Brian Smith - Director, Investor Relations
Nick Konidaris - Chief Executive Officer
Michael Darwin - General Manager, Interconnect and Microfabrication Division
Jon Sabol - Head, Semiconductor and LED Division
Tullio Panarello - General Manager, Lasers Business
Paul Oldham - Chief Financial Officer
Electro Scientific Industries Inc. (ESIO) Investor and Financial Analyst Conference Transcript March 14, 2013 9:00 AM ET
Ladies and gentlemen, good morning. Welcome to ESI Financial Analyst and Investor Conference today. My name is Brian Smith, and it’s my pleasure to welcome you today. I’m the Director of Investor Relations for ESI. I’d like to quickly go over the agenda for today.
And first you will hear from our CEO, Nick Konidaris, who will give a company overview. Then we’ll hear from Michael Darwin, who is the General Manager of our Interconnect and Microfabrication Division, and he will be talking about our consumer electronics business and our laser business supporting consumer electronics.
Then we’ll take a short break and afterwards, Jon Sabol, the Head of our Semiconductor and LED Division will speak on that business. Afterwards we will hear from Tullio Panarello, who is the General Manager of our Lasers Business.
And we’ll wrap up with a financial summary from our CFO, Paul Oldham, after which Nick will come to the front and take any questions that you have and will assign himself or other executives to answer any question that you got. So just for the sake of the flow, we would ask that you keep your questions until the end but we will be happy to answer any of those questions that you have.
After that has ended, it will some probably sometime around 11:30 or noon we will have lunch, and lunch is just upstairs, for any of you who can join us and we would appreciate you joining us for lunch. Our executives will be there and we’d be happy to answer any, continue the conversation and answer any more questions you've got. So that’s the agenda for today.
Before I turn it over to Nick, I would like to mention that we will be making some forward-looking statements in today’s presentations and those statements contain risks that are can be found in our SEC filings and we would request that you seek out those risks in our filings.
We also want to announce that we are not going to be making any adjustments or update to quarterly guidance, or talk about near-term conditions today but more general long-term view of our strategy and our company.
So, with that, again, I'd like to welcome you here and I would like to turn the time over to our CEO, Nick Konidaris.
… is the laser microfabrication. The other message is that we are focus in growth industries which are consumer electronics, semiconductor and LED. Growth from the point of view that we are involved in applications in this industry that is our mainstream technology the laser microfabrication. And we are well positioned to grow because of good and solid execution of our strategy and because we have a strong balance sheet that both events are foundations to allow us to grow.
My presentation has basically three parts. One part is to give you an overview of the company, and I have got opportunities then to zero-in into our growth strategies with more details and give you a sense of our execution. And I’m going to end up with some longer term performance targets that we’re having for both next year and the following period.
So the best way to start the overview is to start with the highlights for calendar ‘12. This was for the company that brought here. Nevertheless we had significant accomplishment that I like to go over because we are proud for them and because we have worked hard for them and they are in many ways a result of hard work over many, many years, stepping up strategy for growth.
First of all, the consumer electronics business grew year-over-year. And as you are going to see later, it’s a business that is growing continually for the last eight years year-over-year. We have a number of new product successes in consumer electronics to introduce a number of low-cost systems in the 5900 series platform.
We developed capability to process strengthened glass which we believe at this point in time is unique which stays in the middle of this consumer electronic growth. We introduced the 3510 model for MLCC testing that is ideally suited for the very small footprint of MLCCs and that has received -- has the ability to do well and gain market share from one competitor that we have in this area.
And in the area of semiconductor of 3D packaging, we’re involved in a number of significant evaluations with major players in semiconductor industry. On top of that, part of our strategy is to really develop proprietary laser technology and we did acquire Eolite together with PyroPhotonics which we acquired earlier, allows us significant differentiation in the field of fiber lasers from a point of view of either tailored-pulse link or power both of them are important to us.
And another thing that should not go unnoticed is that we are dealing now in the consumer electronics with customers that when they ramp, they ramp extremely steeply, very fast. In order for us to be successful supplier, we need to be able to ramp even faster. I’m talking about days or few weeks.
And we have been able to do that successfully going after events, downsizing, delivering the task that we are able to deliver. And I think this is not highly life but it is becoming a major, major confidence that we’re having.
We do have a strong patent portfolio. We’re very proud for it and demonstration of that is that after many years in a very -- in the litigation that lasted -- that was -- that had many grounds. We prevailed and received a compensation for damages of $16.3 million. This is in the MLCC area. And through the strong balance sheet that we have been building over a year, we’re able to offer both ordinary dividend last year as well as one-time special dividend for a total of $2.32, about $70 million and be still less with $170 million of cash. And year-to-date for Q3, in a trough year, we generated $9.3 million of non-GAAP operating profits, just under $50 million of operating cash flow.
Through this highlight, I’d like to really focus on this topline that talks about growing consumer electronics revenue year-over-year. It’s because that concentration basically talks in terms of a transformation that is taking place in the company, what is responsible for this transformation.
Prior to 2008, we were primarily a memory repair company. We dominated that industry. But as a result of doing very well in this area and as a result of our growth strategy, we started investing in R&D that allowed us through the core competencies that we had in memory repair and in microfabrication as far as the memory repair is concerned to really expand this thing to look in the larger picture and really start focusing in consumer electronics.
We started entering the consumer electronics market prior to 2008. But our memory repair after 2008 started basically through the recession and technology change shrinking, we’re able to really grow the consumer electronics. So after 2008 through 2012, we really replaced memory repair with that growth in consumer electronics.
And today basically, we’re standing as a company that is leading laser microfabrication four components in smart mobile devices. And when I say that, I really mean the very simple thoughts that if you take a smart mobile device, a phone or a tablet, almost all components inside and outside, we’re doing something with our laser systems in the form of laser microfabrication.
And the people who made this component allowed that. And as a result of that, we are a transformed company today. And I think this is a kick-start that is being build up over many, many years but we don’t realize the significance of that. And this is a foundational thought for our growth strategy.
If you look between 2006 and 2013 -- fiscal year '06 and fiscal year ‘13, you basically by looking at the top of bars, you say this is a company that’s really is not growing. We test that over 200 million in 2006 and we had tests over 200 million in 2013, maybe 5 million more.
But if you break this performance into the consumer electronics microfabrication part and the rest which is basically memory repair and some MLCC test, what we’re finding out is the -- that the consumer electronics microfabrication is a business that is growing year-over-year continually for the last eight years. And it’s a business that has been able to replace the loss of memory repair which was about $150 million in 2006.
And if you do the math, you find out that this growth has a compounded annual growth rate of 27% and as we’re going to explain, we see that this growth is going to continue. That will be the foundational growth of the company and on top of that, as a result of that growth, we expect to be able to be making investments, which we’re making in the area of semiconductor and laser that are going to provide additional growth.
And if you think in terms of consumer electronics, semiconductor and LED, these are all the components basically that are in site. Smart mobile device today turns out to be simple way of thinking in terms of about these, the engines for our goals.
So moving forward who we are today? We are a company that leads the laser microfabrication and we are extremely focused in the area of consumer electronics. At the same time, we are investing for emerging needs that deal with 3D packaging in semiconductor and novel packaging for LED. These are all sorts of technologies that evolved. We do think of them separately from consumer electronics. They are fundamental also for consumer electronics.
As they get smaller and smarter, the consumer electronic devices, they will need to have advances semiconductors and they are working very nicely through these things. The beauty of our focus in consumer electronics and semiconductor will be, is that the big customers in these areas are in total, no more than 15 in both of them. I have a slide later to talk.
And if you look at our history through memory repairs, we do very well with the customers. We know this is a core competence. We know how to tackle with them. We know how to deliver things that work year in, year out with 98%, 99% up time. We know how to be an extension of their R&D.
So the fact that these industries are highly concentrated, it plays to our strength although we are a small company. And by the way, this is not only plays to our strength but it’s a good thing because the fact is that we are dealing with the big customers. So these are customers we are going to provide volume orders to really payoff for the investments we are making to participate in this industry.
The other thing that is very important as we move forward, because we are really pushing the envelope in everything we are doing. We do depend on the fundamental components of the laser microfabrication, which is the latest. And we are building gradually significant proprietary capability that is going to be a source of differentiation that will in a way leveraged through differentiation our growth in these areas and provides also, at the same time the opportunity for addition revenue.
So based on these kinds of scope and our strategy, we have focused our organization into basically two divisions that deal with all components in the smart consumer electronic device other than semiconductor and LED. And other division that deals with semiconductor and LED and then the third one that has a big customer called ESI for lasers and is looking around for other customers for mix opportunities for high-end lasers.
And that’s a structure that is highly focused to our strategy. So we want to see laser microfabrication opportunity. I mean we are proud that we in a way were ushering that technology but why is that important, what we have that is there. And I do have a chart here that says over time, if you look at both technical capabilities from a point of feature size and capability from a point of view of economics.
We have had laser microfabricaiton play as a technology and then there is two technologies that basically are in competition or provide the opportunity for laser to emerge. One is CNC and the other is litho. CNC is base technology and basically it’s capable of doing all sorts of fabrication down to about hundred microns.
As things get smaller and begin to go below 100 microns that CNC runs out of steam and the new technology takes off. That’s the laser microfabrication. Now, the premier microfabrication technology, by the way it is also laser. It is the litho that use an excimer laser in markets and so forth that goes down to 10 microns feature sizes.
We cannot do that technically with laser. But litho is an expensive technology. Litho, every time you have to go through that process, the marginal cost of that technology is very high because you’ve got to work through markets and so forth. We obviously have one feature or a billion features. So in an economic sense in particular applications, on a mix and match kind of an approach, laser microfabrication can be very competitive with litho.
So that’s the sense of our excitement. We play in between CNC. In litho, we saw both of them very big. We play in a way that they ran out of steam and that is -- it’s a fundamental assumption based on foundation of inception to our strategy moving forward.
The other thing is we talk about my consumer electronics. I think that the way we put smart, I got to accept that we are surrounded by lots of smart people all of you. Smart players and all of you have opinions in terms of consumer electronics, but the fact of the matter is that things are going to get smaller. They are going to get smarter.
