Camtek Ltd
NASDAQ:CAMT
Earnings Call Analysis
Q4-2023 Analysis
Camtek Ltd
The company concluded 2023 on a high note, posting record Q4 revenue of $89 million, culminating in an annual revenue of $315 million. The year had started modestly, but demand for High-Performance Computing (HPC) related products in the second half led to a 20% Q4 uptick over Q1. Gross margin and operating margin improvements are notable, with figures reaching 49.2% and 29.2% respectively. A strong position with Tier 1 customers, particularly in HBM and chiplet devices for AI applications, bolsters the company's outlook. The company indicates a robust pipeline and rising orders, creating positive momentum entering 2024 with a Q1 revenue guidance of $93 to $95 million, approximately 30% above the previous year's Q1.
HBM and chiplet modules, vital for HPC, are projected to expand at an annual rate of 20% to 30%, signaling significant opportunities for the company as a key player in this arena. Growth is driven by the rising complexity and stringent yield requirements of these devices, with the company frequently consulted for innovative inspection and metrology solutions. Recent significant orders for HPC-related applications, with indications of further substantial orders for the latter half of the year, point to a strong continued demand for the company's offerings.
Beyond HPC, the company is diversifying its revenue sources, catering to an increasing number of OSAT customers and adjusting to shifting territorial demands; a gradual shift in business towards Korea, Taiwan, and the USA is expected due to the heightened demand for HPC.
The acquisition of FRT, closed in late October 2023, is shaping up as a strategic enhancement. FRT is anticipated to contribute positively to sales and profit in 2024, and its integration into the company's operations is expected to complete later in the year. FRT's positioning in metrology for HPC and power devices augurs well for leveraging growth in these segments.
The company's management has expressed strong confidence that 2024 will mark a new sales record, based on the existing backlog and the pipeline of orders. With a promising start to the year and the anticipation of continued strong order flow, 2024 is set to be a milestone year for the company.
Financially, the company remains solid with $448.6 million in cash and equivalents, despite the acquisition of FRT for $100 million. The cash flow from operations was robust at $34.2 million, inventory levels increased to support future growth, and accounts receivable improved, underpinning the company's operational efficiency and readiness for upcoming opportunities. With a targeted Q1 revenue growth and a focus on year-long expansion, the company positions itself for continued success in the dynamic semiconductor market.
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Ladies and gentlemen, thank you for standing by. I would like to welcome all of you to Camtek's Results Zoom webinar. My name is Kenny Green, and I'm part of the Investor Relations team at Camtek. All participants other than the presenters are currently muted. Following the formal presentation, I'll provide some information and instructions for participating in the live question-and-answer session. I would like to remind everyone that this conference call is being recorded, and the recording will be available on Camtek's website from tomorrow. You should have all by now received a press release. If not, please view it on the company's website.With me on the call today, we have Mr. Rafi Amit, Camtek's CEO; Mr. Moshe Eisenberg, Camtek's CFO; and Mr. Ramy Langer, Camtek's COO. Rafi will open by providing an overview of Camtek's results and discuss recent market trends. Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe, and Ramy will be available to answer your questions.Before we begin, I'd like to remind everyone that certain information provided on this call are internal company estimates, unless otherwise specified. This call may also contain forward-looking information. These statements are only predictions and may change as time passes. Statements on this call are made as of today and the company undertakes no obligation to update any of that forward-looking information or statements contained, whether as a result of new information, future results, changes, expectations, or otherwise.Investors are reminded that these forward-looking statements are subject to risks and uncertainties that may cause actual results or events to differ materially from those projected, including as a result of the effects of general economic conditions, risks related to the concentration of significant portion of Camtek's expected business in certain countries -- in certain countries, particularly China, from which Camtek expects to generate a significant portion of its revenues for the foreseeable future, but also Taiwan and Korea, including the risks of deviations from our expectations regarding timing and size of orders from customers in these countries, changing industry and market trends, reduced demand for services and products, the timely development of new services and products and their adoption by the market, increased competition in the industry and price reductions, as well as due to other risks identified in the company's filings with the SEC.Please note that the Safe Harbor statements in today's release also covers the contents of this conference call. In addition, during this call, certain non-GAAP financial measures will be discussed. These are used by management to make strategic decisions, forecast future results, and evaluate the company's future performance. Management believes that the presentation of non-GAAP financial measures are useful to investors understanding and assessment of the company's ongoing core operations and prospects for the future. A full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release.I'd now like to hand the call over to Rafi Amit, Camtek's CEO. Camtek -- sorry, Rafi, please go ahead.
