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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Greetings and welcome to the Kulicke & Soffa Third [sic] [Fourth] Quarter Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Joe Elgindy, Senior Director of Investor Relations for Kulicke & Soffa. Thank you, Mr. Elgindy. You may begin.
Thank you. Welcome everyone to Kulicke & Soffa’s fourth quarter fiscal 2020 conference call. Joining us on the call today are Fusen Chen, President and Chief Executive Officer and Lester Wong, Chief Financial Officer. For those of you who have not received a copy of today’s results the release as well as the supplemental earnings presentation are both available in the Investor Relations section of our website at investor.kns.com. This new supplemental earnings presentation provides additional details regarding and market trends and our outlook.
In addition to historical statements, today’s remarks will contain statements relating to future events and our future results. These statements are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Our actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For a complete discussion of the risks associated with Kulicke & Soffa that could affect our future results and financial condition, please refer to our recent SEC filings, specifically the 10-K for the year ended September 28, 2019, the 10-Q for the period ending March 28, 2020, the 10-Q for the period ending June 27, 2020 and the 8-K filed yesterday.
With that said, I would now like to turn the call over to Fusen Chen for the business overview. Please go ahead, Fusan.
Thank you, Joe. We are pleased to report that despite global COVID-19 related challenges, our operations, pace of development and supply chain remain healthy, as they were through the June quarter end. Our focus on employee welfare, collaboration and safety has allowed our global workforce to operate efficiently through this unique period. We are proud of the resilience, flexibility and dedication of our employees.
We are also pleased with our pace of development, new product traction and the improving state of our core business. Our global development teams continue to make significant and meaningful progress on several fronts, increasing our long-term alignment with significant technology transitions, impacting the semiconductor assembly market, the automotive market and the display market. Within our core semiconductor assembly space, memory, logic and image sensor applications are adopting more complex, heterogeneous integration, which is increasing interest and the adoption of higher density packaging options such as high-accuracy flip chip and the thermo-compression. Fundamental challenges with two-dimensional node shrink are well reported and the new packaging approaches provide an alternative path to deliver both cost savings and performance. This fundamental change is essentially extending the value of back-end assembly, which benefits our core high volume businesses as well as our dedicated advanced packaging solutions.
Customers are seeking solutions and technology partners for emerging 2D and 3D multi-chip assembly techniques. Here we see heterogeneous integrations for complex logic system, memory, mobile application processors and the image sensors driving a need for our Katalyst and APAMA, dedicated advanced packaging systems. In parallel, we are seeing general system-in-package applications for high-volume, cost sensitive devices which continue to benefit our core wire bonder business. We are actively engaged and well positioned to support this ongoing transition and anticipate adoption to accelerate over the coming years.
Next, major trends, such as autonomous, plug-in hybrid and fully electric vehicles are increasing semiconductor demand for the broad automotive market. Our multiple products and the broad base of automotive customers provide insight to this progression of transition. We anticipate demand for our high-reliability and performance-focused automotive systems to grow along with the demand for plug-in hybrid and fully-electric vehicles. Our initial success in automotive power storage and the distribution solution has been beneficial, even with electric vehicles representing only a tiny fraction of today’s global production. We have recently experienced increased demand for power semiconductor applications supporting electric vehicles as well as charging station infrastructures. Although traditional automotive demand has been below our long-term average, we expect a gradual recovery to continue and remain well positioned to support this broader technology transition.
Finally, within display, we continue to ramp production of our PIXALUX system, which is a critical solution to enable new forms of backlighting. This transition is a logical evolution that can deliver performance and the power efficiency for the high-volume display market. Advanced LED unit growth forecasts are significant. Mini and micro LED annual unit production is expected to approach 500 billion units, roughly half of current annual semiconductor production by calendar year 2022 and will continue growing aggressively for several years. This represents a significant capital equipment opportunity for sorting, mixing and final placement.
