GlobalWafers Co., Ltd. (6488) Earnings Call Transcript & Summary

Good morning, good afternoon and good evening, ladies and gentlemen. Welcome to the conference call. Our chairperson today is Roland Shu. Roland, please begin your call, and I'll be standing by for the Q&A. Thank you.

Thank you. Good afternoon, and good morning, everyone. Welcome to GlobalWafers Fourth Quarter 2020 Earnings Conference Call. I'm Roland Shu, Citigroup's semiconductor analyst. Together with me are Doris Hsu, the Chairperson and the CEO of GlobalWafers; and William Chen, the Vice President and the Spokesperson of the company. We will start the call by William for the introduction. Followed by the subjective summary by Doris. And then review our fourth quarter results by William. Doris will have heard prepared remarks of the frequently asked questions in the beginning of Q&A session. We will then open the line to callers up for questions and answered by Doris and William on the line. And now I'm turning the call to William Chen for the introduction. William, please go ahead.

Hello, everyone. Welcome joining GlobalWafers Fiscal Year 2020 Earnings Call. I'm William Chen, Global Wafer, Vice President and the company's Spokesman. We have Doris Hsu, Chairperson and the CEO of GlobalWafers in this call. Doris will give us the executive comments first. And then I will present industry overview, Siltronic, FY 2020 performance update and the company ESG highlights. The final Q&A session will be hosted by Doris as usual. For today's presentation file, as always, we have uploaded on to company's website around 2 hours ago. If you do not have the file on hand, please access into our website to get the most update file. Please note that some information during our discussion today will consist of forward-looking statements, which are applied throughout the call and this presentation. These are subject to significant risks and uncertainties. Actual results or trends could differ materially from our forecast. Please refer to the safe harbor notice in our presentation, Page 1, disclaimer. Now I would like to hand over the call to Doris for Page 2, executive comments. Doris, please.

Thank you, William. Good afternoon. Good day, everyone. Thank you for joining us today for GlobalWafers' 2020 financial results conference. In Page 2, I would -- first of all, I would like to make a very quick update, our GlobalWafers tender offer to Siltronic. We have already achieved an acceptance level 70.27%, successfully achieving well above our offer's minimum acceptance threshold, which is 50%. We are continuing to progress on track with the regulatory clearance process and have already obtained the following clearance. The first one is German antitrust approval, which was received on February 9, 2021, and U.S. CFIUS clearance on March 3 and this year. In Austria, antitrust approval on March 8 this year. I will provide more details of this project as the Q&A session later on. Now back to the business update. GWC encountered quite a lot of unprecedented challenges in 2020. A lot of lockdowns caused by COVID-19, unfavorable FX rate, extremely weak demand from automotive and very high freight, very long transportation lead time, trade tensions in some regions. All of these are super challenging for GlobalWafers. Regardless of these headwinds, GWC did achieve quite well. Sequential revenue growth quarter-on-quarter in every quarter in 2020. GlobalWafers 2020 revenue is TWD 55.3 billion, which is 4.7% lower than 2019. But in U.S. dollar, it's almost flat 2019's revenue. 2020 is GlobalWafers' third best year in history. On the following in-depth on revenue, gross margin, EBITDA, operating income, net profit and also EPS. Our 2020 EBITDA is as high as 39.7% of our revenue. And our net profit accounts for 23% -- 23.7% of our revenue, 2020 revenue. Both of these 2 rates are our all-time best performance. That's my quick update of our 2020 performance. Next page, we're talking about the outlook of semiconductor industry. I think most of the headwinds we experienced in year 2020 are not over yet. We are still suffering from COVID-19. And also, we are still suffering from very high freight and long lead time for transportation and also trade tension. Meanwhile, very volatile FX rate right now. So even in 2021, all of these headwinds are still here. However, government stimulus and [ estimation ] deployments may bring some surge in consumer device spendings in development countries. These are some positive development for us, for semiconductor industry. In addition to this, digital transformation is still in the early stages. So we believe that remote working, remote learning and migration to online activities, cloud service, all of these will continue even post-COVID-19. 5G is another driver for future growth of the whole semiconductor industry. Although trade disputes and COVID-19 have had quite some negative impact on the world's progress to 5G, but I think that is expected to accelerate further in 2021 this year. Smartphone is also another important driving force for the growth this year. It is expected that in 2021, we will see smartphone demand rebound. Automotive is being a very strong recovery this year, starting from Q4 2020. Average semiconductor value per car now is expected to keep increasing this year again. The above are our outlook for 2021. I would like to conclude my presentation here, and William will share more details of our 2020 performance and also 2021 overall market overview with you later on. Thank you very much. And William, please.