There is going to be new applications and then we all of us are reading in terms of new things in terms of glasses, watches, TVs. You know it. You may not ask about buying this brand, wearing this brand two days ago. That monitors by steps continually might sleep. It gets loaded into a phone.
It’s very basic right now. I just don’t know where this thing is going to adapt. But the significance of that is this is an electronic device that reflects everything around, most probably we are doing something. We are doing this and this reflects exactly that.
I never thought even a month ago that I would be wearing that. God only knows. So this is a large growing industry with lots of capital. And we have already a very extensive installed base. And not only that, but we have the technology to enable and we are enabling novel feature innovation that has not been part of until few months ago, continually we are doing that.
And we have a full funnel of opportunities that is the basis of future growth. But the fact of the matter is that we are extremely well positioned not only because of extensive installed base and the funnel opportunities, but because of our fundamental technology in the process we are well positioned in the smartest, in the fastest growing segment which are smartphones and tablets today.
So none of those things could have been possible without core competencies that are extremely flexible and which have been holding day after day over many, many years. You have seen some of those in previous presentations but let me go basically through them.
Laser material interaction is paramount. We were probably one of the premier organizations in the world today that has a deep understanding of laser material interactions. We have ability for very high-speed manipulation and accurate positioning. We are introducing technology today that can move the beam into million times per second.
Proprietary technology, when I was talking about accurate positioning, which has been now hallmark for many years in memory repair and gear all technology we’re able to place 200,000 times per second the beam over stages for moving and all other stuff with an accurate of almost 0.1 micron, I mean, that’s capability that very few people have.
The fact that our systems work for people who really are very high volume producer of devices, either consumer electronics or semiconductor and they operate 24x7 with 98 plus percent uptime and so forth that’s in our scene.
But I don’t want to grow not this fast that we have developed an ability for rapid turnaround from customer problems to delivery of solutions. This is very, very important because the industries that we are moving are extremely dynamic and they want solutions yesterday and later which we’ll be providing those yesterday.
On top of that, through the differentiated fiber laser expertise that we have developed were able to compliment the laser industry and when we read something that is extremely important for particular applications, already this fiber expertise that we are having comes in and provide the differentiation.
For instance, we have this PyroPhotonics company that have the tailored-pulse laser, that company has already a largest base within our systems, without those lasers we not have been able to implement the technology that we deliver to our customers. And we have vision and inspection.
Another valuable path of our core competence is that allows us to really feel a lot of comfort about our strategy is our IP portfolio. It’s extensive and these have strategic assets. The recent win just highlights the quality of that portfolio. But it’s extremely important because its deals with all the core competencies that are important to us, like laser material interaction, beam positioning, accuracy of the beam positioning, material handling. A number of machine vision algorithms that allow their integral to the performance of our systems and small parts throughput.
So the nice thing about these competencies that we are having is that they can address multiple markets, the markets that we are focused today and the number of other markets. So this are, some of them are specific but their competencies that really allow us to participate in more than one market and also give us opportunity to think whether it is advisable to participate in the different markets, we are not doing that right now we are focusing the market that I highlighted.
So just to close the overview, I like to give you a more exhausted list of the markets and applications that we participate today. In smart computer electronics, we do via drilling in flexible circuits. This is both flex and rigid. And we have the number one position when it comes to UV. UV is still not a biggest part of the markets but it’s the sweetest market because everything is moving there, because UV is the smaller wavelength energy and therefore allows the smaller feature manufacturing.
We are in advanced microfabrication. This is the market that, I don’t know who is the number one but I know we are the state-of-the-art player there and this is the market that is growing at 25% per year.
We are in glass microfabrication. This is the new entrant and when I say glass microfabrication we are at the high end with tempered glass where you got to use lasers after the glass has been tempered. We are not in the commodity. Commodity is (inaudible) in the diamond. And we are in electrical test of ceramic capacitors. We have the number one position but this is a mature market.
In semiconductor, we are in 3D packaging of microfabrication that is an emerging market. We are in LED wafer scribing. We have the number one position for standard LED but standard -- standard we do have products for the entire spectrum, this market right now is overcapacity but we do have the products, if that market comes back in 2014 and beyond we’ll be able to enjoy business in LED.
And of course we are number one in DRAM yield improvement, but as I said earlier, DRAM today is not counting in our strategy moving forward. And latest we have proprietary capability and we have the opportunity in which way will make sense to also participate commercially.
So that’s the overview of the company and now I’d like to go little deep in terms of our growth strategy and then I’ll be moving to our execution and summary, excuse me.
In terms of our growth strategy, the summary of it is that, we are fundamentally extremely focused to capture another of opportunities in consumer electronics. We think this has a lot of growth and there is a lot of room for us to expand. I will detail that in the next slide.
As I said earlier, we are investing in emerging applications in 3D, semiconductor and LED packaging. We try to invest and develop proprietary laser technology that will allow us to leverage our growth opportunities, from the point of view of creating a competitive advantage.
And part of this growth strategy today is we are really explicitly extremely focused on playing with big players, because these are the people who can make a difference. So we are moving into fewer place or bigger players, this is a game that we know how to play through our experience and exposure with memory repair and through our most recent experience in consumer electronics.
And lastly, part of our growth strategy is to leverage our platform that are not extensive, they are very few into many, many applications, because the more you do that, the more leverage you can create that mean something to the bottom line.
So what are these expanding opportunities in smart consumer electronics? What, if you look overtime, few years ago, we were doing things in the guts over smart device and guts meaning components. And if you see flex DRAM that’s what we are doing.
Gradually we moved into the DRAM closure. Most recently we are moving into the glass. Glass is not glass. This is a complex sandwich of many players. It’s an extremely intelligent and high techy sandwich -- of layer. And this is becoming smarter and smaller as you’re going to hear from Michael later on.
So one way that we can expand in this area is by literally dominating the microfabrication on any components in this smart device. In other way, you can expand this by expanding the customer base. It’s not diverse but these customers are big customers every expansion comes.
The fact that we’re moving to glass, that in itself means an expansion. And the other thing, keep in mind, these components and closure displays are not static device. There is a lot of people who work with very aggressive roadmap to keep upgrading that making them smaller, making them smarter. And therefore these things continually acquire new solutions.
So this has three dimensions of the expanding opportunities that we’re having in consumer electronics which as a market today for us conservatively is a $500 million market and growing at a rate of greater than 20%.
When we compound to 3D semiconductor packaging, we have identified today four applications, thin wafer dicing, thin film scribing and advance package micromachining, this is both semiconductor and then for LED, we have wafer and packet singulation.
I will not go through the details of these applications. Jon when his turn comes is going to take you through the details of these applications. But the fact is that by 2015, we expect this applications to be greater than $150 million market growing also at the rate of 20% because they are going to be driven by consumer electronics.
In case of the laser technology, what has happened is that laser micromachining, the micro part is the part that we operate in small power in watt less than 300 watts, different wavelength and we operate from the central to nano seconds regime that’s more or less the sweet spot.
Around that sweet spot, not throughout the area but in specific area, we are gradually building capability. And we do have a history of participating in the laser. We have been pioneers in this concept of laser material interaction. We basically ushered the diode pump, solid state lasers into high volume production. This is exactly what happened with both flex and memory repair.
Most recently, we acquired state-of-the-art expertise in fiber lasers through PyroPhotonics and Eolite. And you are going to hear from Tulio why it is -- our capability is unique and what is the value on a proprietary basis. And of course, you are going to hear from him that in addition to the differentiation that we can get on immediate basis, we can also look at the laser market that is $50 million to $100 million and growing in the churn of about 10% as a market, maybe not part of the market, maybe growing even higher than that.
So growing with large strategic customers. Today, we’re looking basically at the step that -- from a strategic point of view with customers that are very few but very big. In consumer electronics, we see less than 10 customers.
In semi conductors, we see less than five. In lasers, we see one big strategic customer called the ESI. I mean, this is the fundamental that we’re focusing to grow. And we’re not novices when it comes to deal with the customers. Again, we have done that many, many times before in memory repair.
We’re doing that already in consumer electronics. That requires deep understanding of how you can build customers intimacy. It requires ability to turn their needs into solutions faster than anyone in the industry requires, comfort to really on both sides, comfort to really act as an extension of their development.
These are all of the things that are fundamental core competencies that we’re having. So this plays into our strength and this is the strength of the strategy that we’re having. And to summarize this growth pattern, I mean, this is a chart that we’re updating from last year’s presentation but we do have -- we’re highlighting here markets and applications both in terms of existing and in terms of new and what we’re highlighting is that we have an existing advanced microfabrication UV via drilling, passive component, SLED scribing. In the new we have glass, advanced interconnect, wafer and packaging singulation, both for semi and LED, and proprietary lasers.
And if you add advanced microfabrication UV via drilling, passive components, glass microfabrications and advanced interconnect, you come to the $500 million market I mentioned earlier. And if you add LED scribing and 3D wafer and packaging singulation, you come to $150 million market that I mentioned earlier in terms of 3D packaging in semiconductor.
And proprietary lasers that’s the $50 million to $100 million market. The fact is that consumer electronics have both in existing and new growing application with the only exception being passive components which is mature but everything else, the majority of the $500 million is growing and emerging. LED and 3D is emerging market. We call LED mature but our focus is in 3D semiconductor and proprietary laser’s growth.
So with that, I’m moving to the execution. I have a couple of slides there and then I’ll give you along this certain view of what is our target performance. So from an execution point of view, we have started for the last three years globalizing.
This thing is moving fast, continues to be a sort of sense for us. And what we’re doing there is basically addressing the fact that our revenue has been globalized for quite some time. And this is primarily area based and globalizing the company means we’re moving most headcount over there. We’re building most headcount in Asia and doing a lot of manufacturing in Asia.
Today, all of our systems are manufactured in Asia. And if you look at last year’s performance, we increased the manufacturing from 55% to 73% in Asia. We’re operating this month Shanghai Development center to address local needs in consumer electronics and we have increased substantially the headcount in China to support the very large install base that we have there.