We are pleased with the performance, market acceptance and the rapid development of PIXALUX and are committed to developing additional technology solutions that support this broad advanced LED transition. As we execute toward these long-term trends supporting advanced packaging, automotive and display, we also anticipate a more fundamental recovery in our core businesses driven by an improving semiconductor unit growth rate. As a reminder, semiconductor unit production declined steeply in early fiscal year 2019 which dramatically reduced the industry’s need for incremental equipment capacity. This extended decline in production is historically uncommon and seems to be behind us.
Based on our September results, near-term outlook and the recent customer feedback we continue to anticipate an ongoing unit-driven recovery throughout fiscal 2021 and expect unit growth, excluding advanced LED, to return to a more normal growth rate over the coming years. After an extended period of low capacity addition, unit growth recovery is being driven by 5G, work-from-home, consumer products and smartphone recovery. These end-market dynamics and our advanced LED ramp are anticipated to shift our seasonal demand pattern through fiscal year 2021. Historically, demand for our products is stronger during the second fiscal half, although we are anticipating demand to be first half weighted in fiscal 2021.
While demand is currently strong, the broad macro environment remains dynamic. Considering the uncertain environment and our limited visibility, we are anticipating revenue within fiscal year 2021 to increase by approximately 20% to 25% over fiscal year 2020. This estimate assumes annual semiconductor unit growth, excluding advanced LED, will return to a historic average of 6% to 7% during the fiscal 2021 year.
Turning back to the September quarter’s performance, capital equipment increased by 21% and APS increased by 9% sequentially. Capital equipment represented 76% of overall revenue and the sequential growth was largely due to a steep recovery within the general semiconductor market. General semiconductor is our largest end-market and most OSAT-based customers fall into this category. In prior calls, we have consistently discussed how the installed base of wire bonders has been running near full utilization rates. At this point, incremental semiconductor output is triggering the need for broader capacity additions in the general semiconductor space. We see strength in 5G, smartphones, gaming, IoT and an increasing demand for multi-die wire-bonded packages.
While our general semiconductor end-market showed the steepest sequential change, we also experienced sequential improvements within the advanced LED market. LED overall was sequentially down, due to a sizeable set of general lighting orders in the June quarter, although our advanced LED sales for the display market increased sequentially. We expect healthy demand for both general lighting and advanced LED applications over the coming quarters.
The auto and industrial end-market, as well as our memory end-market, improved sequentially although remain well below their long-term average. Within auto and industrial, we are seeing a gradual recovery in the traditional automotive market. In memory, we are beginning to see a few customers adding overall capacity and we expect this market to recover as general semiconductor also recovers.
The advanced packaging end-market also grew sequentially and represents our dedicated advanced packaging system that support high-accuracy flip chip, stud bumping, mass-reflow system-in-package and the thermo-compression, and includes our Katalyst, APAMA and AT Premier systems. While this dedicated advanced packaging end-market represents just 9% of capital equipment sales, it is important to note that multi-die advanced packages and advanced LED assembly are becoming material components of our higher general semiconductor, memory and now LED end-markets. Collectively, we estimate that over 30% of our capital equipment sales during the September quarter support advanced packages.
Looking into December quarter, we anticipate general semiconductor and LED to be the primary drivers of the near-term demand. We anticipate strong demand through the December quarter, which again suggests fiscal 2021 will not follow a historical seasonal pattern. Operationally, we are focused on ramping production level to satisfy the strong demand level anticipated for December.
Over the past few years, the broader industry and macro environment was challenging, although the strength of our balance sheet and the market positions allowed us to execute our market expansion strategy, create new long-term growth vectors and return capital to investors. I am confident in the company’s direction and expect new opportunities in automotive, display and advanced packaging, combined with a broader general semiconductor recovery, to fundamentally enhance our business model over the coming years.
I would now like to turn the call over to Lester Wong who will cover this quarter’s financial overview in greater detail, Lester?
