Tower Semiconductor Ltd. (TSEM) Q4 2020 Earnings Call Transcript

Tower Semiconductor Ltd. (NASDAQ: TSEM) Q4 2020 earnings call dated Feb. 17, 2021.

Corporate Participants:

Noit Levy-Karoubi — Vice President, Investor Relations and Corporate Communication

Russell Ellwanger — Chief Executive Officer

Oren Shirazi — Chief Financial Officer

Analysts:

Rajvindra Gill — Needham & Co. LLC — Analyst

Achal Sultania — Credit Suisse — Analyst

Cody Acree — Loop Capital Markets — Analyst

Natalia Winkler — Jefferies LLC — Analyst

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

David Duley — Steelhead Securities — Analyst

Lisa Thompson — Zacks Investment Research — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Tower Semiconductor Fourth Quarter and Full-Year 2020 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, February 17, 2021.

Joining us today are Mr. Russell Ellwanger, Tower’s CEO, and Mr. Oren Shirazi, CFO. I would now like to turn over the conference call to Ms. Noit Levy, Senior Vice President of Investor Relations and Corporate Communications. Ms. Levy, please go ahead.

Noit Levy-Karoubi — Vice President, Investor Relations and Corporate Communication

Thank you and welcome to Tower Semiconductor financial results conference call for the fourth quarter and full year of 2020. Before we begin, I would like to remind you that some statements made during this call may be forward-looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected. These uncertainties and risk factors are fully disclosed in our Forms 20-F, F-4, F-3 and 6-K filed with the Securities and Exchange Commission, as well as filings with the Israeli Securities Authority. They are also available on our website. Tower assumes no obligation to update any such forward-looking statements.

Please note that the fourth quarter and full-year of 2020 financial results have been prepared in accordance with U.S. GAAP. The financial tables and data in today’s earning release and in this earnings call also include certain adjusted financial information that may be considered non-GAAP financial measures under Regulation G and related reporting requirement as established with the Securities and Exchange Commission. The financial tables include the full explanation of these measures and the reconciliation of these non-GAAP measures to the GAAP financial measures.

Now, I’d like to turn the call to our CEO, Mr. Russell Ellwanger. Russell, please go ahead.

Russell Ellwanger — Chief Executive Officer

Thank you, Noit. I welcome everybody to our 2020 fourth quarter and fiscal year business and financial results. Thank you for joining our call. We finished 2020 with revenues of $1.266 billion, representing year-over-year 3% growth and 5% organic growth. We entered 2021 having completed a very strong fourth quarter with revenues of $345 million, having exceeded our mid-range guidance, which represented an 11% fourth quarter year-over-year total growth and 20% organic growth with resulting EBITDA of $95.8 million and net profit of $31 million. We continue to maintain a healthy balance sheet that fully supports and enable us to add value while capitalizing business opportunities to facilitate future growth.

We are guiding the first quarter to a mid-range of $345 million counter to the typical Q1 seasonality, which will represent a year-to-year of 15% total growth with an organic growth of 20%. In addition, from this $345 million revenue base, we expect sequential quarterly revenue growth throughout 2021. Looking at the revenue breakdown, we’ll first discuss the end markets and give numbers to the best of our ability and knowledge regarding the end markets our ICs are serving. Infrastructure revenue, which predominantly is our RF optical with a certain amount of advanced discrete was at about $230 million. Wireless was approximately $425 million. Automotive was $180 million, which we serve with power ICs, power discrete, imaging and RF radar.

Consumer including computing, power management for home appliances and general accessories and home use security cameras was approximately $220 million. Industrial was approximately $100 million. Image sensors for high-end photography and medical applications was at about $50 million. Aerospace and defense was also at about $50 million and there’s an additional of about $10 million of devices that we sold that will be divided among the end markets that I’ve spoken to but for which we don’t have the granularity to break down further. Analyzing the revenue by technology platform for our three corporate focus being Seamless Connectivity, Green Everything and Interactive Smart System, the breakdown is as follows: Seamless Connectivity which for us is RF infrastructure and RF signal for mobile platforms total to approximately 36% of our corporate revenues or about $450 million.

Mobile was $280 million, a 22% 2020 over 2019 growth. Infrastructure, which is silicon germanium based including the initial silicon photonics ramp was approximately $170 million, a 15% year-over-year growth. Green Everything, our contribution being energy efficient power management ICs and Power Discrete was approximately $405 million or 32% of our corporate revenues. Power management ICs were $195 million, flat year-over-year; however, 25% up organically. Power discretes totaled to $210 million, a decrease of 12% year-over-year. Interactive Smart Systems, which relates to our image sensors and non-imaging sensor offerings represented about 18% of our corporate revenues at about $230 million having realized a 7% growth in 2020 despite significant contraction in medical predominantly stitched large die dental sensors.

The rest of our business of about 14% of our corporate revenue served various mixed signal CMOS technologies, mainly computing and specialty memory applications. Looking at our activities in our different business units. Within our Analog business unit, our silicon germanium infrastructure business, which provides technology for advanced optical transceivers where we enjoy greater than 60% market share experienced double-digit growth in 2020 versus 2019. Customer forecasts continue to show this elevated level of demand to be sustained through the remainder of 2021. In the next several years, there’s an expected industry growth of data traffic of about a 15% CAGR. Our opportunity is to mirror this growth and benefit from both the continued rollout of 5G infrastructure, which drives demand for our 25-gigabit-per-second transceivers and telecom networks and by data center build-out, which drives demand for our 100 gigabit per second through 800 gigabit per second transceivers.

At 400 gigabit per second and 800 gigabit per second we also anticipate increased adoption of our silicon photonics platform, further increasing our footprint in the optical market and providing new opportunities for growth. As previously mentioned, we are well-positioned in this market having already announced a partnership with Inphi for which we began volume production and we additionally have over 30 customers engaged with us at various stages of qualification and development. Last month, we announced participation in a DARPA program developing a SiPho platform with integrated lasers, further differentiating our capabilities in this emerging market. Our mobile business, which provides components for our front ends and handsets grew as mentioned over 20% year-over-year due to a combination of increased market share, overall market recovery and the beginning of a transition to 5G handsets.

Growth was broad-based and included ramps of our newest 200-millimeter and 300-millimeter technologies as well as very strong demand for existing offerings. Forecast for mobile are strong for 2021, and we expect that 5G handsets, which as previously mentioned, require 30% to 50% more RF content will increasingly replace older models over the next few years creating a sustained opportunity for growth in this market. Our Power IC organic business grew 25% in 2020 over 2019 through gains in market share both at 200-millimeter and 300-millimeter across a wide range of voltages and applications. We see increasing demand for power management ICs and multiple applications including hybrid and electric vehicles as well as consumer e-bikes, computing and industrial applications.

