ACM Research (NASDAQ:ACMR) Q2 2026 Earnings Call

0:00 Good day, ladies and gentlemen. Thank you for standing by. Welcome to the ACM Research Second Quarter twenty twenty six Earnings Conference Call. Currently, participants are in a listen only mode. Later, we will conduct a question and answer session. Instructions will follow at that time. As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Mr. Steven Pillay, Managing Director of The Blue Shirt Group. Steven, please go ahead. Good day, everyone. Thank you for joining us to discuss second quarter twenty twenty six results, which we released before The U. S. Market opened today. The release is available on our website as well as from Newswire services. There's also a supplemental slide deck posted to the investor section of our website that we will reference during our prepared remarks.

0:45 On the call with me today our CEO Doctor. David Wong, our CFO Mark McKechnie and Lisa Fang our CFO of our operating subsidiary ACM Shanghai. Before we continue please turn to slide two. Let me remind you that remarks made during this call may include predictions estimates or other information that might be considered forward looking. These forward looking statements represent ACM's current judgment for the future However, they are subject to risks and uncertainties that could cause actual results to differ materially. Those risks are described under risk factors and elsewhere in ACM's filings with the Securities and Exchange Commission. Please do not place undue reliance on these forward looking statements, which reflect ACM's opinions only as of the date of this call. ACM is not obliged to update you on any revisions to these forward looking statements. Certain financial results that we provide on this call will be on a non GAAP basis, which excludes stock based compensation and unrealized gains and losses on short term investments.

1:38 For our GAAP results and reconciliation between GAAP and non GAAP amounts you should refer to our earnings release which is posted on the IR section of our website and to slide 13. Also unless otherwise noted, the following figures refer to second quarter twenty twenty six and comparisons are with the second quarter twenty twenty five. So with that, I will now turn the call over to David Wang. David? Thanks, Stephen. Hello, everyone, and welcome to ACM's second quarter twenty twenty six earnings conference call. The June quarter marked another period of strong execution for ACM Research. Revenue and shipment increased 36% year over year. Revenue growth was led by our ECP and advanced packaging product category, both of which increased more than 150% year over year.

2:30 This strong performance reflects the progress we are making in transforming ACM into a broader multi product semiconductor equipment company. In June of this year, third party research, Frost and Sullivan, published a report called the Global and China Semiconductor Equipment Market Research. They now estimate the global semiconductor equipment market exceeded $140,000,000,000 in 2025 and will grow to more than $200,000,000,000 by 2029. We also estimate the Mainland China market exceeding $50,000,000,000 in 2025 and will grow to more than $80,000,000,000 in 2029.

3:20 To fund our global operation, we have recently strengthened our balance sheet. ACM now has more than $1,000,000,000 of net cash globally. This includes approximately $300,000,000 in The U. S. Following our $150,000,000 which is the direct offering completed this past May. This financial strength provides a solid foundation to support our mission to become a key supplier of world class capital equipment for the top major product of semiconductors. We believe AI is driving one of the most significant technology transition the semiconductor industry has experienced in many years.

4:05 As chip complexity and chip size continue to increase, traditional wafer level packaging approaching are reaching practical limit creating demand for entire new manufacturing technology across advances of packaging. ACM predicts their shift from wafer level to panel level packaging more than five years ago and began investing early in horizontal panel level plating and other panel level wet process technology. We believe the market is now coming to us and it has begun to validate those investments. Today, I'm pleased to announce that we have received order from two advanced packaging customers for our panel level horizontal plating tool, addressing both five ten by five fifteen millimeter and the three ten by three ten millimeter panel size.

5:00 One is a production order from existing customer in Mainland China and the second one is evaluation system for new customer in Asia. We believe ACM would be among the first company to deliver horizontal panel level plating system to multiple customers across multiple regions. Our proprietary horizontal plating architecture is a key differentiator, delivering strong or superior plating uniformity while addressing the demand process requirement of next generation AI packaging. This order are important milestone for what we believe could become a significant long term growth opportunity.

