The Zhitong Finance App learned that semiconductor equipment manufacturer Fanlin Group (LRCX.US) announced that its revenue, profitability, and earnings per share for the September 2026 quarter all reached record highs. Demand related to artificial intelligence (AI), advanced semiconductor manufacturing and packaging continued to support spending on deposition and etching equipment.
Chief Financial Officer Doug Bettinger said that total revenue for the September quarter was US$8.22 billion, up 22% month-on-month and 54% higher than the same period in 2025. The company recorded record gross margin of 52.4%, operating margin of 40.2%, and non-GAAP diluted earnings of $2.20 per share. According to the company, the operating margin surpassed 40% for the first time.
President and CEO Tim Archer said, “In the September quarter, the company once again achieved record revenue and profitability.” He said the demand for AI-driven semiconductors and the rise in device complexity are increasing the strength of deposition and etching processes in storage, logic, and advanced packaging applications.
For the 2026 December quarter, Fanlin Group's estimated revenue will be US$8.6 billion, fluctuating up and down US$400 million. The company expects gross margin of 52.5%, fluctuating 1 percentage point; operating margin of 40.5%, fluctuating 1 percentage point up and down; earnings per share of 2.33 US dollars, fluctuating 0.15 US dollars up and down.
Bettinger said that without recent supply chain constraints, the December revenue outlook would have been “slightly higher.” He did not quantify the impact, but said that shipments delayed from December due to scheduling will be carried over to the March quarter.
Fanlin Group expects wafer manufacturing equipment (WFE) spending to be in the middle of the $150 billion range for the 2026 calendar year. Its initial forecast for 2027 is WFE spending of more than $200 billion, with DRAM leading the percentage increase, followed by advanced foundry logic and NAND.
Archer said cleanroom availability and supply constraints for some components may limit the industry's ability to fully meet demand in 2027. He said the company is cooperating with suppliers to expand production capacity, and the supply situation is expected to improve soon. Bettinger added that the company expects 10 new Tier 1 fabs to be put into operation in 2027.
Based on the median outlook for the December quarter, Fanlin Group expects a year-on-year increase of more than 40% in system revenue for the 2026 calendar year. Archer said that the company expects 2026 to be the third year in a row that WFE will outperform the industry, thanks to the growth in the available markets the company serves and the increase in product share.
Demand for storage and foundry drives growth
Storage accounted for 46% of system revenue in the September quarter, the same as the previous quarter; OEM accounted for 46%, up from 44% previously. Logic and other applications account for 8% of the system's revenue.
Storage systems revenue reached a record dollar level, up 120% year over year. NAND accounts for 26% of system revenue, up from 23% in the June quarter, and customers continue to switch to 256-layer devices and above. NAND's revenue increased by about 40% month-on-month, and the company said it had seen initial expenses for 384 tier devices.
DRAM revenue also set a record, with spending focused on technology upgrades and expansions for DDR5, LPDDR5, and high-bandwidth memory 1α, 1α, and 1γ nodes. Archer said that as DRAM architectures become more three-dimensional, the company expects the intensity of etching and deposition to increase.
The company also discussed potential additional NAND requirements associated with AI storage tiers. Archer said QLC NAND supports cost-effective data storage, TLC for higher-bandwidth context memory and key-value caching workloads, while SLC-grade NAND is emerging for low-latency access in proxy AI applications.
Fanlin Group said that shifting NAND production from TLC to SLC grade devices would reduce the number of bits per device by about three times. According to the company, for every percentage point of NAND bits transferred to SLC grade devices, an increase of about 2% of installed wafer production capacity is required to support the same bit requirements.
Technology investment and advanced packaging
Archer said that since the beginning of the year, OEM logic and DRAM account for about 80% of the company's system revenue growth. The company emphasized the needs of its Akara etching, conductor etching, and Aether dry film photoresist products in advanced graphics applications.
Fanlin Group said its Aether dry film photoresist solution has shown sub-10 nm resolution under high-NA EUV and can reduce exposure dose by 10%. Archer said that Aether products are using low-NA EUV to accelerate release in high-volume HBM manufacturing. The company currently anticipates that by the end of this decade, the cumulative revenue related to Aether will reach about 2.5 billion US dollars, which is about 1 billion US dollars higher than the previous forecast.
The company also mentioned opportunities in backside power supply, and has obtained benchmark equipment certification for four products by a leading customer. In terms of advanced packaging, Fanlin Group said its Syndion etching products have won four new seats in advanced logic and HBM silicon through-hole applications for multiple customers.
Fanlin Group expects advanced packaging revenue to increase by about 70% in the 2026 calendar year. Archer said panel level packaging is an emerging growth opportunity, and the company has delivered panel plating systems to more than 20 customers around the world. The company expects its panel-level packaging market share to surpass its current position in the wafer-level packaging field.
Regional structure, services and return on capital
China accounted for 35% of the September quarter's revenue, up from 26% in the June quarter, thanks to investment from domestic and international customers. Bettinger said that China's contribution is expected to decline significantly in the December quarter, mainly due to a decrease in domestic customer revenue, while demand from multinational customers in the region should remain relatively strong.
South Korea accounts for 20% of revenue, and Taiwan accounts for 18%. Fanlin Group's customer support business group revenue was close to US$2.5 billion, setting a record for the fourth consecutive quarter, with a year-on-year increase of 40%. The company expects CSBG's revenue to grow by more than 30% in 2026 and more than 15% in 2027.
Fanlin Group generated a record free cash flow of US$3.24 billion in the September quarter. The company repurchased approximately $1 billion in shares and paid $325 million in dividends, returning approximately 41% of quarterly free cash flow to shareholders. By the end of the quarter, the company had $7.5 billion in cash and short-term investments, and authorized the remaining $3 billion under the share repurchase plan.
Conference content
Moderator: Also, please note that today's event is being recorded. Now, I'd like to entrust the meeting to Ram Ganesh, VP of Investor Relations. Please get started.