Thank you, Doris. Now let me share some pages of industry overview. Please turn to Page 5, global GDP forecast. From the World Bank, the world economy is forecasted to rebound with 4% global GDP in 2021. However, World Bank also saw exceptional uncertainties about the near-term outlook. Where the new outbreaks or delayed virus deployment could derail 2021 forecast. Page 6. COVID-19 heightened FX volatility. Please refer to the Page 4 -- please refer to this Page 4 charts, foreign currency trend since 2020. Among the global crisis caused by COVID-19, the FX market has experienced a higher level of volatility. At the same time, the overseas demand for chips used in smartphone, AR and high-performance computing has helped the feeling and appreciation of new Taiwan dollars. These appreciated NT dollars will negatively reduce GlobalWafers' U.S. dollar-denominated revenue. Page 7, semi industry forecast. From this page, several analysts institution predict strong growth for semi industry in 2021, with average forecast around 9.5%. This surge is attributed to double-digit growth of the memory and optoelectronics and the growth in all other categories. Page 8, semiconductor forecast by end application. In this page table, semiconductor monetized by application, the data processing, the light blue color bar and the communication, the dark blue color bar, will take up the largest share of the 2021 overall semi market. Consumer electronics, the blue bar, are expected to have the highest growth in 2021 at 26% Y-o-Y growth. The automotive, the grey color, and the industrial, the orange one, also expected to have strong growth at 18% and 16% Y-o-Y respectively. Page 9, new 300-millimeter fab from SEMI organization published report, 300-millimeter fab outlook to 2024. The industry will add at least 38 new 300-millimeter fabs, from 120 fabs in 2019 to 161 fabs in 2024. During the same period, the world's monthly fab capacity will grow by about 1.8 million wafers per month from 5.2 million per month to reach over 7 million per month. Page 10, Global Automotive Semiconductor. [ Flat ] global automotive semiconductor due to 2020 notably low automotive inventory and the continuously favoring packaging stimulus the switch to electric and hybrid cars. It is expected to have a robust growth in 2021. IHS Markit research forecasts that 2021 global automotive semiconductor might reach USD 67.6 billion. It is a healthy compound annual growth rate of 7% from 2019 to 2026. Now about the Siltronic transaction, please refer to Page 12, Development of Takeover Offer for Siltronic. The table is the Siltronic acquisition progress summary. On 2020 December 10, announcement of signing of business combination agreement with Siltronic and the launch of takeover offer at EUR 125 per share. On 2021 January 21, revision of offer price to EUR 140 per share. On January 22, revision of offer price to EUR 145 per share as best and the final offer. January 25, reduction of acceptance threshold from 65% to 50%, and the confirmation of no substantial public offers nor a DPLTA for a 3-year period. February 9, German antitrust clearance. February 10, end of main offer period. February 15, announcement of acceptance rate at 56.92% at end of offer period and the commencement of additional acceptance period. March 1, end of additional acceptance period. March 3, CFIUS U.S. FDI clearance. March 4, final acceptance rate of 70.27% at end of additional acceptance period. March 3 -- March 9, Austria antitrust clearance. Settlement of the takeover offer is expected in the second half of 2021, following receipt of required regulatory approval. Now let's move to Page 14. FY 2020 performance update. Page 14, Financial Highlights. About 2020 financial performance, [ our story ] is higher right now, semiconductor market has remained largely resistant to global macro economy headwinds. However, GlobalWafers still reached sequential improvement in revenue and the shipments. 