Thank you, Fusen. My remarks today will refer to GAAP results, unless noted. While fiscal 2020 clearly came with challenges, we were able to generate full year revenue of $623.2 million, representing a 15% year-over-year increase. Income from operations during fiscal 2020 came in at $58.5 million and represented a 171% sequential increase, highlighting our business model’s operating leverage and potential as we execute on our strategic goals.
For the September quarter, net revenue was $177.7 million, up 18.1% sequentially. Gross margins came in at 50% and generated net income of $15.8 million and $0.25 of EPS. On a non-GAAP basis, we generated net income of $18 million, or $0.29 per diluted share. Gross margins came in much better than expectations. This was partially due to favorable product mix and also a favorable end-of-year adjustment related to our warranty accrual. Without this favorable adjustment, gross margins would have been approximately 47%. However, we are anticipating gross margins to be around 45% over the coming quarters.
Operating expenses for the quarter came in on the higher end of our long-term target range due to end of year incentive compensation accruals associated with the stronger September financial performance. As Fusen mentioned, our global development and operational teams continue to aggressively work towards several long-term initiatives while we also ramp near-term production capacity. We also have several SG&A related projects that have been delayed due to the softer demand environment over the past years.
We anticipate our GAAP operating expense model to remain consistent at $53 million of fixed expenses plus 5% to 7% of variable expenses, tied to revenue. However, we are anticipating the variable component to approach the higher side over the coming quarters. Tax expense for the quarter came in at $8 million due to increased profitability and jurisdictional adjustment. Our total effective tax rate for the year came in just above our long-term tax target of 18%.
Turning to the balance sheet, we ended the September quarter with a total net cash and investment position of $530.1 million, which was up sequentially by $14.3 million and represented $8.49 per diluted share. On a book value per share basis, we closed the September quarter with $12.30, representing a slight sequential improvement. We generated $25.8 million of free cash flow in the September quarter, driven by higher operating income and strong working capital performance. From a days standpoint, we improved working capital efficiency during the September quarter. Days of accounts receivable was down from 117 to 101 days, days of inventory improved from 127 to 113 days and days of accounts payable increased from 55 to 58 days.
For the December quarter, we are guiding revenues to be approximately $240 million plus or minus $10 million. We are guiding gross margins to be approximately 45% plus or minus 50 basis points, due largely to product mix and higher freight charges. This margin forecast also supports a near-term market share strategy for a recently introduced product in our wedge bonding business. GAAP operating expenses is expected to be approximately $70 million plus or minus 2% and non-GAAP EPS to be $0.53 plus or minus 10%. This guidance suggests operating income should increase by over 60% sequentially and highlights the business model’s leverage. This also highlights our potential to create meaningful long-term shareholder value as we support the significant transitions within the semiconductor, automotive and display markets.
This concludes our prepared comments. Operator, please open the call for questions.
Thank you. [Operator Instructions] Our first question today is coming from Craig Ellis from B. Riley. Your line is now live.
Thanks for taking the question and congratulations on the strong recovery in the business guys. The first question, I wanted to follow-up on with some of the elements related to guidance. I believe that one of the things you mentioned, Lester, was that that OpEx will be on the high side of the typical model. So, can you just help us understand how long that will play out? Can you give us some further insight into the specific expenses that are keeping OpEx towards the high-end of the models range?
Sure, Craig. I mean, as we have indicated the fall over the last couple of quarters, we have had a lower level spending over the past six quarters due to lower travel, initially cost reduction reasons during the semi downturn in ‘19 and obviously because of COVID now. We also have lower variable expenses. And also as I said, during fiscal year ‘19, we had a very focused corporate-wide reduction on less critical and discretionary-related expenses, basically we pushed out certain projects that was not critical at the time. Some of these products are now being more critical. And we are also actually increasing our technology engagement with new customers. So, I think for the rest of FY ‘21 again, I don’t guide beyond the quarter, but I would say that it would probably be on the high side of the 7%, 5% to 7% variable.