Ram Ganesh, Vice President of Investor Relations at Fanlin Group: Thank you and good afternoon everyone. Welcome to Fanlin Group's quarterly earnings conference call. I am in attendance today with President and CEO Tim Archer and Executive Vice President and Chief Financial Officer Doug Bettinger. In today's conference call, we'll share an overview of our business environment and review our financial results for the September 2026 quarter and our outlook for the December 2026 quarter. A press release detailing our financial results was issued shortly after 1 p.m. Pacific time. The press release and accompanying presentation slides for today's conference call can also be found in the investor section of the company's website. Today's presentation and Q&A session included forward-looking statements based on our current beliefs, expectations, and assumptions. These statements are subject to risk and uncertainty, and actual results may differ materially from those expressed or implied in such statements.
For a discussion of factors that may cause material differences in actual results, please refer to the risk factors in our recently submitted Form 10-K and Form 10-Q periodic reports and subsequent filings with the U.S. Securities and Exchange Commission, as well as the cautionary statements in the accompanying presentation slides. Unless otherwise stated, today's discussion of our financial results will be presented on a non-GAAP financial basis. A detailed reconciliation table between GAAP and non-GAAP results can be found on the accompanying presentation slides. The conference call is expected to continue until 3 p.m. Pacific time. A replay of this conference call will be made available on our website later this afternoon. Next, I'll leave the meeting to Tim.
Tim Archer, President and CEO of Fanlin Group: Thank you, Ram, and thank you all for attending the conference today. In the September quarter, Fanlin once again achieved record revenue and profitability. Gross profit margin, operating margin, and earnings per share all hit new highs, with operating margin exceeding 40% for the first time. Our performance throughout the year reflects the broad strength of our product portfolio and unrelenting focus on operational execution, as AI continues to drive unprecedented semiconductor demand and increasing device complexity. Including the midpoint of our December quarterly guidance, we expect system revenue to grow by far more than 40% year over year for the 2026 calendar year. The rise in deposition and etching intensity in all device types and advanced packaging solutions continues to bring greater opportunities to Fanlin. Over the past few years, the increase in device complexity and the move towards higher levels of 3D miniaturization have driven our Serviceable Market (SAM) share of WFE by 4 percentage points.
Combined with the share growth brought about by this growing SAM product, we expect 2026 to mark the third year in a row that we have outperformed WFE. For the 2026 calendar year, we expect WFE to be in the mid-$150 billion range. Our initial outlook for WFE in 2027 is spending over $200 billion, with DRAM leading the percentage growth, followed by advanced foundry logic and NAND. As we enter the 2027 calendar year, we see that cleanroom space availability and supply chain limitations for certain components continue to limit the ability of chip makers and device companies to fully meet terminal needs. We are actively working with suppliers to accelerate their capacity expansion plans, and believe Fanlin is well positioned to meet the strong demand we are seeing. Underpinning our growth outlook for WFE is the continued rapid adoption of AI by businesses and consumers.
According to reports, the average weekly token usage has increased about 250 times in the past 18 months. As AI increasingly moves towards autonomous agent workflows, the demand for computing, memory, and storage solutions continues to expand. For example, in NAND, AI performance and economics are driving the need for multiple tiers of storage, each optimized for different workloads. Today, QLC provides cost-effective storage for rapidly growing AI data volumes. TLC storage is used as a high bandwidth tier for context memory and KV cache workloads. Meanwhile, SLC-grade NAND is on the rise for low-latency, high-speed access in intelligent AI. We believe the adoption of the SLC storage tier may be an important driver of NAND wafer production capacity. Converting from TLC to SLC grade devices reduces the number of bits per device by about 3 times.
In other words, for every percentage point of NAND bits transferred to an SLC level device, an increase of about 2% of the installed wafer production capacity is required to support the same bit requirements. The incremental increase in bit demand will further amplify wafer capacity requirements. We expect all three tiers of storage to grow, increasing the value and strategic importance of NAND. We believe Fanlin is in the best position to benefit from this inflection point. We have the largest installed base of NAND systems in the industry and a comprehensive product portfolio covering all critical deposition and etching steps. Any increase in NAND bit demand, whether met by upgrading the installed base or expanding production capacity, will create additional demand for Fanlin's tools and technology. Foundry logic and DRAM are also undergoing similar device-level evolutions to meet the emerging performance requirements of AI.
From advanced graphics to backside power to next-generation packaging, we expect Panlin to usher in billions of dollars in potential SAM expansion and share growth opportunities over the next few years. We have seen the impact of our targeted investment in foundry logic and DRAM products in our 2026 calendar year results. These two market segments account for approximately 80% of Fanlin's year-to-date system revenue growth. A great example is our focus on foundry logic and DRAM's advanced graphics requirements. As each technology node brings more stringent EUV graphic fidelity and defect rate requirements, Fanlin's Akara etching, conductor etching, and Aether dry film photoresist tools are being used together to achieve unprecedented miniaturization capabilities. Importantly, these tools also help improve the productivity of DRAM miniaturization, and currently maximizing fab output is a key priority for our customers.
Many chipmakers are using Akara because it can control etch very high depth and width characteristics with an excellent profile, while reducing wafer to batch variability by up to 50%, and increasing wafer output per fab floor area by up to 50%. Similarly, Fanlin's Aether dry film photoresist solution has demonstrated sub-10 nm resolution with the highest graphics density and fidelity under high-NA EUV. It helps achieve this result while reducing the required exposure dose by 10%, thereby increasing scanner productivity and reducing the cost per wafer for graphing. Aether solutions are already being mass-produced in high-volume manufacturing of HBM using low-NA EUV, and we expect more opportunities to be introduced to DRAM and OEM logic customers in the future. As a result, we now expect the cumulative revenue associated with Aether to reach about $2.5 billion by the end of this decade, which is about $1 billion higher than our previous expectations.
Backside power supply is another example of the advantages of floodplain forests in terms of deposition and etching. Separating the power supply and signal wiring allows for thicker back metallization, thereby reducing resistance and improving energy efficiency. This implementation increases process complexity and drives the need for more deposition, plating, and etching steps. As customers mass-produce power at 2nm and below nodes, our production-proven Vector, Sabre, and Flex tools are ideal for this task. With its unique four-chamber architecture, Vector offers industry-leading floor area density and wafer-to-wafer repeatability. With high productivity and excellent on-chip performance, Sabre has become a benchmark in the global electroplating industry. Flex utilizes its differentiated small-volume chamber design and confined plasma to achieve high throughput media etching and maintain low defect levels. New materials such as molybdenum are also being introduced to enable more efficient electrical connections between the back and front of the wafer.
