Tom Diffely: Okay, thank you for your time.
Operator: One moment for the next question. The next question comes from Mark Miller with The Benchmark Company. Your line is open.
Mark Miller: Thank you for the question. You mentioned you had three evals underway for Purion H200 and also a Dragon eval with an advanced logic customer. Are there any other evals currently underway?
Russell Low: Yes, there’s eight evals underway, Mark. We’ve got one medium current tool that’s at a DRAM customer, a Purion XE Max under eval for an image sensor company. The three H200 silicon carbide tools you mentioned for power device and also a Purion VXE in a power device application. And then general mature, we have a Purion H and then the Purion Dragon in advanced logic, so many customers, many applications, and many different products across the board there.
Mark Miller: What was the medium current, I’m sorry, customer?
Russell Low: DRAM.
Mark Miller: DRAM, okay. Thank you.
Russell Low: Thanks Mark.
Mark Miller: Wolfspeed indicated a week ago that they saw very strong design and they’re a major silicon carbide, as you know, manufacturer. I’m just curious why your first half will be weaker given what Wolfspeed was indicating would appear to be very strong design, and I think 75% of them are from automotive.
Russell Low: Yes. I think Mark, so we see strength in silicon carbide globally. Right now there is more strength coming from the Chinese customers. The Chinese EV market getting lots of press in terms of it is slowing its growth rate. When you look at the number of EV companies, the breadth of the product lines that they offer, they are very focused in China on silicon carbide, not only for internal to China, but to be a global low cost provider. So we’re seeing strong bookings and continued strong quote activity from China. Throughout the rest of the world it slowed a little bit over the course of the last quarter, but as you comment, many of our customers are talking about that picking back up as the automakers start to settle on their exact product plans.
Mark Miller: Thank you.
Operator: One moment for the next question. The next question comes from Jed Dorsheimer with William Blair. Your line is open.
Jed Dorsheimer: Hi, thanks for taking my question. I guess the first one, I just want to put a finer point, Russell, it sounds like to a previous question, when you preannounced positively three weeks ago that you had insight that Q1 would be weaker. I just want to make sure, is that the case that you knew that sort of the Q1 one would be off by 15% or did you see any push outs over the last three weeks? And then I have a follow up.
Russell Low: Yes, I’ll take that on. We have seen again the shifting in those delivery requirements over the past couple of weeks, especially as our customers now are firming up their CapEx requirements and the timing of those requirements over the course of the year, Jed. So the reality is, as we thought through the guide for 2024, our historical practice has been to make sure that we can provide the most meaningful guidance to the folks relative to that and we historically have done that on this call. So it was the combination of factors there relative to the timing of that preannouncement.
Jed Dorsheimer: Got it. That’s helpful. Thank you. And I appreciate how fluid things and dynamic things can be. I guess along those same lines, I know I heard Doug talking, speaking positively on China. The average utilization for fabs in China is below 50%. Most are around sort of 30%. So I’m just wondering what gives you the confidence that those orders materialize? Typically you would not see additional CapEx spend with such low utilization unless the tools are being repurposed for something else. So I’m curious, what gives you the confidence that in that bookings that you don’t see additional push outs in the power market in China? Thanks.
Russell Low: Yes, so I think, Jed, a lot of it is the fact that the Chinese companies, I think the Chinese Government has a long-term plan for silicon carbide and EVs. And so the utilization is probably a little less of a factor in determining their investment policy over the course of the next few years. And so, we see a lot of new customers in addition to the larger silicon carbide customers in China, and so there’s quite a bit of activity despite your comment on lower utilization. I think they’re also preparing for the fact that there is still expected to be a significant growth in EVs over the course of the next 10 years. Most of the automakers globally, outside of China, will say, have changed their plans a little bit over the course of the last six months especially.
But none are really backing away from the fact that there’ll be a significant number of electric vehicles. And a lot are moving to a combination of hybrid and electric, and hybrid, of course, utilize power devices and inverters as well.
Jed Dorsheimer: Got it. And last question for you guys and I’m assuming it’s probably in the software, but I just want to ask it anyways. Most of the equipment companies that have sold into China have been reengineered and are now being supplied by local vendors, with one exception, which is in implant. So, I’m just curious, how do you gauge that with so much exposure to a market that government subsidies are literally tied to reengineering of the tooling? How do you have confidence that that won’t happen with your solution?
Russell Low: Jed, this is Russell. So there have been a couple of domestic suppliers, probably for 20 odd years there’s a couple of them they’ve been working on knockoff medium current implanters. One thing I’d say that does insulate us a little bit is that these are highly complex technical products and the software is a huge component of it. The operation of the machine, the recipe, tuning, the setup is a huge part. So, I would say that it’s a very difficult technology to replicate. People have been trying without too much success to date. And I think there’s another couple of things that go on here as well, that we are an innovator and we are keep moving faster and faster, working with our customers to make sure they have the most up-to-date solutions that make them competitive whereas typically the domestic tool manufacturers get left behind.
So once a technology starts to plateau, then that’s when foreign vendors get run over and I saw that happen in a couple of other areas.
Jed Dorsheimer: Got it. Thank you. I’ll jump back in queue.
Operator: [Operator Instructions] The next question comes from David Duley with Steelhead Securities. Your line is open.
David Duley: Thank you. I was curious about the memory recovery you talked about in 2024. I think you mentioned that memory would be 10% of revenue this year. And I think historical peaks were around 20%. But that was split evenly between NAND and DRAM. And I think you’re talking about 10%, it’s mostly DRAM. Could you just elaborate a little bit about the breakout of revenue there? And if it is going to be 10% DRAM, that’s pretty close to historical peaks, I think and just talk about what the drivers are behind that memory business?
Russell Low: Yes, Dave. So the number that we’ve got in the presentation is it’ll be under 10%. So, that we’re monitoring that very closely as the year goes on since it’s a second half situation, the drivers for it are basically getting back to a point where we start to see wafer start additions by the memory companies on both DRAM and NAND. We expect DRAM to happen ahead of NAND. And the drivers for utilizing capacity are HBM, which is currently seeing a lot of our customers shift capacity over we see shrinks happening that will allow them to get more bits out before they add capacity or add wafer starts, and then they’ll start to respond to demand. And we expect demand drivers like all the consumer and auto stuff as it comes back, AIPCs look like they could be a big driver of DRAM.
Microsoft, they’re requiring 16 gigabyte per AIPC for Windows 12 and AIPCs. So there’s a lot of good indicators that we’ll start to see capacity additions as we get towards the second half and end of this year. Driving into 2025, where we expect it to be a very good year for DRAM. NAND, we don’t expect to really see a lot of activity until we get into the beginning of next year. That’s going to be driven by storage both on device and in data centers.