And other thing that we’re doing in execution is focusing our portfolio. This is an ongoing effort and today if we take a nutshell of what we have done, basically in our portfolio we are investing in laser microfabrications in 3D semiconductor and proprietary lasers. There is where our investments are going.
MLCC test, laser ablation and LED microfabrication, we are defending. This is primarily applications based investments. And LED test, this is a business which we have exited and memory repair we have under exit. We don’t make any investments there. We will still keep application as resources to support installed base, but fundamentally we have exited that.
And other thing that we are doing is really thinking very hard of our shareholders and trying to understand how we can improve things down to the shareholders. And there is various components there. One is to really grow and be profitable. And we are working very hard to grow the revenues and we expect to grow them by double-digit next year. And that growth next year is going to be still around three areas -- advanced microfabrication, glass and lasers.
And at the same time, because we have become a little bit more volatile company as we moved in consumer electronics, we are trying to streamline the expense structure, so we can make money in good times and bad times on a quarter-by-quarter basis. And basically, we want to lower the break-even point and increase the leverage on sales growth. We initiated an ongoing dividend of $0.08 per quarter per share and we did have one-time Christmas present with a special dividend last year of $2.
So coming to the outlook for fiscal year ’14, which is a year that starts from April 1. In terms of consumer electronics, we see that this is a business that will remain robust. We have a full funnel of opportunities, as I described before and we will provide multiple growth opportunities for ESI.
When it comes to semiconductor 3D packaging that will continued to emerge. We are very active with very big players in that are in developing technology and in evaluation of that technology. And our goal this year, we will continue to emerge, still is not going to become ubiquitous. We think that will be an event that will start in towards the end of ’14 and fiscal year ’15 and beyond.
We think that LED market is gong to remain in overcapacity. The fiber laser market, however, will continue to grow. We will be participants in the merchant flows by buying a lot of lasers but also have proprietary technology and opportunity to create incrementally additional revenue for ESI.
And overall, I would say that we expect growth in fiscal year ’14 compared to fiscal year ’13. And giving you a more of three year outlook in terms of the target performance, how we, in short, internally measuring ourselves is that we want to see and we are targeting an annual revenue growth of 15%.
Operating profit leverage that we have been talking to you guys for quite some time that is going to be in excess of 40%. And operating profit margin that’s ranged from 10% to 20%, don’t forget this is a tough year. So we are not going to be at 20%, as we exit this year but moving towards the end of the three years as we see that growth, we think we are going to be closer to the 20%.
And operating cash flow of greater than 10% of savings, by the way in terms of cash flow I think for how many years, Paul? Yeah, for 10 consecutive years, this is positive. We are cash generators, but our metric here and the target is greater than 10% of sales. And return on invested capital is between 10% to 20%. Again, don’t forget that this has been a tough year, but as we grow the company that will be closer to the 20%.
So in summary, this is a transformed company. It is a leader in laser microfabrication. We have very advanced and very diverse technological capabilities. We are addressing complex issues and opportunities with customers that are very big, and this is a core competence of our as how to be an extension of laser development and the fact that this has big markets with lots of customers.
It creates a concentration that really can provide leverage in terms of payback for our investments. And just to repeat this one more time with different words. We are a market leader in laser microfabrication. We are really focused on these growing markets in consumer electronics, 3D semiconductor and LED. And as a result of good execution and strong balances, we think we are ideally suited to grow in the next few years.
Thank you. Michael.
Good morning. Nice to see familiar faces again, I recognize a few of you from last year. So introducing myself, my name is Michael Darwin. I will be talking about the microfabrication, test and inspection business of ESI.
The business itself is driven, primarily by the consumer electronics industries. We provide essentially novel manufacturing solutions to our customers, enable them to make smaller products more efficiently, more cost effectively. We are considered a market leader in microfabrication systems, basically addressing market segments that Nick alluded to in terms of the display, components and enclosure segments.
We also provide micro capacitor test solutions into this industry and are considered the industry standard. Our history has been represented by a really strong growth, due to this market segment and from the predictions that we see that is the market predictions we expect that growth to continue going forward.
So a little history left in terms of the consumer electronics products and general trends, most of the trends over the last 10 to 20 years have been towards integrated capability. So what I mean by integrated capability is that taking functions such as a camera, a video, a recording device, a phone, a computing device and putting them into a single unit. And the trend has not only been putting those different capabilities into a single unit, but premium and a mobile form factor, so we take our phone. We take our laptop or PC in most places we go. And like most consumer of electronic devices.
The one thing that we want to be free of is that tether. So a major concern in the industry or major trend in the industry is battery life. So people concern about, okay. How long can I operate on the plane without having to plug in, or when do I need to plug in to recharge my phone or my blackberry.
So being finicky consumers of these electronic devices. We offer such an enhanced user experience. So not only do we want to be able to take a picture with our phone. We want to be a high quality picture. We want to be able to post it on Facebook. We want to be able interact instantly with our family and friends. And so all of these trends in the consumer electronics industry are producing unique devices and we expect those trends to continue.
At the technology level, there is three basic driving forces, that’s costs, form factor and battery life. So costs can be address in several different ways. One way is through manufacturing in China, manufacturing at lower cost environment, but also in terms of modifying the process flow.
An example I’ve shown here at the top where historical displays, which is as Nick described, multilayer stack of components can be simplified significantly by changing the process flow through technology or technology development.
The form factor is fairly self-descriptive. We don’t want to be playing around a very heavy piece of equipment or large piece of equipment. We want to be small like, we wanted to fit in our pockets inside of our jacket.
Battery life, again, going back to this hovering concern, we wanted to be free of that hover that plugging the wall. So a lot of effort, lot of development is going to extend the battery life. And one of the benefits of actually making a smallest form factor is you bring all components together and you reduce the resistive losses. So actually making a smaller form factor actually gives you a longer or better battery life or life time of the device.
Now looking specifically at the market trend, this is some interesting data, looking at the global installed base notebooks and desktop PCs compared against mobile devices. And one of the interesting trend is that, notebooks and desktops sort of seem to beat up.
In fact there is a prediction over the next three years that will be stable, in other words, there will be the replacement level of those devices. However, if you compared against the tablets and smartphones you see exponential growth. So the adoption rate of these mobiles devices is just growing exponentially.
It’s anticipated in 2013 that for every laptop and desktop PCs that there will be an equivalent to mobile device and by 2015 for every desktop and notebook there is going to two mobile devices.
So I’m looking around right now seeing how many people have two mobile devices. I know I have one and another one back in my bag. So I’m participating this trend, I suspect all of you also sort of participating us as well.
If you segment the data little bit on the mobile phone side of the market, another interesting trend arises. First off, the overall mobile phone market is growing about 6% year-over-year. But if you look at the smartphone component of that it’s actually growing at 20% -- 25%, 26% compounded annual growth rate.
So the mobile phone is becoming smarter. It’s becoming more ubiquitous and the smartphone is actually display seeing the traditional mobile phone. Again, I think we all recognize that as a general truth in our everyday life. But the rate at which that adoption is taking place is double-digit and currently we don’t see anything in the adoption.
So I show this two market segments first, I could compare that to the slide that Nick showed earlier about our growth in consumer electronics. So our growth actually parallels the growth and adoption of the smart mobile devices, and it’s really representation of our business and how it applies to those particular segments.
So how do we, yes, how do we win as a company. How do we -- how we’ve been able to grow with these new market segments and how do we expect to continue to win in the future?
First and foremost, it’s involves technology in our IP. So we have a long history of laser material interaction. We have the ability to move the laser beam very quickly and very precisely around the sample and we have a history of -- and a strong IP portfolio of vision and vision algorithms.
So on the laser business we’ve been able to combine that technology into a package, into a system that we sell, into -- to our customers. The -- but having this technology alone isn’t sufficient, right. It’s a basis for our business but can you do something else, can you be able to take that technology and ramp it very quickly. Can you be able to deploy it into manufacturing solutions, manage in United States and abroad in China, and you have ramp very, very fast.
Now, its one thing that we’d able to think the technology and to ramp it fast and to build towards and shut them at the door. You have to be able to do in such a way that you enable the customers to maintain yield, right, in a cost effective manner.
So if we -- you put a lot of tools on the field that don’t produce well. It causes problems in the customer ramp, that doesn’t do anybody any good. So we’ve math through over the last few ramps, the ability to ramp very high volume and very cost effective manner to essentially provide a customer’s with high yielding processes.
So our focus is on the mobile consumer electronics market. This exploded you, I’m going to talk in little bit more detail and Nick did about, what we do in the applications that we go after in this market.
Again, we’ve segmented the market in three different ways, we have this display, this enclosure and this components. Our history is primarily been in the component sub-segment focusing on PCB drilling, [technical difficulty], et cetera. And if you breakout one of this mobile devices and we do a tear down.
You’ll see that there are several different components and I’ll point out here that our flexible circuit going back here too. We’ve been doing flexible circuit, manufacturing, drilling and routing for several years now, and we found that those circuit in particular becoming ubiquitous in all the mobile devices.
We also participate at manufacturing the board so drilling via and routing these boards here and inspecting the microcapacitors on those boards. And those board are somewhere between 15 to 30 microcapacitors per board. So its quite a large volume let’s think about a million phones being produced per day, million plus phones produced per day, that’s a large number of capacitors need to be inspected.
We also do quite a bit of singulation in this, so we actually not only drill for this flex circuit and rigid boards, but we also route them that is we cut them out of the background, so that gives us role to role for the overall PCB board itself.
We have taken the technology, it’s a precision technology associated with doing that machine, that is drilling and routing, and we started expanding our market space by moving into adjacent segments, for instance in the enclosure segment.
We have applications and drilling, milling, marking and etching. So basically anything that wraps around and protects the display, and encases the component we will provide microfabrication solution for drilling very, very small type holes or to etching or marking the process. And that could be for protective purposes, functionality as well as the static purposes.
The display of the new area, relatively new area, market for us to enter, we have historically participated in display through the micromachining of thin film, paint layers in particular.
So if you explore to display, again there is one, two, three, four layers in the display, at least four sheets of glass, five sheets of glass. On those various layers in the display, there is paint, there is thin film et cetera, polarizer film that we will cut and will grill and now most recently we’re actually looking and cutting the tempered glass. The tempered glass primarily is this upside component.