2020 Q-o-Q revenue continuously grows 1.4%, 2.2% and 0.9%, respectively. Besides, in terms of revenue, gross profit, gross profit percentage, EBITDA, operating profit, profit before tax, net profit and EPS, company also reached the third best year in history. Above the EBITDA percentage and the net profit percentage, company achieved the best record than ever. The financial leverage, company still owns sufficient cash position at TWD 28.2 billion. The prepayment is about TWD 16.8 billion. Page 15, Financial Highlights: 2020 versus 2019. In this Y-o-Y comparison table, as stated earlier, 2020 was still under global economy's strong headwinds caused by COVID-19. Plus unfavorable exchange rate, strong NT dollars versus U.S. dollars significantly increased the freight cost and the increase in depreciation in our Korean new plant ramping up operations since Q3. Some Y-o-Y financial figures were slightly declined than 2019. However, even so, GlobalWafers still reached company best records in EBITDA percentage of 39.7% and a net profit percentage of 23.7%. Page 16, Revenue & Gross Margin. As described in Page 14, company achieved a better Q-on-Q revenue plus 0.9%, but with slightly dropping gross margin percentage from 37.2% in Q3 to 36.4% in Q4. The main reasons for this gross margin increasing were: number one, exchange rate, strong NT dollars versus U.S. dollars; number two, freight cost, increased air and ocean freight costs; number three, depreciation, Korea new plant ramping up operations, with depreciation counting from Q3 and not fully loaded capacity by 2020; number four, annual maintenance. Couple of sites conducted annual maintenance in Q4. Page 17, EBITDA & EPS. For EBITDA percentage, as mentioned earlier, company hit the record high 39.7% in 2020. About EPS, given strong headwinds caused by COVID-19, companies still reached the third best EPS as high as TWD 30.11, just slightly lower than 2018 and 2019. Page 18, Financial Leverage. By Q4 2020, GlobalWafers cash -- sufficient cash as high as TWD 28.2 billion for company sustainable development. Cash decreased because of takeover offer for Siltronic. The LTA prepayment month was TWD 16.8 billion, which is around [ TWD 3.6 billion ], decreasing in 2019. That was a similar decreasing trend of 2018 to 2019. Page 19, Income Statement. In this income statement, just to recap, company achieved the best record in EBITDA percentage and net profit percentage. For the other financial figures, company also reached the third best year in history, just slightly next to 2018 and 2019. Page 20, Balance Sheet. In this balance sheet, just highlight. The cash and cash equivalent decreasing was mainly because of takeover offer from Siltronic. Inventory was still well managed at the same low level as of TWD 7.2 billion. Page 22 to 25 is for company ESG highlights. Here, just specially address the 2 pages. Page 22, Committed to Green Energy. GlobalWafers tries to fulfill its social responsibilities to make the world greener through construction of solar power plants. Up to 2020, GlobalWafers' cumulative solar capacity reached of 7.6 megawatts, owned by company, which could generate 8.7 million kilowatt per hour electricity. And equals to reducing 4,433 tons of CO2 emission and planting around 403,000 trees per year. Page 24, Promotes Sustainable Finance. GlobalWafers signed USD 20 million Sustainability Linked Loan, SLL, with HSBC, which will provide the preferential interest rate once GlobalWafers achieve the sustainability-linked target during the next year. GlobalWafers cooperates with HSBC to build out 0 carbon economy, aiming to open a new chapter for sustainable development. Above is my presentation. Thanks. Next, I would like to hand over to Doris for the Q&A session. Doris?