That’s helpful. And then I will turn to a couple of product questions if I could. First, Fusen, can you just give us a better sense of what you are seeing for PIXALUX, APAMA and Katalyst as we go through fiscal ‘21? It sounds like end-market demand is coming back fairly broadly. And it seems like you have got good traction with those products. But any color and an update on PIXALUX’s fiscal ‘21 prospects specifically would be helpful?
Sure. For the PIXALUX, we previously in our call we have a target to achieve $40 million revenue for FY ‘20. So I am very happy to report that we achieved the goal. For the FY ‘21 actually our first quarter of FY ‘21 we see a sequential growth compared with Q4 of FY ‘20. And we are guiding maybe a run-rate for the next couple of quarters, FY ‘21 from Q1 to Q4, which roughly is going to be between $15 million to $20 million. So, we actually would expect conservatively we will achieve $60 million to $80 million for PIXALUX for FY ‘21. Actually, by ‘22, we have a goal to be a $100 million business and somewhere around ‘21/22 we intend to introduce a new product to the market. And beyond ‘22 we believe – this business shall grow faster and currently show above $100 million and will grow comfortably. So, our goal is around 24%, 25%, hopefully a 40% of our K&S revenue, product revenue probably will be display related. So, that’s PIXALUX. In advanced packaging, particularly PCB, actually [indiscernible] integration is very important in this group and we believe we make very good traction and we believe we [indiscernible] of a few design win in ‘21. And for the advanced packaging, we expect to be much bigger I think in ‘22. So, any other questions?
That was helpful. Yes, one more question, then I will hop back into queue. So I appreciate the color on fiscal ‘21 revenue potential. So, it looks like if I am doing the math, right, that the company expects around $760 million in revenue and that assumes 6% to 7% semi unit growth. I think in the past, you have noted that it’s possible that semi growth would be as high as 10% in ‘21 and ‘22 following 2 years of below seasonal growth. So, if we see semi unit growth more in the double-digit range versus 6% to 7%. How would we think about the model’s potential for upside versus the 20% to 25% or $760 millionish in revenue?
So, maybe I can answer this. We feel good about the current business recovery. And we feel this is sustainable. So at this moment what we plan is for the 20% to 25% and you mentioned this close to maybe $760 million region to maybe $790 million, sounds great. So at this moment, that’s our plan and we plan to [indiscernible], but I think we will have a big outlook about the trends in the second half. So, that’s what we are operating, but it looks like that this recovery is sustainable and we will give you more update in next quarters.
That’s great. Thanks so much, guys. And I will hop back into queue.
Thank you. Our next question today is coming from Tom Diffely from D.A. Davidson. Your line is now live.
Yes, thank you. Maybe just to follow-up on the last line of questioning, so what is driving the unusual seasonality or lack of seasonality this year versus previous years? Is it truly just sort of recovery in the general semiconductor ahead of expectations?
Okay. So, Tom, let me give you a little bit color, the area of our strengths we are seeing. So finally, we are seeing our strengths in the 5G, consumer products, IoT, smartphones and the increase in SIP, also multi-die wire-bonded package die. And we also see ongoing strength in both traditional LED and advanced LED after display, the product we just introduced. So, I can summarize, I have few reasons behind this. The number one, in 2019/2020, I mentioned few times our customer under invest, right. So, when you have over a certain number are triggering by the rush to actually increase our business. So, it’s because of our ongoing investment in our products and customers. And number two actually this recovery is also related to consumer pattern change, such as work-from-home and also stay-at-home. That drives more needs in PC gaming and the other home applications, right. So number three reason I think it’s significant for us. Actually, we see 5G investment. 5G actually is a key end-market. That’s another increasing demand for SIP and very complex multi-die wire-bonded module in the package. So the increasing the complexity in these devices is actually driving incremental capacity [indiscernible] for our advanced wire-bonded. So, that’s what we are seeing. It’s important – I think wire-bonded is also the important part of the 5G investment. So, the last reason I think I mentioned already, in this upcycle, we also see ongoing strength for both traditional LED and advanced LED product, which I introduced. So, these are few reasons behind the current trends we are seeing.
