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

Good day, everyone, and welcome to GlobalWafers' FY 2022 Earnings Call, hosted by Sunny Lin. My name is Marcell, and I'm your event manager. [Operator Instructions] I would like to advise all parties that this conference is being recorded. And now I'd like to hand over to your host. Sunny, please proceed.

Thank you, Marcell. Good afternoon and good morning, everyone. I'm Sunny Lin, Semiconductor Analyst at UBS. It's a great honor today to host GlobalWafers management for their Q4 2022 earnings release. Now let me hand over to Ms. Leah Peng, who just got promoted to be the spokesperson of GlobalWafers, for opening remarks. Over to you, Leah.

Thank you, Sunny. Dear all, thank you very much for joining GlobalWafers 2022 earnings call. This is Leah Peng, the new spokesperson. We will also have Doris Hsu, the Chairperson and CEO of GlobalWafers. Doris, will guide us through the executive comments, then I will elaborate on the industry overview and the financial results. Doris will answer the questions we recently received from the investors followed by an open Q&A session. Kindly note that this presentation has been uploaded onto our web homepage. If you do not have the file on hand, please access our websites. Please understand that this earnings call contains forward-looking statements. Forward-looking terminology such as believes, expect, may, will, should, anticipate and their update or similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future preferences or events that are subject to a number of uncertainties, risks and other influences. Many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which statements are based and could cause actual results to differ materially from those anticipated by these forward-looking statements. Please refer to the safe harbor notice in our presentation. Now I would like to hand over the call to Doris for the executive comments. Doris, please.

Thank you, Leah. Good afternoon, everyone. Thank you very much for joining GlobalWafers' earnings call of Q4 2022. Leah, our spokesperson will guide us through the presentation after my comments. So first of all, let me share some comments about financial results and update operation status. If you have already downloaded our material, please turn to Page 3, financial highlights. 2022, again, is our best effort year for GlobalWafers. We have notched a record-breaking growth. First our revenue hit a historical high with double digit YoY growth. Our Q4 revenue totaled TWD 18.4 billion with 16.7% YoY. Full year revenue in 2022 achieved TWD 70.3 billion, this is a 15% increase YoY. Our growth momentum has been lasting for 3 years, starting from Q1 2020, which is consecutive growth for 12 quarters. Considering all the challenges in the past 3 years like COVID, supply chain disruption, border control, extreme climate and geopolitical tensions, I think this result is quite remarkable. Regarding to GlobalWafers' gross profit, our gross margin -- gross profit margin Q4 2022 hit 42.7%. In the whole 2022 full year gross margin hit 43.2%. This is a record high for us as well. And our operating profit margin in 2022 amounted to 35.5%. This is, again, an all-time high. Page 4, please. I'm going to talk a little bit about our net profit. We achieved the best quarterly net profit margin at 31.5% in Q4 2022. So in general, our overall revenue, gross margin, operating income and net profit are doing pretty well. And our EPS has been deeply corelated to the mark-to-market valuation on Siltronic shares, which has eroded our profits in previous quarters owing to Siltronic's low share price and very fluctuating share prices. Even though GlobalWafers managed to contribute the best effort in both quarterly and annual EPS, which were TWD 13.31 per share in Q4 and 35, sorry about that, TWD 13.31 per share, that's our Q4's EPS and TWD 35.31 EPS earnings per share, this is our 2022 full year's EPS. If excluding the valuation loss and other nonoperational factors, GlobalWafers' 2022 EPS amounted to record-breaking high TWD 40 per share. That will be a very good number. Okay. And next, I would like to talk a little bit about prepayment amount. As of end of 2022, GlobalWafers' net prepayment amount is as high as TWD 39.7 billion or USD 1.3 billion, increasing around TWD 1.5 billion in Q4. This is a very good number for us, and this is a good protection for us as well. This is our new record as well, TWD 39.7 billion prepayment -- net prepayment amount. Next, please turn to Page 5. Let me share a little bit about industry outlook. Global economy, in general, in January, IMF has raised its 2023 global GDP forecast by 0.2% to 2.9%. This is the very first time the forecast has been revised upward in more than 1 year. As the adverse risk have moderated, IMF sees a turning point for the global economy with growth bottoming out in 2023 and then climbing to 3.1% in 2024. And for semiconductor industry, specifically for semiconductor industry, soft momentum in consumer electronics and oversupply in memory sector has dragged down 2023. However, the long-term prospects are still very bright, the growing 5G subscription, large data storage and new AI applications will together drive