expect it to be -- to exceed the 50% incremental model, also as Russell explained, previously because of some very good selling price increase trend and improved mix for the next year. If you ask going forward, I think you should go from the baseline of the Q4 betterment on the margins and then from that point in time to assume incremental model slightly above the 50%. If you want to be conservative or not, slightly above, but better than the 50% if the trend in the market, which you know better than me, will continue or, as me, continue like now, because now it's a very good trend for us.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. And, Oren, just to follow up on same side, I don't have details on what kind of total dollar capacity you're expecting here. I'm not sure how far to take that incremental 50% gross margins and get to a -- hope for level down the road here? Again, I'll ask if it's -- if we can get to near prior levels here as you thought this new capacity is at. Is that possible or can we approach that? Just any comments relative to your history would be great.

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

What is your question? The maximum revenue capacity? What was it?

Richard Shannon -- Craig-Hallum -- Analyst

No, where we can go with gross margins over time giving all -- given all these investments here? Again, relative to your history here we've got up to the 25%, even closer to 26% level figures ago and now we're at the 20% level, and obviously we've got some investments that will increase depreciation here, but over time as you fill that up, can we get back up close or to that level that you see?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Yeah, of course, it depends what outlook in the future you're looking into. But for the next year, yes, definitely we can achieve the 25% or even higher, slightly higher.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. Okay. Perfect. That's helpful. Kind of a multipart question here on the power market here. First of all, you said, I think Russ you said, discrete you're expecting the level off here over the next few quarters. Help us understand, why there? And if you can make some broader comments also on your power IC space where I think you've been gaining some share? It'd be great to know what voltage levels you're seeing the benefit and to what degree that's happening in EV set would be a great to know? Thanks, Russell.

Russell Ellwanger -- Chief Executive Officer

Yes. So our power discrete market has been a little bit different than others in that for power discretes we don't offer a foundry offering flow and for the power discretes we have customer flows that we bring into the Company and we do, in many instances, co-developments on additional flows or incremental flows or capabilities. The -- and power discrete business itself is not the highest margin business within the Company, but it's a very stable business for us by virtue of the relationships we have with those customers. And the fact that it's very dependent upon each of these customers, we've reached levels of revenue that we think is very adequate in the companies and the Company is not presently taking the capital expenditure to put into those flows as there is others such as was the follow-up question on previously, such as our silicon-germanium, such as some imaging capabilities, certainly SiPho capabilities that both have a higher margin impact for us. And, secondly, we own the flow, so we have much more freedom in the market as to who we work with. So that's the issue there. It's not that we don't have customers that would not wish or do not wish to grow with us in that area, it's at this point not our preferred area that we wish to grow our capacity in the Company.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. That makes total sense. I will jump out the line. Thank you, Russell.

Russell Ellwanger -- Chief Executive Officer

Thank you.

Operator

The next question is from Patrick of Stifel. Please go ahead.

Patrick Ho -- Stifel -- Analyst

Thank you very much, and congrats on the nice quarter. Russell, maybe first off, in terms of, I think you guys were very present in terms of the capacity expansion plans to meet the market demand environments. I know you have a lot of customers today and obviously some of the capacity expansion is dedicated to getting more share with the existing customers. But can you qualitatively, maybe, discuss how potential new customers can be brought on-board as you expand this capacity given the current demand environment?

Russell Ellwanger -- Chief Executive Officer

Certainly. We are actually, in some instances, taking new customers on-board, but those customers are coming in under different types of arrangements, where potentially they'd be paying for certain capacity itself as it's all pure incremental capacity. And when a customer would give money toward capacity, the model is one of two. One model is that, whatever the prepayment is would be amortized over time against wafers typically a nominally with a end time date, so that the capacity is more or less are committed or money is forfeited. The other is that the money is just given with no amortization, which is more or less a guarantee for the Company that does return on that incremental capacity and has one impact and that is, it really does increase the specific margin dollars for that customer on top of whatever the selling prices on the wafer. So those are two models.

For the most part, at this point, we're working to support our present customers that all have increasing demands and we think that that's very important that those people who really have made commitments to us, you know, relying on us that we're doing all that we can to enable their growth within the market. And I think one thing that is very, very indicative that we have a good truly taxonomy of customers is the percentages of organic growth that we're seeing that, I believe, really are much higher than the market growth itself. And hence it shows that the customers that we're working with are good growth customers that themselves are increasing market share and, hence, we're increasing market share in the respective end segments. Hopefully, that answers your question.

Patrick Ho -- Stifel -- Analyst

Yeah, it does. Thank you very much. And maybe as a quick follow-up. I know 200-millimeter tools are different from 300-millimeter tools, but we're hearing more from the equipment industry that they're facing supply constraints. And, again, I know 200-millimeter, there are probably a little more -- or there are probably more options out there to procure those type of tools. But have you seen any constraints on your end trying to get deliveries of some tools or is everything still kind of on track on your end?

