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Kulicke & Soffa Industries Inc (KLIC) Q4 2020 Earnings Call Transcript

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Kulicke & Soffa Industries Inc (NASDAQ:KLIC)
Q4 2020 Earnings Call
Nov 19, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Kulicke & Soffa’s Third [sic.] [Fourth] Quarter Results Conference Call. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

It is now my pleasure to introduce your host, Joe Elgindy, Senior Director of Investor Relations, Kulicke & Soffa. Thank you, Mr. Elgindy. You may begin.

Joseph ElgindySenior Director of Investor Relations and Strategic Initiatives

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 end 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, Fusen.

Fusen ChenPresident and Chief Executive Officer

Thank you, Joe. We are pleased to report that, despite global COVID-19 related challenges, all operations, pace of development and the supply chain remain healthy as they were through the June quarter end.

Our focus on employee welfare, collaboration and the safety has allowed all global workforce to operate efficiently through this unique period. We are proud of the resilience, flexibility and the 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 team continued to make significant and a meaningful progress on several front. Increasing our long-term alignment with a significant technology transitions, impacting the semiconductor assembly market, the automotive market and the display market. Within our core semiconductor assembly space, memory, logic and the image sensor applications are attracting more complex heterogeneous integration, which is increasing interest and adoption for higher density packaging options, such as High Accuracy Flip Chip and the Thermo-Compression.

On the major challenge with two dimensional [Indecipherable] and the new packaging approach provide an alternative path to deliver, both cost saving and performance. This one of the major change is essentially extending the value of back end assembly, which benefit our core high volume businesses, as well as our dedicated advanced packaging solution.

Customers are seeking solutions and a technology partner for emerging 2D and 3D multi-chip assembly techniques. Here we see heterogeneous integrations for complex logic system, namely, mobile application processor and imaging sensor, driving a need for our Katalyst and APAMA, dedicated advanced packaging system.

In parallel, we are seeing general [Indecipherable] 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 anticipated adoption to accelerate over the coming years.

Next major challenge, such as autonomous, plug-in hybrid and the fully electric vehicle are increasing semiconductor demand for the broad automotive market. Our multiple product and the broad base of automotive customers provide insight to these provision of transition. We anticipate demand for our high reliability and performance focused automotive system to grow along with the demand for plug-in hybrid and the fully electric vehicles.

Our initial success in automotive power storage and distribution storage has been beneficial even with electric vehicle representing only a tiny fraction of today’s global production. We have recently experienced increased demand for power semiconductor applications supporting electrical vehicle, as well as charging station infrastructures.

A low 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 solutions to enable new phone of backlighting. This transition is a logical evolution that can deliver performance and 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 unit, roughly half of current annual semiconductor production by calendar year 2022. And it will continue growing aggressively for several years. This represent 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 solution that support this broad advanced LED transition. As we execute toward this long-term trend, supporting advanced packaging, automotive and the display, we also anticipate a more fundamental recovery in our core businesses, driven by an improving semiconductor unit growth rate. As a reminder, semiconductor until production declined steeply in early fiscal year 2019, which dramatically reduced the industries need for incremental equipment capacity.

This extended decline in production is historically uncommon and seems to be behind us. Based on our September result, 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 the smartphone recovery. This end market dynamic and our advanced LED ramping are anticipated to shift our seasonal demand patterns through fiscal year 2021. Historically, demand for our product is stronger, even in the second fiscal half, although we are anticipating demand through the first half weighted in fiscal 2021.

Wire demand is currently strong, the broad macro environment remain dynamic. Considering the uncertain environment and our limited visibility, we are anticipating revenue within fiscal year 2021 to increase approximately 20% to 25% over fiscal year 2020. This estimate assume annual semiconductor unit growth, excluding advance LED, will return to a historic average of 6% to 7% during the fiscal year 2021.

Turning back to the September quarter’s performance. Capital Equipment increased by 21% and the APS increased by 9% sequentially. Capital Equipment represents 76% of overall revenue and that sequential growth was largely due to a steep recovery within the general semiconductor market. General semiconductor is our largest end market and the most OSAT based customer fall into this category. In prior calls, we have consistently discussed how the installed base of wire bonders has been running near full utilization rate.

At this point, the incremental semiconductor output is triggering the need for broader capacity addition in the general semiconductor space. We see strength in 5G, smartphone, gaming, IoT and an increasing demand for multi-die wire bonding packages.