It’s a cover glass, if you will and people refer to it as, some cases, Gorilla glass or strengthened glass. And we can live with DiamondBlaze product announcement. That’s the market that we see the opportunities going forward.
So we enable the consumer electronics industry to grow. We do that by providing microfabrication technology that allowed the interconnect circuits to grow smaller as well as enable precision machining of the components which could be in different materials, metals, films, ceramics, glasses and of course, enabling smaller capacitors to be implemented throughout the year.
So still talking about product family, like you did last year. Unless you want to talk about how our products fit into this market segments. So you can do one-to-one association with those products in the market.
Historically, we’ve been known as a leader in easy laser processes with 5300 product family. This is the tool that used to drilling large flexible circuits. We recently announced a new version of that product, 5335. It has some enhanced technology in it that allows us to drill and we’re up about 30% faster than the historical tools. And that’s pretty significant given the fact that we’re already the market leader. And now we’ve added this technology on top of that to sort of extend our leadership in that area.
The 5900 product family also serves the components of this industry. We introduced a new low-cost versions in this last -- actually in 2012 that specifically focus on routing for de-paneling of rigid circuit board. So why did we introduce this product. While it turns out that when you try to make -- I should say when you make the part smaller on a PCB, that is you reduce the -- and also try to reduce the width of the curve associated with the cut.
You can actually get higher density packings on that board. So unlike mechanical routing applications where you need a certain width between the active devices. With a laser you can reduce that width, in some cases three or four times, so you get high-density packing, more cost effective, processing of those lose board. And we see that as -- again the consumer electronic devices shrink, the subtle rigid board that you attached to the display or attached to some of the modules within the device themselves, require a higher density packing on the panel and that does drive towards laser manufacturing, laser depaneling or laser singulation.
Lastly, the 3500 product family is considered a leader in MLCC test. Trying to extend our leadership there, we introduced a new 3510, 3520 series where we’re really focusing on the latest generation capacitors particularly Metric 0204, very, very tiny capacitors. And with this product introduction, we’re enabling much, much higher throughput, 40% faster than our historical tools.
So the top level, if you look at this, we have two discerning technologies. So we introduced 6035, 6310, 6320 products that really discerned our market. And we have introduced to a near adjacent market with 5950, this de-paneling application.
In enclosure market -- for enclosures, we have an active strategy to segment this market. So our traditional 5900 product is really aimed at serving the high-end market. It has integrated inspection and review capability built in. It has high-end laser, very precise microfabrication capability.
However, we thought there was a need for mid tier, low tier sort of solutions. In the past year, we introduced 5970 to address that low-end, low-to-mid tier microfabrication market. And I think simply doing the same applications except more cost effect with 6900.
On the display side, we introduced a 5390 and this is based on 5300 platform but a 5390 tool focused at processing thin films, primarily polarizing film. Again, you can ask us why, why polarizing films? Well, historically polarizing films can process with a mechanical stamp process. So for large displays, you can get away with mechanical staff coming down maybe propping the edges a little bit because eventually it’s going to be covered up by bezel.
On mobile devices, they don’t have bezel. So you want that edge to be nice and crisp. And you can form it with the actual display itself. So laser start coming to play in order to produce that nice crisp edge and also it enable these small interior features. So we’ve seen lasers taking over replacing some mechanical punch processes for the [Samsung] application.
And then lastly, the DiamondBlaze product family, this is the most recent release that we’ve done, addressing the strengthened glass market. And we decided to announce this product, not necessarily because we can cut strengthened glass. Strengthened glass has always been used to produce mobile flex but because of this new process code, the thing called one glass solution.
And I’m going to talk a little bit more about what the one glass one solution is and how we pay uniquely in that process. First off, I’ll talk a little bit about the market size and then about the technology and then the process.
So market size, we estimate this to be about $50 million plus per year market for capital equipment. And we recognized this several years ago that this is a growing market that glass is sort of somewhat ubiquitous. Look all around us, you’ll see glass from anything on the table to again your electronic devices. So we’ve been developing capability. We’ve been investing in laser microfabrication capability for the past three to five years.
But we didn’t hinder the market because we didn’t see that there was significant enough value to apply lasers to these specific applications until we started looking at this what’s called as one glass solutions. This one glass solution is associated with these Concore’s strengthened glass.
And this one glass solution is a way to make the display thinner and lighter, right and less expense still maintaining its scratch resistance and damage resistance property. So it’s a very unique process where we have this opportunity to participate in this development.
So what is the one glass solution process? Digress a little bit and talk about what a one glass solution process is for your standard phone, phones or tablets or even some computers that use a Gorilla Glass process in the industry in terms of the discrete process. And what they do on a discrete process is shown up in the upper left-hand of this display.
We have two different processors that kind of go simultaneously. At the top, we have what’s called a sensor glass. In our sensor glass, we took a transparent film, transparent conducted film. They patter it and then they cut it down to size and they machine it to the final shape.
And in parallel, they have this cover glass that such as big sheet of (inaudible), which is telemeters by telemeters. They cut down the size, right. Then they shape it and do all the machining on it and they strengthened it through an ion exchange. This little bubble process right here is actually the strengthening process itself.
So once they have the final components strengthened and the final components patent, then they grow them together and that module becomes bases of protected glass and a touch sensitive screen. Now the One-Glass-Solution is a little bit different. In that, we take a large sheet of glass and you strengthen that large sheet of glass. All right.
Then, you put the transparent conducted film on the surface with patent, that’s the ITO, Indium Titanium Oxide, we then cut that strengthened piece of glass and shape it to sizes and now you have everything that you -- on this one sheet of glass that you have on the film that’s up above.
So we reduced the number of process steps, right. We reduced the amount of glass in a non-material use. We have as much as sensor processor slow and a less expensive process flow. Now, the key difference between the two is where you cut the glass. From the top process slope, you are cutting on strengthened glass. So you have mechanical scribe that can go in very quickly and easily see with the glass.
You can’t cut strengthened glass with a mechanical scribe with any high yield. So this is where the laser comes into play. The only way to cut the strengthened glass in a manufacturable sense of high enough use is with the laser and that’s where we play. So we think we are fairly unique positioned to grow with this market segment and to enable this process to take our films in mobile devices.
So what does that market look like? This is a projected revenue by display types over the next several years in OGS sense or One-Glass-Solutions. And to predict it because of the ability to process this display at a lower cost but maintain all these critical properties in terms of glass damage resistant of this segment of the touch panel industry will be the most rapidly growing quite a bit of the market for the next -- foreseeable future.
The last thing I want to talk about is our customer base. Most of my customers were in Asia because majority of my customers are in China. And I firmly believe been closer to the customers because that’s where the firms are in the manufacturing process. So we decided that we would have many discussions and now, whether or not we should open up a development center in China or not. We made the decision. I think it’s the right decision to be closer to the customer base and to enable our customers locally to utilize our technology, utilize our development skills, et cetera.
So we are opening next week. As a matter of fact I travel to Shanghai next week to open up the center for advanced developments. It’s going to have the advanced microfabrication equipment, locally in Shanghai. That’s going to be staffed with engineers for both, mechanical software and process development.
The intent really is to allow local access in a common language of Chinese to drilling, marking, cutting applications on various materials to enable implementation metals, ceramic, et cetera for the various products, supply chain of consumer electronic devices. There is also an arrangement to it in terms of the turnaround times.
So historically when we transfer process up to China, we would go through because of secrecy, right. We wouldn’t know exactly what the form factor of the device that we are going to be manufacturing them, so adding and going into a ramp and not knowing exactly how to hold a part.
Actually we don’t, we’ve not given the dimensions because it’s dramatic. And so we -- historically, we’ve gone through seller revisions, rapid timeframes, prototype and U.S. ship it out to Asia. They’ve got first to know, they’ve done small design tweaks, et cetera. So we go through these loops.
And when you start going with customs and this communication areas, days matter. So we have local team now that stations maintenance, engineers the software and power engineers. So they are going to be custom parts design. So be much closer to the customer and to be able to talk in native language, to be able to look at the part, be able to make notes, take a look at the machine task and implement that on the system.
We think that’s going to reduce significant turnaround times and better serve our customers. And I think with that last slide, move on to a summary. Again, we are driven primarily by consumer electronics market, that’s what my business is primarily about. When you provide these novel solutions to our customers to use and ramping those processes and making their components, and we do so at a lower cost than our competitors and enable high yield to our customers. And we expect this growth to continue going forward. Right now, there is no foreseeable and for the smart mobile phones devices. Thank you.
So we are now going to take a short break and we will be back here in about 10 minutes. Thanks.
Okay. So, good morning. I’m Jon Sabol. I’m the General Manager of the Semiconductor and LED Division of ESI. So what I want to do today is talk you bout these two markets that ESI is in.
Start off first with, building a little bit also what Nick already told you and what Michael spent the last half hour describing? We’ve got a growth strategy based on consumer electronics microfabrication business.
My division looks at the additional opportunities over and above that. So we’re looking specifically at the semiconductor space and the light emitting diode space. In semiconductor basically 3D packaging is an enabling opportunity for us and that’s where effectively our growth is going to come if you look at the yellow bars and kind of the trajectory out into the future.
So from a semiconductor and LED standpoint, we’re focusing on emerging opportunities in the 3D packaging space and also LED singulation markets. Consumer requirements drive growth for us, right. So this is new cell phones, LED for general lighting, et cetera.
And we are enabled by technology inflection, so we see material changes, the ongoing shrink that occur in the semiconductor space, power consumption requirements, et cetera. And if we add up the opportunity across these two markets and I’ll go into details into specific sub-segments, we see a greater than $150 million addressable market will account in calendar year ‘15
Again, we’re investing for the future right now. So I’m not talking about memory repair today, I’m talking about opportunities that the company has going out into the future calendar years.
Strong foundation in semiconductor, so ESI as company has good -- really good laser material interaction expertise, we’ve with semiconductor customers for a long time, so we have strategic customer relationship with those customers. Strong knowledge of semiconductor fab, this is kind of the heritage of the company, now we’re taking it from one, what was once a memory repair franchises business in the 3D packaging.