healthy growth in the digital economy and support the semiconductor resurgence in 2024. That's our view as well. And talking about inventory, I think in the past several quarters, inventory correction is always a big issue for the whole supply chain. Semiconductor market is entering into a major correction cycle, inventory correction cycle. While the overall inventory index is no longer in shortage, shortage is gone. There are still inventory imbalance with an abundance of consumer electronics and also unavailability of automotive. So still not very balanced now. But inventory correction has been in place for several quarters already. And turning to Page 6, please. I'm going to talk a little bit about compound semiconductor. I think in the past several quarters, Ukraine-Russia is a catalyst for many nations to strengthen domestic energy security, propelling the robust growth of compound semiconductor attributed to its features of low switching losses and high thermal conductivities. Not only EV, matter of fact silicon carbide are widely found in power supply applications such as industrial equipment. So the COVID-19 pandemic and its aftermath have accelerated the future of mobility with profound effects on customers' preferences, technology adoption and regulations. So we believe that in automotive industry, we're expecting continue to seeing disruption throughout the whole 2023. Page 7, I'm going to talk a little bit about our global solution, and those are some uniqueness of GlobalWafers that forge our competitive advantage in the volatile era in the following pages. Page 8, a succession of disruption to world trade have put the reorganization of international supply chain high on the political agenda. The increased risk of interruption of supplies forces business today to pricing political factors and respond to political demands. Luckily GlobalWafers needs not long timeframes to reconfigure supply chains. Our global presence comprising 17 sites in 9 countries across Asia, Europe and America, enable us to -- enable us the rapid responses immediately. So our customer distribution matches the semiconductor Tier 1 players geographically, translating to real-time service and flexible shipments. So that's our uniqueness. We are running our operation in 3 continents, 9 countries, 17 sites. If we add the new site in Sherman, we have 18 sites in 9 countries, 3 continents. Global presence, that's our uniqueness. On Page 9, I want to update a little bit about our green solutions. Climate change is creating many life-threatening disruptions and almost 200 countries have already committed to the 2016 Paris Agreement to limit the temperature rise so as to mitigate or prevent some of the most dangerous effects of climate change. Business across industries are now scrutinizing emissions along their entire supply chain to reach net zero emissions for their full value chain. Local supply is the most efficient way to achieve substantial emission reductions, CO2 emission reduction. With multiple operations across the 3 continents, GlobalWafers' low carbon footage makes it a reliable ESG partner for our customers for being green. So that's some quick summary of our overall operation and finance information. So I would like to pass this to Leah for further detail, to introduce the industry outlook and financial performance. Thank you very much. Leah, please.

Thank you, Doris. Let me begin with the global GDP growth forecast in Page 11. Despite the continued tailwinds from Russia's invasion over Ukraine, inflation, COVID shutdowns and the resurgence in China, global GDP was surprisingly strong in the second half of 2022. Energy markets have adjusted to sanctions on Russia faster than our expectations. Regardless of impression, consumer spending was better than originally forecasted. China's reopening is also believed to eventually boost supply chains. By quarter is just that the IMF has raised its 2023 global GDP forecast by 0.2%. It is the first time this has been revised upwards in more than a year. Seeing a turning point for the global economy with growth bottoming out in 2023 and then will climb in 2024. Yet the concerns of spiking interest rates, Russia's invasion and China's enormous health outcome after [indiscernible] reopening, this will continue to weigh on the outlook of the economy activities. Next is Page 12. This chart, speculation of various researches and analysis. While we could see comments that after the historical highs in shipping area and revenue in 2022, semiconductor faces stagnation in 2023. However, the long-term growth is anticipated, underpinned by the burgeoning digital economy, including 5G, EV and data centers. Also it is believed that 2024 and 2025 will grow 6% in each year. Let's move on to Page 13. Being ubiquitous in all applications, semiconductor industry is forecasted to have an 8% CAGR in the next 4 years, from 2023 to 2027, and this will drive double-digit growth across all regions with positive growth in all device types. The top growth device categories in this time period are sensors, actuators at 11% and IC at 9%. Please allow me to further elaborate the inventory status in the following 2 pages. First, let's start with Page 14. After the start of pandemic, demand