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ACM Research Inc (NASDAQ:ACMR)
Q3 2021 Earnings Call
Nov 5, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the ACM Research Third quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today, Gary Dvorchak. Please go ahead.

Gary Dvorchak -- CFA

Good day, everyone, thank you for joining us on today's call to discuss third quarter 2021 results. We released results after the US market close yesterday. The release is available on our website as well as from Newswire services. There is also a supplemental slide deck posted to the Investor portion of our website that we will reference during our prepared remarks. On the call with me today are our Chief Executive Officer, Dr David Wang; our Chief Financial Officer, Mark McKechnie and Lisa Feng, Chief Financial Officer of our Operating subsidiary ACM Shanghai. Before we continue, please turn to Slide two. Let me remind you that remarks made during this call may include predictions, estimates, or other information that might be considered forward-looking.

These forward-looking statements represent ACM's current judgment for the future; however, they are subject to risks and uncertainties that can cause actual results to differ materially. Those risks are described under Risk Factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward-looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward-looking statements. Certain of the financial results that we provide on this call, will be on a non-GAAP basis, which excludes stock-based compensation, a loss relating to a change in fair value of the financial liability and unrealized gain in trading securities. For our GAAP results and reconciliations between GAAP and non-GAAP amounts, you should refer to our earnings release. With that, let me now turn the call over to Dr Wang, who will begin the slide three.

David H. Wang -- CEO and President

Thanks, Gary. Good day and welcome to this call. We had an excellent third quarter with strong financial results. We deliver record revenue and shipments with a solid profitability. Third quarter results demonstrate the strength of our expanding customer base, our differentiated multi-product solution, strong product cycle for both front-end and back-end, and our growing production scale. Revenue growth to 67 million of 41% year-over-year. Shipments were 99 million, upper 68% from $59 million in the same period last year. We maintain a good balance of growth and profitability with a 44.5% gross margin and 19.5% operating margin. We are focused on profitable growth as we invest in R&D to drive innovation, broaden our product portfolio and introduce new products.

On the bottom line, we report to this extent of net income value [Indecipherable] this year compared to 42% in the same quarter last year. We ended the quarter with 65 million of cash, in addition, we add 30 million in the quarter and holding of SMIC stock market shares. I will now discuss recent operational highlights on slide three. First, our quarter three revenue growth was the broader base, driving both current and the new products, all wet cleaning and other front-end process tool growth 29% and represent a 70% of the total sales in quarter three. The growth or trailing by our flagship [Indecipherable] good contribution from TiVo Canadian tool and all semi-critical cleaning tools.

Advanced packaging other process tools services and spare parts grew by 8% to 26% of a sale. The strong growth of this group was driven by AP tools, including ECP ap wet Etcher, stripper and scrubbers together with the increase in our service and spare parts business. Second, we received good orders from 3 new major customers. Several weeks ago, we announced evaluation orders from 2 potential new customer, the first order is the 4 SAPS Canadian tool from a major global semiconductor manufacturer and is scheduled to be in-store in the China-based development fab in the first quarter of next year. The second order is for Ultra ECP map copper plating tool from Major Asia based semiconductor manufacturer also for deliver early next year. Yesterday, we announced order from leading global integrated device manufacturer or IDM orders of 2 Ultra-C pr wet stripping system to be used in thier China-based advanced packaging facility. We already deliver their first order in October and plan a second half delivery in Delivery in quarter one of 2022. ACM offers a full product line of WLP wet process tools ranging from colder [Indecipherable] wet Etcher, cleaning and PR strippers, to advanced copper plating tools. Our WLP wet process tool have gained wider acceptance with a number of China-based manufacturers, this order ACM first WLP tool win the major global player. ACM progress is the three new major player is a testament to our technology leadership. Regional support teams and the production scale, we are confident that successful qualification of this tool can result in larger business opportunities. We continue to build our sales tidy pipeline with a top tier player. I want to thank our sales and technical support teams for their outstanding execution. China is among the largest and the fastest growing market.

For semiconductors over the year, ACM has become a significant supplier of semiconductor equipment in China with our major [Indecipherable] from, and the customer. We believe ACM differentiate technology and a multi-product offering provide us opportunity to capture significant market share on a global basis. Longer term, we are targeting half of our sales from countries and regions outside of Mainland China. Third, all ECP product ramps is gathering momentum. We deliver the multiple ECP tool in the first half 2021, even more in quarter three. As noted in last quarter's call, we expect that ECP momentum to continue with the delivery of 20 ECP tools for the full year 2021.