Our Halo tool is receiving increasing attention for this emerging application, which enables both plasma and heat treatment processes in a single chamber while providing industry-leading productivity. We're winning our share of this expanding back-side power SAM opportunity, and recently received a tool of record (tool of record) victory for all four products at a leading customer. In the field of advanced packaging, our market-leading Syndion products are winning in HBM TSV applications with advanced logic. Syndion's differentiated hardware design enables rapid process changeover, providing a highly uniform TSV profile, smooth sidewalls, and high mass production productivity. Recently, we have acquired four new application locations across multiple customers. Our Striker ALD products have also won multiple TSV liner applications due to the film's excellent step coverage and low etching rate. In addition to TSV applications, we have won additional Vector and Vector TEOS 3D orders for high-adhesion bonding films and inter-chip gap filling applications due to lower defect rates due to thick film deposition.
With its high deposition and etch strength, advanced packaging has become the main growth driver for Fanlin. For next-generation AI and high-performance computing devices, customers are increasingly turning their attention to panel-level packaging to achieve large-scale manufacturing. Our panel-level packaging product portfolio continues to grow in fan-out packages, glass core substrates, and emerging substrate and intermediate layer architectures. Up to now, we have delivered panel plating systems to more than 20 customers around the world, with panel sizes ranging from 300 x 300 mm to 600 x 600 mm. Customers continue to choose our Kallisto platform because of its differentiated coplanarity and plating uniformity performance in bumps, columns, and redistributed layers. With the increasing adoption of glass core substrates, Kallisto is also expected to benefit from emerging glass through-hole applications.
Given our customer engagement, growing installed base, and technology leadership, we expect to achieve a panel-level packaging market share that surpasses our current strong position in wafer-level packaging. Finally, speaking of CSBG, we will end the 2026 calendar year on a solid momentum, with annual revenue growth of more than 30% year over year. That's more than double the speed of the long-term goal we set for our last Analyst Day. Growth was widely distributed across upgrades, spare parts and services, thanks to high fab utilization rates and continued customer focus on the efficiency of the installed machine base. The value we deliver through Equipment Intelligence and Dextro Cobots recently helped us sign performance-based service contracts with several storage manufacturers. We expect CSBG's momentum to continue in the 2027 calendar year, with revenue growth of more than 15% year over year.
All in all, we believe the industry is in the early stages of a multi-year investment cycle, with customer visibility extending into 2028. Increased manufacturing complexity, integration of new materials, and advanced packaging are driving up the deposition and etching intensity of various device segments. Our technological leadership, growing installed base, and strategic investments in product innovation and manufacturing capacity have enabled Fanlin to seize these inflection points and drive continued excess performance. Thanks, next up is Rick.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: OK. Thanks Tim Archer. Good afternoon, and thank you all for attending our conference call today during what I know is a very busy earnings season. We are pleased with the continued strong execution in the September quarter, achieving the fifth consecutive quarter of record revenue, as well as record gross profit margin, operating margin, and earnings per share. Revenue for the September quarter was US$8.22 billion, up 22% month-on-month and 54% year-on-year. The balance of deferred revenue at the end of the quarter was $2.66 billion, up $227 million from the June quarter. This increase was mainly due to increased sales volume, which was partially offset by lower customer advance payments. In terms of market segmentation, storage systems accounted for 46% of revenue in the September quarter, the same as the previous quarter.
In dollar terms, this represents a record level for the storage business, growing 120% year over year. In storage, non-volatile storage accounts for 26% of our system revenue, up from 23% in the June quarter. In dollar terms, NAND's revenue grew by about 40% month-on-month as the industry continued to invest in the conversion to 256-layer and above devices. We saw initial spending on 384 hierarchical devices. DRAM revenue recorded a record month-on-month increase in dollars, but declined slightly from 23% of system revenue in the June quarter to 20% in the September quarter in percentage terms. DRAM spending is still focused on technology additions and upgrades for 1α, 1beta, and 1γ nodes. These technologies enable DDR5, LPDDR5, and more importantly high-bandwidth memory. Foundry also achieved record revenue.
Its share of system revenue rose to 46% from 44% in the June quarter. Strong performance during the quarter was driven by investment in advanced nodes, including advanced packaging, and mature node spending in China. Finally, Logic & Others accounted for 8% of our system revenue in the September quarter, slightly lower than 10% in the previous quarter. Most of the expenditure here is for advanced process nodes. Let me now discuss the regional composition of our total revenue. China contributed 35% of revenue, up from 26% in the June quarter. We've seen strong investments from domestic and international customers here. In the December quarter, we expect China to account for a significantly lower percentage of our total revenue than in the September quarter. South Korea's contribution to revenue in the September quarter was the same as the June quarter, at 20%.
Taiwan contributed 18% of revenue, down from 27% in the June quarter. The customer support business group achieved its fourth consecutive quarter of record revenue in the September quarter, close to $2.5 billion. This is a slight increase from the June quarter and a 40% increase over the same period in 2025. Every component of CSBG remains as strong as it was in the previous quarter. Talk about gross margin performance. The September quarter reached a historical record of 52.4%, up from 52% in the June quarter due to favorable customer and product structures. Additionally, we continue to balance costs and pricing attitudes. Operating expenses for the June quarter were $1 billion, up from the previous quarter's $916 million. Growth is mainly driven by higher incentive pay brought about by our higher profit levels.
We're also investing incremental resources to support growing projects such as Akara, Halo, panel form factors, and Dextro. Research and development accounts for about two-thirds of our total operating expenses. The operating margin for the September quarter was 40.2%, another record, compared to 38.4% for the June quarter. This improvement reflects stronger gross margins and continued operating leverage as the business scales. The non-GAAP tax rate for the quarter was 16.5%, compared to 11% for the June quarter, which is in line with our expectations. Growth was mainly driven by higher US tax rates applied to foreign earnings and anticipated changes in the geographic structure of income. We expect tax rates to remain in this range during the December quarter and possibly beyond. I recommend everyone make sure to update the profit model to this higher tax rate.