Okay, I appreciate the color. That looks pretty impressive. Okay. And then just to follow-up on the PIXALUX too, when we look at growth from $40 million this year to $80 million or so next year, does that require an expansion to multiple customers or does it require a new tool from you? What are the individual growth drivers or is it just the market itself that’s going to be a little stronger?
Okay. I think actually it’s both, but actually more probably its own intention in the next 2 years also or 1 year also, we intend to introduce multiple products to broaden our advanced LED portfolio. And we do expect our ongoing development activity that we put in will sustain our competitive advantage as we broaden our advanced LED portfolio. So I mentioned ‘20 $40 million, ‘21 about $80 million and beyond that, I think we will need multiple products to judge this business and we are preparing for that.
Great. Okay. And then finally, maybe just a quick overview of what your expectations are for the APAMA and Katalyst in ‘21 as well? Thank you.
Okay. So, moving on, I think we are working on a few design wins. We already had a few, but we actually will try to complete all our targets and we feel confident in our ‘21 to win a few more design wins. I think that ‘22 will be a more significant one. So in ‘22 I mentioned, our PIXALUX and the display business is $100 million. That’s our goal. We also expect maybe [indiscernible] dedicated advanced packaging. We talked about the flip chip PCB and also AT Premier always together can also reach about $100 million [indiscernible].
Great. Okay, thank you.
Thank you. Our next question is coming from Krish Sankar from Cowen & Company. Your line is now live.
Yes, hi, thanks for taking my question and congrats on the very impressive guidance. I had a couple of them. First one, Fusen, if I try to take your comments on FY ‘21 revenues growing 20% to 25% and more first half fiscal year weighted. It looks like the December quarter midpoint of $240 million is probably going to be the highest revenue quarter in FY ‘21. I just want to double check on the math if that’s true? And secondly, is that mainly because the PIXALUX is really front-loaded with new products or like mini LED coming out in Q1 of next year calendar Q1 and therefore it will like slowdown after that?
So, Krish, let me answer that. I don’t think we said the December quarter will be the highest quarter for fiscal ‘21. We did say that seasonality has switched to the front end – sorry, the front part of the year. And as Fusen said for now that this is what we see, we see 20% to 25%, but in response to an earlier question, I mean, as we go ahead further into our fiscal year, we will get better visibility and I can have at that time we revised guidance if we believe that’s necessary. And again, your second question is, the ramp is not because PIXALUX is front loaded, I think the ramp is as Fusen indicated across the board both in advanced display as well as traditional LED as well as general semi driven by again, 5G, as IoT and we are seeing a little bit of recovery in automotive and memory as well.
Got it. Yes, go ahead.
If you remember, our trough actually is Q1 FY ‘19, right. So it’s almost 2 years. And it’s just [indiscernible] every quarter from the point either we got up, we got trapped. So until this moment, we even change the seasonality to go up in the next quarter Q1 ‘21, right. So we didn’t see – we didn’t say it’s going to be the highest one, but the second point is where we will not be every quarter for many, many years, right. So, that’s what we are framing, because of the decent coming back is so strong, we just cannot plan, every quarter going up. That’s why we have current business is at 20% to 25% growth. That situation can be stronger than that. And we already mentioned next quarter, we will take the book, we will have a big outlook for second half of the ‘21 and we will provide update at that time.
Got it. Got it. That’s very helpful. Yes, I do remember, you guys definitely called the bottom – beginning of last year. Couple of other questions. One – second one is, Lester, it does look like in the December quarter, there is going to be more mini PIXALUX shipments relative to the September quarter. But I understand you gave some reasons why the margins might still be like around some gross margin around 45%. We are just trying to figure out, is there drop-through happening because my understanding was that PIXALUX is super high margin for you and there should be pretty nice drop through all the way to the bottom line?