We expect the ECP product line to drive meaningful growth in 2022. We see good opportunity for ECP in both front-end and back-end or packaging applications. From a smaller geometry require advanced plating solutions, our ECP portfolio includes the ECP MAP for [Indecipherable] copper interconnection and ECP [Indecipherable]. Meanwhile, back-end and advanced packaging has become more important as industrial moves via moist law. Manufacturers are looking for packaging innovation to drive higher performance, ACM ECP ap for advanced packaging address is a back-end opportunity. We estimate that the total global market for ECP front-end and back-end application will triple from 500 million last year to up to 1.5 billion in the coming years.

Fourth, we are seeing strong interest for our outdoor event furnace dry process tool portfolio. So far in 2021, we delivered several [Indecipherable] frost tools and evaluation tools, including top and the non-top [Indecipherable]. We expect to deliver additional units by year-end. More recently in October, shipped furnace product with higher temperature oxidation and a [Indecipherable] capability. Building on this strong effusion, the next major development in our furnace road-map, is a batch Atomic Layer Deposition or ALD process. We view this as a most challenging and promising product for advanced manufacturing nodes for both memory and analogy. We expect furnace product cycle to ramp in 2022.

Based on 2022 market data, we estimate our current products sale of 5 billion total global market opportunity. We are committed to our goal to double our addressable market to 10 billion in the next several years. On that note, we are making steady progress with our R&D investment in 2 additional major new product categories. This is our long-term commitment to major adjustment market, in which our customer are pushing us to invest in product road-map, their support, their advanced nodes. We have accelerated our hiring to supporting this program. We are confident that we can deliver the first tool in each category in the second half of 2022 respectively. We have a deep R&D program, intended to address the next 2 product generations by entering this category as it is a leading edge nodes. We are in a strong strategic position to leverage our local relationships with some of their most advanced semiconductor fabs in the world where we can test [Indecipherable] and develop our most advanced technology. This will help driving in most of our product line to the leading edge and competing on a global basis.

Next, I would like to recap ACM customer base on slide five. All this group includes our five major from end customer that represent the foundry 3D-NAND and DRAM manufacturers. For 2021, we expect a good growth from Huahong Group and YMTC, which we expect to remain as our top 2 customers. However each may represent a lower percentage of total revenue as we anticipate meaningful growth from other customers. For 2021, we also expect a good contribution from our other three major front-end customer [Indecipherable] likely to be over 10% contributors. This including as SMIC which contributed to our third quarter results as earlier anticipated, SK Hynix and CXMT.

Our second group including a number of new China-based semiconductor customers who manufacture power analog CMOS, image sensor compound semiconductors and other devices. This customer including 4 of 5 Tier 2 player and handful of new Tier 3 and others, which each is relatively small, this grew up a new customer combined with the contribute 10% or more to our 2021 revenue. As the newer customer are investing in new capacity to support the growth of 5G, IoT, EV and AI and other emerging technologies. ACM has good presence at customers supplying a broader range of tool including SAPS semi critical cleaning ECP and furnace products. Our third group is advanced packaging and the wafer manufacturing customer, top customer here have including JCAP, Tongfu, Nepes and Wafer works. We have had a good order momentum in this group this year, including orders from 2 new advanced packaging house in quarter one and yesterday announcement from the China-based packaging facility, a major global IBM.

We expect additional orders from more potential customer in this group by year-end. Collectively, we expect tremendous growth from this group. This should be driving buyer increased industrial focus on advanced packaging and wafer manufacturing. Penetration of new customer and a strong product cycle for ACM ECP ap floors. Looking ahead we believe opportunity for ACM, most of the customers are still in early or middle stage of our multi-year capacity expansion. We are committed to further broaden our customer base as we believe every major semiconductor manufacturer can benefit from our technologies. Move on, I would now like to discuss quarter three shipments and provider update on our manufacturing facility.

Please turn to Slide six, we delivered record and total shipments of a 99 million in the third quarter shipments. Shipments were 32 million higher in revenue, the difference being first tools and the evaluation tools, net of a customer acceptance for previous deliver first tools. This is a positive indicator as it reflects demand for new product and from new customer. To achieve this level of shipments, we must thank the production team [Indecipherable] our facility, we're ramping production capacity to meet the strong customer demand in a constraint supply chain environment.

