6. BUSINESS OVERVIEW 6. BUSINESS OVERVIEW OVERVIEW OF OUR GROUP’S BUSINESS ACTIVITIES AND SERVICES We are principally involved in the design, engineering and development of ATE, where our products are used by semiconductor manufacturers and OSAT companies to test semiconductor wafer and packaged devices, before they are shipped for final assembly into various electronic devices and gadgets. Our ATE are designed to test the functionality of semiconductor devices, including functionalities such as power levels, electrical behaviour, analog signals, digital signals and RF signals. We provide different testing platforms to cater for a wide range of semiconductor devices and markets. In the value chain of the semiconductor industry as illustrated below, semiconductor testing is carried out at the assembly, test and packaging stage of the value chain, where semiconductor devices undergo testing before being shipped or distributed to end-users.
(Source: Independent Market Research Report by Smith Zander) Our core expertise is in the design and development of ATE for the testing of RF front-end devices, which are used in wireless applications such as mobile phones, tablets, wireless networking devices such as wireless routers and other wireless-enabled products. The RF front-end devices encompass RF power amplifiers, low-noise amplifiers, RF switches and antenna tuners. With the growth in the wireless application market, specifically in mobile wireless communications, our RF test equipment are well-positioned to meet global market demand for cellular and wireless devices. Our products are also capable of testing sensors, optocouplers and fibreoptic transceivers. Some of the sensors that we test include proximity sensors used in mobile phones and tablets; and reverse sensors and rain sensors used in vehicles. An optocoupler is an interface between two (2) electrical circuits operating at different voltage levels and is widely used for industrial process control equipment where it is important to have good electrical isolation between the two (2) circuits. Fibreoptic transceivers are used for high-speed electronic data transfer. Our product range also includes ATE for the testing of discrete devices. A discrete device is the most basic electronic component with just one (1) circuit element, such as resistor, capacitor, inductor, diode, transistor or vacuum tube. Discrete devices appear in almost all electronic circuits in electronic devices and gadgets. 50 6. BUSINESS OVERVIEW (cont’d) Our ATE used for catering testing solutions for the RF front-end devices, non-RF devices and discrete devices has contributed approximately 56.55%, 35.71% and 4.51% respectively of our Group’s revenue in FYE 2014 and 57.06%,35.01% and 4.80% for FPE 2015. Please refer to Section 6.3 of this Prospectus for further details in relation to our products. 6.2 KEY ACHIEVEMENTS, AWARDS AND RECOGNITION 6.2.1 Key Achievements The table below sets out our Group’s key development and achievement milestones over the years:Year Milestones 2004 Incorporation of ASB as a private limited company on 30 July 2004 by our Founders. Commenced operations in 2005 at our first office in Gurney Tower, Penang by focusing on the R&D of our first tester. • Launched first generation of our ATE, known as Amoeba 1320, under our Amoeba 1000 series. • Relocated to a larger office in Krystal Point, Penang. • Developed the Amoeba 1340 which was a SMU for testing of wireless and RF semiconductor devices found in mobile and portable gadgets such as mobile phones and smartphones. • ACSB awarded the MSC-Malaysia status by MDeC on 19 December 2007. • Launched the Amoeba 2000 series tester for the testing of industrial products. • Launched our first test development and production software, namely techFlow 1.0. • ASB entered into a Master Transfer of Business Agreement. • Launched the Amoeba 4100, which was designed for the testing of discrete semiconductors. • Developed our techFlow 2.0 software. • Launched the Amoeba 4200, a PXI-compliant scalable platform developed as an upgrade to the Amoeba 2000. • Launched the Amoeba 7500 as a full-fledged RF tester. • Launched upgrade of our testing software to techFlow 3.0. Launched the Amoeba 7600, an upgrade of the Amoeba 7500. Moved to a larger premises located at One Precinct in Bayan Lepas, Penang. 2005 2006 2007 2008 2010 2012 2013 2014
[The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) 6.2.2 Awards, Accreditation and Recognition Over the years, we have been awarded with the following awards and recognitions:No. Award and Recognition Awarding Body Year 1. 2. 3. 4. Technology Fast 500™ Asia Pacific 2010 Technology Fast 500™ Asia Pacific 2011 Technology Fast 500™ Asia Pacific 2012 Recognised under Entry Point Project 13: Growing Automation Equipment Manufacturing Deloitte Deloitte Deloitte PEMANDU 2010 2011 2012 2013
6.3 OVERVIEW OF OUR GROUP’S PRODUCTS, SERVICES AND OPERATIONS Our product line-up is set out below:No. Tester Models Description Application 1. AMOEBA 1340c AMB1340c-06 High-density SMU with fast Used as a power AMB1340c-08 communication protocol source for an electronic
AMB1340c-081 using high-speed USB. Can be combined with multiple units to increase channel density for increased testing capacity. device or circuit and to measure the voltage and current accurately. Suitable for RF frontend devices, sensors, optocouplers and fibreoptic transceivers. 2. AMOEBA 2000 Not applicable Customised test system that allows customers to configure the tester to integrate with other third party instruments in order to cater for greater test functionalities. Used for testing of optocouplers and electronic sensors.
6. BUSINESS OVERVIEW (cont’d) Tester Models Description Application
No. 3. AMOEBA 4100 AMB4100 AMB4100-D Test equipment designed
Used for testing of specifically for high-speed discrete devices such testing of discrete devices. as transistors, diodes, Small in size and supports inductors and resistors. dual-site, time-multiplexed Usually hooked up with testing feature. turret type automated test handlers for multisite testing.
AMOEBA 4200 4. AMB4200
5. AMOEBA 7600 Amoeba 7500 Amoeba 7600 •
A PXI-compliant test A scalable and flexible platform with the capability platform used for to mix-and-match test testing a wide range of modules in order to cater semiconductor devices for different test at a broad spectrum of requirements and frequencies, for the configurations. These industrial product
modules are also sold market such as power separately to our management ICs, customers. sensors, optocouplers, fibreoptic transceivers and mixed-signal devices.
Used for the testing of for RF frequency of up to FUll-fledged RF test system semiconductors used in 13GHz. It comes with the wireless applications time-multiplexed multi-site such as mobile phones, test feature. tablets, wireless networking devices such as wireless routers, and other wireless-enabled products.
6. BUSINESS OVERVIEW (cont’d) No. Tester Models Description Application 6. AMOEBA 4600 AMB4600 Testers using hard-docking Used for the testing of mechanism and are widely mixed-signal – deployed at the front-end of semiconductor at wafer semiconductor testing or level and for the wafer level testing. This is semiconductor needing the first product by precise and high-speed Aemulus which is capable digital signal, high- of performing hard-docking resolution timing testing method. measurement and precise direct current sourcing and measurement.