Okay. Thanks, Kenny. Good morning or good afternoon, everyone. Camtek ended 2023 with record fourth quarter of $89 million in revenue at the upper end of our guidance, bringing our full-year revenue to $315 million. Sales in 2023 predictably started modestly after a record year in sales in 2022. Yet due to increased demand of HPC-related products in the second half of the year, we experienced a significant increase in orders and sales, so that Q4 came in 20% higher than the first quarter of 2023.The gross margin in the quarter came in at 49.2%, which is a continued improvement over previous quarters as we had indicated earlier this year. The operating margin also showed an improvement to 29.2%. 65% of our revenue from product came from Advanced Interconnect Packaging applications with a substantial portion coming from HBM and chiplet modules. The remaining 35% is divided between compound semiconductors for power devices, CIS, and process control applications. This achievement was primarily due to our strong position in Tier 1 customers who manufacture HBM and chiplet devices for AI applications. We expect this demand to continue into 2024 and beyond as it has been reflected in our current order flow, backlog, and pipeline. We expect 2024 to be a record year even before taking into account the contribution of sales from FRT. Our revenue guidance for the first quarter is $93 million to $95 million, which represent around 30% growth over Q1 of last year.Now I would like to give an overview of the business environment. As we have mentioned, our main growth engine are the HBM and chiplet modules. These 2 products are the cornerstones of HPC and there is a consensus among analysts that they will continue growing in the coming years at an annual rate of 20% to 30%. Camtek is a strong player in this segment. We are present at all Tier 1 customers in a large number of inspection and metrology steps. The HBM and chiplet integration require high-yield and known good dies to ramp to high-volume production. This requirement drives the inspection and the meteorology needs.In addition to that, these customer invest a lot of R&D resources to add more feature and capability to increase the performance of the HPC and we are being frequently asked by our customers to provide new inspection and metrology solutions. As an example, at one of our major customers, we have developed tens of new inspection and metrology steps over the last year. We have recently announced receiving significant orders for HPC-related applications for delivery mainly in the first half of 2024. We are now getting initial indications that an additional substantial amount of orders are also expected in the second half.We also continue to receive orders from customers who do not belong to the HPC field. A great number of our OSAT customers continue to increase their production capacity. China is still an important market for us, but the high demand for HPC will change the distributions of our sales between the different territories. I estimate that the share of our business coming from Korea, Taiwan, and U.S.A. will increase in the coming years.Regarding FRT, the official closing was at the end of October 2023. We are very pleased with this acquisition. We are confident that FRT will meet our expectation regarding sales and profit for 2024. We are in the process of post-merger integration, which we expect to be completed later this year. FRT is well established in certain meteorology applications for HPC and power devices based on silicon carbide, and we are preparing FRT to meet the increasing demand for these markets. We believe FRT has the potential to grow rapidly in the coming years.Regarding our assessment for 2024, in our last meeting, you heard us estimate that 2024 will be a record year in sales. Today, we are halfway through the first quarter and based on our backlog and orders in pipeline, we feel even stronger that 2024 will indeed be a record year. However, it is too early to give accurate prediction about the expected growth in 2024.And now, Moshe will review the financial result. Moshe?
Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-GAAP basis. The reconciliation between the GAAP results and the non-GAAP results appear in the table at the end of the press release issued earlier today.The FRP transaction and purchase accounting treatment are included for the first time in our non-GAAP reconciliations. Revenue for the fourth quarter came in at a record $88.7 million, an increase of 8% compared with the fourth quarter of 2022 and an increase of 10% from the third quarter of 2023. The geographic revenue split for the quarter was as follows: Asia was 82% of our revenues, with U.S. and Europe the remaining 18%.Gross profit for the quarter was $43.7 million. The gross margin for the quarter was 49.2%, a slight improvement from the third quarter of 2023. This gradual improvement is a result of the efforts we have made throughout the year and we anticipate this trend to continue in the coming quarters.Operating expenses in the quarter were $18.2 million compared with $17.4 million in the fourth quarter of last year and $17.2 million in the previous quarter. I know that this quarter we included for the first time the 2 months of FRT-related expenses, which explains the increase from the previous quarter.Operating profit in the quarter was $25.5 million compared to the $22.8 million reported in the fourth quarter of last year and $22.2 million in the third quarter. The increase is mostly due to the increase in the revenue and the improvement in the gross profit. Operating margin was 28.7% compared to 27.8% and 27.6%, respectively.Financial income for the quarter was $5.7 million, at a similar level to the previous quarter and higher than the $3.8 million reported last year. The increase from last year relates to significantly higher interest rates on our cash balance.Net income for the fourth quarter of 2023 was $28.2 million or $0.57 per diluted share. This is compared to a net income of $24 million or $0.50 per share in the fourth quarter of last year. Total diluted number of shares as of the end of Q4 was 49.1 million.Turning to some high-level balance sheet and cash flow metrics. Cash and cash equivalents, including short- and long-term deposits and marketable securities as of December 31, 2023, were $448.6 million. This compared with $517.1 million at the end of the third quarter. The decrease is due to the $100 million cash for the acquisition of FRT.We generated $34.2 million in cash from operations in the quarter on the back of an increased revenue and good collection. Inventory level increased to $94.9 million. The increase over the previous quarter is in part to support the anticipated sales growth in the coming quarters, as well as the addition of FRT inventory.Accounts receivable decreased to $87 million -- $87.3 million in the quarter, despite the increase in revenue and the addition of FRT. This was done primarily as a result of strong collection in the quarter. Our days sales outstanding, DSO, decreased to 90 days. As Rafi said before, we expect revenue of between $93 million and $95 million in the first quarter, and that we look forward to a year of growth in 2024.And with that, Rafi, Ramy, and I will be open to take your questions. Kenny?
Thank you, Moshe. We'll now start the question-and-answer session. [Operator Instructions] Our first question will be from Charles Shi of Needham. Charles, you can go ahead and talk.
I have a 3-part question, orders -- the order flow. So I think last time when you report earnings, that was in mid-November, you talk about starting from the third quarter '23, you got probably 240 systems in your order. Now, you said that the entire second half '23, the order number is close to 300 systems. So the first part of this question, right, can you give a little bit more color? What's the incremental 60? Where are they from and what kind of applications?The second part of this multipart question really is, what's the general trend of the order intake in January and February? Understand there's a Lunar New Year in between, but any color would be great. But the third thing, I think you said on the -- in the prepared remarks, you talked about initial indications of new orders in second half '24. Want to ask you to clarify, do you mean taking in new or you expect to taking new orders in second half '24? Or do you expect to take those orders in coming months, but then you deliver in second half '24?
Charles, this is Ramy. So, first of all, yes, the older flow continues linearly. There's nothing outstanding on the flow itself. But I think most of the orders that came lately, the addition came more from the OSAT world. So, it was less from the HBM. And regarding the beginning of the year, so definitely, we're starting to see orders, Chinese New Year definitely, it's 2 weeks where Asia is more or less closed. But the discussions, the pipeline is coming up, and we don't see any change in the activities.I think we had a long discussions about the second half. And I think was the -- the question was specifically about the HBM. So, yes, we discussed, and I think Rafi mentioned it in the prepared notes, we are seeing orders and we are talking, let's say, we're expecting orders in the coming weeks, all deliveries already in the second half of this year. So definitely, we're a -- we see a very positive trend. The backlog is building up for the second half and we are in discussions with customers, including HBM customers for shipments of machines in the second half of the year.
Ramy, that's a great color. Glad to see you are expecting more orders to come over the -- from HBM customers for -- maybe for delivery in the second half. Maybe I want to ask Moshe a question. Some of the new items in your non-GAAP reconciliation looks like you wrote-off some of the FRT inventory after the close last year. So, can you provide some more details why you're -- you chose to write-off some of the inventory now because I would guess it's less likely you're actually seeing some inventory you're not going to sell, but what's the rationale behind the write-off?Maybe a related question. Any update on the FRT outlook for this year? Because at the time of the -- close of the acquisition, you talked about maybe $30 million-ish revenue you expect from FRT in 2024. Is that number maintained as remains the same? Any upside from that number?
Okay. I'll address both questions and Ramy and Rafi will add if they want. So regarding FRT, we said it in also in the press release, we are very pleased with the acquisition. No change in terms of our expectation from FRT as it relates to 2024 revenue and profitability. We are in the midst of post-merger integration efforts, trying to put together the business already -- the some of it is already done and some is in process. We plan by the end of the day to have FRT to be an integral part of Camtek, such that we are not going to report separately the FRT results. Some of the products will also become part of our product offering, so this will have a positive impact also on our revenue, as well as on their revenue.So that's FRT. And specifically, what you see in a write-off is a small amount of inventory that we find that we could walk out together between us and FRT to put together a new product offering in some part of this. The end result of the product resulted in some inventory write-off. It's a small amount of $900,000. So -- but we are not shutting off any FRT-related product lines.