Started production in the second building of our Chuansha factory in quarter three as planned. We are on track with our capacity road-map, which targets a full rate of $500 million of annualized production capacity by the end of this year, up from $350 million at the beginning of this year. We expect to further increase production capacity to $625 million by the end of 2022. We are committed to our long-term strategic plan to build the production and R&D center in the Lingang region of Shanghai. The 1 million square feet of floor space will enable us to increase our annual production capacity to 1.5 billion. The facility will also be used to support advance R&D with a state-of-art [Indecipherable].

We recently began initial construction [Indecipherable] ground work toward our plan for initial production in the beginning of 2023. Before I provide our 2021 outlook, I want to provide an update ACM Shanghai has STAR Market IPO. Yesterday, the Shanghai Stock Exchange announced the pricing of the STAR Market IPO for share of ACM Operating subsidiary ACM Shanghai. In IPO, ACM Shanghai proposed to issue 43.4 million shares, which is a 10% of the total share outstanding following the IPO at there announced pricing of 85 RMB per share. This would represent gross proceeds of 3.685 billion RMB or approximately 575 million US dollars at the current exchange rate. If all goes according to plan, we tended to be [Indecipherable] ACM Shanghai Stock to begin trading on November 18, 2021. Please keep in mind that the term tiny and successful completion are subject to factors beyond ACM Shanghai control. We are confident that the STAR Market listing of ACM Shanghai shares combined with [Indecipherable] ACM Class A [Indecipherable] can provide a strong foundation to a supporting our mission to become a major player in the global semiconductor equipment industry.

Now let's move to our 2021 outlook on slide eight. Our guidance reflects optimism about our growth opportunity for 2021, we have tightened our revenue guidance to the range too highly of 30 million to 240 million. We presenting 50 percent of annual growth at an needle point. Our outlook for 2021 is based on several key assumptions. First stability regarding the global COVID 19 pandemic. Second, the stability in US-China trade situation. Third, a range of a spending scenario for their production ramps of key customers, fourth management of ACM supply chain and finally, a range of a timing of customer acceptance of our first tools. Our results and outlook demonstrate successful execution of our strategic.

We have strong strategy, our strong growth is a supporting additional R&D spending on new products, we are building our global sales and marketing resource to penetrate the new customer in the region and we are carrying production capacity to support our long-term growth plan. We believe we can on track to achieve our mission to become a major equipment supplier to global semiconductor industry. To conclude, I would like to thank our employees for their hard work and dedication. I also want to thank our customers, partners and shareholders for their support and the confidence in ACM Research. I will now turn the call over to Mark to discuss financial results in more detail. Mark, please.

Mark McKechnie -- CFO and Treasurer

Thank you, David, and good day everyone. We delivered strong financial results in the third quarter, unless I note, otherwise I will refer to non-GAAP financial measures, which exclude stock-based compensation and unrealized gains and trading securities. Reconciliation of these non-GAAP measures to comparable GAAP measures is included in our earnings release. Now the third quarter shown on slide nine, revenue was $67.0 million, up 46%. Revenue for single wafer cleaning tools, which include SAPS, TEBO, Tahoe and semi-critical cleaning was $49.5 million, up 29% from $38.3 million.

Revenue for ECP furnace and other technologies, was 8.2 million, up 69.1% from $4.9 million. Revenue for Advanced Packaging excluding ECP services and spares was $9.4 million, up 109.5% from 4.5 million in 2020. Total shipments for $99 million versus $59 million in the third quarter of 2020 and 82 million in the second quarter of 2021. This includes deliveries for revenue in the quarter, deliveries of systems awaiting customer acceptance for potential revenue in future quarters and deliveries of evaluation tools. This represents another quarter of record shipments, great accomplishment by our production team given industry wide supply constraints. Gross margin is 44.5% versus 42.8%. This was at the upper end of our normal expected range of 40% to 45% due to its favorable product mix. We expect gross margin to continue to vary on a quarterly basis due to a variety of factors including product mix and manufacturing utilization.

Operating expenses were $16.7 million versus $10.1 million. The increase in operating expenses reflected higher R&D and new products, our expanded US sales team and other costs. R&D expenses grew by 82.2% to $7.6 million or 11.3% of sales versus 4.2 million or 8.7% of sales last year. The increased R&D intensity reflects ACM's commitment to new products and innovation. We expect to increase R&D spending in 2022.

