Camtek Ltd. Price & Performance (CAMT)

Camtek does not undertake the obligation to update these forward looking statements in light of new information or future events. Today's discussion of the financial results were presented on a non GAAP financial basis unless otherwise stated, As a reminder, our detailed reconciliation between GAAP and non GAAP results can be found in today's earnings release. And with that, I would now like to hand the call over to Mr. Rafi Ami, Hamtex's CEO. Rafi, please go ahead. Okay. Thanks, Kenny. Hello, everyone. Complic ended the fourth quarter and the whole year with record results. Q4 revenue were $117,000,000 an increase of 32% year over year. The operating income was $36,300,000 42% improvement year over year. [indiscernible] [indiscernible] Revenue were $4.00 $29,000,000 an increase of 36% year over year and operating income came at $130,000,000 56% better than last year. The distribution of revenue for the whole year was around 50% for HPC, and 20% for other advanced packaging applications. The rest was divided between CIS compound semi front end and general two d applications. We are starting 2025 with strong business momentum and expect 2025 to be a year of growth. Well beyond the 5% WFE gross estimates. The main growth driver is a expected to be high performance computing or HPC in which we are a key provider.

The demand in HPC segment remains [indiscernible] And overall, we expect the contribution of HPC to be at least 50% in the first half of twenty twenty five. Just this week, we received orders totaling over $10,000,000 for HPC related product, which reinforce our assessment of continued growth in the demand for this segment. We identify a shift in the market regarding manufacturing and packaging of HPC modules, where these model are gradually start to be manufactured not only by IDML foundries, but also by OSATs. This change in trend is a positive opportunity for us as we have a strong position with OSATs in the different regions. From orders we have on hand our pipeline and from discussion with customers, our revenue guidance for the first quarter of twenty twenty five is between $118,000,000 to $120,000,000 close to a 25% increase over Q1 last year. We also estimate that the demand for our systems for HPC related products will continue into 2025 and beyond. In our last call, we discussed the two new models that we have introduced to the market, the Eagle [indiscernible] The Eagle G5 is currently in operation at multiple customers' production lines. Delivering excellent performance that align with both our expectations and those of our customers.

Meanwhile, The Ogg has successfully completed qualifications with several customers and we anticipate receiving more order for it in all the future in the near future, We plan to officially launch the Oak in SemiCon Korea show Next week, A few words about the ARC and its distinct keen from the eagle. The ARC is a new cutting edge platform engineered for high end applications. Such as detecting 100 nanometer defects measuring several hundred of million microbump at pitch lower than 10 microns all while performing [indiscernible] This advanced requirement are beyond the scope of the Eagle platform. Although the Eagle models, especially the Eagle g five, provide excellent performances in a variety of applications. The aux system has high capabilities, but also a high price tag. So there is a room for both models. Going back to our opportunity in the HPC segment. A major part of our business support HPC related hardware. The growing demand for HPC hardware has placed Comtech in a leading position and allowed us to grow significantly in 2024 much beyond the market growth rate. The use of AI capabilities in large organization is causing rapid growth in demand for HPC. And we are seeing significant investment in server farms around the world in recent years and expect this trend to continue.

Looking into the future, we expect to see AI capabilities penetrate edge computing devices such as automotives, robotics, PC and eventually mobile phone which require the development of powerful dedicated hardware to be implemented in these edge devices. When this happens, it will be a great opportunity for us. In summary, our primary growth engine for the upcoming years will be advanced packaging, particularly in high performance computing, HPC. We are strongly positioned in this sector and with the introduction of our two new advanced systems reinforce our leadership [indiscernible] And now Moshe will review the financial results [indiscernible] 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 tables at the end of the press release issued earlier today. Fourth quarter revenues came in ahead of our guidance, at a record $117,300,000 an increase of 32% compared with the fourth quarter of twenty twenty three. An increase of 4% from last quarter. This is the fifth consecutive record quarter in revenues For the year, we ended 2024 at $4.22 $9,200,000 versus $315,000,000 last year, which represents 36% increase year over year.

