Kulicke & Soffa Industries (KLIC) Q2 2022 Earnings Call Transcript

Kulicke & Soffa Industries (KLIC -2.58%)
Q2 2022 Earnings Call
May 05, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Kulicke and Soffa second quarter results conference call. [Operator instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Joseph Elgindy, senior director of investor relations for Kulicke and Soffa. Please go ahead.

Joe Elgindy -- Senior Director, Investor Relations

Thank you. Welcome, everyone, to Kulicke and Soffa's fiscal second quarter 2022 conference call. Joining us on today's call, we have Fusen Chen, president and chief executive officer; and Lester Wong, chief financial officer. For those of you who have not received a copy of today's results, the release, as well as our supplemental earnings presentation, are both available in the Investor Relations section of our website at investor.kns.com.

In addition to historical statements, today's remarks will contain statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a complete discussion of the risks associated with Kulicke and Soffa that could affect our future results and financial condition, please refer to our recent SEC filings, specifically the 10-K for the year ended October 2, 2021, and the 8-K filed yesterday.

With that said, I would now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusen.

Fusen Chen -- Chief Executive Officer

Thank you, Joe. We continue to make significant progress toward our long-term target and remain well-positioned to support significant and fundamental transition occurring within the automotive, semiconductor, and advanced display markets. I will provide a brief update to each shortly. In parallel, industry growth through calendar year 2022 is still anticipated to remain well above average, creating ongoing need for capacity expansion across our served markets.

We continue to be in a multiyear industry expansion period, which is consistent with the market assumptions shared at our Investor Day last September. Before discussing our business performance, I would like to provide our perspective on the Russian-Ukraine war and the COVID-related shutdown. At this point in time, we do not anticipate these events will materially impact our outlook and we'd like to provide some additional context. First, I would like to address the humanitarian crisis and express our consent and compression for a pronged resolution of the Russia-Ukraine war.

We do not expect K&S will have any meaningful direct operational or demand impacts due to this conflict. For the broader semiconductor industry, material and commodities costs for items such as noble gases may increase, although we do not anticipate this to be a major concern to our business. Separately, we wanted to also provide an update related to the Shanghai COVID lockdown. Our consumables facility in Suzhou China, where we produce capillaries and hub blandes continues to be fully operational.

Logistic challenges increased temporarily, but our production and the supply chain teams proactively identified alternative routes mitigating the impact. To reiterate, we do not anticipate either of these recent events to significantly impact our outlook. And we remain focused to continue proactively managing our own supply chain risks very closely as we have successfully demonstrated over the past two years. Overall, the industry remained very resilient and has overcome many obstacles over the past two years.

We believe the prolonged state of industry supply chain challenges is shifting production strategies from just-in-time approach to a more prudent and long-term inventory management and the capital equipment planning approach. Moving on to our March quarter performance. We continue to make meaningful progress toward the specific opportunities outlined during our Investor Day. Customer engagements are proceeding as anticipated, and we remain well-positioned to actively support several megatrends impacting the Automotive, Semiconductor, and Advanced display market over the coming years.

Our near-term ability to develop, qualify and recognize revenue on our growing portfolio of solutions will help solidify our long-term strategy and position within this key market. I will briefly explain each. First, within automotive, semiconductor space and the battery assembly needs are anticipated to continue growing above average as the transition to the electric vehicle and autonomous driving continue to accelerate. We have a dominated leadership position within the automotive segment we serve and continue to expand our offering and increase customer engagement.

Currently, we are aggressively preparing our next-generation laser-based battery assembly solution for qualification and acceptance over the coming quarters. In addition to this new system, we are also well engaged in driving acceptance and broadening the base of our proven wedge-bonder battery solutions to a variety of new customers. Secondly, within the semiconductor space, we continue to broaden our portfolio and further increase alignment to the market's renewed focus on assembly. The growing complexity of semiconductor assembly for was the leading edge and the high-volume market is creating several new technology-driven opportunity and enhancing our long-term growth prospects.

While our primary focus is to develop a new capital equipment solution, as assembly become more complex production challenge increased, driving the need for closed loop feedback and better process and the production controls. Last month, we announced a partnership with PDF solution to provide customers with a new analytic platform that leverage comprehensive real-time data available within our leading assembly system with artificial intelligence and the machine learning capability. Ultimately, we anticipate this partnership will directly add value to customers by enabling efficiency and throughput enhancement for both high volume and the leading-edge semiconductor production. Additionally, more complex assembly represents a significant paradigm shift for an industry like historically relied heavily on node-shrink.