Other revenue and expenses for the September quarter were approximately $16 million compared to $19 million in expenses for the June quarter. The improvement in OI&E was due to exchange rate fluctuations, higher interest income, and favorable performance of our venture capital portfolio. As we've discussed in the past, you should expect OI&E to experience some quarterly fluctuations due to market factors. The September quarter recorded record earnings per diluted share of $2.20. The number of diluted shares was approximately 1.26 billion, which is roughly the same as the June quarter. Let me turn to return on capital. We allocated approximately $1 billion for share buybacks and paid $325 million in dividends during the September quarter. During the quarter, we signed an accelerated share repurchase structure, which will continue to be implemented during the December quarter.
We returned approximately 41% of our free cash flow during the quarter and 59% year to date. I would like to point out that we also used $750 million this year to pay off our maturing debts. Our long-term plan remains to return 85% of free cash flow to shareholders. We have $3 billion left over from our board-authorized share repurchase program. By the end of the September quarter, our total cash and short-term investments were $7.5 billion, up from $5.6 billion at the end of the June quarter. The factor behind the growth was cash generated from operating activities, which was partially offset by our return on capital activity and capital expenditure. Our free cash flow also hit a record in the September quarter, which was $3.24 billion.
As I mentioned last quarter, we've been increasing our cash levels slightly to support growing business volumes and capital investments in this environment of growing demand. The number of receivables turnover days for the September quarter was 63 days, down from 72 days in the June quarter. Inventory at the end of the September quarter totaled $4.6 billion, an increase of $274 million over the June quarter as we build inventory to meet anticipated future demand for our products. Despite this, inventory turnover continued to increase to 3.4 times compared to 3 times in the previous quarter. I would like to mention that this is the highest level of inventory turnover in almost seven years. Our non-cash expenses for the September quarter included approximately $115 million in equity incentives, $106 million in depreciation, and $16 million in amortization.
Capital expenditure for the September quarter was US$258 million, up from US$189 million in the June quarter. As we continue to increase our laboratory infrastructure and expand our manufacturing facilities globally, capital expenditure has increased. At the end of the September quarter, we had about 24,300 full-time employees, an increase of about 1,900 over the previous quarter. The increase in the number of employees is mainly in our factory and field teams to support expanding manufacturing activities and growing tool installations. We are also adding personnel to the R&D department. Let's turn to our non-GAAP guidance for the December 2026 quarter. We expect revenue of $8.6 billion ± $400 million. I'd like to mention that this revenue guide would have been slightly higher if it weren't for some of the recent supply chain restrictions we're actively managing. We expect gross margin of 52.5% ± 1 percentage point.
Despite headwinds associated with the customer structure, this number improved slightly. We expect an operating margin of 40.5% ± 1 percent. Finally, earnings per share were $2.33 ± $0.15, based on approximately 1,253 billion shares. Let me sum it up. We continued to execute on our overperformance strategy and achieved another quarter of record revenue and profitability. The operating margin exceeded 40% for the first time in our history, and we are directing it to expand slightly. We are increasing our R&D investments to strengthen our already strong product portfolio. We're also investing in the infrastructure needed to support our anticipated future growth. These activities continue to provide a comfortable level of return on invested capital compared to competitors. Moderator, this concludes our preparations.
Q & A session
Moderator: Thank you. We will now begin the Q&A session. To ask a question, you can press the star key on the phone keypad and then press 1. If you use a hands-free phone, we ask that you pick up the handset before pressing the keys. If your question was answered at any time and you want to withdraw it, press the star key and then 2. As a reminder, we do ask that you only ask one question and one follow-up question. Today's first question comes from UBS's Timothy Arcuri. Please get started.
Timothy Arcuri, UBS Analyst: Thank you so much. Doug, I don't think I've ever seen your systems business grow 35% month-on-month in a quarter, so congratulations. You did mention recent restrictions. I think you can see that from accounts payable. I think payables have increased by about $1.3 billion. Can you give us a feel? Can you say this cost you $300 million to $400 million? Is it reasonable to assume that this cost you this number in the December guidelines? Then can you get it back in March? Can you actually get it back? Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, Tim, that's a good question. I won't give specific numbers. In my speech, I said it would be slightly higher. So it would have been slightly higher. Yes, Tim, if this is something we should have shipped in December, we will ship it in the March quarter due to the schedule.
Timothy Arcuri, UBS Analyst: Okay, Doug. Can you talk about a major storage company hosted a conference call today and they talked about 4F².
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes.
Timothy Arcuri, UBS analyst: They said they would prioritize 3D DRAM over 4F², and your stock fell, which is a bit strange to me. Seems like people don't really understand where you stand there. So Tim, I was wondering, maybe you can talk about that. Can you talk about how you're performing in the 3D world and the 4F² world, and what you've seen on customer DRAM roadmaps. Thanks, Tim.
Tim Archer, President and CEO of Fanlin Group: Of course. Obviously, we don't fully know what the reaction is, or why people react that way, because we've long said that as all device architectures move towards 3D, etching and deposition intensity will increase. Now, I'd like to say, in a way, the interesting thing is that the longer it takes to achieve this goal, the more we can see momentum in some of our other downsizing activities. We focused on that, even during this conference call — advanced graphics. If you want to expand the existing architecture and make the graphics smaller, that's why we're starting to see a rise in processes such as Aether and Akara conductor etching, which are the processes required to etch and create those smaller structures.
I'd say etching and deposition intensity is rising in the short term, and if we actually jump directly from 6F² to 3D DRAM, then etching and deposition intensity will rise faster and sooner than we thought, which is a good thing.
Timothy Arcuri, UBS Analyst: Okay, Tim. Thank you.
Tim Archer, President and CEO of Fanlin Group: Yes. Thanks, Tim.
Moderator: Thank you. Today's next question comes from Deutsche Bank's Melissa Weathers. Please get started.
Melissa Weathers, Deutsche Bank Analyst: Hi. Thank you so much for the question. I'd also like to ask about supply restrictions. I think you said you're working with the supply chain to ensure that some of the bottlenecks are addressed. Can you provide more details on what actions you are taking? Would you consider making any co-investments with those companies or providing capital assistance? What needs to happen to ease these restrictions?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Listen, Melissa. We've been working with the supply chain to ensure they're prepared for the demand environment we're seeing. But given how strong the situation has always been, we've seen some tension. I'm not going to be specific about where the tension is, but I'll tell you that we're managing it like we've always done. We'll continue to do that, just this quarter has been a bit tense. I fully expect us to manage this as effectively as anyone in the industry. If we need to make some investments, we'll be open. But quite frankly, many of our suppliers are well-capitalized and can manage themselves from a financial perspective. I don't know, Tim, would you add anything? No, I think that's right.