The geographic revenue split for the quarter was as follows: 92% Asia, and 8% the rest of the world. Gross profit for the quarter was $59,300,000 The gross margin for the quarter was 50.6%, an improvement from the 49.2% reported in the fourth quarter of last year and similar to the third quarter of this year. Operating expenses in the quarter were $23,100,000 compared to $18,200,000 in the fourth quarter of last year and similar to the $22,900,000 in the previous quarter. Operating profit in the quarter was $36,300,000 compared to the $25,500,000 reported in the fourth quarter of last year, and $34,200,000 in the third quarter. The increase is mostly due to the increase in revenue levels accordingly in the gross profit. Operating margin was 30.9% compared to 28.7% in 30.4% respectively. Financial income for the quarter was $6,200,000 an increase from the $5,700,000 reported last [indiscernible] and similar to the $6,400,000 in the previous Net income for the fourth quarter of twenty twenty four was $37,700,000 or $0.77 per diluted share. This is compared to a net income of $28,200,000 or $0.57 per share in the fourth quarter of last year. Total diluted number of shares as of the end of Q4 was $49,500,000 For the year in a row, we recorded net income of $139,000,000 45% improvement over last year.

Turning to some high level balance sheet and cash flow metrics. Cash and cash equivalents, including short- and long term deposits In marketable securities, as of December 31, 2024, were $501,200,000 This compared with $488,700,000 at the end of the third quarter. We generated $16,200,000 in cash from operations in the quarter And for the whole year, we generated $122,000,000 Inventory level increased to $123,100,000 from $116,300,000 The increase over previous quarter is to support anticipated sales growth in the coming quarters. Accounts receivables increased to $99,600,000 from $71,000,000 in the previous quarter mostly due to the timing of collection. We have already recorded strong collection since the beginning of 2025, and we expect accounts receivable level at the end of Q1 to be in line with revenue. DSO as of the end of Q4 was seventy seven days down from ninety days a year ago. With respect to guidance, as Rafi said before, we $18,000,000 to $120,000,000 in the first quarter and that we look forward to a year of growth in 2025. And with that, Rafi, Rami and I will be open to take your questions.

Kenny, Thank you, Moshe. At this time, we'll begin the question and answer session. If you have a question, you can raise your hand via the Zoom platform. I'll introduce you and ask you to unmute, after which you may ask your question. So as we have a lot of people on the call, we will wait a few moments to poll for your question. So our first question is going to be from Charles Shee of Needham. Charles, you may go ahead.

Yes, thanks. Congrats on the the good results and the solid guide.

I think my first question is about the guidance on the HPC contribution in the first half. 25 think you guys mentioned about 50%. But from the commentary, it sounds like you're seeing HPC demand probably broadening more to OSAT where you have the historical strength I recall like last year, I think you guys were providing a little bit more details into the HPC There's a part of that is HBM, part of that is chiplet. So assuming OSAT is probably taking up more of the chiplet related demand from the leading foundry is the mix between HBM versus chiplet kind of shifting more to chiplet at least through the first half twenty twenty five? I know you guys don't give that details, but directionally, can you comment on that?

So So hi Charles, this is Roni. So In general, yes, we continue. Let me try and answer with I'll give you two views about the HPC market. So I think what differs us for probably some of the competition is that we have a strong position at all the big manufacturers. And as a result, we are less and we are performing several inspection and metrology steps at [indiscernible] and continually winning these steps So this makes us a little bit less sensitive to a specific customer. And as you mentioned, the OSATs are starting to open up and this is definitely this is reflected in our forecast for the first half. [indiscernible] so yes, we do not give the exact numbers. But what I can tell you that we continue to see demand and we have significant orders on hand for the first half of 2025 that we plan to deliver.

Any early view on the second half of this year at this point?

It's very typical. Obviously, we have a lot of discussions We are starting to see a backlog building up for the second half. We I would say that this discussions with our customers are positive. But still you know, it's too early to give something more solid from a guidance point of view.