In 2020, we released a breakthrough Power IC, 200-millimeter technology Gen 6, which is now prototyping with multiple customers. This technology offers over 35% power efficiency improvement and/or equivalent amount of die-area reduction at 24-volt operation through an innovative transistor design. This new technology complements our platform leadership positions at lower voltages with our previously announced 65-nanometer BCD 300-millimeter process and at higher voltages with our recently announced 140-volt Resurf and 200-volt SOI technologies. As validation to the value of these power platforms, customers are approaching us for long-term volume contracts for which we have already signed one significant one.

Looking at power discretes, we see strong recovery from most customers included, but not limited to, our Tier 1 MOSFET customers. Moving to our Sensors and Display business unit, first to discuss CMOS image sensors. In the past quarter with OPIX, we introduced a state-of-the-art indirect Time-of-Flight, iToF imager with unparalleled performance and accuracy and sensitivity. Based on OPIX measurements, the [Indecipherable] accuracy are better, meaning, higher level, higher performance than the two otherwise industry-leading iToF sensors in the market. This sensor will enter volume production in the second quarter of this year. It is planned to be embedded in smartphones and other devices for face recognition and 3D imaging applications such as fast autofocus and artistic picture-focused blurring effects.

The sensor is based upon our unique pixel level stacking, state-of-the-art platform with the best in industry, less than 2 micron electrical connection pitch. During last year, we engaged in several programs of large x-ray sensors, some already having moved to production. Our differentiation in this market is in pixel performance, especially sensitivity and linearity and in yields. For 300-millimeter, we are the only foundry to supply such sensors in mass production. 300-millimeter tooling enables very high yields and very importantly a design advantage to manufacture a full 21-centimeter-by-21-centimeter detector from one wafer and, hence, eliminating the need for expensive wafer tiling.

Our next-generation industrial sensors on 300-millimeter, using our state-of-the-art global shutter pixels, are also ramping into mass production. Our pixel size of 2.5 micron is the smallest in the world. We provide high-resolution sensors with current maximum resolutions of 288 megapixel, with excellences sensitivity and shutter efficiency for the display screening market. We expect to see many of these new machine vision sensor products based on our 65-nanometer 300-millimeter platform ramp to production this year. The industrial market continues to grow steadily and we expect to see nice growth of these high-resolution sensors tens of millions of dollars at high margin.

The lifetime of such products is long, five to eight years, so we expect high margin, steady business based on these products. If we look at, for example, one such industrial sensor market, manufacturing lines for TV, laptops, smartphone among others, there is a need for display inspections, which drives a large demand for very high resolution, fast global shutter sensors that meet the tight form factor requirements of the optics, perfectly matched to our high-performance, smallest-in-the-industry, 2.5 micron global shutter pixel.

Alongside the new 300-millimeter product adaption, we see notable increase 2021 forecast for our existing 200 millimeter advanced platforms. The imaging area that for us, was hit the hardest by COVID was dental X-ray. We are encouraged to see an initial increase in purchase orders and customer forecasts now shows second half of the year fully recovering returning to pre-COVID run rates. Moving to non-imaging sensors and displays, there are three end markets that we are focusing on. For each of these, we chose a customer development partner who has a differentiated capability. In the MEMS area, we are entering the MEMS microphone market. This is a fast growing market with microphones being embedded not only in earbuds and cellular phones, but also in many command operated devices. Speech recognition AI is being used in such devices.

For high fidelity speech recognition, differentiated performance of high dynamic range and low noise microphones are needed. We entered this market with a partnership with GMEMS as press released in Q4 ’20. We’re in the initial production ramp and are moving forward on developments for the best in industry, signal-to-noise figure of merit. MEMS microphone is a large new serve market for us reported to have been a $1.2 billion market size in 2019 with analyst projections of $1.7 billion in 2024. The display market is undergoing a dramatic change from LCD-based screens with LED backlighting, into micro-LED or micro-OLED displays allowing substantially higher dynamic range with true black and higher brightness. In entering this display area, we announced our partnership with Aledia.

This partnership continues well with developments in preparation for mass production of their unique gallium nitride nanotube based Micro LEDs which offer unique figure of merit superiority at substantially lower cost than existing volume manufacturing solutions. In addition, we continue forward with our technology development of CMOS backplane for stitched large died micro-OLED array for the virtual reality market with a significant market leader. Moving to utilization, our customer base continues to grow. The demand of our customers, existing and new continues to grow and grow strongly. This is good validation of the value of the previously described technology offerings. To meet this increased demand, we are investing $150 million to increase our capacity as well enable some existing capacity to serve new higher margin offerings.

We are investing in Tonami Fab 5 200 millimeter, Migdal Haemek Fab 2 200 millimeter, San Antonio Fab 9 200 millimeter. And an additional investment in our Uozu Fab 7 300 millimeter site. These expansions will have the potential of adding about $150 million of revenue on an annual basis once fully qualified [Indecipherable]. We will begin to see some incremental revenue benefit in the second half of 2021, targeting full revenue capacity during the first half of 2022. Fourth quarter utilization levels were as follows: Migdal Haemek Israel Fab 1, our 6-inch factory was at 64% utilization. Fab 2 is at 76%, Newport Beach Fab 3 was at 75% utilization. Our San Antonio Factory Fab 9 was at 67% utilization. Looking at our TPSCo Fabs in Japan, utilization for the 8-inch foundry business is at about 65% rate. And our 12-inch foundry business was at about a 90% rate.

With that, I’d like to turn the call to our CFO, Mr. Oren Shirazi. Oren?

Oren Shirazi — Chief Financial Officer

Thank you, Russell. Welcome, everyone, to our call and thank you for joining us today. We released our fourth quarter 2020 results today demonstrating double-digit percentage quarter-over-quarter and year-over-year revenue growth as well as very strong margin growth and balance sheet financial indicator. We also announced today a new $150 million capacity expansion plan that we initiated in four of our seven publications focused on our 8-inch and 12-inch facility [Indecipherable] due to our customer demand forecasts that are exceeding our current capacity. I will now move to our fourth quarter and full-year P&L highlights and then discuss our balance sheet and cash flow financial statements. Revenue for the fourth quarter of 2020 was $345 million, reflecting 11% revenue growth as compared to $310 million in the previous quarter and 13% revenue growth when compared to $306 million in the fourth quarter of 2019.

Looking at our organic revenues, which are defined as total revenue excluding revenues for Nuvoton Japan, previously Panasonic Semiconductor, and excluding revenue for Maxim in our San Antonio fab, revenue in the fourth quarter reflects 20% quarter-over-quarter growth and 17% year-over-year growth. Gross operating profits for the fourth quarter of 2020 were $70 million and $33 million, respectively, $17 million and $14 dollar higher than in the previous quarter, respectively, and $15 million and $14 million higher than in the fourth quarter of 2019, respectively. Net profit for the fourth quarter of 2020 was $31 million or $0.20 basic earnings per share or $0.28 diluted earnings per share, which is $16 million higher as compared to net profit of $15 million in the previous quarter.