for microchips was since skyrocketing by computers, TV and household appliance manufacturers. However, the consumer electronics sector is reporting an up to 30% lower demand in revenue, resulting in sales decline for semiconductor manufacturers in 2022 and 2023. Older generation semiconductors, on the other hand, those are often used in like automotive and industrial electronics. These are set to remain in short supply for the foreseeable future due to the supply bottleneck for analog chips and microcontrollers. Therefore this is not a structural oversupply in all types of application. But on balancing, in different market centers that are impacted in the different ways, and different times. For example, memory stocks are said to be suffered from low demand since Q3 '22. Foundry started in Q4 '22, while automotive and industrial are giving signals of resilience and maintaining a good traction. Page 15 is the involvement of inventory depletion. Based on Gartner's research in the fourth quarter of 2022, the impact of inventory semiconductor supply chain has entered the moderate surplus zone, while the overall index is no longer in the shortage zone. There are still inventory imbalances with abundance in some chips and shortage of others. Overall most chips categories are exhibiting an improvement in inventory. Semiconductor demand from consumer markets continue to deteriorate due to the weakening microeconomy. The inventory index is expected to continue increasing until the second quarter of 2023 before it starts to recede and demand picks up. Let's move on to Page 16, the automotive electronics. Automotive electronics and software market will see a very strong growth through 2030. This will be driven by the car electronic softwares, ECUs and DCU. The CAGR of the whole market is projected to register at 5.5% CAGR, nearly 4x than that of the passenger car sales during 2019 to 2030. This is evidence that increasing silicon content per unit driven by technology innovation. The next slide, I'd like to talk about the renewable capacity growth, in Page 17. Being capable of reducing energy loss by up to 90%. Compound semiconductors are deployed in a wide range of power applications, particularly ideal for renewable energy. The Ukraine war and the climate change are the catalysts for many nations to build energy autonomy. The IEA, which is International Energy Agency, expects the global renewable capacity will increase by almost 2,400 gigawatts. This is 70%, 75%, between 2022 and 2027, in its main scenario forecast which in turn will augment SiC penetration rate. In Page 18, this is SiC powered device market, which is expected to grow at a CAGR of 34% between 2021 to 2027. SiC is perfectly suitable for power applications for being able to offer high thermal conductivity. Its various application includes converters, inverters, power supply, battery charges and motor control systems and the renewable energy and rail. Page 19, this is, again, power device market forecast, which will grow with a CAGR of 59% in 2021 to 2027 and will eventually reach USD 2 billion. The consumer segment has the largest share at 50% CAGR. This is driven largely by the adoption of GaN mobile phone fast chargers. Automotive share is small today, but it will have the largest CAGR of 97% by 2027. So the following page, are GlobalWafers' financial results. Like what was just presented, we have contributed remarkable 2022. Page 21 shows our Q4 quarterly performance. Our Q4 revenue hit TWD 18 billion with 17% Y-o-Y, is the best ever. Marking the 12th quarterly growth, a long-lasting momentum. Gross margin was 42.7%. This is our [indiscernible] best. Operating profit margin amounted to 34.6%. Our Q4 net profit totaled TWD 5.8 billion with 31.5% margin. This is our record high. Our EPS climbed all time high at TWD 13.31 per share. Our Q4 ROE was 44% and the ROA at 14%, reflecting our current business model and nimble operation. Page 21 is our 2022 performance. Our annual revenue has crossed TWD 70 billion milestone. Once more, our consolidated revenue in this January and in this February in 2023 has reached nearly TWD 6 billion. Both rose to the highest revenue in the same period over the entire history. Our 2022 gross profit margin was 43.2%. Operating income margin amounted to 35.5%. All of these hit the highest record in the history. Net profit margin was 21.9% and 2022 our full year EPS amounted to TWD 35.31 per share. This is also an all-time high. But our annual EPS would have climbed to TWD 48 per share if all nonoperational influences were excluded. In Page 23, you can see the chart, which shows our quarterly revenue and gross profit. Revenue trends up in Q1 '20, a momentum now lasting for 3 years. Page 24 is our EBITDA and EPS. In 2022, our EBITDA was TWD 25.5 billion. This is the best ever. And its margin has hit 36.3%. If excluding all the impacts we just mentioned, our EBITDA would have become nearly TWD 34 billion with 49% margin. And our annual EPS is TWD 35.31. It will have been as high as TWD 48, our best performance ever. Please refer to other pages for our income, income statements and balance sheet and ESG performance. Now I would like to give the floor to Doris for the Q&A session. Thank you, Doris.