A typical ATE system comprises individual test modules which determine the specific functionalities and test requirements of the system, and runs on our techFlow software. We also sell these modules separately to our customers, primarily as replacement modules for ATE systems purchased from us. An illustration of an ATE system, with test modules placed inside the system, and connected to the Oevice-Under-Test (“DUTil), is shown below:An ATE
“!J’.,”,’ ~,’:,’,'”/;'” ” “: ” “,,’,’ ” “” I’ “,” “,. .” “, I’ “” I ,.,., ,• II””” , : “f ,t’ ,,~ ,t “, I “” ” ” ‘,’ Tester Platfonn
Test modules Inside a tester platfonn An ATE system in operation is shown below, whereby the OUT is physically connected to the ATE by robotic machines called handlers (H1 and H2):
6. BUSINESS OVERVIEW (cont’d) 6.4 BUSINESS PROCESS FLOW The overall process flow for the design and engineering of our ATE is as depicted below:Confirmation of sales order Product design output Production planning Raw materials procurement Raw material kitting PCB assembly Quality inspection Final assembly, calibration and testing
Board assembly NO System calibration and System testing
Outgoing quality inspection Product packing C ~
Delivery 6. BUSINESS OVERVIEW (cont’d) The following are illustrations of our production flow upon the receipt of confirmation of a sales order:(a) Product Design Output Our R&D team is responsible for the product designs. Designs are first developed by our R&D team using circuit design tools and sUbsequently converted into data, commonly referred to as design output. This design data is also used to test our final products on the production floor. (b) Production Planning A production plan is formalised prior to production run. Production planning involves detailing the materials required for production, timeline for production and resources required. (c) Board Assembly (i) Raw Material Procurement Raw materials are procured based on the product design. We have in place sufficient personnel to manage our inventory of raw materials. In the event that there is a shortage of raw materials, we will purchase and stock up the raw materials from our list of qualified suppliers. (ii) Raw Material Kitting (i.e. Preparation) We prepare our raw materials in a production kit according to the product design and specifications. As each unit of our product consists of potentially thousands of components, it is important that all of the raw materials are set out systematically in a production kit to ensure that production progresses smoothly. (iii) PCB Assembly The heart of our testing equipment rests in the integrated circuits and electronic devices on the PCB, as a major part of the functionality is specified within the interconnection of components on the PCB. Our assembly process is automated, as the components, comprising mainly surface mount devices, are mounted and soldered onto the bare PCBs using surface mount machines. We employ a combination of in-house assembly and third party contract manufacturing assembly. Our contract assemblers are based in Penang, mostly within the Bayan Lepas Free Industrial Zone. (d) Quality Control and Inspection Please refer to Section 6.5 of this Prospectus for further details on quality control and inspection. [The rest of this page is intentionally left blank] 56 6. BUSINESS OVERVIEW (cont’d) (e) Final Testing and Calibration Upon completion of quality control and inspection, we carry out final assembly, calibration and testing of the circuit board to ensure all components are in proper working order and that all testing functionalities are as per the product design. All final assembly, calibration and testing are done in-house, while assembly may be carried out by our third party contract assembler or performed in-house. At the end of this stage, testers that are to be produced as part of a system will undergo the next stage of our production process, i.e. hardware assembly, software installation, and system test and calibration, before undergoing outgoing quality inspection. On the other hand, testers that are to be delivered to our customers as standalone modules will immediately undergo outgoing quality inspections. (f) Hardware Assembly, Software Installation and System Test and Calibration
For our system-based test equipment, a combination of our module-based PCBs are assembled and integrated by way of hardware and software into a system. We assemble these modules within an enclosure together with software installation to integrate these modules to form a functional ATE. These modules are then calibrated, followed by system testing to ensure that the system is in proper working order and that all testing functionalities are as per the product design. Upon calibration and system testing, the system undergoes outgoing quality inspection.
(g) Outgoing Quality Inspection
Outgoing quality inspection check comprises final visual inspection and electrical inspection of the test boards, electrical wiring and connections, mechanical parts and enclosures, whichever is applicable, to ensure that there are no electrical and physical defects or faults.
(h) Product Packing
Once the ATE has passed the outgoing quality inspection, it is then packed into boxes and properly secured with wooden crates before delivery to our customers. 6.5 QUALITY ASSURANCE MANAGEMENT As we are committed to R&D and product development, we place importance on our quality control and assurance processes. We adopt the following approaches in our production to ensure that quality standards are maintained. 6.5.1 Quality Policy We are committed to ensuring that our customers are satisfied with our product quality and deliveries on a timely basis. This is supported by an organisational culture of continuous improvements across all disciplines and commitment by all employees. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) 6.5.2 Quality Objectives Our quality objectives are as follows:(a) Fulfilment of our customer expectations regarding product quality according to product specification and delivery efficiency;
(b) Continuous improvement, commitment and efficiency throughout our organisation;
(c) Reduction in internal process rejections; and
(d) Training of employees.
6.5.3 Quality Management System We have adopted a stringent internal quality management assurance policy to ensure that the products we manufacture are of high quality and meet the specifications and requirements of our customers, as well as to our internal quality specifications. Our testers adhere to IPC-A610 and IPC-A-620, which are standards set by IEEE. Our quality control and inspection is carried out once our products have been assembled, and before final testing and calibration. Our in-house QC team will carry out the quality control and inspection process. The inspections and tests carried out by our QC team are described below: Quality Control Tests Description Solder joint visual inspection • Solder joints of the components, such as transistors, resistors and diodes, that have been mounted on the PCB are visually inspected to ensure all the terminals of the components have been correctly soldered. • Any solder joints that are incomplete or faulty will have to be reworked. • Mechanical inspection is carried out on the PCBs to ensure that the wire harness, heatsinks, nuts and bolts are installed according to specifications. • Mechanical faults will be rectified and faulty components replaced. • The PCB is tested with a power measurement instrument to ensure that sufficient and appropriate electrical current is running through the circuit. • Non-functional units are sent for debugging, repairing and retesting. • Critical parameters such as power range, frequency range, s-parameters and harmonics are tested to ensure that the RF performance of the ATE meets specifications. • Extensive test on the design circuitries is performed to validate the integrity of circuits and components in the ATE. • Functional test is performed on the ATE to determine that the behaviour of the ATE conform to all functional requirements in the design specifications. • The ATE is tested under load conditions to ensure that the behaviour of the ATE is in compliance with the product specifications. Mechanical inspection Basic electrical test RF Test Full electrical test Functional test Load test
6. BUSINESS OVERVIEW (cont’d) Quality Control Tests Description Calibration and report • • • • • The ATE is calibrated and tested to verify that the performance and accuracy of the ATE are in conformity with design specifications. A calibration certificate and measurement report is generated for all ATE which had pass the calibration and electrical test. The ATE is calibrated and tested to verify that the functionality of the ATE is in conformity with the design specifications. A calibration certificate and measurement report is generated tor all products which pass the calibration and electrical test. All system, components and accessories to be delivered to customers are labelled and verified against an outgoing product checklist. FUll electrical test and report Label visual inspection
6.6 R&D AND TECHNOLOGY 6.6.1 R&D Policy We are cognisant that our investment in R&D will sustain our competitive advantages and continuous growth. Hence, our Group has continuously invested in R&D since our incorporation. Our R&D direction is guided by the following policies:(a) Continuous development of relevant circuit design technologies to meet evolVing market needs, customer demands and emerging technologies to remain competitive and commercially relevant;
(b) Create marketable and cost competitive ATE products; and
(c) Build on strengths, competencies and domain knowledge of existing ATE in developing future products.