EBITDA for the fourth quarter of 2020 was $96 million, $17 million higher as compared to $79 million in the previous quarter and $21 million higher as compared to $75 million in the fourth quarter of 2019. For the full year of 2020, revenue was $1.266 billion, $32 million higher than in 2019 and gross and operating profits for 2020 were $233 million and $91 million respectively as compared to $230 million and $87 million in 2019 effectively. Net profit for 2020 was eighty $82 million representing $0.70 diluted earnings per share as compared to $90 million net profit or $0.84 per share diluted in 2019. We also announced today a new capacity investment plan of $150 million in the majority of our facilities due to customer demand forecasts that are exceeding our current maximum capacity capabilities.

The investment is expected to be made in the coming 12 months in our Fab 2 facility in Israel, Fab 9 in Texas, U.S., Fab 5 in Tonami Japan and Fab 7 in Uozu, Japan. The equipment will begin to have incremental revenue impact during the second half of 2021 and targeted to be fully qualified during the first quarter of 2022. We believe the capex payments will be mostly made between mid-2021 and the first quarter of 2022. In addition in relation to the buildings and facilities that are used by us for TPSCo manufacturing, the lease contract for such building and facility was extended for at least 2032. This lease contract extension resulted in an increase in fixed assets and liabilities of approximately $60 million recorded in our balance sheets under U.S. GAAP ASC 842 named leases.

I would like now to describe our currency hedging activities. In relation to the Japanese yen, since the majority portion of TPSCo’s revenue is dominated in yen and the vast majority of TPSCo’s costs are in yen, we have a natural hedge over most of our Japanese business in operations. In order to mitigate part of the remaining yen exposure, we executed zero-cost cylinder hedging transactions. This transaction has hedged currency fluctuations to be contained in a narrow range as compared to the spot exchange rates. Hence, while the yen rate against the U.S. dollar may fluctuate, the impact on our margins is limited. In addition, in relation to the Japanese yen impact on the balance sheet, we have a natural hedge on JPY cash and JPY loan balances due to the extent the loan amount does not exceed the cash amount.

This helps to partially protect us from potential impact of yen fluctuations. Lastly, in relation to the fluctuations in the Israeli shekel currency, we have no revenues in this currency. But since approximately 10% of our costs are denominated in Israeli currency and we have some liabilities denominated in niche, we also hedge a large portion of this currency risk by: A, engaging zero-cost cylinder transactions to mitigate exposures resulting from our shekel-denominated costs; and B, investing a portion of our cash in Israeli Marketable securities dominated in the Israeli currency to mitigate the exposure resulting from the shekel denominated payables and accruals. Looking at the balance sheet, we present a strong and stable financial position.

Property and equipment increased from $682 million as of December 31, 2019 to $839 million as of December 31, 2020. The increase is mainly due to A, the 12-inch fab capacity expansion program we announced already in July 2019 which equipment mostly arrived during this year — during 2020. And B, approximately $60 million recorded following the extension of the lease contract of TPS for the buildings and facilities in Japan as assets and liabilities under U.S. GAAP ASC 842 as explained beforehand. Short-term and long-term debt balance in the balance sheet increased as well from $312 million as of December 31, 2019 to $390 million as of December 31, 2020, mostly due to the signing of the extension of the building and facility lease contract in Japan. As described before, this lease is treated as a capital lease, thereby increasing fixed asset and liabilities by approximately $60 million net.

Our shareholders equity reached a record of $1.45 billion. Our cap table consists of 108 million outstanding ordinary shares and an additional 2 million is of related shares resulting in a fully diluted share count of 110 million. Current assets ratio defined as current assets divided by short-term liabilities were 4x. And a last note on our cash flow report. In the fourth quarter of 2020, cash flow generated from operations was $73 million, investments in fixed assets mainly for manufacturing equipment were $64 million, which included investments to increase our 12-inch fab capacity in Japan. In addition, we repaid $8 million of our debt during the fourth quarter of 2020. For the year 2020, we generated $277 million cash from operation. We paid $64 million of debt. And we invested $257 million in fixed assets, mainly for the purchase of manufacturing equipment including investments to increase our 12-inch fab capacity in Japan under our release from July 2019.

And now, I wish to turn the call back to the operator. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from Rajvindra Gill of Needham & Company. Please go ahead.

Rajvindra Gill — Needham & Co. LLC — Analyst

Congratulations on all the great results exiting the year. Russell, on the $150 million capex — incremental capex investment, maybe you could talk a little bit about the supply/demand environment. This earnings cycle across semi’s capacity is extremely tight. Demand has come in a lot faster than expected. And so, the industry is scrambling across the board to increase capacity. So obviously, you’re putting $150 million to increase the capacity. I’m just wondering what your thoughts on the current supply-demand environment? What was kind of the basis of the $150 million? And any thoughts on do you think that should be enough to meet the surging demand that’s happening across the business?

Russell Ellwanger — Chief Executive Officer

Well, certainly the investment is triggered by an increase in demand. We have a model as many companies will or do to have a prescribed ROI off of investments that we make. $150 million investment would obviously mean that we have it pretty much spoken for. The environment, you are correct is a very strong demand environment. That environment makes things sometimes challenging. It also gives opportunities as you’re making decisions off of an increased demand. We have some opportunity and benefit in that that increased demand is off of a good revenue base where the factories were not fully utilized.

So there is open utilization right now that can be used to grow revenue. And as you’re looking at that, you always have to have I think a loyalty to customers and their previous run rates. But on the increase in demand, over time, you move that towards a different mix, not the previous run rate but the incremental against previous run rates to where you would favor those that are going to be giving a higher margin. And that’s a good thing. So not just the fact of an increased demand but as we continue to release new platforms, the increase of demand is against a nominally higher margin. And we expect that in the — any time that you have a ramp itself, the ramp costs money.

So and for many, many reasons, you’re increasing headcount, you’re increasing incentive — other incentives. You’re increasing your supply. So you don’t see necessarily an immediate margin increase. In fact, maybe to the opposite, you see a margin decrease as you start a ramp. But come the third and fourth quarter, through both increases in utilization as well as the ability to favor higher ASP mixes, we believe that we’ll see a very, very nice margin increase in the fourth quarter that would maintain as we then continue to utilize — not just utilization, but utilization capacity increases that will come through this $150 million investment. So hopefully, that answers your question. I think it’s a.

Rajvindra Gill — Needham & Co. LLC — Analyst

Yeah, it does. No. That’s helpful. And so, to the margin point, Oren. So as the utilization rates start to kind of move up, as you fill the fabs. And to Russell’s point, you will be kind of migrating higher margin process flows and you’ll be mix shifting to higher ASPs and higher profit flows. How are you thinking of — how are you thinking about the gross profit fall through kind of metric? You talked about 50% to 55% on incremental revenue. Is that — do you think that would be going up as you go to the third quarter and fourth quarter? Any thoughts on the kind of gross margin?

