ACM Research, Inc. (ACMR) is a leading supplier of wafer processing solutions for the global semiconductor industry. The company has a rich history of innovation, delivering world-class tools that drive value for its customers and strengthen its position in the global market.
Company Background
Founded in 1998 in California, ACM Research has since expanded its operations to mainland China, where it conducts the majority of its product development, manufacturing, support, and services through its subsidiary, ACM Research Shanghai, Inc. (ACM Shanghai), which was formed in 2005. The company's success is rooted in its ability to develop advanced, innovative capital equipment that caters to the evolving needs of semiconductor fabricators.
Product Evolution
In its early years, ACM Research focused on developing and delivering innovative wet-cleaning tools for semiconductor fabrication. These tools were designed for use in fabricating foundry, logic, and memory chips, including dynamic random-access memory (DRAM) and 3D NAND-flash memory chips. Over time, the company has expanded its product portfolio to include a range of technologies, such as single-wafer cleaning, Tahoe, and semi-critical cleaning equipment, as well as ECP (Electrochemical Copper Plating) front-end and packaging solutions, furnaces, and other advanced technologies.
Challenges and Milestones
ACM Research has faced and overcome several challenges throughout its history. In 2020, the company had to navigate the impact of the COVID-19 pandemic, which disrupted supply chains and operations. However, ACM Research demonstrated its adaptability by continuing to serve its customers during this difficult time. The company has also had to navigate the complex legal and regulatory environment in mainland China, where a significant portion of its operations are based, ensuring compliance with evolving rules and regulations while maintaining operational effectiveness.
Despite these challenges, ACM Research has achieved several important milestones. In 2012 and subsequent years, ACM Shanghai was certified as an advanced and new technology enterprise, entitling it to a preferential income tax rate. In 2021, ACM Shanghai was also certified as an eligible integrated circuit production enterprise, further enhancing its tax advantages. These certifications have contributed to the company's financial strength and competitive position in the market.
Global Expansion
In recent years, ACM Research has made significant strides in expanding its global footprint. While the majority of its sales have traditionally been to customers in Asia, the company has been actively pursuing growth opportunities in North America, Western Europe, and Southeast Asia by expanding its direct sales teams and increasing its global marketing activities.
Product Innovation
One of the standout achievements in ACM Research's product portfolio is the Ultra C Tahoe Cleaning tool. In November 2024, the company announced a major performance breakthrough for this flagship product, which now delivers the same cleaning performance as standalone single-wafer cleaning tools on low-to-medium temperature sulfuric peroxide mix (SPM) processes. The Tahoe's patented hybrid architecture combines batch wafer processing and a single-wafer cleaning chamber, offering enhanced cleaning performance, high throughput, and process flexibility with up to 75% reduction in chemical consumption.
Financials and Liquidity
The company's financial performance has been impressive, with revenue growing 44% year-over-year to $558.6 million in the first nine months of 2024. Shipments also increased significantly, rising 56% to $709.7 million during the same period. ACM Research's gross margin remained strong at 50.3%, and the company generated positive cash flow from operations of $63.9 million.
For the most recent fiscal year, ACM Research reported revenue of $557.72 million and net income of $77.35 million. The company's operating cash flow (OCF) for the year was -$75.32 million, while free cash flow (FCF) was -$139.66 million.
In the most recent quarter, ACM Research delivered strong results with revenue of $203.98 million, up 21% year-over-year. Net income for the quarter was $30.90 million, while OCF was $11.91 million and FCF was -$19.47 million.
ACM Research operates two main product segments:
1. Single Wafer Cleaning, Tahoe and Semi-Critical Cleaning Equipment: This segment, which includes ACM's single wafer cleaning equipment, Tahoe tools, and other semi-critical cleaning equipment, generated revenue of $160.99 million in Q3 2024, up 21.6% from $132.42 million in Q3 2023. It accounted for 78.9% of total revenue in Q3 2024, making it ACM's largest and most important product line.
2. ECP Front-End and Packaging, Furnace and Other Technologies: This segment, which includes ACM's ECP front-end and packaging equipment, furnace tools, and other technologies, generated revenue of $34.60 million in Q3 2024, up 35.6% from $25.51 million in Q3 2023. It accounted for 17.0% of total revenue in Q3 2024.
Additionally, ACM has a smaller Advanced Packaging excluding ECP, Services & Spares segment, which generated $8.39 million in revenue in Q3 2024, down 21.2% from $10.64 million in Q3 2023, accounting for 4.1% of total revenue.
The company's gross margin for Q3 2024 was 51.4%, slightly down from 52.5% in Q3 2023. Operating expenses increased 9.6% to $60.65 million, with increases across sales & marketing, R&D, and G&A.
Looking at liquidity, ACM Research maintains a strong position with a debt-to-equity ratio of 0.16. The company had $333.47 million in cash and cash equivalents as of the most recent reporting period. ACM Research has several credit facilities available, including a line of credit up to RMB 200 million from China Merchants Bank (with RMB 66.43 million outstanding), a line of credit up to RMB 400 million from Bank of China (with RMB 364.23 million outstanding), and a loan of RMB 100 million from China CITIC Bank. The company's current ratio stands at 2.37, while its quick ratio is 1.34, indicating a healthy liquidity position.
Looking ahead, ACM Research has raised its 2024 revenue outlook to a range of $725 million to $745 million, representing a 32% year-over-year growth at the midpoint. This is an increase from the previous guidance of $695 million to $735 million. The company expects full-year gross margins to be above the high end of their long-term target range of 40% to 45%, based on year-to-date gross margins of around 50% and expectations for Q4.
For operating expenses in 2024, ACM Research anticipates R&D expenses to be in the 12% to 13% range, sales and marketing expenses in the 7% to 8% range, and G&A expenses in the 5% to 6% range. The company expects an effective tax rate on non-GAAP pre-tax income in the 12% to 14% range for the full year 2024. Capital expenditures are projected to be around $100 million for the full year.
Geographic Focus and Future Outlook
Geographically, ACM Research remains focused on the robust semiconductor market in mainland China, where it believes WFE (Wafer Fab Equipment) spending will remain at a high level as the country continues to pursue its goal of matching production capacity with end-market consumption. The company is also expanding its business to new customers in the United States, Korea, Taiwan, Europe, and other Asian markets, with a long-term target of generating half of its revenue from outside China.
The global semiconductor capital equipment market is expected to grow at a CAGR of 8.6% from 2023 to 2028, driven by increasing demand for semiconductors across various end-use industries. This trend bodes well for ACM Research's future growth prospects.
Despite the broader market challenges and geopolitical tensions, ACM Research has demonstrated its ability to navigate these uncertainties and deliver strong financial and operational performance. The company's commitment to innovation, global expansion, and serving the evolving needs of its customers position it well for continued success in the years ahead.
Conclusion
In conclusion, ACM Research is a well-established player in the semiconductor equipment industry, with a diversified product portfolio, a strong presence in mainland China, and a growing global footprint. The company's recent performance and forward-looking guidance suggest that it is well-positioned to capitalize on the robust demand in the semiconductor market and further strengthen its position as a leading supplier of wafer processing solutions. With a solid financial foundation, innovative products, and a focus on expanding its global reach, ACM Research appears poised for continued growth and success in the dynamic semiconductor industry.