Okay. Thank you very much, William. Dear ladies and gentlemen, we have received quite a lot of questions from investors, analysts and media in the past few days. And many of the questions were asked multiple times by different parties. So for the interest of time, I would like to answer those questions together first. Followed by an open Q&A section. So first of all, let me answer the questions about transaction of this Siltronic deal. So let me answer the question -- all the questions about transactions. First question is that, are you going to try to acquire additional staff in Siltronic before settlement or just wait until all regulatory clearance have been obtained. And our answer is that no, we do not plan to acquire additional staff. We will wait for regulatory clearance. And next question is that, when can you start to work with Siltronic as one company to deliver the merger synergy? Our answer is that upon receiving all required clearance and closing -- in the closing of the transaction, we will be able to exercise our right as the major -- majority shareholders in Siltronic, and we will work alongside with Siltronic management. Next question is that, have you -- have there been any issues so far with the regulatory review? Any problematic jurisdictions or expectations of any so far? Which filings have been made and which are yet to be made? And our question here for this -- our answer for this question is that, no, we are continuing to progress with the regulatory clearance process as expected, everything on track. We are not commenting on specific filings at this time other than upon receive approval clearance, which I have presented at my -- at the very beginning of the presentation this afternoon. So that's the answer for this question. And next question is that based on the final acceptance level, what would be the impact on leverage versus current leverage of the deal? This is talking about our financing and the leverage for the deal. So our answer is that post settlement based on the final number of shares tendered into our offer, net leverage is expected to be manageable. So far based on the numbers, I think it's manageable, which can be paid down rapidly based on the strong internal cash flow generation. We also have the option to explore a number of financing alternatives, which can further accelerate deleveraging or to target our optimal long-term capital structure should we choose to do so. This is our answer. And next question is, what are the sources of financing for the settlement of this acquisition? Our answer to this question is that we will always seek for best financing options, which creates a balanced and healthy financing structure of our company. We have numerous financing options should we elect to do so, including and which are not maturely -- not mutually exclusive, including a long-term bank facility, a bond issue -- a bond issuance and/or a capital increase. We aim to achieve a proper funding mix to support the settlement of this acquisition and also to the potential future expansion and technology upgrades. I would like to also share some previous numbers, examples for everyone's reference for this financing question. Our previous acquisition of SunEdison Semiconductor in 2016. That deal was for USD 683 million, which closed in December 2016. This case provides a very good example of our successful track record. This acquisition was initially financed with USD 550 million in acquisition debt, which was 2.3x net debt over pro forma EBITDA. And only 4 months later, we successfully launched a GDR issuance of USD 469 million, which was 15.6% of the enlarged capital. So that was a very good example for our financial capability to settle the deal. So that's just for your reference. That's our answer for this question. And next question is, what are the expected sources and quantum of synergies, particularly given that our prior statements of no DPLTA for at least 3 years. We received this question from a lot of parties in the past couple of days. And our -- our answer to this question is that we can realize the synergies and other benefits without a DPLTA in place. Expected synergy primarily relates to increasing the scale of the combined business and the ability to offer a broader portfolio of products to our combined customers. And also access to greater financial resources, which will allow us to increase our R&D and to expand our capacity. So that's our -- that's what we can answer for this question for now. Next question is about that, is there any change to your previously stated position regarding the implementation of a DPLTA? Also, this has been asked multiple times. And our answer for this -- to this question is that there is no change to our previously communicated position regarding a DPLTA as we can realize synergies and other benefits without a DPLTA in place. So our position, no change. Next question is that, are there any feedback from any of our customers regarding the consolidation with Siltronic? Our answer is that we are receiving positive feedback from -- and customers seem to share the same view on the transaction benefits as we have communicated. So, so far, it's positive. Next question is that, do you see any other allocation change from any of our customers because of the consolidation of this deal? I think our answer to this question is that I think this is -- it's a little bit too premature to say at this point in time. So we will keep monitoring this, and we will keep communicating with our customers. That's all of the question about the transaction. And next, I'm going to answer some questions about finance market outlook and our operation -- some operational questions. Okay. So first question for the financial and operational questions and market outlook is that -- the first question is, what is your outlook for 2021 revenue given annual declines since 2018? Yes, I think