6.6.2 R&D Initiatives and Activities Our R&D team constantly explores and keeps abreast of the latest technology trends and market development. Our R&D team encompasses the digital design group, analog design group, PCB design group, software group and new product introduction group. The development of a new prodUct within our Group typically goes through the following phases:(a) Marketing product plan (“MPP”);
(b) New product development (“NPD”); and
(c) New product introduction (“NPI”).
A MPP is drafted out by our Sales and Marketing team, based on feedback from our customers and market intelligence gathering. Based on the MPP, a demand list is given to our R&D team to determine the technology to be employed and/or new features to be designed. Our R&D team will update the request list with any new results based on past R&D work before finalising the product specifications. Based on these specifications, our Sales and Marketing team produces a final MPP. 6. BUSINESS OVERVIEW (cont’d) Based on the MPP, the design and development of the new product begins. This is the NPD stage, whereby the platform of the new product, the associated functional modules, the software tools and the design verification programmes are developed. Towards the end of the NPD, the platform, modules and software are verified to ensure the specifications in the MPP are met. Following the NPD stage, the new product moves into the NPI stage. A test programme is created to detect design bugs or manufacturing defects. A set of test programmes called production test programmes are also developed and handed over to our Production team for production testing use. The NPI stage bridges the gap between our R&D and Production teams. Our constant involvement in the R&D of new technology or features is the key to our Group’s future revenue growth. Our on-going and future R&D projects are set out below, with details provided in Section 6.16 of this Prospectus:Product/Solution Description R&D Commencement Year Expected Completion Year Fund Allocated (RM’OOO) On·Going and Future R&D Projects Advanced RF tester Upgrade of Amoeba 7600 with improved features and functionalities such as wider frequency coverage and additional software utilities. 2013 2016 2,150 Wafer probe tester New ATE for testing during semiconductor wafer fabrication 2014 2015 1,900 Advanced tester analog Upgrade of Amoeba 4200 with wider test spectrum such as new analog and digital modules. 2015 2016 450
As at the LPD, our Group has incurred R&D expenses of RM1.83 million on related R&D activities for the designing and development of our Advanced RF tester and RM1.75 million on wafer probe tester, which were funded via our internally-generated funds. We were awarded a Domestic Investment Strategic Grant from MIDA for the funding of our R&D activities on the upgrading of the RF tester and related training expenses in the use of technology pertaining to RF testing and the fund from this grant has been utilised for our R&D activities in relation to our RF tester between 2013 and 2015. Please refer to Section 11.4.4 of this Prospectus for further details on the said grant. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d)
6.6.3 R&D Facilities and Personnel We currently have a R&D facility in our present headquarters where we carry out R&D. The divisions which are involved in the R&D activities include the R&D, NPI Software and Product Applications. As at the LPD, we have 37 personnel who are engaged in R&D activities. We will deploy other operational personnel to the R&D activities as and when required. As at the LPD, the current breakdown of our staff engaged in the R&D activities is as follows:R&D Division NPI Division Software Division Product Applications Division Staff engaged in R&D activities 12 8 6 11
Please refer to Section 6.16(c) of this Prospectus for further details on our future plans of R&D facilities.
6.6.4 R&D Expenditure Our R&D expenses during the past three (3) FYE 2012 to FYE 2014 and FPE 2015, including expenses that have led to the development of our current products are set out below:R&D Expenditures * Our Group’s Total R&D Expenditure (RM’OOO) Total R&D Expenditure as Proportion of Our Group’s Total Revenue (%) FYE 2012 1,351 12.25 FYE 2013 2,618 26.17 FYE 2014 3,024 12.97 FPE 2014 2,011 20.20 FPE 2015 2,526 15.42
Note:Details of our R&D expenses that have led to the development of our current products are set ourbelow:R&D Expenses FYE 2012 (RM’OOO) FYE 2013 (RM’OOO) FYE 2014 (RM’OOO) FPE 2014 (RM’OOO) FPE 2015 (RM’OOO) R&D staff costs R&D material costs R&D capital expenditures” 1,054 260 37 1,273 247 1,098 1,599 768 657 718 639 654 1,430 474 622 Total 1,351 2,618 3,024 2,011 2,526
Note:1\ Capitalised under property, plant and equipment for the FYE 2012 to FYE 2014 and FPE 2015 as these expenditures relate to purchases of test instruments, office equipment and software. 61
6. BUSINESS OVERVIEW (cont’d) 6.7 RELEVANT TECHNOLOGIES The primary technology that we use in the design of our testers is circuit design technology which is implemented in the FPGA. FPGA are ICs designed to be configured to required specifications after manufacturing, hence “field-programmable”. FPGAs are generally written in a HDL which is different from software programming languages as they include ways of describing the propagation time and signal strengths. We use a HDL called Verilog in our circuit designs, whereby the circuit design is carried out by describing the hardware using Verilog. In other words, the circuit designs are in the form of Verilog design files which are converted into hardware logic in FPGAs. The FPGAs are assembled together with other electronic ICs on a PCB and act as the main controller for the PCB to work as intended. The Verilog code is compiled into design files through EDA software. 6.8 RAW MATERIALS AND MAJOR SUPPLIERS/SUB-CONTRACTORS 6.8.1 Key Types, Sources and Availability of Supplies The key supplies for our operations include semiconductor components such as PCBs, ICs, FPGAs, transistors, resistors, diodes, fuses, relays, connectors, RF instruments and other accessories. As at the LPD, our Group has not experienced any difficulties in sourcing for our major raw materials and supplies as they are readily available from both local and international markets. The prices of other raw materials and supplies used by our Company are fairly stable. Save for the IC and FPGA which are indirectly affected by the fluctuations in foreign exchange. In the past, the price movements of our major raw materials and supplies varied in the range between 1% and 10%. Nonetheless, our Board and management are of the view that such fluctuations will not have any material impact on our future profitability. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) 6.8.2 Major Suppliers Our major suppliers contributing more than 10% of our purchases for the past three (3) FYE 2012 to FYE 2014 and FPE 2015 are as follows:Suppliers FYE2012 (RM’OOO) j (%) FYE 2013 (RM’OOO) (%) FYE 2014 (RM’OOO) (%) FPE 2015 (RM’OOO) (%) Length of Business Relationship (Years) Kenlzy International INC (“Kentzy”) -I – 86 2.50 694 6.61 2,397 20.76 3 Aeroflex Wichita Inc. (“Aeroflex Wichita”) AEI Electronics Sdn Bhd (“AEI”) 750 33 18.45 0.81 -103 -2.99 2,383 877 22.71 8.36 1,989 1,179 17.23 1 , 10.21 2 7 Digi-Key Corporation (“Digi-Key”) 195 4.80 498 14.47 1,073 10.23 873 7.56 10 Element14 Sdn Bhd (“Element14”) 75 1.84 379 11.01 867 8.26 499 4.32 5 NSW Automation Sdn Bhd (“NSW Automation”) 419 10.30 272 7.90 261 2.49 – – 3 BI Technologies Corp Sdn Bhd (“BI Technologies”) 511 12.57 80 2.32 – – – – 3 Total Purchases 4,066 3,442 10,492 11,546
Our major suppliers are suppliers of semiconductor components such as transistors, resistors, fuses, ferrite beads, diodes, connectors and other accessories, which are generic semiconductor components and peripherals widely available from local and international suppliers. At times, we may choose to procure our supplies in bulk as this allows us 10 negotiate for better pricing and achieve cost savings from bulk purchases. Kentzy and Aeroflex Wichita contributes approximately 20.76% and 17.23% of our total purchases in the FPE 2015 respectively. We are not dependent on Kentzy and Aeroflex Wichita as the semiconductor components we purchase from them, such as RF instruments, are readily available from other suppliers. NSW Automation and 81 Technologies were our major suppliers in the FYE 2012, contributing 10.30% and 12.57% of our total purchases respectively, while Digi-Key and Element14 were our major su ppliers in the FYE 2013, contributing 14.47% and 11.01 % of our total purchases respectively. We purchased generic equipment and instruments from these suppliers. These supplies are considered generic products and are readily available from other suppliers. As such, we are not dependent on these suppliers. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) 6.9 MARKETING STRATEGIES AND MAJOR CUSTOMERS 6.9.1 Marketing Strategies We market our products through direct approach, our Aemulus website and international trade shows as set out below:(a) Direct Approach As the sales and marketing of our products require in-depth knowledge of our products, the direct approach is the most effective method as it allows us to deliver the required technical information and detailed explanations and descriptions accurately. During the MPP stage of our R&D process, our Sales and Marketing team gathers new product demands and reqUirements from our customers and potential customers, through regUlar discussions, meetings and information exchange sessions. (b) Corporate Website Corporate website, http://www.aemulus.com. is another means of introducing and broadcasting information on our products to potential customers and provides immediate searchable information on our Group. The current widespread use of the internet as a source of information enables us to cross geographical borders and facilitates access from any part of the world, enhancing our potential market reach and exposure. (c) Trade Exhibitions and Events International trade shows are an effective way to showcase our products and our capabilities. We typically contact our potential customers prior to these events to invite them to visit our booths, where we engage them and provide detailed explanations on our products. Visitors and participants to these trade shows are generally potential customers sourcing for alternative solutions to their existing test equipment, or those looking for testers for upcoming projects. The early engagement with these groups of potential customers is important as once they have identified the right testers that meet their requirements and have qualified the testers at this early stage, there is an increased likelihood that they will incorporate the same ATE into their manufacturing process. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) The major trade exhibitions and events that we have participated in the past three (3) FYE 2012 to FYE 2014, FPE 2015 up to the LPD are as follows:Year Name of Exhibitionl Trade Showl Event Organiser Location June 2013 Exhibition for the PXI Show at Silverstone PXI Systems Alliance Silverstone, UK June 2013 International Test Conference 2013 International Test Conference Washington, US June 2013 SEMICON WEST 2013 Semiconductor Equipment and Materials International California, US April 2014 Exhibition for the PXI Show During National Electronics Week PXI Systems Alliance Birmingham, US August 2014 Exhibition for the PXI Show PXI Systems Alliance Beijing and Shanghai, China April 2015 SEMICON Southeast Asia 2015 Semiconductor Equipment and materials International Penang, Malaysia July 2015 SEMICON WEST 2015 Semicond uctor Equipment and Materials International California, US
Such participation also allows us to remain up-to-date on relevant market trends and technical information, expand our business networking within the industry as well as provide significant opportunities to meet new customers. Additionally, participation in these trade shows and exhibitions greatly enhances our brand visibility as it enables us to showcase our products and solutions. 6.9.2 Principal Markets for Products and Services In the past three (3) FYE 2012 to FYE 2014 and FPE 2015, our testers have been sold to customers in Malaysia, Singapore, China, USA, South Korea, Philippines, Thailand, Germany and Hong Kong. The breakdown of our sales revenue by our principal markets for the past three (3) FYE 2012 to FYE 2014 and FPE 2015 are as follows:Principal Markets FYE 2012 FYE 2013 FYE 2014 FPE 2015 (RM’OOO) (%) (RM’OOO) (%) (RM’OOO) (%) (RM’OOO) (%) Malaysia Overseas 8,209 1,567 74.42 14.20 5,960 2,275 59.57 22.74 8,579 5,722 36.81 24.55 6,873 3,807 41.97 23.25 Singapore China 806 7.31 1,249 12.49 5,310 22.78 3,315 20.24 USA 223 2.02 486 4.86 2,287 9.81 1,808 11.04 Others (a) 226 2.05 (a) 34 0.34 (a) 1,409 6.05 (b) 574 3.50 Total Revenue 11,031 100.00 10,004 100.00 23,307 100.00 16,377 100.00
6. BUSINESS OVERVIEW (cont’d) Notes:(a) Other overseas market include South Korea, Philippines, Thailand, Germany and Hong Kong.
(b) Other overseas market include South Korea, Philippines, Thailand and Germany.
