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

Dear ladies and gentlemen, welcome to GlobalWafers First Quarter Earnings Conference Call. This is Haas Liu from Credit Suisse. Joining us today from GlobalWafers is Chairperson, Doris Hsu; and IR Manager, [ Leah ]. Doris will start with some prepared remarks with -- and Leah will provide more detail, and then we will follow by the Q&A session. Doris, you can go ahead. Thank you.

Hi. Thank you very much. Thank you very much, Haas. Good afternoon, ladies and gentlemen. Welcome to GlobalWafers Q1 2022 earnings call. This is [indiscernible] spokesperson [Technical difficulty]

Hi, Leah. I think you're muted.

Thank you very much, Haas. So good afternoon, ladies and gentlemen. Welcome to GlobalWafers Q1 2022 earnings call. This is [indiscernible] the deputy spokesperson. We also have Doris Hsu, Chairperson and CEO of GlobalWafers in this call. Today's call will be started with executive comments by Doris followed by my brief summary of the industry overview and the financial performance. Regarding the Q&A section, Doris will answer the questions we recently received first, then address the online questions rest in the call. Please visit GlobalWafers website for today's presentation and kindly note that some information during our discussion today will consist of forward-looking statements, which are subject to significant risks and uncertainties. Actual results or trends could differ materially from our forecast. Please refer to safe harbor notice that appears in the Page 1 disclaimer. So please allow me to hand over the call to Doris for executive comments. Doris, please.

Hello. Good afternoon, ladies and gentlemen. Sorry for some technical problems, so delay 1 minute. Good afternoon, everyone. Thank you very much for joining GlobalWafers' earnings call of Q1 2022 business stories. Our spokesperson, William Chen, he is not available to join us today for his personal matters. But Leah Pen, the deputy spokesperson, will guide us through the presentation material today. First of all, let me share some comments of our overall performance in Q1 2022. And also, I will update our operation status as well. If you have the material, please move to Page 2. Let me start from some financial highlights. In the first quarter of 2022, our revenue is TWD 16.3 billion, which is 10.1% Y-o-Y. This is a record high for us. What's even better than this is that our growth momentum has been lasting for more than 2 years, starting from Q1 2022 -- starting from Q1 2020. So it's over 9 quarters of sequential growth. I think this is quite remarkable considering all of the headwinds like the pandemic, the rising commodity and transportation costs and also quite a lot of geopolitical tensions in many regions. This is a good quarter, good performance on revenue. And for gross margin and operating profit, we are doing pretty well in Q1 as well. In Q1 2022, our gross profit margin hit 42.6%. This is a sequential growth since Q2 2021. And also our operating profit margin reached 36.1% as well. Operating profit of 36.1%. So both of these 2 profitability index, gross margin, 42% and operating income, 36.1%, both of these 2 are our record height. And then let me move to EPS. Our Q1 EPS is TWD 4.01, TWD 4.01. Although our Q1 2022, our overall performance is quite strong on revenue and also gross margin and operating income, and we also broke a lot of historical highs. But our GWC EPS in Q1 was not as good as previous quarters, which is mainly due to the mark-to-market loss on Siltronic shares we are holding now, which eroded our EPS by TWD 10.6 -- TWD 10.67 per share. If we exclude the valuation loss of Siltronic shares, our Q1 EPS would have amounted to TWD 14.68 per share. So we got a huge mark-to-market loss on Siltronic shares we're holding. I will share more details of our overall EPS impact of our Q1 in the Q&A section later on. Okay. So next item I would like to share with everyone is the prepayment status. We continuously have further increased on our prepayments from our new LTAs in Q1 2022. At the end of -- as of end of March 2022, our prepayment -- net prepayment amount has already reached TWD 33.1 billion, TWD 33.1 billion. This is very close to USD1.2 billion. This increasing by 15% compared to the end of 2021. So in 1 quarter, we increased 15% prepayment and our net prepayment balance right now is TWD 33.1 billion. This is all-time high prepayment -- net prepayment all-time high for GWC. And today, we also announced our cash dividend payout -- payment plan for the second half of 2021. And we resolved to distribute a cash dividend of TWD 8 per share for the second half of 2021. So total dividend payout for the second half 2021 is TWD 3.48 billion. For the whole 2021, the annual cash dividend is TWD 16 per share and the annual payout dividend is TWD 6.96 billion. I will elaborate the strategic rationale later on in the Q&A section for our dividend payout. Next is the outlook of semiconductor industry. Though the uncertainties in the world economy, the strong momentum in semiconductor industry -- strong momentum in semiconductor industry is still -- is less driven by long-term mega trends such as 5G, EV, AI, server and cloud. All of these will consume much more semiconductors than before because of the increasing silicon content. The outlook for semiconductor industry looks still very bright, notwithstanding the potential short-term volatilities due to supply-demand mismatches as well as changing macroeconomics and geopolitics. Also, we keep monitoring the impact from the Ukraine crisis very closely as well. The ongoing war will further increase the economic risk. But so far, no order reductions have been seen from GlobalWafers. We are still fully loaded, and we are still working on the LTA discussions with our long-term customers right now. So GlobalWafers, we closely monitor the evolvement and corporates with customers very closely and timely. We also have built multiple vendors to diversify the risk long before the crisis. So, so far, no particular impact on our operations from the Ukraine crisis. And next, I would like to update a little bit about our view on the automotive and wide band gap semiconductors. This year, I think global automotive production will cut maybe as much as -- maybe several million or even 10 million to 11 million vehicles due to logistics, supply disruption and shortage of critical vehicle components. But EV is still scaling up backed by government stimulus package to ensure a very smooth pathway to net 0 carbon emission. So there will also be robust demand for compound semiconductor, not only for EV vehicles itself, but also for the infrastructures such as the charging stations and of course, a lot of onboard charge in the vehicle. So we are seeing very strong demand for compound materials, including wide band gap semiconductors like gallium nitride, silicon gallium nitride, silicon carbide or silicon carbide. Next, I would like to update our China lockdown status. GlobalWafers has an operation in China. It's located in Kunshan, Jiangsu province. Our production has been suspended during -- from April 2 to end of April, basically the whole April. It's almost a very, very limited production due to local government and zero COVID policy. However, with our GlobalWafers group comprehensive shipping channels and flexible allocation, GlobalWafers responded this crisis with agility and minimized the impact on our customers. There is no material impact on finance and operation due to the China lockdown for our consent operation, owing to it ways our Kunshan operation ways less than 5% of GlobalWafers group consolidated revenue. So basically, we are resuming our production in Kunshan gradually now. That's our current status. Last but not least, I'm very glad and proud to announce that GlobalWafers is once again awarded as the top 5% corporate core governance evaluation among all Taiwanese companies for 4 consecutive years, demonstrating GlobalWafers continuous -- improve our corporate governance. The above are my comments. And next, [ Leah ], please share more on the industry outlook and financial performance with the team. Thank you very much.