Yes, there is drop-through question as you know. I mean, the drop-through is at $175 million, we get very good operation flow through and if you look at what we are guiding in terms of non-GAAP EPS, I mean, it’s growing by 50%, meanwhile, revenues only go up by 35%. So, that does show that the operating leverage is happening. And as far as why the gross margin went down, I think as I indicated it’s as – for us its product mix. So, there is more traditional LED wire bonders as well as wire bonders in general. And also capital equipment is a larger piece of the quarter rather than APS and our APS business has higher margins plus I get a call from unique items like the freight charges because of the great demand by customers. We are doing more things by air freight than sea freight and that increases our cost as well as we are introducing a new product in our wedge bonded business unit. And as far as the market penetration strategy, the margins are down a little bit.
Yes. So this is one-time. It will not be enough for you.
Got it. Got it. That’s very helpful. Just as a final question for Fusen, ones that are more mini LED products in the marketplace, should we assume PIXALUX will have your typical consumer seasonality embedded in it or do you think because it’s still in a growth mode we should not think a whole lot about seasonality on a quarterly basis?
So, actually, Krish, we did not state the PIXALUX is on seasonality. Again, what I just mentioned to [indiscernible] is $30 million actually for the last year, we are very happy to report we achieved the goal and the ‘21 we actually see quite even, our shipment, that’s our business plan. Every quarter, it’s between $15 million to $20 million, but we would like to state hopefully we will be in the high side, so even the high side will be $80 million business. So, we didn’t see seasonality for PIXALUX, the 7 point, I think that this is the initial product and the customer base is not many, so it’s a 7 point you will see some more spotty right in our business quarter by quarter and hopefully in the December quarter maybe a year from now on and after penetration we will see more repeatable and more trustable business in our advanced.
Got it. Thank you very much, Fusen. Thanks, Lester.
Thanks, Krish.
Thank you. Our next question today is coming from David Duley from Steelhead Securities. Your line is now live.
Yes, thanks for taking my question. I guess the first question I have is about your core wire-bonded business. The large OSAT in Taiwan was talking about a huge difference between supply and demand somewhere between 30% and 40% of not needing more capacity? And also talked about how the wire bonders now I guess I want to say are slowing down a bit, because they are having to do more stacking and having to connect more wires per device. I am just wondering what sort of intensity increases you are seeing as you move into calendar 2021 on the wire bonder front? Are these packages and more wires like 15% or 20% more wire bonder intensive than previous packages or could you comment on that? And just then also just comment on what the utilization rates are for your equipment?
Okay. So I will answer the first part and then Lester [indiscernible] into the second part of the question. So, Dave, let me say this many people come in above – [indiscernible] business and also technologies. And after that we improved this long and we will continue to be long. We believe that the wire bonder is very important part of packaging solutions. And so far, I feel that yearly production is our semiconductor devices before the packaging is about 1 trillion of devices waiting for to be packaged – to be interconnected. 70% actually use our product mix and [indiscernible] and we are seeing a more dedicated, more complex [indiscernible] wonder, because the 5G is not only smartphone only and not only our station as there is a whole infrastructures and then bring actually a lot of devices and they did need to have a very complex wire-bonded process to pull a multi-die together in SIP and also multi-die module. And because of that additional requirement, because of additional increasing capacity or there is a complexity type and that will drive our [indiscernible]. So, I don’t know if I answered your question or not, but let me give you a color. So, we believe part of the bank’s board under is a very, very special technology. You can do our 3D, our packaging for some [indiscernible]. So, actually, if I could, every company have a different definition of advanced packaging. So I think K&S above advanced packing should be defined as following, right. We mentioned our dedicated advanced packaging, flip chip for the last, PCB, APAMA, [indiscernible] and AT Premier. So, this part actually will be present in our September quarter, 9% of our total capital equipment sales, right. I think it is advanced packaging, because of our special requirement, because very, very complex looping capability, you can connect our 2D and 3D die-to-die and within the die. Actually, in this capability, we know that these are multi-die I think packaging would not be possible. So, we have 2D and 3D multi-die packaging, I think by using our advanced bundle that should be categorized as advanced packaging. So follow 2D as IP, multi-die package is about 8%, 3D spec memory is about 5% of our September capital equipment sales for September, right. And then I think our [indiscernible] should also include advanced LED assembly, and we love our system, I think we will not be able to achieve very, very high final placement. So, advanced LED assembly is above 10% of our September quarter sales. So all is 18% together, we believe our products [indiscernible] of advanced packaging. So I don’t know if I answered your question.