This shifting paradigm is increasing the technology-driven growth rate within both high volume and the leading-edge semiconductor applications. Growing demand for market die package, new sharing requirement and the new memory opportunity are expanding our core market prospects and creating the need for additional features and the capability for advanced wire bonding. In parallel, we are also gaining share in leading-edge and optical market. During the March quarter, we recognized revenue on seven TCB systems supporting next-generation interconnect for mobile applications, processor and high-performance computing.

Our TCB order book continued to increase. As we outlined last quarter, the adoption of thermocompression is occurring within both OSATs and IDM and we continue to pursue both customer groups with a major focus on mobility, sensing, silicon photonics, and heterogeneous applications. We also remain very focused on our fluxless thermocompression solution and recently received a purchase order for several systems, which will ship later this year. Our capabilities of fluxless TCB are very unique and provide efficient and capable solution for high-performance triplet integration.

This recent purchase order increased our amendment with long-term cloud spending and the triplet trend. Finally, in addition to the evolving semiconductor assembly market, our opportunity in advanced display continues to expand. We remain extremely committed and we are actively enhancing our leadership in both mini and micro LD applications. Our advanced display engagement and efforts continue to revolve around three areas, near-term capacity expansion for Pixalux, new engagement and qualification for our recently introduced Luminex system and the long-term ongoing development for next-generation display assembly solution.

During the March quarter, we shipped to Luminex system for qualification to separate customers and recently also received two purchase order for initial Luminex system. This system address different process steps at the different customer side and represents a significant milestone in our advanced display business. We remain optimistic on our advanced LED opportunities and look forward to providing an update to our long-term target over the coming quarters. In addition to our growing market access, we continue to improve margins and drive strong operational cash flow at the current level of business.

During the March quarter, we achieved $384.3 million of revenue and a non-GAAP EPS of $1.95. Within capital equipment, we generated $333.9 million of revenue. End market conditions come in largely as expected. The sequential trend driven by general semiconductor was largely related to our ability to search production aggressively in support of customers' expansion plan in September and the December quarters.

Additionally, we continue to see supply chain constraints and the global logistics challenges, limiting the pace of growth throughout the electronics space. As a reminder, we still anticipate semiconductor growth to remain above average into fiscal 2023, which is also a view shared by a major third-party forecaster. Despite 2022 still being an extremely strong semiconductor growth year, it will be relatively lower than dramatic growth experienced last year. Next is industry capacity in early '21, provide headroom to enable last year's aggressive growth.

However, at the start of 2022, this excess capacity was no longer available, which creates shortage and additional supply chain headwind and is now extending the global chip shortage. To highlight this relationship, the majority of high-volume systems we shipped in the March quarter were related to new fab capacity. That has only recently come online. This reinforces our view but broad industry supply chain challenges should begin to result as wafer capacity growth improves later this year.

Within our business, product mix is evolving, which is reducing our reliance on industry capacity expansion and better align our business with the technology and the secular growth opportunity in many of our end markets. This was clearly highlighted during our Investor Day, and I will provide a few examples that highlight this transition. Within general semiconductor, our thermal compression sales have doubled and our wafer label bonding system have tripled in revenue sequentially. Within the wire bonding market, we are experiencing an ongoing increase in demand for complex multi-die wire-bonded package in high-volume consumer market and are also seeing an ongoing ramp in wire bonding to improve sharing requirement for 5G applications.

Later this year, we anticipate customers to start wire bonding assembly for application at a six-nanometer technology node. Again, these trends are increasing the rate of the future capacity and also technology needs across our semiconductor offer. Within LED, advanced display system have remained consistent and represent 88% of LED sales in the March quarter. At this point, we are already approaching our fiscal year revenue target of $80 million and expect to reach the target ahead of schedule.

Within automotive, demand has increased dramatically and is expected to remain above average over the coming years due to the growing demand of electric and autonomous vehicles. In addition to high gross market lighter battery assembly, we also provide high variability IC and the power semiconductor solutions, which are essential to this technology-driven change and the broader automotive industry. Finally, within memory, we are experiencing ongoing demand for our high-performance market-leading NAND assembly system. We are also working to develop a new cost-effective solution for stack DRAM, leveraging our wafer label packaging capabilities.