Okay. So thank you, Doris. Let me begin with the global GDP growth forecast in Page 7. IMF has downgraded 2022 GDP growth twice in a row because of the prolonged Russia and Ukraine conflict. The latest world growth forecast is 3.6%, down by 1.3% from last October. In Page 8, despite of the pressure on world economy, semiconductor industry, which serves as infrastructure, carrier for innovations, bridge for connectivity, the most important emotional needs in the era of dynamic, it's still robust and solid and is anticipated to be a $1 trillion industry by 2030 at 7% CAGR, driven by computing storage, wireless communication and automotive electronics. Page 9 shows 2022 is projected to be a very strong year for semiconductors as well. The average growth rate is 9.5%. In Page 10, the world turbulence reinforces the code to reship supply chain, stressing the necessity of local or regional supply. One of GlobalWafers unique features is its global presence, which strategically locates every major semiconductor players, favorable for timely response with allocation flexibility, hoping to mitigate geopolitical tensions and the micro instability. Page 11 is EV forecast, which will register substantial gains with net-zero emission policy support. Also, the price gap between EV and the internal combustion engine cars will narrow over time with increasing fuel price and the decrease in battery costs, which in turn will drive strong demand for wide-band gap semiconductors, such as SiC and the GaN. These are our key products. Let's move on to Page 12. Apart from electrical vehicles, the rising levels of autonomous driving will augment chip market revenue and will wait 93% of automotive chips in 2030. Page 13 demonstrates 5G megatrend that is already live in many geographies market red in this world map. This broadening adoption coupled with immense capital expenditures in mobile networks and the peripheries upgrade will consume high value wafers and the scale will expand further in the future. In Page 14, silicon carbide's compact feature is very suitable for inverter, particularly ideal for renewable energy. Surge in oil price and the backdrop of Russia and Ukraine war reveals the criticality of building a resilient energy system. SiC market will be exuberant with 2 pillars. The first one, electrical vehicles, as previously mentioned. The second one is the ultimate driving force to combat the climate change. As a result, SiC market will grow further with the storing capacity additions led by solar and wind. So now let's move on to our financial performance in Page 16. GlobalWafers has contributed a remarkable Q1 considering all the headwinds in the world. Our Q1 '22 revenue grew 10% compared to last year, achieving TWD 16.3 billion. Gross margin is 42.6%. Operating profit margin amounted to 36.1%. These are our best ever. However, as Doris previous comment, EPS has decreased by 10.67% due to Siltronic shares non-cash mark-to-market valuation without overseas earnings distribution, the reversal of deferred tax liability generated TWD 3.79 in EPS. GlobalWafers current Q1 '22 EPS is TWD 4.01. However, the EPS would have climbed to record breaking TWD 14.68 if the Siltronic share valuation is excluded. Regarding ROE, fewer net profits coupled with higher shareholder equity, which is mainly due to the capital surplus recognized from equity component of convertible bonds, causing a relatively low ROE at 15%. Similarly, the increasing cash position by corporate bonds and LTA prepayment with fewer profits brought above the 3.5% ROA in Q1 '22. The chart in Page 17 shows the sequential growth of revenue and gross margin. Revenue trends up since Q1 '20, and the gross margin has also increased starting from Q2 '21. Page 18 is our EBITDA and EPS. Q1 '22 EBITDA is $1.8 billion, with margin at 11.1%. If excluding Siltronic share valuation, EBITDA would have become TWD 7.3 billion with nearly 45% margin and EPS would have been as high as TWD 14.68. These are all our best ever performance, and will be further elaborated by Doris later. Next page is our income statement and the balance sheet for your further reference. Now I would like to give the floor to Doris for the Q&A section. So thank you, Doris. Please.