Based on our Group’s revenue of approximately RM23.3 million for the FYE 2014 and the local ATE industry size of RM79.4 million as estimated by Smith Zander, our Group garnered an industry revenue share of 29.3%. (Source: Independent Market Research Report by Smith Zander). 6.9.3 Major Customers Our Group’s major customers which have contributed more than 10% of our total revenue for the past three (3) FYE 2012 to FYE 2014 and FPE 2015 are as follows:Customers FYE 2012 FYE 2013 FYE 2014 FPE 2015 Length of Business Relationship (Years) (RM’OOO) (%) (RM’OOO) (%) (RM’OOO) (%) (RM’OOO) (%) Avago Technologies 7,108 64.43 3,041 30.40 6,214 26.66 3,278 20.02 8 (Malaysia) Sdn Bhd (“Avago Malaysia”) Carsem Semiconductor 741 6.72 1,217 12.17 5,305 22.76 3,277 20.01 3 (SuZhou) Co Ltd (“Carsem Suzhou”) Avago Technologies 1,273 11.54 1,464 14.63 4,942 21.20 2,897 17.69 5 Manufacturing Singapore Pte Ltd (“Avago Singapore”) Dominant Opto 489 4.43 1,939 19.38 497 2.13 507 3.10 4 Technologies Sdn Bhd (“Dominant Opto”) Total Revenue 11,031 10,004 23,307 16,377
Our customers mainly comprise semiconductor manufacturers and OSAT companies which provide assembly and testing services to semiconductor manufacturers. A large majority of these companies are multinational companies, and as a result, we supply our ATE to established multinational companies in both the local and intemational markets. Avago Malaysia remains as one of our major customers in the FYE 2012 to FYE 2014 and FPE 2015 as we have a strong and established business relationship with them. Nonetheless, our sales to Avago Malaysia has reduced as a percentage of our total revenue in the past three (3) FYE 2012 to 2014 from approximately 64.43% in the FYE 2012 to approximately 26.66% in the FYE 2014, as we have diversified our customer base. In the FYE 2013, FYE 2014 and FPE 2015, Carsem Suzhou, which is based in Suzhou, China, was one of our major customer with contributions of approximately 12.17%, 22.76% and 20.01 % respectively. As we aim to penetrate further into the China market, our increased sales to Carsem Suzhou will provide us with a credible customer reference to potential new customers in China. Avago Singapore was also our major customer in the FYE 2012 to FYE 2014 and FPE 2015. Due to our successful business relationship with Avago Malaysia, our sales to Avago Singapore has also increased from approximately 11.54% in the FYE 2012 to approximately 21.20% in the FYE 2014. 66 6. BUSINESS OVERVIEW (cont’d) As our ATE is designed to cater to a wide range of multinational semiconductor manufacturers and OSAT companies, there are potential customers and an addressable market for our products that we have yet to explore, and as such, we do not have dependencies on our existing major customers. Nonetheless, we have built strong, trusted and mutually beneficial relationships with our major customers, and this has provided our Group with a strong platform for future growth. 6.10 CYCLICALITY/SEASONALITY Our business is subject to the cyclicality of the global semiconductor and electronics industry, which is caused by variations in supply and demand for semiconductors and economic cycles. In addition, demand for our products and services are subject to new electronic products launches and seasonal variations particularly in the fourth quarter of our financial year. Demand for our products and services usually increase during this period in tandem with our customers’ production schedule to fulfil holiday season orders. 6.11 BRAND NAMES, TRADE MARKS, LICENCE AGREEMENT AND TECHNICAL AGREEMENT As at the LPO, save for the trade marks disclosed in Section 6.11.1 of this Prospectus which we are currently using in our day-to-day business, our Group does not presently hold any brand names, patents, trade marks, licences, technical assistance agreements, franchises and other intellectual property rights. 6.11.1 Trade Marks Registered As at the LPO, our Company has filed applications to register the following trade marks with the Registrar of Trade Marks, Intellectual Property Corporation of Malaysia (“MyIPO”):No. Registered Owner Representation of Trade Mark Issuing Authorityl Trade Marks No. Date of Certificatel Effective Datel Expiryl Renewal Date Classification 1. 2. 3. 4. 5. ASB* ASB * ASB * ACSB ACSB Amoeba Navigatus Aemulus (Series 2 trade marks) aVEC Semiconductor Tester MylPOI 08050110 MylPOI 08050111 MyIPO/ 08050114 MyIPO/ 2010050197 MyIPO/ MY1 0-00274-01 01 12.05.20081 12.05.2018 12.05.2008/ 12.05.2018 12.05.2008/ 12.05.2018 11.03.2010/ 11.03.2020 17.03.2011/ 12.03.2020 09 09 09 09 14-02
Note:We had on 31 OCtober 2014 entered into a Deed of Assignment with ASB whereby ASB had unconditionally assigned to ACSB all its benefits, rights, title and interest together with the goodwill of the business attaching to each trade mark with an assignment consideration of RM1.00. 6.11.2 Licence Agreement As at the LPO, our Company has not entered into any Licence Agreement with any parties. ICompany No: 1114009-H I 6. BUSINESS OVERVIEW (cont’d) 6.12 OUR GROUP’S PROPERTY, PLANT AND EQUIPMENT 6.12.1 Own Properties As at the LPD, the details of the property owned by our Group are as follows:
Date of CFI Registered/ Restriction in Tenure of Property/ Date of Sale Audited Beneficial Description! InteresUMajor Date of Expiry of Built-up and Purchase NBVas at Owner Title/Address Existing Use Encumbrances Lease Area Agreement 30.09.2014 (Sa Ftl (RM’OOOI ACSB Master Title One (1) unit at the 2nd floor Nil Freehold 1,049 02.10.1998/ 188 Lot No. 12033, Mukim 12, Daerah of a 5-storey commercial 02.05.2008 Barat Daya held under Geran building/ Mukim No. GM 1333 (formerly Rented to third-party forming part of Lot No. 9561, Mukim 12, Daerah Barat Daya, Pulau Pinang held under Geran Mukim No. GM1166) Address: B-2-4, Krystal Point, 303, Jalan Sultan Azlan Shah, 11900 Penang
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ICompany No: 1114009-H I 6. BUSINESS OVERVIEW (cont’d) 6.12.2 Rented Properties As at the LPD, the details of properties rented by our Group are as follows:Period of Tenancy Approximate Land Area! Built-Up Area (Sq Ft) Annual Rental (RM) Date ofCF or CCClDate of Tenancy or Notice of Extension 01.09.2014 to -I 400,633 09.10.20121 28.02.2017 10,117 16.06.2014 16.08.2013 to -I 19,200 02.10.19981 15.08.2015 1,049 03.08.2013
ACSB Description! Title! Address Existing Use Landlord Capital Assets Sdn Bhd Title Lot PT No. 17335, Mukim 12, Daerah Barat Daya, Negeri Pulau Pinang held under HS(D) 23167 Address: One Precinct, 1C-6-02, Mayang Pasir, 11950 Penang Lengkok
CHRB Utara Sdn Bhd Title One (1) unit at the 6th floor of Block 1C of a 7-storey commercial buildingl Corporate head office, marketing office, R&D
facilities and storage One (1) unit at the 2nd floor of Lot No. 12033, Mukim 12, Daerah Barat a 5-storey commercial buildingl 1333 (formerly forming part of Lot No. Daya held under Geran Mukim No. GM Vacant 9561, Mukim 12, Daerah Barat Daya, Pulau Pinang held under Geran Mukim No. GM1166) Address: B-2-11, Krystal Point, 303, Jalan Sultan Azlan Shah, 11900 Penang [The rest of this page is intentionally left blank] 69
ICompany No: 1114009-H I 6. BUSINESS OVERVIEW (cont’d) Date ofCF or No. Tenant Landlord Titlel Address Description! Existing Use Period of Tenancy Approximate Land Areal Built-Up Area Annual Rental CCC/Date of Tenancy or Notice of Extension (Sq Ft) (RM) 3. ACSB Elsoft Systems Sdn Bhd Title Lot 85(c), Daerah Barat Daya, Mukim 12.Penang Factory building/ Manufacturing and warehouse 01.06.2015 to 31.05.2017 -I 10,780 279,840 29.04.20151 01.06.2015 Address: Plant 2, Unit 4, Plot 85(c). Lintang Bayan Lepas 9, Bayan Lepas Industrial Park, Phase 4, 11900 Penang
Our Board confirmed that the properties disclosed in Sections 6.12.1 and 6.12.2 of this Prospectus:(a) have not breached any of the land use conditions/permissible land use; (b) comply with current statutory requirements, land rules or building regulations; and (c) all the buildings for our production and business facilities have been issued with CF/CCC.