Thanks, Charles. Our next question is going to be from Brian Chin of Stifel. Brian, you may go ahead and ask.
Hi, there. Can you hear me okay?
Yes, we hear you very well.
Yes.
Great. I think previously, Rafi, you had noted that HBM and Heterogenous Integration could comprise 30% or maybe 30%-plus of revenue in 2024. And maybe that would also account for a predominant amount of the growth incrementally year-to-year. Do you still see those to be sort of the right expectations for this year? Or do you see now with expectations for improved order fill for second half? Could those percentages be higher this year?
I think in general, I believe that since we have a very strong position in our customers and assuming our customer meets the expectation of the analyst, regarding the growth rate and the demand, probably we will -- our growth will be very similar to these demands in terms of the Heterogenous Integration, HBM, chiplet field. But we still have OSAT and other type of products that are not expected to grow in this level of 20% to 30%. So it's going to be eventually an aggregate of this, and it's not -- in this point, we cannot be very accurate with the number. So this is why, I believe that we have to wait few more months to be sure or to be more accurate about the growth rate.
Okay. Yes, fair enough.
Let me add one thing. Brian, just let me add one thing. And I think I just want to further to what Rafi said and based on your question. So, we said in previous calls and meetings that the HBM and chiplet, what we call the high-performance computing section of our business will be at least 30% of our business in 2024. I believe that this is the case. It may be even slightly higher, but in the range of these numbers, this is going -- this is how we see this business for '24.
Okay. And I sort of heard about China historically has been a good exposure for the company. Ahead of the 20-F, could you maybe quantify what percent of sales China could represent or did represent in calendar '23? And even if you think other areas of your business are going to outstrip the growth rate that you might see out of China and some of the traditional wafer-level packaging, are you starting to see a more significant contribution from HBM or chiplet activity in China? And is that in any way sort of embedded in your thinking for 2024?
No. So first of all, the HBM and chiplet business, it's definitely the -- it's not a Chinese business. And when you talk about it, it's related to the HBM manufacturers and primarily TSMC and Intel. These are the 5 players in this arena. So when we talk about this business, this is definitely business out of China. Whether there will be similar things in China, it's easy to -- it's early to talk about it. When we talk about the business in China, it's -- I think the main growth driver there is the OSAT capacity that is being built there. And I would say that we -- to give you a number, i.e., it's in the mid-40% range for 2023.
Okay. Got it. Appreciate that. Yes, I think there's some talk of maybe a China DRAM player starting to maybe add some -- pursue some advanced capacity, but that's helpful. And then the last question, maybe for Moshe, where do you expect gross margins to be in Q1? And is the company on track for gross margins to still cross back above 50%, maybe by mid-year? And is there any particular revenue level that's needed to achieve this? Or is that more reflective of normalizing material and product cost and maybe mix as well?
All right. So, as we said in previous calls, and I will repeat it, we have made tremendous efforts this year to improve the gross margin. And we said in the beginning of the year, year 2023, I mean, that we expect gradual improvement. And indeed, in the last several quarters, we have improved gradually the gross margin. We are now at 49.2%, and we definitely expect this number to continue to improve in Q1 and beyond. And we believe that throughout 2024, we will achieve the 50% target for gross margin.
Thanks, Brian. Next question will be from Tom O'Malley from Barclays. Tom, you may go ahead and ask.
I just had another one on the order side. If I do some napkin math here from what you reported in Q3 and Q4, it looks like the run rate of those orders has slowed slightly, and you're saying the mix is a little bit away from the HBM side. Could you -- it's nice that you guys give clarity, but could you just give me a little more color there? Do you guys see order rates slowing? Or is that just a function of when you're announcing these results?
So first of all, Tom, it's a question of decisions from our customers. When they make the decisions, at least, the main customers, so they make a decision that they need the capacity. So in many cases, the order is a little bit ahead of time, and there was no doubt a surge in the orders at the -- about 2 months or 3 months ago. But still, there is a good, healthy flow of orders. And we usually announce only when it's a very big order, but definitely, the flow and the indications and the pipeline show a very healthy business, as we have discussed in the discussion that Rafi just gave.