Okay. Okay. So this is Doris again. As always, let me start from the questions -- answering the questions we received in the past several hours and the last couple of days. Okay. The first question we received is that the GlobalWafers has contributed a robust 1Q 2022 in terms of revenue, gross margin and operating income. But EPS is as slow as TWD 4.00. Please explain the reason for this low EPS. Well, let me explain our EPS this time, this month. I think we have a very good Q1 operation result, but we have 2 non-operational factors, which affect our final EPS. And these 2 non-operational factors are: one is positive, one is negative. Let me start from the negative one. The negative factor non-operational factor is the impact from Siltronic, the shares we hold from -- we're holding for Siltronic shares. This is an unfavorable non-cash mark-to-market valuation on Siltronic shares. We currently -- we are holding 13.67% shares in aggregate. The -- this shares investment has been recorded as non-current financial assets at fair value on our financial statements, income statements. So as at the end of Q1, Siltronic stock price was very low and also the fluctuation of euro against NT dollar. This exchange rates, both of these 2 factors, the stock price and the FX exchange rate resulted in a loss of over TWD 6 billion loss for only this non-operational factor for Siltronic shares only. We had -- we suffered -- we have lost over TWD 6 billion. And by this loss, non-cash mark-to-market valuation loss, this lowering our EPS by around TWD 10.67 per share. So this is a big hit for our Q1 EPS. Consequently, our Q1 2022 EPS is very low. So if we -- if there was no Siltronic, if we exclude Siltronic mark-to-market valuation loss then our Q1 2022 EPS would amounted to TWD 14.68 per share. And this is our first factor, first non-operational factor. As I said, this is a negative factor to our EPS. And another non-operational factor is our -- if you check our Q1 core income tax, you will see that that's a big positive number. And this one is because that our Japanese subsidiaries, [ GW and MJL ] our Japanese factories operations have already kicked off the expansion project we announced months ago. So that project is now ongoing. And the return -- retained earnings -- the retained earnings of [ GW and MJL ] is still kept in Japan without distribution back to the parent company. So pursuant to IFRS principle, we have to reverse the deferred tax liability based on no dividend distribution of our Japanese operations earnings. This one, this reverse, this deferred tax liability reverse contributed to our EPS by TWD 3.79 per share. So this is a positive impact to our EPS. So we had the 2 big impacts in Q1. The negative one is from Siltronic, which is as big as TWD 6.67 per share. And we have also, we have a positive impact from our -- the reverse of our deferred tax liability, which is TWD 3.75 per share. So that's my explanation. That's my elaboration for our EPS share -- EPS performance in Q1. The second question is about dividend. Compared to previous -- the question we received was compared to previous high payout ratio, GlobalWafers proposed TWD 16 per share for 2021. This is not as high as the past few years. So could you please share with us your rationale? I think GlobalWafers has maintained a very strong cash generation with over TWD 20 billion -- over TWD 20 billion EBITDA year in average. Although we maintain very strong profitability as usual, by strategic adjusting down the dividend payout ratio, we could retain more cash on hand at much lower cost for our huge ongoing expansion projects. Please note that the global type of rising interest rates is coming. So we are empowered to pursue future growth, future growth planned by CapEx in view of the industry uptick. So that's why because of the -- because of the high expansion projects, high CapEx for our ongoing expansion project, we have to reserve a little bit more cash on hand to fund of those expansion projects. That's why we make our dividend payout for 2021 slightly lower. But even this is a little bit lower, but such payout ratio is still inconsistent with the semiconductor peers. The dividend payout rate is still higher than 58%. So that's our answer for the dividend question. And the third question is that seeing the rising global interest rate. Okay, sorry. The third question is seeing the rise in global interest rates while GlobalWafers step ratio has increased to close to 70%. So please advise if this will cause unfavorable impact on interest and hinder your future operation, that's the question we received. Our debt ratio in Q1 2022 is lower than last year, but still very high, it's 68%. Our Q1 debt ratio is 68%. This is 2% lower than 2021, but maintains a relative high level compared to our past record. Our past record is always around 50% our debt ratio, but now it's 68%. Although the debt ratio is relative high compared to GlobalWafers past record, but the cash on hand is higher, is very high as well. As of end of Q1, our cash on hand is as high as TWD 65.9 billion. Our -- both of our current ratio and quick ratio surpassed 250%. So we are very strong and very solid in our overall cash position in which majorly weighted by deposit, our financial structure remains very solid, and this is also reflected in Taiwan credit rating, which states that the very recent rating stays that GlobalWafers improved capital structure underpins the strong rating, TW -- AA- in February 2022. We received this rating in February 2022. So we are still very stable and strong, very solid financial -- finance structure. The debt. Our debt, 68% of our debt ratio, but the debt is mainly composed of prepayment, which is TWD 33.1 billion and ECB, this is TWD 27.9 billion and corporate bond, which is TWD 19 billion. So these are the main components of our debt because for prepayment, we received huge TWD 33.1 billion prepayment bid on our balance sheet, prepayment is a part of our debt as well. So with very low interest rates, these financial measures, for example, our ECB, our ECB interest rate, actually, our interest rate was negative -- is negative 0.25%. And our corporate bond interest rate is as low as 0.5% to 0.62%. So our interest rate is extremely low, coupled with the accumulated cash from the lower dividend distribution. I think we will have a strong leverage insulating from the rising fund cost -- funding cost and empowers GlobalWafers to expand our operations and build our long-term competitivity with very manageable capital cost. If we -- excluding prepayment, as I said earlier, prepayment is a part of our -- is recognized as step as well. So if excluding prepayment, the debt ratio, GWC debt ratio would drop to 59%. Also, GlobalWafers holds abandoned cash on hand. If we include restricted cash from repatriated offshore funds, then our total cash on hand is as high as TWD 74 billion as of end of Q1. So TWD 74 billion cash. If we deduct the bank loan, which is TWD 6.4 billion and corporate bond, which is TWD 19 billion, and we deduct a prepayment, TWD 33.1 billion, and also we deduct ECB, which is around TWD 27 billion, then the net debt is reduced to just around TWD 10 billion. So it's very low. Our net debt is very low. It's just around TWD 10 billion. And as I said earlier, that GWC EBITDA is, in average, our EBITDA is around TWD 20 billion. So if our net debt is only as low as TWD 10 billion, I think our overall financial structure is very solid, very strong. So from net debt to equity, you can see that our net debt to equity is as low as 0.23%. So our overall financial structure is very strong. And that's -- the fourth question is about China lockdown. China government -- the fourth question is the China government has imposed a series of zero COVID lockdown measures in an effort to quarantine the outbreak of COVID-19. GlobalWafers Chinese subsidiary located in Kunshan, Jiangsu, the outer of Shanghai and was also locked down since April 2. Please elaborate the impact to