BE Semiconductor Industries N.V. · EURONEXT:BESI
BE Semiconductor Industries — Investor Presentation (June 2019)
80 slides from BE Semiconductor Industries's investor presentation, Jun 6, 2019
Slide 1: Analyst Presentation
ANALYST PRESENTATION June 6, 2019
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains statements about management's future expectations, plans and prospects of our business that constitute forward-looking statements, which are found in various places throughout the press release, including, but not limited to, statements relating to ex
Slide 3: Agenda
Agenda I. Strategic Overview Richard Blickman II. End Markets & Drivers Ruurd Boomsma III. Product Development Strategy Ruurd Boomsma IV. Strategic Initiatives Richard Blickman V. Capital Allocation & Acquisition Strategy Richard Blickman VI. Outlook & Summary Richard Blickman June 2019 3
Slide 4: I. Strategic Overview
I. STRATEGIC OVERVIEW June 2019 4
Slide 5: CEO Summary
CEO Summary • 2019 is transition period before next investment round in 2020/2021 • Strategic focus: • Increasing development spending for next-generation systems • Exploring new opportunities to exploit technology leadership • Cost, cost, cost • Disciplined capital allocation to maximize ROI and sh
Slide 6: Revenue and Gross Margin Cycles Since 2006
Revenue and Gross Margin Cycles Since 2006 € millions 700 60.0% 56.8% Revenue Gross Margin 600 51.1% -11.4% 50.0% 525 500 39.5% 40.0% 424 400 34.1% -7.8% -6.9% 593 30.0% 4 year averages 300 302 -12.9% 379 20.0% 200 351 164 10.0% 100 191 0 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2
Slide 7: Capex Trends of Major Semiconductor Producers
Capex Trends of Major Semiconductor Producers Source: VLSI May 2019 • VLSI has been revising downwards 2019 capex forecast. Now -16% • Particular weakness in mobile and DRAM/flash memory • Logic and Cloud applications one of few bright spots Source: VLSI May 2019 June 2019 7
Slide 8: Assembly Equipment Market Trends
Assembly Equipment Market Trends Assembly Equipment Market Market Size YoY Growth Rate 6.0 30% 22.3% 4.8 5.0 4.4 4.5 20% 4.1 US$ billions 3.5 25.8% 3.7 18.3% 4.0 3.7 10% 3.1 3.0 12.7% 8.6% 3.0 0% 2.1% 2.0 -10% 1.0 -16.3% -20% -17.1% 0.0 -30% 2013 2014 2015 2016 2017 2018 2019E 2020E 2021E Source: VL
Slide 9: Market Update
Market Update Current Environment Looking Forward • Downturn of four quarters continues post extended • Timing of rebound uncertain; “U” or “Canoe” super cycle recovery? • Q1-19 results indicated some stabilization in • VLSI anticipates recovery in 2020 and 2021 assembly equipment market • 5G could
Slide 10: Impact of US/China Trade Dispute
Impact of US/China Trade Dispute • Tariff battle is reshaping global semi supply chains • Manageable China exposure: • 2018 China revenue of 24% • Both foreign IDMs and Chinese subcontractors • Limited exposure Huawei • Revenue impact neutral so far • Some order softness from US supply chain offset
Slide 11: Strategic Execution Has Helped Maintain Margins in Current Downturn
Strategic Execution Has Helped Maintain Margins At Attractive Levels in Current Downturn Revenue Gross Margin 180.0 170 100.0% 159 161 160.0 153 155 90.0% 140.0 80.0% 120.0 117 109 110 € millions Gross Margin % 100.0 93 93 70.0% 94 81 86 80.0 79 58.7% 58.0% 55.7% 57.3% 56.3% 56.5% 56.5% 56.4% 55.9%
Slide 12: Increased Gross and Operating Margin Variance vs. Peers
And Increased Gross and Operating Margin Variance vs. Peers Gross Margin Operating Margin Variance Variance Q1-16 Q1-17 Q1-18 Q1-19 Q1-16/ Q1-16 Q1-17 Q1-18 Q1-19 Q1-16/ Q1-19 Q1-19 Besi 49.2% 55.7% 56.5% 55.9% 6.7% Besi 12.2% 28.0% 31.4% 18.1% 5.9% ASMPT ASMPT 39.9% 46.6% 44.4% 39.2% -0.7% 12.3% 24