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6. BUSINESS OVERVIEW (cont’d) 6.12.3 Material Plant and Equipment As at the LPD, a summary of the material plant and equipment owned and used by us are set out below:No. Machinery No of Units Audited NBVas at 30.04.2015 (RM’OOO) 1. 2. 3. 4. 5. RF instruments with sub-20 Gigahertz Source, Analyzer and Test Accessories High Precision Direct Current and Altemative Current Sources and Meters High Speed Digital Oscilloscopes and Timing Analyzers Digital Multimeters PCB Assembly and Process Machines and Tools Total Material Plant and Equipment 3 9 16 38 8 1,322 72 216 91 33 1,734
6.12.4 Production Capacities and Output The maximum annual capacity of our Group is defined by the capacity of final assembly, testing and calibration of our Amoeba systems. Our maximum annual capacity, actual production volumes and utilisation rates for the past three (3) FYE 2012 to FYE 2014 and FPE 2015 are as depicted below:(1) Annual Capacity (units combined for all products) (2) Actual Production (units combined for all products) (3) Average Utilisation Rate (%) FYE 2012 255 196 76.9 FYE 2013 255 108 42.4 FYE 2014 (4)232 131 56.5 FPE 2015 (5)410 291 71.0
Notes:(1) Combined annual capacity of Amoeba 1340, Amoeba 200014200, Amoeba 4100 and Amoeba 7600, based on lO-hour working day, 300 working days per year. Annual capacity is different for each Amoeba system, based on our production configurations, which are in tum designed based on market demand for our products.
(2) Total combined actual production of Amoeba 1340, Amoeba 200014200, Amoeba 4100 and Amoeba 7600.
(3) Average utifisah’on rates based on respective utilisation rates of Amoeba 1340, Amoeba 200014200, Amoeba 4100 and Amoeba 7600.
(4) Annual capacity reduced as capacity for Amoeba 1340 was lowered to cater for increase in capacity for Amoeba 200014200 and Amoeba 7600.
(5) Annual capacity has increased due to the introduction of Amoeba 4600 and the increase in capacity for Amoeba 200014200.
71 6. BUSINESS OVERVIEW (cant’d) Our Group’s total actual production and average utilisation rate do not correspond with the trend of the Group’s revenue during the financial years under review due to the higher selling price of Amoeba 4200 and Amoeba 7600 vis-a-vis Amoeba 1300c, Amoeba 2000 and Amoeba 4100. 6.12.5 Material Capital Expenditures and Divestures Save as disclosed below, we did not incur any material capital expenditure for the past three (3) FYE 2012 to FYE 2014, FPE 2015 and up to the LPD:Description FYE 2012 (RM’OOO) Transaction Value (at Cost) FYE 2013 FYE 2014 FPE 2015 (RM’OOO) (RM’OOO) (RM’OOO) 01.05.2015 up to LPD (RM’OOO) Investments Purchase of equipment (a) property, plant and (b) 128 (c) 1,060 (d) 1,099 (d)1,266 (e) 1,736 Divestments Property, plant written off (I) and equipment – 32 17 17 185 Divestment of subsidiaries – – (9) – –
Notes: (a) The property, plant and equipment invested by our Company were primarily held locally at our corporate office and were financed through intemally-generated funds of the Group. (b) Comprising testing and measurement instruments, motor vehicle, fumiture and fittings. (c) Comprising testing and measurement instruments, laptops, fumiture and fittings. (d) Comprising testing and measurement instruments, laptops, renovation, fumiture and fittings. (e) Comprising testing and measurement renovation, fumiture and fittings. instruments, software, office equipment, laptops, (f) The property, plant and equipment divested by our Company were held locally at our corporate office prior to the divestment. (g) In order to streamline our business, we had struck-off our wholly-owned subsidiary, namely Aemulus Photovoltaik Pte Ltd, on 19 February 2014 and divested our entire equity interest in our wholly-owned subsidiary, namely Aemulus Marketing Sdn Bhd on 11 September 2014 for a disposal consideration of RM2 as disclosed in Section 10.1.1 of this Prospectus. Aemulus Photovoltaik Pte Ltd and Aemulus Marketing Sdn Bhd were dormant companies since their incorporation.
The capital expenditures incurred by our Group are based on the cost incurred and funded via our internally-generated funds. Our capital expenditures during the past three (3) FYE 2012 to FYE 2014 and FPE 2015 were incurred on testing instruments, office eqUipment, furniture and fittings, motor vehicles and renovation. 6. BUSINESS OVERVIEW (cant’d) 6.12.6 Material Plans to Construct, Expand or Improve Facilities As at the LPD, save as disclosed in Sections 6.16(c) of this Prospectus, we have no immediate plans to construct, expand or improve on eXisting facilities. 6.13 DEPENDENCY ON CONTRACTS/ARRANGEMENTS/LICENCES/PATENTS As at the LPD, save as disclosed below, our Group is not dependent on any other contracts! arrangements/licences/patents:(a) approvals, major licences and permits as set out in Section 5.5 of this Prospectus; and
(b) registered trade marks, licence agreement and technical collaboration agreement as set out in Section 6.11 of this Prospectus.