Operating income was $13.1 million, up from $10.3 million. Operating margin was 19.5% versus 21.6%. Unrealized loss on trading securities related to the change in market value for our SMIC investment was $1 million in the third quarter of 2021 versus an unrealized gain of $9 million in the year ago quarter. Note that we exclude this non-cash item from our non-GAAP results. We had a tax benefit of $0.3 million versus a tax benefit of $1.7 million in the year ago. Net income attributable to ACM Research was $12.4 million versus $9.0 million in the year ago. Net income per diluted share was $0.56 compared to $0.42 in quarter three of 2020. Tax items and the effects of foreign exchange fluctuations on operating results provided a net benefit of $1.7 million or $0.08 per share in the third quarter of 2021 versus a net benefit of $0.3 million or $0.02 per share in the third quarter of 2020.

I will now review selected balance sheet items. Our cash balance was $65 million at the end of the third quarter versus $70.2 million at the end of the second quarter. In addition to the cash balance, we also had trading securities $30.2 million related to our SMIC investment, this includes a significant unrealized gain from our original purchase price. Total inventory was $176.6 million at quarter end, up from $136.9 million at the end of last quarter. The 39.7 million quarter-to-quarter increase was driven by 2 items, first finished goods inventory grew by $17.9 million to 81.9 million, this represents the balance of first tools that have been delivered to customers and evaluation and are carried on our balance sheet at cost, pending a potential transfer of ownership. The second item is work in process and raw materials, which in total grew by 21.8 million from the prior quarter. This was due to purchases to support future shipment growth.

At quarter end, short-term borrowings including the current portion of long-term debt was $17.5 million down from $24 million at the end of the second quarter. Now current long-term borrowings were $23.1 million versus $18.7 million to close in the second quarter. Cash flow used by operations was approximately $4 million for the third quarter. In 2021, capital expanding as planned at approximately $10 million. This includes $5.5 million already spent through the first 9 months of the year. Our 2021 investments will be primarily focused on capacity increase at our Chuansha factories investments to support our R&D programs and initial spending on laying down. In some, we are successfully executing on our strategy. We are participating in the growth of major new IC fabs, we are ramping production and we are developing and delivering new products to a growing list of customers. We are positive about our opportunities in China and expansion outside of China. We remain committed to achieving our mission to become a major player in the semiconductor equipment market.

Now, let's open the call for any questions that you may have. Operator, please go ahead.

Questions and Answers:

Operator

Thank you so much. Ladies and gentlemen, we will now begin the question-and-answer session. As a reminder, if you wish to ask a question please press 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question from the line of Patrick Ho from Stifel. Your line is open.

Patrick Ho -- Stifel -- Analyst

Hi, thank you very much and congratulation on nice quarter and outlook. Actually, Mark, maybe to start off first with you the supply chain. Based on your results, your outlook and the margin profile, it looks like you guys managed it very well. Can you discuss what problems you may have seen and how you mitigated the situation given the results and outlook.

Mark McKechnie -- CFO and Treasurer

Yeah. Hey, Patrick, maybe I will let David start on that and then I can add, but yes, Dave.

David H. Wang -- CEO and President

We saw that there, Patrick, the [Indecipherable] actually you know the orders the constraints and the semiconductor equipment their spending is double compare to last year. So we see our component also [Indecipherable] constrained and I should say some components we buy from US and buy from Japan and we also on Europe, right, there is a leading time get a longer and longer, I can give you some example some normal products, we have 2 months, now they are getting in four months, even some special products getting in six months. Yeah, so for that reason delay where we had over forecast to ourselves and then based on sales forecast, we are buying those long leading item ahead of time and so that's the approach we are taking so far.

Obviously now when they are rolling base and forecasts next 12 months and what is the possible delay, what our vendors supply [Indecipherable] and actually now we require our vendor give us next 12 months and [Indecipherable] can provide to us right, so that the approach we are taking, and hopefully we can have this supply security or we call supply on time to be improved and you can see that the third quarter, we are doing a lot of good work and however as compared with the regular last year, our leading [Indecipherable] it will take more time anyway. So that's the status right now and we know our chief supplier start includes hire more people and also increase the manufacturing floor and we're hoping those situation going to improve for the next year. Hi, Mark anything you want to add on that.

Mark McKechnie -- CFO and Treasurer

Yeah. No. Thanks, David. I mean, the only thing I would add Patrick is, it's not new to deal with the supply chain. I mean we've been dealing with the situation you know related to COVID and the global supply chain and then of course the big recovery where the industry is building back semi-capacity pretty aggressive but at our size as a company, I think we're demonstrated some scale, it's really important that our customers are confident that we can deliver and so we're sending that message, but I think our manufacturing and supply chain team did a good job in quarter three and we anticipate that as well in quarter four.