From an end market standpoint, we anticipate Memory, Automotive, and LED to remain strong. Additionally, the 5G transition and the need for more complex assembly continue to provide long-term tailwinds to our core business. We continue to anticipate wafer capacity growth will improve in the second calendar half through 2024, which will ease industry supply chain challenge and will provide additional visibility to our outlook. In summary, our progress on new growth initiatives and the customer engagement remains on track.

We are expanding position across several new markets while also actively participating in a fundamental transition within our core market. With growth, long-term development engagement with industry leaders, we have developed several high competitive systems and our position to win new qualification across the advanced packaging, automotive and advanced display portfolio over the coming quarters. Our ability to succeed near term can provide significant upside to our long-term outlook and the target. We look forward to demonstrating this progress over the coming quarters.

With that said, I will now turn the call over to Lester who will discuss our financial performance. Lester?

Lester Wong -- Chief Financial Officer

Thank you, Fusen. My remarks today will refer to GAAP results unless noted. As Fusen mentioned, during the March quarter, we continued to enhance our fundamentals and growth prospects by executing on internal development goals, driving external partnerships, and returning value directly to shareholders through our increased dividend and aggressive repurchase activity. We believe our business and cash generation potential have improved in a consistent and sustainable way due to our ongoing strategic execution and participation in long-term technology transitions, Fusen outlined.

In addition, we continue to make progress to achieve our long-term financial targets. During the March quarter, we generated revenue of $384.3 million and very strong gross margins of 52.5%, up over 400 basis points sequentially. This strong gross margin performance highlights our consistent operational efficiency and improving product mix, which includes an accounting true-up related to a long-term and ongoing customer projects. Without this true-up, gross margin would have been just above 51%, in line with our long-term targets.

Non-GAAP operating expenses came in at $66.8 million during the March quarter as some of our SG&A plans were reprioritized, delaying spending to the June quarter. Tax expense for the quarter came in at $13.7 million, and we anticipate an effective tax rate of around 13% for the full fiscal year. Non-GAAP net income came in $121.5 million, driving $1.95 of non-GAAP EPS during the March quarter, significantly above expectations due to stronger gross margins and lower expenses. Turning to the balance sheet.

Days of accounts receivable increased slightly from 84 to 86 days. Days of inventory increased from 75 to 104 days and days of accounts payable decreased from 56 to 49 days. During the March quarter, we generated free cash flow of $69.8 million and ended the quarter with a net cash balance of $415.6 million. In early March, we expanded the share repurchase authorization by $400 million and extended the timing through August 2025.

Shortly after this announcement, we entered into a $150 million accelerated share repurchase program, which allow us to immediately reduce share count by initial 2.5 million shares, equivalent to nearly 4% of shares outstanding. This accelerate program has completed in late April. At this point, we have $340 million remaining on the repurchase authorization, and we intend to resume open market purchasing opportunistically. This remaining balance equates to over 10% of the company's current market value.

Our competitive dividend yield and ongoing opportunistic repurchase activity continue to provide additional path beyond our fundamental growth prospects to create and deliver value to shareholders. For the June quarter, we expect demand to remain stable and anticipate approximately $365 million of revenue, plus or minus $20 million, which includes a risk adjustment that considers our current view on COVID-related closures, ongoing global logistic difficulties, and industry supply chain challenges. For the June quarter, we anticipate gross margins to remain strong at 49%, plus or minus 50 basis points due to product mix and absence of the onetime true-up. Non-GAAP operating expenses is anticipated to be approximately $74 million plus or minus 2% and non-GAAP EPS to be $1.53 plus or minus 10%.

We are very focused on supporting this ongoing period of industry expansion and are extremely focused to drive new engagements, qualifications and ultimately ramp production of our new advanced packaging, automotive and advanced display solutions. Execution on our development and qualification goals throughout fiscal 2022 can potentially drive upside to the long-term targets shared during our Investor Day. This continues to be a very exciting period in the company's history. Over the past few years, our core business and growth prospects have fundamentally improved and we are aggressively executing on the multifaceted growth strategy outlined last September.

We look forward to sharing additional information regarding these new opportunities over the coming quarters. This concludes our prepared comments. Operator, please open the call for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question today is coming from Craig Ellis from B. Riley. Your line is now live.