While our general semiconductor end market shows the steepest sequential change, we also experienced sequential improvement within the advanced LED market. LED overall was sequentially down due to a sizable set of general lighting order in the June quarter allow our advanced LED sales for the display market increase sequentially. We expect healthy demand for both general lighting and advanced LED application over the coming quarters.

The auto and the 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 customer adding over capacity and we expect this market to recover as general semiconductors also recoveries.

The advanced packaging end market also grew sequentially and represent our dedicated advanced packaging system that support high accuracy flip chip, stud bumping, mass-reflow system-in-package and the thermo-compression, and that include our Katalyst, APAMA and AT Premier systems. While this dedicated advanced packaging end market represent just 9% Capital Equipment sales, this is important to note that multi-die advanced packages and advance LED assembly are becoming material components of our higher general semiconductor, memory and in our LED end markets. Collectively, we estimate that over 30% of our capital equipment sales during the September quarters support advanced packages.

Looking into December quarter, we anticipate general semiconductor and LED to be the primary driver of the near-term demand. We anticipate strong demand through the December quarters, 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 the macro environment was challenging. Although the strength of our balance sheet and the market position allow us to execute all market expansion strategy, create new long-term growth vector and return capital to investors.

I’m 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?

Lester WongSenior Vice President and Chief Financial Officer

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 models 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 margin came in much better than expectations. This is 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 toward several long-term initiatives, while we also ramp near term production capacity.

We also have several SG&A related products that have been delayed due to 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’re anticipating the variable component to approach to 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 efficiently during the September quarter. Days of accounts receivable was down from 117 days to 101 days, days of inventory improved from 127 days to 113 days and days of accounts payable increased from 55 days to 58 days.

For the December quarter, we are guiding revenues to be approximately $240 million, plus or minus $10 million. We’re 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 support a near-term market share strategy for 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 models 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 market.

This concludes our prepared comments. Operator, please open the call for questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question today is coming from Craig Ellis from B. Riley. Your line is now live.

Craig EllisB. Riley FBR, Inc. — Analyst

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 and give us some further insight into the specific expenses that are keeping opex toward the high end of the modest range?

Lester WongSenior Vice President and Chief Financial Officer

Sure, Craig. I mean, as we’ve indicated before over the last couple of quarters, we’ve had a lower level of 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 2019 we had a very focused corporatewide reduction on less critical and discretionary related expenses, basically we pushed out certain projects that was not critical at that time.

Some of these projects 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.

Craig EllisB. Riley FBR, Inc. — Analyst

That’s helpful. And then I’ll turn to a couple of product questions, if I could. First, Fusen, can you just give us a better sense of what you’re 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’ve got good traction with those products, but any color and an update on Pixalux’s fiscal ’21 prospect specifically would be helpful?

Fusen ChenPresident and Chief Executive Officer

Sure. For the Pixalux, we previously in our call, we have a target to achieve our $40 million revenue for FY ’20. So I’m very happy to report that we achieved the goal. For FY ’21, actually, 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 next couple of quarters, FY ’21 from Q1 to Q4. I think, roughly is going to be between $15 million to $20 million. So we actually would expect, conservatively, we will achieve our $60 to $80 million Pixalux for FY ’21.

Actually, by ’22 we have a goal to be a $100 million business, and somewhere along ’21, ’22 we intend to introduce a new product to the market, and beyond ’22 we believe we — this business should grow faster and [Indecipherable] above $100 million and will grow positively. So our goal is, along ’24 ’25, hopefully achieving 20% of all K&S revenue, product revenue probably will be display related. So that’s Pixalux.

In advanced packaging, particularly at PCB, I think our heterogeneous is very important in this group and we believe we make a very good traction and we believe we will [Indecipherable] 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.

Craig EllisB. Riley FBR, Inc. — Analyst

That’s helpful. Yeah, one more question, then I’ll hop back in the queue. So I appreciate the color on fiscal ’21s revenue potential. So it looks like, if I’m 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’ve noted that it’s possible that semi growth would be as high as 10% in ’21 and ’22 following two 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 models potential for upside versus the 20% to 25% or $760 million-ish in revenue?