Tim Archer, President and CEO of Fanlin Group: For those of us who have experienced COVID shortages, this is completely different. We learned a lot of lessons during that time. In fact, over the past two months, we've held several major events with global suppliers that really set out our expectations for growth over the next few years. Where you might run into problems is in our own products. As we mentioned, etching and deposition strength are increasing in some parts of our business, such as the advanced packaging we talked about, which is indeed the main growth driver for Fanlin. You might find that some suppliers are seeing our demand increase in percentage even far faster than Fanlin's own growth.
I think we've been communicating this very clearly to those suppliers and are really asking for transparency to understand what help they need to keep up with our drive in the industry. I think we'll catch up soon.
Melissa Weathers, Deutsche Bank Analyst: Thank you. Regarding the NAND spending cycle, and the upgrade opportunities you've been talking about, you were ahead of schedule last quarter. I heard the 384 layer devices and I think you are shipping them, which is great. Can you update what stage you think we're in that NAND upgrade cycle? What trends are you seeing? Maybe some forward-looking comments on SLC and some new opportunities.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, there is room for the upgrade cycle. In fact, when you're in a period of high demand, actually taking a tool offline to upgrade can sometimes be a scheduling challenge for the customer and us.
Tim Archer, President and CEO of Fanlin Group: I'd like to say we're moving this forward; we said we'll finish it in 2027. But we also point out, and then you move on to the next upgrade cycle. Remember, that upgrade was from layer 128 to level 200 devices. As you mentioned earlier, people are already entering the 300 and 400 layers of devices. We've been involved in these in R&D for quite some time. But I think what we're really trying to point out today is that while we used to only talk about layer count as a driver of floodplain equipment requirements and wafer production capacity requirements, what you're really seeing now is the separation of storage tiers, and each device in NAND starting to be more specialized to suit different workloads in AI.
In fact, just as it affects HBM and the number of bits that can be manufactured per wafer in DRAM, you're beginning to see that AI's performance requirements are starting to create the demand for higher performance, lower latency devices. I think one of our customers just talked about this opportunity in detail, and I think it will drive demand for NAND wafer production capacity, as well as the strength of Panlin equipment. Thanks, Melissa.
Melissa Weathers, Deutsche Bank Analyst: Thank you.
Moderator: Today's next question comes from TD Cowen's Krish Sankar. Please get started.
Krish Sankar, TD Cowen Analyst: Yes, hi. Thanks for answering my questions. I have two questions. Doug or Tim, when I read your Q4 guidance, I understand you're talking about a mid-$150 billion WFE, but the implicit WFE in Q4 is almost around $180 billion. I'm just wondering if there are any incidental revenues in Q4 or are some price increases being made by front-end semiconductor equipment companies affecting Q4 and making the WFE numbers bigger? Then I have a quick follow-up question.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, Krish. No, there's nothing unique, one-off, or occasional in the December quarter, in your own words. Frankly, this is just in line with customer needs. Like I mentioned, it would have been slightly higher if it weren't for some supply chain restrictions, but there aren't any one-off things.
Krish Sankar, TD Cowen Analyst: Got it, Doug. So just a quick follow-up question. I think you mentioned in preparing your statement that China will be significantly lower in December than in September. I wonder, can you quantify it? What will the structure be like? Because the September quarter seemed like an upside surprise, multinational companies and domestic companies came in.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, Krish. It's no surprise to us. This is exactly as expected. I mean, domestic customers were strong in September, but so were global multinational companies. I expect we will have a meaningful drop in December, driven by domestic customers in China. I expect Chinese multinational companies to continue to be relatively strong in the December quarter, but China's share of revenue will decline meaningfully in the December quarter.
Krish Sankar, TD Cowen Analyst: Thanks so much, Doug.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Thanks, Krish.
Moderator: OK, today's next question comes from Harlan Sur of J.P. Morgan Chase. Please get started.
Harlan Sur, J.P. Morgan Analyst: Yes, good afternoon. Thanks for answering my questions. Regarding CSBG, it grew 36% in the first nine months of this year, and the full-year outlook is over 30%. Very, very strong. Growth is going well. I'm assuming higher spare parts due to record customer utilization, higher sales with higher NAND dollar value upgrades, and maybe Reliant's strong performance as mature parts of the market begin to recover. And, of course, your Equipment Intelligence service products. Can you rank these growth drivers? More importantly, how high was CSBG's operating profit margin compared to the previous year? I'm just wondering if CSBG's internal structure and sales dynamics contributed to the strong overall operating margin performance.
Tim Archer, President and CEO of Fanlin Group: Yes. I'll let Doug talk about the ranking of short-term financial impacts, but if I were to rank them by level of excitement, obviously, as we mentioned, we see Equipment Intelligence, collaborative robot-driven maintenance, and the performance-based service contracts we're talking about as a real new part of our CSBG business, and it's really trending. In our current environment, as someone asked before, are people trying to shrink devices faster to get more bits or more performance. This creates intolerance to process variability, whether in process control or maintenance. This is where Equipment Intelligence and collaborative robots come into play. So we're seeing a strong pull on this element, which is new to our CSBG business.
I'm so excited that it's a bigger driver of growth for us than in the past. I'll let Doug talk about upgrades, spare parts, and everything else.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, Harlan, we won't give you hard numbers for each sub-component. However, with regard to the strength of each component, what I want to tell you is that given such strong utilization in the industry, spare parts and service are just humming along, just as you'd expect. I've always said that spare parts are the biggest single component, and that's still true. But I won't specify anything else. What you implied was right. Given where we are in the NAND conversion/upgrade cycle, this segment of business continues to be strong. Yes, given the strong spending of mature nodes, Reliant performed quite well last quarter. I expect all of these trends to continue into next year.