Craig Ellis -- B. Riley Financial -- Analyst

Yeah. Thanks for taking the question and guys, congratulations on the very strong strategic initiative execution. First, two product-related questions. First on the Luminex side, can you give us some color on whether the orders you're receiving are for R&D-related use? Or are those production tools? And can you give us some indication on order size? And then on the NAND side, is it your sense that the demand for NAND is additional layer count work that customers are doing? Or is it capacity or both?

Fusen Chen -- Chief Executive Officer

So our first generation is Luminex -- is Pixalux and Luminex is a second system is a laser base and provide much higher productivity. So I think this is a very huge market. In the meantime, customers need to have a higher productivity. That's why we introduced this system.

So to answer your first question. We actually shipped -- we're already in the three side for qualification. Normally qualification would take about six to nine months to finish it or sometimes take a little bit longer, really depend on complication in the customer side. So after that, I think if we're successful, it will be a high-volume order.

So actually, Luminex are at the initial stage for qualification. We have a steady qualification side. And the order actually probably is also -- actually will be shipped and also need to be qualified. So at this stage, I think many customers are waiting for our system for qualification.

And hopefully, after qualification, we will see higher growth of our revenue related to Luminex, probably second half of '23. So that's our view. So if I miss any -- questions?

Craig Ellis -- B. Riley Financial -- Analyst

Yes. So one, following up in the NAND drivers for strength, is that layer count work for customers or capacity adds? And then on the financial side, Lester, can you just comment on two items. One, what drove the upside to gross margin, excluding that true-up that you mentioned? And in the past, I think the company identified potential for $1.58 billion in revenues this year. What's the company's view on revenue potential this year versus what it expressed three months ago?

Fusen Chen -- Chief Executive Officer

So I think you questioned about NAND, like DRAM stagnant. OK. So actually, my -- stack NAND we have absolutely a leadership position, a dominant position, and we see actually NAND grows nicely. In my script, actually, I mentioned about stack DRAM.

So the stack DRAM, actually, the process for connection between our stack DRAM once we use the TSB, right? So in this case, we are working with a leading customer, tried to actually replace the TSB by vertical wire provided by our actually process a wafer-level packaging standing process. So to reduce the cost and also footprint, all the form factor of TSB. So that was my remark in --

Lester Wong -- Chief Financial Officer

Craig, so as far as the gross margin upside, yes, besides the onetime accounting true-up, I think the upside was, again, as we've talked about many times before, it's a lot depending on product mix. So I think both, ball bonder business unit, we sold less LED bonders and more higher power computing bonders, which gave us better margins. That's also true in wedge bonder. We also saw the higher-margin product in wedge bonder for power management.

And then also for this quarter, the split between capital and equipment and APS. APS actually was a little bit higher percentage this quarter and APS, as you know, has a higher margin. And finally, we also, besides product mix, what affects the gross margin is customer mix. So our customer mix shifted a little bit more to the IDMs versus the OSATs, which generally also give us a slightly higher margin.

So all those factors together, in addition to the onetime accounting true-up gave us a very strong over 52% gross margin.

Craig Ellis -- B. Riley Financial -- Analyst

Excellent. And then finally, on the full year revenue view, Lester?

Lester Wong -- Chief Financial Officer

Yes.

Fusen Chen -- Chief Executive Officer

So Craig, at this moment, actually, low, we're still seeing some shortage, some -- a little bit headwind for the industry. Like a shortage in the material, mainly in the component IT and wafer capacity. Also, COVID related challenge closed some logistics and shutdown in the customer side. But we also still see a wafer capacity will increase in the second half of '22 this year.

So at this moment, the end market demand remains still very strong. So it's our view, we still think 1.58 actually is achievable attendable at this moment.

Craig Ellis -- B. Riley Financial -- Analyst

Thanks, guys.

Operator

Thank you. Our next question is coming from Tom Diffely from D.A. Davidson. Your line is now live.

Tom Diffely -- D.A. Davidson -- Analyst

Yes. Good morning. Thanks for the question. So first, following up on your last comment, what is your expectation for industry unit growth? And perhaps if you can quantify the wafer capacity growth you see for this year as well? And where that -- how that compares to a normal or typical year?

Fusen Chen -- Chief Executive Officer

This year, actually, I think it's less than last year. So we actually already put into our forecast. So it's our view, probably wafer capacity will increase a little bit more because we only have -- our year actually finished in September, right? So we probably only have initial three months to probably enjoy, if it comes additional wafer capacity. So actually, our view of unit count does not change from the beginning of the year, right? But what's significant is significantly lower than last year.