I guess my question was more about just wire bonder intensity, it seems one of your large customers in Taiwan was talking about on their conference call that the wire bonders are literally slowing down, because they are having to connect more leads per device and having to do more loop. So, you need more wire bonders per device or so the intensity of wire bonding is increasing. So I am just wondering if you are – if you have some sort of metric is it increasing by 25%, 20%, 10%?
Well, I can only tell you, we are only in the beginning of a huge event at this moment and – but we believe, because we are highly bringing very, very complex multi-die packaging that we covered under. And right know we have capacity constraint and we will give you a more precise number maybe on the next call. We will give you the demand percentage increase.
So, Dave, let me answer the utilization question, right. So, from September quarter, utilization was about 80%, Taiwan and China of significantly above 80%, China is almost at full capacity, over 90% Southeast Asia also has improved significantly and they are now still around 75% or so. Obviously, Europe and North America have improved, but they are actually lagging the other markets.
But as you know, [indiscernible] is sustainable and the [indiscernible] also big part of that. So along with the new product introduction, we talk about PIXALUX in the future would be new product portfolio in display, in advanced packaging, as we mentioned it and the board, I think this also participates in the big ramp again for this current obstacle.
Thank you.
Thank you. [Operator Instructions] Our next question is coming from Christian Schwab from Craig-Hallum Capital Group. Your line is now live.
Great, thank you. Congrats on the nice recovery starting here. So, can you follow-up to the previous question stated slightly different, when you look at your general semiconductor business and you see more silicon content in next generation 5G applications and we saw in 4G as well as the continued movement to electrical vehicles and continued electrification of automobile facility contents going forward, in addition, potential increased capital needs to the complexity of some of these chips. Can you give us an idea if the general semiconductor unit growth is just to keep the math easy say 10% a year for the next few years? Would you expect to outgrow unit growth into Q2 over time, what percentage would you expect?
Christian, I am sorry I think your voice is [indiscernible]. But I hear your question asked about the unit growth rate, right, but at this moment I think, the industry actually have a different forecast. And now, it is a little bit more positive, so for our business trends, I think trends ‘21 and ‘22 is going to be around 6% to 8% and the market, I think dynamic change. We are going to update you maybe in one or two quarters. But, at this moment, I think, that’s what we are planning. We are going to see forecast very, very long life next 2 years, as we are seeing of our 6% to 8% [indiscernible] but we are going to revise it and see the change.
Okay, great. No other questions. Thank you.
Thank you. Our next question today is coming from Craig Ellis from B. Riley. Your line is now live.
Yes, thanks for taking the follow-up questions. I’ll just start with one that goes back to the utilization color that you provided, Lester, thanks for the granularity there. Would it be fair to say that the strength in the business that you are seeing in the fiscal first quarter is really led by China and Southeast Asia, in effect? So given the utilization levels in Europe and North America, would it be fair to think that, as we look ahead to fiscal 2Q that more of the incremental strength would be coming from those geographies or is impact the order dynamic different than what we see if we just did a one-to-one correlation with utilization levels?