So we’re focused on promising applications, the opportunity for us is obviously Moore's law continues, right. So future size geometry keep shrinking, this drive a lot of change in itself. So when we talk about 3D packaging, I’ll talk about some opportunities there that driven specifically by Moore's law and changes in materials.
But there was more than more which is the dimensional integration, so this is the packaging of the microprocessor with memory chip, et cetera. And so we have opportunity coming up there also and we see a similar thing occurring in LED where things are from a packaging standpoint where we have opportunities there also.
So to start with, we’ll start with semiconductor, if you look at the semiconductor industry calendar year ‘13, $320 billion growing to $300, approximately $370 million in calendar year ’16.
The interesting thing here is that semi capital equipment spending doesn’t grow that much nor does packaging, right. It’s an industry that we’ll spend a lot of money to make that revenue, but we don’t see significant growth, it’s a very large industry. The unique opportunity for ESI is in the areas of laser scribing and dicing, so in this calendar year we see that to be approximately a $10 million business.
Going out to calendar year ’16, we see it growing to greater than $100 million and I’ll talk about three specific applications that we’re working on, but there will be others too. So just, for ESI it’s a small fraction of what the packaging CapEx is but for us it’s a large growth opportunity across the calendar years.
We have a system that was originally designed for thin wafer dicing. It’s a system called the 9900. It’s based upon proprietary patented technology where we use a step and repeat system that allows us to place each laser pulse very precisely.
So the system is been design, we’ve been going after the thin wafer dicing market, but we’ve identified other complementary markets to go after with this tool, right. So we kind of a little bit ahead of the industry adoption for thin wafer dicing but we found other application.
So the first application I’ll talk about today is thin film scribing, the second application will be package micromachining and then I’ll give update on where we are with thin wafer dicing. So, each of these markets are the markets that will allow us to grow into the future.
Those thin film scribing, basically what's happening here is, we have, it’s a singulated advanced wafers. There, basically cutting in the street, so there is a lot of different films that need to be singulated, if you singulate them long way it cause delamination. You can get the image of the film therefore the device doesn’t work.
So the next-generation materials that we see drive need for advanced laser processes to limit this damage, to limit the delamination. One example that we’ve been working on is a low-k films.
So you can see in the same picture delamination of the interlayer dielectric here and here. This is typically caused by a mechanical process, so if you have a saw blade it will come through and it will care that or fracture that film the interlayer dielectric.
So a few leading customers have begun making the transition or in one case made transition to our laser process. The thing is that low-k is continue -- low-k films continue to evolve overtime and they become more and more fragile as you go to the next generation. So the existing -- even the existing laser processes don’t work well. Again, laser causes damage when its singulate something just like saw blade, it’s just on the much smaller level.
So the first thing you do if you start to see interlayer dielectric damage or thin-film damage as you slow the process now. If you go slower, you’ll chip less, you will do less damage. If it’s a laser process, also you are going to want to go slower and you are going to want to find a way to limit the amount of damage causing by laser process, you have two things happening at one time.
So we see these markets as significant growth but again in the 2015 timeframe when we see the actual growth occurring. So we see an opportunity here of $25 million to $40 million a year starting in calendar year ’15.
There are opportunities with the current materials that specifically the next-generation material what’s going to drive the growth opportunity. Why is ESI -- why are we differentiated? So the first thing is, if we are competing with mechanical process, just having a laser processes differentiating. If we are competing with an existing laser process, it’s the laser material interaction that’s for pieces, it’s going to allow us to add value and be differentiated from the current solution.
So as you go to this next-generation materials you are going to move from a nanosecond laser potentially a femtosecond laser. You have a completely different process, right. So it’s the ability to bring the laser expertise and the laser material expertise to bare on the problem, right. So Tullio get up, Tullio Panarello, the General Manager of our Laser business unit will get up and talk about our laser technology, some of that used here.
The second thing is in this case we are using a zero overlap process which allows us to control the damage that caused, right. So now you can limit the damage, firstly, you can bring a better laser technology, something you can deliver the laser pulses in a better way.
So instead of scribing, right, moving a stage and running a laser along the street, we are able to place specific pulses, so that we don’t overlap, we don’t cause significant damage when we that, that allows us to scribe and it -- the big advantage is that this proprietary process allows you to have a much higher throughput, right.
So, A, we can bring a technological advantage in the laser material interaction. B, we can bring a cost of ownership advantage in a much higher throughput, okay. So that’s the opportunity for us.
We are partnering with major semiconductor manufacturers in this case, one, we are working with, spending a lot of time with right now, so it’s a very good opportunity for our company.
Okay. Package micromachining, this is, as long as I’ve been in the semiconductor industry I’ve talking about 3D, right. Industry is not there yet, but there have been several thoughts along the way. So the first kind of thought improved the bandwidth between devices is to do with Fan-Out Wager Level package. There is an opportunity here for ESI because of the type of material that will be singulated.
As you keep moving in time, now you have 2.5D which is the glass interposer or silicon interposer. This is also a very good application for us. 3D is not happening today but these are the precursors to that, right. If you are able to bring a laser process to play in these areas then it will be extendable to 3D where things get very complicated.
So if you look at the specific opportunity of interposers, there are several things you need to do here. You need to control debri whether its large debri or the small particular debri associated with singulating the die.
The large debri is effectively the edge pieces that don’t have chip populated, so when you cut these, you get to be able to remove them. You have mechanical process you are going to throw them around, if you throw them around you’ve got known good die on this interposer wafer, so you get pieces like. The small debri is just the effect of singulating the interposer out you are going to create silicon wafer debri that you don’t want piling up on the wafer.
So the typical process flow today that we are working with customers on, is they take a silicon wafer, they form the wiring on the interposer wafer, now you got a wafer, mount the known good die on the interposer wafer and then use the laser dicing process to singulate out each of the individual interposers, okay. So you can see, this is a three-chip package that physically on that wafer, right, we are cutting this out.
So, again, ESI we have a proprietary process that allows us to do a step and repeat process. So we can come in to this area, where there are no die and we can singulate this and remove it.
So now it’s no longer in the process environment. So we just take out with, exactly how we do it. But then we can come back and singulate all the remaining parts of the wafer with the laser and not create a debri problem.
One other advantage that customers have been talking to us about, they have been trying to evaluate the thermal impact. So now we’ve got known good die on an interposer wafer, you don’t want keep that wafer up, they are worried about reliability of the chips after this process right.
And again, ESI’s proprietary processes one that where we do pulse place zero overlap. So we are going to impact the thermal effect on the silicon substrate on the silicon interposer I believe. So we are not just running a laser across that, we are placing process with no overlap, so its least amount of thermal impact.
So this is a second opportunity for us, when we look at this market again, we see laser processing of chip packaging growing to $15 million to $30 million addressable market, effectively taking off in calendar year ’15.
Now, again, we are working with customer today, buying a system this year or next year pilot production, et cetera, but high volume manufacturing occurring out in the calendar year ’15 timeframe.
Okay, the last one is thin wafer dicing, this is the market that the 9900 was original developed for us. So we saw this market a long time ago. If you look at thin wafer dicing it’s going to happen, right. The first, Michael talked about smartphone, the first smartphone I bought it, I think was 4 gigabit of memory, right. I just bought most recent version of that and it was 64 gigabit. There are going to go to 128 next.
So mobile and memory is where thin wafers will be required first, right. This is all about the form factor of this handheld smartphone hasn’t changed, right. And the area that they are providing for the memory module also hasn’t changed, matter of fact its got thinner, now instead of having four chip, four die in the package, you need to have eight or need to have 16. So you got us in the wafer. You’ve got to get sub 30 micron pretty soon, right.
So lasers are required to dice ultrathin wafers, we are working with a leading flash memory provider in the industry on evaluation of the 9900 for this application. Again, it’s the market that we saw long time ago and we now see it starting in this calendar year to be pilot production, R&D development and then over the next two years, this will move into a high-volume manufacturing-type application.
This is a large market. If we go out and just look at the number of sub 30 micron wafers that will be required in calendar year ‘15, where we see a $60 million to $75 million opportunity for laser singulation in this market. Again, why do we win?
The thin wafer dicing the technology challenge is difficult to do. Mechanical saw faces multiple issues here. So what’s really happening is in the streets of these wafers, where you’re doing the singulations, you’ve got metals, you’ve got all different types of materials as they built the device. And it probably goes through that. And the last material that goes through is the silicon and the silicon is effectively used to clean the blade, right.
So now as you thin that silicon, you have less clean area. Now your blade are [gone down] right. So just like using a saw and the whole bunch of wood chip and it doesn’t work effectively at that point. So the industry has been working to extend that technology to the current node but sub 30 micron is effectively where it is and the transition for laser will begin.
So ESI again, the 990 enables us because we haven’t seen overlap process, right. So we have this step and repeat process that allows us to place process precisely. And we can do multiple different recipe steps that allow you to deal with various materials that you see in this industry.
It’s not just a simple as running a laser process. So a buried layer or a bunch of metals can turn into volcano. It explodes and you get chipping results in that and that is where it strengths and now you’re not going to use this. So that’s the opportunity for ESI.
Okay. So in summary, the emerging applications we see grow to $100 million plus in calendar year ‘15 for the 3D packaging market. This is what we’re focused on. We have a versatile platform that’s addressing multiple complementary application, all in 3D packaging, right. So we’re working on thin film scribing, we’re working on package micromachining and we’re working on thin wafer dicing.
Inevitably, you’ll probably find other applications too. But in these cases, this is the market in search of the technology, market in search of the technology and a market in search of the technology, right. The company built this system several years ago but we have it in this applicable (inaudible).
And again, we have evaluations underway with leading manufacturers in each of these areas. LED, so a little bit of discussion in the hallway about the LED market. So the LED market in over capacity. Backlight is absolutely saturated. There has been an industry shift from performance to cost, right. When I first joined the ESI, the customers we’re talking to, was all about lumens per watt. How do you get more brightness out of each device, now it’s all about lumens per dollar.