Fusen ChenPresident and Chief Executive Officer

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, it is close to maybe $760 million to maybe $790 million, translate. So, at this moment that’s our plan. And we plan for revenue more weighted in the first half, but I think we will have a better outlook about the trends in the second half. So that’s our opinion. But it looks like that this recovery is sustainable and we’ll give you more update maybe in next quarters.

Craig EllisB. Riley FBR, Inc. — Analyst

That’s great. Thanks so much, guys. And I’ll hop back in the queue.

Operator

Thank you. Our next question today is coming from Tom Diffely from D.A. Davidson. Your line is now live

Tom DiffelyD.A. Davidson — Analyst

Yes. Thank you. Maybe just a follow-up on the last line of questioning. So what is driving the unusual seasonality or the lack of seasonality this year versus previous years? Is it truly just a recovery in the general semiconductor ahead of expectations?

Fusen ChenPresident and Chief Executive Officer

Okay. So Tom, let give you a little bit of color. The area of strength we are seeing. Okay. So currently we are seeing our strengths in the 5G, consumer products, IoT, smartphone and a increase in SIP, also multi-die wire-bonded package. Okay. And we also see ongoing strength in both traditional LED and advance LED display, the product we just introduced.

So I can summarize, I think there are few reason behind this. The number one, in 2019, 2020 I mentioned a few times, all customer under invest. So when you have reached over a certain number are triggering by the rush to actually increase our business. So it’s because of our under-investment in our products and customers. And number two, I think this recovery is also related to consumer pattern change, such as work from home and also stay at home, but drive more need in PC, gaming and other home application, right? So number three reason, I think, is significant for us. Actually we see 5G investment, 5G actually is a key end market that drive another increasing demand for SIP and very complex multi-die wire bounded module and the packages.

So the increasing complexity in these devices actually drive incremental capacity [Indecipherable] for our advanced wire bonding. So that’s what we are seeing. In simple language, I think wire bonder actually also an important part on the 5G investment. So the last reason, I think, I mentioned already, in this up cycle we also see ongoing strength for both traditional LED and advances LED new product was we introduced. So these are few reason behind the current strengths we are seeing.

Tom DiffelyD.A. Davidson — Analyst

Okay. No, I appreciate the color, that looks pretty impressive. Okay. And then just a 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 as we’re going to be a little stronger?

Fusen ChenPresident and Chief Executive Officer

Okay. I think that is — it actually is both, but actually more probably is our intention in the next two years or so or one year or so. We intend to introduce multiple products to broaden our advanced LED portfolio. And we do expect ongoing development activity, the effort we put in will sustain our competitive advantage as we broaden our advance-LED portfolio. So I mentioned ’20, $14 million, ’21 above $18 million. And beyond that, I think that we will need multiple products to drive this business and we are preparing for that.

Tom DiffelyD.A. Davidson — Analyst

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.

Fusen ChenPresident and Chief Executive Officer

Okay. So for ’21, I think we still working on few design win, although we already had few, but we actually will try to complete all our target. And we feel confident in ’21 to win a few more design win. I think the ’22 will be a more significant one, right. So in ’22, I mentioned, our Pixalux and display business is around $100 million. That’s our goal. We also expect maybe at a time, our dedicated advanced packaging. We talked about the Flip Chip, PCB and also AT Premier always together can also reach above $100 million. That is really our current goal.

Tom DiffelyD.A. Davidson — Analyst

Great. Okay. Thank you.

Operator

Thanks. The next question is coming from Krish Sankar from Cowen & Company. Your line is now live.

Krish SankarCowen & Company — Analyst

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 revenue is 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 wanted to double check on that math, if that’s true?

And secondly, is that mainly because the Pixalux is really front loaded with the new product, sort of like, Mini LED coming out in Q1 of next year, calendar Q1 and therefore it will like slowdown after that?

Lester WongSenior Vice President and Chief Financial Officer

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%, 25% but in response to an earlier question, I mean, as we go ahead further into our fiscal year, we will get better visibility in the second half. And at that time we’ll revised guidance if we believe that’s necessary.

And again, your second question is, the ramp is not because Pixalux us front loaded. I think the ramp is, as Fusen communicated, across the board, both in advanced display, as well as traditional LED, as well as general semi driven by, again, 5G, IoT and we are seeing a little bit of recovery in automotive and memory as well.

Tom DiffelyD.A. Davidson — Analyst

Got it. [Multiple Speech] go ahead.