Harlan Sur, J.P. Morgan Analyst: Yes, I appreciate it. As a follow-up, the tight supply of advanced foundry logic is straining mature and specialty nodes, analog, power, and microcontrollers. The OEM supply here is being tightened very rapidly, right? It appears that mature OEM suppliers and in-house IDM factories are increasing production capacity. You just said this is reflected in your Reliant business, but if you exclude China, do you expect this customer base to grow this year?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: There will probably be no meaningful growth this year, Harlan. I do expect mature node spending outside of China to be strong as we enter next year because of the dynamics you just mentioned. I'm not sure if it's actually already clearly prominent in 2026.
Harlan Sur, J.P. Morgan Analyst: Understood. Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Thanks, Harlan Sur.
Moderator: Thank you. Today's next question comes from RBC Capital Markets' Srini Pajjuri. Please get started.
Srini Pajjuri, RBC Capital Markets Analyst: Thank you. Tim, I'm watching your systems business grow. I think you grew 40% last year, and then probably 45% this year, all of which are far higher than WFE's growth. Looking ahead to next year, given your $200+ billion outlook, about 30%, let's say. I doubt you expect to outperform that market next year as well. Can you talk about what the drivers are? Being driven by any specific end market such as NAND or DRAM, or any product line, or anything else you can comment on, would be helpful.
Tim Archer, President and CEO of Panlin Group: Yes, I think on a very general level, I'd say it's driven by increased deposition and etching intensity in all devices. If I were to point out a few things, perhaps as a clear trend in the market, Fanlin has a very high level of exposure in the field of advanced packaging. I think advanced packaging continues to play a more critical role in almost every AI-enabled device today. I think this is a great location and we're going to see overperformance. We've even talked about it extending to the panel level. It really is in every device. You're seeing an increase in the number of NAND layers. You see the new architecture entering NAND. We've talked about the emergence of some SLC levels, and you're starting to hear from our customers. OEM logic, we talked about success in ring grids.
We invested in a full suite of products four or five years ago, focused on improving our position in foundry logic and DRAM. I commented on the fact that today, these products are driving a significant portion of our growth in those years where foundry logic and DRAM led growth. We are very happy with that. From our perspective, NAND hasn't shown its full potential, and I think you're starting to hear about it and the strategic role it can play in AI. I don't know. It's hard to predict accurately. We'd love to see all devices grow, but I think the biggest theme is that no matter what device we're talking about, deposition and etching will play a bigger role in 2027.
If you think about it, we have this model, where $100 billion in AI capital expenditure corresponds to approximately $10 billion in WFE. Importantly, of next year's $10 billion, the chances of flooding in it will be greater than this year because devices evolve. I think the intensity of etching is just a way to think about opportunities for flooding.
Srini Pajjuri, RBC Capital Markets Analyst: Right. So maybe it's about gross profit margin. Doug, despite your emphasis on some customer structure headwinds, you're actually guiding a slight increase. I doubt
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes
Srini Pajjuri, RBC Capital Markets Analyst: This relates to China. I think based on normalization, when we look forward to the next few quarters, once China is normalized, how should we think about gross profit margin? In the past, you did talk about some pricing actions, and of course, you also had cost and efficiency improvements. Just curious how we should think about the gross profit margin entering next year.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, listen, in the short term, Srini, I think you'll be in the positive or negative range of our current level. We do suggest that in the next few years, we see an opportunity to expand gross margins to the middle of 50%. You are triangulating yourself between these two points. But in the short term, it will fluctuate around its current level. Yes, a factor contributing to our very strong gross margins and our expectations of how to drive improvements in the future is the launch of new products, right? We have some very good technologically differentiated new products such as Akara and Aether. We're excited about all of these trends in terms of profitability.
We talked about our close-customer strategy of manufacturing close to the fab, which has contributed, and there's still some room to explore. Then we also talked about we're looking at pricing. All of this contributed to our historic record level set in the September quarter, and the leverage we will continue to work hard to drive in the future to reach what we call the 50% mid-term target.
Srini Pajjuri, RBC Capital Markets Analyst: Thanks, Doug.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Thank you, Srini.
Moderator: Thank you. Today's next question comes from Bank of America's Vivek Arya. Please get started.
Vivek Arya, Bank of America Analyst: Thanks for answering my questions. First question, if I look at last year, you can continue to expand WFE expectations. I think you were in the middle of $130 billion at the beginning of the year. It's now in the middle of $150 billion. I'm curious what helped you raise your WFE expectations last year, then what constraints do you think can be addressed next year to help you do a better job than the industry's growth of around 30%? I know you mentioned some recent restrictions. I'm curious if they are the same or different restrictions that will limit the industry's growth next year. Just what can help you do better than this 30% WFE growth in the industry?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Vivek, I'll start first, then let Tim add. As we made it through this year, you were absolutely right. We started in the mid-$130 billion segment, then slightly over $140 billion, then slightly over $150 billion, and then we just brought you to the mid-$150 billion segment. Basically, what we're seeing is that in every aspect of our customer base, everyone is squeezing a little more out of their existing clean room and/or pulling projects earlier than they might have intended. That's basically what happened. Frankly, we did the exact same thing. For figures over 200 billion, what we're giving you is our initial starting point, over 200 billion. We don't usually give this much specific information as early as the beginning of the year; we'll give you more accurate numbers during the next quarter earnings call.
Vivek Arya, Bank of America Analyst: Understood. As my follow-up, Doug, you mentioned a few things about the accelerated buyback program.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes.
Vivek Arya, Bank of America Analyst: I think everyone can guess why, but it would also be helpful to hear from you. If you could help give me some sense of scale, how long do you plan to last. I know you mentioned that the buyback has $3 billion left, but what are the components of the ASR and how long will it last? Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, Vivek, the way these accelerated share repurchase structures work is that you sign them, you get some shares in advance, and then they execute over time, depending on factors such as share price and volatility. I'm not disclosing the actual start or end date because there's a range around. I don't like to let people know what we do and how we do it, but I'll stress to you that it will continue in December and then we'll probably do other things related to repurchases in the marketplace, right? Our medium- to long-term goal remains the same, which is to return 85% of free cash flow to shareholders.
Vivek Arya, Bank of America Analyst: Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, thank you.
Moderator: Thank you. Today's next question comes from Atif Malik from Citi. Please get started.
Atif Malik, Citibank Analyst: Hi, thanks for answering my questions. First question for Tim. Tim, I think your panel level package review is very bullish. You're talking about the share going to surpass wafer-level packaging. Can you elaborate on the rise of the panel-level packaging industry and your products? Will products at the wafer-level, such as Sabre, drive this growth?