5:47 I'm pleased to report today that our order book has been quite strong. For the first half of twenty twenty six, orders increased 1105% year over year. This is a mix across all product category with a heavier emphasis on some of our new product. As with the prior years, ACM Shanghai plans to release backlog figure as of September 30 in early October. Thanks to good execution by our operation team, we continue to expect a shipment across each of our category to grow faster than revenue.

6:34 We remain confident in our growth target for 2026 and beyond. For 2026, we see a healthy backdrop for China WFE as our customer continues to scale their production capacity. We expect an extra boost for our business from a few product cycle, including our SPM and Furnace to enable us to outgrow in the China WFE. Beyond this year, we estimate that our newer platform including TRAC, PLCVD and horizontal panel level plating will proceed for evaluating phase into a commercialization phase resulting in production orders and drive our growth for years to come.

7:21 In summary, we see 2026 as a big year for new product and another year of a solid growth for ACM. Now on to our business results, please turn to Slide three. Revenue for the second quarter was $293,000,000 up 36%. Shipments for the second quarter was $282,000,000 up 36%. Gross margin was 46% and operating profit margin was about 19%. And we ended the quarter with a gross cash of $1,400,000,000 and a net cash of $1,000,000,000 Now I will provide detail on product. Please turn to Slide four.

8:08 Revenue from single wafer cleaning, Tahoe and semi critical cleaning tool was $133,000,000 down 14% and represent 45% of revenue. We believe ACM has built industrial broadest cleaning product portfolio. Our product in this category, SAP Tebow, Tahoe, Backside Clean, Sovan Clean, Bevel Clean, Scrubber and Wet Etcher and our proprietary single wafer hot SPM technology. In May, we present our proprietary hot SPM cleaning technology in twenty twenty six Surface Preparation and Cleaning Conference. This system demonstrates 15 particles performance at 15 nano particle size.

8:59 Our proprietary nozzle design prevents acid mist and chemical splashing outside chamber during the hot SPM process. Therefore, it does not require periodic TI water chamber outside cleaning. For customers, this means less maintenance, better uptime, and a more stable particle performance. We believe this represents the best performance in the industry. Our SPM platform is well suited for their advanced logic and memory, while cleaning requirements are becoming more demanding. Today, we also announced new capability for our offshore sea Tahoe, expanding it into a broader wet process platform.

9:50 Tahoe is built on our patented hybrid architecture that combines batch SPM process and a single wafer cleaning. We have added a wet etching and the monitor wafer reclaim application to the Tahoe platform. This integrated multiple process that had previously required a separate standalone tool into a one Toggle platform. The expanded platform has been adopted by multiple leading semiconductor manufacturers. ACM will continue to drive world class process performance with a focus on ESG benefit to helping make advanced semiconductor manufacture more efficient and more stable, sustainable.

10:40 We have shipped a handful of single wafer SPM tool in the first half of this year and we are on track to ship more than in the second half of this year for more than 20 by end of this year. As a reminder, we estimate that SPM represents about one third of the total cleaning market. We have had very little revenue today for the SPM tool. And with this major product cycle, we expect our overall cleaning revenue to rebound as our customer qualifies the first tool and we grow our repeated shipment. Revenue from ECP, furnace and other technology grew 168 and represented 44% of the revenue mix.

11:29 Growth was driven by momentum on both front and back end plating tool. In logical device, we have benefited from larger die size and a steady increase from higher interconnector layer counts. In memory device, we have benefit as HBM packaging demands higher level of DRAM stacking and thus more copper process steps. During the quarter, we shipped our 2,000 electroplating chamber. This follows our five hundredth chamber shipment in 2022 and our fifteen hundredth chamber shipment in 2025. This shows how quickly our installed base has grown and how broadly customer are adopting our technology in volume production.

12:22 We had a larger contribution from furnace in the quarter, but it's still just a small part of our overall revenue mix. We continue to improve the technology breakthrough across key applications, including LPCVD, oxidation, thermal ALD, PLD and ultra high temperature anneal. Revenue from advanced packaging, which excludes ECP but including service and parts, was up 153%. This including coaters, developer, etcher, stripper, scrubber and vacuum cleaning tool supporting a broader range of our advanced packaging application.