Helpful. And then as a follow-up, you mentioned the mix of business with the new orders is a little bit lower on the HBM side. Could you just give us a status update or a health check on what you're shipping into your customers and where you think they are in terms of capacity? Are you still sort of hand-to-mouth where customers are trying to take everything they can get? Or are you starting to get some signals from your customers like, "Hey, we're getting a little bit closer to what we need right now?" Any kind of color on those communications on the HBM side would be super helpful.
Okay. So first of all, I didn't mention, I don't want to make any indication that our customers are telling us that they have enough capacity. This is not the case. I think what I did say and this is important, that the last orders came from were more on the OSAT side of the business, other businesses rather than the HBM. And the reason for that, and it's important to mention it, yes, the HBM and the chiplet is going to be 30% of our business or even a little bit more next year. There is another healthy 70% aside from this business that we are getting orders and there are many customers, and these businesses are very important.Regarding the HBM, I think this was discussed in details in previous calls. We received a lot of orders, yes, and we're getting now clear indications and discussions from customers that we are going to get additional orders for shipment in the second half of 2024. So if in previous calls, we discussed the fact that most of the orders came for the first half. So today we can give an update that this is not only the case, that there is going to be a continuation of orders and installations in the second half of '24.
Thanks, Tom. Our next question is going to be from Craig Ellis of B. Riley. Craig, you may go ahead and ask.
I wanted to follow-up on some of the earlier commentary regarding orders and what you're seeing. So just to clarify, it sounds like what you're saying is as you look at customer mix and the customer mix you'd expect from the recent trends toward more OSAT and non-HPC, it's back to HPC-related OEMs in the back half of the year. And as you look at what's coming in the back half of the year, since the duration we're talking about really covers technology transitions with HBM to HBM 3E from HBM, and maybe even by the end of the year, activity with HBM 4. Can you talk about the potential benefit you may be getting from just volume versus any benefit that might be coming from these tech transitions?
All right, Craig. So let's go step by step and just make clear that we all understand. So I think we have talked in previous calls, we had quite a few orders coming in for the HBM and the chiplets for the first half of the year. What we are saying now, there was a concern whether there is an overflow, there is too much capacity, what the update is and talking with customers, we understand today there are going to be additional orders for shipments of HBM and chiplets in the second half of the year as well.So from that point of view, we are on track to do at least 30% of our business will come from what we call the high performance computing, which comprises of the chiplets and HBMs. And from that point of view, I think the color of those orders we understand them. So this side of the business is healthy. What we've seen is that from the OSATs and the other applications that we have, there is continued addition of capacity, and the rest of the 70% from the orders we have on hand and what we see on the pipeline, we are very confident that this part of the business will be fulfilled this way.
And that's really helpful, Ramy. Does that 70% include any benefit from the smartphone market? The team has done a phenomenal job positioning for HPC, but there was a time when the smartphone market was a much bigger percentage of sales and shipments than it is today. And there have been signs that the Android market is starting to come back and that leading APU manufacturers like MediaTek are doing some interesting things with AI-related capability, which could be more inspection intensive. So what are you seeing out of that end market? And is it one of the things that has you excited about record calendar '24 organic revenues?
So most of this business will come more from the side of the OSAT business. That's where we will see. And definitely, we are seeing additional capacity coming into the OSATs. And it's hard for us to know here who is the end customers and what is exactly the application, but the overall growth in capacity on the OSAT world is positive, it's pretty strong. And that's the reason that I mentioned that the last orders came actually from the OSAT and not just the HBM and chiplets business. That was the reason for my remark.
Got it. That's very helpful. And then lastly, Moshe, just digging into some of the other financial dynamics as we look near term and through 2024. Can you just talk about operating expense expectations for calendar 1Q, which will include a full quarter of FRT. And how should we think about the arc of things from there as we go through the year, as you're investing in new product programs and as you're supporting increasingly diverse growth?
Okay. So in terms of operating expenses dynamics, first of all, R&D, we definitely continue to invest heavily in R&D, and this will grow pretty much in line with the revenue growth next year.In terms of sales and marketing activity, we are working -- trying to go more and more direct in order to improve the cost structure and this is the -- the result of it was performed nicely in Q4 when we were able to show slightly below operating expenses than our model. In terms of 2024, this dynamic will continue. Indeed, Q1 will include the full consolidation of the FRT expenses. So obviously, the level of expenses will go up slightly, pretty much proportionally to the business.And G&A finally, is one of the areas that we are trying to keep as modest as we can and trying to keep this entity lean and mean. So you won't see a major increase in the G&A. So overall, we expect an improvement in the operating expenses in 2024 versus 2023 in a whole year.