Got it. Got it. So maybe my last question, what's the China revenue contribution last year? I recall you said it's somewhere around 30% to 35%. Is that number still the case based on the actual results? [indiscernible] any expectation for China revenue this year is that percentage going up or going down or going to be flattish versus 24.

So hi, Charles. This is Moshe speaking. With respect to the geographical split for the year, indeed China went down a bit from 2023. In 2023, we reported 47% from China, This year, we this year, I mean, 2024, we expect China to contribute around 30% It's a bit early to say about 25%, but we see demand coming also from China. So we expect somewhat in the range of anywhere between 3035% coming from China in '25 Thank you. Yes, I would like if you don't mind, I would like to go back to previous The previous question, try to expand a little bit the view of HPC in general. As you know, the HPC include three major components. We talk about the HBM, We talk about all the GPU. We talk about the the interposers. There are more, but this they are the main the major three components. Now if one of them we suffer of any issue of capacity or missing capacity definitely, it could affect the whole other. Because if you cannot put your component on the interposer, nobody will make any extra HBM or CPU if there are no room to put them on the interposer.

So so you you have to look always not just to the final demand of the end user, the server farm, but also in the capacity, in the production capacity. And TSMC made announcement. They said that they don't have enough capacity. They build extra and hopefully until mid of this year, they will make catch up. So you ask about the second half. I would say that that this is one of the major issue. If if TSMC can make the catch up and expand its capacity and production capacity, definitely it may open the other you know, player to provide the components. So all the module could be built. So this is something that probably you will see very soon.

Thanks, Raffi. Appreciate the insights. Thanks, Charles.

Our next question is going to be from Tom O'Malley of Barclays. Tom, you may go ahead and ask your question.

Guys, this is Kyle Buscino for Tom O'Malley.

Thank you for taking our questions. So I wanted to start off asking about the move to hybrid bond thing. You guys have talked about it in the past about how your inspection steps actually goes up versus current generations. So I was kind of wondering, like, if you could refresh us, like, what your expectation is on the timing for hyperbonding and what, like, the delta is at the number of steps you could address there versus in current solutions now?

Hi, this is Rami. So definitely hybrid bonding is starting to make the first steps in the market [indiscernible] I think in our segment, we're starting to see initial production We have already installed machines at several sites that are being used as we speak for several steps in the hybrid bonding, The HOC is definitely going to play a major role in this segment. Although we also have machines from the Eagle family as well there. Definitely, we are seeing activities there. But I think when we think about hybrid bonding, and the contribution to production, high volume production, it's still a couple of years away, I would say, starting 2728, we will start to see volume production there. What else I can mention that definitely there are going to be some metrology steps where we will take part of it [indiscernible] So all in all, as I said in previous calls, we view the hybrid bonding as an additional opportunity in our market space.

Okay. And then I would like to I have one more comment on that. As far as we understand from customer who developed this process, You know, it's suffer of a very low yield because very complicated very high risk So so as far as we understand the major application for this goal for the very high end application, it means that that the hybrid bond is not going to replace all the connection or the current, you know, connection method that we have today. Applications and definitely cannot replace all The current application. That's our observation at this point.

All right. Thank you. That's very helpful. And then for my follow-up, I wanted to ask on the HPM market. So of like the three or the three big customers, I know you can't talk like by customer specifically. But if one of them ends up having a slowdown in spend or trouble getting qualified on leading production, do you expect like other customers to be able to pick up any sort of gap One of the big players or I'm kind of just trying to figure out like I know you talked about the first half visibility very strong for HBM. Just it could look like in the long term across those customers.

So this is a commodity product at the end of the day. So definitely, you know, there is a slowdown in one customer, the other customer will pick it up. I believe there there are some that are doing better than others. But as we said, we have a very strong position in all three.