13:08 We are particularly pleased with our global progress here with active deployment in Singapore and North America across a range of these tools. We're making good progress with our new track and PCVD platform. We remain confident that we have the right approach for our PCVD and the TRAC platform and we have made a significant progress in 2026. Our proprietary one chamber three trucks architecture for PECVD performed well in our Lingang mini lab early this year. We shipped the secondary tool to our new customer in Q1 and we anticipate this qualification by year end.

13:57 The story is similar to our TRAC platform. Indeed, our high throughput KIF TRAC tool is progressing through customer evaluation and we anticipate production qualification by year end. We see strong interest in both standalone tools and configure to integrate with the scanners. For both PCVD and TRAC, we are hard at work with the development effort with several key customers. We are optimistic that our tool performance can meet or exceed our customer requirement and result in production order in the near future. Please turn to Slide five.

14:43 The quarter we have updated our market assumption with the latest WFE data from the report I mentioned earlier. This result in a $1,000,000,000 increase to ACM, the global SAM of about 22,000,000,000 Please turn to Slide six. There are no changing to our long term revenue target of $4,000,000,000 This is still based on market share assumption for each of our product category, which gets us to about $2,500,000,000 from Mainland China and $1,500,000,000 from the global market. We adjusted some of our assumption based on China WFE now and about $50,000,000,000 We continue to assuming a robust WFE environment over the next several years for the global market.

15:38 The magnitude and the timing of our growth will be impacted by the overall spending trajectory of our customer and our market share gains. Next, let me provide an update on our production facility. First on Ningang, return to Slide 8. The first building is in volume production and we plan to open the second building later this year. Together, the two facility can support up to $3,000,000,000 in annual output. With our strong order book, we are fortunate to be ready to scale the second facility. Next, our Oregon facility, Frutin To Slide Nine.

16:23 In Oregon, we remain on track for a US based demo center with multiple tools in world class cleaning room environment starting later this year. This is important for our global customer and we believe they will help us to secure production orders. Our global business is beginning to scale. As we said last quarter, we expect to have more than 20 tools installed at a customer site outside Mainland China by the end of twenty twenty six. This included about 10 customers in five countries. It is clear that leading global chip makers can benefit from our innovative product. Although it is still early day for our global deployment, our engagements are growing and we are confident that our global sales and the service team will deliver good results.

17:20 Now I will provide our outlook for full year 2026. Please turn to slide 10. Based on our first half performance and the improved visibility, we have reached the middle point of our full year revenue guidance. We now expect our full year 2026 revenue of $1,125,000,000 to 1,175,000,000 versus the prior range of $1,080,000,000 to $1,175,000,000 This new range implied 25% to 30% year over year growth. We also expect the shipment growth to outpace revenue growth in 2026. Now let me turn the call over to our CFO, Mark, who will review details of our second quarter results.

18:13 Thank you, David, and good day, everyone. Please turn to slide 11. Unless I note otherwise, I'll refer to non GAAP financial measures, which exclude stock based compensation, unrealized gainloss on short term investments. Reconciliation of these non GAAP measures to comparable GAAP measures is included in our earnings release. Also, unless otherwise noted, the following figures refer to the second quarter of twenty twenty six and comparisons are with the second quarter of twenty twenty five. I'll now provide financial highlights. Revenue was $292,900,000 up 36%. Revenue for single wafer cleaning, Tahoe and semi critical cleaning was $133,000,000 down 14.2% and represented 45.4 percent of sales. David noted this included very little contribution for some of our newer products.

19:02 As normal, SPM will be reflected first in our shipments followed by revenue contribution in later quarters. Revenue for ECP front end and packaging, furnace and other technologies was $128,500,000 up 167.7% and represented 43.9% of sales. Revenue for Advanced Packaging excluding ECP services and spares was $31,400,000 up 153.3% and represented 10.7 of sales. We saw a good improvement in our customer concentration. During the first half of twenty twenty six, our 10% customer mix has improved to just one customer at 12.7% of our revenue mix. This compares to 3% customers representing 49.9 of our mix for the first half of twenty twenty five. While this can vary by period, we consider the reduced concentration as positive as it represents broadening of our customer base.

