adminAehr Test Systems (NASDAQ:AEHR) Q4 2024 Earnings Conference Call July 16, 2024 5:00 PM ET
Company Participants
Jim Byers – IR, MKR Investor Relations Inc.
Gayn Erickson – President and CEO
Chris Siu – CFO
Conference Call Participants
Christian Schwab – Craig-Hallum Capital Group
Jed Dorsheimer – William Blair
Jon Gruber – Gruber & McBaine
Matt Winthrop – Equitable
Tom Diffely – D.A. Davidson
Shahar Cohen – Lucid Capital
Larry Chlebina – Chlebina Capital
Operator
Greetings. Welcome to the Aehr Test Systems’ Fiscal 2024 Fourth Quarter and Full-Year Financial Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]
Please note, this conference is being recorded. I will now turn the conference over to your host, Jim Byers at MKR Investor Relations. You may begin.
Jim Byers
Thank you, operator. Good afternoon and welcome to Aehr Test Systems’ Fiscal 2024 Fourth Quarter and Full Year Financial Results Conference Call. With me on today’s call are Aehr Test Systems President and Chief Executive Officer, Gayn Erickson; and Chief Financial Officer, Chris Siu.
Before I turn the call over to Gayn and Chris, I’d like to cover a few items. This afternoon right after market closed Aehr Test issued a press release announcing its fiscal 2024 fourth quarter and full year results. That release is available on the company’s website at aehr.com. There were two other announcements issued today and those are also posted to the company’s website.
This call is being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the company’s website. I’d like to remind everyone that on today’s call, management will be making forward-looking statements that are based on current information and estimates and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements.
These factors are discussed in the company’s most recent periodic and current reports filed with the SEC. These forward-looking statements, including guidance provided during today’s call, are only valid as of this date and Aehr Test Systems undertakes no obligation to update the forward-looking statements. And now with that said I’d like to turn the conference call over to Gayn Erickson, President and CEO. Gayn?
Gayn Erickson
Thanks Jim. Good afternoon everyone and welcome to our fiscal 2024 fourth quarter and full year earnings conference call. Thanks for joining us today. I’ll start with a quick summary of the highlights of the fiscal fourth quarter and full year we just completed in May and spend some time giving an update on the key markets areas addressing for semiconductor wafer level test and burn-in, including some new emerging opportunities.
I also want to go over the exciting news we announced today with the acquisition of Incal Technology, which has some incredible products addressing the ultra-high power semiconductor market, including a significant number of AI processor makers. Then Chris will go over the financials in more detail and provide our guidance for the new fiscal year. After that, we’ll open up the lines to take your questions.
Starting with our financial results, as we reported in our pre-announcement last week, our full year revenue and net income results exceeded our previously provided guidance and surpassed analyst consensus. Although we saw customer pushouts of silicon carbide devices due to slower electric vehicle demand in the second half of our fiscal year, we still achieved another record for annual revenue for Aehr of $66.2 million. On the bottom line, GAAP net income was $33.2 million or $1.12 per share, which includes a tax benefit resulting from the release of the company’s full income tax valuation allowance of approximately $20.8 million recognized in the fourth quarter. Chris will talk more about that.
This past year, wafer level test and burn-in the silicon carbide power semiconductors used in electric vehicles or EVs were a key driver of our business. And we anticipate that market will continue to be a key contributor to revenue in the current fiscal year. We’re also seeing traction with several emerging opportunities for our test and burn-in solutions in new target markets and expect bookings and revenue across a much broader range of [customers and markets] (ph) this fiscal year. These new target markets include quality, reliability, and production test and burn-in of artificial intelligence processors, wafer level burn-in of flash memory devices used in solid-state disk drives, burn-in of semiconductors used in hard disk drive magnetic read/write heads, wafer level burn-in of gallium nitride power semiconductors used in data centers and solar power conversion, and stabilization and burn-in of silicon photonics integrated circuits used for optical IO Communication between chipsets and processors.
I’ll cover at least a little on each of these key markets beginning with wafer level test and burn-in the silicon carbide devices. We continue to have a high level of confidence in this market which remains an enormous opportunity for Aehr. While most forecasters are saying that the inflection point for silicon carbide and electric vehicles is now the second half of 2025 into 2026, from our many meetings with semi-suppliers, tier-ones, and electric car companies themselves, it’s even more clear now that silicon carbide is the plan of record for electric vehicles and preferred over IGBT. Virtually every car manufacturer is designing new electric vehicles with silicon carbide modules, which absolutely need reliability test and burn-in to screen out failures that otherwise will show up in the life of the vehicle.
Burn-in of the die at the wafer level before the modules, before they’re put into modules is significantly more cost effective with much higher yield than doing this at the module level. We believe we’re in a strong position to win more than our fair share of this business, as we believe we have the industry-leading wafer-level burning solution. This past year, we engaged with a significant number of new silicon carbide device and module suppliers related to their anticipated capacity needs and we remain engaged with these and all major players in the market including many in China.
We continue to make great progress with our previously announced benchmarks and engagements and believe these potential customers are committed to wafer level burn-in to meet their requirements for known-good die for die sales and for their power modules. The silicon carbide market continues to be an enormous opportunity for us and we’re seeing more and more auto suppliers that are committed to silicon carbide in their EVs as well as roadmaps that are based on modules for their electric motor power inverters. We’re also seeing growing demand for silicon carbide devices beyond the EV market, such as solar, data center, and other industrial applications for power conversion.
We remain very enthusiastic and believe we’re well positioned to continue to grow our business in silicon carbide and expect to receive first orders from a significant number of additional silicon carbide customers by the end of this fiscal year. Today we announced that we received over $12 million or $12.7 million in orders from one of our silicon carbide customers for WaferPak for wafer contactors to be used for production needs for wafer level burn-in and screening of the silicon carbide devices for the EV market. We’re excited about our continued partnership with this customer and to receive these orders to help them meet their needs for new device designs.
As these orders illustrate when our customers win new designs from their customers or they change device designs, wafer patterns or sizes, these customers need to order new WaferPak contactors from Aehr to fulfill these design changes. This consumable type of revenue grew in fiscal 2024 for us, representing 57% of total revenue as systems orders growth slowed but new designs and variety of devices increased, causing incremental WaferPak sales on the install base.
As we look ahead, we believe that silicon carbide remains a very large market opportunity for Aehr, as more and more EV manufacturers adopt silicon carbide, and we believe we’re well positioned to continue to capture market share. We expect to add a significant number of silicon carbide customers both this fiscal year and the next fiscal year, as silicon carbide ramps in the second half of 2025 and into 2026.