So you can buy less performing LEDs for much less money. So you just add a couple of LEDs to the package and it works just as well. So the industry has changed pretty significantly. The only thing that’s going to drive growth in the LED space is general lighting.
We don’t need it for any more flat panel displays. We don’t need it for any more televisions, that’s not the requirement anymore. The interesting thing here is the general lighting drives a material cash, right. So we’re going from what they call PLCC packaging or plastic package to a ceramic package. So in general lighting, I don’t how many of you bought an LED light bulbs but the majority of the cost in that thing is the heat sync.
It’s all the packaging that’s goes around the dye, right. The die is maybe 50% of it, so a unique opportunity for us here. In addition to that, we have a large installed base of scribers or standard LEDs. So these are 70% to 80% of the manufacturing capacity. In the world today, traditional LEDs are being built on sapphire. That’s the market, ESI created. We have a large installed base there.
And then there’s new opportunities for the next generation LED. So we’re well positioned with a strong portfolio of tools to address both the die singulation and the package singulation market.
If we look at this market, $26 billion for lighting. So I’m only going to talk about lighting at this point. I’m not going to worry about traditional LEDs or Christmas tree lights. The lighting opportunity in calendar year ‘13 is $26 billion, growing to $48 billion in 2016.
The pretty significant growth, nothing near the size of the semiconductor industry. But we see a large growth rate here. Same thing from device and packaging, spending going from $15 billion to $31 billion and the opportunity for laser singulation, which we estimate to be approximately $20 million this year growing to almost $100 million by calendar year ‘16. It’s low this year. Nobody is buying fibers. Nobody is buying MLCC reactors. Nobody is buying scribers.
So this market is not, it is not a big market right now. If you look specifically at the die singulation, again general lighting drives growth. We’re looking at a market of $48 billion in the calendar year ‘16. It’s growth in vertical LEDs and flip chip which gives us new opportunities in die singulation.
Again, we have a large installed based for the traditional built-on sapphire LED. In vertical LED, you’ve got a material change, right. So now we’re talking about singulating silicon, silicon alumina. It’s a different set of substrates. It’s a different device.
We have a product for that. In the case of flip chip, it depends on exactly how they do it but we have a product for that also, okay. Capacity adds we’re estimating that will resume in 2014. So we don’t see any significant growth in this calendar year for die singulation.
If we look at the LED packaging opportunity, again the industry will -- growth in the industry will come from general light. General lighting requires a higher power device. So they want to drive the LED as much as they can. These things get hot. So they have had to transition from a PLCC package to a ceramic package.
This substrate material change drives demand for laser singulation. We have a product offering that we’re in evaluations with multiple leading LED manufactures. So we again with tier 1 in this case, we’re not with the tier 2 customers. These are the guys that are going to produce ceramic packages that need to be singulated.
It’s unique because now instead of cutting sapphire singulated die, you got to die this and mount it, you got a whole bunch of die. I’m going to mount it on a square ceramic panel. The phosphorus has been added, the lens has been added and the silicon and (inaudible) been added.
Now what you need to do is singulate that. So this is a great opportunity for ESI to work on. That you can -- you can do that mechanically. You tear the silicon, you break the hermetic seal, now the device network. Ceramics are pretty tough material. You go through lot of blades trying to singulate. So laser is well adapted to this application. And again thermal management and costs are key packaging driver.
So the LED summary, backlight saturated, dollars per lumen is what’s critical now, not lumens per watt. General lighting drives the growth and we have customer validated solutions both for the die singulation and for the package singulation. And again this is a market that ESI created. It’s a market that we have a large installed base. So we need that market to come back to growth which is not an issue.
Okay. So we’re investing in emerging technologies. We have innovation in semiconductor and LED singulation. We have products for both of these markets. We’re engaged with leading customers and we’re definitely focused on emerging technology requirements in both markets. That’s all I got. Thank you.
Thanks, Jon. Good morning. I guess this is my first time presenting at this conference. Most of you were last year, but my name is Tullio Panarello and I’m the General Manager of the Laser Business Division for ESI.
So, what I hope to show you today is, how we are building on ESI’s deep expertise in laser material interaction and the recent investments in laser technology, a differentiated core competence in lasers for ESI. And at the same time, we're actually providing an additional revenue stream for the company.
So let’s get started. So why invest in laser technology? Well, from a system’s business perspective, the laser is the single most expensive components in the [barm]. It’s generally upwards of 20% of [barm] costs. So having control of that internally is important.
The second reason for investing in laser technology is the process recipes, are closely tied to the laser parameters, so things like pulse width, pulse energy, repetition rate. This defined the process of the process windows, the most of the processes that we do within our system. So in order to be able to deliver a differentiated solution to the market, having control of those parameters internally becomes very important.
So, ESI has made two investments in companies as of late and each of these companies have brought a different core proprietary technology into ESI. The first was the acquisition of PyroPhotonics, which Nick talked about and that acquisition brought in something we called pulse shaping.
Pulse shaping is the ability to uniquely tailor the shape of the pulse that the laser produces and control it independently of all the other parameters of the laser in such a way that you can deliver that particular concentration of energy in a particular timely fashion to the surface of the material that you are trying to build.
The other technologies come through the acquisition of EOLITE, which is this rod fiber amplification technology. This actually allows us to cost-effectively scale power into lasers to really high levels, and allows us do that while maintaining all the key beam parameters that we would like do is generally easy to scale power. It’s difficult to scale power and maintain what we call single mode of functionality of the laser. Okay.
So when we look at the areas, I think Nick alluded to this in this presentation where we generally buy lasers where we are looking after them, the processors that we are looking at from a system’s perspective today. We basically use lasers generally around the -- anyway let’s say it’s under 200 watts worth of power, right. But it’s from a process perspective they stand from hundreds of nanoseconds to all the way into the picosecond regime. With the technologies that we acquired, it allows us to create products and platforms that cover a broad range of these applications, not the whole phase but a very important chunk of those applications.
We are going to start by talking about the PyroFlex laser platforms family. This platform actually leverages the pulse shaping capability because it allows us to produce lasers where we can control the shape of the pulses. We could create multiple pulses. We could create what I effectively called specialized recipes, tailored to the materials that you're actually processing. Okay.
And it allows us to do independently from the other laser parameters. In many cases, we can do this independently of the repetition rate of the laser, independently of the power of the laser. We can maintain the other parameters without changing the pulse characteristics. We actually already have a very large installed base of these lasers in ESI systems today.
Next is the Boreas Nanosecond Q-Switch laser family and this comes through, this leverages basically the rod fiber amplification technology to deliver what is the most powerful diffraction limited Q-Switch laser on the market. Really allows us to scale power quite easily and quite cost effectively.
There you are seeing 250 watts of IR power, 120 loss of green. This is actually able to address multiple applications within ESI. It gets us higher throughput because we have higher power. We are able to split the beams multiple ways in applications where less power is needed for process. And it actually enables us as a laser supply to participate in things like light -- what I call light metal fabrication where we are modifying metal, drilling holes through thin metal sheets in the glass.
So, finally, we have Hegoa Picosecond laser family. This also leverages the rod amplification technology that I talked about and basically this technology in the picosecond regime gives us, what is effectively the most cost effective dollar per watt play in the picosecond process laser.
It basically got best-in-class, diffraction limited beam, which allows us to operate at over 75 rep rates then basically zero all the way up to about 5 megahertz. It actually can operate even beyond that if needed but we never really operate the lasers beyond 5 megahertz. And again, this also allows us to address multiple applications both within ESI and externally.
So, as I mentioned before, other than leveraging this technology within ESI, we are actually able to go out into the market and generate additional revenue streams for ESI in the broader markets. The global laser market is about $2 billion. Fiber lasers, which is the class of lasers that we make is the fastest growing part of that market. And basically the lasers that we make really targets the small part of the market, which is mostly semiconductor processing and micro processing, which is on the -- and the part of that market that we can actually address is somewhere between a $50 million to $400 million SAM. Okay.
We actually break down those applications that we can address as the three broad categories, something that we call complex laminates, brittle materials and light industrial applications. The complex laminates are multi-layer materials, things like PC boards, things like multilayer thin-film applications.
In these applications, the PyroFlex laser and ability to tailor the pulse is such that you can tailor the pulse shape or switch from one pulse to another relatively quickly on-the-fly effectively, allow you to process these materials very effectively and give you a very broad process when doing so.
On the brittle material side, these are things like glass, semiconductors, ceramic. Here, it’s the picosecond family of lasers, which basically addresses many of these applications. Generally, things like glass, you want to avoid thermal shock. You want shortest possible pulse. You can have in order to be able to process the glass.
Same thing with semiconductors, I think. Jon alluded to the fact that you don’t want thermal damage in the surrounding areas or having short pulse lasers to become very important.
On the industrial side, the Boreas laser, which is really -- that allows us to access really high powers in a diffraction limited beam, allows us to address some light industrial applications, things like surface texturing, battery foil cutting and drilling the cooling hole in various material.
So I hope I was able to demonstrate to you that by building on our deep expertise in laser material interaction and the investments that we’ve made in laser technology, we’ve been able to deliver to ESI some really proprietary and differentiated capability for their systems business while allowing us to generate additional revenue streams in the broader market. Thank you.
Thank you, Tullio. I’d also like to welcome everybody today and thank you for being here. I’d like to do just take few minutes and take the strategies and things that we have discussed this morning and kind of wrapped them into how that we see them from a financial perspective as we look out over the next three years of the company.
The first thing I think it’s important is that we do have a series of what we call core financial strategies that we try manage the company too, that starts with focusing on growing revenues faster than the market, in part by growing share in our existing markets and expanding into adjacent applications that will give us additional opportunity for growth.
We try to concentrate our focus on investments in those new applications in the three specific areas you’ve heard about this morning, areas for consumer electronics, where we've seen good underlying growth over the last several years as we’ve made really investments in that particular area.
Our next-generation semiconductor and LEDs wafers singulation which is largely in investment mode today, but we see as a large market opportunity in the future and chance to really create a whole another leg of growth opportunities for the company. And finally, the underlying enabling technologies particularly in the area of proprietary laser technology that will give differentiated ability as we go forward.
