PDFS
#Correct.
Sure.
Actually, in our prepared remarks, <UNK>, we refer to it as Asia because right now the business we talked about the past quarter was for a company that was headquartered in China.
But we also see a lot of our Taiwanese customers making expansions into China.
So broadly, greater China ---+ we see a lot of activity.
Foundry capacity is going in there, greatly at the 28-nanometer node initially.
And we believe there are some R&D activity that we are seeing in FinFET nodes.
We see that part of the market wanting to move very fast on buildout of capacity, and bring up, and a needing to get to worldwide competitive status quickly.
In that regard, I think we have a wonderful offering for them, because we have a proven infrastructure on these advanced nodes from development design for manufacturability to process control and production control.
So we are ---+ we started out about a year ago making introductions.
We did some pilots in the first part of this year.
This contract we signed in Q3 is the first conversion of a pilot into a contract.
And we anticipate others as we go through the remainder of this year, and into next year.
Our activity started first with the fabless entities, and we see good activity there.
We believe that will be the way that China moves into the leading-edge nodes.
We will start with the fabless and system companies ---+ or has started, I should say.
And then it will also permeate to the foundries.
And we believe PDF could be a very important bridge between those fabless and system companies and the foundries themselves.
Yes.
So of course you know they are stated is about 60% of what their funds are putting ---+ what the China government is investing is going into the [fine] manufacturing.
And 40% goes into design, test and assembly.
If you took the numbers that they are quoting, and they are gargantuan numbers, right, in the tens of billions of dollars, and put 60% of that into capacity and take all of these things that they are forecasting and to put it into volume, yes, then it would dwarf the amount of capacity that we have under contract today, should we then capture that business.
So I think you've got to take a ---+ certainly, we take a healthy dose of realism, right.
And say, okay, we have to be careful about how excited we get about this.
This is certainly the potential for a lot of capacity to go in there.
And if they spend the money they say they are going to spend on capacity on the front end, primarily at 28 and below, it represents a tremendous opportunity for us, and an opportunity that would be as large or much larger than the factories that we have under contract today.
It's a great question, and one we asked ourselves earlier this week.
And we haven't gotten the math done yet.
We are just saying, okay, let's go back and look at what our investment has been on the pilots so far.
And now that we're starting to sign contracts, how is this going to look over the next twelve quarters ---+ that we turn the corner, and we are still on invest mode.
We got to China in 2006.
Right.
We made a decision to go to China in 2005.
We got there in 2006.
And we invested in and engineering team there.
We now have 120 folks in China, almost ---+ I don't know what that works out to be.
It used to be 33%, but slightly less than that of the company.
So we have been investing a very long time in China.
So we are not impatient.
At the same time, I think we are now starting to turn the corner.
I don't think we are very ---+ we are not very many quarters away from that being a meaningful part of our business.
That's correct.
Well, you could have been in the meetings earlier this week, <UNK>.
Yes, it's actually something we are trying to model out.
We've got two competing things there.
Most of the business is ratable, so you make investment in the field.
To see that business, you book a couple-million-dollar contract, and you see in that quarter maybe $100,000 to $200,000.
So we are trying to ---+ in the field, as we we're doing the strategic planning, was reporting on where they saw the business opportunity around the world, in terms of Exensio Big Data.
And it was quite a number of potential business, potential clients, the customers, on a variety of all of our geographies ---+ Asia, Europe, US.
And so we were trying to balance our investment levels to get at that business, versus the profitability we drive off that business, and understand a little bit about that trade-off.
If you go to the steady-state, yes, our goal and our reason why we started making this investment is we want to drive profitability off design-to-silicon solutions business, irrespective of Gainshare.
We want to get to a model eventually where that covers not just our expenses and our investments, but also drives profitability.
We are not there yet, obviously.
And we don't know quite how long it's going to take us to get there.
Because, as I said, we're balancing investment in the channel versus immediate return.
And we are trying to understand that.
But for sure, that is the reason why we made that investment.
I would certainly think it would be no more than 5%, at this stage, of our total spending, and probably in that range.
Yes.
That's as a percentage of revenue.
Yes, I thought that was a little bit more.
Yes, sorry.
As a percentage of revenue, it would be no more than 5%, higher on total.
I think another way to look at it is the majority of the growth in the R&D line has been design for inspection.
So if you compare 2014's spend level with 2015's spend level, the majority of that design for inspection, there was some design for inspection in our 2014 number.
And there was even some in our 2013 number.
There was some very, very early [are] in our 2012 number.
But the majority of that growth has been design for inspection-related activity.
Gainshare is ---+ 28 is still the majority of the Gainshare revenues.
But just the total amount has fallen.
Okay.
Well, thank you very much for your attending the call today.
We look forward to talking with you after the end of Q4.
Have a great day.