I think last year was much higher than 10%, right? So this year is a more normal year.

Tom Diffely -- D.A. Davidson -- Analyst

OK. And I think you made a comment earlier that you thought that the wafer growth, you could see it going through 2024. Does that portend I guess, then for a pretty strong unit growth over the next couple of years as well then?

Fusen Chen -- Chief Executive Officer

Yes. I think that's third-party view also. I think the next few years, the unit count -- actually normal for us probably is about 6% -- maybe 6% to 8%.

Tom Diffely -- D.A. Davidson -- Analyst

OK. Great. And then a lot of the equipment guys are seeing fairly mixed business between the leading edge wafer growth capacity and the trailing edge. From your point of view, is there one of those that's particularly better driver? I know historically, the trailing edge has been a bit of a driver of wire bonding, but since you have so many projects now at near the leading edge.

I was curious if that also is going to be a fairly nice driver for you for the next few years?

Fusen Chen -- Chief Executive Officer

Well, I think in my remarks, I mentioned this quarter, the majority of our bounder actually go to the fab, just to finish construction, right? So I think both leading-edge and no more like IoT, all these devices, most capacity will expand. Of course, at this moment, I think because the front-end capacity needs to take a much longer term to prepare, right? So I think probably investment is a little bit heavy. But at this moment, I think both the back-end and the front-end wafer advanced and the normal wafer actually, both capacity will increase in the second half.

Tom Diffely -- D.A. Davidson -- Analyst

OK. Great. And then finally, can you talk a little bit about your partnership with PDF Solutions and the creation of the closed-loop assembly solution. How does that, do you think, impact revenue going forward? Are you going to be able to create some recurring revenue streams just from the data flow? Or how do you view that longer term?

Fusen Chen -- Chief Executive Officer

Right. So I think at this moment, the real-time monitoring, all the information chamber become closer is very important because of the process and everything getting more complex. So a partnership, we do believe it's an added value to our customers in terms of efficiencies, throughput, and the analysis. So this -- I think at the first one or two years after we get enough experience, we probably will help our APS revenue, right? That's our view.

Tom Diffely -- D.A. Davidson -- Analyst

OK. Thank you for your time today.

Fusen Chen -- Chief Executive Officer

Thank you.

Operator

Thank you. Your next question is coming from Krish Sankar from Cowen and Company. Your line is now live.

Krish Sankar -- Cowen and Company -- Analyst

I have a few of them. First one, can you guys tell what the wire bonder lead times are today?

Lester Wong -- Chief Financial Officer

Yes. So, Krish, I think wire bonder lead time is about four and a half months.

Krish Sankar -- Cowen and Company -- Analyst

Four and a half months. Got it. Got it. OK.

And then I think if I remember right, I think Fusen, you kind of -- I understand there's a lot of capacity constraints, etc., but you feel OK with the $1.58 billion number for this year. I'm just kind of curious, at what point do you think some of these growth initiatives like the auto, advanced display, etc., will start offsetting your legacy wire bonder? Or is that like way down the road?

Fusen Chen -- Chief Executive Officer

OK. So Krish, maybe I'll answer maybe not from a number point of view, right? As you know, wire bonder actually is a big business and it used to be very cyclical. But in my view, actually, I think what we try to do is make sure the bonder, we have leadership position and also ensure, bonder grow on top of a new initiative we have, right? So actually, overall, I am quite bullish about future of the ball bonder, right? So let me give you an example. I think the whole world, the ball bonder represent about 65% of our market share for total IC packaging solution.

So whatever capacity increase in the wall, it can be high end, can be mid-end, it can be low-end devices. The ball bonder actually represents 65% of market share to packaging overall of all these IC. And so I think ball bonder demand will continue to grow. Actually, because of -- in addition to yearly semiconductor unit growth, we see the ball bonder continue to find new application to grow.

I'll give you a few examples. I think we talked about the multi-die. This multi-die, actually provide -- actually interconnect not only between a die to substrate, but also between die-to-die. So because of this, it's also a kind of advanced packaging.

You put a different notch maybe it's not an advantage of that, but actually, increase -- actually transits density, right? So increase actually also the capital intensity. So we really see the growth of this multi-die. The second application I'm telling you is, we are entering 5G lot and they are multi-die actually in a package. Between a die-to-die, there may be a different kind of bandwidth, different kind of noise or interfere to each other.