Slide 13: Opex Levels Reflect Structural Cost Reduction Initiatives and Flexible Production
Opex Levels Reflect Structural Cost Reduction Initiatives and Flexible Production Operating Expenses (€ millions) Q1-16 Q1-17 Q1-18 Q1-19 High Low Average Base Line Opex 23.5 25.6 31.7 25.3 31.7 23.5 26.5 Other Opex* 5.7 4.9 7.4 5.4 7.4 4.9 5.8 Total 29.2 30.5 39.1 30.7 39.1 29.2 32.4 • Baseline ope
Slide 14: Besi Market Share Trends
Besi Market Share Trends 2014 2015 2016 2017 2018 Total Assembly Market ($MM) $3,725 $3,119 $3,515 $4,421 $4,516 Besi Market Share 13.5% 12.4% 11.9% 15.1% 13.3% Percentage of Total 2017 2018 Addressable Market ($MM) $1,622 $1,286 $1,540 $1,983 $1,848 Revenue Besi Market Share 30.4% 29.6% 27.0% 33.5%
Slide 15: Current R&D Spending Focus
Current R&D Spending Focus 2017 2018 2019E • Gross R&D spending increasing over past two years in anticipation of next upcycle Die Attach 24,300 26,700 28,000 • Primarily focused on new development (~70%) Packaging 9,300 9,800 9,800 • ~20% sustaining Plating 1,000 1,500 2,200 • ~10% common platforms
Slide 16: Current Business Model Objectives
Current Business Model Objectives Objectives Revenue € 800MM Addressable 40%+ Market Share Gross Margin 55-60% Net Margin 30-35% Headcount 80% Asia/20% Euro Split June 2019 16
Slide 17: II. End Markets & Drivers
II. END MARKETS & DRIVERS June 2019 17
Slide 18: Digital Society
Digital Society June 2019 18
Slide 19: Our Markets
Our Markets 40% 35% 35% 30% 25% 21% 20% 17% 15% 10% % 0% 2 © > > a SS ef ¥ oo eo SS & SS > s & r SS * e SS > ‘Source: Company Estimates 2018 % of Revenue 3 Besi mam * Mobile Internet, Computing and Automotive are largest end markets + Estimated 73% of revenue in 2018 \ + Percentages vary p.a. based
Slide 20: Mobile End Market: Record Data Traffic Again in 2018
Mobile End Market: Record Data Traffic Again in 2018 Source: Ericsson Mobility Report Update Feb 2019 June 2019 20
Slide 21: Mobile: 5G Is Coming
Mobile: 5G Is Coming Will Drive Increased Mobile Data Traffic and New Applications Source: Ericsson Mobility Report Nov 2018 June 2019 21
Slide 22: Mobile: Implementation First in NA, Europe & Northern Asia
Mobile: Implementation First in NA, Europe & Northern Asia Source: Ericsson Mobility Report Nov 2018 June 2019 22
Slide 23: Mobile: 5G Implementation Happening Much Faster Than 4G
Mobile: 5G Implementation Happening Much Faster Than 4G Source: Qualcomm June 2019 23
Slide 24: Mobile: 5G Applications Much Broader Than Just Phones
Mobile: 5G Applications Much Broader Than Just Phones Source: Digital Trends Source: Qualcomm June 2019 24
Slide 25: Mobile: Use of High Frequency Spectrum Enables Faster Data Transmission
Mobile: Use of High Frequency Spectrum Enables Faster Data Transmission 5G - Technically: To get higher data transfer, higher frequencies are needed (24 GHz and above) This will need new transmission technology Will also need more advanced networks June 2019 25
Slide 26: Mobile: Requiring New Base Stations and Antennas
Mobile: Requiring New Base Stations and Antennas at Both the Transmission and Receiving Ends Mm waves have shorter range. Active beamforming in GHz Base station with Therefore need more base stations. several antenna areas to enable beamforming Mm Waves Source: Nokia Source: Google Splash Chart LA J
Slide 27: Mobile: 5G Implementation Will Also Require Changes in Handset Assembly
