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

Good day, everyone, and welcome to the GlobalWafers Fourth Quarter 2021 Earnings Call. My name is Rita, and I am your event manager. [Operator Instructions] I would like to advise all parties that this conference is being recorded. And now I would like to hand over to Sunny Lin. Please proceed.

Thank you, operator. Good afternoon and good morning, everyone. I'm Sunny Lin, semiconductor analyst at UBS. It's our great pleasure to host GlobalWafers management today for their Q4 earnings call. Now let me pass the call to Mr. William Chen, the spokesman of GlobalWafers, for opening remarks.

Thanks, Sunny. Hello, everyone. Welcome joining GlobalWafers 2021 Earnings Call. I'm William Chen, GlobalWafers Vice President and the company's spokesman. We also 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 the capacity expansion plan, industry overview, 2021 performance update and the ESG highlight. The final Q&A session will be hosted by Doris as usual. For today's presentation file, we have uploaded onto company website around 2 hours ago. If you do not have the file on hand, please access into our website and get to the most updated 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 result or trend could differ materially from our forecast. Please refer to the safe harbor notice in our presentation, Page 1 disclaimer. Now I'd like to hand over the call to Doris for the Page 2, executive comment. Doris, please.

Thank you, William. Good afternoon, everyone. Thank you very much for joining GlobalWafers' earnings call for its 2021 financial -- annual financial result. First of all, let me share some comments about our financial results and update our operation status. Page 2, our financial highlights. Seizing the burgeoning demand and economics rebound from the pandemic, GlobalWafers has accomplished a very fruitful 2021. In the fourth quarter 2021, our revenue totaled TWD 15.8 billion with 11.4% Y-o-Y and our 2021 full year revenue hit TWD 61.1 billion with 10.4% Y-o-Y. Both Q4 and 2021 full year, both of these 2 revenues hit our record high. Up to Q4 2021, GlobalWafers have -- has been growing for 6 (sic) [ 9 ] consecutive quarters. And let's take a look of our gross margin and operating profit. Our Q4 gross profit margin hit 41.3%. This is growing for 4 consecutive quarters and reached our record high 41.3% in Q4. 2021 full year gross profit margin reached 38.1%. This is the second highest in our history. And our annual operating profit margin was 28.9%. This is our third highest record. EPS. Q4 EPS was TWD 4.87 per share. And our 2021 full year EPS amounted to TWD 27.27 per share. The revenue and gross margin. Both the revenue and gross margin of our Q4 2021 was record high. But our Q4 EPS performance was not as good as the previous quarters and the main reason is because of the reserve of the EUR 50 million termination fee for the unfulfillment of Siltronic transaction. This EUR 50 million reserve in Q4 impact -- negatively impacted our net profit by 2.6% and our EPS by TWD 3.5 per share. So if there was no termination fee, our EPS would have amounted to -- Q4 EPS would amounted to TWD 8.37 and our 2021 full year EPS could be -- could have been TWD 30.77. But because of this EUR 50 million termination fee reserve in Q4, our annual EPS was only TWD 27.27. Then move to Page 3 regarding to our prepayments and our overall capacity. At end of -- as of end of 2021, the amount of our prepayment balance reached TWD 28.6 billion or around USD 1 billion. And this is TWD 6.2 billion higher than our prepayment balance as of the end of Q3. So in Q4 only, this one quarter, we received another new TWD 6.2 billion new prepayment -- TWD 6.2 billion prepayment or USD 0.2 billion. And this prepayment amount keeps increasing in 2022 as well. Our capacity expansion as we announced to the market that we have our brownfield and greenfield big capacity expansion. Overall, global digital transformation accelerated by COVID-19 has propelled the demand for cloud services -- server and also high-performance computing. 5G is rolling out an unprecedented pace and its uptake is far faster than 4G, so embodying people's need for connectivity. Yes, connectivity, this is the key word for the growth. And those technological advancements and increasing silicon content could not be achieved under current level of worldwide semiconductor production capacity. Therefore, we are seeing very aggressive expansion program announced by almost all the key 1 -- the key Tier 1 players, all key players in all sectors of semiconductor supply chain. GWC also we announced our total CapEx spending of TWD 100 billion, approximately USD 3.6 billion. This amount covers both brownfield and greenfield investments spanning across Asia, Europe and the United States. It is expected to start ramping up from the second half of 2023. I will share more details of our expansion following. Our Italian subsidiary, MEMC SpA, our Italian -- that's our Italian operation, we will broaden its production line by expanding new 12-inch polished and epi wafer modules, together with the 12-inch crystal growth expansion plans, which has already been implemented. So GlobalWafers will achieve the full 12-inch line integration in Italy. This one will be the very first 12-inch wafer fab in Italy. The investment is strongly supported and recognized by European customers and subsidized by government as well. And it is expected to be operational by the second quarter 2023. Apart from Italy, other sites are