Fusen ChenPresident and Chief Executive Officer

If you remember, our trough actually is Q1 of ’19, right? So it is almost two years. And since we reach a trough, every quarter from that point, either we go up, or we go dropped. So until this moment we even changed 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 a highest

One. But at the certain point it will not be every quarter for many, many years, right. So that’s what we are planning, because the business coming back is so strong, we just cannot plan at quarter going up. That’s why we have current business is 20% to 25% growth, but situation can be stronger than that. And we already mentioned, next quarter we will take the book, you will have a better outlook for second half of ’21, and we probably will provide update at that time.

Krish SankarCowen & Company — Analyst

Got it, got it. That’s very helpful. And I do remember you guys definitely called the bottom beginning of last year. A 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 — gross margin around 45%. I’m just trying to figure out, is the drop through happening, because my understanding was that, Pixalux have super high margin for you and there should be pretty nice drop through all the way to the bottom line?

Lester WongSenior Vice President and Chief Financial Officer

Yeah. There is drop through, Krish. As you know, I mean, the drop through is at $175 million which is 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 60%, meanwhile, revenue is only growing 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, for us it’s product mix, so there is more traditional LED ball bonders, as well as there’s ball bonders in general and also capital equipment is a larger piece of the quarter, rather than APS. And our APS business has high margins, plus I did call some unique items like the freight charges because of the great demand by customers. We are doing more things by air freight and sea freight and that increases our cost, as well as, we are introducing a new product in our wedge bonder business unit. And as part of the market penetration strategy, the margins are down a little bit.

Fusen ChenPresident and Chief Executive Officer

Yeah. So this is a one-time, it will not be for ever.

Krish SankarCowen & Company — Analyst

Got it. That’s very helpful. The final question for Fusen. Once there are more mini LED products in the marketplace, should we assume Pixalux will have a 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?

Fusen ChenPresident and Chief Executive Officer

So, actually, Krish, we did not say that Pixalux will have a seasonality. I think what I just mentioned to Craig’s question, with $40 million actually for last year, we are very happy to report we achieved the goal. And for ’21, we actually see quite even achievement, that’s our business plan. Every quarter it’s between $15 million to $20 million, but we like to say, hopefully, we will be in the high side. So given we are in high side we will be $80 million business. So we didn’t see seasonality for Pixalux.

The second point, I think this is the initial product, and the customer base is not many. So at a certain point you will see some steady business quarter-by-quarter. And hopefully, by introducing more product, maybe a year from now on. And after penetration we will see a more repeatable and a more flexible business opens.

Krish SankarCowen & Company — Analyst

Got it. Thank you very much, Fusen. Thanks, Lester.

Operator

Thank you. Your next question today is coming from David Duley from Steelhead Securities. Your line is now live.

David DuleySteelhead Securities — Analyst

Yeah. Thanks for taking my question. I guess the first question I have is about your core wire bonder 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 are, I guess, I want to say are slowing down a bit, because they’re having to do more stacking and having to connect more wires per device. I’m just wondering what sort of intensity increases you’re seeing as you move into calendar 2021 on the wire bonder front? Are these stacked packages and more wires, like 15% to 20% more wire bonder intensive than previous packages? Or could you comment on that? And then also just comment on what the utilization rates are for your equipment?

Fusen ChenPresident and Chief Executive Officer

Okay. So, I will answer the first part and then Lester [Indecipherable] into the second part. So Dave, let me say this, many people comment about the [Indecipherable] business and also technology. And I think we already prove it wrong and it will continue to be wrong. We believe the ball bonder is a very important part of packaging solution. And so far, I think, that yearly production of semiconductor devices before the packaging is about 1 trillion of devices waiting for to be packaged to be interconnected.

70% of that actually use our product mix and when we come through the 5G IoT and that we are achieving a more dedicated, more complex requirement for the bonder, because the 5G is not only — smartphone only. And not only in our station and actually it’s a whole infrastructure and bring actually bring a lot of devices and they really need to have a very complex wire bonder process to put a multi dice together in SIP and also multi diode module. And because of our additional requirement because of additional increasing capacity or this complex diode and that would drive [Indecipherable] and continue to grow, right? So I don’t know, if I answer your question a lot, but let me give you a color.