GlobalWafers. Okay. Here is our update for this one. So far, the impact to GlobalWafers is not significant. First of all, SSC, the Chinese subsidiary of GlobalWafers in China has shipped out most of the finished goods by end of March. So no influence on the consolidated revenue for Q1 revenue. And the main challenge is the limited workforce and lack of chemicals, which are under strict safety rules on daily storage volume due to the lockdown measure. So we also take advantage of the comprehensive sales and production channels to flexibility allocate to minimize the impact. So that's our China lockdown update. The fifth question we received is that there are so many headwinds such as rising interest rates, spike in freight and energy cost, plunging stock market, COVID-19 spread combined with automotive production cut and slowing down in smartphones and notebooks, all of these are very critical headwinds at the same time. So the question is that please advise if GlobalWafers see any signs of customers' inventory correction and any demand change in terms of wafer sizes and applications. Okay. Here's our answer. Undoubtedly, rising energy costs and interest rates play a damper on all of our business. Nevertheless, we are not yet seeing demand pull back from any of our customers on an overall basis. There is some unevenness in the market with customer -- consumer demand slowing. For example, smartphone and notebooks. Those are slowing down a little bit while the automotive, industrial and server markets continue to be very hot. So the conclusion is that, so far, although so many headwinds, so far, all of our production lines are fully loaded and customer demands -- customer demands remain pretty strong in general. So except those weaker one, but we have some harder demand, stronger demand to take over the overall capacity. So all of our lines are still very strong. So, so far, no order cancellation or push out from any of our customers. That's our answer to the fifth question. And next question is that per the previous earnings call, GlobalWafers forecasts a very promising 2023 to 2025. Please illustrate if you still maintain same positive projection despite of the recent headwinds. Yes, I think that here is our answer. We still see very strong demand, especially for 200-millimeter and 300-millimeter and also for compound. For 2022, customer fab capacity is forecasted to have a second year of unprecedented growth greater than 8% with the fab utilization rate greater than 93%. So, so far, our view for 2023 to 2025 remain unchanged. Next question is LTA. The question is that please advise if customers are less willingly to sign LTA more hesitant to sign LTA under such a volatile world circumstances. Have you closed any new LTA with customers recently? These are the questions, and we received so many investors asking for the same question, the LTA question. So let me answer it together here. With each passing week, we continue to sign to keep working with our customers for new LTA, and we continue to sign new LTA, new customer LTA contracts, especially on larger diameter in advanced products with 300-millimeter being our customers' primary target. Please note that if you check our financial statements from the net prepayment amount, you can see that you can see that our prepayment keeps increasing month by month in 2022. So our current prepayment is around 15% higher than end of 2021. So the answer to your question is that we are still -- our customers are still positive and they are -- we are still -- we keep finalizing LTAs with our customers even in Q1 under so many headwinds environment. Okay. And the last question I want to answer here is about the CapEx. GlobalWafers announced CapEx plan in February. Please update the current progress. If there are any difficulties in construction or delay in ramp-up schedule after experiencing the aforementioned headwinds. Okay. We are having our brownfield expansion. We are having brownfield expansions in Taiwan, American, Italy, Korea, Japan and Denmark, these 6 countries, 6 operations. And the common and major headwind is the too early time. We are experiencing much longer, too early time than before. Most of our brownfield projects are still, although the too early time is getting longer. But most of our brownfield projects are kept on schedule because we have already placed the long lead time tours earlier. So basically, most of our brownfield projects are okay, schedule-wise. But some expansion projects will delay a little bit by around 2 quarters due to a couple key tools delay. We are still working on the negotiation with our -- to our vendors. But so far, it seems that some key tools lead time is still longer than our original expectation. Even we place [indiscernible] still delayed the lead time a little bit. But it's just some of our expansion project. Most of our brownfield expansion projects will be kept on schedule. The worst one, the worst one will delay around 2 quarters. That's the current status. But we are still working very actively with our customers and customers and vendors, we try to mitigate the delays as best as we can. And also, we try to work with our vendors, try to mitigate the impact from the long lead time as well. That's what we are seeing. Okay. So -- okay, by the way, actually, I missed the last one. The last one is about greenfield. The last question is greenfield. GlobalWafers, we announced -- we previously announced the expansion consists of both not only brownfield, but also greenfield investment. Please update the status of our greenfield. Are we going to -- or is GlobalWafers going to postpone the greenfield expansion or scale down? How about the location of your greenfield expansion project? Here -- here is the status. As we have reached the limit of our brownfield capacity, so greenfield is our only remaining expansion alternatives. So we will keep working on greenfield. But consistent with all of our sales strategy, we will continue to increase our capacity. But definitely, all of our capacity will be linked with LTA and customer commitments. So we will not make an expansion if we cannot secure the LTA with very strong firm commitment with customers. So, so far, customers' commitments -- customers still hold their commitment, customers are still willing to sign LTA with us. So we keep doing our greenfield on schedule as our original plan. But regarding the location of our greenfield project, our original plan is to finalize the location and finish our site selection by end of April. But we are at the final stage of our overall site selection discussion and analysis now of our several candidate locations. We still have several candidate locations. As I said last time, the decision for our site selection, mainly rely on 3 factors. One is customer location. We -- I hope that our new location will be close to our customer. And the second is that the competitiveness of that location, the total competitiveness of the location, including power, labor force availability and overall environment, the ecosystem. And the third factor is government support. So we need to have -- we need to -- we are working on -- we are working on the final calculation and analysis of all these 3 factors with the candidate locations. So that's why -- that's what we're -- that's why we are not able to finalize -- to announce our final location to date. But I think that the final decision will be made in 2 months in order to keep our expansion on schedule, we keep placing POs for our production tools right now. But the location is still -- is not finalized yet. But it's in parallel, we are doing the site selection calculation analysis and check all the competitiveness. But at the same time, we order the tours. The tours orders, no matter which location we choose, they can just ship to the right location. So no conflict. So that's our update of the greenfield. And that's all of my presentation, my FAQ now, and I would like to open the Q&A section now. Thank you very much.