also expanding in full swing. Such as in Denmark, we are going to have a float zone capacity expansion. In USA, we will expand our 300-millimeter SOI and also silicon carbide epi. In Japan, we will have 300-millimeter GaN, a new wafer expansion. And also, we will have Perfect Silicon -- 300-millimeter Perfect Silicon wafer and epi capacity. In Korea, we will build another fab as well. And in Taiwan, we will have 300-millimeter silicon epi -- silicon wafer epi for advanced product. And also, we will have very massive expansion for silicon carbide and gallium nitride product line -- production lines as well. Regarding greenfield, the equipment and construction lead times are long. But as we are contemplating the final destination, the negotiation with the vendors are proceed in parallel. We envision the equipment delivery and construction plan will meet the schedule, which also provides a better window to factor in all the rising costs in energy and raw materials with investments across multiple regions, which I mean that we are having our investments, brownfield expansions, in 6 countries at the same time. So with this worldwide investment in the -- worldwide investment, GlobalWafers not only augments its advantage in local supply, but also we will build our moat for sustainable growth. Next, please move to Page 4. That is -- I'm going to share some outlook of our -- of the industry, macroeconomics and also semiconductor industry. Global -- for global economy, I think according to IMF following the booming in 2021, which increased by 5.9%, the global economy is set to expand in a weaker position with 4.4% in 2022 and 3.8% in 2023. I think there are some downside risks to recovery. The first downside risk is COVID-19 variant. We know that there are some countries, especially some cities in some -- in the world, some cities in China and some other countries are seeing some outbreak or another wave of COVID-19 now as well. So COVID-19 variant, this is something still -- it's not over yet. It's not well contained yet. So this is one of the potential downside risk. And the second one is supply chain disruption, including the logistic issue. This risk is still there. The third one is energy price volatility. This is a big uncertainty around the world, and it's not over yet. And the fourth downside risk is geopolitical tension and also the foreign exchange rate volatility. And the last one is climate emergency. These are the downside risks we are considering -- we are reviewing and monitoring very closely for the next several years. Okay. And also, Page 5, let's move to Page 5. For the chip crunch, ongoing pandemic effects from new virus variants expected to continue shutdown in manufacturing and shipping centers, although the duration will be shorter due to vaccine lessening the virus impact. Temporary shutdowns are foreseen to cause ongoing ripples in the supply chain. Therefore, I think that the chip crunch will be easing, but not end in 2022. For automotive, after the severe chip shortage in automotive industry, which caused automakers to cut production, they are very aggressively -- they are very aggressive in finding alternative ways to address the issue and anticipate the car business to resume recovery in 2021. However, the Russia invasion of Ukraine further casts looming shadow for automotive industry. With policy support and major carmakers upping the ante and EV to retake the initiative, EV now is scaling up across geographic. For the silicon carbide and gallium nitride, I think with the compact and reliable features, silicon carbide and gallium nitride are very likely to witness a significant growth in the next several years because of its expensive applications in various products, including consumer electronics, power devices, EVs and 5G. And that is why we made a big investment -- expansion investment for silicon carbide and gallium nitride this year. Last but not the least, I would like to update a little bit about Russian-Ukraine conflict -- the war, how this affects our business and the industry. First of all, we are not foreseeing a direct impact on our demand or our supply chain caused by this Russian invasion of Ukraine. However, with the global supply of natural gas and oil yield affected, we anticipate that the logistics will increase in cost and possibly lead time as well, which we will need to comprehend. We are not seeing and we do not expect any change in our LTA activities, which maintain our recently announced CapEx plan. For automotive, I think we see some impacts from the war. Regarding the automotive industry, the war results in key raw material constraints, such as wire harness and some neon gas, and many automakers have cut down their production. We are monitoring the situation, but up to this moment we have not evidence of any reduction in silicon wafer orders, partly because that the events are very recent and the supply chains have a long response dynamic. So in parallel, we assume that customers are using a protective approach by maximizing inventory since wafer stocks are still pretty low for our automotive customers and they are still struggling to recover from the previous shortage. So far, we haven't seen any order cuts or rescheduling of the shipment from any of our automotive customers. The above are my comments for our 2021 -- Q4 2021 results and also the update of our 2021 financial -- annual financial results. Thank you very much for your time. William, please share more details on the industry and financial result with everyone. Thank you.