So from our point of view, we expect to continue and play a major role in this specific market I want to reiterate we will ship machines in the first quarter and I think also, of course, beyond. Rafi made a very important statement just a few minutes ago that really this high performance computing is built out of a few building blocks. It's the GPUs, it's the HBM, it's the interposer and other things. So basically, as we understand the TSMC are going to double the capacity next year This is going to free additional capacity to other players to enter this market and there are more places than the OSAT. So definitely, we see this market developing [indiscernible] growing at a very high rate, the growth rate of the COAS and COAS like [indiscernible] the number of packages The growth the CAGR is in the range of 50% over the next few years. So definitely, this is a market that is going to draw a lot of HBNs to it And we feel very comfortable with the long term future of this market. Thank you. Thanks, Kyle.

Our next question is going to be from Matt Prisco of Cantor. Matt, please go ahead. Yes. Thanks for taking my question.

Think it would be great if we could talk about the product traction across Eagle G5 and Hawke. Maybe an update on orders and early customer reception and And importantly, what type of market opportunities do you view these opening for Camtek this kind of going to expand your current SAM or is this more to address [indiscernible] future issues make it So so first of all, there are two aspects here. So first of all, there is one aspect of being more competitive. So the the Eagle G5 or our fifth generation that is a much faster, more accurate, brings in more capabilities, will make our position more competitive and we expect to take more and more market share. So this is on the G5. The Halk will open new markets for us. Markets that today are beyond the capabilities of the Eagle product line. The entire quarter, I'll give you an example. It's the high number of microbans from wafers or logic devices, you are talking about 500,000,000 devices [indiscernible] That's an application that is starting to develop that is beyond the capability of the power So definitely, will increase our total available market And it's a couple of, I would say, at least 200,000,000 and potentially more.

It will free up some front end applications and so forth. I think I won't be able to give you more details in this call but definitely it will increase our available market It will take us to places that our current products today just cannot perform.

Although we have an excellent product line for our existing our existing market. About the orders, we made an announcement last November that we received orders for over $50,000,000 We also said in that announcement that we expect to get additional orders and in this this is the case. And we plan to ship these machines This year, For the G5, we've already received a comparatively large number of orders. The again, we already started to ship them. Actually, in the fourth quarter of last year, we shipped the initial machines already in production. And we are starting to ramp the G5 into production. The Hawk is also finished already qualification And so we are in a very good shape there Okay. I would like to add again one more comment. Because you ask if this new product is for the the near future maybe longer, I would say that the ARC in general has two major capability. Number one is its capability for high end application. Probably, we will see more and more by the end of the year, next year because while R and D running production and it's moved to production, it takes some time. But the other aspect of the of the Oke is very, very high throughput even in current application.

So if customer, the throughput is very important for him, and he's willing to pay the price tag definitely, he may choose the oak. So the oak definitely can serve customer that the main issue is higher throughput. But when we designed the ARC, it was designed mainly for high end application. So it can answer for both of that.

And then for my follow-up, as as the industry transitions to technology such as HPM4 and colossil, How does that impact Camtek's opportunity or maybe process control intensity in general? So in general, it's a positive, I would say, it's a positive trend What you call process control, the intensity will probably grow. As you're putting more and more dyes in the same module, So you would like to make sure that none of the devices any defects [indiscernible] we've in our view and our discussions with customer, this will have a positive effect on the quality control.

Yeah. But the main application is 100% inspection and metrology. Our customer use our machines to inspect and measure each [indiscernible] Now when you go to metrology, in metrology, they do maybe more sampling. But in inspection, most of them do 100% [indiscernible] that answers all your questions.

That is perfect. Thank you, guys. [indiscernible] Our next question is coming from Brian Chin of Stifel. Brian, you may go ahead and ask.

Hi there. Good afternoon. Thanks for laying us at a few questions.

Maybe just for the stick on the HBM4 topic for a moment here. How large of an increase are you expecting on the micro bumps per die or per wafer for HBM4 versus 3E And you expect your system shipments to be stronger really next year versus this year? And is this an are there any applications there that are better suited for Hawk relative to Eagle?

