With that, I’ll now turn the call over to the operator to open up Q&A.
Operator: We will now be conducting a question-and-answer session. [Operator instructions]. This comes from Rick Schafer with Oppenheimer Co. Please proceed with your question.
Rick Schafer: Excuse me. Thanks, guys, for letting me on. And congratulations on another solid quarter. Two questions, if I may. The first one, Bill, it’s a new year. You guys just highlighted a ton of growth drivers. I didn’t know if you could give a sense of how backlog compares this year, obviously guiding for growth. But I know you talked a lot about $500 million, I think, around this time last year for ’23. I was just curious how that compares for ’24?
John Kiernan: Yes, Rick, this is John. And thanks for the question. We haven’t published our 10-K yet. So we haven’t published a backlog number yet for the full year of 2023. We expect to publish that in a few days here in the normal course. I would say that as we look into 2024 and in our guide, I would say that we continue to see strength in semiconductor. The largest portion of the backlog comes from the semiconductor business here. We are expecting our semi-business to be up about 5% to 10% in 2024 compared to 2023. And of course, when we gave our outlook for the full year 2024, we considered the backlog in hand at that point in time, as well as forecasted orders.
Rick Schafer: OK, thanks, John. And if I could follow up, just a quick one on China, the REV contribution there was up pretty sizably, I think, year-over-year in ’23. And so I don’t know if you give a little more color around what sort of order velocity seemed like it kind of peaked in the fourth quarter. So I’m just curious if you could comment on order velocity there, outlook for that region this year, and maybe if you could, like a little nuance, but a sense of how much that demand do you think is sort of pull-ins, geopolitical stuff out there versus what normal demand kind of trends would look like there? Thanks.
John Kiernan: OK, Rick. Yes, thanks for the question. If I miss any part of it, Bill could help me or please ask, because you had a couple pieces to that question there. So for 2023, our revenue was about 33% of the company’s revenue came from China. That’s versus 19% in the prior year. And I would say the largest driver of the increase in business was from mature node semiconductor and really coming from the laser annealing business there. So we see a number of customers investing in mature node. I would say one of the things that we saw there as well, typically LSA was adopted at 28 nanometer node. We’ve also been seeing advantages, or customers have been seeing advantages in even adopting at a 40 nanometer node. So that’s been helpful to the business there.
As we look forward, activity with customers is still very strong. We’re seeing customers continue to advance, excuse me, to invest in new projects. And activity with customers right now continues to be strong. As I look at the whole year of 2024, I think our business in China will come in somewhere around 30% of revenue, give or take. We’ve got really good visibility for the first half of the year. But there’s no sort of indication as we sit right now, any significant change in the customers’ patterns at this point.
William Miller: I guess I’ll just add, Rick, that we’re seeing in the central planning in the second half to have a little bit more volume from the leading edge. So I would think maybe that mix might shift a little more towards the leading edge from the lagging edge in China. But we’ll have to kind of wait and see how that develops.
Operator: Our next question comes from Brian Lee with Goldman Sachs. Please proceed.
Brian Lee: Hey, guys. Good afternoon. Sorry for that. I was on mute. Can you hear me? Yep. Good afternoon. Thanks. Good afternoon. Thanks for taking the questions. Kudos on the nice execution, I guess. Can you talk a little bit about – well, I guess one housekeeping question just to begin with. I thought there were some reports out there. You guys had talked about maybe 10% growth in semiconductor for ’24. You’re officially saying 5 to 10. Was there a change, or maybe we just misinterpreted the initial comments you made in January?
William Miller: No, there’s no change. That was the guide that we gave out at the conference in January, 5% to 10%. Okay. Fair enough. Just making sure we had the right notes.
Brian Lee: Appreciate that. Then on the compound semis opportunity, I know you called out Gannon Silicon specifically. Presumably, there’s some SIC embedded in that opportunity as well. Can you talk about where you have EVAL tools out in ’24, maybe the timeline for success, and then when you might be thinking about high-volume manufacturing orders? And does that differ from the different types of EVAL opportunities you have across Gannon Silicon versus SIC versus anything else? Thank you.
William Miller: Yep. Brian, compound semi this year in ’24 is going to be a year of investment for EVALuations. In power electronics, we’re actively working with a number of Tier 1 customers in silicon carbide and are planning to place two EVALuation systems in the field in 2024. Also, in Gannon Silicon, we have an opportunity to place a 300-millimeter system at a Tier 1 customer for Gannon Silicon opportunities. And then the fourth EVALuation system we’re planning is actually in micro LED, probably in the second half of 24. So, we have a fair amount of new products we’re planning to put into the field in 24.
Brian Lee: That’s great. And I know it’s going to depend on how the EVAL process works, and that can be customer dependent and specific, but any kind of visibility around typical timeline you would expect? And is there a view – you didn’t call it out specifically for this category, but high-volume manufacturing orders in ’25, is that your expectation across any of those four opportunities you just called out?
William Miller: Yes. I would say, Brian, that in the front-end semi-market, typically an EVALuation can be 12-plus months. In compound semi, they’re typically a bit shorter, maybe six months, 6 to 12 months. And so, I would expect, as you said, to have – assuming success, we’re successful having HBM orders late ’24 and into ’25.
Brian Lee: Okay. Fair enough. Last one from me, and I’ll pass it on. You talked a lot about the semiconductor opportunity and the good growth you’ve been seeing there. Specific to, I guess, advanced packaging, can you talk to a little bit of what you’re seeing in that market, what the outlook there is over the course of ’24, and where you might be having some growth opportunities there as well? Thank you, guys.
William Miller: Yes. We are seeing some exciting growth opportunities in ’24 in advanced packaging, particularly in high-bandwidth memory applications. We sell wet processing equipment for the HBM memory stack. And so, that is driving some growth for us over 2023 there.
Operator: Our next question comes from Charles Shi with Needham & Company.
Charles Shi: Hey, guys. Good afternoon. Bill, John, I wonder if you can give us a little bit of a high-level breakdown of your compound semi-business, which you expect to grow by, I think, 5% to 10% this year. Yes. I think, Yes, you said it’s power electronics and photonics driving the growth, but I think your business is more than these two. And Mark, there’s RF communication. I don’t know how much of the commodity LED lighting is still there. Can you kind of unpack a little bit there? And specifically, right, this is a two-part question. The photonics side, I think you didn’t mention too much on the photonics side in your pre-payment, Mark. Your focus was more on the GaN and the second carbide. But the photonics side, what do you see right now, especially, let’s say, data communication side? There seems to be some activity, some optimism about more of the VIXO, more of the EML type of devices. Are you a beneficiary of that side of the end market growth? Thank you.
William Miller: Sure, Charles. I would say, to try to unpack your question a little bit, Veeco has almost zero exposure to the commoditized LED portion of the market. At this time. What we are seeing in that growth is we’re seeing opportunities in photonics as well as in silicon carbide and GaN power, in particular, with our wet processing equipment, driving a fair amount of business for us. The one area we haven’t seen much growth yet is really in the kind of 5G RF area, kind of for filters and power amplifiers that has driven our business in the past. That business has been soft and remains soft, even though some numbers are starting to improve. We haven’t really seen an uptick there in our business as well.
Charles Shi: Got it. Maybe let me ask you a little bit more about the gross margin guidance for the next quarter. Obviously, Q4, you guys did deliver very strong gross margin performance, but the guidance did seem to indicate some level of margin compression into the Q1. Is it just out of conservatism, or are you seeing anything that’s leading to a lower margin, a mix or something else?