I would say, Craig that for Q1 actually is China and Taiwan more than Southeast Asia. Southeast Asia utilization is as that improving, but not to the levels where Taiwan and China is. I think going forward I think the continued growth will also come from Taiwan, Taiwan is lagging further behind the China utilization but they are already very, very high. So we can see continued strength from Taiwan and Southeast Asia over the next two quarters or so. And then as North America and Europe, they will catch up hopefully assuming they solve the COVID issue. So I would say it’s probably in that sequence. But we see continued strength in the next two, three quarters, in the Taiwan and Southeast Asia.
Great. And then the next one is really just a housekeeping question. On the color you have provided around fiscal 1Q gross margin. So clearly, there is increased shipping cost because of order intensity with customers and then you talked about the new wedge product impacting gross margin. Can you quantify what the combined impact of those two or four?
I would say probably around maybe 150 basis points or so.
Great. That’s very helpful. Yes. And then tax rate for the quarter and year, should that be 18%?
Yes, I think we are still forecasting 18%.
Okay. And then lastly, long-term question, Fusen, so, it’s clear that you are gaining some visibility into new product ramps on a multiyear basis, very encouraging to see that. And we clearly have a rebound in the general semi business that as you have articulated multiple times, is led by numerous secular dynamics plus some cyclical things like a SAR recovery and a smartphone recovery. The question is this, as you look at how the business is unfolding on a multiyear basis, are you starting to gain visibility into the low end of the target model, which was $1.15 billion and $4 in earnings per share or do you not yet have visibility to revenues at that level as you look out to ‘22 and ‘23?
Okay, so Craig, let’s look at this. We must group, I mentioned, the negative unit growth, actually is very uncommon, right, especially happen in this industry, ‘19 and ‘20, this is really, really uncommon fact, but considerably let me answer the question on legacies. It should be yes, probably [indiscernible] close to $90 million and then we have [indiscernible] 540 and we have this year just finished of 20 is about 630 also. So if you add additional 3 together, we have one in Australia and 2 in the upcoming year. So if you add actually it’s about $700 million. So this I believe can represent the very, very strong [indiscernible] long way of acquisitions, right, because we are in a very strong year and very, very too low. And I mentioned already, this is very uncommon, how can we in this war, how can we have negative unit growth. So, relative to this, I – we feel like $700 million run-rate should be sustainable as a base for the core business. So – but in 2 years, [indiscernible] in 2 years, 2022, we mentioned already, I think, display we already guide ‘21, maybe we reach 60, 80, right. So on the high end 80 is already very close to 100. So, we believe 2020 – 2022 display, we can sit at $100 million goal. I say we can feel it, we can touch it. I think you know we feel that’s available. Advanced packaging actually we get paid about $100 million we [indiscernible] are offering our advanced packaging dedicated, dedicated. We are dedicated in the advanced packaging will bee $100 million. And APS we can also grow another $58 million, so all this together, I think [indiscernible] looks like it is achievable from our view that is more a fact. So but if we are very lucky with the current business in a beautiful water, then we almost reach $250 million runway, I think your business goals are crazy. I think we probably will be also higher than $700 million or even higher like the $100 million or it can be a little bit even higher than, but we believe that want to – we really don’t want to see our core business overrun, but we believe this was sustainable above $700 million. So overall, we feel good. The general [indiscernible] I think is recovering and we also believe our product [indiscernible] and we are making objection. And hopefully, by 2022, not 2021, we want that to be luck, by 2022 and hopefully we have a good possibility to achieve our goals.
That’s very helpful. Thanks everybody, and good luck.
Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comment.
Thanks, Kevin. Thank you all for the time today. We will be presenting at Needham, Sidoti, D.A. Davidson conferences and also the CEO Summit over the coming months. As always, please feel free to follow-up directly with any additional questions. Have a great day everyone. Kevin, this concludes our call. Thanks.
Thank you. That does conclude today’s teleconference and webinar. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.