Thank you, Doris, and [ Leah ] for the details. We are now beginning the Q&A session. [Operator Instructions] And maybe I can start with a few questions. So Doris, regarding the supply and demand and pricing environment, with slower demand for some tech and markets, as you just mentioned, could you rank the relative strength and weakness for [indiscernible] by diameter?

Thank you, Haas. Thanks for your question. Yes, the strongest one, the strong demand-wise, strongest one is still 300-millimeter or all kind of 300-millimeter, including 300-meter epi-wafer, 300-meter SOI, 300-millimeter polished wafer. So number one is 300-millimeter. And another also, I could say that as strong as 300-millimeter is compound. So compound demand is just -- is very strong. When I say compound, I mean that silicon carbide and gallium nitride, also these 2 are very strong. But as I said, that our revenue for compound is still very low. So the strong demand for compound will not really contribute too much to our revenue for now. But starting from next year or the second half of this year, we will see more revenue from compound. So this is the second one. The third one is 200 millimeter. When I say 200 millimeter, this covers not only CZ 200-millimeter, but also flows on FZ 200-millimeter. The demand for 200 millimeter of flows is extremely strong. This is the strongest ever, I've ever seen for flows on 200-millimeter. So we will have a big expansion for 200 millimeter. That's one of our big brownfield expansion as well. The weakest one, no doubt, definitely, the small diameter up to 6-inch, that's the weakest one. But quite some of our 3 6-inch small diameter wafers are for automotive components. So our small diameter in general, our small diameter production lines are doing still okay. But you can -- it's very obvious that the demand for 300 -- for small diameter is not as strong as 200 and 300 and compound.