Oren Shirazi — Chief Financial Officer

Yeah. So I believe as Russell indicated, I mean, firstly, yes, on the long-term plan, we should see the 50% incremental margin maybe starting Q4, maybe a little bit Q3 but for sure starting Q4 because like Russell indicated, there should be time now that we are increasing our maybe employee base, our cost, our working capital in order to be ready for that significant ramp that we are facing. With additional equipment, of course, comes maintenance contracts and things like that. So those tools like mentioned by me and by Russell in the call will arrive in the coming 12 months. But until we’ll be qualified, it will take a few quarters and we’ll contribute to the revenue. So for sure, Q4 or Q1, you will see the 50% incremental margin. For the coming quarter or two, you will still not see that, of course.

Rajvindra Gill — Needham & Co. LLC — Analyst

Okay. So for the first couple quarters of this year, we should be thinking about below 50% kind of gross profit fall through until these things get qualified and then getting above 50% kind of Q3, Q4.

Oren Shirazi — Chief Financial Officer

Yes, yes. Certainly Q4, yeah.

Rajvindra Gill — Needham & Co. LLC — Analyst

Certainly Q4, okay. And then a question, Russell, on the end market. You’re seeing a nice recovery in power discretes which was down, as you said, 12% year-over-year in 2020. So any kind of specific color on what’s driving kind of the rebound in that? Is it by region, by end market? And then another follow up just on the automotive kind of shortages that are impacting auto production, any thoughts on how that might be affecting your business? Thank you.

Russell Ellwanger — Chief Executive Officer

So as far as the discrete itself, we see Q1, an increase in discrete against what we had in Q4. We see continued and reasonable increase in Q2, and in Q3 and Q4 staying at a good rate. My belief is that one of the big reasons for the discrete drop that was quite severe in the previous year was that a lot of discretes are served through distribution centers. And distribution centers are by model, in good times, they have quite a bit of inventory because their only differentiator is being able to supply parts when they’re asked for. I believe that distribution centers react more quickly than anyone else whenever there’s bad news and maybe overly correct when there’s bad news. So, if you have our customers that have a big portion of business going to discretes that will always overcorrect. I think that that’s one reason that there is such a big drop in discretes. But other than that, I didn’t necessarily have good reasoning for discretes dropping as our power management itself did not drop.

And I think that they more or less go hand-in-hand in end markets. So — but that’s what I believe was the reason for it. And it’s coming back now. Will the distribution centers go to the inventory levels that they had before? I don’t know. But we do see that snapping back. However, I am not saying that discrete are presently are in Q2 at the same levels as they had than in previous years. It’s still not back to those levels. But it is up against what we are seeing in 2020. The other areas where we had been down in 2020. And as I had stated previously, the dental sensors are coming back in full force and that we see a very nice increase in POs and forecasts that bring us back, at least back, to pre-COVID times and potentially maybe even beyond.

On industrial sensors, we had seen an impact even before COVID, mainly driven I think through some trade wars and a decrease of some manufacturing lines being built for which, obviously, industrial sensors are used for. And industrial sensors are — they’re humming right now. So, I think maybe one of the beauties that I think of is that we’ve — in our own business, where we had growth in many areas last year and those levels that we had achieved through the growth will maybe continue or at least stay at that same level as we had been. All areas that were down last year are either fully recovering or recovering to a reasonable extent. And that’s a good thing. When you have a fourth quarter that has a 20% organic growth year-over-year and within that you still have certain weaknesses, and then on top of it to have that base entering into the new year and have the weak portions that are returning and the forecasts of growth, that’s a very nice position.

Rajvindra Gill — Needham & Co. LLC — Analyst

In combination. Yeah.

Russell Ellwanger — Chief Executive Officer

No. It ties into your first question as well about how confident are we on the demand, that’s the reason for confidence in the demand.

Rajvindra Gill — Needham & Co. LLC — Analyst

Okay, great. Thank you. Appreciate it.

Operator

The next question is from Achal Sultania of Credit Suisse. Please go ahead.

Achal Sultania — Credit Suisse — Analyst

Hi. Good afternoon, Russell and Oren.

Russell Ellwanger — Chief Executive Officer

Hi.

Achal Sultania — Credit Suisse — Analyst

Maybe a couple of questions from my side. First on the demand, obviously, we are actually seeing demand recovery across all end markets, which is pretty obvious. So clearly, your outlook for the rest of the year seems pretty confident. What I’m trying to understand is how much within that outlook can we assume for some kind of new projects or customer wins that you’re probably working on? And could that be a meaningful contributor as we go into the second half of this year?

And maybe if you can shed some light on those specific area. I think you mentioned iToF as one of the projects that you’re working on. But I’m just trying to understand what are the new things that you’re working behind the scenes? That’s one. And then second one is on capex. Obviously, you’re spending this $150 million, which is going to be spread over this year and probably next year. So, you strengthen the stand how should we think about the capex number for this year? And if your old model of $45 million per quarter of maintenance capex is still valid and what does that mean for full year 2021 capex? Thank you.

Russell Ellwanger — Chief Executive Officer

Okay. So, on the last part of the question, Mr. Shirazi will address that. On the first part of the question, I don’t know that we have anything behind the scenes that we’re working on that I would mention right now. There are things that I mentioned for a reason, they’re maybe too premature to mentioned. But those things that we have mentioned that are big growth drivers in the company, one for sure is silicon photonics. If we look at the 2019 to 2020 revenue increase was substantial by percentage, not substantially amount of millions. If we look at the 2021 to 2020 forecast, it’s remained substantial in percentage and becomes meaningful in millions as well.

And then as you would look into 2022 and beyond, and obviously as I stated, well maybe obvious off of what I stated. In addition to Inphi where we press release going into volume production, we have 30 other customers. And that’s quite a big customer base to be having working on the forward movement of a silicon photonics platform that really complements an area where we already have a 60% market share. So I think that that’s definitely very strong. If we look just at the silicon germanium itself. We have multiple generations of silicon germanium. I talked about the two different areas, one being areas that is being driven by 100-gigabit per second to 800-gigabit per second capabilities.

And I think that that’s quite a big area with new platforms. So our what we call, H5 platform which is the — our highest speed silicon germanium. Many customers are taping out to it. Those that had taped out to it are now going into higher volumes that getting qualified. So as far as the growth, there is certainly growth in new platforms. and that, I think, is one of the strains that we always look at is having a very, very aggressive roadmap tied with our customers as to what our customers are going after and needing. If we look at our RF-SOI, the 65-nanometer platform, we’ve released a more advanced platform and worked with customers actually to have a very, very good LNA tied to that platform. So we’re always doing more developments. Is that necessarily new?

It’s certainly a new platform that customers are taping out to and designing and working forward to where there’s very, very high demand and all of that becomes very exciting. If we look at the number of mass sets in Q4, it was probably the highest ever in the company history. So there’s certainly many new tape-outs going on. But they’re mainly off of the activities that we’ve been talking about. iToF should start growing in this year. Will it become an absolutely significant portion of revenue for the company in this year? No, I mean, it will not. Is it in and of itself a significant advancement and a base of what can grow in the future? Definitely. So — but across the board, we have many, many things that are happening. If we look at the non-imaging activities that I spoke to, one area really that has grown already and will continue is what we’re doing in MEMS in the MEMS microphone.