Okay. Thank you, Doris. Okay. Let's move to the summary of our capacity expansion plan. Page 7, global advanced technology development and the capacity enhancement. As Doris mentioned right now, GlobalWafers estimate the total CapEx, TWD 100 billion, equivalent to USD 3.6 billion, including substantial brownfield and greenfield investments across Asia, Europe and the U.S. The new production lines are expected to be ramped up in second half 2023. GlobalWafers focus on its growth by building new production lines, which is specialized in next-generation products for advanced process, targeting on large-sized wafers such as 12-inch epi, 12-inch polish, 12-inch SOI, 8-inch SOI and the 8-inch FZ wafers, also targeting on compound semiconductors such as SiC wafers, SiC epi and gallium nitride on silicon wafers. Next, share some pages of industry overview. Page 9, global GDP growth forecast. IMF states the global GDP booming growth of 5.9% in 2021 yet a weaker position with 4.4% in 2022 and 3.8% in 2023. Originally, global recovery continues. However, recent Russia invasion of Ukraine has caused the potential serious inflation not only in energy, but also food and all commodity prices. Page 10, world uncertainties intensify FX volatility different than other major currencies during these 2 years, the COVID-19 impacting period. New Taiwan dollars are continuously appreciating to U.S. dollars that negatively reduced GlobalWafers' U.S. dollar-dominating revenue. Page 11, worldwide semiconductor sales forecast from SEMI. Semiconductor worldwide revenue rebound from the outbreak of COVID-19 virus crisis. The average semiconductor sales growth rate in 2022 reaches 8.4%, crossing the USD 600 billion milestone. Page 12, worldwide silicon wafer shipments and revenue set new record in 2021. Comparing to 2020, the 2021 worldwide silicon wafer area shipments increased 14% to 14,165 MSI. Wafer revenue rose 13% to USD 12.6 billion, reaching new all-time highs. About quarterly shipments. After 4 consecutive quarterly records, Q4 '21 total shipments flat to Q3, but estimated to be -- continue grow another 4.6% in 2022. Page 13, global front-end fab equipment spending hits record high in 2022. Benefited from a wide range use of AI and HPC, global front-end fab equipment spending in 2022 will grow 10% to USD 98 billion, hitting an all-time high, marking a third consecutive year of growth again. South Korea will lead the fab equipment spending in 2022 followed by Taiwan and China, combining to account for 73% of total worldwide spending. Page 14, attractive growth opportunities in silicon carbide market. The silicon carbide market is projected to reach USD 2.1 billion by 2026 at 18.7% CAGR. Momentum comes from growing implementation of the silicon carbide in power device applications and EV. Page 15, electric vehicle outlook. EV sales normally 2 or 3-wheelers, buses, cars, LCV, MCVs or HCV, are all surging sharply every decade till 2050. It is because of a combination of policy support, improvements in battery technology and cost, more charging infrastructure being built and new compelling models from automakers. To achieve net zero by 2050, as soon as 2030, nearly 60% of new car sales need to be 0 emission to stay on track for the net zero scenario. Page 16, 5G subscription uptake. From Ericsson Mobility Report, 5G subscription uptake is expected to be faster than 4G forecasted to reach to USD 4.4 billion in 2027, fueled by price falling and the government's early engagement. Page 17, 5G subscription become mainstream. Also from Ericsson Mobility Report, the 5G mobile network carry about 300 times more mobile data traffic than in 2011 if building out accelerates in the world and is forecast to cover 75% of worldwide population in 2027. Now let's move to the quarter performance update. Page 19, financial highlight, 2021 versus 2020. For 2021 revenue, now market hit the cycle bottom in the first half of 2021. Macro demand were turning better quarter-by-quarter without significant macro supply increasing in 2021. GlobalWafers, all size, all diameters capacities were fully loaded from middle of 2021. This all-sized capacity, fully loaded situation helped GlobalWafers fully monthly demand in LTA and spot orders. Also, spot price rising up and the product mixing improved. Under such favorable condition, company 2021 revenue was reaching the record high, TWD 61.1 billion, with Y-o-Y 10.4% growth. Gross margin. Company 2021 gross margin reached 38.1%, which was 0.9% higher than 2020, was the second highest in company history. This higher gross margin was attributed by quarter-by-quarter higher revenue and well cost management. In terms of revenue, as right now explained, 2021 higher revenues were driven by higher capacity utilization, improved ASP and better product mixing. That generates the record high revenue. About the cost, the increased quarterly capacity utilization also helped the manufacturing overhead reduce to offset some global unfavorable transportation costs and material costs increasing caused by COVID-19 and the geographic conflict. Operating profit and percentage. Company 2021 operating profit reached TWD 17.7 billion, which was 15.7% Y-o-Y growth. Operating profit percentage, 28.9%, which was 1.3% Y-o-Y increasing, hitting the company's third highest record. Net profit and the percentage. Given company 2021 revenue, gross margin percentage, operating profit percentage were all hitting company relatively higher performances. However, as announced, company reserved the Siltronic M&A termination fee, EUR 50 million, by end of 2021. That caused the huge net profit deduction in 2021 with the result minus 9.4% Y-o-Y decreasing. EPS. The same