Now we want to be able to take that revenue growth and translate that into profitability. And so we have a lot of focus on improving gross margin over the last several years and streamlining our cost structure to enable us to achieve our target operating margin leverage of greater than 40% of operating income.
Now, at the same time our business has shifted in mix, where we consciously decided to go after larger opportunities, high-volume opportunities in consumer electronics which has both made our business more lumpy, as well as change the gross margin mix in that area.
The result of that is we focus on two things, one, making our business more flexible so that we can react quickly to those changes in business and also streamlining our cost structure including gross margin so that we can effectively leverage our fixed cost structure and achieve this same bottom line margin -- operating margin, even though gross margin may vary from one quarter to the other.
Now we want to take that profitability and translate that in the good cash flow and so we also have a strong focus on the balance sheet, and strive to have top quartile performance in our working capital metrics relative to our peers.
Our DSO, we think we are in the top quartile in the 50 to 60 day range performing very level with our peers.
Inventory is an area where we have made a lot of improvement, our inventory practices and continue to see that as an area of focus for us that continue to be able to translate profitability to good cash flow.
Now historically we’ve been able to do that and as despite cyclicality and volatility in our revenue and earnings, we’ve been a very consistent generator of cash. And that’s given us a very strong balance sheet, that we’ve been able to use not as a foundation for growth in cyclical markets but been able to invest in our business going forward and return some of that capital to shareholders overtime.
Nick talked a lot about the changes happened in our company as we’ve consciously invested in new applications and been able to grow, our laser microfabrication business focused on consumer electronics.
This is taking this capability to drill, cut, route, mark, etch using a laser in multiple different types of materials like glass, plastic, metal, paints and other types of films, primarily targeted the consumer electronics market. We’ve been able to see that business grow at a compound annual growth rate of about 25% for the last several years.
Unfortunately our growth has largely been matched by saturation overtime like semiconductor, our memory repair business, as well as overcapacity in some of our traditional markets. But as we’ve seen this shift in our business we’ve seen this consumer electronics business come from quite small to now over 75% of our business.
As we look forward, we believe that the headwinds of saturation and memory repair and over capacity are largely behind us and this underlying market growth will allow us to now see our growth in our business that we’ll able to see on the topline. That will be driven in part by the continued growth in the market for consumer electronics and the new applications that we are introducing in glass, additional advanced micromachine opportunity and advanced interconnect.
In addition we’ll be able to see growth as our underlying markets recover from the overcapacity condition that they are in and as we enter new capabilities in both laser and as Jon talked about in the longer term in semiconductor and LED packaging. We believe that the combination of these factors will allow us to see growth of approximately 15% for year over the next three years or so.
Now we recognized that in the near-term our business mix has changed and that caused our quarterly revenue to be more volatile, despite the fact that we expect to see growth on year-on-year in our business from quarter-to-quarter we can continue to see the business move around a little bit.
That volatility should be able to be dampened over time as we enter some of these new applications with expansion our customer’s base and there is market recovery in some of our traditional market.
But in the meantime we’ve taken a number of actions to manage that volatility. First of all, we focused on the increasing the variable costs, nature of our company, so that we can react quickly both to upturn large ramps as Michael discussed but also be able to react quickly in quarters where we don’t see that ramp of activity.
As an example of that in our most recent quarter, where we saw activity come down, we are able to reduce our manufacturing expenses by over 30% quarter-to-quarter sequentially and our operating expenses by over 20% enabling us to deliver respectable results despite the fact that we saw some change in the revenue level.
In addition, we are taking a number of actions to improve our cost structure and flexibility, and essentially lower our break-even point. And yesterday we renounced the restructuring plan that encompass the number of things including reducing our costs, sharing a number of assets that we don’t think will be utilized in the future, as well as taking valuation allowance against the tax reserve related to U.S. income you saw a lot of our activity continues to move overseas.
The result of that as we think we’ll be able to sharpen our focus, improve flexibility in our company and lower our cost structure. We talked quite a lot about how we sharpened our focus in our investment areas around consumer electronics, advanced semiconductor and laser.
But we’ve been able to shift resources and funding from some of our traditional markets we are really concentrating on defending our position in those areas, making sure we’ve got temporary products allow us to maintain and grow our market share.
But we’ve existed or reduced significantly our investment in some areas like LED, parts and memory repair which has allowed us to have a little more streamline structure, as well as concentrating our investments that we think provide a greatest growth opportunity.
We continue to focus on improving gross margins, particularly we continue to migrate our manufacturing towards, Asia, just three years ago that we opened our manufacturing plant in Singapore and today over 70% of our volume is produced out of that plant.
In conjunction with that, we’ve been able to convert and continue to focus on converting a lot of our supply chain to Asian sources be able to improve material cost not only through sourcing but also through the design.
And as we talked earlier, we believe we’ll have opportunities to leveraging proprietary technology in particularly lasers to be able to not only improve the performance of our products that enable us to achieve cost reductions as well.
On the operating expense side, if you clearly focused on increasing the flexibility of our cost structures, streamlining our operations and our management structures and as a result of that, we do headcount and total operating expenses between 10% and 15%. In addition, we have consolidated facilities and this year, we’ll reduce our footprints in facilities by about 25%.
Combined with a leaner balance sheet, we think this will allow us to increased returns and profitability for our company. So as we look at that, certainly on the revenue side, with fewer headwinds from the saturation and memory repair and overcapacity, we’ve seen in our market will allow the underlying growth in our consumer electronics business and the new applications we’re investing in to kind of shine through.
With that growth, we’d expect to see greater than 40% operating leverage in our business. And we’ll manage our fixed cost structure as we see large opportunities, high volume opportunities that might have a different margin mix that still contribute significantly to the bottom line and achieve that bottom-line leverage.
We expect to lower our break-even point to $40 million to $45 million range and that will not only allow us to be profitable even in trough market conditions but also improve operating income at our sales level. As a result of the valuation allowance, we’ll see a reduced tax rate as we go forward and that will translate into increased earnings per share.
A part of that as we go into our fiscal year 2014, which begins next quarter, we’re going to change how we record our non-GAAP tax rates to be more cash basis tax rate. Again this is more consistent with the actual tax expenses that we have, we have in a company and we’ll also mirror our GAAP tax rate more closely, given the valuation allowance that’s in place.
And finally as we’ve been able to shed some of the assets that we’re not utilizing as effectively as well as the dividend that we paid, we had a leaner balance sheet, which should improve overall returns both on a return on equity perspective and a return on invested capital perspective.
Now, although our revenues and earnings has seen some cyclicality over time, we’ve been able to generate cash consistently over many years. And in fact, we’ve been able to generate positive operating cash flow in all markets for over the last decade and 19 out of the last 20 years. In fact, the one year where we weren’t cash positive on operating basis, we were cash negative by $73,000. So we’ve been able to essentially break-even cash positive for 20 consecutive years.
As a result of that, we have a very strong balance sheet with the current cash just over $170 million and no debt. And as we generated that cash over time, we think we’ve been able to utilize very effectively both to be able to operate well in cyclical markets, make strategic investments. And we turned a portion of those -- that capital to shareholders.
In fact, if you look over the asset 10 years, we’ve been able to retire significant amount of comfortable debt in fiscal year ‘05. We have made strategic investments in about $50 million. And we’ve returned about $140 million of cash. The shareholders do opportunistic share repurchases and more recently our ongoing dividend which we announced a little over year ago and the special dividends that we paid at the end of December.
From a capital structure perspective, we’ll continue to leverage the profitability that we have in our business as well as the strong cash -- strong and consistent cash flow generation, to maintain the strong balance sheet. This gives us the confidence to continue to invest in cyclical market, make strategic investments through acquisitions, both to add capability or to increase scale overtime and allow us to enter into some of these adjacent applications. And then we will continue to take a portion of those returns of that cash flow to shareholders for our ongoing dividend.
So in summary, as we’ve gone through the transformation of the company and the headwind from a saturation, memory repair and overcapacity side, we’ll be able to see the underlying growth at consumer electronics really shine through to over our topline growth of the company, targeting about 15% per year growth as we introduce new applications that we continue to grow in consumer electronics.
We continue to focus on improving our flexibility, our focus and our ability to manage to our cost structure so that we can achieve a target of operating leverage of greater than 40% and be able to translate that growth into good earnings growth. Our leaner balance sheet should improve returns both on return on equity and invested capital perspective.
And that cash that will continue to strengthen our balance sheet from a cash perspective and prior to invest and growing the business and it’s hard to invest in growing the business. And it’s hard to return that capital on a regular basis to our shareholders.
So at this time, I’ll turn over to Nick for a short summary.
Before we take your questions, I hope we communicated today that our company that has been transformed. We’re not thinking any more of memory repair. Please don’t ever think of us as memory repair.
We’re a consumer electronics laser microfabrication. We have the best technology in the industry to serve the consumer electronics. We’re executing well. We have strong balance sheet and we have a company with great customers. This is part of our closed sense that really allows us to plant and think of ourselves as a growth company in this consumer electronics business.
So thank you very much and the floor is open for questions.
Nick, there was more talk in this presentation event to your laser capabilities. Can you say what percentage of IMG’s business today is serviced internally by your lasers and where do you see that going?
Yeah. I’ll just speak the laser. The internal laser business is -- can be together with the external and mostly be external business. Today, it’s just sharp $10 million right now. But moving forward, we expect that the internal laser business is really going to grow. And be a significant part of our laser expense today, which is anyway to the tune of about -- any way up $20 million to $30 million, so large part of that is going to be served internally. And then on top of that, they’re going to have a continuation of the extent of our laser business with lesser growth.
What is that due to gross margin in that business?
The simple answer is it helps the gross margin both in terms of absolute gross margin and then over a period of time in terms of service costs. But given more importance than that, it provides a sustainable, differentiation because of unique technology.
And then just continuing on a go-forward basis, can you talk a little bit about the kind of investments that you have to make in this area?
Yeah. Well, right now, we’re really focused on both PSS and fiber lasers but primarily into the fiber that has a characteristic of power in the neighborhood of below 300 watt for microfabrications but have the ability of tremendous, very high faster petition.