So let's talk about the HBM. Those application range today for you take away for us, it's over 100,000,000 bulbs and it's going to stay in this range at least for the not in the near future. So from that point of view, definitely, I would say the work hall of the industry is the Eagle product line. And I expect that in most cases it will continue. And I think as Rafi alluded to, there will be some customers a very, very sensitive to the to the space and may prefer to take the HAWK in order to get a double throughput for the same space of the machine. So this is a potential. This is something that we will see over time. But from the capability of the Eagle to respond definitely the Gen five, It is a very good machine that can probably meet all the requirements of the HP. Now as we said in previous calls, definitely [indiscernible] Today, we are doing, in most cases, a 100% inspection and the metrology, three d metrology and there are [indiscernible] metrology steps that are done in different areas. So definitely, the intensity of the quality control is going to stay or improve in certain areas.

That don't do 100% inspection and metrology in as we go into the HBM4 and beyond, definitely the opportunity for Comtech is going to grow but you need to couple it with the larger number of Cohass and Cohass like packages that are going to grow by a CAGR of about 50% in the foreseeable future. So the combination of the market expansion together with the complexity of the dyes and the wafers, and the need for higher intensity of quality control, is definitely this is the ingredient for better business for County.

Great. Thank you.

And Relative to Relative to the Coas opportunity, I think there's a fair bit of transparency about maybe what the size of that could be in terms of expansion this year? Can you help us size maybe the planned capacity footprint for some of these OSATs? Who kind of work in conjunction with the lead customer there a sense of sort of how much capacity could they be planning to build out this year, next [indiscernible] to kind of help to alleviate the overall industry constraint and also your position reinforce your positioning. At NetOSAT.

It's very hard now to give numbers, you know, What I can tell you from what we see and what we see I would say significant number of machines go to these OSATs. Now the point with the OSATs that you don't really know all the applications that they are doing. But it definitely, we are seeing OSATs buying machines from us For these applications, So yes, the market is broadening. Now you need to take in account that all kind of fabulous companies that you know are just making the entire design by themselves some of the silicon, they they design by themselves, the chiplet, they design by themselves. And then they buy the [indiscernible] and have the OSAT do the full integration of the film manufacturing of the module for them. So that's something that is very hard today to track down the capacity. But I think it's going to be a significant capacity in the next couple of years.

Great.

Maybe just one last question to to maybe frame the market there's been some discussion or uncertainty whether the HBM TAM for inspection metrology will increase this year versus last year. If you're not comfortable maybe providing that update, Overall, do you it sounds like you expect the overall TAM for AI packaging or HPC packaging inclusive of co OS, etcetera, to increase this year versus last year?

Definitely. We definitely expect it to increase and you can see the capacity I mean, TSMC are going to double their capacity. They're going to be a number of homes that are going to jump into this area that are actually already manufacturing some of them. So this market is going to grow. One of the building blocks [indiscernible] HBM. And you know the more complex the application we are going to become more and more complex, You're going to see more and more memory that is required Now we've seen from history that whatever memory you provide for your products, you know the requirement is higher. So this is a trend that we have seen before I think it will continue. And definitely, we're just at the beginning of the AI era and see how fast it's catching up A lot of organization are starting to adapt these capabilities So I think whatever the numbers are, the numbers seem to be solid. And as you can hear, we hear that there is not enough capacity in the market to support the requirements of all the companies that are going to go into it. So our view that the market is going to grow there is going to be requirements for more HBM The available market or the market for these products is going to grow and we believe that we will grow With it, in the foreseeable future.

Thanks, Romy. Thanks, Brian.

Our next question will come from Vivek Arya from Bank of America. Please go ahead with that.

This is Michael Montney on for Vivek Arya. Thanks so much for taking our questions. To start, could you give us a sense for between Hawke and Eagle G5, this year? And then maybe a little further out, as we think about the competitive scale present to you guys. It seems like these tools should help you gain traction in the two d market where there's already a strong competitor who participates here. But based off your previous experience of product cycles, how your customers make allocation decisions. What sort of timeline do you expect for any share gains in this market? Does it could it happen more quickly just because of how rigorous the new technology requirements are? For some of these upcoming inflections like HBM4 Or do you expect these share gains unfold more gradually over time? Thank you. [indiscernible] So you can see there is a limited information that I can provide here. But I think that from the older size, we received from the Hawk, and you understand that we are getting more orders So you can understand that it's going to be a substantial number for The Hawk. And I can tell you that it's going for the G5 to be also a substantial number However, the HOC ASP is higher So it's here I would say the comparison is not one on one.