our revenue, our 2020 revenue was lower than 2019. So that is true, although in U.S. dollar, it's almost flat. Our outlook for 2021 is, I think 2021 will be better than 2020. That's our answer. And the second question is that, how will change in product mix affect our overall profitability in 2021? Our answer is that comparing with 2020, contribution from 300 millimeter in this year, in 2021, it will be higher due to Korean fab. So this definitely will improve. This overall promise will improve our overall revenue and profitability as well. And next question is that when was the last time you signed a new LTA? And our answer to this question is that our last -- the last time we signed a new LTA award in February 2021, which was last month. We just signed a new one. And next question is the output at MKC Fab2 in South Korea was close to 80% of the designed capacity at the end 2020. How about the output in 2021? I think that 2021 for the Korea site is very likely to be same or better than last year. That's our answer. And next question is that, is the Taisil [ epitaxial ] capacity expansion plan still on track for early 2022 mass production? And our answer to this one is, yes, everything on track. Next question is that, any newcomers in the market in 2021? What's your view of total industry capacity increase in 2021? Our answer to this question is that we believe that there will be overall industry capacity expansion and investment in 2021, including the investment expansion from Chinese players and many others as well. So the capacity -- the industry capacity this year will increase. That's our view -- our answer to this question. Next question is that, what is your view on customers and the semiconductor industry demand outlook? I think the demand for 2021, the demand will continue positive. So far, the demand continues to look quite positive. That's our view. And next question is that, what are your views on the shipment outlook in 2021? I think global silicon wafer shipments were up [ 13% ] Y-o-Y in Q4 2020, according to the industry association semis analysis. With demand improving, we expect that the shipments continue to be strong this year. So far, we don't have the number yet, but we think that we expect that the shipment will continue to be strong this year. Next question is that what impact is the global semiconductor shortage having on your outlook for global silicon shipments and wafer growth? I think that we expect that smartphone recovery driven by 5G and memory recovery post inventory digestion from early '21 should result in a more balanced situation by end of 2021. Next question is that, what are your thoughts on the overall industry demand recovery time line? Our view is that 2021 continues to be quite challenging with geopolitical and global economic development. It is also difficult to predict. For now, it's still very difficult to predict that how COVID-19 will develop and how foreign exchange rate fluctuation will look like. However, we expect customers' inventories to have less of a negative impact on demand development in 2021. Then it was the case at the beginning of 2020. So the mega trends, such as 5G, AI, EV and digitalization describes the growth drivers for semiconductor industry. So size in these areas point to a positive environment in this year. So we believe that the wafer demand is strong, it's high. And our production loading is good. We expect that demand will continue to grow this year. That's our view of the overall industry demand recovery. Next question is what are your thoughts for the overall industry demand to be driven by auto recovery and smartphone recovery? Our view is that we anticipate that a rebound in the automotive market and momentum in smartphone sales during -- part of that was driven by 5G devices, could drive a stronger wafer demand than earlier anticipated. So that's our view for the growth -- for the overall industry demand by automotive recovery and smartphone recovery. And next question is that, could you quantify the wafer usage expansion arising from new applications such as 5G, smartphone, smartphone infrastructure and so on? I think that we could only anticipate that overall increasing demand but is very difficult for us to -- we could not quantify the usage expansion yet. We will observe closely how the market develops. That's our view. And the next question is that in Q3 2020 earnings conference, you expressed expectation that 2021 silicon wafer supply will be tight and 2022 will be very tight. What are your views of silicon wafer supply and demand now compared to 3 months ago? With the likely double booking at foundries because of capacity tightness, do you see wafer demand crossover overall supply anytime soon? Well, this is a tough question. But we believe that the demand is likely to grow, and suppliers are working on capacity expansion, which is a key reason for our transaction as well to be better able to invest in expanding capacity. So that's our view now. So basically, our view is the same as what we presented 3 months ago. There will be -- we will see some investment as well. And next question is, what are your views on Chinese local wafer suppliers? Any recent developments and impact of supply in the market? Our view is that we believe that there will be overall industry capacity expansion investments, particularly from Chinese players in 2021. So far, that's all we can foresee for now. So that's our answer for this question. And these are the answers we received in the past 1 week for our overall operational performance, financial performance and also for the transaction we are working on with Siltronic. So that's why I think that many of the questions were asked by multiple parties. So that's why I put all the answers together here. And that's all I prepared for the frequently asked question, and we are okay to assess open questions now. Now thank you.