So we believe part of the advanced bonder is a very, very special technology. You can do our 3D packaging for [Indecipherable]. So actually, if I could — maybe company have a different definition of advanced packaging. So I think K&S advanced packaging should be defined as following, right? We mentioned our dedicated advanced packaging, the chip Katalyst, PCB, APAMA, stud bumping and AT Premier. So this part actually represents in our September quarter 9% of our total capital equipment sales, right?

I do believe advanced packaging of a special requirement because of very, very complex looping capability, you can connect 2D and 3D diode to diode and within the diode, actually in this capability, we know that this mulit-diode I think packaging will not be possible, right. So we have 2D and 3D multi diode packaging, I think by using advanced bundle, that should be capitalized as advanced packaging. So for 2D as SIP multi diode package is about 8%. 3D stacked by memory, is about 5% of our September capital equivalent sales for September.

And right now, I think our AP should also include advanced LED assembly, and we love our system. I think, I will not be able to achieve a very, very high final placement. So advanced LED assembly is about 10% of our September quarter sales. So all these adding together, we believe our product 32% of our product is supporting for advance packaging. So I don’t know, if I answer your question.

Krish SankarCowen & Company — Analyst

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’re having — kind of connect more leads per device and having to do more loops, so you need more wire bonders to — per device or — the intensity of the wire bonding is increasing. So I’m just wondering, if you have some sort of metric, is it increasing by 25%, 20%, 10%?

Fusen ChenPresident and Chief Executive Officer

Well, I can only tell you, we only seen a beginning of huge demand at this moment. And, but we believe because of our 5G bringing very, very complex multi-diode packaging that we call the bonder [Indecipherable]. And right now we really have a capacity constraint. And we will give you a more precise number, maybe a next couple of — the demand percentage increase for the bonder.

Lester WongSenior Vice President and Chief Financial Officer

So Dave, let me answer the utilization question, right. So for the September quarter utilization was above 80%, Taiwan and China significantly above 80%. China is almost at full capacity over 90%. Southeast Asia also has improved significantly, they are now up to around 75% or so; Obviously, Europe and North America have improved, but they’re actually lagging the other markets.

Fusen ChenPresident and Chief Executive Officer

But a case, [Indecipherable] I think the simple answer. This upside, we feel like it is a sustainable and the ball bonder will also be part of that. So along with a new product introduction, we talked about PIXALUX in the future will be a new product portfolio in display and advanced packaging, as we mentioned it, and the ball bonder I think is also published in a big ramp I think for this current [Indecipherable].

Krish SankarCowen & Company — Analyst

Thank you.

Operator

Thank you. [Operator Instructions] Our next question is coming from Christian Schwab from Craig-Hallum Capital Group. Your line is now live.

Christian SchwabCraig-Hallum Capital Group — Analyst

Great. Thank you. Congrats on a nice recovery starting here. So can you follow-up to the previous question you’ve seen a slightly different? Listen, when you look at your general semiconductor business and we see more silicon content in next generation 5G applications and as we saw in 4G as well as the continued movement to electrical vehicles and continued electrification of the automobile to some of your content going forward. In addition, potential increased capital needs due to the complexity of some of these chips. Can you give us an idea the general semiconductor unit growth is just to keep the math easy, say, 10% a year in the next few years. Would you expect to — outgrow unit growth? And if you do overtime, what percentage would you expect?

Fusen ChenPresident and Chief Executive Officer

Well, Christian, I’m sorry, I think your voice did not come very clear to us, but I hear your question asking about our unit growth, right? So at this moment, I think the industry actually have a different forecast. And now it’s a little bit more positive. So for our business plan, I think we planned ’21 and ’22 is going to be around 6% to 8%. And if 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 don’t see, we don’t want to walk [Indecipherable] up very, very long, right? The next two years, actually, we are seeing about 6% to 8%, that’s what our core plan. It can be faster, but we are going to do revise it — [Indecipherable] change.

Christian SchwabCraig-Hallum Capital Group — Analyst

Okay. Great. No other questions. Thank you.

Operator

Thank you. Your next question today is coming from Craig Ellis from B. Riley. Your line is now live.

Craig EllisB. Riley FBR, Inc. — Analyst

Yeah. 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. But would it be fair to say that the strength in the business that you’re seeing in the fiscal first quarter is really led by China and Southeast Asia and in about 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 other dynamic different than what we see, if we just did a one to one correlation with utilization levels?