Now let me talk about the AI processor market. Last month, we announced we’re working with an AI accelerator company to move their AI processor test and burn-in to wafer level and have secured a commitment from them to evaluate our FOX Solution for production level test and burn-in of their high power processors. This company recognizes the potential of the significant benefits of production test and burn-in of their accelerators while still in wafer form before they’re integrated into the end application product, which would prove to be more cost effective and significantly more scalable than doing the screening later in their manufacturing process.
We think this is an amazing opportunity to displace the current package and system level tests for AI processes for large language model development and we believe we can meet this enormous challenge with the current capabilities of our new high power FOX-XP system with up to 3,500 watts per wafer testing. We’re working on this benchmark as I speak here in the lab right now and expect to complete the evaluation in the next couple of months. Upon successful demonstration of wafer level test results and throughput, we expect they will utilize our new high-power FOX-XP systems for production of their next generation AI processors, starting this fiscal year.
The rapidly growing AI market is still in the early stages, and we see a significant opportunity in this market for our FOX wafer level production systems as I just discussed. However, in addition given the unique challenges of testing very high power devices related to AI processors, there’s a very real need for a significant amount of engineering qualification and process development, as well as a significant new opportunity for production reliability screening at the package part level.
AI semiconductors are amongst the highest power consumption devices in the entire semiconductor industry, with power levels of recent devices up to a thousand watts or more, well beyond typical processors. These power levels open a new market that requires new unique test solutions. I’m personally very excited and proud to announce today our acquisition plans for Incal Technology, a manufacturer of highly acclaimed reliability test and burn-in solutions of a wide range of semiconductor devices and markets. They have a particularly strong new product family of ultra-high-power test solutions for AI accelerators, graphics and network processors, and high-performance computing processors. Their ultra-high-power package for our test capabilities, combined with Aehr’s industry-leading lineup of wafer-level test and reliability solutions, uniquely position us to fully capitalize on the rapidly growing opportunity within the AI semiconductor market, as a turnkey provider, a reliability and test that spans from engineering to high-volume production.
Incal is in a unique position with intimate knowledge and working relationships with a significant number of AI-industry leaders, providing a front row seat to the technology needs of those customers. They’re shipping systems today for use by a broad range of companies with many of these companies projecting needs to move to high volume production level burn-in of these devices. Both Aehr and Incal believe there’s a tremendous opportunity to grow this business substantially.
Incal has world-class system hardware and software architectures and customers that have a high degree of customer loyalty for their products. Aehr brings worldwide sales and support infrastructure, as well as high value manufacturing capacity and capabilities that together we feel will quickly address customer demand of very high global growth rate of AI and other high-power semiconductors. We also bring R&D resources, technology and processes, and the financial resources to be able to enhance and accelerate new needs that customers may ask for. This unique combination strongly positions us to capitalize on the significant opportunity within the AI market.
Interestingly, we share several subcontract manufacturers and have similar supply chains as well as our strategy for in-house assembly and final test of our systems. I have known the founders and management team for a very long time, including their CEO, Alberto Salamone, who has been in the test and burn-in business for many years, and who will be joining Aehr, as an Executive Vice President to lead our package part burn-in business.
Incal is located less than 4 miles away from Aehr’s headquarters here in Fremont, California, with all employees located at that facility. This makes combining the two companies simpler and straightforward. We believe that between wafer level and package part, the reliability test and burn-in market for AI processors exceeds $100 million annually. And with this combined product portfolio, we have the opportunity to capture a meaningful share of this market within this fiscal year.
So moving on to the NAND flash memory market. We’ve been in discussions for several years with multiple flash memory companies related to our FOX wafer level test and burn-in systems. These companies have provided us feedback on the definition and capabilities required for a next-generation wafer level test and burn-in system for their high volume production roadmap. This included feedback on our systems, WaferPaks, and particularly on our automation using our new fully automated WaferPak Aligner.
We see the NAND flash market as a key market opportunity for our systems and WaferPaks with long-term potential to also move into DRAM wafer level test and burn-in. This last quarter, we secured an engagement from one of the major flash memory suppliers to evaluate the FOX-XP system with our proprietary WaferPak full wafer contactors for wafer level test and burn-in of their flash memory devices. This application is for 100% test and burn-in of devices to be used in high reliability applications such as enterprise storage. This is a benchmark that’s going to take us throughout the fiscal year to complete and includes the development of a new high-density WaferPak for production wafer level burn-in a 300 millimeter NAND wafers. We see this as a multi-year opportunity and expect to have preliminary results and feedback during this fiscal year.
Our goal is to come to an agreement for a customer-specific development of a test cell with the potential for revenue contribution in our fiscal 2026 that begins next June. We’re very excited to have accomplished this critical goal this past year and believe this is the front end of an exciting and potentially enormous opportunity for our solutions. Another interesting market opportunity is hard disk drive market. One of the new market opportunities for wafer level burn-in is semiconductors used in hard disk drives for data storage.
Some of you may recall that in 2019, prior to the COVID-19 epidemic, we announced an order and shipment of our FOX-CP, which is our single wafer testing reliability solution for logic memory and photonics devices. This was a key win with a major customer who purchased a system for wafer level test and burn-in devices in a very high volume application for enterprise and data center market. They had forecasted to ramp into production over several years, but the pandemic impacted their plans. After a multi-year product development and qualification process and impact due to COVID-19, this customer, who we’ve now disclosed in the hard disk drive space, has introduced their product and is now forecasting the production ramp to begin in our current fiscal year, most likely in the second half.
We believe this will drive orders for multiple CP production systems and WaferPaks and could even be a 10% customer for us this year. All right, turning to the Silicon Photonics burn-in market. Within the silicon photonics market, we ship the first order from a major silicon photonics customer for new high power configuration of the XP system late in our third fiscal quarter. This new configuration expands our market opportunity by enabling cost-effective volume production tested wafers of next generation photonic ICs that are targeted for use in the new optical IO or co-packaged optics market.
Nvidia, AMD, and Intel are examples of companies that have all discussed the potential for adding optical chip-to-chip communication for performance improvement and power savings for AI processors and high-performance computing chips. Optical IO, has the potential to be a game changer for semiconductors, as it breaks the bottleneck of data transmission bandwidth limitations of electrical IO. These next generation silicon photonics-based integrated circuits can require up to 2 times to 4 times as much power for full wafer test burn-in and stabilization.
Aehr’s new high-power system configuration can be used to test and burn up to nine of these new optical IO device wafers at a time, up to 3,500 watts of power per wafer. This is absolutely unique in the market as we’re not aware of any other solution that can test even one of these wafers in a single touchdown, much less nine of them at a time like we can. While the timing of these devices and volume ramps are not clear, we’re watching this market very closely to ensure that we have the products and solutions available to meet the needs of our customers for this potentially significant market application.
