I’m confident that we can qualify at least in 2024. That will take a while to build into a significant share and revenue position, but we’re setting the groundwork now, and it’s a very important objective for some key people of FormFactor in 2024.
Christian Schwab: Great. No other questions. Thank you.
Mike Slessor: Thanks, Christian.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Craig Ellis from B. Riley Securities. Your question, please.
Craig Ellis: Yeah. Thanks for taking the question. So Mike, hard to believe there could be even more DRAM questions, but there was some new ones I wanted to better understand. As we look at high-bandwidth memory here in the first quarter, understandable that it’s ramping given what’s going on more broadly. But the question is this, as you look at the mix of your high band with memory exposure in 1Q from high-bandwidth memory 3 to potentially 3E, which I think really launches commercially on a system in 2Q and high bandwidth memory 4, which I think everybody expects to come out in early 2025, how much of the mix in 1Q is 3 versus 3E and 4? And to the extent we’re not really generating revenue on the latter 2? When would you expect that to hit?
Mike Slessor: Yes. There actually is a little bit of revenue on 3E. So most of the production volume, as you note, is on third generation or HBM3. But 3E, the mini step, we are shipping probe cards in some significant volume. I don’t have the mix off the top of my head, but I guess it’s something like two thirds HBM3, one third HBM3 and then a sprinkling of HBM4 in early R&D shipments.
Craig Ellis: Yes. And then part of that, just so I don’t offend the moderator with too many questions. There’s growing chatter that in PCs, we could see a format change from [indiscernible] to LP cams. And I don’t know if that has any impact on probe card intensity. But are you seeing anything on the personal computer side that would drive up probe card intensity that’s AI related?
Mike Slessor: I don’t think so, Craig. I think those format changes, especially, that’s two steps downstream from us in the integration when they get integrated into the package and then into the module. I don’t anticipate that having – and we, of course, interact with the die at the wafer level. I don’t anticipate that would have a significant impact. What we really need is a PC refresh cycle to drive unit volume increases of PCD [ph]
Craig Ellis: Yes, I hear you on that one. And then for the second question, typically, I think in the first half of the year, the business within Foundry & Logic would start to benefit and have a signed way relative to an APU program at a large foundry? Is everything on track there? And do you still expect to hold the same share that you’ve historically had there?
Mike Slessor: Yes, I think so. I mean it’s going to be an interesting year with in the foundry business, a lot more high-performance compute than just application processor, although I think the application processor projects in the foundry space generally continue to be big middle of the year drivers of revenue. Those are key customers and very important focus areas for us as we move through 2024. There are one element of the overall diversification strategy we talked about, right? The DRAMs running pretty hot right now. HBM, not so surprisingly, but DDR5 being, as I said in the prepared remarks, a bit surprising given where we are in the DRAM cycle. But it’s exactly a case study of why we’ve put these different businesses together to try and produce a relatively stable top line demand profile so that we can weather this subcyclicality and continue to invest in things like R&D for competitive differentiation and capacity.
Craig Ellis: Got it. Thanks, Mike. Appreciate the help.
Mike Slessor: Thanks, Craig.
Operator: Thank you. One moment for our next question. And our next question comes from the line of David Silver from CL King & Associates.
David Silver: Yeah, hi. Thank you. I’d like to ask maybe a strategic question regarding capital deployment at this point in time. So Mike, with the sale of the Metrology business, I mean you kind of had to make a strategic decision not to invest to grow that business. And I don’t believe the Livermore [ph] capacity — you have some extra capability at Livermore [ph] now. So when I look at your balance sheet, I mean it’s certainly highly liquid, could you just maybe discuss some of your thoughts about the highest and best use for that, what you would call may be incremental or excess portion of your cash? In other words, does vertical integration either forward or back makes sense? Are there parts of your global footprint that you could profitably expand?
Or would there be something from the equity investment that your large competitor received recently that maybe requires a countermove or some kind of – some kind of step to retain or maintain your competitive balance. But sitting here with a highly liquid balance sheet, what goes through your mind in terms of optimizing the use of at least a portion of that?