Lester WongSenior Vice President and Chief Financial Officer

I would say, Craig that for Q1 actually is China and Taiwan more than thought if Asia. Southeast Asia utilization is 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 a little bit behind the China in terms of utilization, but they are already very, very high. So we can see continued strength from Taiwan and in 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 issues. So I would say it’s probably in that sequence, but we see continued strength in the next two, three quarters kind of in the Taiwan and Southeast Asia.

Craig EllisB. Riley FBR, Inc. — Analyst

Great. And then the next one is really just a housekeeping question on the color you provided around fiscal 1Q gross margin. So clearly, there is increased shipping costs because of order intensity with customers, and then you talked about the new wedge [Indecipherable] product impacting gross margin. Can you quantify what the combined impact of those two are for? I would say probably around maybe 150 basis points or so. Great. That’s very helpful. Yep. And then, tax rate for the quarter and year, should that be 18%?

Lester WongSenior Vice President and Chief Financial Officer

Yes. I think we’re still forecasting 18%.

David DuleySteelhead Securities — Analyst

Okay. And then lastly, long term question, Fusen. So it’s clear that you’re gaining some visibility into new product ramps on a multi-year basis, it’s very encouraging to see that. And we clearly have a rebound in the general semi business that, as you’ve 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 multi-year 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 of that level as you look out to ’22 and ’23.

Fusen ChenPresident and Chief Executive Officer

Okay. So [Indecipherable], let’s look at this. In my script, I mentioned the negative unit growth actually is very uncommon, right? Especially happened in this industry ’19 and ’20, this is a relatively uncommon, right? So in a conservative way, let me answer the question like this. If we add three years, probably ’18 is a very strong year, right? Revenue is close to $900 million. And then we have [Indecipherable] and we have this year just finished ’20 is about $630 million also. Right? So if you add these three together, we have one very strong year and two very uncommon year, right? So [Indecipherable] is about $700 million. So this I believe can represent the very, very solid [Indecipherable] long way of our core business, right? Because of one strong year and very, very two low years.

And I mentioned already, this is a very uncommon. How can we — in this world [Indecipherable] we have a negative unit growth. So over a certain phase we feel $700 million run rate should be sustainable as this for the core business. So — but in two years, maybe we don’t talk about one year and two years 2022. We mentioned already, I think, display. We already guided ’21 maybe will reach $60 million, $80 million, right. So on a higher end, $80 million is already very close to $100 million. So we believe 2022 display, we just sit at $100 million goal. I think we can feel it, we can touch it. I think we feel good about the goal.

Advanced packaging, actually, we paid about $100 million. We intend to have a few significant design wins in ’21 and in ’22, I think, hopefully our advances packaging dedicate –dedicated advances packaging will be $100 million. I think APS, we can also grow another $50 million, $80 million. So all these together, I think $1 billion look like is achievable from out view at this moment. Right. So — but if we are very lucky with the current business in a beautiful water. Right now, we almost reached $250 million run rate. I think if the business go crazy, I think we probably will be also higher than $700 million or even higher level $800 million or can be a little bit even higher, right. But we really don’t want to — we really don’t want see our core business overall, but we believe this should be sustainable above $700 million.

So overall, we feel good. The general semi, I think, is recovering. And we also believe our product road map is strong and that we are making traction. And hopefully by 2022, and not 2021, 2021 that would be luck, but 2022 and hopefully, we have a good possibility to achieve our goals.

Craig EllisB. Riley FBR, Inc. — Analyst

That’s very helpful. Thanks, everybody, and good luck.

Operator

Thank you. We reached end of our question-and-answer session. I’d like to turn the floor back over to management for any further or closing thanks.

Joseph ElgindySenior Director of Investor Relations and Strategic Initiatives

Thanks, Kevin. Thank you all for the time today. We’ll 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.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Joseph ElgindySenior Director of Investor Relations and Strategic Initiatives

Fusen ChenPresident and Chief Executive Officer

Lester WongSenior Vice President and Chief Financial Officer

Craig EllisB. Riley FBR, Inc. — Analyst

Tom DiffelyD.A. Davidson — Analyst

Krish SankarCowen & Company — Analyst

David DuleySteelhead Securities — Analyst

Christian SchwabCraig-Hallum Capital Group — Analyst

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