20:00 Total shipments were $281,500,000 up 36.4. 2026, we expect shipment growth to outpace revenue growth. Gross margin was 46.0% versus 48.7%. Gross margin was above the midpoint of our long term target model. We maintain our 42% to 48% long term target range and product mix can cause fluctuations on a quarterly basis. Operating expenses were $78,500,000 up 23.9%. R and D was 13.9% of sales. Sales and marketing was 7.7% and G and A was 5.2%. For 2026, we plan for R and D in the 16% to 18% range, sales and marketing in the 8% range and G and A in the 5% to 6% range.

20:47 Operating income was $56,300,000 versus $41,500,000 Operating margin was 19.2% as compared to 19.3%. Income tax expense was $13,500,000 versus $1,900,000 For 2026, we expect our effective tax range in the 10% to 12% range. Net income attributable to ACM Research was $44,500,000 versus $37,300,000 Non GAAP net income excluded $6,600,000 in stock based compensation expense and the $69,600,000 of unrealized gain on short term investments and its effect on non controlling interest. Net income per diluted share was $0.61 versus $0.55 Now onto the balance sheet and cash flow items.

21:35 Cash, cash equivalents, restricted cash and time deposits were $1,360,000,000 at the end of the second quarter. Net cash, which excludes short term and long term debt, was $1,000,000,000 This includes about $300,000,000 of net cash on our U. S. Balance sheet. Total inventory net was $783,100,000 This consisted of raw materials net at $406,100,000 work progress net at 89,000,000 finished goods inventory net at $287,900,000 which primarily consists of first tools under evaluation at our customer sites along with finished goods located at ACM's facilities. Cash used by operations was 6,400,000 and capital expenditures were $65,400,000 For the full year 2026, we continue to expect capital expenditures of about $175,000,000 That concludes our prepared remarks. Now let's open the call for any questions that you may have. Operator, please go ahead.

22:35 Thank you. First question coming from the line of Suji Desilva with ROTH Capital. Your line is now open. Hi, David. Hi, Mark. Hi, Lisa. Congratulations on the progress here. Great diversification going on. So it's really good to see. You got it. Yep. So, David, I mean, the global tool shipped to 200 is a great number. What geographies are you seeing the largest shipments today in? And maybe what geographies do you expect the best growth opportunity near term and as you scale out beyond China?

23:21 Yeah, actually we see there, especially I want say first half of this year, we have almost like close to a dozen tools go to Singapore, right? One of their packaging house there, Also have a tool and they're running one of their foundry in Singapore too. So we do see Singapore as an opportunity for our front end tool and also packaging tool there. Of course, we do have a customer continuing in The US. As I mentioned, we're going to finish the building of our demo lab in Oregon. With that demo lab started using, we're going track them more of interest and also attention into our differential technology.

24:12 So this way we can provide more of a demo capability for customer in a global. Great. And then my second question is, given that you now have a significant amount of cash in The US $300,000,000 maybe David or perhaps for Mark, what are the some of the plans you see use of those proceeds? Is it expanding capacity, which regions and perhaps even inorganic activity? Any color would be helpful there. Yes, obviously with this cash preparation, it'll show our determination, also our confidence expanding the sales activity outside Mainland China. As I mentioned, our long term goal is still $1,500,000,000 for the revenue outside China. That's exactly for that goal we prepare our funding and also our activity. So those funding based on supporting our activity definitely US and also Taiwan and Singapore, Asia, also the Europe.