Russell Ellwanger -- Chief Executive Officer

For the most part, all of the POs that have already gone out for equipment is on time on deliveries. And what we're seeing now is just that the lead time on deliveries is extending for new POs and that's particularly the case for 300-millimeter, but for 200-millimeter as well, but we've not seen a gating of -- on any of our suppliers refusing to take a purchase order.

Patrick Ho -- Stifel -- Analyst

Great. Thank you very much.

Russell Ellwanger -- Chief Executive Officer

You're very welcome.

Operator

The next question is from Lisa Thompson of Zacks Investment Research. Please go ahead.

Lisa Thompson -- Zacks Investment Research -- Analyst

Good morning.

Russell Ellwanger -- Chief Executive Officer

Good morning, Lisa, or good afternoon from me, I guess, or morning.

Lisa Thompson -- Zacks Investment Research -- Analyst

Yes, I guess. Good morning, OK. So you spent about $56 million [Speech Overlap]

Russell Ellwanger -- Chief Executive Officer

Lisa, I'm having a very hard time hearing you. Yeah.

Lisa Thompson -- Zacks Investment Research -- Analyst

Hi. Can you hear me any better now?

Russell Ellwanger -- Chief Executive Officer

Yes. Much better.

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Yeah. Much better.

Lisa Thompson -- Zacks Investment Research -- Analyst

Okay. I'll just yell. All right. So this quarter you said about $56 million capex and said it was going to be like $45 million to $49 million, so do you have any different thinking on Q3, Q4, and Q1 from what you had previously said?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

We have a little bit different because of the -- what we said in the press release that we have announced an additional $100 million. So, actually, it's a -- this is why I said in my script that I expect now -- you know, we announced in January -- in February, $150 million and we announced to additional $100 million, so total is $250 million. As I said in my prepared remarks, we'll be paid in the coming five quarters. So, if you assume it linearly, it's additional $50 million to the baseline.

Since we just announced the new $100 million recently, you may assume obviously that it will be below $50 million extra from Q3. So I would assume a lower than $50 million, for Q3 like something like $40 million and then $50 million a quarter and maybe sometimes $60 million to capture for the full $250 million and this is on top of the baseline that we had without those capex plan, which is like you mentioned $45 million. So if you want to know Q3, Q3 will be about $45 million base, plus additional $40 million from the $250 million and pretty similar for the upcoming quarters, so between $85 million to $95 million total.

Lisa Thompson -- Zacks Investment Research -- Analyst

Great. That really helps. Thanks a lot. That's my only question. Thank you.

Russell Ellwanger -- Chief Executive Officer

Very welcome.

Operator

The next question is from David Duley of Steelhead Securities. Please go ahead.

David Duley -- Steelhead Securities -- Analyst

Yes. Thanks for taking my question. Just out of curiosity, as far as the Panasonic business goes, is that capacity fungible to other customers? Just kind of curious if it's unique to them or if, let's say, theoretically Panasonic didn't exist, could that capacity be transferred to other customers easily?

Russell Ellwanger -- Chief Executive Officer

Yes. So I understand the question, I just want to clarify so I don't offend anybody. Nuvoton bought the Panasonic semiconductor, right? So, it's now -- the Group is called Nuvoton Japan Technology, but -- so, again, just don't want to offend anybody there. I think to a good extent the capacity is fungible to the extent that there is some specific flows that are used that are non-fungible that's the case as well. So there are some flows that really is pretty much dedicated to end markets that are served with certain products had previously been Panasonic Semiconductor now are Nuvoton Japan and are serving Nuvoton as a whole, but a good amount of that capacity is fungible.

David Duley -- Steelhead Securities -- Analyst

Okay. And then as far as the -- you mentioned the utilization rates and you just gave us layer counts that were processed at different wafer sizes.

Russell Ellwanger -- Chief Executive Officer

Yes, sir.

David Duley -- Steelhead Securities -- Analyst

But did you give a -- I guess, there are still a utilization rate number available, right, because you gave us a total layer counts at 100-millimeter, and 200-millimeter, and 300-millimeter, we could calculate the utilization rates, so could you help us understand -- you gave us the number of process, what's the total number available, so we can back into the utilization rate?

Russell Ellwanger -- Chief Executive Officer

No, that's exactly why I'm using the process layers. The exact amount of photo layers is not necessarily a relevant number as there is other constraints and bottlenecks that are not necessarily photo related. And we're adding photo as time goes on. So that's not an area that we'll be presenting at all anymore. We've all just be presenting photo layers used and, on a comparative basis, it's a good operational metric.

David Duley -- Steelhead Securities -- Analyst

And so then how do we tie that into utilization rates and efficiency of using your equipments, in fact basically one of the most important metrics of a foundry business is the utilization of your equipment. So is there another metric that we can look at? Because when you just give us the foundry -- the number of layers processed, it's not necessarily utilization rate driven. So is there any other metrics you'll be giving us to understand about how efficient you're using your equipment?

Russell Ellwanger -- Chief Executive Officer

You can certainly assume that presently we are fully utilized, that every layer that we can ship are shipping before [Speech Overlap]

David Duley -- Steelhead Securities -- Analyst

Okay.

Russell Ellwanger -- Chief Executive Officer

...tools are rising.