Now let me lastly talk about the GaN market opportunity. This past year, we announced our first order for a FOX wafer level test and burn-in system for gallium nitride or GaN devices. While silicon carbide will be the semiconductor material choice for EV traction inverters, GaN is expected to gain significant penetration in the onboard charging market, as well as other automotive, solar, and data center power conversion applications. We’re working with several of the GaN market leaders and received a significant number of WaferPak orders throughout the year for gallium nitride reliability test and qualification of our systems.
We have now received our first forecast for wafer level production burn-in systems to be delivered during this fiscal year. We continue to be encouraged by this market and believe it will be a significant in market size for semiconductors and has the potential to be a solid market opportunity for Aehr Solutions. Looking ahead we expect fiscal 2025 to be an exciting year for Aehr. Silicon Carbide is poised to be a key contributor to revenue again this year, but we also expect bookings and revenue from across a much broader range of customers and markets, as I discussed. We have a lot of opportunities in front of us and we look forward to reporting on our progress throughout the fiscal year.
With that let me turn the call over to Chris before we open up the line for questions.
Chris Siu
Thank you, Gayn. Good afternoon, everyone. On today’s call, I will summarize our results for fiscal year 2024, as well as the fourth quarter and then I will provide our guidance for fiscal year 2025. Starting with the full year results, we reported record revenue of $66.2 million, up 2% year-over-year. Our full year GAAP gross margin was 49.1% compared to 50.4% in the prior year.
Our full year non-GAAP net income increased to a record $35.8 million, or $1.21 per diluted share, which includes the impact of a tax benefit resulting from the release of the company’s full income tax valuation allowance of approximately $20.8 million, compared to non-GAAP net income of $17.3 million or $0.59 per diluted share in fiscal 2023. In fiscal 2024, we generated $1.8 million in operating cash flows. Our annual bookings in fiscal 2024 were $49 million compared to $78.3 million in the prior fiscal year. The decrease was mainly due to customer push-outs of forecasted orders related to silicon carbide devices due to slower electric vehicle demand in the second half of our fiscal year.
Our backlog as of the end was $7.3 million with $13.5 million in bookings received in the first six weeks of the first quarter of fiscal 2025. We now have an effective backlog of $20.8 million. Looking at our financial results for the fourth quarter, total revenue was $16.6 million, down 25% from $22.3 million in Q4 last year. WaferPak revenues were $12.4 million and accounted for 75% of total revenue in the fourth quarter, which is significantly higher than the 38% of total revenue in the prior year Q4.
WaferPak revenues continue to represent a significant revenue stream for our business due to the strong demand for new WaferPak designs from our existing and new customers as they win new and customer designs and look to meet their market requirements. GAAP gross margin for the fourth quarter came in at 50.9% down from 51.5% in Q4 last year. The decrease in gross margin is primarily due to lower revenue, resulting in a higher overhead absorption rate and lower manufacturing efficiencies.
Operating expenses in the fourth quarter were $5.9 million, consistent with $5.8 million in Q4 last year, to slight year-over-year increase is primarily driven by increased headcount related expenses to support our R&D programs and G&A requirements, which were partially offset by lower professional fees. We continue to invest in R&D to enhance our existing market-leading products and to introduce new products to maintain our competitive advantages and expand our applications and addressable markets. During Fiscal 2024, we have invested significant resources to augment the features and performance of our automated WaferPak Aligner and developed a new high-power configuration of our FOX-XP system for volume production wafer-level burn-in and stabilization of next-generation silicon photonics integrated circuits.
At the end of the fourth quarter, we released a full income tax valuation allowance and recorded deferred tax assets and a tax benefit of $20.8 million. We will release this valuation allowance as we believe it is more likely than not that the company will realize the deferred tax assets. Non-GAAP net income for the fourth quarter, which includes the impact of the tax benefit mentioned earlier but excludes the impact of stock-based compensation and acquisition related costs, was $24.7 million or $0.84 per diluted share for the fourth quarter compared to non-GAAP net income of $6.9 million or $0.23 per diluted share in the fourth quarter of fiscal 2023.
Moving to the balance sheet. We finished the year with a strong cash position. Our cash and cash equivalents were $49.2 million at the end, up slightly from our cash and short-term investments of $47.9 million at the end of Q4 last year. With a solid balance sheet, we’ll fund the acquisition of Incal Technology using our cash on hand and common stock. We’ll continue to invest in scaling our business and entering new markets and supporting new opportunities. We generated $1.2 million in operating cash flows during the quarter. We have zero debt and continue to invest our excess cash in money market funds.
Interest income earned during this higher interest rate environment was $592,000 in the fourth quarter compared to $487,000 in the same quarter last year. As of the end of Q4, the remaining amount available under the previously announced $25 million ATM offering was $17.7 million. We did not sell any shares during fiscal 2024. It remains our plan to only sell share against this ATM offering at times and prices that are most advantageous to our shareholders and to the company.
Today we announced that we have changed the company’s fiscal year end from May 31 to a [445] (ph) fiscal calendar ending on the Friday closest to May 31st. The first fiscal year under the new financial calendar began on June 1st, 2024, and will end on May 30th, 2025. Our first quarter in fiscal 2025 will end on August 30th, 2024. This change is expected to improve the comparability of the company’s financial results between periods.
Now turning to our outlook for the current fiscal 2025. For the fiscal year ending on May 30th, 2025, we expect total revenue of at least $70 million, which includes the acquisition of Incal Technology. As we mentioned earlier, we released a full income tax variation allowance and recorded deferred tax assets in the fourth quarter of fiscal 2024.
Beginning in the first quarter of fiscal 2025, we expect to incur income tax expenses. For fiscal 2025, we expect a net profit before taxes of at least 10% of revenue. Lastly, looking at the investor relations calendar, Aehr Test will be meeting with investors virtually at the Needham Fifth Annual semiconductor and semi-cap conference on Wednesday, August 21st. And then the following week, we’ll be meeting with investors in person on Tuesday, August 27th, at the Jefferies Technology Summit taking place in Chicago. We hope to meet some of you at these conferences.
This concludes our prepared remarks. We are now ready to take your questions. Operator, please go ahead.
Question-and-Answer Session
Operator
Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] First question comes from Christian Schwab with Craig-Hallum. Please proceed.
Christian Schwab
Hey, congratulations guys on the acquisition. Gayn, if you look at the Incal acquisition, I assume that the company is a growth company. Can you give us an idea of approximately how much revenue of the $70 million is Incal?
Gayn Erickson
Probably the easiest question that I’ll try and answer as best I can. So one of the challenges is we need to close it first. And they did about $12 million over the last 12 months. And so you know, plus or minus a month or two even at that same run rate, plus or minus $1 million or $2 million or something like that.