Our next question is going to be from [ Duckson Yang ] of Bank of America. Duckson, you may go ahead and ask your questions.
I'm on behalf of [ Zakalik ]. I just have a question on the competitive landscape. You have all these orders coming in this year. You said 30% HPC, 70% OSATs. What are your market share expectations this year in wafer-level packaging against your main competitor? And is there a difference in HBM chiplet versus OSAT?
I would say, first of all, we need to look at it in basically 2 areas. On the 3D metrology, that's an area that we are very dominant. And our technology is the industry standard. And I would say that most of the -- the major players in the market across the market, not just the HPC world are using our equipment. Regarding the 2D inspection, that's an area that we have very, very competitive technologies. And I think our market share is in the range. It is similar to our main competitor. Here, there is a vast variety of applications. So therefore, the market share is a little bit harder to judge. But I can say that we are very, very competitive and we have a significant market share. It's very hard to put here a number. But it's definitely in the 20% to 30% range and even a little bit higher.
Understood. Do you have an expectation of share growth potentially this year?
Share growth.
Market share.
Well, of course, we go into the year expecting to increase our share. But this is a little bit more, I would say, complicated and I think Rafi discussed it in the prepared notes. The way that this market works and especially the HPC world and the advanced packaging in general, this market is changing all the time. And here, we are developing new steps all the time. So it's not just looking backwards, can we take a step from a customer or from a competitor at a certain customer. This is less case. This is less on the taking.Here, what we are trying to do is get as many of the steps of the new steps, and we have very, I would say, intimate relationship with all the Tier 1 players and our long-term customers, and here what we are doing a lot of efforts, and we are very successful in that. And Rafi mentioned that a certain Tier 1 customer, we were able to develop tens of new steps and obviously, the ones that we develop together with the customer are ones that we will win and will take from our competitors. So I think that we are winning a lot of steps and this will be one of the main reasons for increasing the business in '24 and beyond.
Thanks, Duckson. Our next question is going to be from Gus Richard of Northland. Gus, you may go ahead and ask your question.
Yes. Just a follow-on, you did mention tens of new inspections. I was wondering if you had a sense of how much TAM expansion you got, or you could give us some color on is this for backside power? Is it for what sort of end applications, not specific, but just in general?
Well, we have to be very careful because we cannot disclose information from customers. I can say that those steps are in the advanced packaging world.
TAM opportunity, is it tens of machines, single-digit?
No, no, no. It's here at this customer and in other places, you are talking about tens of machines. The potential is very large. And this is why we are so focused on winning new steps.
Got it. That's super helpful. And then just in terms of your supply -- your ability to supply your customers supply constraints, in slotting. Could you give us a little bit of color on, if orders continue to accelerate, sort of -- what sort of sequential growth can you deliver? Are there any inventory constraints, people constraints in terms of ramping the revenue as we go through the year and into next?
So I think we discussed in previous calls, and we've mentioned that already, I think, a couple of years ago, we increased our capacity from clean room space and our, I would say, operational capabilities to around, I would say, at least $500 million in revenues. So from the longer, I would say, the longest lead time, which is the building itself and the basic clean room space we have enough capacity. Now what we have done, we also increased our inventory in order to meet the potential growth. And I think if you go back to 2020 during the year when we grew up 70%, we were able to work very closely. We have excellent relationship with our subcontractors, they have enough capacity to grow if we need to grow certainly beyond our expectations. So we have all the capabilities to grow, and we are very confident that we will be able to supply all the requirements that are out there.
Thanks, Gus. Our next question is going to be from Alon Last of Meitav Dash. Alon, you may go ahead and ask your question.
Going back to the orders, could you please provide some details about what are the implications of those 300 machines? What kind of revenue projection are due to -- only to the current orders? What would we expect in the first and second quarters?
Okay. Alon, the orders that we have received in the second half of 300 machines partially were delivered in the -- within the second half. But most of them, I would say, close to 70% will be delivered in 2024, mainly in the first half of the year. Our ASP for the machines is around $1 million. So that's the magnitude of the orders. And again, this is a general number, but our ASP is $1 million. So we are talking orders of the magnitude of $300 million. And a big portion of these orders will be delivered already within our guidance of $93 million to $95 million in the first quarter.