As I mentioned, very specific customers and one I didn’t get the name, but it’s — I certainly won’t speak to the forecast of a given customer. And when we’re entering new markets and states that we have it — those specific three markets tied to certain customers on very differentiated platforms, it becomes a little difficult to talk about the degree of growth that we’re expecting in it. Because it’s information that obviously then goes to them and it’s really their volumes, it’s not my volume. It becomes my volume, but it’s their market. So, but certainly — what we think, Aledia is a very, very strong opportunity. We think that the VR opportunity we have is extremely strong and honestly, it can be very, very significant volumes.

And what we’re doing with the MEMS microphone, we think is already strong and will continue to grow. So across the board, if I talk about power management, we have a huge amount of activity happening in power management. And this is, as I say, Gen 6, you either have greatly improved performance. Got the same die size or a person who can have a much cheaper wafer because of the reduction in dye size because of the performance of the Gen 6 platform. So, I again, if I state that — and I didn’t state in the call, but we did have the highest number of assets in Q4, there’s obviously then a lot of new activity that customers are doing, designing to existing advanced platforms and designing to new platforms that will be driving growth. So hopefully, that answers your question.

Achal Sultania — Credit Suisse — Analyst

Yes. No, that’s very helpful, Russell.

Oren Shirazi — Chief Financial Officer

Yeah. On the capex question, yeah. So, I believe I said in the script that we believe that the capex payment will be mostly made between middle of 2021 and the first quarter of 2022. So you may assume that most of it, I don’t know, $90 million or $100 million from that or even more will be paid or even more will be paid in those three quarters, Q3, Q4 and Q1. So, maybe you want to assume $30 million each one of them. And there will be some that needed to be paid, Q1, Q2 as a payment towards facility and towards first payment of the tool, but it will not be significant. So, if you ask me about the total forecast, I believe it should be — Q1 should be back to the levels that we see — we saw before this year, the $45 million per quarter, which we had before the expansion. It could be slightly up to $49 million or $48 million, not more than. Same for Q2, $45 million to $49 million. And Q3 and beyond should have an additional maybe $30 million per quarter for capex, so eventually until Q1 ’22 maybe slightly some push-outs to Q2 ’22, we will exhaust the $150 million.

Achal Sultania — Credit Suisse — Analyst

Okay. That’s clear. Thanks, Oren.

Operator

The next question is from Cody Acree of Loop Capital. Please go ahead.

Cody Acree — Loop Capital Markets — Analyst

Thanks for taking my questions and congrats on the progress.

Russell Ellwanger — Chief Executive Officer

Hey, Cody. Thank you.

Cody Acree — Loop Capital Markets — Analyst

Hey. The capacity constraints that you are seeing did not quite work out in the numbers that you gave us for utilization rates. I would have expected those rates to be higher. Is there just a timing issue, or are you strategically setting aside capacity for what you now are seeing in your visibility to be much higher demand coming? I guess, why is the utilization rates reasonable but not seeing that from others?

Russell Ellwanger — Chief Executive Officer

I don’t necessarily understand the question. The utilization rates for the utilization rates, the demand is very, very high. That goes beyond our 85% model. So, one would expect and, as I stated, that there is room for growth above the utilization rates that I had stated because they were not at 85%.

Cody Acree — Loop Capital Markets — Analyst

Yeah.

Russell Ellwanger — Chief Executive Officer

Now, some of the capex that is being invested really is to address mixes and to be able to do higher-margin mixes. Some utilizations are a little bit low because we report utilization in a very, very objective way and it’s against photo lithography capability. And I’ve stated multiple times that every line, because you’re running different mixes in the line, has other bottlenecks that are not necessarily photo capability. So, as you’re increasing demand, part of that capex is to enable a freeing of bottlenecks so you can maximize the photo lithography itself.

And that’s part of this capex investment is, as we’re evolving as per the previous question, new platforms are coming out. You want to change the mix capability of the factory. So, some of it is changing mix capability. But we are also adding photo lithography within this $150 million investment and not an insignificant amount of photo lithography either. So, a lot of the capex that we’re investing is to enable existing lithography to do different mixes and additionally adding more lithography to it. Does that answer your question Cody? Hopefully it does.

Cody Acree — Loop Capital Markets — Analyst

It does, Russell. Thank you very much. The strength that you’re seeing across the board. Could you give us any quantification, any color to stratify the end markets that you see isn’t most in the highest demand and the most constraints? And then I guess just with automotive likely in that list, have you been able to massage capacity toward that end market demand maybe outside of what you would — how you would normally shift per customer need?

Russell Ellwanger — Chief Executive Officer

We have very few customers that we ship to that are 100% serving automotive. So it’s in the demand that we have from our customers within whatever their run rate is, whatever their allocation is. They really have the decisions themselves to move it to automotive or not move it to automotive. We don’t make very much decision on that. If we’re going to get more or less to automotive because we don’t necessarily have other than one customer that I can think of. We don’t have any customers. That I would say everything we ship to them is for automotive. So that really does more or less stand in their mind. Not — it’s not a decision we make.

Now as far as the end markets in the near term, we have very, very strong demand for 200 millimeter RF SOI, what we call our QT9 platform. We have very strong demand for 300 millimeter RF SOI, and we have very strong demand for power management. Both really extremely strong demand to 200 millimeter and strong demand as well at 300 millimeter. So in the short-term, those are very, very high demands. In the mid to long-term, we have very big demand within image sensors. And the others maintain the — when I say short-term, I don’t mean that it ends. But the biggest short-term demand is really in the area of RF SOI. As far as demand increases, it’s RF SOI and power management. And then in the mid to long-term, I would add the image sensor into that.

Cody Acree — Loop Capital Markets — Analyst

Great. Thank you very much, guys.

Russell Ellwanger — Chief Executive Officer

At least the image sensor business unit. So image sensor and displays.

Cody Acree — Loop Capital Markets — Analyst

Yes.

Russell Ellwanger — Chief Executive Officer

Thank you, Cody. It was a good question.

Operator

The next question is from Natalia Winkler of Jefferies. Please go ahead.

Natalia Winkler — Jefferies LLC — Analyst

Hi, Russell. Thank you for taking my question. So I was wondering if you can give us some color about the split of this — the new capacity that’s being added between 200 millimeters and 300 millimeters? Like how do you think it would roughly fall between these two? And then, as we think about the total new revenue max for TSM. I think our estimates before this were about $1.6 billion. And now, you’re saying that this new capacity would add about $150 million per year. Is it fair to just kind of sum up these numbers and then think of the total as a sum of these?