25:12 It's a bigger opportunity. We see a lot of demand come out for those, for our differential technology, cleaning, plating and also R and D for the even new PCVD and the furnace. So it's really exciting. As I mentioned, AI really driving a lot of new demand for the innovation technology. So we believe whatever developer in Shanghai can be real spread out to benefit for all the customer globally, right? It's our goal here. Okay, that's very helpful. And then my last question, I know you guys are diversifying your customer base and you have 110% customer focusing on global, but I'm curious in China, how levered are you to what's going on with CXMT and the DRAM market, understanding AI is a plating play for you and other areas where you're very strong, but the DRAM effort there is growing very strongly.

26:10 I'm curious how much leverage you have to that opportunity? Well, I really cannot comment too much detail with any issue customer, right? By looking at overall, you look in the for Frost and Sullivan, their report, right? Showed a very strong demand and definitely market war in China, First of all, I want to say China is a bigger market for the oldest application AI including. So it's a huge market there and therefore they can supporting a lot of our cheaper manufacturer in here. In the same way they demand a lot of our WFE equipment. So that's where we see opportunity here. And with ACM, I said we have a real multiple product in the timeline, especially this year we call our 2026 as a big year for product, new product come out to the market and all our PCVD furnace and a track system, we started development from 2000 or 2001 or 2019.

27:18 In those timeline, we're really focused on their technology, focused on differentiation. So through the four or five years, our R and D team is working. We got some real exciting results and some of them obviously very approaching to the top tier performance and sometimes we see even better than top tier performance. So that's really our confidence with this new product come out, we can further sustain or increase our high growth rate and for our revenue in the market China. Of course, those new products after qualified in the China market would also eventually will sell to the global market. So it's a lot of exciting for next few years. So our revenue will be not only come from cleaning and cover printing anymore, new product will join our revenue growth. So it's going be a very exciting year for next few years.

28:22 That's very helpful color, David. Thank you and congratulations to you and the team on the strong execution here. Thank you. Thank you, Suji. Thanks, Suji. Thank you. Our next question in queue coming from the line of Charles Lee with Needham and Company. Your line is now open. Hi. Thanks for taking my question. Maybe the first one, I know you don't really guide the quarter, but can you kind of walk us through how the Q3, Q4 is shaking up? You have probably a very big beat in Q1 and now in Q2. And I think if I look at the consensus estimates for Q3, Q4, those numbers probably need to come down a little bit. So wondering if the revenue timing or shipment timing has some change over the course of the last ninety days, and maybe I'll have a follow-up on the PML related items.

29:27 Thank you. Yeah, as I mentioned in our script, right, we do have the first half year, our PO receiving and there has been increased 100%, more than 100%, right? It's real indication to have real demand and also a larger backlog. So, and some of those tool obviously we're try to deliver Q3, Q4 and some of the tool probably we're waiting for probably a little later. So now we're really trying to increase our capacity and obviously now the components has been I want to say everybody demand for components, right? So there's little bit of constraint for supply there. So we're kind of looking at Q3, Q4 revenue, I think it really how we execution our order manufacturing and also how we qualify, ship the further revenue of the tool. So I want to say we're still very positive about our projection for whole year, right? That's why we are increased our low site and now we're expecting our whole year revenue 25% to 30% range.

30:42 I think we're pretty confident for this forecast. Yeah, thanks. Maybe another question for Mark. Mark, I noticed that the range for SG and A as a percent of revenue kind of revised it down a little bit compared with the last quarter. So, I guess, I mean, on your midpoint of your guidance, your overall OpEx may actually come in a little bit lighter than you previously expected. I wonder what is the reason for the slight OpEx cut for this year? Because I, if I recall correctly, one of the reasons you raised the OpEx range, think at the beginning of the year was related to the build out of the R and D lab, R and D center in Lingang and wondering the OpEx savings relative to what you previously thought.

31:49 Related to some of the timing of that R and D center? And any color would be great. Thank you. Yes, Charles, there's not a lot to read into that. I mean, R and D, we're looking 16% to 18%. G and A, I said 5% to six and sales and marketing around 8%. So it's really just tightening up by the estimates now that we're halfway through the year. So but not a meaningful change from where we were at the beginning of the year. All right. Thank you. Yes. Thank you. Thank you. Our next question coming from the line of Jimmy Hwan with JPMorgan. Your line is now open. Yes. Hi, it's David, Mark. Congrats for the results. Can you hear me? Yes, Jim.