Okay. And another question. If I look at the -- I mean, at the operating expenses, it doesn't seem the form factor contributed a lot to the expenses. So could you please provide some pro forma details about what's the contribution of form factor to the OpEx and also revenues during this quarter?
So we can't get into the level of details between Camtek and FRT. But they -- obviously, they did contribute their share to the operating expenses in the form of 2 months only. Next quarter, the contribution to the expenses will be a little bit higher. Also, as I said, it's harder to provide an exact number because, as I said, we are going more and more direct in terms of sales distribution. So the level of sales and marketing expenses that are part of the operating expenses level are coming down.But in general, the -- what is important to say is that what we plan to -- the plan that -- we plan to integrate FRT fully into our business, our salespeople, when I say our, there will be a combined sales team that will sell both the Camtek legendary product, as well as the FRT new products. Technical support team will support both product lines. So everything will be integrated within 2024.
Okay. And last question from me. Applied had mentioned that they expect a certain pullback in orders from China in the second half or during 2024. What's your projection about the Chinese demand? Are we likely to see it stable or decline during the year?
We see a stable demand coming out of China. I think the comparison of Camtek with Applied is a little bit misleading because we serve, I would say, first of all, the OSAT world, which is growing very fast on China. Trailing edge, fabs, I think these are the main markets. And of course, there are small applications. But these are not the segment that Applied is serving. And therefore, I think the comparison here is a little bit misleading.
Thank you, Alon. Next question is going to be from Joey Chai of Analog Century Management. Joey, you may go ahead and ask your question.
Can you guys hear me?
Yes. We can.
We hear you, Joey.
Yes. So I have more of a housecleaning question here. So today, like management reported like 300 orders. But based on like my track, so I think since Q3, the company reported around 240 orders and on December 18, there was another 25. So I suppose like on public release, there's like 265 machines. So I'm just trying to ask like, is there a discrepancy between 300 and the 265 that I see here, is that rounded on the 10s to the 300 or was it rounded on the single-digit base? Like for example, was around 295 machines, then you guys run it to 300?
So far so it's rounded up in a single layer on the single...
Understood. Okay.
Correct. But look, what we have discussed is in the last call, we have mentioned 240 machines, if I remember correctly. And since we've got additional orders, and we're already counting them until the end of the quarter. We did not mention the orders. So by the end of 2023, we had about 300 orders, 300 machines, some of them -- some of those 300 were shipped in the second half and a significant portion of it will be shipped during 2024. And of course, we are getting additional orders as we speak, it's on a daily basis. In general, we announced orders when we receive a large order, that's the time we make a special announcement. And from time to time, we discussed it during our calls. Did I answer your question, Joey?
100%. Yeah, I have one more follow-up. So for the 30% of the revenue in 2024, which is management comment is going to be from like HBM and HPC, like can management kind of comment what's split between these 2? Because based on the comments, it seems like most of it is from the HBM part going forward.
So Joey, I cannot really make here the distinction, and I don't have it in front of me. But in general, we talk about the high performance computing. It just comprises of the chiplets and the HBMs.
Sorry. How about the -- so what would be the split between the chiplets and the HBM?
I don't have them in front.
Okay. No worries.
So we just bundled them together because eventually, they -- this is more or less the segment that is really today the growth engine and eventually most of these chiplets need the HBMs around it.
Understood, understood. And another clarification. Sorry, this is the last one. So, yes, you guys saying, seeing clear indication for the orders in the second half of 2024. And I assume you guys have much more better visibility also into 2025. Can I assume that's also the case?
No, that's not the case.
Okay.
I think still 2025 is far enough that we still we cannot have the visibility. We understand the market, we understand the trends, but when you come to a real backlog, this is a little bit -- this is beyond the horizon.
Thanks, Joey. So that ends the Q&A session. Before I hand it back over to Rafi, for a concluding statement. I'd like to just let everyone know that in the coming hours, the upload and recording of this call will be available on the Investor Relations of Camtek's website at camtek.com. I would like to thank everybody for joining this call. And Rafi, please go ahead with your closing statements.
Okay. I would like to thank you all for your continued interest in our business. I want to especially thank the employees and my management team for the tremendous performances. To our investor, I thank you for your long-term support. I look forward to talking with you again next quarter. Thank you, and goodbye.