So industries start to use our ball bonder, actually to build a vertical wire, become a fence along the die and to prevent the interference and also reduce the noise between each other, right? So we see this area also growing and ball bonder received this application. The third one, I think we just mentioned, the TSB load is very mature, but very high cost, and we are working with the industry leader, DRAM and try to use our [indiscernible] solution, the vertical wire actually connect between a stagnant instead of TSB. So later this year, people will start to use our ball bonder for six-nanometers. So what I'm trying to say is a low, the ball bonder is cyclical and so is industry and what we believe is ball bonder will continue to grow and AV cycle high and low, will become higher for the next cycle, right? So in the meantime, we try to speed up our new initiatives as soon as possible to push Luminex and also grow advanced packaging.

And APS, AV will grow. So I think to answer your question, bottomline. We are seeing maybe second half of '23, all these new initiatives will become much meaningful to offset the cyclical of ball bonder. But in the meantime, I think we are bullish on the ball bonder.

I think the cycle will take longer right now because the industry is more mature and the ball bonder start to -- continue other than you need growth need additional capacity, also have additional growth in the area, like I mentioned, the multi-die and also sharing requirement and also other applications in the memory.

Krish Sankar -- Cowen and Company -- Analyst

Got it. Got it. Very helpful, Fusen. Then last question, in the past, you mentioned TCB thermocompression bonder revenues would be around $40 million in 2020 to $80 million in FY '23.

Is that still a good number to use?

Fusen Chen -- Chief Executive Officer

Yes. Yes. Actually, we are quite bullish on our TCB. And TCB, actually, we have 4 markets, right? We focus on mobile.

We also focus on heterogeneous integration. And also, I think in the CMOS imaging sensor and also heterogeneous integration. And all these four application I think will grow nicely. So I think we are -- our goal right now is higher than originally, we show during our Investor Day.

I think also flux, maybe I mentioned a little bit about fluxless. We believe our TCB will continue to grow strongly. But one concern about TCB is flux contamination that will not be able to extend to very fine pitch like below 20 microns. But all fluxless, capability is a very unique process, can actually provide a very clean copper-to-copper service, and we believe it will extend able almost to like a 15-micron space, right? So we actually already have a customer, either mobile, also in the CMOS imaging sensor, silicon photonics for optical transceiver and also heterogeneous integration.

So I think '23 next year we actually aim in close to $100 million. I think that the number should be what we showed at our Investor Day, right? But we do believe TCB provides a very significant growth opportunity for us for the coming years.

Krish Sankar -- Cowen and Company -- Analyst

Got it.

Operator

Thank you. [Operator instructions] Our next question is coming from Christian Schwab from Craig-Hallum. Your line is now live.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

Hey. Good morning, guys. Great quarter. Just a couple of quick questions that haven't been asked.

As we ramp the Luminex, should we expect that gross margins to be in line with the corporate average? Or is that going to be slightly better or slightly worse?

Lester Wong -- Chief Financial Officer

Hi, Christian. It's Lester. We expect Luminex again, as we said previously, because it is an advanced display of one of our more advanced products, we believe that actually will be higher than in terms of a little bit higher than the corporate margin. We think it's going to be one of the higher-margin products because we believe it's going to be one of the leading products in the space and also I think there's great demand for the product in Mini and Micro LED.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

Perfect. And then can you remind us -- I know you guys talked about this being a substantial market opportunity, [Technical difficulty] by your bonding business, given the acceleration adoption of mini, micro LED and your dialogue, I mean can you give us a three- to four-year path about how big you think that business could be again?

Fusen Chen -- Chief Executive Officer

So, Christian, you're talking about advanced display, right?

Lester Wong -- Chief Financial Officer

Yes.

Fusen Chen -- Chief Executive Officer

OK. So if you remember, I think '21 is the first year we enter this high-volume production. In '21, we guide $80 million we attribute. This year, we also guide about $80 million, $80 million to $100 million.

We believe this year, we will end -- close to high end close to between $80 million to $100 million close to the high side. And next year, I think we will have both revenue from Pixalux and Luminex. But our goal is Luminex, I think should be much higher in the future. But because of -- we are still in a qualification stage, the qualification can take a long time, but we are quite bullish, qualifications should do very well.