Candidly, we’re taking a pretty cautious stance but if you use those kind of numbers, like $1 million per month from the time we close it. It’s probably a good number. But it gets into a lot of the strategy that’s going on. There’s been a number of customers that they’ve been engaged with that– we have reason and believe either directly or indirectly, our engagement is going to help them with respect to their manufacturing plans. And so we’ve taken a pretty conservative forecast based upon kind of their current run rates in that $70 million. And we would expect it to grow from there.
So again, just trying to take a pretty conservative stance right now and we’ll know a lot more after we do all the customer visits here over the next several weeks.
Christian Schwab
No, that’s fair. Thank you. As you mentioned on the silicon carbide side that you would expect to qualify this fiscal year with a number of companies in China, given their increased presence in the silicon carbide market and ability to maybe lower prices faster than others and gain further share, how many customers by the end of the fiscal year would you hope to be engaged with?
Gayn Erickson
Okay, well, I hope to be engaged with fewer customers because I feel like we are cup runneth over with the number of engagements because as soon as they become customers, then we stop talking about the engagement and trying to be serious there actually. I think what you probably meant is how many are we now adding as customers? And if I may put that in your words. I’ve put a specific number on, I mean we’ve got some internal targets that we’re going for, but I would say, several plus if you look at our current forecast and funnel. There is — in terms of well-qualified, perfectly capable, have fabs, it’s well over a dozen just pure silicon carbide players. These are guys that aren’t customers from us yet. And might be close to two dozen total if you look at everybody.
And as we discussed about it last year, there are probably more questions on China. We are engaged with multiple Chinese suppliers as well and would hope to add one or more of those as customers also over the next year-and-a-half or so. The reason I’m hedging a little bit on the year-and-a-half is we know that there are people that are talking about bringing on capacity in second half of 2025. And we’re just trying to figure out when the first tools would be installed, i.e., I can still win them and maybe install the darn thing in the fall and that would still be a win for us. But the timing relative the over, under, or June 1st fiscal year is a bit of a [pain] (ph) right now.
Christian Schwab
Okay, that’s fair. Thank you for that clarity, Gayn. And then my last question, on the AI Accelerator large language model, can you give us an idea if you’re successful there on the new customer? How big could that be?
Gayn Erickson
Yeah, we’re trying to get our arms around that as well. It’s a little weird to talk about who it is or who it isn’t, but I’ve actually just, and this might get me in trouble someday, but it’s not Nvidia. I’ve been trying to be pretty clear with people because it’s just not fair. I guess at some point, if Nvidia ever goes with us, now what am I going to say? But they are a revenue generating company today. They have customers, they’re doing very well. It’s pretty exciting. There’s some discussion about being able to go public with them once we have successfully demonstrated it. They really would have a huge benefit by moving their system level test burn-in to wafer level.
And I can’t decide who’s more excited about this, if it’s us or them, with them cheering us on to please hopefully make this work for them. This is an interesting one because we are doing some pretty unique things that I’ll just share a little bit about, but I’m also holding things to my chest because of competitive reasons. I just don’t want to give away any of our secrets. But the idea to actually be putting, I mentioned 2,000 – 3,000 watts on a wafer, 3,500 watts on a wafer. If you’re actually close to this technically, you would know that all AI processors at these geometries are, in lithographies, are all 1 volt or they’re about parts.
What that means, if you’re going to do 3,000 watts, you’re putting 3,000 amps onto a wafer. Okay, people’s head spin with this the idea of putting you know 1,000 amps much less 2 or more 1,000 amps on a wafer. And so what we’re doing is quite novel and we’re using the FOX-XP system that we shipped first to optical AI. At the last quarter we mentioned that, that we were working on something else on the side, stay tuned, but that’s what we were alluding to.
The development of that system in terms of the power, being able to put that much power out and remove that much power because you have to remove it all through the wafer itself is totally novel. How we deliver that power for optical IO, is actually interestingly a little higher voltage and lower current, whereas in the AI, it’s higher current and lower voltage. But the thermal challenge is the same. So we have a lot of confidence through that. We’re working through that with this right now. And where — I walked in back just now, was talking to the apps guys. They’re working on this on multiple wafers right now with multiple WaferPaks.
So it looks encouraging. And stay tuned. I’ve got my fingers crossed that we can work through all this stuff. And we think we are pretty confident that we can make this work. And the customer is hoping and cheering us on to make it work.
Christian Schwab
Great, thanks, Gain. I’ll get back in the queue and let some other people ask questions. Thank you.
Gayn Erickson
Okay, thank you.
Operator
[Operator Instructions] The next question comes from Jed Dorsheimer with William Blair. Jed, please proceed.
Jed Dorsheimer
Hi. Yeah, thanks for taking my question. And, Gayn, congrats on the acquisition. I guess just from a framing perspective, is it fair to say that next year is largely going to be driven off of silicon carbide, maybe a little bit in gallium nitride, and is you invest in some of these other very interesting and high-volume markets?
Gayn Erickson
The way we’ve actually got the forecast right now is we’ve taken a pretty conservative stab at the silicon carbide things. And so I think we’re – we could do well over 30% and new customers in new markets in that $70 million number. So, if you look at the hard disk drive application, I already mentioned it could be like a 10% customer. The production forecast for the AI is a 10%, certainly of the $70 million. The flash memory will not be. We don’t — I think that’s not going to be for revenue, we don’t have any in there for this, but we hope to secure an order for maybe the next year revenue. And then the GaN could — with the production capacity that we’ve been shown, that could maybe be a 10% customer or more as well.
So you got you got 10%, you know, three different 10 percenters and none of those are silicon carbide. And then I feel like I’m missing one, there’s too many of them. But then within the customer base we are seeing some of the customers candidly we thought we’re going to close this year that had moved out in time, but then the fabs are coming. So I think being able to secure that first wave, but you know, several of those guys at least getting a single production if not multiple production systems could happen by May as well.
So I guess yes, silicon carbide is still going to be really strong. We think that even within silicon carbide we’ll be more diverse than sort of the six customers they have, but only two of them really were 10% type customers. We’ll actually see more customers that could be material to us, but they are the leading edge to the fabs that’ll be coming online in 2025, late, and 2026.
Jed Dorsheimer
Got it. That’s helpful. Thank you. And then could you just help me connect the dots? If I use, you know, you said $12 million with 2 months of $1 million, so $10 million for Incal. It would suggest that the core business is kind of your guidance for a conservative or down year at the low end of $60 million. But on the operating income, if it is immediately accretive, which I think was stated in there, are you making a significant investment in the OpEx to cause the EBIT to come down by 6% or so percentage points or is that — is something going on in gross margin?