Thanks a lot for the detailed update from [indiscernible]. So operator, we are now ready to open the line for questions from [ all ] callers.

[Operator Instructions] Our first question comes from Haas Liu with Crédit Suisse Singapore.

Congratulations on the good results. So my first question is to follow up on your detailed prepared remarks and also the prepared questions about the long-term agreement. Could you provide some more color on the long-term agreement you recently signed in February? And also, your total prepayment from your -- on your balance sheet has dropped by 17% year-on-year in 4Q last year. Does that imply your long-term agreement exposure down by similar magnitude in the past year? And will you consider to sign with our customers at a lower price? Just what you did after you acquired SunEdison back in 2016 and 2017 to ensure more stable financials following the acquisition of Siltronic?

Yes. We -- our last LTA was signed in February last month. That's same before the long-term agreement. Our long-term agreement is always coming in with the prepayment. So regarding to the price of the structure-wise, our LTA structure is the same as before. But the price-wise, sorry about that. Sorry that we are not going to comment anything about this price. But it's basically -- it's the market trend and also the view of the demand because when we sign a long-term agreement, we are talking about the price for the next several years. So we have our view. Our customers have the view and we discussed and we finalized and mutually accepted. Both feel that is the right way to secure future demand. So I cannot disclose too much about the pricing. But yes, you are right that our payment -- our total cash position dropped quite a lot. Most of -- there are 2 -- 3 main reasons of the -- our cash -- total cash balance -- cash position dropped. One is, of course, the LTA prepayment balance dropped. And this is because of quite a lot of LTAs were executed in year 2020. So we -- according to the LTA, we have to repay the prepayment to our customer base on the LTA. So it's the LTA execution attainment -- repayment for LTA attainment. And that's the first part of the LTA, the cash drop. And the second part is our -- of course, as I explained earlier for the transaction for Siltronic, we purchased quite a lot of shares from the market. And so that's one of the key reasons of our cash drop as well. And also another one is CapEx. As you know very well that we have Taisil epi capacity expansion. And the other side, we have a lot of expansion, debottlenecking as well. So these are the main reason of the cash position lower. So before LTA, yes, you see the drop around 17%, and that's our LTA volume drop as well. That is true. And also we have new LTA coming in. So we will have -- we will see some new prepayment received this year as well from new LTA. Thank you.

That is very helpful. But I guess what I mean is now whether you will consider to sign more LTA would give your customers better pricing to ensure more stable cash flow generation post the acquisition of Siltronic.

We will not sign LTA, get the prepayment for Siltronic deals. These 2 are independent. So Siltronic deal, the settlement, we need the cash but that's another adjustment. As I answered some of -- one of the questions, that we have several alternative -- financing alternatives to work out our settlement deal financing, but it has nothing to do with the LTA. LTA prepayment from the LTA is to secure the -- to make sure that the LTA will be executed by both parties. And we will -- so that -- and also the LTA prepayment is also for the expansion for the capacity expansion as well. So that is solely different. So we definitely will not sign LTA at a lower price just because we need more prepayment, more cash to fund our Siltronic deal. These 2 are totally 2 different projects. So yes, to answer your question, the answer is no, we're not going to sign LTA at a lower price just because we need the prepayment to fund Siltronic deal.

Okay. My second question is regarding the capacity and also demand outlook. I think you mentioned quite a bit on the overall supply demand landscape for the industry. But I just wanted to follow up. Do you see the wafer demand finally catch up with supply in first half? And do you see any signal of the spot pricing finally improve? Or it is still quite stable because there's still a little bit of -- a little bit of room for demand to catch up with supply?