So second half -- and after that, I think it can grow much, much faster, right? So we will probably share more detail in the next few quarters when we have more detailed information.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

OK. Great. And then as it relates to the aggressive buyback plan and then a slight follow-up to the partnership with PDF Solutions. Do you think we're at a stage where there's limited M&A opportunities to create greater scale for the business through M&A versus just repurchasing stock? Or do you think the best way is doing what you're doing to invest aggressively and what you know and understand in the stock that's undervalued as well as expand opportunities to partnerships like a PDF solution versus maybe more consolidation to the back end if you will.

Lester Wong -- Chief Financial Officer

So, Christian, I think we look at all three of the areas you talked about. I mean as we've shown, for capital return, we have a very attractive dividend, which we increased every year, right? In addition to that, on the share buyback, we did a very -- on an opportunistic basis, the open-market repurchase which we've also been pretty aggressive on. And then obviously, we did do the ASR of $150 million. So we do believe that the stock is undervalued currently and definitely undervalued considering all the exciting growth factors that Fusen talked about.

As far as partnerships, we're always open to partnerships, whether with PDF and other people in terms of providing better solutions to our customers and also monetizing these solutions, and hopefully, these will become more sustainable. But we don't actually think that M&A is not something we would look at. We've always looked at it. And I'm not sure whether we look at it from a consolidation standpoint in the back end.

I think what we look at is to basically adjacency, particularly in things that, again, we think there's a lot of opportunity in automotive and advanced display along the supply chain for mini and micro-LED. I think we're looking at a lot of different things there as well as things that enhance our core technologies and basically accelerate our development, and that was shown, for example, in the Uniqarta acquisition, right? So I think we consider both capital returns through share repurchase and dividend, definitely partnerships with people like PDF, but also, we definitely are not saying that M&A is not something we would consider. We think definitely there are opportunities in M&A.

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

Great. Thank you for that clarity. No other questions. Congrats on another great quarter and a great outlook.

Thank you.

Lester Wong -- Chief Financial Officer

Thank you, Christian.

Operator

Your next question is coming from David Duley from Steelhead. Your line is now live.

David Duley -- Steelhead Securities -- Analyst

Yes, thanks for taking my question. Lester, I was wondering, I think it was at your Analyst Day, you talked about having gross margins improve by about 500 basis points from, I believe, 47% rate, and we just saw that you achieved that gross margin target or rate in this current quarter, but it was mainly driven by mix, as you mentioned, the onetime true-up. I think when you were referring to the 500 basis points improvement in gross margins before it was going to be driven by lower cost and new products, particularly, I think, a new wire bonder product. I was wondering if you could give us an update where you are with the new product initiatives.

And if the new products continue to come out in the future, will gross margins perhaps grow higher than the 50% or 52% range?

Lester Wong -- Chief Financial Officer

Well, Dave, I think we said 51% to 52%. And you're correct. You have a great memory. We did talk about the core business.

I mean Fusen's really driven cost reduction over the last couple of years. We're continuing to drive cost reduction down, which will help our margins. I think also we do have new products in our core business, both in ball bonder as well as wire bonder. And these new generation products actually will have very attractive ASPs because with their UPH as well as their accuracy, the cost of ownership to our customers actually are falling.

So, therefore, we can maintain healthy ASPs. We look at cost reduction, always. We built that in right from the beginning. Now Fusen has really infilled the culture of cost savings from engineering all the way through the supply chain.

So I think going forward, we do believe we will reach our long-term target of the gross margin in the 51%, 52% range. And that's both from our very strong core business through cost reduction and new products as well as the new vectors in automotive, advanced display, and advanced packaging.

David Duley -- Steelhead Securities -- Analyst

OK. A clarification question. What should the share count be -- maybe you mentioned this, but I might have missed it. What's the share count going to be in Q2 and going forward?

Lester Wong -- Chief Financial Officer

Dave, you should use $60.1 million.

David Duley -- Steelhead Securities -- Analyst

OK. And Fusen, you mentioned -- we've talked about this in the past. There is a higher capital or wire bonder intensity with some of these heterogeneous packages and multichip modules. I'm wondering if you could maybe update us on what you think versus just a standard die.

How much more capital intensive you're seeing some of these newer advanced packages are and just standard parts?