Gayn Erickson
Yeah you know what it’s I’d say, it’s mostly the prior than the gross margin of it. We’ve actually made incremental expense investments, some of which candidly was in anticipation of much higher revenue this year, but it was things like the additional infrastructure we put in place in sales support infrastructure for all the selling that’s going on. And eventually those need to turn into orders, as we are now very diversified in terms of the number of engagements at high level, but they obviously need to come to fruition, otherwise you put all these dollars in place and they’re not helping.
So there’s explicit direct sales costs associated with that. We also have in our forecast, it’s a little different than last year, the mix of our customers changing with some new customers includes customers that today were engaged in both directly and with local reps in those countries and they have a commission structure in them that is higher up front than later. So we have a pretty material, I think it’s $700,000 — $800,000 or so in external commissions on, would seem to be the same dollars, but it’s actually dollars that are bought by new customers in new markets or new countries that has kind of messed us up a little bit. But I mean good money spent for sure, but that’s another one.
And then we’ve got some of the legal things, legal costs that we’ve talked about with respect to, I’m just going to use their code name with the acquisition, right, that are going on. And there’s a few other things just respect to some profit sharing and some other things are slightly different year-on-year. We definitely are making investments in R&D this year, both incremental to the — I’ll call it the wafer level burn-in product line, we have to get used to thinking about that, but also we’ll be making some incremental investments in the package part. We’ll talk more about that roadmap as we close that deal, but some things that we’re already contemplating and working on.
It’s interesting, we just did our – [start] (ph) planning last week and we’re looking at the R&D programs and while things like Sierra, the automated aligner and some enhancements, the silicon carbide roadmaps are pretty much in play. I mean, we’re meeting the customer needs with all the different capabilities that we need. So the bulk of the R&D resources this year are all in the other markets that we’ve talked about in pure-execution against some things against the GaN guys, the hard disk drive, the flash memory side of things, and the AI. All kind of incremental to our platform, so nothing like you know boil the ocean, but it’s kind of fun to watch us being able to start putting more energy behind these other markets.
Jed Dorsheimer
Got it. And then well that begs the — I guess my final question. So given these changes, you know, as you start to grow in these other areas, how do you see, has there been a shift in, I would assume that once you cover those incremental investments, you will have a contribution margin that drops. How does that leverage look? Is it at $80 million or $100 million? How are you thinking about getting back to that 20% operating margin or above?
Gayn Erickson
You know, without — I mean, you guys have created your models on there. If you were to think that our OpEx is approximately the same going forward this year, so that makes sense, like it went up, but our revenues didn’t go up. I think we put the infrastructure in place, [majority] (ph) to be able to continue to grow, get back to our $100 million plus run rate that we were on without incremental expenses. So I mean, I would be careful ratcheting it down but if you would just look at similar gross margins and then just incremental revenue you can draw a line and connect the dots as to when we get back to 20%, you know, 25% plus net profits pre-tax.
Jed Dorsheimer
Got it. I’ll jump back in the queue. I appreciate it. Thank you.
Operator
Okay, the next question comes from Jon Gruber with Gruber McBaine. Please proceed.
Gayn Erickson
Jon, that’s you. He just misspelled your name, mispronounced your name a little bit.
Jon Gruber
Yeah, yeah, I mean good presentation, a lot of prospects, but what I don’t understand is with the acquisition, all these prospects, you get flash member 30% in new things, the disk drive, why is there no revenue growth excluding the acquisition?
Gayn Erickson
Yeah, I think you’re getting it right. I mean, I think in general, you’ve got to put some numbers together, and that’s probably not a bad model to think about. It’s really about the push-outs that we saw with respect to the silicon carbide ramps, things we were expecting people to be coming in pretty strong. And we’re just looking at soft forecasts right now. We have multiple customers in our forecast that are going to buy one or two systems and not a lot of big ones. So our key customers themselves, for example and again, if you just look at the big silicon carbide guys, so let’s just back up so I’m not talking about my customers in general or who they are.
But I think if you look at the top four silicon carbide customers, they all guided down this year. And so, there have been people that are — we’re wondering how bad it was going be for us, and can we even continue to maintain our growth while they’re having a soft year followed by a strong year. So I think we’re — it’s the right thing to do right now is to communicate this. If we see strength in the second half come in harder than we are currently conservatively forecasting, then we’ll guide up at that time.
Jon Gruber
Thank you.
Gayn Erickson
Okay. Thanks, Jon.
Operator
Okay. The next question comes from Matt Winthrop with Equitable. Please proceed.
Matt Winthrop
Equitable, I don’t know. Hey guys, how you doing, Gayn?
Gayn Erickson
I’m good, thanks, Matt.
Matt Winthrop
Sort of on a global basis, I have never seen a company turn or you turn as excited 180 degrees from how [grower] (ph) you were the last two calls. Is there anything you could put your finger on? Are cycles shorter, were you guys super lucky? Had a lot of things in the fire that all started to turn? What do you attribute to much more upbeat and such a rapid sort of positive, at least potentially positive outlook going forward?
Gayn Erickson
Geez, Matt, I feel like I’m always a pretty optimistic and upbeat guy, so.
Matt Winthrop
Listen to [what else we call] (ph).
Gayn Erickson
Well, I mean, that’s kind of weird, and I know you mean that professionally, not on a personal level, but I’ll just say on a personal level, I feel like, in January and February, you know, we had customers, when we forecasted last year, we weren’t — our forecast was bigger than what we told you guys, okay? Not that anyone thought $100 million was conservative, but I did. We had these customers that were anticipating those fabs going in, and then by the time we got to November and December, you started to see some of the wheels getting wobbly, and people got kind of scared, and they just held.
We absolutely were completed benchmarks or finished with people that we thought would have been buying two, three, four months ago and they just pushed out. And it just sort of seemed as a lot of these things are, if you look at the kind of technology adoption cycle, I can draw it, but if I can draw it in everyone’s mind, you’re going up this hill, it actually accelerates a little bit, then it turns over and goes down, turns around again and then goes up strong. That sort of technology adoption cycle has existed in a lot of different things. And when you turn down that first time, it’s pretty scary. And people are like, oh gosh, that’s it.
We went from, a year-and-a-half ago, our entire business model was built around the crazy idea, one of the things that was driving the silicon carbide, and it wasn’t always about silicon carbide, but that 30% of EVs, 30% of automobiles in 2030 would be EVs, or $30 million. At that time, people were like, come on, is that even possible or not? By around fall people were saying oh, it’s going to be way higher than that and way sooner than that which we never repeated.
And it was — as if everybody and their brother was going be driving an EV, but we didn’t buy into that because we were looking at the fabs. I’m looking at the ground and there’s dirt, and they’re not putting that fab in yet, but people were talking about it with such enthusiasm. And even our customers were starting to get as excited and then they went to the opposite like oh gloom is doom, doom, you know, everyone’s all gloomy The reality is they’re not you go and you talk to and we have the opportunity which is the first time in my whole career.