Mobile: 5G Implementation Will Also Require Changes in Handset Assembly Need new antenna structures and modules Multiple antennas New modems Source: JCET NCAP symposium April 2019 June 2019 27
Slide 28: Mobile: Many Besi Customers Working on Aspects of 5G RF
Mobile: Many Besi Customers Working on Aspects of 5G RF First example of Qualcomm 5G Antenna: • 5G will also require massive power reduction in processing and future assembly design changes Source: Yole June 2019 28
Slide 29: Mobile: Additional Handset Features Being Introduced
Mobile: Additional Handset Features Also Being Introduced In Next Investment Round June 2019 29
Slide 30: Automotive End Market
Automotive End Market June 2019 30
Slide 31: Automotive: Long-Term Outlook Favorable
Automotive: Long-Term Outlook Favorable As Electronic Content and Features Continue to Increase Source: Yole June 2019 31
Slide 32: Automotive: Requiring a Variety of Package Formats
Automotive: Requiring a Variety of Package Formats For Customers Source: Amkor investor presentation April 2019 June 2019 32
Slide 33: Automotive: Evolving Technologies Will Require New Assembly Solutions
Automotive: Evolving New Technologies Will Require New Assembly Solutions Source: Yole June 2019 33
Slide 34: Automotive: Move to SiC and GaN Substrate Materials
Automotive: Move to SiC and GaN Substrate Materials Also Requires New Assembly Solutions New materials coming Higher efficiencies Higher switching frequencies Lower losses in on state Higher temperature Smaller form factor Requires new mounting and packaging technologies Source: Infineon Jun
Slide 35: Computing End Market: Explosion in Demand for Computing Power
Computing End Market: Explosion in Demand for Computing Power Continues Source: Intel May 2019 June 2019 35
Slide 36: Computing: Applications Have Greatly Expanded for High End Processors
Computing: Applications Have Greatly Expanded for High End Processors June 2019 36
Slide 37: Computing: Further Device Shrink is Critical
Computing: Further Device Shrink is Critical to Meet Increased Computing Power Requirements Source: ASML ISS Europe April 2019 June 2019 37
Slide 38: Computing: New Device Architectures Required
Computing: New Device Architectures Required to Facilitate Node Size Reduction Source: IMEC 3D Conf Dresden 2019 June 2019 38
Slide 39: Computing: As Well as New 3D Assembly Solutions
Computing: As Well as New 3D Assembly Solutions Requisites for 3D assembly structures: Standard interfaces (Intel just launched) More bandwidth Smaller pitches Higher levels of placement accuracy Source: IMEC 3D Conf Dresden 2019 June 2019 39
Slide 40: Computing: Back End Assembly Becoming More Critical
Computing: As a Result, Back End Assembly Becoming Even More Critical Process Step 3D STACKING AND MULTI CHIP ARCHITECTURE AS IMPORTANT OR EVEN MORE IMPORTANT THAN FRONT END PROCESSES !!!!!! Source: ASML Investor Day Nov 2018 June 2019 40
Slide 41: Computing: Key Players Working in 3D Memory and Logic
Computing: Key Players Working in 3D Memory and Logic Solutions June 2019 41
Slide 42: III. Product Development Strategy
III. PRODUCT DEVELOPMENT STRATEGY June 2019 42
Slide 43: Besi Product Portfolio
Besi Product Portfolio June 2019 43
Slide 44: Key Development Projects Currently
Key Development Projects Currently • Next generation TCB systems • Nano accurate direct Die Bonding systems • Next generation High Speed, High Accuracy Flip Chip/Fan Out system • Large Panel Die Bonding • Enhancements to existing portfolio of die bonding, packaging and plating systems June 2019 44
Slide 45: TCB Next Gen System for 10 uM Pitches