David Duley -- Steelhead Securities -- Analyst

Okay. And then, Oren, what would we expect for operating expenses in the Q3 and Q4? I know, you've been adding people and capacity at various locations, what should we kind of expect on a dollar basis for operating expenses in Q3 and Q4?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Yes. Operating expenses should remain flat in the future quarters, because you're right that we are adding people, but they are in COGS, it's mainly technicians and the operators, engineers to support the fab production. So that in the course that's within the 50% incremental model. opex, R&D, M&A, SG&A, we are keeping them flat.

David Duley -- Steelhead Securities -- Analyst

So, we should see some nice leverage in the back half of the calendar year?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Some what? Nice leverage?

David Duley -- Steelhead Securities -- Analyst

Some strong earnings leverage from operating expenses being flat in the back half of the calendar year?

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Yes, in percentages, yes.

David Duley -- Steelhead Securities -- Analyst

Okay. Thank you. That's it for me.

Russell Ellwanger -- Chief Executive Officer

Yes. So just to follow up on your question. In the prepared script, I had mentioned the Q3 guidance and then I said that we expect top and bottom line continued growth in the fourth quarter as more tools become qualified for production, enabling further increases in high value flows. So, I think, somewhat intrinsic to the statement and if we're depending on new tools to be qualified what we're running right now is running at full utilization.

David Duley -- Steelhead Securities -- Analyst

Excellent. Thank you.

Russell Ellwanger -- Chief Executive Officer

Very welcome. Thank you.

Operator

The next question is from Richard Shannon of Craig-Hallum. Please go ahead.

Richard Shannon -- Craig-Hallum -- Analyst

Well. Hi, guys. Just a couple of quick follow-ups from me. Just to be clear, I'm pretty sure the answer is no, but I just want to confirm Russell the new $100 million capex addition here, that doesn't including equipment that would be installed within the ST Micro facility, is that correct?

Russell Ellwanger -- Chief Executive Officer

You are correct. It is not included.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. That's what I thought. A quick question on another topic, your silicon germanium. Are you seeing much of any benefit from 400 gig devices or I guess devices that go into 400 gig datacom modules yet or is that still a pretty small piece of business?

Russell Ellwanger -- Chief Executive Officer

It's a growing piece. I wouldn't say -- it's certainly not the biggest portion of the SiGe, but it is a growing piece and we've press released our revenue customer Infi for silicon photonics, that Infi does 400-gig right?

Richard Shannon -- Craig-Hallum -- Analyst

Yes. Yeah. Okay. Are you seeing a 100-gig capacity -- or 100-gig, are those still growing at a decent rate, or is that starting to plateau?

Russell Ellwanger -- Chief Executive Officer

So in the prepared remarks, I had mentioned that's what's really up and moving right now is the datacom, not the telecom. The telecom is where we do predominantly the 100-gig, right, so telecom is not -- the 100-gig is not increasing hugely in volume at this point, the datacom is and those are typically 25-gig chips.

Richard Shannon -- Craig-Hallum -- Analyst

Okay. All right. Perfect. That is all from me, Russell. Thank you.

Russell Ellwanger -- Chief Executive Officer

You're very, very welcome. Thank you.

Operator

There are no further questions at this time. Mr. Ellwanger, would you like to make your concluding statement?

Russell Ellwanger -- Chief Executive Officer

Certainly. Thank you very much. Thank you for your interest and for the good questions. For your reference, posted on our website on the Quarterly Release page on the Investor Relations section is our second quarter 2021 financial results slide deck. Please access it as per desire and interest.

To summarize the call and where we're at, we really were excited, are excited with second quarter record revenue results and particularly the activities that have led to a third quarter guidance of substantial continued growth and breaking a $1.5 billion annualized run rate. We believe that the $385 million Q3 guidance, which represents a 38% year-over-year organic growth is really extremely strong evidence that we're serving the right customers in the right markets and that type of a growth, I think, is quite substantial.

We are really executing well on our expansion plans and most everything is in place and on target and hence, as stated in the script, we are looking for and expect fourth quarter growth in both top and bottom lines and we're very excited with the partnership with ST at the Agrate factory. And over the next years, expect and believe that we'll see very important and significant movement in 300-millimeter growth and 300-millimeter capabilities as we qualify our tools and install more tools in that facility. Other activities happening in the Company are still exciting and look forward to meeting with you again for the third quarter release and possibly other interactions in the interim. So, thank you very much for your interest and best wishes for health and happiness. Thank you.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Noit Levy -- Senior Vice President of Investor Relations & Public Communications

Russell Ellwanger -- Chief Executive Officer

Oren Shirazi -- Chief Financial Officer and Senior Vice President of Finance

Rajvindra Gill -- Needham & Company -- Analyst

Mark Lipacis -- Jefferies -- Analyst

Richard Shannon -- Craig-Hallum -- Analyst

Patrick Ho -- Stifel -- Analyst

Lisa Thompson -- Zacks Investment Research -- Analyst

David Duley -- Steelhead Securities -- Analyst

All earnings call transcripts

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