I’m talking to my customers customer or if you call OEMs the tier-one’s customer, if you’re in the automotive, okay, we’re actually the customer’s, customer’s customer. Sitting with them face to face talking about burn-in times and quality and reliability. And scary talking about multiple companies burn-in times and test times and things not because I’m sharing anything I can guarantee that — they’re always — but they’re really trying to drive for higher quality and higher burn-in and you know through the market and some of those players are going to start building their own silicon or silicon carbide in this case to drive for their own quality requirements. Very interesting.
You see these people and you see their roadmap and they’re putting in place massive factories. And by the way, way more so outside the US than the US. US is really kind of its own thing and the market penetration is going to end up being less than you’ll see in Korea and Europe and certainly China but even in Japan. But you start talking to the big Japan OEMs as we have, the Korean OEMs as we have, the China OEMs as we have, and the European OEMs as we have. You can see through their eyes, this is serious. It’s not going to be 30% tomorrow but it — EVs are certainly coming and that gives me reason to believe that we’ll be okay and that our business is going to be strong and more and more data to support why you need long wait for little burn-in test times.
I continue to get reminded of that, including news even the last few days again, okay? On top of that, our whole story, if you will, is about semiconductors growing from $600 billion to over $1trillion by the end of the decade. More and more semiconductors need reliability tests because in reality they have — they’re not getting more reliable. Compound semiconductors, nobody was using compound semiconductors like they’re talking about with silicon carbide, gallium nitride, the elements putting into optical, they all need burn-in. More and more memory, stacked memory, HBM memory, flash memory going to SSDs, processors, AI processors, they all need to be burnt in because they’re going into applications where the reliability is not good enough for them to last long term. And as people go to heterogeneous integration or multi-chip modules or whatever you want to call it, it was driving for wafer-level burn-in.
And now we even see it’s beyond that, even with the package challenges that’s going on with the AI. So yeah, if you’re reading into that, I’m enthusiastic. We’re in this really good spot that’s not temporary. This is an upward draft where we saw softness, we’re going to be fine. We have highly differentiated sought after products and we certainly have the manufacturing capacity inventory to be able to meet those needs. And so, yeah, we’re going to do well. Sorry, Matt.
Matt Winthrop
That in my mind is a fantastic answer. Keep on plugging. We’ll keep watching. I appreciate everything you do again.
Gayn Erickson
Thanks Matt. Thank you.
Operator
Okay, the next question comes from Tom Diffely with D.A. Davidson. Please proceed.
Tom Diffely
Yes, good afternoon. Thanks for the question. Gayn, curious, you know, when you look at the book of business you had a year ago when there’s a $100 million you thought you would get for the year versus where you are today. I assume most of that was Silicon Carbide and a lot has been pushed out. So I guess the first part of the question is how far have some of these programs been delayed or pushed out? Obviously some of them look like they’re about a year behind schedule. And then the second part of the question is, have they all been pushed out or have some of them been canceled?
Gayn Erickson
Yeah, so, okay. So it feels like mostly pushed out. So if I — that’s actually, I like the way you phrased it because it helps you remember. I’m good at remembering what I thought at the time. If I were looking at my forecast in my funnel last year, I had like three big guys that were all planning to be buying in the spring. Two new ones and more from one of our — the big lead guys. I’m sorry, I’m sorry, four big guys, right? One of them struggled to build some products, another one ended up doing well with their package part because of the way the customer makes. The other one had some slowdowns. Another one, the value — and two others, actually, there’s five of them, two others were in the midst of evaluations and they didn’t end up pulling the trigger because they pushed out their fabs.
So I mean I just that’s — and I was you know $10 million here $20 million there, $15 million there and you kind of do this and so a lot of it just sort of shifted out in time. Every single one of those is still absolutely committed to wafer level burn-in and modules and their fab capacities have pushed. What they told The Street and themselves one year ago, is definitely pushed out from that now but every one of those fabs is well it’s not true. Most of those fabs have all been, continue to be reiterated and re-announced. I think there’s some people that might have pushed this fab out a little bit further.
So if you look at the OEMs, in some cases, some of the big guys, like if you look at Korea, Japan, and Europe their ramps were always [‘25, ‘26] (ph) it feels like these early EVs were like foot soldiers like you know forward whatever they call you know scouts to test the water but their big programs are yet to come and some of those haven’t even changed their mind. This is still the exact same schedule they were on but now it’s just getting closer.
So you know it feels like to me that it’s about, you know, a one year, to one-and-a-half year push out of most of those guys, and I believe it’ll come back. The difference is I don’t think anybody believes, no one’s saying, oh, it’s going to be 60% penetration by the end of the decade. They’re back more to the 30% kind of number, which is a lot of systems for us.
Tom Diffely
Yeah. Okay. And then the second question would be, think back to a year ago again. And when you think about the car makers themselves, are they all still on the silicon carbide path or have some of them decided to stick with silicon a little bit longer?
Gayn Erickson
Yeah, so I think it’s, they’re more towards silicon carbide than they were a year ago. And I can, — yeah, I have specific examples of it, I’d be careful of it, but some of the examples were, people were like, well. So a lot of cars, as you know, have more than one engine in it, okay? And if you look at two years ago, it was very common, people understood, that Tesla put the IGBT in the front, and silicon carbide was the first one in the back always. So if you had a single engine, it was silicon carbide, if you had two, it was silicon carbide and back and IGBT in front. IGBT is silicon for everybody else that’s knowing, okay? They had different properties, et cetera.
My car that I’m driving, I have a Model S, has two silicon carbide engines in it, the inverters. So we’ve heard that more and more from the OEMs they’re actually prefer to just use silicon carbide and candidly because costs have come down and availability is up they can afford to do that. Try to think. There’s other things I have that’s more under NDAs and stuff I can’t share but I believe more and more. One thing that shocked me when I was in China, is how the China OEM guys really talked to silicon carbide with preference. Now there’s still models that they’re going to have a second engine in IGBT, but it’s more and more silicon carbide in all modules as a preference. So I’d say more conviction to silicon carbide and more to modules than a year ago.
Tom Diffely
Great. All right. I appreciate the perspective and thanks for the time.
Gayn Erickson
Thanks, Tom.
Operator
Okay. We have a follow-up coming from Christian Schwab with Craig Hallam. Please proceed.
Christian Schwab
Great. Thanks. Let’s have a quick follow-up, Gayn. We did hit China in silicon photonics. Whether you expect those to be revenues in fiscal ‘25 or ‘26?