Okay. A quick follow-up on the long-term supply. With multiple greenfield fabs running from 2024, do you think you're growing brownfield capacity and also using industry supply from 2024, well probably further push out your progress on the greenfield investments from 2024 to 2025. And also, what is the current progress on LTA negotiation with the customers on the greenfield? Do you think it takes slower than expected to secure sufficient commitment from the customers?

Yes. Most of the -- most of our tools will be available by -- 20 in 2024 -- mid-2024. But I think that maybe our greenfield, our brownfield is totally fine, most of the brownfield are okay. For greenfield, maybe it will be a little bit late. Maybe it will be 1 quarter delay, 1 quarter to 2 quarter delay due to that -- for 2 reasons. One is that the too early time is longer than our expectation, longer than the brownfield. We ordered the tools for brownfield earlier. So at that time, the lead time is not as strong as what we are seeing today. So this is the first reason longer lead times for tools. And the second reason is that because we finalized the site selection a little bit late, so some of the customers we are checking that we need to figure out that how -- what will be the impact of carbon emission and the schedule. So it's -- that's one of the reasons that we are collecting the LTA, we are finalizing LTA a little bit later than longer than before. But for the LTA, we see very strong willingness from our customers to sign LTA with us, but we are still negotiating with our customers for the greenfield. So it's still -- we just started a greenfield negotiation, LTA negotiation, just starting from March. So we are still working on this.

