Mike Slessor: And that’s the way we classify it, too, David, for clarity, right? Regular flip chip, although, some people would call that advanced packaging, we’re really targeting that classification at chiplet multi-die architectures assembled using techniques like hybrid bonding and TSV, because that’s really where the increase in performance, the decrease in cost, the innovation acceleration comes from. It can sometimes be a little bit difficult to break out. But given what we highlighted in the third quarter, my guess is that somewhere around 20%, 25%, maybe even 30% of our business at present is associated with advanced packaging. The combination of the client based microprocessor, HBM at the various customers and a smattering of other designs.
So we’re still clearly in very early innings associated with this. But if you look at the increase in test intensity associated with it, it’s also one of the things that is underlying the strength in the third quarter results. The fact that some of the revenue concentration was associated with things in advanced packaging really does help out the overall top line. And that’s why we’re so optimistic of our exposure and the eventual growth advanced packaging will drive for us.
David Duley: And when you look at both the unit volume growth that you see in advanced packaging plus this increased intensity and increased complexity, or more advanced packaging business over the next two years, what would you guess the growth rate is? Clearly, it’s probably more than 2x the industry growth. But I’m just kind of curious if you have an idea of what it might be?
Mike Slessor: So we’re going through annual planning and strategic planning right now, and it’s one of the key things we’re looking into. So over a two year time frame, we do expect it to outgrow the industry significantly. I think 2x may be a little bit aggressive. But again, it’s one of the reasons given our competitive position, given the value we create for our customers in advanced packaging applications with things like our MEMS probe technology, with things like co-packaged optics, tthat outsized growth is somewhere where we got good exposure, and we’re going to continue to prioritize and capitalize on.
David Duley: And just one more clarification. As far as sub 7-nanometer and below foundry logic business, what percentage of those wafer starts are MEMS based probes versus other technology, is it a vast majority at this point?
Mike Slessor: Yes, it’s a vast majority of MEMS probes. There are counter examples where MEMS probes have not been adopted in areas like very large footprint, single [indiscernible] GPUs, for example, because the interconnect density doesn’t require a MEMS based probe, but it’s a pretty reasonable rule of thumb that the vast majority of sub 7-nanometer foundry and logic devices do need to be probed with the MEMS probe cards.
Operator: And our next question comes from the line of David Silver from CL King and Associates.
David Silver: I had a couple of questions maybe about planning for next year, but this is typically the time of year when budgeting and everything takes place. Just focusing on your CapEx budget. There has been the Livermore capacity expansion. But when you’re thinking about next year’s CapEx spend, could you maybe call out where the biggest amount — the largest amount of discretionary CapEx is going to be spending? In other words, what efforts or applications are you going to be committing discretionary resources to?
Shai Shahar: So as you said, we are going through the planning process. And given our big footprint in Livermore in California, I expect most of the additional CapEx to happen in that facility. In terms of magnitude, I did talk about completing majority of our capacity expansions that is required for achieving the target model and that’s where we expect the CapEx in 2024 to decrease certainly compared to the $60 million midpoint CapEx we expect in 2023. I don’t expect it to go down significantly like to the $20 million a year levels that we had before starting this capacity expansion, but somewhere in that range is what we expect CapEx to be in 2024, and most of it in the probe cards business and most of it in Livermore.
David Silver: And then I’d kind of like to ask a similar question on your R&D spend. So I think the third quarter R&D spend was an all-time high. And again, when you look out to next year, what are the new or significantly increased efforts in your R&D budget, if you could call out maybe the top one or two, that would be very helpful?
Mike Slessor: Really go back to the themes we’ve talked about today, advanced packaging, chiplets, making sure our product roadmap is aligned with the key customers who are adopting advanced packaging and chiplets in volume and making sure we’re focusing our R&D spend to have differentiated products in those applications are really the focus areas. So in DRAM, making sure we’re keeping our competitive lead in HBM. But in foundry and logic, there’s a variety of new requirements and new products that we’re releasing associated with higher speed, higher power, smaller pads and higher pin counts that are really the focus of our envisioned R&D spend, I won’t call it planned yet in 2024.
Operator: Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Mike Slessor for any further remarks.
Mike Slessor: Thanks, everybody, for joining us again today. We have a couple of investor conferences on our docket to end the year. I believe they’ve been posted on our Web site. So we’ll hope to see you there to wrap up an eventful 2023 and look forward to 2024. Take care.
Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