Tim Archer, President and CEO of Fanlin Group: Yes, fundamentally, they are similar. I think part of the reason we're optimistic in this area is, firstly, that's reasonable. Obviously we talked about it, and I think during the last earnings call, the package itself was getting bigger, which in many cases was too big for a wafer-level package, so the panel makes sense when you're trying to assemble an increasingly larger system-level solution. So we saw this a long time ago, and we've been investing in panels for years. I'd like to say, but we're still in the very early stages. Wafer-level packaging is the primary method. But as we mentioned shipping to more than 20 customers, you can think of these as sowing seeds for an industry, and I think this industry will eventually take on quite a bit of the packaging work in the industry.
The process we're talking about, we're not calling it Sabre in this case, but there's an electroplating aspect and a few other processes that I think will perform very well at the panel level.
Atif Malik, Citi Analyst: Great. Doug, with regard to the outlook for fab equipment worth more than 200 billion US dollars next year, your ranking is DRAM, OEM logic, and NAND. This is the same as 90 days ago, but given some announcements from foundry and new logic fabs such as Terafab, has the gap between DRAM and foundry logic expectations narrowed?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: No, Atif, they really don't have any. As you might expect, people are now publicly hearing about all of these projects, and we know about them beforehand. It really hasn't changed much.
Atif Malik, Citi Analyst: Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Thanks, Atif.
Moderator: Thank you. Today's next question comes from Jim Schneider of Goldman Sachs. Please get started.
Jim Schneider, Goldman Sachs Analyst: Good evening. Thanks for answering my questions. I would like to know, as you look to 2027, can you frame for us some moving factors that may raise or lower the WFE outlook? How much of this is actually your customer's personal spending plan for different technology or product areas, and how much depends on the overall supply of clean plants?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, Jim, I'll start first, then let Tim add. As we look ahead to next year, we see 10 new tier 1 fabs going online from the beginning of the year to the end of the year, and they will be added in layers over time. This is clearly a contributing factor. This year, mainly due to cleanroom restrictions. At this point, again, you see, like we said, some emerging supply chain restrictions that we believe we can effectively address, but the entire industry will have to solve very similar problems. At the end of the day, it all has to be balanced. Every equipment company needs to be able to supply something. Clean rooms need to go online as planned. People need to be hired and trained to make sure they're all ready.
The industry is good at doing this, and so are we. But all of these things must work when you're thinking about what next year will look like.
Tim Archer, President and CEO of Fanlin Group: Yes, I think in my preparation for my statement, I talked about extending our visibility to 2028. This is really from the demand side. I think it's probably a bit early for us to say that it's probably a bit early to give such an accurate WFE figure, simply because we think by the time of the January conference call, it's normal time for us to give that level of detail, we'll have a better idea of the cleanroom schedule and supply chain restrictions, and really be able to determine it accurately. But these are the things we're focusing on. Just like this year, we were able to address these issues, and I think as we get closer, we'll better understand how the industry is responding.
Jim Schneider, Goldman Sachs Analyst: Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Thank you, Jim.
Moderator: Today's next question comes from Bernstein Research's Stacy Rasgon. Please get started.
Stacy Rasgon, Analyst at Bernstein Research: Hi everyone. Thanks for answering my questions. First question, I understand that next year's WFE of over $200 billion is a limited number. Do you have an opinion on what that number would be if there were no restrictions, if clean rooms were available, and if the supply chain were less tight? What I want to ask is, in addition to the supply expectations you have given, how do you view the actual demand for WFE in 2027?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Listen, Stacy, you always ask these funny questions. You know what I'm asking. Nevertheless, I love this question. Listen, we think next year will continue to be limited by the things we've described. I'm not going to give a figure of how much unrestricted demand would be. It's going to be higher. I'm not going to give you an exact number. Like I said, we'll be fine-tuning the numbers we think and give you more specific information on next quarter's conference call.
Stacy Rasgon, Bernstein Research Analyst: Okay, that's helpful. As a follow-up for me, what are your thoughts on NAND upgrades versus services? Sounds like a pretty strong upgrade. I don't know if that means they are growing month-on-month. I'm assuming they've grown because NAND revenue has grown quite a bit, but CSBG revenue is somewhat flat. I thought the upgrade was in CSBG. If so I'm asking if the upgrade is driving NAND growth? If promoted, what else in CSBG is absorbing growth and leveling the overall balance?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Listen, Stacy, upgrades are part of NAND and part of CSBG. NAND, when you make these conversions, you'll also need to buy a new device. Obviously, the demand for new equipment also contributed to the expenditure.
Stacy Rasgon, Bernstein Research Analyst: Is it bigger than the upgraded part? Sounds like it.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Both are significant contributors.
Stacy Rasgon, Bernstein Research Analyst: OK. Thank you, everyone.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Thanks, Stacy.
Moderator: Today's next question comes from Jefferies' Blayne Curtis. Please get started.
Blayne Curtis, Jefferies Analyst: Hey guys. Thanks for letting me in. I actually wanted to ask the NAND side, you mentioned SLC, that might be a big shift. Is this something you've seen from customers or is it still a potential shift?
Tim Archer, President and CEO of Fanlin Group: I think this is something you started hearing from customers and talking about. Fundamentally, I think the idea of customizing memory and storage tiers for different workloads is now quite commonly understood. I think this is becoming one of the potential solutions for low latency NAND access. I think if you look at the last few days and weeks, there's already been discussion about SLC+ NAND appearing as part of that stack. There have also been discussions about high-bandwidth flash memory and the role it can play for a longer time. We're really starting to see NAND move from what we've always thought of as a single application to an application where maybe the device's performance itself will require customization. This will have an impact on us, but also from a process standpoint.
But what we are really emphasizing here is its impact on wafer production capacity demand, so it may be an increase in demand for NAND devices.
Blayne Curtis, Jefferies Analyst: Thank you. I want to ask about Advanced Packaging. I think the last time you said that it will grow by more than 70% this calendar year, I'm curious what the latest situation is. If you look at it, it's probably the smaller end, so you didn't mention it, but in terms of the $200 billion outlook, what are your thoughts on the growth of advanced packaging next year?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Blayne, 70% is still the correct figure this year. I'd be shocked if advanced packaging doesn't grow well next year.