But in general, I believe that we will see a comparatively high ramp into production and getting these two products And the reason for that that they provide a better cost of ownership to our customers they understand it, That's on one side. On the other side, on the HOC side, it opened markets and applications that today we don't have and are needed by our customers that will be the second reason of buying these products and for the G5 definitely the the Egan is a very, very popular machine. I would say it's the work horse of the industry in many of the metrology, but also in many of our many two d applications, In fact, we sell more machines eventually than Duke two d than three d. So we are very strong. Yes, there is competition in this market and an excellent competition But we are doing pretty well In certain applications, we dominate and we expect to have even stronger position in the two d market as a result of the introduction of the Hawk and the G5, So yes, in fact, it's going to be a pretty I would say, steep ramp into production over the first year.

And but to many of our customers and we have thousands of [indiscernible] Some of those customers not want to change anything on their production lines they are very satisfied with what they have We'll still continue to buy the the regular Eagle, which is a very good machine.

And that's how this industry behaves. Certain customers are more conservative are sensitive to making changes, others are willing to make those changes Camtek, So this is something that we see as we move along.

Great. Thank you. And just a question on the Other part of your business, compound semi CMOS image sensors. I think last quarter you indicated that there were some green shoots unfolding there. Just did those kind of persist into this quarter? What are your kind of expectations for that market this year? And if you do have a constructive view, what's really driving the growth there just because as we look at all the various end markets that it's right? End of that seems to be pretty weak right now. So just any more color there would be appreciated. Thank you.

So I think when we look at the would say, in the non HPC market, So definitely, I would say the business is stable there. I think most of the applications are stable there isn't now an application that is growing very fast. And the reason for that is the consumer goods in general are not going there. There isn't an application there that is growing very fast. We do see some improvement on the CMOS market. Apparently, there are new sensors and so there is, I would say, some demand coming from the CMOS market, the CMOS image sensors market if I want to compare it to last year, I think when you look at the silicon carbide market, it's stable The reason, I would say, huge growth there there's a lot of capacity out there that I think will take some time to digest it And we'll continue to see some business, but I don't think there will be a major growth. I would say that the non advanced packaging, which is about 30% of our business, will grow next year very much in line of what the industry expectations are. But most I would say the growth is going to come from the high performance computing and other advanced packaging, I would say the more traditional advanced packaging application such as Fan Out and others that continue to grow.

Michael, that answers all your questions.

Yes, it does. Thanks so much.

Great. Thanks. Our next question will be from Craig Ellis. Craig or Stacy, please go ahead from B. Riley, sorry. Thank you. This is Stacy Ong asking for Craig. [indiscernible] thank you for taking the question. I was wondering if you can discuss a little bit about the digestion risk And also the magnitude of it in HBM and or [indiscernible] and if it's related to in foundry or OSAT or kind of both? Thank you.

Well, Let me Stacy, this is Rami. Let me try and answer and maybe Rafi and Moshe will jump in. In general, when we look at the HPC market, we see a very solid business going into next year. We have, as we said in the prepared notes, we see a solid 50% of our business is going to go into this market. And The overall Specifically regarding the HVAM, yes, we are going to ship to the HBM segment and significant orders that we already have on hand for the first half of twenty twenty five and we will deliver and install those machines [indiscernible] So all in all, we don't see a digestion On the contrary, understanding what TSMC is going to double the capacity with all the increased capacities in the different allsats and we are actually shipping machines for our two OSATs and we will ship including in the first half of this year So we are seeing the market expanding the business is healthy There is a lot of interest There might be some for other people, at least we don't there could be some customer related concerns but when we look at the entire industry, as we serve all the customers we feel very good about this market as we enter twenty twenty five.

Rafi, you want to add something?

No, I think you covered it very well.