Russell Ellwanger — Chief Executive Officer

The second part of the question, I’ll have to think about for a minute. The $1.6 billion was before we had a reduction in the Panasonic contract that we had released last year, right? So, I don’t know that you’re dealing off of the correct base at this point. But — and I’m sorry. The first part of the question was the 300-millimeter — 200-millimeter split. The bulk of it is 200 millimeter. As discussed previously, we added last year about — well, we invested last year about a $100 million for a 300-millimeter capacity increase. And we’re giving an additional multiple tens of millions of 300 millimeter. But the bulk of the investment is 200 millimeter.

Natalia Winkler — Jefferies LLC — Analyst

Understood. That’s very helpful. And then as we think about kind of longer term, longer term beyond 2021 in terms of how you would see to expand your capacity further, I was just trying to understand if there’s kind of room for you to continue with organic expansion or if at certain point you may be reaching kind of the max that you can add organically at 300- or 200-millimeter fabs.

Russell Ellwanger — Chief Executive Officer

It’s a very, very good question. At 200 millimeter, we have a reasonable amount of leeway. It’s a question of working out whatever peripheral agreements one would wish to have or could have to increase the manufacturing footprint in our San Antonio factory. San Antonio sits on over 100 acres of land that we own. And it’s a beautiful facility, a very well-run facility. So we have, if you will, an infinite amount of build-out capability there. It’s simply a question of striking the right agreements to grow. And I’m not trying to speak out of turn here or whatever. But it’s pretty obvious and some of the questions about automotive.

There’s a lot going on right now in the U.S. legislation with regards to bills, infrastructure bills, CHIPS Act, etc. And there becomes questions in about how proactive the government wishes to be in order to build capabilities onshore and if we would be the right partner for them to start doing that with. So, that’s as far as 200-milemeter footprint. Honestly, we have huge opportunities to grow with adding additional clean room space. Some of that would be converting maybe gray area into a white area, others is really adding additional buildings. So, San Antonio is a prime spot that I would say we have, if you will, infinite expansion capability providing that the investments can get the right ROI. And that becomes, to a degree, what and how much the government will wish to partner on that.

I think one thing for sure is that the automotive needs become very, very big in the US. And very specifically, San Antonio does a lot of automotive manufacturing. So, it sits really in the in the core of what the U.S. wants to get done. San Antonio is also a place that we have put our advanced silicon germanium flows as well, which for RF communication is a very, very big deal for the United States. So, we’ll see. But to answer the 200-millimeter, we really have more or less potential for unlimited growth depending that the ROI becomes proper to do it. And ROI is always a good decision. On a business model and a financial model, growing something organically is very, very good on a margin basis because you have a lot of fixed cost that’s already absorbed in that factory or set of factories.

So, that’s always a good thing on the long term. The question is the upfront investment and how much do you have to do, and then depreciate, and if there is abilities to partner with a government that becomes obviously advantageous maybe for both people, okay? On the other side, the 300-millimeter, we still have capability to grow in our existing facility in Japan. However, any growth at this point beyond this incremental new investment that we’re doing will necessitate facilities work as well and facilities work becomes expensive. So, within 300-millimeter, there is ability to grow. The growth is not unlimited. And it becomes a question of the ROI is doing facilities work for some finite additional growth versus the potential of doing a deal outside of organic growth.

Oren Shirazi — Chief Financial Officer

If I may add, Russell, organically, we can also add not much but we can add in Fab 2 and in Tonami.

Russell Ellwanger — Chief Executive Officer

Yeah, and we are. That was part of the.

Oren Shirazi — Chief Financial Officer

Yeah, but in addition.

Russell Ellwanger — Chief Executive Officer

In addition, correct. I’m sorry. That is correct. And we have plans beyond this investment. We’re talking about to grow Tonami as well without needing to do facilities work. That’s correct, but not unlimited.

Oren Shirazi — Chief Financial Officer

Yeah. Yeah. [Indecipherable].

Natalia Winkler — Jefferies LLC — Analyst

Understood. Thank you very much. That’s all for me.

Russell Ellwanger — Chief Executive Officer

That’s a good question. Thank you.

Operator

The next question is from Richard Shannon of Craig-Hallum. Please go ahead.

Russell Ellwanger — Chief Executive Officer

Hi, Richard.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Hey, Russell. How are you?

Russell Ellwanger — Chief Executive Officer

Good. Thank you.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Great. I guess, a couple of questions on a similar theme here. You gave us some numbers about growth in a few different application markets. And if I got the numbers right, you said mobile was 22% growth last year, Power ICs. These organically was 25% and then you had silicon, germanium/infrastructure at 15%. You seem to be talking fairly positively about all of those markets here. How would you see growth in each of those markets relative to those that performed, what you had last year? Are they similar, better, worse, how would you characterize those?

Russell Ellwanger — Chief Executive Officer

I specifically didn’t state. I did — that we’ll have growth in the company throughout the year. If I look at those markets itself and was going to speak to it, let’s see. I think we’ll maintain growth in silicon germanium. As I stated earlier a very, very good growth in SiPho, so we’ll continue growth in Power. And we’ll see certainly a year-over-year growth in Discrete. So I — but and RFCMOS, we’ll also continue to see, I believe strong growth. But I didn’t give specifics, didn’t really want to. I didn’t wish to give numbers.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Okay. That’s fair enough. Maybe in one of those areas in RF, you talked about gaining share. Do you still expect to gain share in 2021?

Russell Ellwanger — Chief Executive Officer

Yes, sir.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Okay. Where do we sit in share right now? Do you have the majority of the market do you think or getting close to that?

Russell Ellwanger — Chief Executive Officer

I’m sorry. The question one more time please, Richard?

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Again on RFSOI, you said you’re gaining share. Where do you sit with share today? Are you at or close to majority there?

Russell Ellwanger — Chief Executive Officer

There’s multiple players there. I think we’re probably sitting somewhere in the mid-20s.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Okay. All right. That’s helpful. And then in silicon germanium, do you expect 400 gig to be a material contributor to sales this year or is it more in 2021?

Russell Ellwanger — Chief Executive Officer

2021 is this year.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

I’m sorry, 2022. Sorry.

Russell Ellwanger — Chief Executive Officer

Yeah. We’re starting to see a growth in 400-gig which obviously is not a 400-gig chip. It’s a 4 by 100 or an 8 by 50.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Right.

Russell Ellwanger — Chief Executive Officer

But the little grows stronger what — I think the big deal is that we don’t see a decrease in the 100 gig.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Okay.

Russell Ellwanger — Chief Executive Officer

And it appears that the 400 gig growth is not cannibalizing the 100 gig baseline.

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

Okay. That’s helpful. One last question for me. I suppose we could address this to all of your kind of new areas of growth. You identified a few of them in the non-imaging space like Micro LED. When do you see that opportunity kind of blossoming here? And as you said you’ve kind of selected a first partner to help work in that area, to what degree is the work done there or customer engagement there more broadening to see that the pipeline grow, where we see Micro LED becoming a really big deal in, I don’t know, one to three or four years. How do you look at that?

