Question-and-Answer Session
Operator
Thank you, sir. (Operator Instructions). We’ll take our first question from Patrick Ho with Stifel Nicolaus.
Patrick Ho - Stifel Nicolaus
Thanks. Guys, is the biggest lever for gross margins still factory absorption, are you feeling any increasing pressures given the current market environment?
Andy Moring
This is Andy. No, I think the biggest issue, as we have said before, is the factor absorption. We feel that that has as much as 5 or 6 percentage points impact on our margins. We have not seen any erosion on ASPs due to the continuing downturn.
Patrick Ho - Stifel Nicolaus
Hey great. And in term of the overall market, Dave, you have gone over the memory CapEx market, and I think that we know the situation there. On an incremental basis, looking forward, which segment do you think, I guess, is worse looking forward, DRAM or NAND flash? And do you believe these push-outs and particularly that we are seeing right now, are they only for second half ?08 or do you see them bending into 2009?
Dave Dutton
Yeah. So, Patrick I think it’s too early to call what’s going to happen in ?09. Certainly, the macroeconomic conditions will improve as we go through the Christmas season. I would have concern going into ?09. And we’ve already been feeling the pressure of the DRAM side of the memory segments, and now we are starting to see some pressure on NAND side. I think recently, Toshiba and [San Jose] just announced, and you can see how difficult that flash market is becoming. So, we remain extremely cautious and at this point we don’t have the visibility to see where the inflection point is on either of these.
Patrick Ho - Stifel Nicolaus
Great. Thanks a lot guys.
Dave Dutton
Thank you, Patrick.
Operator
And we’ll take our next question from Peter Kim with Deutsche Bank.
Peter Kim - Deutsche Bank
Hi, thanks for taking my questions. I just wanted to get – Andy, I wanted to get a clarification on the inventories. There were two items from the inventories, one for delivery system, and one for regular inventory. And, you mentioned that approximately 15% of the inventory was evlas. So, was there any evlas in the 7.5 million?
Andy Moring
No. The 7.5 represents tools that have been delivered to customers that have not been taken to revenue due to our revenue recognition practices. So, that would be above and beyond any evals that we have in the regular inventory.
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