Charlie Chan: I see. Thanks, David. So my next question is about the China CapEx sustainability. I mean right now, as you said, right, it’s for local sufficiency. But you also see that some of your major customer, their gross margin already dropped to like 10% gross margin, right? So I’m a little bit worried about sustainability. So any kind of signs or lead indicator we should pay attention to, right to check the China CapEx sustainability.
David Wang: Yes. Well, I should say there as we said a couple of times before, is China’s fab is still in the multi-expansion, no matter the logic or memory, right? Also a lot of, I call the mature nodes, it’s very related to the EV, IGBT it’s still in the, I call the products in the building process. Also I want to say another thing is the consumption of the chip, especially mature modes in China is way higher than capability that can be produced in China. So you look at that gap, I’m still saying next few years and China and WFE, this market will continue to grow.
Charlie Chan: Okay, got you. So, yes. One last question I will be back to the queue. So, question to Mark. Since you are ramping up the Lingang new campus, can you give us some updated gross margin and also OpEx assumption for 2024?
Mark McKechnie: Yes. Hi, Charlie, thanks for asking. So yes, I said in my prepared remarks, I gave some detail there, but I’ll go ahead and repeat it. We’re anticipating our target model for gross margin is unchanged at 40% to 45%. Obviously we’ve done better than that for the last several years, but that’s kind of the margin level that’s our target level. And then for the OpEx levels, and these are non-GAAP numbers, we expect R&D continue to invest pretty strong in R&D. And you should always expect, as we’re a growing company, to spend at about 16% level is our outlook for non-GAAP in 2024. Sales and marketing we expect in the 7% to 8% range and then G&A about 5.5%.
Charlie Chan: Okay. Okay. Yes. So — yes thanks for the recap those guidance.
Mark McKechnie: You bet. You bet.
Operator: [Operator Instructions] One moment for our next question. Our next question comes from the line of Mark Miller with The Benchmark Company. Your line is now open.
Mark Miller: I believe you — well, first of all, congratulations another great quarter. But just wanted to get a little more into the OpEx in the December quarter. You did mention the sales and marketing was down. You said it was because of demo systems. I’m confused why that fell so much.
Mark McKechnie: Yes, it was a significant decline in the sales and marketing promotion tools. So we took that out of the sales and marketing expense. And going forward, you won’t see that expense level in the sales and marketing. And so we look at it kind of for the full year, sales and marketing was about 7.4% on a non-GAAP basis. And so we expect that sales and marketing level to be kind of in the 7% to 8% in non-GAAP next year.
Mark Miller: Can you give us a little bit — you said you had a lot of quals underway. Can you give us a little more color of what’s going with your quals and timing of quals in terms of when you expect revenue generation.
Mark McKechnie: In terms of — yes, David, he’s asking about our evals at our customers. Maybe I’ll let you address that and then I can add to it in.
David Wang: In general, right?
Mark McKechnie: Yes.
David Wang: Okay.
Mark McKechnie: And so that’s — I think Mark, you know our finished goods inventory is largely comprised of evaluation tools at our customers. And so I think, yes, David.
David Wang: Yes, let me see that. Obviously there’s this finished goods in the customer side for evaluation. Mostly the first tool. And those first tool can be their first of new customer, right, especially their first time buyers. They want to make sure those tool and not just qualify for tool itself. Sometimes they’ve qualified the whole production line to look at the yield to come out. That takes some time, right? Also, there’s also the first tool is pretty new, brand new tool. And we need a customer to real, we call it a beta tool, right? You need a real evaluate that and that sometimes take a process one year, even a year and a half. It depends on how that tool first building be mature, how mature it is. So those kind of tool will be considered as our first tool.
Mark Miller: Okay. And Just final question. You previously said you were doing more investment in Korea, I guess get more business from SK Hynix. Can you give us an update on what’s going on there?
David Wang: Okay, great. So Hynix actually is a real long-term customer, right. And we are fully engaged with the customer, I mean, Hynix right now because we are real — emphasize our investment also expansion our R&D force also manufacturing in Korea. We do have about 150 employee in Korea right now. As I mentioned, we bought a land and also to building factory there at a future property time. So key point I’m trying to see that is we have multiple tools like cleaning, copper plating and including furnace and also a developer of PECVD and also Track. So all these five tools will try to engage with the customer in Hynix and because of a relationship and also because of our local R&D force and also we offer customer with differential product and differential technology, which is quite interest or get interest from the customer in Korea.
Mark Miller: Thank you.
Mark McKechnie: Thanks, Mark.
David Wang: Thanks.
Operator: [Operator Instructions] One moment for our next question, please. Our next question comes from the line of Christian Schwab with Craig-Hallum Capital. Your line is now open.
Christian Schwab: Hi guys, fantastic year and great quarter. So I’m trying to better understand, you know, the two or three reasons better either from a product category standpoint or a customer standpoint. Your conviction and your ability to outgrow WFE not only in China but else so globally year-over-year.