Patrick Ho -- Stifel -- Analyst

Great, thank you. That was really helpful as my follow-up question, maybe for David in terms of the advanced packaging market, are you showing some really nice growth there. The marketplace itself is growing, can you give a little more color on the type of applications you seen today and how it may progress to say next generation techniques like heterogeneous integration, what are you seeing today and what are some of the opportunity, say over the next couple of years.

David H. Wang -- CEO and President

Okay. Patrick, actually I should say we have relayed on very good product portfolio, right, and therefore that advanced packaging tool with where the positive cleaning and coater developer, stripper and also in the most important copper plating tool. Right. So we see the people in this growing area is obviously pillar and also we see the people in the [Indecipherable] out and also there also people talking about is micro pillar, more than 300 micron of copper play there. So it's really high demand for our copper plating tool and also our copper plating add certain benefit compared to our competitors including I call their edge control and high plating rate with special design of the plating number. So we see there very strong I call driving for our revenue growth or the [Indecipherable] growth this year and next year. So I should say we're also see there a customer outside Mainland China interest in our plating tool and we're expecting with those tool hopefully next year, we're getting in the Taiwan market and that's our planning. So that maybe there in general way of their I call their advanced packaging tool and plus we also increased new customer in China, JCAP and Tongfu is our traditional top 2 customer. Also we are seeing a few other emerging or I call the new start company getting into this application tool. So we have very good a positive or I call the forecast right for the advanced packaging tool growth.

Patrick Ho -- Stifel -- Analyst

Great, thank you very much and congrats again.

Mark McKechnie -- CFO and Treasurer

Thanks, Patrick.

David H. Wang -- CEO and President

Thank you.

Operator

Thank you so much. Your next question from Charlie Chan from Morgan Stanley, your line is open.

David H. Wang -- CEO and President

Hi Charlie.

Charlie Chan -- Morgan Stanley -- Analyst

Hey David and Mark, and hey [Indecipherable]. First of all, congratulations for your great result in China IPO and finally also congrats. My first question is about, it seems like we're in the component shortage, you can do more shipments, right. So I'm not sure this year is still delivering very strong growth. Right, the next year, do you think we can even stronger growth rate for 2022, any preliminary outlook.

David H. Wang -- CEO and President

Okay. Yeah, actually, you look at our shipment right in quarter two, almost double. Right, I mean 80% and our quarter three shipment also 60% in quarter two. So our total shipment you know compared to last year has been increased a lot right, by the end of this quarter I am giving you more detail how much percentage increase, it is much, much more than previous year. So, we think next year continue we look at strong in our forecast pipeline. So in other words, we have the real increase more of the components and buying from our supplier. So you know the words we are real working closely with our key supplier and as I said, we give them a rolling 12 months their forecast plan and they can tell us what is deliver and what is the capacity they can build costs. So we're working on that and I really hopefully next year get a better, but again we're still very carefully watching the market and also working close to our supply chain, it is ongoing process, [Indecipherable] carefully also manage this supply chain.

Charlie Chan -- Morgan Stanley -- Analyst

Okay, thanks and I'm not sure if you Talk about these, but previously, you mentioned you have 2 new product lines to launch, right. Can you update the status right now.

David H. Wang -- CEO and President

You're talking about new product or the existing product.

Charlie Chan -- Morgan Stanley -- Analyst

Yeah, the new product line.

Mark McKechnie -- CFO and Treasurer

About the 2 new products. Yeah.

David H. Wang -- CEO and President

I see, OK, well probably there let's put this way 2 years ago right was starting, announcing 2 new product and unfortunately as you cannot tell you what the product and may however, we believe these 2 products represent the bigger market and so it was a market globally and also, we see the 2 new products and also have our I call [Indecipherable] also need that innovation for technology improvement, so now we are working closely with R&D and their team. I think probably one product will come out at first half next year, and also we do have a customer talk together it gathers through as a better side application [Indecipherable] and also our second product, we're targeting second half next year. So with our team and looking very dedicate, we're hoping those 2 tool would deliver in the timeline.

Charlie Chan -- Morgan Stanley -- Analyst

Okay, seems on the track and my last question is to Mark, again lots of works on China IPO. I am not sure that the pricing, what's the kind of [Indecipherable], and what will [Indecipherable] into your US listing, [Indecipherable].

Mark McKechnie -- CFO and Treasurer

Yeah, hey, Charlie. So I think we put a lot of the details out on where it was price in the number of shares. Right, we have the proceeds $3.685 billion remnant [Indecipherable] $575 million US, so we in terms of the valuation, I think you can kind of look at our numbers and work that out and of course, I don't know how that's going to necessarily filter back into our US market cap. But after after the offering, we mentioned that the US, we would own 82.5% of the subsidiary.