termination fee factor caused the net profit decreasing then had Y-o-Y EPS minus TWD 2.84. However, as mentioned by Doris right now, excluding this termination fee, that is TWD 3.5 EPS, the 2021 EPS should be TWD 30.77, which will be TWD 0.66 higher than 2020 EPS. EBITDA percentage, ROE and ROA. The negative Y-o-Y percentage in 2021 EBITDA percentage, ROE and ROA were also impacted by these same termination fee factor. Page 20, Q-o-Q and the Y-o-Y financial highlight, Q4 '21 versus Q3 '21 versus Q4 '20. In terms of Q4 '21 performance, as mentioned right now, company were fully loaded at all sites, all diameters capacity since middle of 2021. Therefore, we reached a very good overall Q4 performance. Q4 '21 revenue attributed by fully loaded demand, improved ASP plus better product mixing, company reached a record -- quarterly record high revenue, TWD 15.8 billion, which is 2.5% Q-o-Q growth than Q3 '21 and 11.4% Y-o-Y growth than Q4 '20. Besides, as mentioned by Doris, GlobalWafers also reached the 9 consecutive quarter of revenue growth regardless the headwinds in 2019 and 2020. Q4 gross margin percentage, 41.3% with 2.2% Q-o-Q growth and 5% Y-o-Y growth was reaching company record high as well and 4 consecutive quarters of growth. Great financial result also demonstrates in Q4 '21 operating profit with 3.3% Q-o-Q growth and even 51.8% Y-o-Y significant growth. The Q4 net profit and percentage, again, given we had a company record high quarterly revenue and gross margin percentage in Q4. However, as explained right now, recognized M&A termination fee in net profit, company had minus 6.7% Q-o-Q and minus 10.8% Y-o-Y in Q4 net profit percentage. This termination fee also caused the negative Q-o-Q percentage and Y-o-Y percentage in EPS, EBITDA percentage, ROE and ROA. Page 21, revenue and gross margin. Given market is still impacted by COVID-19 and the higher logistic costs, increasing material prices and the unfavorable weak U.S. dollar headwinds, GlobalWafers is still generating 9 consecutive quarter revenue growth. Furthermore, Q4 '21, company reached the best -- record high in quarterly revenue and a gross margin percentage of 41.3%. The good trend of all favorable factors, fully loaded capacity, lower average overhead, increasing ASP, better product mixing, are all continuously happening in year 2022. Page 22, EBITDA and the EPS. 2021 EBITDA-to-revenue percentage was dropped from 39.7% to 36.8%, mainly was caused by M&A termination fee. If excluding this termination fee, the EBITDA-to-revenue percentage will come back to 39.4%. Then if add back this termination fee, the Q4 '21 EPS TWD 27.27 will be recovered back to TWD 30.77. Page 23, income statement. In this income statement, just to recap. The revenue, 9 consecutive quarters of revenue growth reached the record high in company history. Gross profit percentage significantly increased to 41.3%, also achieved the record high in company history. Operating profit percentage also improved into 30.6%, continuously recovery from COVID-19 impacting. EBITDA-net profit percentage and the EPS were dropping by M&A termination fee impacting. Page 24, balance sheet. In this balance sheet, just highlight cash and the cash equivalents. Huge increasing was because of receiving LTA prepayment continuously. Same as other liabilities increasing was coming from this prepayment collecting. Shareholder equity decreasing was mainly impacted by M&A termination fee. Inventory was maintained at the same level as of TWD 7.2 billion. Page 26 to 30 are for ESG highlights. Page 26, sustainable environment. By practicing energy-saving measures, GlobalWafers saved 2.59% in unit electricity consumption in 2020. At the end of 2021, cumulative solar capacity reached 19.8 megawatt, which could generate around 24 million kWh electricity, equivalent to reducing around 12,000 tons of CO2 emission and plant around 1.1 million trees per year. Page 27, volunteering for our earth. GlobalWafers hopes to contribute a better tomorrow by fostering a common goal among colleagues and raising employees awareness about environment protection. One typical activity in Global Taiwan -- GlobalWafers Taiwan in 2021, we held a beach cleaning event along the cost line of Zhunan Long Fong Port to raise awareness in marine pollution. There are total 123 employees and their family volunteers and cleared out nearly 500 kilograms of waste. Page 28, social concerns. GlobalWafers regularly hold a charity event covering 4 aspects, education, children, disability and volunteer, to foster a belief about the sharing and the giving back to this society. Year 2021 in Taiwan, company's twice-per-year activities included college students aiding plan, food box for children, living goods and materials raising plan. These social welfare activities embody our wish to people in need and dispatch our love with warmth. Page 29, employee welfare. GlobalWafers continuously creating a flexible and positive working environment; maintaining the physical and the mental health of the employees; offering better life resources, such as legal consulting, group insurance and perks; and increasing generously benefits in the economic security of employees for stronger motivation. Page 30, corporate governance. GlobalWafers has been awarded a top 5% corporate governance among all listed company for 3 consecutive years and included as top 10 companies in TIP Taiwan Taipei Exchange ESG Index. GlobalWafers is dedicated to embodying transparency and ethical management to fulfill its social responsibility and strive to become the benchmark of the world. Above is my presentation. Thank you. Next, I would like to hand over to Doris for the Q&A session. Doris, please?