TCB Next Gen System for 10 uM Pitches Example Wafer Level TCB Die Attach TCB TECHNOLOGY (THERMO COMPRESSION BONDING) Application area - Memory - Advanced 3D structures 2014-2018 GEN 1 TCB NOW WORKING ON NEXT GEN TCB - Even higher accuracy - Advanced planarity features - More feeding options - Larger
Slide 46: Developing Nano Size, Precise Direct Bonding for Pitches <5 microns
Developing Nano Size, Precise Direct Bonding for Pitches <5 microns Direct Cu-Cu bonding Also called Hybrid Bonding 200 nanometer accuracy !!! For next generation devices with contact pitch below 5 uM First field evaluation ongoing - Accuracy 200 nanometer - Low particle design - Complete new bondhe
Slide 47: Next Generation Flip Chip / Fan Out
Next Generation Flip Chip / Fan Out Besi 8800 series is industry standard for high accuracy, high speed FC and Fan Out bonding Introducing next gen high speed system for Flip Chip and Fan Out • Parallel pick up 4 dies • Flip or non flip • Advanced inspection • Parallel transport to location • Indivi
Slide 48: Large Panel System
Large Panel System Large panel system Started R&D in 2016 Goal: high accuracy panel system - 720mm x 650mm working area - Panel size => lower overall costs - Global accuracy 3 uM - Local accuracy 2uM - High theta accuracy - Good speed Applications • Fan Out • Micro LED • High end embedded substrates
Slide 49: Evo Multi Module Systems
Evo Multi Module Systems Most universal Die Attach system in industry Over 6,000 systems installed Many applications 7uM accuracy - 3D face recognition - Camera- & 6 axis alignment - High end SIP - High end large interposers - High end LED - Power - Sensors Introducing now 3uM accuracy for specific
Slide 50: 2100 Fast Epoxy Systems
2100 Fast Epoxy Systems Most cost effective epoxy Die Attach system in industry Over 3,000 systems installed Many applications - General ICs - Automotive - Sensors - Stacked memory Introducing now - Dual dispensing - High bond line thickness control - Filet height control - High precision bondhead -
Slide 51: Soft Solder Automotive Power Systems
Soft Solder Automotive Power Systems Our soft solder system is standard in industry Over 1,000 systems installed New developments - Plasma cleaning - Dual writing/dispensing - High force bondheads - Improved illumination - Bowl feeder - Silver sintering - Diffusion bonding Example high force bondhea
Slide 52: AMS-LM Molding Systems
AMS-LM Molding Systems Most cost effective molding system in industry FOR LEADFRAME AND SUBSTRATE AMS LM SERIES Over 300 systems installed Key advantages - Standard in thin die molding - Exposed die molding - Superior mold chase design Many applications - Mobile/wearables - Advanced SIP applications
Slide 53: AMS-LM Exposed Die
AMS-LM Exposed Die EXPOSED DIES Besi has 90% of exposed die market Dynamic clamping control ensures equal clamp force on dies and/or solder balls No solder ball/copper pillar deformation and no flash on dies 5G DEVICE June 2019 53
Slide 54: Double Sided Molding
Double Sided Molding June 2019 54
Slide 55: Wafer Panel Molding Line
Wafer Panel Molding Line Next generation wafer molding system FML fan out Over 10 systems installed Key advantages - No Die Swim - Narrow gap filling of 50 uM between dies over full 300 mm - Wafer placement into mold 100 micrometer - Mold planarity +/- 5 uM over 300 mm Many applications - Mobile/wea
Slide 56: Wafer Level Molding Exposed Die
Wafer Level Molding Exposed Die Wafer Molding Exposed Die Example - Perfect die position (no swim) - Tight filling of lanes between dies - No mold flash on the dies First fill completely then pressure up This prevents movements of dies June 2019 56