6.14 INTERRUPTIONS IN BUSINESS OPERATIONS We have not experienced any interruption in our business which had a significant effect on our operations during the past twelve (12) months prior to the date of this Prospectus. 6.15 OUR COMPETITIVE ADVANTAGES AND KEY STRENGTHS Our competitive strengths are important in sustaining our business as well as providing us with future business growth. (a) We have resilient technologies and expertise to adapt our products to the changing landscape of the semiconductor industry Since the commencement of our business in 2005, we have developed ATE for use in the consumer and industrial electronics industries, and we have adapted our products and our technologies to suit the evolving nature of the semiconductor and electronics industry. One of our earlier products, the Amoeba 1340c, was developed for the mobile wireless market, in particular during the early days of the smartphone market. The Amoeba 2000 was subsequently developed for the industrial product market and the Amoeba 4100 for the discrete semiconductor market. Thereafter, with the increasing importance of PXI-based platforms, we developed the Amoeba 4200 series to cater for this market. One of our current flagship products, the Amoeba 7600, was then developed in response to the increasing demand for wireless applications testing, as the worldwide smartphone and tablet market grew significantly, leading to a rise in a wide range of wireless communication products. We have demonstrated that our technologies are adaptable across multiple industry segments and they are resilient through time as we have been able to develop new products with the changing landscape in the semiconductor industry. With our emphasis on R&D, we have been able to respond rapidly to these evolving requirements. The adaptability and resilience of our technologies have been fundamental to the growth of our business to-date, and will continue to ensure that we remain sustainable over the long term. 6. BUSINESS OVERVIEW (cont’d) (b) Our R&D has been the cornerstone of our growth Our entry into the ATE business in 2005 was founded on developing locally-made products to substitute foreign imports, and thus we have, at all times since the commencement of our operations, placed focus and emphasis on our R&D activities. Our R&D activities have enabled us to develop all of our products in-house and have served as the foundation for our growth and success in new product development. Our commitment to R&D has seen our R&D team developed five (5) ATE platforms, namely the Amoeba 1340c, Amoeba 4100, Amoeba 4200, Amoeba 4600 and Amoeba 7600. These are used for the testing of semiconductor components used in a wide variety of applications, such as mobile communication devices, automotive LEOs, industrial products, discrete devices and semiconductor wafer testing. Our success in securing multinational customers across several countries is largely driven by the capabilities and expertise of our R&D team. As at the LPD, approximately 41% of our total headcount were involved in R&D activities, comprising personnel from our R&D, NPI, Software and Product Applications divisions, which is evidence of the priority we place on developing new improved products for our customers. Furthermore, in the past three (3) FYE 2012 to FYE 2014 and FPE 2015, we incurred R&D expenses amounting to RM1.35 million, RM2.62 million, RM3.02 million and RM2.53 million respectively, accounting for approximately 12.25%, 26.17%, 12.97% and 15.42% of our total revenue respectively. This substantial amount spent is further testament to our commitment to R&D. As we grow our business and market presence, we will continue to place strong emphasis on our R&D, as it will continue to drive our product development activities. Our proven success in new product development will help us to continuously introduce new ATE to meet evolving global market needs. (c) Our customers are primarily large global multinational semiconductor test and assembly companies Most of our customers are large multinational semiconductor manufacturers and semiconductor test and assembly companies. Our success in securing and retaining these globally renowned semiconductor companies is a testament to our product quality, customer service and proven industry track record. Since securing these customers, we have managed to retain many of them over the years. These companies have stringent supplier selection processes, whereby they conduct detailed audits on their suppliers prior to selection to ensure that their product quality and operating standards have been met, and many of these evaluation processes can take up to one (1) year to complete. Many customers also carry out regular follow-up assessments to ensure compliance have been maintained. As a supplier to these multinational companies, we have had to undergo these audits and assessments, which is evidence of our standing as a proven industry player. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) (d) We have a range of ATE that caters to a wide range of growing consumer and industrial electronics industries We have a product line-up that consists of ATE used for the testing of discrete devices, analog-digital components, automotive LEDs, RF front-end devices and semiconductor wafer components. These cater to a wide range of end-user industries such as general consumer and industrial electronics, automotive and wireless commun ications. Our Amoeba 4100 series is a small-signal discrete tester, designed for testing the most basic semiconductor components such as transistors and diodes, also known as discrete devices. These components are used in all integrated circuit designs and are therefore used in all semiconductor and electronics applications. As SUCh, our testing capability begins from the start of the semiconductor product value chain. In addition, our Amoeba 4200 product series cater to analog and mixed signal testing, which are applicable to most types of general consumer and industrial electronics. According to the Independent Market Research report by Smith Zander, the global market for electronic products was estimated to have grown from USD1.8 trillion (RM6.3 trillion) in 2009 to USD2.3 trillion (RM7.3 trillion) in 2013, registering a CAGR of6.3%. Furthermore, our Amoeba 1340 and 7600 series are specially designed to test RF front-end devices, which are used in wireless communication devices such as mobile phones and tablets. Amoeba 1340 and 7600 series contributed a combined revenue of RM7.31 million, RM4.31 million, RM7.45 million and RM6.84 million to our Group for the FYE 2012, FYE 2013, FYE 2014 and FPE 2015 respectively. Over the last decade, mobile communications has radically transformed the global communications industry, including changing the lives of billions of consumers worldwide. According to the Independent Market Research report by Smith Zander, in just five (5) years, the number of smartphones shipped globally has grown almost six-fold, increasing from 172.0 million units in 2009 to over 1.0 billion units in 2013, at a CAGR of 55.4%. Demand for tablets has also grown strongly, at a CAGR of 85.4% between 2010 and 2013, from 16.0 million units to 102.0 million units. Notebooks/laptops grew from 135.0 million units in 2009 to 232.0 million units in 2013, at a CAGR of 14.5%. In addition, our latest product, the Amoeba 4600, is catered for semiconductor wafer testing. Over the last three (3) financial years, we have served multinational customers across Malaysia, Singapore, China, USA, South Korea, Philippines, Thailand, Germany and Hong Kong. As our range of ATE is utilised for the testing of semiconductors used in many industry segments, we are able to serve a wide range of customers, and our product range also helps us diversify our orders from the same customers. (e) We have strong commitment to quality and customer service We place strong emphasis on product quality and have strong commitment to consistently develop products and services that meet the requirements of our customers. As such, we have made efforts to implement stringent quality control procedures at each stage of our development and implementation processes. Our Quality Management Programme encompasses our entire R&D and product development processes. We are thorough in carrying out stringent evaluation on each stage of our design and development processes as well as final assembly to ensure the quality of our products and services. 75 6. BUSINESS OVERVIEW (cont’d) In addition, our track record of providing quality products and services has allowed us to maintain strong relationships with our customers. As a result, we have been able to secure recurring orders from our key customers as well as derive sales from referrals by these customers. Since our establishment, we have built a strong customer base consisting of several longstanding customers, with more than three (3) years of working relationship with many of our customers. We believe that our commitment on strict and uncompromising quality control standards and our emphasis on providing efficient customer service has been instrumental in building our industry reputation amongst our customers in the industry. (f) We have an experienced management team We have been operating our business for more than ten (10) years, and we are led by an experienced and technically strong senior management team. Collectively, our key senior management personnel have exposure across a broad spectrum of business activities, including engineering, operations, sales and marketing and finance. More importantly, most of our key management are technically experienced as they are qualified and professionally-trained engineers, and have hands-on input into R&D and product development. Since our inception, we have built an established reputation in the industry through our management’s engineering experience and expertise, as well as our ability to provide quality products and consistent levels of customer service. In 2013, our R&D effort was recognised under the Entry Point Projects 13: Growing Automation Equipment ManUfacturing by the PEMANDU, whereby ACSB was named as one of the companies in Southeast Asia with capabilities to produce its own semiconductor tester. The competencies of our key management team will enable us to sustain our future growth and improve the overall financial performance of our Group. Please refer to Sections 8.1.2, 8.2.2 and 8,4.2 of this Prospectus for further details on the profiles of our Directors and key management personnel. (g) We have approximately 29.3% of industry revenue share in Malaysia Based on the independent market research report by Smith Zander as enclosed in Section 7 of this Prospectus, the local ATE industry size has been computed based on revenues of local industry players whose principal activities are in the manufacturing and sale of ATE for functionality tests. Foreign industry players involved in the manUfacturing and sale of ATE for functionality tests have been excluded in the computation of the ATE industry size as revenues of these foreign industry players include revenues from other types of ATE and/or test-related products and/ or non-test-related prodUcts and/ or support services which include training, installation, maintenance, upgrades and trOUble-shooting services. Furthermore, segmental revenue related to ATE for functionality tests of the foreign industry players are not pUblicly available. As such, based on our Group’s revenue of approximately RM23.3 million for the FYE 2014 and the local ATE industry size of RM79.4 million as estimated by Smith Zander, our Group garnered an industry revenue share of 29.3%. (Source: Independent Market Research Report by Smith Zander). 