Mike Slessor: Yes. I’ll let Shai talk through the details. But I think in an environment where we still expect consolidation in the space, we don’t think holding on to some cash, especially with decent returns is a bad strategic move. We’re going to need dry powder for M&A. We continue to be believers in M&A and consolidation, not necessarily inside our served segments, but to expand our served available market and cash is a very useful asset to have. So with that, I’ll turn it over to Shai to talk a little bit about capital allocation priorities.
Shai Shahar: Right. Yes. So as Mike mentioned, our priorities really didn’t change compared to what we communicated before. We are focusing on reinvesting in R&D. We’re still investing in capacity. Although we started down recently, things like vertical integration that you mentioned and automation. And we have the share repurchase program that I talked about. We still have $75 million to invest in share repurchase. This is to offset dilution. And it’s a 2-year plan, and it’s been one quarter since we announced it. So we still have 1 year and 3 quarters to do that. And M&A, right? And with the current interest rates and cost of capital, accumulating cash is aligned with our M&A strategy. If you look at our historical acquisitions, the MicroProbe acquisition in 2012, the Cascade Microtech acquisition back in 2016, we’ve been pretty good in creating value through our M&A activity and have been a good steward of capital.
David Silver: Okay. That’s great. I’ll stop there. Thank you very much.
Shai Shahar: Thanks, David.
Operator: Thank you. [Operator Instructions] And our next question is a follow-up from the line of David Duley from Steelhead. Your question, please.
David Duley: Yes. I was just kind of curious, are you comfortable with unit volume – IC unit volume growth in the 6% to 8% range for 2024 for the foundry logic segments. And if that’s the case, would – do you guys think you can grow faster than that or slower than that as far as the market growth? Yes. I think as we look, there’s a lot of variance in different assumptions for – specifically the second half of the year to drive growth. I think where we’re more focused in our planning and forecasting and resourcing activities is on the first half because I think there’s enough different variables where, sure, you could see 6% to 8% growth, you could see more, you could see less. And as I think most of you know, our visibility really doesn’t extend into the second half.
The — if you were to have that scenario, I do think there is a very good likelihood that we can outgrow the unit growth of the market, especially if the bulk of it is associated with advanced nodes and some of the high-volume markets like PCs and mobile. And honestly, I don’t see how you get to foundry and logic, high double-digit unit growth without PC and handset growth in the second half of the year. So in that scenario yes. I think it’s reasonable given the adoption of advanced packaging given the increase of test intensity that we can outgrow the market, but I’m not sure I’d adopt that yet as a baseline scenario as we work our way through the first half.
David Duley: Fair enough. One final question is I was just kind of curious from your point of view where you sit, you’ve talked a lot about increased intensity from advanced packaging, all sorts of form factors and whatnot. And I’m wondering – and that’s generally been with Intel and TSMC, frankly. I’m wondering if you’re seeing that start to spread out onto the OSATs because there’s certainly a lot more chatter on their conference calls and I think ASE’s CapEx is up more than 50% year-over-year this year focused on advanced packaging. And so I’m just wondering, are you starting to see a ramp up in kind of middle part of the market for advanced packaging? And are you well positioned to capture OSAT business? Thanks.
Mike Slessor: Yes. So typically, the way the probe card market works is we have a very large installed base at the OSATs, but the OSATs often are not the purchasers of the probe cards. It’s the fabless semiconductor manufacturers or the foundries themselves. And so there’s a lot of interaction with the OSATs, but they’re often not issuing purchase orders to us. So I think for us, advanced packaging, if it happens at the OSATs, if it happens at the foundries, if it happens at the IDMs, all a good trend because it’s going to drive up test intensity. And if a fabless customer has adopted advanced packaging, and they’re going to do it at the foundry or at the OSAT that’s going to drive higher test intensity in either of those places no matter what. It’s just a slightly different business model for us.
David Duley: Okay, thanks.
Mike Slessor: Thank you.
Operator: Thank you. One moment for our next question. And our next question is a follow-up from the line of Krish Sankar from TD Cowen. Your question, please.
Krish Sankar: Thanks for taking the follow up. Mike, just a quick one. It looks like the high-density GPU customers are finally evaluating MEMS-based process. How to think about when that EVA [ph] will be done? When to expect post revenues from them? And if you can prognosticate what do you think the market share between you and Technoprobe would be in that specific category?