Okay. Yes. Thank you. And if I can have a follow-up is, can you also talk about [indiscernible] maybe the backlog levels through 4Q and 1Q to date, and the composition of those by end usage and if possible some degree of visibility maybe throughout the year in 2025?

Okay. So What we can comment on the backlog in general is that we have a very strong backlog for the first half of the year. The second half is starting to build up. It's very and and for the first time, let me just complete that. We said that 50% will go to HBC. For the second half, it's starting to build up It is much too early to say to talk about the composition of the backlog or to give a feeling on the actual numbers in the second half of this year. And this is very typical to our business, And SD lead times are three to six months.

So still we're starting to build up I think we will be in a position to understand the fact in the third quarter in our next call but I think at this stage, [indiscernible] I think we feel that next year this coming year, the €25,000,000 will be a growth year. We feel very well about the business. But still the second half to retry and give you know, more color on it.

It's a little bit too early.

Got it. Thank you. Thanks, Stacy.

Our next question is going to be from Vipati Shhotra from Evercore. Vipati, you can go ahead and ask your questions.

The first one I have is, how how should we think about the your revenues versus the cost capacity that's being added. So if I if I go through Teams TSMC CapEx on advanced packaging, it's doubling from $3,000,000,000 to $6,000,000,000 Does that mean your revenues from COVID double as well as we go into 2025? Is that is that a fair interpretation?

So, okay. [indiscernible] let me let's talk about how the business builds. Definitely, the the capacity that was installed in 2024 is now serving the market. So part of the growth in 2025 is built on the capacity that was built that was already built in 2024. And this will go on So the capacity that we are going to install in the first half, I assume, will still be installed in serve the growth in the second half of twenty twenty five.

What will be shipped in most of the second half will probably affect the tail end of this year and really contribute in 2026.

And this is how this industry works. It's true for the colas capacity So [indiscernible] I think, in my mind, should look at the second half of this year, what will be shipped out?

A lot of it will be served for the first half of twenty twenty six.

And I think the additional capacity of of what TSMC are adding in the OSATs some of it will still you know, end up in this year, some will again will go to 26.

Understood. And then for my follow-up, as you ramp Eagle g five and Hawk products, how should we think about gross margins from here?

So I think as we are ramping these products, they are definitely accretive from day one. And specifically about the Hawken, I think we'll discuss it in previous calls, we definitely expect the Hawk have a positive growth impact on our gross margin in 2026. So maybe just to clarify, Vigwati, overall, the HOKEN, the Gen5, has a positive impact on the gross margin. And they are accretive to the gross margin. However, as we are ramping the production this year most of the impact to the gross margin level you will see it only in 2026. This year, we are kind of ramping the production streamlining the processes, And next year, you will see the benefit and the contribution to the gross margin.

That's helpful. Thank you. Thank you. Thanks, Ebati.

Our next question is going to be from Gus Richard of Northlands. Gus, you may go ahead and ask.

Good for squeezing me in here. As you walk through the AI ecosystem, you know, a couple of major players that are doing their own chips have moved to chiplets this generation.

The hyperscalers, the revenue is constrained by their capacity in their data centers. [indiscernible] when you look at it, it looks like the new process Towas is what's sort of limiting the output of chips and servers, etcetera. And so my question is, what's slowing the ramp? Is it facilities? Is it equipment? Is it OSATs coming up? Can you kind of help us understand what's going on there?

So you know, Gaz, for us, it's very hard to know who is who is the limiting factor. But at least from our view, things are starting to pick up. You see there's a lot of additional capacity So I think they will catch up pretty quickly. I suspect them to catch up in these areas in the in the first half of this year, I believe they will catch up with most of the capacity and we will start to see hopefully the ramp for these guys in the second half of twenty twenty five, as Rafi alluded to, in his comments, or early in 2026, but definitely all of these guys are going to add more and more need more and more capacity that will definitely increase the potential opportunity for us.

