Kulicke and Soffa's Q4 2025: Contradictions Emerge on Memory Segment Growth, HBM Shipments, and Advanced Packaging Projections

Date of Call: None provided

Financials Results

• Revenue: $177.6M, GAAP revenue, noted as above guidance
• EPS: GAAP $0.12; non-GAAP $0.28; guidance for next quarter GAAP $0.18 and non-GAAP $0.33
• Gross Margin: 45.7%, with guidance of 47% for the December quarter

Guidance:

• Revenue for the December quarter expected to be ~$190M (~7% sequential increase).
• Gross margin expected to be 47% in the December quarter.
• Non-GAAP operating expense expected around $71M (company expects ~ $70M run-rate over coming quarters).
• GAAP EPS targeted at $0.18 and non-GAAP EPS at $0.33 for the December quarter.
• Effective tax rate expected to remain above 20% near term.
• Shipping first HBM system in the December quarter; expect FTC, vertical wire and advanced dispense ramps in FY2026.

Business Commentary:

• Improved Order Activity and Market Recovery:
• Kulicke and Soffa reported revenue of $177.6 million for the fourth fiscal quarter, with general semiconductor revenue increasing by 24% sequentially, driven by technology and capacity needs.

• The recovery was supported by favorable utilization trends in general semiconductor and memory end markets, with utilization rates over 80% for both sectors.

• Memory Market Recovery and Technology Transitions:

• 
• Memory-related revenue increased by nearly 60% sequentially to $24.4 million, driven predominantly by NAND-related capacity additions.

• The improvement was attributed to high-density NAND assembly and the anticipation of growth in high-performance edge applications like on-device AI or AI on the edge.

• Advanced Packaging and Component Innovations:

• The company is actively preparing for a production ramp of its Fluxless Thermal Compression (FTC) process through fiscal 2026, with growing demand across its customer base.

• The adoption of FTC is driven by the increasing capacity needs of IDM, foundry, and assembly and test customers, supporting advanced heterogeneous logic applications.

• Automotive and Industrial Market Improvement:

• Revenue in the automotive and industrial market is expected to increase sequentially in Q1 from Q4, showing early improvement, although it remains dynamic.
• The turnaround is due to the company's technology transitions in power semiconductor applications and customer optimism in Southeast Asia and China.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "We are encouraged by improved order activity" and "We are optimistic about fiscal 2026"; highlighted utilization >80% for general semiconductor and memory, sequential memory revenue up nearly 60% and APS up 17%, and continued technology ramps (FTC, HBM shipment, vertical wire).

Q&A:

• Question from Krish Sankar (TD Cowen): It looks like based on your guidance, sequentially all three segments (general semi, memory, auto industrial) should grow; is that right and how to think about the March quarter and seasonality?
  Response: General semiconductor and memory are strong (utilization >80%); auto/industrial is lagging but expected to grow sequentially into Q1; March likely flat to Q1 (no meaningful seasonality).

• Question from Krish Sankar (TD Cowen): A Taiwan competitor said their FTC plasma solution passed final call at a leading foundry — what is your status and are you still in pole position?
  Response: K&S believes it remains highly competitive and the foundry incumbent for high-volume production; our FTC offers both formic acid and plasma options and single/dual heads, providing customer optionality.

• Question from Charles Shi (Needham & Company): You mentioned shipping a system to the HBM customer — where is it going, what’s the next milestone, and which HBM generation is targeted?
  Response: The HBM system is shipping to a U.S. customer for installation and wafer runs leading to qualification in a few months; management indicated the target is likely HBM4E.

• Question from Charles Shi (Needham & Company): You said half FY2026 growth from tech transitions/share gains and half from cyclical recovery — any quantitative color?
  Response: Company won't guide beyond the quarter but is comfortable with consensus ~ $730–$740M for FY2026, with ~50% of incremental growth from technology transitions (FTC, vertical wire, advanced dispense, power semi) and ~50% from cyclical recovery.

• Question from Tom Disley (D.A. Davidson): Can you comment on the NAND/memory market strength and whether you expect a post-Chinese New Year ramp?
  Response: Memory utilization is high (~82–83% overall; ~90% in China) with orders already increasing into Q2; management expects flatter, more linear demand through FY2026 rather than a large post-CNY spike.