Charlie Chan -- Morgan Stanley -- Analyst

Okay. Okay, thanks. Yeah, I thought that it's a big catalyst give us any kind of an overhand, so hope that your market kept can continue to expand. Yeah. That's all from me. Thank you.

Mark McKechnie -- CFO and Treasurer

Thanks, Charlie.

Operator

Thank you so much. Next question from Quinn Bolton from Needham and Co. Your line is open.

Quinn Bolton -- Needham & Company -- Analyst

Thanks, David and Mark, I will offer my congratulations on the STAR Market IPO as well as the international customer retention. I wanted to start with the international customer retention. It sounds like the 3 customers you're working with or that you recently announced are all taking tools for delivery to their China manufacturing facilities and wondering if you could give us your thoughts that as you first penetrate their China manufacturing facilities, what's the opportunity to begin to place deliver tools to international.

David H. Wang -- CEO and President

Hey, we lost your voice. Hi, Mark, can you hear Quinn.

Mark McKechnie -- CFO and Treasurer

David, I heard Quinn OK, I can repeat the question. Can you hear us. David.

David H. Wang -- CEO and President

Hi Mark.

Mark McKechnie -- CFO and Treasurer

Yeah.

David H. Wang -- CEO and President

Are you there?

Mark McKechnie -- CFO and Treasurer

Yes, we are.

Quinn Bolton -- Needham & Company -- Analyst

Hi, Mark, I can hear you, or am I coming through.

Mark McKechnie -- CFO and Treasurer

Yeah, you're coming through. Okay Quinn. I don't hear David, maybe.

David H. Wang -- CEO and President

Hi Mark, can you hear me.

Mark McKechnie -- CFO and Treasurer

David, we can hear you OK. I guess you cannot hear us. Yeah. Quinn, I can take that question while we wait for David to come back, but I think your question was about the new customer announcements. I think we mentioned that two of those were for delivers to the China fab and other one was in Asia [Indecipherable] one and so can you maybe just clarify your question.

Quinn Bolton -- Needham & Company -- Analyst

Yeah, I guess maybe I misunderstood I thought all three were smart tool deliveries taking place in China, and was asking what's the progression, you know that the company's opportunity to first deliver tools to China facilities, but then to expand to other manufacturing facilities at those customers around the world.

Mark McKechnie -- CFO and Treasurer

Got it. Yes, it's a great question for David, but I think you know, we've got a global sales force and so these are the three that we announced here recently, but we still feel pretty positive about our opportunity for customer deployments in outside of Mainland China. I think, as David noted, our longer-term goal is to have half of our business outside of Mainland China. So we've got activities that we think can can result in that in the coming year. Soon.

Quinn Bolton -- Needham & Company -- Analyst

Got it. Just to clarify, did you said it one of the customers was taking delivery outside of China somewhere else in Asia well.

Mark McKechnie -- CFO and Treasurer

These 3, we talked about a SAPS evaluation order from a global semi manufacturer with the China Development fab, we talked about the two stripper orders right where two global IDMs China packaging facility and then the ECP evaluation order, we just mentioned it was from Asia, a regional semiconductor manufacturer, but we didn't say where that tool was going.

Quinn Bolton -- Needham & Company -- Analyst

Got it, got it. The second question David talked about the growth in the advanced packaging business. I'm wondering if we might be able to get you to sort of give us your sense how much of the business in 2022 might come from that broader advanced packaging application.

Mark McKechnie -- CFO and Treasurer

So, Quinn, I guess we gave the mix right for quarter three and year-to-date, it was about 74% on the front-end products and 26% on the. Sorry, guys we are having some technical issues. I think the team in Shanghai just trying to get back into the call, but yeah, I think for now, Quinn, kind of a similar mix. I mean it's hard to say for next year where the growth will come from, will give more details on our quarter four call, but we don't anticipate a significant shift between those two groups got it.

Quinn Bolton -- Needham & Company -- Analyst

That's helpful. Thank you, Mark.

Mark McKechnie -- CFO and Treasurer

Thanks Quinn.

Operator

Thank you so much. Next question from Suji Desilva from ROTH Capital, your line is open.

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

Hi, Mark. I don't know if David back on. But, congrats on the progress here. I wanted to that the TiVo product has been out there for a while since the IPO, today you started talking about more in this call is that ramp opportunity now potentially going to inflect what are the kind of the puts and takes of the pace at which TEBO can grow versus SAPS.