Russell Ellwanger — Chief Executive Officer

Well, we know that our customers — I mentioned again today, our customer there is Aledia. And as I stated, I really don’t want to talk about Aledia’s guidance to us. Number one, it’s not proper for me to. As far as Micro LED, I think it’s the right way to go. I think nanowire is a very, very exciting technology. I think that Aledia has an incredible technology and very strong differentiation. But will Micro LED grow? Certainly. Is it done 2021? I don’t think so. Is it 2022? I think that that will start and I think 2023, 2024 will be very big or will become very big during those years. But I don’t think 2021 is going to be huge at all for that. But I think it will start to grow in ’22 and will become significant in ’23, ’24, ’25. What is your thought?

Richard Shannon — Craig-Hallum Capital Group LLC — Analyst

I’m hearing similar timeframes but just want to get your sense as well and that’s helpful. I’m glad it fits roughly speaking there. So, I think that’s all my questions. Thank you, Russell.

Russell Ellwanger — Chief Executive Officer

Thank you.

Operator

Next question is from David Duley a Steelhead Securities. Please go ahead.

Russell Ellwanger — Chief Executive Officer

Hey, David.

David Duley — Steelhead Securities — Analyst

Hey. Thanks for taking my question. Nice results. Could you help just frame what you think or help us understand what the size of the photonics business is now perhaps in 2020, and what your goals or aspirations are for that business?

Russell Ellwanger — Chief Executive Officer

Okay. I know exactly what it was in 2020 for us. In 2020, it was just shy of $8 million. If I look at 2021 by forecast, it’s — a substantial increase of that maybe close to 3 times increase in what we’re seeing. Where do I think it will get to? I think it will get to, for us, I mean our targets would be to be in the several hundred million. So, I think that it’s very possible for it get there. But yeah, that would be our target is for the photonics business to be sitting within some small amount of years, certainly upwards of $100 million. And I think with the target of getting between $200 million and $300 million.

David Duley — Steelhead Securities — Analyst

And does this — would the photonics revenue have above-average gross margin similar to silicon germanium?

Russell Ellwanger — Chief Executive Officer

Presently it certainly has well above average gross margin. It’s very, very high margins at present. As anything goes into high volume, margins come down but I believe it will stay very high margin. It’ll — yeah, I think it will be among the highest margins we have in the company.

David Duley — Steelhead Securities — Analyst

Excellent. And then in your prepared remarks you mentioned something about a long-term contract and I had some audio difficulties and so I just don’t — could you just elaborate about what you were talking about there?

Russell Ellwanger — Chief Executive Officer

If I recall the exact statements it was — I’m now paraphrasing, it said that as a validation to the strength of the power platforms that we have, we have multiple customers asking us for a long-term supply agreements. Now, when they’re asking for a long term supply agreement that takes on some term or some type of a take-or-pay agreement to where there’s a certain volume that they’re committed to buy and there’s a certain volume that we committed to them. Now, customer really won’t give you that unless your platform’s very powerful because they’re committed to use that platform. So, that was the statement that I made. And to add color to it, that is color now, that it would be involving to some level a take-or-pay agreement.

David Duley — Steelhead Securities — Analyst

So we would expect the customer deposit liability number to be going up over time.

Russell Ellwanger — Chief Executive Officer

Not necessarily. A take-or-pay agreement doesn’t necessarily mean upfront money. The take-or-pay agreement means that they have X amount of wafers that they have tale to take per month. It could be against an upfront payment as well, but that’s necessarily how it is. I mean, it could be that they give an upfront payment to enable higher capacity of which they have — of which are committing a degree of that capacity to them. But there’s multiple different contracts that can be done. Sometimes you would ask for it depending on what’s being driven. You’d ask for upfront cash to help on an investment and other times, you wouldn’t. But regardless a take-or-pay agreement really means that they’re committed to a certain amount of wafers per month or per time period.

David Duley — Steelhead Securities — Analyst

Okay. The final question for me is you mentioned, I think, the MEMS microphone business. I’m — I don’t recall you talking about that in the past. I remember you’ve talked about MEMS but not specifically that type of product. Could you just elaborate as far as what the market opportunity is for the company in this area?

Russell Ellwanger — Chief Executive Officer

Yeah. We actually press released it, David. So we certainly talked about it also in press release. But the market opportunity, I think I had stated that in 2019, the market itself, MEMS microphone, was reported to be $1.2 billion. And some analysts believe it will be $1.7 billion in the 2024 time frame, something like that. Now, that’s the MEMS microphone itself. The silicon content, I don’t know if you take it 30%, 25%, 35%. But it would be somewhere in that the silicon content itself. So for us, the overall MEMS microphone silicon business, I suppose that the serve market is somewhere about $0.5 billion.

And I think the beauty seriously is that any time you enter a new serve market, independent of how much market share that you grow, it’s incremental revenue, and it sounds funny and I don’t mean this to sound really ridiculous, but it’s infinite growth in that market because short and serving it before. So as you go from a zero to a 10% or a 15% market share, it’s all incremental growth, not cannibalizing anything that you did before. And so it’s — I think the opportunity is very, very big for us. As stated, we have a good partner there and we’re working on extreme figures of merit, maybe the best signal-to-noise ratios in the industry. So, that answers your question, I hope.

David Duley — Steelhead Securities — Analyst

Yeah.

Russell Ellwanger — Chief Executive Officer

But there is [Indecipherable] on it, it’s — I believe the PR was maybe December, but I’m not positive. Noit will get back on the exact date of it. We could [Indecipherable].

David Duley — Steelhead Securities — Analyst

Okay. I’m sorry I forgot. I’m sorry, I read it. I just forgot about it. As far as the $500 million TAM that you just kind of highlighted. Would a reasonable expectation for you guys be 10% or 20% market share here in a year or two, or is that the kind of — can you get $50 million to $100 million out of this business?

Russell Ellwanger — Chief Executive Officer

In a year or two? No, I don’t think so. To go from a zero entry in a market to a customer partner that you’re going with, I don’t think that you would go to $100 million in two years. But I think that our target would be to get to those levels.

David Duley — Steelhead Securities — Analyst

Okay.

Russell Ellwanger — Chief Executive Officer

But it wouldn’t be within two years.

David Duley — Steelhead Securities — Analyst

Thank you.

Russell Ellwanger — Chief Executive Officer

At least, I think that’s not realistic. No. Thank you very much. So, the press release was December 21 and the title is, Tower Semiconductor and GMEMS Announce the Ramp to Mass Production of MEMS Microphone Products.

David Duley — Steelhead Securities — Analyst

Thank you.

Russell Ellwanger — Chief Executive Officer

Thank you.

Operator

The next question is from Lisa Thompson of Zacks Investment Research. Please go ahead.

Russell Ellwanger — Chief Executive Officer

Hi, Lisa.