Yes. And I would like to add one more comment on that. You have to consider that also the coax is like third generation, second generation, try to improve the technology They realized that the size of the chiplet is too big, so they have to think about maybe some using more combination of our organic and silicone. So there are also a lot of R and D involved in this product. Because they want to be more efficient and getting better yield and answer to the density and other capability. So it's not easy for us to understand how long it takes to make this process to be mature process, with high yield and move to high volume. But definitely, we can see the investment, we can see the new building and the construction. And it's amazing if you just go and walk in in some places, you see the amount of building Wow. It's a big wow to see this investment. So definitely, it will be convert If it's take six months or three months or nine months, We really cannot estimate right now.

Okay.

And then just looking beyond AI and there's some evidence that maybe in 2026, some of the mobile guys might move to chiplets rather than move to two nanometer I'm wondering if that's another driver of growth for you into 'twenty six or it's not something we have visibility into.

We don't have the visibility, but I think any move to cheapness is very positive for us.

Got it. And then just the last one for me, if I was your most favorite customer and needed a system as soon as possible. Where would you slot me in at this point?

Well, Gus, it's a different question because you are close to us. But so look, I would say it depends really on the on the configuration and the specific models. So if you go from from a regular EGM, we will do it sometimes even in weeks. If you come to the g five, it will probably be two months if somebody really needs a very quick machine.

On the hulk, it will take longer. It and it really is the complexity of the machine the configuration, there are a lot of aspects that Camtek into So but yes, we will we will always, you know, find a slot for one of the important customers that needs a machine ASP will turn the world around to make it happen. But obviously, this is Very small number of machines. When you go to the larger orders that are three to six months in late time.

Got it. Perfect. Thank you so much. That was very helpful. Thank you, Gus. Thanks, Gus. Our next question is from Shahar Khan of Lucid Capital.

Shahar, you may go ahead and ask your question.

I want to ask about The HBM or the mini HBM opportunity in mobile we have seen what is called LMW DERA, We have seen both Hynix and Samsung adopting this mini HBM and we have maybe some of the high end phones may include this CAM stuff in 2026 anticipating the AI phone, which will have some requirement of better better bandwidth between the memory and the in this and the GP and the CPU or SOC.

So can you speak about this opportunity for you guys and how should is it more like end of twenty twenty five or 2026? And just the significance of that opportunity.

So hi, Shahar. I think this specific DRAM it's still more under production. It will take some time until it into would say, a real opportunity for us From our point of view, It's not there is nothing here that we need especially to develop for it. This is a kind of device that will have the micro bumps on it It's a really typical, I would say, advanced packaging. Yes, it's a challenging one, but it's definitely within the capabilities of our machines. But in general, I think the if you ask me about mobile phones, I think this is more 26 and beyond capabilities and still we will see this kind of an application Camtek up. I don't think it is, at least in my mind, it's not immediate.

And if it will be twenty twenty six, it's going to be significant?

It depends on the, you know, the number of cell phones they will adapt it. And so I think it is too early to name it's too early in the game.

But look, in general, I think we discussed it in our prepared notes. Today, the applications very, very centered around servers. And therefore it's a lot of hardware in it and you can see the size of the business, it is very significant. As AI will go into cars, will go into robotics, and these are probably the next two things that will we'll see these technologies and then go to PCs that it's really a factor or more and eventually go to cell phones. So more applications for us it would create a very big opportunity. So long term, yes, all of these things will adopt this technologies one way or another, and we definitely believe and see that this is an area the HBM as part of the COVA's as part of a module, an AI module, is going to be a very, very big business for us. Thanks, Shahar. That ends our question and answer session. Before I hand back to Raffi for his closing statement, I would like to let you all know that in the coming hours, we will upload the recording of this conference call to Investor Relations section of Camtek's website at camtek.com Camtek.

I'd like to thank everybody for joining this call. We will see you next quarter. And I would now like to hand back to Raffi for your closing statement. Raffi, please go ahead.

Okay. I want to express my gratitude to all of you for your ongoing interest in our business.

Especially thanks goes to our employees and management team for their outstanding performances, To our investor, I appreciate your long term support. I look forward to our next conversation in the upcoming quarter. Thank you and goodbye.