32:39 I can hear you. Yes. So obvious China's manufacturing capacity build is very robust and structural. You also have a very solid product portfolio for WLP and POP. Do we have any guidance or expectations for advanced packaging equipment shipment growth rates for this year and next year? Okay. Well, we do not have put a number, right, for the shipment of this year. But definitely, we also because of the strong, I want say the backlog, our shipment definitely will grow out of grow our revenue, right? So it's very will be a very strong shipment this year. Again, as I mentioned, also we're kind of a short we see the shortage in all industry for some components.

33:27 It used to be you can buy four months, sometimes you have to get it probably longer to deliver. Anyway, we're trying to managing those supply chain and make sure those components coming on time. That's maybe the one thing I want to say might be impact the whole year shipment. But I still feel this year shipment is still pretty good. Yes, I see. So do you have any other impact expectation for your advanced packaging equipment for this year? And another question is that for all says, every 10 ks wafer capacity built for 2.5D wafer level packaging, what's ACMR's content value based on your product offerings at this moment? I think some like equipment companies, they could have this kind of sharing for investors to understand your progress.

34:26 I don't quite understand the yes, maybe ask that again. Can I say your question again? I'm not getting lost there. Can you repeat again? Yeah, I mean, like, I mean, also, the wafer capacity I mean, for the advanced packaging capacity build, as 2.5D, I mean, on there every 10 ks capacity build, what's the potential contribution to ACMR based on your product offering? Do we have any sharing on that? Yeah. He's just looking at kind of our the intensity of when our customers spend on 10,000 wafers per month, how much will that drive our equipment sales? I don't think we're really good. I couldn't say there, depending on which line you build, right? Maybe let's put it this way, the cleaning market, right, you can see that there, I want to say there, I'll cover sand.

35:20 Cleaning market today probably in a whole fab spending occupies 5% to 7%, depends on advanced lab or mature lab, right? A fab. But are you looking at really for the future, I want to say, advanced lab, a fab going on, can you become more and more important? And some people even projecting, cleaning to continue market continue marketing to grow. It might be even come to 10% eventually because cleaning become more and more difficult and more of a material loss control, particle size gets more smaller. So also the drying method becomes maybe from the IPA to their supercritical CO2 dry. So anyway, I see that market growth, number one. Second one is carboplating.

36:10 It's clearly actually four or five years ago we said carboplating to be the $1,500,000,000 That time nobody really believed it. Now it's almost $1,500,000,000 already. With all the future backside of their power and HPM layer of their DRAM stacking going on. So there's a lot of our plating tool demand come out. And more important is panel market also demand a lot of plating tool too. So ACM is really pioneer in their panel level electroplating. It's a lot, this is probably I want to say this is the first time ACM really stand in the top and for their horizontal plating technology and marketer, I want say offering.

36:58 So that's really give us a bigger growth potential for this existing market. And further than that is the furnace and PCVD track. We see also big potential there too. So that's why I want to say ACM is a real good or exciting period and we're expecting continued growth for cleaning and cover plating and also with our new product, furnace, PSEPD, track them out, will further reinforce our revenue growth, right? So that's why I said the next few years really exciting year for our growth. Yeah, thank you Doctor. Huang. So I think for China I think they are building a lot of cobas like 2.5D and manufacturing capacity.

37:47 As far as I know, they probably still use a lot of TSMC baseline tool vendors, including web processing tools and other stuff. Are we trying to get more market shares, more qualifications here and also our progress in China's cobots like 2.5 d capacity build? Yes, mean, you can look at our actually plating growth, 156% and also our packaging tool grow also, It's really a short indication a lot of our new demand for three d packaging, And the three d packaging become more and more important and for all the devices. So we see that a growth potential here. ACM well positioned for that with our cleaning and with our coder developer, with all this PR stripper and also a couple of rating. So it's really good I want to say growth for the 2.5D or three d packaging.