Okay. Thank you, William. Thanks. This is Doris again. Yes, as always said, I will start with some questions we have already received by e-mail, by calls or -- all the -- our spokesman received the questions. So let me start from those questions first, and I'll reserve some time for our Q&A. The first question we've been asked multiple times recently is about our cyber attack in our Japan operation. So the question is, please give more details of the cyber attack recently GlobalWafers in Japan went through? Has it resumed the production? What is the impact to your operation and revenue? On 2022, on February 28, 1 a.m. midnight, February 28, a couple of weeks ago, our operation in Japan was -- our Japan operation detected that the servers of some of our sites were attacked. We immediately -- with very immediately implementation of our countermeasures to contain and carry out a thorough network examination. The service now resumed. It took us quite some time to check not only the server status, but also all the terminals to make sure that the computers and servers and terminals are clean. So -- but now the servers resumed. And lucky, the insight -- this incident happened at the last day of February. So the wafers basically for Feb -- for February, the wafers were mostly packed and delivered with little impact to the revenue in February. Production line in March definitely there will be some revenue impact, but the production line now is reopening. And because of this cyber attack, now the cyber -- GlobalWafers now is building a more potent and resilient IT infrastructure now to strengthen our group cybersecurity. So that's the status of our GWJ cyber attack, which just happened very recently. This is the first question. And the second question is that I was requested to describe the overall silicon wafer market condition in 2021 and 2022 and overall supply and demand change. I think that right now, the demand -- overall demand remains very healthy, very good. And the supply is still very tight. Basically, it's still very tight so insufficient supply of some specialty semiconductor products. For GlobalWafers, our capacity in 2022, 2023 and 2024 are basically sold out. Most of our brownfield capacity, which is under expansion right now, are almost sold out covered by LTAs. So the demand right now for 300-millimeter and 200-millimeter are extremely strong. We still cannot support all the volume requested by our customers. But the small diameter, 150-millimeter and below, the supply/demand is now easing a little bit. So it's not as tight as last year. That's current status, but still pretty healthy. That's the current -- the status of supply/demand right now. And the next question is, how about the ASP of 2022 versus 2021? We are still seeing some ASP improvement for 2022. But the actual percentage is confidential based on our company policy. But in general, 2022 ASP is better than 2021. Next question is that, how about our Russian-Ukraine war impact to our operation? I think I have already made some brief explanation when I made the management comments. But here, I will bring a little bit more details. GlobalWafers, we have 3 operations in Europe: 1 in Denmark, 2 in Italy. All these European sites are thousands miles away from Ukraine, so basically, security-wise, we're okay. And also for wafer supply -- or the chemical supply, material supply, so far in our European operations, we're still okay. And we don't receive any -- we haven't received any requests from any of our customer to cut down our shipment or push out our shipment for any operation. So, so far, we are okay. But we are envision -- we are seeing the freight and energy costs increase a lot in Europe. That's what we are seeing. So -- okay, so that's the Ukraine update. And next question is about our on-hand prepayment status update. Our -- as of end of 2021, we have TWD 1 billion prepayment balance. In 2022, January and February, these 2 months, we see the increase as well much higher than -- still higher than end of 2021. So this is our prepayment status. I'm talking about net prepayment balance. So it means that everyone will still have to repay some prepayment to our customers, but we will receive new prepayment as well. And