And my second -- quick second question is about the profitability. Your gross margin has been improving to 40% levels, while operating margins also saw a nice jump to mid-30% levels in first quarter. Although it might be a tough compare due to different business factors to consider. But would you think your gross margins can match the levels seen by foundries at high 40% levels in the current positive price environment? And maybe you can also guide your OpEx for [indiscernible] since you are making a lot of efforts on the expense control.

Yes, I think for gross margin, I think we have some room to improve our gross margin. But it's very hard to predict that how much we can reach for several reasons. Because first of all, I think the energy cost and freight costs keep increasing. And we just don't know that when those logistic costs or -- and energy costs will be back to normal. We have no idea about this. And also FX fluctuation is much bigger than what we are -- what we -- I think in the last several months, the FX fluctuation is huge. And it seems that will be -- this kind of situation will be lasting for a while. And the third reason that is hard to predict is that because of the carbon emission, the net zero goal by almost every country in the world, I think more and more countries will start, will have to pay a carbon fee or carbon test, and this fee maybe will increase year by year. And so far, it's very hard to predict that how much we have to pay. And you know that for the semiconductor industry, especially for [indiscernible] and wafering, I think the whole process is pretty power-intensive industry. So it's hard for me to predict that if we really commit, can reach the same gross margin like foundry or IDM company. That's our goal, but we are still working on this. And of course, when we have so many brownfield, greenfield, we will have a little bit higher depreciation. Of course, our ASP is improving as well. But it's hard to say that if we can really offset all those uncertainties.

[Operator Instructions] I think we have a question from Donnie.

Just 2 housekeeping questions. So first one, I think a follow-up on Haas question because you kind of gave us some OpEx ratio guidance going forward because I'm not sure why the first quarter OpEx ratio was quite low. It's like only 6-point something percent, so like lower than our previous normal level, like 8%. So wondering if you could kindly elaborate more on that.

Okay. Sorry, I missed this question. I should clarify this point a little bit earlier. Actually, our standard OpEx is around 9% -- 8% to 9%. So the reason that Q1 is low is because we have some reverse of our M&A costs. We have some legal expenses and some special advices fee, we made some reserve in 2021. But at the end of January, we know that the deal terminated. And so we calculate that how much is -- what's the actual expenses. So we found that we over reserve some expenses. So we reversed those expense in Q1 because basically, we closed everything of that M&A in Q1. That's why our OpEx is a little bit lower. And that is a part of the main cost.

And the second one is also a very housekeeping question. So you mentioned about like around TWD 10.7 loss from Siltronic stock price volatility. But you also mentioned about around TWD 6 billion loss driven by the stock price. I calculate it is like -- the loss is like $14 EPS. So just wondering if there's anything I missed in terms of the calculation.

Right. Yes, your calculation is correct, but that's not complete. When we have -- our loss from this one is over TWD 6 billion from the mark-to-market. But when we -- if there was no valuation loss, then we definitely we have to pay core income tax, so we have to deduct core income tax. And we have to -- if there was no such loss, we will have a little bit higher employee bonus. We -- this is a whole series of numbers. So if we -- if our profit is a little bit higher than we have 1% more bonus here and there and also we need to pay the tax as well. So that's why after -- when you put all the factors into consideration. So it's not a simple calculation, just $6 billion divided by our capital, it's not like that we have -- not only this, we have to take the test and all the related expenses into consideration. So 10.67% is the right number. If we put all the factors into account. If there was no mark-to-market loss, then our EPS could increase by TWD 10.67.

Understood. Very clear.

With time constraint, Doris, would you like to make closing remarks?

Yes, I would. Once again, thanks for everyone's participating in our earnings call. Appreciate it. Thank you very much. I hope that we will meet you very soon, next quarter. Thank you.

Okay. Thank you so much. Thank you, Doris, and [ Leah ] again, and thanks, everyone, for joining GlobalWafers' First Quarter 2022 Earnings Conference Call. You may disconnect now. Thank you.

Thank you.