38:44 Also I want to say panel was a growth too. Panel level packaging is another big one. So it's very exciting for I see the three d packaging going on, which is a good for our Yeah, I think it's quite exciting that we just announced that we have the first PLP ECP tool evaluation system shipped to a customer in Asia. And regarding the progress, when could the evaluation results come out? Any probability that we could receive the first purchase order from these customers in the next maybe few quarters or the next six to twelve months? Yeah, obviously, you mentioned that a panel now is very hot, right? In all Asia, looking at Mainland China, Taiwan, Korea, and even Singapore, right? It's very, very hot.

39:31 And everybody believe that will be their ultimate solution for their large AI chip or this cobots, HP and whatever packaging in large chip size. So we do see that as a trend. Obviously, where we're positioned for five fifteen by five ten which is more large size as Intel probably pioneer now. And also we're also positioned for three ten by three ten which is leading by TSMC approach, right? So there's a lot of exciting, I want to say we're prepared for both market. Yes, I see. Thank you so much. That's all my questions. Thank you. Thank you. Thank you. Our next question coming from the line of Christian Schwab with Craig Hallum Capital. Your line is now open.

40:25 Hey, guys. It's Ben Taksal on for Christian here. Great quarter. Exciting stuff going on at ACM on ACMR. My first question is, what is any commentary, any initial commentary? I know it's kinda early on 2027 visibility. Get new products and strong orders, but anything else? Or what exactly should we be thinking about for 2027? Right. 2026, right? Yes. Well, I still see that a lot of fab we see in the local China as in real estate in a multi year expansion. Clearly this year we see many fab open and also we see that there are some fab definitely beyond 2027 and grow.

41:18 As I said, probably the market is here strong, bigger, right? So we're very excited about it. Even I said this Frost, Sullivan, they give a report, right? By year 2029, they're charting the market beyond $80,000,000,000 Well, I mean, that's really, I'm liking that number, but it's a bit exciting, right? Anyway, I want to say it's growing in next few year the local market here. And we have obviously some of our new platforms that could kick in. Would also say some of the orders we get this year, we're not going to be able to support all those this year, so that'll kind of flow into next year as well. So, '27 is starting to shape up pretty good growth here.

42:05 Great. Also, as I mentioned, we made a progress, right, with all the track system, PCVD. And we see that those both product take off. And obviously, we're probably will become a leading supplier, local supplier for the track system. I know the PCBD quite a bit of competitive there, but one chamber three chalk is really unique platform and we see there's certain special big market requirement for this PCVD2. So anyway, we're both excited about this new product. Great. Just one other question. Any update on the Shanghai listing?

42:52 Or the Hong Kong, right? Sorry, yes. Yep, sorry. Yeah. Well, I would say really you cannot comment too much on Hong Kong listing, right? I can only tell you that the April timeline we announced, we're going to do that and that's the only information I can tell you right now. Eventually, maybe sometime later in the future, disclose more. Perfect. Thanks guys. That's all I got. Yes. Thanks for asking. Okay. Thank you. Thank you. And we have a follow-up question from Jimmy Flynn with JPMorgan. Your line is open. Yes. Thank you. Thank you, David. Hi, David. Talked about component shortage. There are also a lot of component parts types. Will rising component cost impact ACMR's gross margin? If so, which potential quarters or timelines?

43:45 And what kind of options does your company have to pass cost to your customers? Well, mean, probably this is a global point, right? Looking at our supply, either, I want to say major supply are components from Japan, right? Or some in Korea. Definitely, there's a lot of growing. So there's a shortage there. We see that happen. So something we're still switching to local supplier and here it looks better. But anyway, I want to say this is still, I look into this year, global component suppliers still tight.

44:32 Even some mechanical parts, some sliders, even robots for example, the components they're to get on time. We see that really booming, right? That's why we have a real managing well in the second half of the year, make sure our supply catch our demand. Yes, there's really you kind of take a look at it. I mean, no change to our gross margin target 42% to 48%. So, we're comfortable where we are. We have a good amount of raw materials, right, that we had been purchasing and we stocked up on some raw materials. So what we have in stock and kind of our outlook, we don't see any significant impact on gross Yes, we prepare a certain path and end of last year, right, Because we are predicting this year is a very heavy year. So we are certain our vendor did something special for us. That will help us right now.