Yes, demand-wise, demand is very healthy. So we see a lot of strong recovery from automotive and some other applications, very strong demand for -- strong increase. And I believe that there is definitely some double ordering that is possible. But so far, we see very strong recovery from a lot of applications. And we do see some new capacity available to the market as well, just like what we're doing. We keep increasing debottlenecking and improve our productivity, not only global wafers. Many of our peers, company peers, silicon wafer supply, they are doing exactly the same thing. So we see stronger demand, and we also -- we are seeing some increasing supply as well. But so far, the loading is still very good. So this is good. From our viewpoint, the industry, the direction is very healthy. And for the wafer pricing, and I apologize again that -- sorry, I -- we are not going to make any comment about pricing. I think the industry will show it, will present ASP but the company, GWC for now. I'm sorry about that, that we are not going to make any comment on pricing. Thank you.

Our next question comes from Sebastian Hou with CLSA Taiwan.

So I have 2 questions. First is we saw that the -- I'm not sure if you explained this in the calls, I joined slightly later, but just curious about the OpEx. Seems to have increased or abnormally compared to the past few quarters run rate in 4Q. So what's the reason behind that? And what's the reasonable OpEx ratio or OpEx level that we can assume for this year? Second is that I think the -- I think, Doris, you mentioned about the -- you see the Chinese players, peers are adding capacity, specifically this time. So interesting because it seems like this Chinese new capacity was much of the -- obviously, you didn't mention much in the past earnings calls. So -- but it seems like you mentioned it more, as in 2 times, in your prepared remark. So just curious about whether this is more of a concern for you right now compared to a few quarters or a few years back? And how do you see this could be effectively affect the supply-demand dynamics?

Thanks a lot for your question. For OpEx, yes, you are very right that our OpEx went up a lot in Q4. And that -- there are 2 key reasons for this. The first reason is because of super expensive freight in the next several months, especially in Q4 last -- even right now, it's very tight as well some freight, some airlines, some transportation. Cargo cost is very expensive and space is limited. We -- some of our -- some of our freight increased by several x, not several percent, several times higher than before. So the freight increase, that's abnormal increase for us. That's one of the reasons of the OpEx increase. Another major reason for the OpEx increase, especially in Q4, was because of the Siltronic deal. That we need quite a lot of expenses for lawyers, for advisers, a lot of onetime expenses for this project and that we categorize the administration. So SG&A, the main cost. So that's one of the main reason of our super-high OpEx as well in Q4. And our standard, typically, our standard, our target OpEx is always somewhere around 8% or it's 8-plus -- 8 -- I would put it this way, that is somewhere around at 7.5% to 9%, always this range, depends on the freight, FX and some other factors. So it's 8%, 8-point-something percent, that's our normal target for our OpEx. And your second question about China -- Chinese peers, silicon wafer players. The reason I answered 2 times, I talked about the China wafer suppliers 2 times today was because that was frequently -- that was 2 of the frequency. One of the most frequent questions this time. Actually, I received 2 most frequent questions this time for the Q&A. One is for the transaction. And otherwise, China peers, suppliers, peer company's strategy. So from -- that was why I answered 2x. But our view is that -- our view for China peers companies would -- is same as our view last year. We don't -- we are not more concerned now than before. So there are a lot of silicon wafers, newcomers in China and some of them are better than others. So they are expanding the capacity. We know that. And definitely, they will be -- they are not really ready yet, but they -- definitely, they are improving. And we know that there will be some test monitor and/or mature products, maybe some of the mature wafer, mature design products. I think China silicon wafer will be qualified as well. So it's very healthy. I don't see anything wrong there, and we don't have too much concern. Of this, we keep increasing our wafer quality and wafer capability and cost competitiveness as well. So this is very healthy. You have very strong peers company that is very healthy, and we don't -- we are not too much concerned than the last year. So same situation. Thank you very much for your questions.

Our next question comes from Donnie Teng with Nomura.

My first question is regarding to -- is referring to the -- you mentioned about the industry demand and supply are all increasing in 2021. So just wondering if you are seeing the supply is increasing more than the demand or if the supply is increasing, are they mainly driven by debottlenecking or the brownfield extension? And the second question is regarding to the regulatory clearance. So I guess, probably China government's attitude is quite critical for this Siltronic deal. Just wondering if -- I mean if China government just provide a conditionally approval for this deal, will this have any impact to our overall tender offer? Or in the worst case, if China government just continuously not willing the approval, then what would be the result?