the net prepayment balance keeps increasing. Okay. Next question is about the gross margin. Why Q4 gross margin hit our record high, 41.3%? What's the reason? The main reason is because of higher ASP and better product mix in Q4 last year. That is the main reason. In 2022, we think that the gross margin will keep improving. Of course, as I explained earlier that there are some downside risks, including geopolitical. That maybe will change our cost structure. But so far, it looks like that 2022, I think, our gross margin will very healthy as well. And next is that how is our interest expense affect our earnings? I think this one, we received a lot of questions about this one. Basically, our interest expense, for example, our interest expense, such as our ECB, actually, this interest expense will be recognized in each quarter going forward. That is a noncash accounting item because for ECB -- for our ECB, which is USD 1 billion, the ECB interest rate is minus 0.25%. So there is no real interest payment for ECB. So the only interest we have to pay is for our core bond. That's the only interest we need to pay. And this core bond interest rate is around 0.5% to 0.62% per year. So our interest expense is pretty low. Overall, our interest income is far higher than our interest expense. So our interest has no impact to our earnings. And next question is, what is the foreign exchange gain and loss for our Q4 2021 and the whole year 2021? What's our real -- the actual results of our FX gains/loss? Here is the summary. In Q4 2021, our FX gain was TWD 64.5 million and net hedging costs and loss, TWD 128.7 million. So resulting our net foreign exchange loss in Q4, TWD 64.2 million. That's our Q4 net FX loss, TWD 64.2 million. For the whole 2021, our accumulated foreign exchange gain -- net foreign exchange gain was TWD 48.5 million. So in short, our 2021, the whole year, our foreign exchange is positive, which is TWD 48.5 million. Okay. And next question is about U.S. dollar is now turning strong again and NT dollar depreciates -- while NT dollar depreciates. Please, illustrate the impact it is on our ECB. Okay. That's a very important question, that there is no impact to our NTD-linked ECB since GlobalWafers has fixed our NT exchange rate at 27.912. That's our term for our ECB. So no matter how the FX volatile, basically no impact to ECB. And the next question is that, will we try -- how are we going to try to lower our debt ratio? Our debt ratio, if you look into our financial result, I think you will see that our debt ratio is very high. For year 2021, our debt ratio is around 70%, which is 17% higher than 2020, our debt ratio. This increase is mainly resulted from several factors below. One is that, because of high prepayment income. Whenever we have prepayment -- we receive any prepayment, we have to recognize as a debt as well, is a prepayment, high prepayment. This is one of the reason. And the second reason is because of our core bond in August. And the third factor is because our share dividend payable in December. We recognized share dividend payable in December, which was for first half 2021's earning. And we have already made the dividend in Q1 actually in February last month. So our -- that's the main reason of our high debt ratio. So our debt ratio is expected to decrease from Q1 2022. Although the debt ratio is relative high compared with GlobalWafers' past record, but our cash on hand is very high as well. We have around TWD 65.9 billion on hand. And our current ratio and quick ratio, both of these 2 very important financial in debt surpassed 250%. So this means that our -- really, our debt -- our overall financial status is very healthy. And as I just explained a minute ago that actually our interest income is higher than our interest payment for the bank for all of our debt. So actually, although our financial -- while our debt ratio is high, but our overall financial status is very healthy. But -- although we are still very healthy, but we still have our plan to gradually bring down our debt ratio as well. This is our point. So that's all of the key questions I received from the investors and shareholders. Thank you very much for listening. And I think we can open our Q&A now.