45:30 Yeah, but you know that the demand is very robust and the supply is quite tight. So is there any is it possible that we we could pass through this incremental cost or rising component cost to our customers? Or it's not a key priority of your business? Yeah. Wow. It's hard to tell right now, right? Probably, mean, we're not at risk pricing right now Also, at this I want to say our vendor supply, not many people are raising price. Some are raising, but not much. The only thing that is they're probably delayed the shipment, right? They cannot tell you, maybe I used to be sent to you in four months, maybe they did six months. That's happened. But they didn't increase our price.

46:22 Our key supplier, no. I see. And my second follow-up question is regarding our manufacturing capacity builds outside of Mainland China. Are we going to build more capacity in the status or in other Asia regions if we see more international orders? Yes, you know that we do have our own manufacturer, I want to say a facility and a capability in Korea, right? So that's really start to pay and some tool we ship to U. S. Will be made or actually made now is made in Korea right now. And also some future tool probably shipping to Taiwan and Singapore will be also made probably in Korea too, right? And also I said, as really more of revenue growing in The U. S. Or in other region, can also probably propel a secondary manufacturer side too. So we're really in either, want to say, consideration and direction.

47:23 I see. And regarding your further funding for this kind of manufacturing capacity expansion, would you need to dispose some steps in ACM Shanghai or you don't consider that option? Yes. So, I mean, we're pretty comfortable with our balance sheet, right? David mentioned we have $300,000,000 on our U. S. Balance sheet. So part of that was kind of a war chest to show our customers that when we get the production orders, we can support that. And so we don't have any near term plans to scale out of our any more of our Shanghai shares. Thank you so much, David. It's very clear. Thank you. Yes, you bet. Thank you. Our next question coming from the line of Bintuan Neeb with Daiwa Capital Markets.

48:14 Your line is now open. Hey, thank you for letting me on. Have a first is congratulation on your new orders, 100%, very impressive. Can I ask you know, in terms of by segment, can you rank which one is the strongest for DRAM, HDM, NAND and logic? Thank you. In terms of our order strength, David, he's asking. Yes, I don't we didn't break it out, but David in the prepared remarks mentioned that they were across all of our customer base and across our products, a little bit stronger in some of our newer products, but we didn't break it out by end markets.

48:59 Yes. Well, obviously, we see there strong in memory and also strong in logic, right, both. Okay. Thank you, David and Mark. And next question is about our cash flows. It looks like we have a very strong tailwind from the industrialized and also our new product launches going ahead. So in terms of operating cash flows and CapEx, how should we think about that? Thank you. Yes, I think this year on the cash flow side, we're still obviously heavily in growth mode. We're spending on our CapEx and what have you. But the whole the plan is in growth mode, you make these investments and then you get we harvest those over the next several years. So this year, we'll probably burn some cash, obviously putting capital to work on our new production facilities, on our facilities outside in Oregon and what have you.

49:59 But longer term, we see it, obviously, it's a positive cash flow operation. Okay, great. Before we conclude, I just want to give everyone a quick reminder of our upcoming investor conferences. On August 20, we will participate in Needham's seventh Annual Virtual Semiconductor and Semi Cap one on one Conference. On August 25, we'll present at the twenty twenty six Jefferies Semiconductor IT Hardware Communications Technology Conference at the Four Seasons Hotel in Chicago. On October 13, we will present at the eighteenth Annual CEO Summit Conference in conjunction with Semi Town West in San Francisco.

50:49 Attendance at these conferences are by invitation only for interested investors. Please contact your respective sales representatives to register and schedule one on one meetings with the management team. With that, this concludes the call and you may now disconnect. Ladies and gentlemen, that doesn't count conference for today. Thank you for your participation. You may now disconnect.