• Question from Dave Dooley (Steelhead Securities): The slide referenced increasing market share in DRAM/HBM — is this tied to the HBM thermal compression tool shipment and who are you competing against?
  Response: The slide referenced DRAM; K&S is shipping its first HBM thermal compression tool for qualification and expects to compete mainly against other thermal compression bonders (not hybrids) in that opportunity.

• Question from Dave Dooley (Steelhead Securities): You mentioned vertical wire ramping in 2026 — what’s the timing and expected contribution?
  Response: K&S sees first high-volume vertical wire production in late calendar 2026 (late fiscal 2026), expects initial FY2026 revenue around ~$10M with significant ramp in 2027 and beyond.

• Question from Craig Ellis (B. Riley Securities): Is the memory improvement a steeper recovery or just timing/seasonality; any sign of auto/industrial turnaround?
  Response: Management views memory as a genuine ramp into FY2026 (recovery underway), and while auto/industrial lags, customer discussions show improving trends with sequential revenue growth expected in Q1 and better FY2026 prospects driven partly by power semiconductor transitions.

Contradiction Point 1

Memory Segment Utilization and Growth

It involves differing statements about the utilization and growth expectations within the memory segment, which is a key area driving the company's revenue and market position.

Based on your guidance, will all three segments (general semi, memory, and auto industrial) grow sequentially? How should we view growth for the March quarter and seasonality effects? - Krish Sankar(TD Cowen)

2025Q4: We expect sequential quarter-over-quarter growth in the March quarter with the Memory segment growing strongly and the General Semiconductor and Auto Industrial segments improving sequentially. - [Lester Wong](CFO)

Will December quarter revenues decline sequentially? How should we view the potential for revenue to fluctuate around the $170 million level in the coming quarters? - Krish Sankar(TD Cowen)

2025Q3: We expect revenue to increase to $170 million in the following quarter. We believe Q1 of '26 will be flat, but we expect improvement driven by new products, such as clip-attach and advancements in Advanced Dispense, vertical wire, and TCB. - [Fusen Ernie Chen](CEO)

Contradiction Point 2

HBM Tool Shipments and Status

It involves differing statements about the timing and nature of HBM tool shipments, impacting expectations for revenue and technical advancements in the industry.

Can you provide details on the nature of the shipment to the HBM customer, the destination, and the next milestone? - Charles Shi(Needham & Company)

2025Q4: We are shipping the system to the U.S. for installation and wafer qualification. The next milestone is expected within a few months after the system is installed. - [Lester Wong](CFO)

You mentioned shipping TCB or HBM by the end of this calendar year. Does this refer to the entire HBM market or a single customer? - Krish Sankar(TD Cowen)

2025Q3: We expect to ship our initial system to one of these customers by the end of calendar year 2025. - [Fusen Ernie Chen](CEO)

Contradiction Point 3

Advanced Packaging Revenue and Growth Projections

It involves differing statements about the revenue expectations and growth potential of advanced packaging, which is a strategic area for the company's future growth.

Will all three segments (general semi, memory, auto industrial) grow sequentially as per your guidance? How should we consider growth for the March quarter and any seasonality effects? - Krish Sankar(TD Cowen)

2025Q4: Advanced packaging is expected to deliver approximately $275 million this year. - [Lester Wong](CFO)

Could you clarify how many customers are using your thermo-compression bonding tool and which will be the biggest growth drivers in the near term? - David Duley(Steelhead Securities)

2025Q1: We forecast advanced packaging to be $275 million to $300 million in 2025. - [Fusen Chen](CEO)

Contradiction Point 4

Southeast Asia Sales Slowdown

This contradiction highlights the differing explanations for the slowdown in sales in Southeast Asia, which could impact revenue expectations and market strategy.

What are the trends for June, will the decline be primarily in the general semiconductor and automotive industrial sectors, and how should we approach the outlook beyond June? - Sreekrishnan Sankarnarayanan (TD Cowen)

2025Q4: We have a Q3 slowdown, and this slowdown is the most pronounced in our Southeast Asia region. - [Fusen Chen](CEO)

How do market dynamics differ between Southeast Asia and Taiwan in terms of order activity? - Christian Schwab (Needham & Co.)

2025Q2: Southeast Asia utilization rate is below 80%, and the tariff impact on auto is significant. Southeast Asia's slowdown accounts for almost a majority of the sequential decline from Q2 to Q3. - [Fusen Chen](CEO)