Good energy per pulse, very good affluence because we’re able to put all of that parent teams to the smallest possible size and what we have so far really tease the technology that we need moving forward. That’s in order to deliver all of those things and use them internally, we’ll need to be investing to the churn of about, keeping organization that has an engineering force in the neighborhood of about 30 people and the expenses associated with that.
One thing, I’d add [Jim] is that investment is already embedded within our cost structure by virtue of the acquisition that we made. So we’re not anticipating higher investments as a percentage of sales if you will for the whole company to turn this investment. It’s already included in our investment run rate.
Any other questions?
As EUVs delay, what opportunities arise for you guys in that delay if any and then also somebody had mentioned work on Next-gen NAND. What level NAND to that RRAM or is that prior little more current in the development of NAND.
Okay. The first question was about EUV. Yeah, this conceptually EUV is the technology that basically allows either further shrinkage in term of X, Y, if that’s get delay, the 3D packaging gets accelerated, I mean, that as a trend, that will be a positive trend in terms of our strategy to participate in laser microfabrication for 3D packaging. What was the other?
Yeah. Well, the, well, NAND, exactly right, NAND is, in 3D NAND, the wafers of NAND eventually need to be thin, and as they get thin, they need to be dice and that is one of the applications that Jon talked which is the thin wafer dicing, we are working right now with one of the major NAND manufacturers. Okay.
Thanks. So the refocusing has in aggregate reasonable addressable market size but in components there is quite modest and you are addressing all of them. So I’m curious, how you are going to manage the platform for each of those markets. In other words, it strikes me, that you are going to have very hard time controlling the working capital components of this strategy that will require you to have multiple kinds of machines to address each of these specific either routing or drilling or etching or scribing or dicing opportunities and so whether it’s primarily around inventory and then the supply chain?
So can you explain how much -- how complimentary are the platforms in each of these markets or you are going to have just a blizzard of independent products that you’re going to have to servicing support?
Good question. Yeah. I’ll talk on some notary interest around decline for microfabrication process like you mentioned drilling, routing, scribing, cutting and sort forth, all of those can be serviced by one platform.
The major conciliation with platform is around the handling relative to the size of the object that we are operating, if it is very big, you need to have ability to handle dense six glass piece.
But the fundamental technology through the -- we’ve discussed earlier that have been positioning and accuracy, IT, and core competence and through that we can address all of the micromachining processes but the handling is what really changes.
So it is extremely, it just not that is highly convergence around very few platforms, in around very few customers. And if you recall into Mike’s presentation, his platforms all of them have the same features beginning size. Then by the way this 53, 59 and so forth, this is a platform that we are building starting with the 53 for the last 15 years.
Those platforms share a number of modules within that. There is few platforms that can address a number of applications that’s even among across platforms there is a lot of sharing of the -- in the light modules, the controls and other types of things.
So it’s a very significant strategy.
I had one other question on the SG&A. Given you are going to focus on 15 customers, is there -- there should be pretty extreme opportunity to strength yield in administrative and the selling organizations, maybe not the services but…?
We have extremely -- we having extremely efficient service organization. It’s related to our account, ex equities that we have. So, I will not say that there’s opportunities there. In term of service, depending upon the spreads of a installed base then you need to be available in the various locations because that’s how you provide very high up times. So over there, I will also say that we have an extremely efficient sales organization. I don’t see a lot of synergies there. But the fact that we are really focused on few customers, on few platforms, I think provides synergies around speed of execution, manufacturing inventory those kinds of things. I think we would be enjoying those.
Nick, can you talk a little about the competitive landscape in the glass cutting market?
Yeah. There is a lot of people who participate in glass today and we don’t and the reason we don’t use because the current glass competition that we have is in what you called the commodity glass cutting non-strengthened glass. We don’t anticipate that.
Our discussion about glass is around this One-Touch-Glass that basically is going to be requiring through process strengthened glass. We do believe that at this point in time, there is no competitive solution to the one that we are having.
Over time, I would have to assume that because this is going to be the fastest growing, the most promising part of the glass and the stuff that we are going to see competition. But for awhile, were going to be -- we only provided all that kind of assumptions.
So, if we look at the display search forecast that you have in classification, what does that, what is that in size in terms of number of tools for the coming year in terms of, what the market would be requiring?
Well, this coming year as we’ve said -- we said that we are expecting to get August and ship those August and enjoyed some revenues. The revenues we are going to enjoy are going to be running revenues. They are going to be startup revenues. I think they are somewhere in the $10 million to $20 million neighborhood and that market grows more later on, this coming year.
Okay. And one other question. Just with respect to the growth that you are targeting for the coming year. You had three quarters of relatively weak bookings. And what is that -- in order to get back to a double digit growth rate, can you -- do you need to see booking recover this March quarter or is the business so lumpy that you could presumably still see an acceleration in bookings and still be able to achieve that kind of a double-digit growth
That’s our way to think about. If you think quarterly, you get confused. You got to think yearly. And yearly as we showed over the last eight years, that business is growing year-over-year. That’s what we expect to happen also. So it’s not that any particular quarter is a must quarter. I think what is a must is to win the business over new upcoming consumer device to win web designing and we feel optimistic about that.
I’m looking at slide 50, which is your investing in semiconductor and LED. And we’ve heard a lot about huge CapEx budgets out of semi-large or foundry and so forth. It looks like the trajectory of the slope of the arrow coming of the semi-cap equipment is probably leading to a pretty good 2014. Is that a good assumption to make that you are going to participate with this large CapEx number we are seeing in the second half?
Yeah. I don’t have a slide in front of me. If I recall what we were saying, this is a big industry and the $40 billion in terms of semi-CapEx and the $15 million in terms of the packaging part. But the micro laser, microfabrication is one that grows from $10 million to $100 million if I recall correctly. And that is growing gradually over the next few years, with every year being better than the other but to pick a year, when we are ending up sales we would be around 2015 and that’s when the market, the so called semi 3D packaging market is going to be emerging.
If you are talking about this slide, which is slide -- yeah, okay. Okay. Fair enough. This is conceptual and the concept is the following. One top of the growth for consumer electronics, you are going to start seeing incrementally more growth coming from the semiconductor. But again, this is a market that is emerging and the real business in that is going to be from fiscal year ’15 and beyond.
The best estimation I can give you about next year is that, next year is going to be a growth year vis-à-vis this year and we said it is going to be double digit. The majority of that is going to be based on consumer electronics. The rest is going to be on semiconductor. Any other question?
We are active in M&A because we think that that is towards the balance sheet that we are having, that’s another avenue available to us to grow the company given faster then we can grow with organically. I cannot give you a sense of how much small, but it’s going to be in rates that we have seen in the last five years, where we have done M&A for strategic -- for technology basically. And we did try to make an M&A to adjust all the companies. It didn’t work out for other reasons. Tony?
Pardon me. In a prior presentation you gave an about a month ago, the qualities of the 9900, which is the MLCC packaging specifically micro pulse, where ex-tool. And in this presentation here I see mostly, it was around scribing and dicing of thin wafer. Can you proximate the opportunity? I understand there is a lot of technology, a lot of movement but is this MLCC creation a very big opportunity for the 9900, I mean with there it could be out of steam with that with the next level?
Okay. Let me, which presentation you are referring to.
Okay. Yeah. I will not connect. Okay. So just -- the simple answer would be I will not connect the 9900 with MLCC. MLCC is the component. What we do in MLCC is testing. That is a different platform. It’s a 3500. The 9900, it is focused on 3D semiconductor packaging. And the applications there film, scribing as we discussed today, thin wafer, I think scribing is for all cable electrical as an example.
Singulating into process, silicon based into process -- that would be to singulate into process where you have positions and with some additional processing 3D packages. And the third application in semiconductor is thin wafer, dicing for wafers that you have seen that would be non-wafers in [desktop]. This is what we unfold, this is the 9900, no relationship with the MLCC. Okay. No problem.
Hey, Nick. Two quick questions for you. With respect to the cash, $170 million today, do you view and maybe Paul wants to thinks about it as well. Given the reduced break-even point in the business you have $40 million a quarter, depending on your outlook for the next several -- and giving your outlook for the next several years.
Is that not too much cash to be sitting on still at this point, and how do you think at sort of a minimum cash level you are comfortable with? And if you are not seeing sort of a robust pipeline out there to use that cash strategically, what do you with it and how quickly do you put it to work?
Well, as you have seen in the past, we return our cash to the investors. But the reality is that we are in a growth mode that we are playing with extremely large customers. They are looking at the health of the company. Most recently, we have become extremely fluctuating from anomaly to deploy points of view. And in addition to our organic growth, when a need for the opportunity rises for growth proposition, that cash is very helpful because the alternative is to really to go to the capital markets.
But the capital markets are not as favorable to a company like us as opposed to a different company regardless of the amazing cash generation we are having. So if we really cannot do -- we cannot service, put that cost to the service of the growth of the company, we will do whatever we have done so far. But fundamentally we are considering that as a foundation for
our growth strategy.
Okay. And one last one, real quick, I looked at the math and if I -- and I may have done it wrong, but when I add up sort of addressable markets in terms of how you expecting to grow over the next three or so year. I come up with the number of $250 million to $300 million in addressable market and it looks like you expect to take about a $100 million worth of that in terms of share? Is that a reasonable way to think about or you sort of looking for third of the market?
No. We are thinking in terms of, that’s a reasonable way, but the numbers that you are talking maybe incremental. I think our addressable market now is anywhere, it’s somewhere between $650 million to plus maybe $800 million, I mean, we discussed about $500 million for consumer electronics, $150 million for semiconductor and other $100 million for lasers and…
I was talking specifically the sort of incremental you gave out today…
… incremental, yeah, but even incremental overall, I think that we want to have latest position and in our point of view from a shift, latest position is something that is in the $150 and above.
In the one-third and above -- 35% and above. Okay. There are no more questions. I’d like to thank you for your patience. I hope we were productive to all of you today and I’d like to turn the podium to Brian.
Thank you, Nick. I appreciate you coming today and with that our program has come to an end.
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