Gayn Erickson
Okay, yeah. So I think we have forecasts for China – well, yeah, I guess I just said it – we have forecasts for China in this year. And silicon photonics, I think we have some as well. Pretty conservative assumptions right now. Yeah, like I don’t think we have it assumed to be a 10% this year. Could it be? Sure. But the problem with the silicon photonics, at least the optical IO, is, and again, obviously there’s more than I can share, so I draw this pretty clean, but those companies that would drive that roadmap hold those cards close to their chest. Right, they’re not out, there’s no market. You tell me what Nvidia, AMD, Intel is going to do, and the other AI processors, and I’ll tell you what the optical IO market will look like. And they’re not talking publicly about it.
So we know a little bit more than we can share. We’ll just watch and we’ll have to be careful being the canary to let everybody know what’s going on. But if people start announcing optical IO, chip-to-chip, you can just think to yourself that’s good for us. And China right now is all silicon carbide customers. They have GaN too by the way. Their current engagements are all silicon carbide today. Yeah, for China.
By the way, a couple more things on China, a little bit more color for people, okay? To us, China is not all one market. And I know people are listening to this, okay? There are companies that are going to build extensions and do things in China that are say not Chinese companies, right? And they’re very protective of their IP and they want to be very careful with it. And so if you sell to them outside of China and they want you to build in China, we love those guys, right? That’s not the same even though it would be in China, okay? Second is that we have companies that are OEMs today that are using our products. Well, they use silicon carbide that’s built on our product and they know it. They drive the test times, they know what’s going on, et cetera, they have a high preference for our equipment and they’ve talked about potentially dual sourcing in China, okay?
Well, in that case they said, hey, we want to use your system because we like the same capabilities and all. Well, we like those guys a lot as well. There’s other companies that are actually building products themselves. Think of trains and planes or cars and they want to build silicon carbide. What I can tell you is those companies are so paranoid and so acutely aware of the relationship between burn-in times and quality that they are like, I will dictate a specific burn-in process at a specific quality, it’s really important to me. And I like what your system does and it matters. I like those guys, right? There’s other guys that are saying, I want to buy a bunch of systems from you, I’ve tried some stuff locally, I’m not sure how well it works, blah, blah, blah. I’m like, well, how many systems are you talking about?
If you want to buy a bunch from me, I like that a lot. It just makes me a little nervous about, you know, overall IP concerns there. And then we have companies that say, I’d like to buy an engineering system. Yeah, we’re not interested. I mean, there’s a spread. If you’re committed to us and you can show us some preference and show us that you’re willing to help us protect our IP, even though we have patents all over the place, you get preferential treatment, if you will. So enough on China. I hope that helps give you a little more clarity though.
Christian Schwab
That does. And then my last question was just a means of potential clarity. You talked about OpEx being flat and aggregate year-over-year because you overspent this year. Does that include Incal or is that a comment on your business?
Gayn Erickson
No, no, my OpEx this year – I’m sorry, my OpEx this year, is higher than last year is what I said. So if you look at the numbers, you know, and I think if you just sort of look linear across, you’ll find there’s maybe $3 million, $3.5 million bucks missing. You’re like, wait, wait, what happened here? We’re actually, that’s a result of several areas of expenditures. I forgot to throw Chris under the bucks a little bit too because we’re also spending more money on finance and other things that we did for SOX compliance and stuff.
But we have incremental expenses in R&D — we have expenses in legal, we have incremental expenses in commissions, we added more people in sales, and we have a little bit more finance side of things. And then a sprinkling of some bonuses tied around the company kind of represent those dollars.
Christian Schwab
Okay, I guess just for clarity, again, for Intel, how much should we assume is their quarterly OpEx?
Gayn Erickson
All right, we haven’t done that yet.
Chris Siu
Well, right now, the forecast or outlook, we have already included them in the calculation, in the forecast, yeah, in the model right now.
Gayn Erickson
Basically, it’s a relatively small company. I think we’ve shared about this before, but as our headcount goes up, they have about 24 employees. They have a lease for next couple of years that’s right down the street from us. We haven’t talked about synergies. Synergies aren’t going to come through people. No way. But, you know, over time we don’t need that second building potentially, those kind of things. But we’re not — you know, we don’t need — we’re not needing to scrounge to try and do any expense reductions or things like that. No way. We’re going to spend more money with those guys.
Christian Schwab
Okay, got it. I got it. Thanks, Gayn. Thanks for the added clarity.
Gayn Erickson
Thank you. One last round for folks, Pete. Anyone else with a raised hand?
Operator
The next question comes from Shahar Cohen with Lucid Capital. Please proceed.
Shahar Cohen
Hi guys. Congrats for the amazing turnaround and the [specification into other than sick] (ph). A question about Incal. So first, how much of their current revenue is from their legacy advantage, sub-manufacturing, if you can disclose. And A, to what there’s a normal family, which as I read in the websites, is that the one that’s supposed to do the high-Watt testing, is that already used in testing of AI application, and is that already used by NVIDIA and leading to major revenue growth in the last year or so as one should expect? Or do you expect them to grow significantly in 2025 versus 2024 calendar year?
Gayn Erickson
Okay. All right, Shahar, you’ve done your homework. So you’re going to make me back up and let people know, try and catch up with you a little bit. All right, so Incal is made up of two sources of revenue. They have a test and burn business, which is made up of really three families of burn-in systems. Low power, medium power, and high power. Their Alpine line of systems is their low power, Tahoe is their mid power, [Sonoma] (ph) is high power. They’re all fully compatible from a software perspective. They all have a similar hardware and software architecture, but a very unique platform concept that I think from a tester guide. The Alpine system uses [indiscernible] test electronics and power supplies that are shared over multiple burn-in boards and multiple devices on each burn-in board, making it one of the lowest cost, most cost-effective burn-in systems on the market. We struggled to ever compete with that product line before.
Their Tahoe system is a mid-power system, candidly similar in many of the features to our old ABTS system or our current ABTS system, but it has power supplies and pin electronics that power each burn-in board for more capability and more power with individual temperature control and amazing software. And Sonoma uses, again, similar pin electronics and power supplies, but per device, allowing them to actually, locally generate extremely high currents within millimeters of the device, very similar to how the application works, which is one of its key differentiators. And that allows them to be able to be used for these really high-powered like AI devices.
The Sonoma is in fact what has really been growing for them. They have multiple customers on each of their platforms and there is revenue in all three of those segments even within our fiscal year going forward and we’re currently committed to meeting the needs of those customers. We have no plans to abandon any of those roadmaps, okay? But Sonoma is where a lot of the road growth is and customers want to pull it into production where we can help them with.
You mentioned something that we haven’t talked about publicly, but I’ll go ahead and go mention it. They actually also do some repair business for kind of as a third-party repair authorization. And we haven’t talked about that yet. That’s something ahead of us. We pulled that out of the revenue from last year. So we didn’t talk about how much revenue they did in that business. So the kind of million dollar run rate is without that business.