Mark McKechnie -- CFO and Treasurer

Got it. Yeah, great and Suji, we are trying to get got.

David H. Wang -- CEO and President

I got back in now. Can you give me a Okay.

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

Okay. David, can you hear me.

Mark McKechnie -- CFO and Treasurer

That's great. Hey, David.

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

David, it's Suji, can you hear me.

David H. Wang -- CEO and President

Very well. Please.

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

Okay, great. I have got David. So, I will repeat the question. So I said this call you guys talked about the TiVo product more that you had the IPO, I'm curious, is there an inflection ahead for the TiVo product with the opportunity there. What are the factors the puts and takes of that growth versus SAPS which has done very well for the last few years.

David H. Wang -- CEO and President

Okay. Well, actually the TiVo, we made a progress right and also, we realized a TiVo, we have to combine with a certain dry technology. So a year ago was rather develop with advance drying technology and [Indecipherable] two type, one is hard IPA, a multi [Indecipherable] method. Next one is the, actually a [Indecipherable] The two new joining technology, I think we're one will come out probably quarter one next year and the other one will come out should probably quarter two next year. With this joining technology and together with [Indecipherable] we're further give a TiVo much wider [Indecipherable] why, because all they're like 70 nano DRAM their capacity structure, you have the dry by CO2 because the [Indecipherable] fact right. Also certain [Indecipherable] structure also there [Indecipherable] ratio either hot IP driving origin. So with this, adding additional joint technology on TiVo product and we will see that there tool get a longer [Indecipherable]also their logic manufacturing.

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

Okay, all right, thanks David and Quinn just ask the question, I want to maybe rephrase and ask it make sure we get your answer.

David H. Wang -- CEO and President

Sure.

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

The new customers seem to be shipping primarily into China and the region, with one maybe in Asia, and we're excited about the global customers you talk about 50% of business coming from outside of China longer term, can you talk about what it would take for these customers to start putting your tools in outside of China and why maybe the dominant initial push is in the China facility just understand that dynamic.

David H. Wang -- CEO and President

Yeah. Actually, obviously the tool we ship into the China facility or China fab right there fab, is good starting point. This way, our process data, process capability validate by their fab in China. Right [Indecipherable] potential a quarter getting their fab also, I mean in China, right and so that's we're looking for. So I think it's really good assigned and also a good starting point and those data come out there I think in China may need a driving force and [Indecipherable].

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

Okay, that's very helpful color. David, thank you. Congrats again.

David H. Wang -- CEO and President

Thank you.

Mark McKechnie -- CFO and Treasurer

Thanks Suji.

Operator

Thank you so much. Once again in order to ask a question, please press 1 in telephone keypad. Next question from Mark Miller from Benchmark. Your line is open.

Mark Miller -- Benchmark Company -- Analyst

Thank you for the question and congratulations on the quarter. We're seeing margins jump around a lot and I believe that's through the mix and I'm just, you said the mix looks like it's going to be 75 and 25 front and back-end. I'm just wondering for the next quarter or is it a similar mix to the third quarter.

Mark McKechnie -- CFO and Treasurer

Yeah, David, do you want to answer that. Should I can take that too.

David H. Wang -- CEO and President

I think you can [Indecipherable] right. This is normally gross margin is a flat rate, we [Indecipherable] 40% to 45% and there is a higher margin tool and [Indecipherable] that for a moment to give a high margin and certain I got a copper plating and also give margin for front-end and then there is also no margin tool right and as I older bench as certain I call there ([Indecipherable] the process tool advanced packaging side too. So it's good, I mean this is a good combination and also depend on combination, there a margin we may be change in right [Indecipherable] I couldn't give you precise number, but I think we'll be in a range 40% to 45%.

Mark Miller -- Benchmark Company -- Analyst

Okay. For the next quarter, does it look like a similar mix to the third quarter.

Mark McKechnie -- CFO and Treasurer

Yeah.

David H. Wang -- CEO and President

I said you know, I cannot give you precise numbers. [Indecipherable] combination by customer and this year, [Indecipherable] 40% to 45% maybe [Indecipherable]

Mark Miller -- Benchmark Company -- Analyst

You're breaking up at least on my side. Just wondering if you've been primarily more DRAM, NAND as supposed to come on stronger next year, do you see opportunities, more opportunities for yourself in NAND.

David H. Wang -- CEO and President

[Indecipherable].