Lisa Thompson — Zacks Investment Research — Analyst

Hello. So, I’m kind of getting into sort of this photonics you talked about. You’ve mentioned something about a DARPA contract where you try to integrate lasers. I know that’s a really big deal because it’s really labor-intensive. Can you talk a little bit what’s going on with that?

Russell Ellwanger — Chief Executive Officer

Yeah. It’s a project, it’s called LUMOS. It’s — actually was released by DARPA itself. And that we were the front-runner of everyone working, I believe to my memory, that’s how it was listed. So, yeah, it’s a project with DARPA. It has DARPA funding. And it’s to integrate lasers on a SiPho platform. So, basically in addition to all the passes that you put on the SiPho, you’re now putting in indium phosphide laser on it and making the connections the — to the end in the P and doing different mineralization structures, so that you have a — not just a good-function laser, but signals from the laser going right into the photonics and doing it onboard.

Lisa Thompson — Zacks Investment Research — Analyst

So, it’s to actually create an optical engine by putting the two together?

Russell Ellwanger — Chief Executive Officer

Creating more of a single optical engine. I mean there’s other active components that you would maybe think about as well.

Lisa Thompson — Zacks Investment Research — Analyst

Interesting. Okay. And then just I’m wondering with this new $150 million investment, does that change your thinking at all about tax rate for this year or the minority income?

Oren Shirazi — Chief Financial Officer

First of all, this year, it will not have a significant impact because like mentioned before, the manufacturing equipment tools will arrive and installed and qualified mostly this year. But until it will bring additional incremental margin and revenue will only be a little bit Q3 but mostly Q4. And secondly, this equipment is actually bought also for Israel, also for the US fab, and also for the Japanese fab. The mix is pretty much the same level of profitability base of us. So I don’t think it will impact the tax. I don’t think it will change. What we saw this year was very stable at about 6%. All in effective tax rate I believe it will be about the same.

Lisa Thompson — Zacks Investment Research — Analyst

6%.

Oren Shirazi — Chief Financial Officer

Yeah.

Lisa Thompson — Zacks Investment Research — Analyst

All right. And so no real change in minority income either?

Oren Shirazi — Chief Financial Officer

No. It will not impact the change in minority. The investments that we do in Japan will be like the previous model that we explained last year on the July 2019 announcement that it will be — goes to — it’s a foundry customer. This is a target of the acquisition of the tools and it will be taxable in Israel. So it’s a good tax environment.

Lisa Thompson — Zacks Investment Research — Analyst

Okay, great. Thank you. That’s all my questions.

Russell Ellwanger — Chief Executive Officer

Okay.

Operator

The next question is from Rajvindra Gill of Needham & Company. Please go ahead.

Rajvindra Gill — Needham & Co. LLC — Analyst

Yeah. Thanks. Just a quick follow-up, some housekeeping. So, Oren, what was the Panasonic revenue and the Maxim revenue in Q4 and for 2020 just to make sure we’re modeling it correctly?

Oren Shirazi — Chief Financial Officer

Okay. So, Panasonic is actually today Nuvoton Japan, previously Panasonic Semiconductor. So, in the past it was supposed to be between 90 to 105 in the previous contract. The new contract is like we said, a reduction of about 20, so it’s between 70 to 85 every quarter. That’s the commitment and indeed this is the run rate that they were in Q4 and also for the year, so very stable. And Maxim, like we announced before, is gradually decreasing contract. I don’t think we mentioned the number of that in the past but you can assume that Q4 was in line with the previous quarters, which is a little bit lower than 2019 level.

Rajvindra Gill — Needham & Co. LLC — Analyst

And just what was it in 2019 just so?

Oren Shirazi — Chief Financial Officer

We — because of the contract with Maxim, we agreed to their request not to give the exact number.

Rajvindra Gill — Needham & Co. LLC — Analyst

Okay. Got it. Got it. Got it. And so I just heard it correctly, so the Panasonic Nuvoton is now $70 million to $75 million a quarter and it’s been stable or $85 million?

Oren Shirazi — Chief Financial Officer

$70 million to $85 million per quarter.

Rajvindra Gill — Needham & Co. LLC — Analyst

Okay. Got it. All right. So, that makes sense. And you expect that to be kind of stable in 2021, this year?

Oren Shirazi — Chief Financial Officer

Yeah.

Rajvindra Gill — Needham & Co. LLC — Analyst

Okay, okay. Okay. And just on the capex, so what is the — just so I have it again, it’s $150 million incremental capex to last year. So, last year was I believe $256 million in 2020.

Oren Shirazi — Chief Financial Officer

No, no. No, no. No. So, it’s incremental to the baseline excluding that also $100 million that we had last year. So the baseline which let me remind you, the baseline for — and you can see 2018 and 2019 capex was $180 million — almost $180 million, so $45 million a quarter. That’s the baseline. 2020 was higher than that because we had this $100 million investment which is done, behind us. So for mid of this year, going forward to the baseline of $45 million a quarter which is $180 million annual run rate, you should add the $150 million which is approximately $35 million a quarter, right, if it’s spread over four quarters. But Q1, Q2, like I mentioned before, Q1, Q2 should be pretty low because payments will be starting to be made in the middle of the year. So Q1, Q2 is back to the baseline of $45 million, $49 million a quarter which was the baseline in 2019. And for middle of the year, will go up by about $30 million, $35 million a quarter for the $150 million. Clear?

Rajvindra Gill — Needham & Co. LLC — Analyst

Okay. Thanks.

Operator

There are no further questions at this time. Mr. Ellwanger, would you like to make your concluding statement?

Russell Ellwanger — Chief Executive Officer

I would. Thank you. So really, firstly, my great appreciation to our worldwide employee base at all levels and at all functions. Against a very challenging, difficult, COVID-driven work condition, they did not miss a beat, finished the year with a very strong quarter, and put us in a position to guide our first quarter revenue, being the highest first quarter in a revenue base in the company history. We’re excited to execute on the opportunities before us to realize quarterly sequential growth throughout the year. We really have amazing customer partners. We look forward to grow with you. My many thanks to our investors.

We greatly appreciate your support and really enjoy your interaction. With that being said, we invite you to any and all of the following upcoming events. Next Tuesday, February 23, we will celebrate our 20th year of trading in the Tel Aviv Stock Exchange with a special virtual trade opening ceremony. We invite you to join. Information will be available on our website and social media platforms. On the same day, we will also provide a virtual presentation for the Israeli Capital Market hosted by Oppenheimer Israel.

On March 9, 2021, we’ll participate in the Susquehanna 10th Annual Technology Virtual Conference. I suppose it’s the 10th annual technology conference, probably not the 10th annual virtual one. And hopefully it’ll be the last virtual one. On March 11, 2021, we will participate in the Loop Capital Virtual Spring Conference. Please sign up for these. We would look forward to the interactions. And otherwise, we always look forward to interactions and please contact Noit anytime you wish to speak. Thank you very, very much. Bye-bye. Thank you.

Operator

[Operator Closing Remarks]