Slide 57: Besi Trim And Form
Besi Trim And Form High precision Trim and Form Fully modular concept Over 1,000 systems installed Key advantages - Fast configurable - Full tracking and tracing - Handling most advanced leadframes Many applications - Power/IGBT - General leadframe based products - Automotive/industrial - Charging d
Slide 58: Besi Plating Systems
Besi Plating Systems Besi plating lines Workhorse of industry Over 800 lines installed Key advantages - Very high plating uniformity leading to thinner layers, as better minimum-thickness control allows for more efficient material usage - Very low chemical wastage - Extremely robust Many application
Slide 59: New Besi Plating Process Technology
New Besi Plating Process Technology FLEX FOIL SYSTEM Besi Plating Lines 3 new areas Flexible foil (renewed interest) - System originally for RF Identification - Now used for connector strips in mobile - Foldable screens Chemical deflash line - Better pre-clean of strips CHEMICAL DEFLASH LINE Wettabl
Slide 60: Technology Summary
Technology Summary • Assembly process step becoming even more important gating item to realize development of key mobile, automotive and computing end markets in emerging digital society • 5G is potential gateway to whole new variety of device structures and applications • Computing needs continue t
Slide 61: IV. Strategic Initiatives
IV. STRATEGIC INITIATIVES June 2019 61
Slide 62: Summary Strategy
Summary Strategy Maintain Grow Best in Market Class Tech Presence Leadership and Share Increase Grow via Scalability. Timely Reduce Acquisitions Cost June 2019 62
Slide 63: Revenue Initiatives
Revenue Initiatives Increase market presence and share • Leverage technology leadership • Introduce next generation products to win business from competitors • Increase mainstream penetration of global supply chains with high quality mid-range products • Expand presence and share of wallet in China
Slide 64: Revenue Opportunities
Revenue Opportunities Roll out 3D imaging and other features to 4G and 5G mobile customers Expand share of Korean and Chinese Android mobile customers Favorable Drivers: Increase share of wallet in Memory/Logic space Digital Society Expand share of Japanese automotive supply chain Big Data • Capital
Slide 65: Besi Spares/Service Is An Attractive Opportunity
Besi Spares/Service Is An Attractive Opportunity Total % of Revenue • Spares/Service is positive contributor 90.0 18% • Revenue more than 2x vs. 2013 80.1 • 10-15% of total revenue p.a. 80.0 16% • Less cyclical revenue source 15% 15% 15% 70.2 • Favorable gross margins 70.0 14% 14% • Steady growth in
Slide 66: Summary Cost Initiatives
Summary Cost Initiatives Achieve a more scalable, flexible and lower cost business model • Expand production capacity to meet € 800 million run rate • Further develop European owned Asian suppliers • Outsource higher value systems and modules • Reduce cycle times Target steady through cycle gross ma
Slide 67: Supply Chain Initiatives
Supply Chain Initiatives Material costs are largest single cost = ~35% of revenue Supply Chain Actions • Increased outsourcing of modules and high level systems • Vendor consolidation and volume discounts • Increased common parts • Increased Asian sourcing/selected products Management reviews progre
Slide 68: Headcount