Shahar Cohen
Got you. So thank you very much for the call. Really helpful. Any more color you can provide on the Sonoma growth rate maybe that was or maybe expected?
Gayn Erickson
Yeah, well we’re just going to stay flat on this for right now. I mean, and I’m not trying to be super elusive. We want to go see all of the customers and be able to build that up. But we’ll probably get you more information. In general also, we don’t normally forecast too much going forward on all the different product lines, just for competitive reasons too. But that’s the area that I think that were both companies are most excited about to try and help, although there’s a bunch of Tahoe customers too that are asking for production volume, so there’s the mid power and high power systems are pretty interesting and they’ve been growing and you know we would hope that — we can help accelerate that growth.
Shahar Cohen
All right. Thank you very much.
Operator
Okay, the next question comes from Larry Chlebina with Chlebina Capital. Please proceed.
Gayn Erickson
Hi, Larry.
Larry Chlebina
Hi, Gayn. Your AI processor job, once you complete that, could that evolve into possibly getting into heterogeneous PC chips, you know, high volume PC chips that are all going heterogeneous?
Gayn Erickson
Perhaps, yes. I mean, it’s very interesting, the dynamics in the test space that have gone on with the Advent, the system level test, which is highly adapted, designed for test methodologies as well as application specific test methodologies that have really changed the way people look at semiconductor tests. And then with the heterogeneous integration or the idea you take these chiplets and you take all these devices and you put them all together onto even a silicon substrate. Sometimes a silicon substrate has DRAM in it. It actually has active things inside of it. And you have this multi-chip module, unlike you’ve ever seen before, made up of a couple of compute processors, four or six stacks of high bandwidth memory, a couple of optical IO, interfaces on it, et cetera.
And you think each one of those devices I mentioned today has 100% burn-in. Where are you going to do it? You want to do it at the package level when all those pieces are there? The answer is not if you can help it. You want to move all that stuff to die level and wafer is the best way to handle the die. And so, you know, all of this whole topic just gets me excited as a nerdy test guy because that’s all good for us. And they bringing on, I keep using their code name, but Incal, to be able to help us because they’re doing, you know, the burn-in of those heterogeneous packages, right? I’ve seen them, you know, it’s pretty cool and you’re watching what they’re doing and I can’t help but think, well, boy, maybe we can also help some of this stuff go to wafer level, and if not, we got the package. The beauties all have both.
Larry Chlebina
That’s where I was going next. You got open up the possibility to go wafer level on some of those projects.
Gayn Erickson
Perhaps, and if not, we got them covered. I mean, it’s just way better to be able to say whatever you want, but I just think there is opportunities and you start seeing it all blurring together, you’re like, wait a minute, you got this optical IO, wafer level, you got heterogeneous, you know, you’ve got stacks and stacks of high bandwidth memory. How can we get that to a wafer level? Now you’ve got a processor that you can put into test modes and do a long cycle burn-in — in a much more scalable, also lower power mode than at the system level that might not only be an enabler for scale, but you might even be able to get enough electricity to do it.
And you’re like, wow, it’s a target-rich environment. And being able to go and actually sit down with these companies that are building them for their own use or building them for sale or building them for rent or building, you know, it’s exciting.
Larry Chlebina
Okay, One last question. On the flash memory opportunity, I tried getting you on this at the CEO Summit as, is the opportunity in a new fab or is it possibly in an existing fab since it requires higher power than maybe existing systems can handle.
Gayn Erickson
This was probably one of the many questions you asked me that I said I can’t answer till I answer for everybody, huh?
Larry Chlebina
You said you were going to answer on the conference call – here we go.
Gayn Erickson
So I think I can see both. Generally speaking, people think about making big changes when it’s time to do a new fab, right? So it’s an easier cut to think about the new fabs that are coming online between DRAM and Flash over the next you know four, five, six, seven years. However, having spent you know 20 years of my life building memory testers, I — you know every five years I was replacing the memory tester I sold them five years ago, which sounds crazy, but you get to a point where through parallelism or power or capability you can’t even use the old tool. And this is true with a lot of ATE systems today. Like, you know, I was part of, you know, HP, Agilent, VeriGY. We’re acquired by Avantis. Avantis has the 93,000 platform now that we designed in HP back in the late ‘90s. And today those [93k’s] (ph) are fully compatible. People will have — have made, have hundreds and hundreds of these on their floor, but they’ll buy a new board that goes into that machine each year to meet new capabilities. So in some ways, we built our platform similar, like the FOX system.
The FOX, the very first FOX system we built was for flash memory, right? And people that know our history know that at the time it was like we were too small and a little too risky and Along came a couple of companies that said, you know what, we’re willing to look the other way on your risk because what you have is novel and unique and I need it. One of them happened to be one of the biggest phone manufacturer in the world for facial recognition. And another one was what now is the biggest silicon photonics company in the world for their platform. That part laid into multiple different customers, multiple different applications, silicon carbide, now GaN, and these other applications where people are interested in using it, but memory is still a core target for us and we think that we can get into that.
My install base, those customers have critical technical needs going forward in their roadmap that is going to require them to make changes. The equipment they have will not work. And at that point we could displace seemingly perfectly good systems in their fabs with new ones that are better. So I think it can be.
Larry Chlebina
The greater if it be both.
Gayn Erickson
Me too. I’ll take one right now. I’ll take, you know, we’re excited. This is a big deal to us that this, people don’t make this commitment lightly. And all, by the way, there’s another one. We’re talking about expenses. I’m going to spend some money on this flash development this year. It’s expensive, what we’re going to be doing. And we’re going to build up some WaferPaks, we’re going to be doing some technology, we’re going to do some prototyping, we’re going to put a bunch of manpower on it. We may not make a dime this year and it will be all that OpEx’s money worths then.
Because this, I think this market needs it, I think flash first, then DRAM, and I think we are in a great position architecturally to be able to address that. And so any one of those deals is – is enormous.
Larry Chlebina
Well it’s worthwhile doing this for sure. Alright thanks Gayn, have a good night.
Gayn Erickson
Thanks Larry.
Operator
There are no further questions in queue.
Gayn Erickson
Alright folks thank you very much. I know that we ran a little longer than normal. We really appreciate everyone’s time. We’ll figure out how to make these as concise as possible as our story is no longer focused on a narrow market or a two and a couple of few customers. So we’ll find our way to be able to be able to summarize and make it easier to digest. But we are really excited about this, excited to head into the new year. And we welcome our new friends from Incal. We’re throwing a lunch for them in a couple of days, and we’re excited to host them to come over and meet the crew. And we’ll keep you guys updated on a quarterly basis. Have a good one, and take care.
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