Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ichor Holdings Ltd (ICHR, Financial) reported strong third-quarter results with $211 million in sales, exceeding the top end of their forecast.
- The company achieved a 4% sequential revenue growth and a 40% increase in operating income.
- Ichor Holdings Ltd (ICHR) expects the second half of 2024 to be 7% to 10% stronger in terms of revenues compared to the first half.
- The company is making excellent progress in increasing the proprietary content of its product portfolio, which is positively impacting profitability.
- Ichor Holdings Ltd (ICHR) anticipates continued gross margin expansion and expects to outperform the growth in the semiconductor process equipment market in 2025.
Negative Points
- Gross margin improvement was slightly below expectations due to a strong mix of integration products.
- Higher foreign exchange losses were experienced in Q3, although offset by lower tax expenses.
- The company anticipates a decrease in China WFE in 2025, which could impact overall market growth.
- There is still an overhang in some components, particularly weldments, which are not growing as expected.
- The transition to new proprietary gas panels is progressing slowly, with full benefits expected in 2026.
Q & A Highlights
Q: Jeff, regarding the calendar 2025 commentary, I heard more about NAND than DRAM. Could you clarify the expectations for NAND and DRAM spending next year?
A: Jeffrey Andreson, CEO: We expect DRAM to remain strong, particularly with high bandwidth memory. NAND investment, which we anticipated in the second half of 2025, is now expected to start earlier. Our visibility for the first half of 2025 is strong, and we foresee consistent demand levels throughout the year.
Q: How will the proprietary content contribute to gross margin or revenue in 2025?
A: Jeffrey Andreson, CEO: Most proprietary content will be internally consumed, mainly passive products. We are comfortable with a 25 basis points improvement in gross margin quarter over quarter, even in a flat environment.
Q: Are you seeing a real demand pull-through for NAND, or is it more about inventory normalization?
A: Jeffrey Andreson, CEO: We are seeing some gas panels going into demand, indicating real demand pull-through. However, the majority of the activity is expected to strengthen in the first half of 2025.
Q: Will the proprietary content initiatives help with gas panel ASPs and market share?
A: Jeffrey Andreson, CEO: While we don't expect large share shifts, early applications of the new gas panel are incremental share gains. These will improve profitability with similar ASPs.
Q: How does the current recovery compare to past cycles, considering the bifurcation like China versus AI?
A: Jeffrey Andreson, CEO: The profile is different from past cycles, such as the 2019 outsourcing gains. We expect to outgrow the industry by about 5% and layer on new share gains annually.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