Ongoing Asian Personnel Transfer Aids Cost Reduction Efforts Total Headcount 2,500 18.0% • Asia now represents 72% of fixed 2,040 16.0% headcount, up from 60% in 2013 2,000 14.0% 316 1,759 1,695 • European and NA fixed headcount 1,632 1,669 1,539 67 12.0% continues to decline: 69 Temp % of Total 120
Slide 69: Common Platform Development Update
Common Platform Development Update Development Actions • Redesign products for common parts, platforms • Increase standardization • Lower unit cost, design and maintenance hours • Shorten cycle times June 2019 69
Slide 70: V. Capital Allocation and Acquisition Strategy
V. CAPITAL ALLOCATION AND ACQUISITION STRATEGY June 2019 70
Slide 71: Capital Allocation Trends
Capital Allocation Trends € millions 250 Dividends Share Repurchases 209.5 200 35.5 • Shareholder friendly capital allocation 143.8 policy 150 21.4 • € 622.4 million distributions since 2011: • € 143.8 million YTD 2019 100 88.8 174.0 • High dividend payout ratio 67.4 23.5 60.4 22.0 122.4 • Share rep
Slide 72: Highest Dividend Yield vs. Peers
Highest Dividend Yield vs. Peers* 9.0% 8.3% 8.0% 7.0% 6.0% 5.0% 4.2% 4.0% 3.8% 3.0% 3.0% 2.5% 2.1% 1.9% 2.0% 1.7% 1.2% 1.1% 1.0% 0.0% * Current quarterly dividend (annualized)/current stock price. As of May 31, 2019 Source: Morningstar June 2019 72
Slide 73: Share Repurchase Activity Has Increased
Share Repurchase Activity Has Increased 40 30.0 Share Repurchases Average Cost per Share 35.5 35 25.0 € 23.74 30 € 22.51 € 21.86 Avg Cost per Share 20.0 25 22.8 22.4 € millions 21.4 20 15.0 € 12.44 15 10.0 € 8.93 10 5.0 5 4.0 0 0.0 2015 2016 2017 2018 YTD* *Through May 31, 2019 • € 21.4 million purc
Slide 74: Assembly Market Slowly Consolidating: Peer Group Acquisition History
Assembly Market Slowly Consolidating: Peer Group Acquisition History 1998 2002 2006 2010 2014 2018 Besi $ 22MM $ 10MM € 73MM Probe Technology Orthodyne $ 65MM $ 98MM K&S Electronics Cerprobe $ 133MM $ 30MM € 25MM $ 190MM Siplace/ SEAS DEK € 52MM ASM Business $ 170MM + PT € 36MM + $ 30 MM earn out $
Slide 75: Peer Group Capital Allocation vs. Return on Equity
Peer Group Capital Allocation vs. Return on Equity 1,400 Capital Allocation Return on Average Equity 2013-2018 45.0 1,200 1,164 40.0 • Direct peers allocated € 364MM - € 1.2 billion to capital investments 1,000 since 2013 35.0 Besi 800 30.0 33.8 • Besi skewed towards dividends € millions (69%) • PT
Slide 76: Solid Liquidity Position to Fund Future Growth
Solid Liquidity Position to Fund Future Growth Cash and Deposits Net Cash 600 527.8 507.5 500 475.5 Strong liquidity position: • Total cash of € 507.5 million and net cash of 400 € 229.7 million as of Q1-19 • After paying € 209.5 million of dividends and share € millions repurchases in 2018 304.8 30
Slide 77: VI. Outlook & Summary
VI. OUTLOOK & SUMMARY June 2019 77
Slide 78: Guidance Q2-19
Guidance Q2-19 Revenue Gross Margin Operating Expenses € 81.4 +5% 55.9% 55%-57% € 30.7 -5% Q1-19 Q2-19 Q1-19 Q2-19 Q1-19 Q2-19 -15% June 2019 78
Slide 79: Summary
Summary Long term Assembly market Market presence secular trends Disciplined ever more critical has grown via drive continued strategic focus step in key IDM advanced has created an semiconductor customers and packaging industry leader value chain supply chains growth Successful Asian Tech leadershi
Slide 80: Financial Calendar
Financial Calendar 6-Jun-19 Analyst meeting, Amsterdam 25-Jun-19 Kempen Conference Small & Mid Cap, Paris 27-Jun-19 ABN AMRO Benelux Equities Conference, London 10-Jul-19 11th Annual CEO Summit, San Francisco 25-Jul-19 2019 Second Quarter Results 4-Sep-19 ING Benelux Conference, London 5-Sep-19 DB E
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