Sure. No problem. Thanks, Doris and William. Let's begin the Q&A session. [Operator Instructions] Operator, could you give the instructions?

[Operator Instructions]

So maybe let me kick off with 2 quick ones. So #1, if we look at your blended ASP, will there be a few quarters that we may see more meaningful price increase given more LTAs kicking for this year?

Price increase, yes, this year, we will have, yes, because there will be some -- several new LTAs kicking this year so our ASP will be better than last year.

Right. So looking at maybe the schedule of your LTAs. Should we expect more LTAs to come in first half or in second half? Just want to get some sense on your quarterly price increase. Will there be more meaningful in first half or second half?

Yes. We have some gradually. I think, for example, starting from Q2, that's the start of the Japanese fiscal year, so we have some new LTAs from Q2 as well. So I think that it's pretty flat. I think it will increase gradually. But I don't think that -- I think Q -- maybe H1 would be a little bit -- the percentage of the increase will be much higher than second half.

Got it. And my second question is on greenfield. So any update on the location? And then how's the engagement for LTAs for greenfield? How is that progressing so far?

We haven't decided the location yet, but we will make the final decision within a couple of months. But our sales team are working with our customers on the LTA. Some of the LTAs are maybe will be finalized very soon, but many of them are still under discussion. So far, we see -- we are seeing very strong interest from our customers to sign the LTA with us. For brownfield, basically, all -- almost all of our brownfield capacity have been finalized. And here for a specific customer, we have finalized most of the LTAs for brownfield capacity. But for greenfield, we just started from February 6. So we haven't finalized any LTAs for greenfield yet, but some of them are very close to final signing now.

Got it. So I guess our previous target was to finalize this greenfield expansion by end of March. So there seems to be some delays. Is that because of equipment lead time or the other factors?

No. At the very beginning, we set the target to decide the location by end of March. And now maybe we'll delay a little bit, that's because of we have several candidate location and those governments are very supportive. So we are checking some details of -- some special financial incentive package. So we need to figure out at which site in total is more beneficial for us to run our greenfield locations. So it's more the package comparisons of -- from these different candidates. It has nothing to do with the customer discussion or equipment discussion. Equipment discussions are -- we are doing the equipment negotiation discussion with vendors in parallel, so no delay. So we will -- we are -- we also -- we have already issued some POs to our vendor -- to makers. So the only thing open is that they need to know. They don't know at which location we are going to ship the tool. It's been -- so no impact towards discussion to a PO releasing.