6. BUSINESS OVERVIEW (cont’d) 6.16 FUTURE PLANS, STRATEG.IES AND PROSPECTS Our future plans are focused in the following keyareas:(a) We plan to upgrade our existing products Our current product line-up consists of six (6) range of testers, namely the Amoeba 1340, Amoeba 2000, Amoeba 4100, Amoeba 4200, Amoeba 4600 and Amoeba 7600. These are used for the testing of analog-digital components, discrete devices, automotive LEDs and RF front-end devices. To keep up with the evolution in technological advances, we plan to progressively introduce new models of our current products. As consumer electronic devices continue to get more powerful and contain increasingly more functions, the semiconductor components that control these devices will likewise evolve. Our R&D team will continue to work on upgrading our testers with the following improved features and functionalities:• Greater number of devices to be covered under the range of our test capabilities
• Increase in spectrum of testing, Le. wider range of frequencies, voltages, electrical currents and speeds
As at the LPD, our R&D team is in the midst of developing an upgrade for our Amoeba 7600, which commenced in 2013. We intend to launch this upgrade in 2016. We also plan to commence work on the upgrading of our Amoeba 4200 in 2015, with expected completion also in 2016. Further, we are in the midst of on-going upgrades and enhancement to our latest product, the Amoeba 4600. We commercialised Amoeba 4600 in FYE 2014 and have committed to carrying out further R&D to enhance its features and functionalities to cater to demand from our customers. These proposed upgrades are budgeted to cost RM4.5 million, and we intend to fund these upgrades through our proceeds from the Public Issue. Please refer to Section 6.6 of this Prospectus for further details on our on-going and future R&D programmes. With these systematic planned upgrades of our current products, we will be wellpositioned to remain competitive in the industry and to continue serving our customers, as well as secure new ones. Our success to-date has been founded on our R&D capabilities and our continuous emphasis on product development. We will continue to adhere to these policies and practices, as they will enable us to maintain our competitive edge and help improve our overall financial performance. (b) We plan to introduce new ATE into our product line-up Our current product line-up caters to a wide range of market applications, such as testing of analog-digital components, discrete devices, automotive LEDs and RF front-end devices. To continue growing our market presence and secure an even wider selection of customers, we intend to introduce new ATE to serve new market applications. [The rest of this page is intentionally left blank] 77 6. BUSINESS OVERVIEW (cont’d) Our Group, subject to the adoption rate by our customers to our products, the supply of raw materials and overall market demand for semiconductor products, targets to increase our revenue in FYE 2015 by approximately 50% from the revenue recorded in FYE 2014 in the light of the confirmed orders for our existing products and the expected increase in sales with the introduction of Amoeba 4600 alongside with our existing flagship products, Amoeba 4200 and Amoeba 7600. Based on the unaudited financial statements for the 10-month financial period ended 31 July 2015, our Group has achieved approximately 76% of our revenue target for FYE 2015. As at LPD, our confirmed orders (i.e. orders which are pending delivery), represent approximately 6.67% of our revenue target for FYE 2015. Notwithstanding the above, our revenue target for the FYE 2015 is based on our expectations developed under current market conditions. Any adverse changes to market conditions, including the prospects and outlook of the semiconductor industry, could result in a consequential impact on the financial and business performance of our Group. The development of new ATE will broaden our product portfolio, thus enabling us to serve an even wider market and larger customer segments. This will be crucial to the future growth of our Group, as we aim to increase our competitiveness in the industry by growing our market presence and our market share. Our success in penetrating new application markets will help ensure our long term expansion and sustainability, and contribute towards further growth in our financial performance. (c) We plan to set up a new tester research laboratory to intensify and enhance our R&D activities As we continue to place emphasis and commitment towards R&D, we intend to set up a new tester research laboratory to facilitate and enhance our product development activities. The setting up of this tester research laboratory will involve the purchase of eqUipment for the purpose of testing, calibration and verification, as well as the expansion of our R&D team to operate the laboratory. Our on-going and planned R&D activities, as outlined in Sections 6.6 and 6.16(a) and 6.16(b) of this Prospectus, will be first to benefit from this tester research laboratory, as these activities will be supported by adequate infrastructure and resources, and will facilitate our goal of completing these R&D activities and rolling out our upgraded and new test systems by 2016. The setting up of this tester research laboratory is expected to cost approximately RM1.5 million and will be funded through the proceeds from our Public Issue. This tester research laboratory will be the platform to intensify and enhance our R&D activities, with the aim to continuously develop and commercialise new products to ensure our Group’s long term growth and sustainability. [The rest of this page is intentionally left blank] 6. BUSINESS OVERVIEW (cont’d) (d) We intend to expand our geographical presence As at the LPD, we have exported our testers to a total of seven (7) countries, namely Singapore, China, USA, South Korea, Philippines, Thailand and Germany. As part of our expansion efforts, we plan to further increase our export sales and our geographic footprint. In particular, we plan to focus on further export penetration into the USA and China. The USA and China are among the key markets for consumer electronics and subsequently is a base for many semiconductor manufacturers and OSATs. The growth in these markets are expected to be driven by continued growth in the global electronics and semiconductor industry, as stated in the Independent Market Research Report by Smith Zander and Section 6.15(d) of this Prospectus. As the USA and China are key global markets, our enhanced presence in these markets is an important step towards further recognition of our Group as a global ATE company. At present, we have customers in the USA and China, and we presently visit these customers periodically and/or place our engineers on-site to assist these customers on a regular basis. However, we intend to increase our footprint in these markets, and we are putting in place appropriate sales and marketing strategies to realise these expansion plans. Specifically, we plan to increase our frequency of visits to our customers in the USA and China to continuously understand their needs and requirements as well as to keep abreast of market trends. We also intend to place more engineers on our customers’ premises for longer periods of time and with greater regularity to work more closely with our customers and provide real-time onsite technical support. In addition to our planned expansion within the USA and China, we will continue to explore opportunities in other countries, amongst others, Japan and Taiwan. To this end, we plan to increase our global visibility by increasing our participation in major global electronics trade shows such as International Test Conference, The PXI Show and Semicon West. These are the most prominent trade shows in the ATE industry and are regularly attended by the major semiconductor manufacturers and OSATs. While we have primarily focused on our R&D and product development activities in the past, as we grow into an internationally-recognised player, we will now also place greater emphasis on our sales and marketing efforts. We are cognisant that increased investments and commitment to sales and marketing will help us realise our overall growth and expansion plans, and will be key to our success in expanding our presence in our key growth markets. Furthermore, the expansion of our geographic footprint will enable us to grow our business and revenues further, which will help contribute to higher profitability for the Group, as well as strengthen our product and corporate branding. Leveraging on our competitive advantages and key strengths, our Board is positive over our future plans and strategies. [The rest of this page is intentionally left blank]