Blayne Curtis, Jefferies Analyst: Yes. Thank you, everyone.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes. Thanks, Blayne.
MODERATOR: Today's next question comes from Morgan Stanley's Shane Brett. Please get started.
Shane Brett, Morgan Stanley Analyst: Okay. Thanks for letting me ask a question. My first question is about foundry logic. On your Analyst Day 2025, you talked about a 2x increase in SAM per wafer for foundry logic. With the shift from 3nm to 2nm, how far are we from that 2x, or in other words, how much did our SAM grow from 3nm to 2nm? Do you think your share growth will accelerate as you transition to 1.4? Thank you.
Tim Archer, President and CEO of Fanlin Group: Yes, that 2x is a multi-generational shift. It's hard to say exactly where we are in that road map. If I think about the roadmap we gave there, maybe half. But in reality, as we moved forward, we saw emerging apps. I've talked about a few of them today. Clearly, advanced graphics itself are becoming increasingly critical. We talked about Aether's growth. We talked about using Akara for conductor etching. Backside power is really starting to get more attention, becoming a very etching and deposition-intensive application. We're just seeing multiple elements of that improvement. I then commented on how excited I am about advanced packaging. Advanced packaging plays a huge role in foundry logic, and our WFE exposure there.
I'm just saying that foundry logic is turning into a great story. However, what we've emphasized in the past few conference calls is just a reminder of our role in ring grids, our strength in ALD, and our strength in surface treatment. These are areas where I think even on Analyst Day we probably didn't realize how strong the uptake of things like Argos surface treatment tools would be. So I think this story will only get better as devices for all three device types — OEM logic, DRAM, and NAND — get more complicated.
Shane Brett, Morgan Stanley Analyst: Understood. As a follow-up for me, about advanced packaging. At SEMICON West, one of your colleagues gave a great talk about breaking the integration wall and advanced packaging in the AI era. One highlight was the key challenge of large-scale adoption of hybrid bonding. How does pan-thinning enable hybrid bonding? Is more hybrid bonding better or worse for our share of advanced packaging? Thank you.
Tim Archer, President and CEO of Fanlin Group: Well, I think we're involved in the process that helps enable hybrid bonding. Obviously as a deposition and etching company, we don't do bonding per se, but we've talked about many films, whether in the field of media or metals, that ultimately play an important role in achieving successful hybrid bonding. Through this transformation, there is an opportunity for flooding. I think overall, the reality is that the success of advanced packaging, no matter which version, will lead to greater adoption of advanced packaging. Ultimately, given our very high share position, this is a good thing for us. With or without hybrid bonding, it's a very etching and deposition intensive process compared to other parts of the semiconductor manufacturing process itself. Thanks, Shane.
Shane Brett, Morgan Stanley Analyst: Understood. Thank you very much.
Moderator: Today's next question comes from Mizuho's Vijay Rakesh. Please get started.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Vijay, are you there?
Moderator: Vijay, is your line open, or maybe you're muted?
Vijay Rakesh, Mizuho Analyst: Oh, I just muted it. I'm sorry. Tim and Doug gave some interesting comments on the NAND side. You mentioned that every 1% switch to SLC requires approximately 2% increase in wafer production capacity. As we look ahead to next year's shift to SLC and possibly some HBF, do you have any thoughts on what percentage of the market is shifting to SLC? Is it like 5% or what would you think?
Tim Archer, President and CEO of Fanlin Group: I think it's too early to make any comments; this is probably something our customers should actually comment on. You can rest assured that in this sense, the strength of Fanlin equipment in manufacturing those devices and those wafers will increase.
Vijay Rakesh, Mizuho Analyst: Understood. So a brief follow-up. In terms of advanced packaging, you mentioned that apparently the entire CoWOS and EmiB-T are coming soon. I think Fanlin has huge opportunities in metallization pre-cleaning, TSV, etc. Just wondering if there's a way to evaluate the scale of this opportunity for every 100,000 EmiB-T or CoWOS wafers as you used to. How would you assess the scale of this opportunity for flooding? Thank you.
Tim Archer, President and CEO of Fanlin Group: Yes, I think maybe we'll use this as a job that needs to be done. Maybe we're evaluating the scale. We're not ready to do that today.
Vijay Rakesh, Mizuho Analyst: Understood. Thank you.
Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, of course. Moderator, let's take one more question.
Moderator: OK. Today's last question comes from Stifel's Brian Chin. Please get started.
Brian Chin, Stifel Analyst: Hi. Good afternoon. Thanks for letting us ask a few quick questions here. Maybe Doug, first, the number of days in stock is probably slightly higher than a quarter right now. It has clearly declined. You said the turnover rate has always been very strong. Where would you ideally like it to be?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes, listen, we're very happy with where it is now. As the company grows, you do gain a degree of efficiency to offset, but now we're building inventory to anticipate the increased demand we see next year. But I think we collectively felt pretty good about the 3.4 times position.
Brian Chin, Stifel Analyst: OK, great. Maybe that last question. Does the $1 billion increase in your Aether revenue outlook reflect more of an increase in foundry logic and DRAM customers in adopting the platform? Or is it more time for existing customers to introduce Aether early?
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: I think there's a bit of both. There's some additional customer adoption, but the real thing is when you actually become the POR for things like HBM manufacturing we mentioned, the volume is growing, the number of tools is growing, so the business continues to expand. So we feel like we're in a production position in some of the rapidly growing segments of the market, which is why we're able to raise the numbers.
Brian Chin, Stifel Analyst: Great. Thank you.
Doug Bettinger, Executive Vice President and Chief Financial Officer of Fanlin Group: Yes.
Thanks, Brian. Listen, thank you all for joining the conference call today. We are very excited about the presentation of the business. We're very excited about next year, and I think what we're probably most excited about is the third consecutive year of excess performance and the expectation that we will continue to push these things forward in the next calendar year. So I know we'll be seeing a lot of people at NDR and conferences next quarter, and we're looking forward to seeing you all. Thank you for joining the conference call.
Moderator: Thank you. That concludes today's conference call. We would like to thank everyone who participated in today's demo. You can disconnect now, have a nice day.