Got it. Thank you, Doris. In the interest of time, operator, could you take just one question from the line?

Absolutely. It is coming from Donnie Teng.

Can you hear me?

Yes, Donnie.

My first question is regarding to your new share issuance plan. Because I remember, in February, you previously mentioned about that not yet considering GDR or new share in issuance. But today, I think we have a plan there. Just wondering, what has been changed in the past one month? Any rationale behind? I know we have some explanation in the announcement, but just curious if that's necessary that we need to issue new shares. And as you just mentioned, our cash on hand and also we still have Siltronic stock, it looks like we have quite strong cash on hand. So maybe is still able to support the CapEx plan for the coming years. So just want to justify the new share issuance plan. This is the first question. And second one is a housekeeping one. I think OpEx ratio in fourth quarter was like over 10%. So just curious if that's abnormal. And if that's abnormal, what will be the normalized OpEx ratio into 2022? And also, could you give us some color on what kind of gross margin trend in the coming quarters and maybe coming year?

Thank you very much for your question. Thanks for -- especially for the first question. Thanks for raising that question. I forgot to explain. Yes, nothing changed. We are not going to have any GDR or issuing any new shares for our expansion or greenfield, brownfield. As you said, we have enough -- sufficient cash on hand and also we have -- we generate cash every month, every quarter. So we don't need to have any cash, new shares to raise the cash needed for -- to fund our annual -- brownfield or greenfield. . And the reason we put it here today is because, Donnie, if you remember, actually, GWC every year in our AGM we will put these terms, this specific project every year because in Taiwan you always have to get AGM approval, shareholder approval for this. So we -- in order to keep the flexibility, so we will have these terms when -- if -- in the next 12 months, if we have any new demand, new target for any special project, maybe we'll need a GDR. And at that time, we don't need to have another AGM again because we already have a fundraising proposal already approved by our shareholders and we can -- of course, with the named amount. So that's what -- that's our very typical practice. And if in the next 12 months, we don't need any -- we don't need to issue any new shares at all, then next year, before the AGM, we will just cancel that deal. That's our typical practice. So if you remember that last year AGM also we had this term. And now we will cancel -- we didn't do anything in the past 12 months at all. So that's -- thanks for the question. And let me clarify that, that's the point. So there is no need for us. We don't see any need for us to issue new shares to raise any funds. But in the next 12 months, if anything, could target pop up, then we will immediately have the financial capability to move very fast. So this is the answer to your first question. And the second question, for the high OpEx, I think that is abnormal in Q4 because we pay -- that Q4 was -- we had a lot of discussion, a lot of activities for Siltronic project. So we had quite a lot of one-off expenses for lawyers, for advisers and for some special fee for that project. So that's not our standard OpEx level. Our standard OpEx level, I believe, that remains in the 8% level. That will be still the range like what we did in the past so many years. So that's abnormal -- that was abnormal this -- in Q4. And the third question is about gross margin trend. It's a little bit hard for us to predict what will the trend look like. I think in general, we know that ASP is improving, but at the same time it seems that energy cost is increasing as well in many countries. And it seems that quite some chemical and some material costs are increasing as well. And it's -- also, foreign exchange volatility is totally very hard to predict. And the freight cost is increasing for some specific lands. Especially to Europe, the transportation cost is getting higher and higher. So that's why it's very difficult for us to predict that how this trend will look like, the gross margin trend will look like. But in general, I think that we will have a good gross margin. Our performance in Q4 last year -- better than Q4 last year. Thank you very much. That's my question for your 3 questions -- my answer to your 3 questions.

Okay. Thank you very much. Because of the time, let's wrap up here. Thank you all for joining the call, and thanks again to Doris and William. Thank you, and take care.

Thank you very much. Thank you, everyone. Thank you. Bye-bye.