Fusen Chen -- Chief Executive Officer

Well, I -- actually, we don't have this on hand right now. But roughly, I think we continue to see this multi-die the growth rate -- actually, all the growth majority are focused on a new area. I mentioned the three new areas. You need to like a multi-die not only die to substrate, you also need to connect die-to-die.

So, therefore, increase capital intensity. And this is a new share environment after you bond connect to a substrate. And you also need to build fence or cage along the die to make sure it's not in the field to next die. This also increased capital intensity, right? And continue to find application.

So we -- I think before, say, two or three years ago, our wire bonder may be dealing with like 1,000 wire. And right now, we are doing about 2,000 wire, right? So actually, if you -- capital intensity, we not productively increase probably almost double.

David Duley -- Steelhead Securities -- Analyst

OK. Could you just remind us of the mix in the wire bonder business between OSATs and IDMs and what would you expect that mix to look like in the back half of this calendar year?

Lester Wong -- Chief Financial Officer

Well, Dave, I mean, the mix between IDM and OSAT does shift quarter to quarter, right? So I mean, it's been running for ball bonder, sorry, the core business. I think in the core business, in the last couple of quarters because of the huge ramp in capacity. And as you know, when things ramp for -- based on capacity, the OSAT tends to be more active because they are generally where customers go when they need immediate capacity, right? So that was close to probably to, I would say, almost 90% OSAT, 10% IDMs. In the most recent quarter, Q2, it shifted a bit.

I think it's close to now to about 75%, 25% in terms of OSAT and IDM. The IDMs now have become much more active, particularly, again, as the automotive business is very strong, as you know, and our automotive business actually is quite focused on the IDMs.

Fusen Chen -- Chief Executive Officer

Also, David, I like to add. I think we have a very diversified customers in both OSAT and IDM. And sometimes I think some OSAT probably have enough capacity, not necessarily all the OSAT has a full capacity, right? So I think we have a pretty good relationship with all our customers, and we work with the customers. And especially, I think on ball bonder in my opinion, is reaching to another cycle.

I think on next cycle, we believe will be longer. And ball bonder on top of the unit growth, I think will also grow with a special application, I mentioned like a multi-die. The niche requirement and potentially can be used for the memory, not only for the NAND, which we have very, very high market shares. I think DRAM, we still have much room to go to gain the market share.

David Duley -- Steelhead Securities -- Analyst

OK. Final question from me is you talked about -- I think I see the volumes getting a bit better in the back half of the calendar year. I was kind of curious how you might be looking at this is, I guess it was my understanding in the middle of this year, you kind of have the 5-nanometer transition at the big foundry in Taiwan, and that's definitely going to drive higher units. But I was under the impression a lot of this trailing at capacity wasn't going to come online until early next year.

What's your view of both the kind of the front-end advanced capacity and the trailing capacity and when it will come online. And I'm imagining that the trailing edge capacity is more relevant for you as far as a wire bonder opportunity, but maybe not.

Fusen Chen -- Chief Executive Officer

That's correct. I think, David, I think you are right. I try to -- I think I'll give you an example. I think our ball bonder continued to be extended, right? Even our six-nanometer, I think the new application is going to be a big application.

It's in the mobile space. And so I think a lot of people believe ball bonder actually is a very old technology. But I can just tell you, there's a lot of very sophisticated technology over there. And it's continuing to extend because of ball bonder, wire bonder is the most effectively for interconnect, right? So we believe -- a lot of people believe 20-nanometer, but we'll be more free chip but actually continue to extend.

And people is actively working on the six-nanometer might not be high-volume production by end of this year, But for sure, the volume will come quickly.

David Duley -- Steelhead Securities -- Analyst

Thank you.

Operator

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Joe for any further or closing comments.

Joe Elgindy -- Senior Director, Investor Relations

Thank you, Kevin. Thank you all for joining today's call. Over the coming months, we will be presenting at several virtual and in-person investor conferences in New York and San Francisco. As always, please feel free to follow up directly with any additional questions.

Have a great day, everyone.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Joe Elgindy -- Senior Director, Investor Relations

Fusen Chen -- Chief Executive Officer

Lester Wong -- Chief Financial Officer

Craig Ellis -- B. Riley Financial -- Analyst

Tom Diffely -- D.A. Davidson -- Analyst

Krish Sankar -- Cowen and Company -- Analyst

Christian Schwab -- Craig-Hallum Capital Group -- Analyst

David Duley -- Steelhead Securities -- Analyst

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