Thank you very much for your question. The first question is about supply-demand. We do see stronger demand. And also, we do see more supply. But so far, we haven't seen any real big-scale supply increase from greenfield. So far, what we are seeing now is more from debottlenecking, productivity improvement and capability of -- in some brownfield like what we're doing. Like our Taisil is working on right now. We increased our capacity on epi, and we do a lot of debottlenecking out. In our St. Peters, we have our expansion on SOI. So all of these are small scale in its debottlenecking and on-site expansion, no greenfield. That's what we see. So far, we don't think that the supply -- the increase on supply will be higher than the increase on demand. I think it's quite balanced, quite healthy. That's our view. And your second question about the regulatory approval in China. Those are super critical questions. It's very hard to answer. So far, everything on track, including China. We have already done the -- provided the document. I think everything on schedule, everything on track. And it's too early to make any further comments on the China approval. Any conditional -- any special conditions or anything, I think it's too early to answer this question. We just do our best to improve our communication to provide the document and also we will keep working on the communication. Yes, so far, everything on track.

Can I have a follow-up? In terms of the supply increase, could you have some comment on the supply increase for 12 inch and 8 inch across the industry? Is 12-inch supply is growing faster than 8 inch or it's the other way around?

Yes. So far, we think that the 12-inch increase is higher than -- is greater than 8-inch increase. That's our view. And also the demand increase is also -- 12-inch demand increase is much stronger than 8-inch demand increase. Of course, 8-inch demand is very strong. Both 12-inch and 8-inch demand is strong now. But the growth, the increased percentage of the increase for 12 inch is still greater than 8 inch. That is our view, demand-wise. And so demand is like this and supply new capacity, also the increased -- capacity increase for 12 inch is greater than 8 inch. That's our view for the market.

Yes. Doris, for the interest of the time, I will now take question from the last caller from the line.

And our last question today comes from Jeff Ohlweiler with Macquarie Taiwan.

So I guess, first question, flattish sales last year in U.S. dollars. Can you just talk about -- I know you're not talking about ASPs going forward, but in terms of last year shipments versus ASPs in terms of the flat revenues?

Yes. Last year, our shipment volume was higher than 2019, area-wise. So actually, ASP -- last year's ASP was slightly lower than 2019. For 2020, it was slightly lower, but volume-wise was a little bit higher. So actually, our revenue in U.S. dollar was basically flat 2020.

Okay. And did you bring down your loading rates at all in 2020 or generally fully loaded for full year except for maybe some issues with COVID related?

We're talking about the whole -- if you see our revenue, actually, our revenue is quite flat, even fourth quarter. We're sequentially grow -- so we are growing Q-on-Q, all the 4 quarters, but basically it was quite flat. So I'm talking about the whole year, total average, the ASP and shipment trends. So the summary is that our total shipment in 2020, total area was bigger than 2019. ASP was slightly lower. Total revenue was flat.

Okay. Great. And then last question, just -- I know you mentioned earlier about the new Korea capacity, that, that was mostly secured with long-term agreements. Is that true? And did that include prepayments? Or I guess -- okay. So some came down a lot in 2020, but obviously some of the new ones, including the ones from Korea?

That's right. Yes. So right. So any -- all of our new expansion will be earmarked for specific customer or to specific LTAs with prepayments. And that's our strategy and we'll keep doing so for 2021 and 2022, in the next couple of years.

Okay. Thanks, everyone. Let's conclude today's Q&A. So let's turn the call back to management. If you still have questions, please e-mail your questions to management after the call. Thank you. Now I will turn back the call to Doris.

Thank you very much, everyone, for your time joining us. That's our -- here, we would like to conclude our conference call today. Thank you very much. Have a very good day. Thank you.

Thank you.

Thank you. Thank you for participation. This concludes the conference.