Mark McKechnie -- CFO and Treasurer

Hey hey, David. You're breaking up a lot. Maybe I'll take the question, Mark since David's breaking up. Yeah. So, Mark, just to be clear, if you look at our customers in China, they are very reflected. Our NAND business as you know YMTC is our big NAND customer right, so they were in the 30% range last year and so I think kind of your premise, we have a pretty good mix in NAND and then of course SK Hynix, CXMT or DRAM customer. So we continue to expect to get good content in both in 3D NAND and with our DRAM customers.

Mark Miller -- Benchmark Company -- Analyst

Thank you.

Mark McKechnie -- CFO and Treasurer

Yeah, you got it.

Operator

Thank you so much. Next question from Emma Tian from [Indecipherable]. Your line is open.

Emma -- Analyst

Hey guys, congrats first of all on the really straight quarter three. This is Emma from [Indecipherable] my questions are probably more for David as well, but Mark you're welcome to share your thoughts [Indecipherable] David back on line, probably not yet.

David H. Wang -- CEO and President

Yeah, yeah. Can you hear me OK.

Emma -- Analyst

Oh that is great, Hey, I can hear you (Foreign Speech). Thanks. So my first question is we related to Quinn's question as well. I just wanted to ask a bit more details about your future plans, probably in the long-term about expanding the global markets, since we know that the three factories of ACMR are all based in Mainland China. They actually quite they are all near Shanghai, if I remember correctly, is there a particular reason for that. Like, do you have any plans to build any other factories say in Beijing or even outside of Mainland China or outside of Asia area.

David H. Wang -- CEO and President

Okay. Let me give you little [Indecipherable] STAR Market and it's ultimately our [Indecipherable] Market IPO most strong financial foundation and [Indecipherable].

Emma -- Analyst

Sorry, David, you're still breaking up quite a lot or is it just me, I am not sure.

David H. Wang -- CEO and President

Can hear now better.

Emma -- Analyst

Yeah, this is much better.

David H. Wang -- CEO and President

Okay. I said there, we already have our manufacture in their Korea. All right. So from now when we probably are [Indecipherable] major customer in China and actually Beijing and also Wuhan and potentially [Indecipherable] right. Those R&D is more than they were helping closing support customer, but more than that is also we consider other region and also country and as a our business moving out of China is a goal, Taiwan and go to US and even though in Europe and we do have a plan view the R&D support center and we believe the R&D closings for the customer will give you faster choice or faster supporting capability. Meanwhile also we consider if we found good [Indecipherable] tenant people for the company, we can [Indecipherable] company in the local region that's a further enhance our R&D power in local.

So our goal is really getting into their diversifying and global R&D in our road-map and also as I mentioned in our [Indecipherable] we said that we are going to have eventually 50% still right from outside Mainland China and you 50% from the inside and that's our long-term strategy right and also with our our division technology, I think what would be much strong driving force, our tool to be sold in global like we mentioned TiVo or Tahoe and also wet development, new technology also on the role as our innovation product come out be validate in the local market in China and then we can start that push those verify the product into their global market and meanwhile we see also some fab in China altogether [Indecipherable] a process going on. So, we have also our tool can be evaluate in most advanced technology nodes, in our sense we got a better of their technology being verify here, they will help us getting into the market outside China.

Emma -- Analyst

Thank you, David. That's all from, do you mind sharing a bit of a timeline for the factories outside of China or is it just it's more of a long-term plan and it depends on how the R&D activities and other opportunities go.

David H. Wang -- CEO and President

Yeah, actually it really depends on how we penetrate

Operator

The customer and also how we see their opportunity in other M&A or potential I call there group come out and [Indecipherable] dynamic and as I said we're building Korean [Indecipherable] centre few years ago and we're definitely have that in our plan and also according to our success, our penetration with their local customer, I will say China than will speed up those [Indecipherable] up, right all found some good people and good product. While we may be just group of people there, too, that also can further enhance our sales and supporting capability for that a local region great.

Emma -- Analyst

That's awesome. All the best for that.

David H. Wang -- CEO and President

Mark, anything you want to add on that.

Mark McKechnie -- CFO and Treasurer

Yeah, nothing to add. I think we are kind of at the end of our call here. So I think we need to wrap up. Operator, if you can please wrap up the call thanks.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Gary Dvorchak -- CFA

David H. Wang -- CEO and President

Mark McKechnie -- CFO and Treasurer

Patrick Ho -- Stifel -- Analyst

Charlie Chan -- Morgan Stanley -- Analyst

Quinn Bolton -- Needham & Company -- Analyst

Suji Desilva -- ROTH Capital -- Managing Director, Senior Research Analyst

Mark Miller -- Benchmark Company -- Analyst

Emma -- Analyst

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