Okay. Thanks, Leah. We have received quite a lot of questions from investors in the past several days. I would like to answer some of them, the most frequently asked questions, especially the first one is about our business, our order status and what's our outlook? And also we were asked a lot about our view of the industry inventory correction. And how about chip at new information, talking about the percentage and also special profit-sharing type of things. What's our view on this? And also we received a lot of questions about how about Tesla's Master Plan 3, talking about silicon car by a huge cut, 75% down of the use of silicon carbide size. So what's our view of this? So basically, I'm going to answer these questions first. And then we'll move to the open questions. Let me answer some of the questions first. And the first question I would like to answer is about that, what is GlobalWafers' order status? And what's our view on the future outlook? Our answer is that, yes, a quick answer is that currently, our 12-inch, 8-inch lines are still -- basically, we are still running in full production, small diameter utilization rate is much lower. But when I said full production, that doesn't mean that we ship every single wafer to our customers every month. That's not the case. If you check our inventory financial report, you will find that our year-end inventory value is as high as TWD 8.5 billion, which is about 5% higher than previous quarter. And that means that some of our customers, they are suffering from even high inventory. So they ask us to keep some inventory for them. So that's what we are doing. We keep our line fully loaded. We fully utilize the line to produce. But at the same time, we work with our customers to adjust what they need most now, so then we can ship -- we can produce the product they need, like power-related components or some automotive stuff. But some of the customer, after adjustment, they still have some -- a little bit open, and then we will produce for them, and we reserve the shipment. We push out the shipment by a couple of months. That's what we are doing now. So let me summarize my answer for this question now that basically with the onset of the market drop starting from the second half of 2022, we had been working very diligently with our customers to mitigate the growing inventory situation. We have been adjusting shipments to more closely align with our customers' needs, thereby helping to minimize the specific product inventory buildup. An example is that we're shifting more production to power production, power products in support of automotive, industrial and IoT applications. These product pivot help to limit impact to our factory's utilization rate while also helping customers meet the commitments of their LTA. So that's what we are doing. A little bit higher inventory in GWC. But at the same time, we work very closely with our customers. That then meets their LTA, but also swap a little bit some of their wafers to different application like automotive. That's what we are doing. I think that Gartner also made a comment, talking about the inventory adjustment. They said that inventory adjustment should be mostly resolved by Q2. That's our view as well. I think the whole overall industry inventory adjustment should be mostly resolved by Q2. Although PC, smartphones shipments maybe will decrease this year, but the rate of decline will be significantly lower than 2022. Yes. So that's our view for this. I think that the market -- the future -- our future outlook is that the near term -- the near-term view is that somewhat is still cloudy. The visibility is not really very clear yet, but we believe that the inventory correction will be very mild in the second half if it's still there. And we think that the recovery will be starting from second half 2023 or as late as end of 2023. That's our view for the industry. And the second question is semiconductor industry outlook. What's our view of the industry outlook? I think we anticipate that early 2023 will still be slump as it is a traditional low season for consumer products and the inventory correction persists. But will gradually recover in the second half. That's still our view and automotive is likely to grow after 2023. So this is our overall view that application of the inventory -- the recovery will be very -- will vary from application to application and power industry, automotive-related components will recover -- will be [indiscernible] overall performance much better than consumers or memory-related applications. That's our view. And next question is about -- next is about CHIPS Act and GWA status. Okay. The first question we received is about GWA's current status and what's our progress on CHIPS Act. GWA current status is that our construction is fully in the excavation phase with initial piece being drilled starting from this week. That's what we are doing. So GWA, if you visit Sherman, you will see that we already started our construction over there. And the progress remains on track with pilot production line capability available in July 2024. This is still in line with our original point in enabling our customer sampling during second half 2024 and initial mass production starting from Q1 2025. That's our schedule and everything is on schedule. That's our production expansion plan, which should be, I think Q1 2025 starting our production -- mass production. This should be a very good timing within the next semiconductor upturn. That is our view. That's the current status of GWA. In CHIPS Act, our American team is -- our Texas team, American Texas team is following the timeline closely and closely monitor the U.S. government's announcement. Right now, starting from February, CHIPS Act already started Phase I all the application procedures. But Phase I is for fab, not for material. We are a material company. So our -- for our sector, the CHIPS Act application process will be starting from late April or early May. That's current status. So we will follow the timeline very closely and also we will closely monitor what U.S. government announced. Okay. And next question is that -- also is about U.S. government information. The question is that it has been widely reported that U.S. government has set a strict condition on incentive and profit sharing. If GWC only receives 5% to 15% of our expected capital expenditure, how does it compensate the expensive cost of American manufacturing? Not to mention, those who receive more than USD 150 million in subsidies, must share the excess profit with U.S. government. That's the question. We received so many shareholders asking about exactly the same question. Let me answer the question here then. The first question is talking about incentives limit to 5% to 15%. Actually this is not true. From NOFO, that's notice of funding opportunity, this is U.S. government's information, NOFO, notice of funding opportunity. Let me provide some clarification here. On Page 9 of this document, it states that 5% to 15% is the generally expected range for the direct funding, cash funding, cash grant. However, there is no fixed amount for how much a project receiving CHIPS Act funding. So far we haven't found any firm number of fixed amount that how much a company, a project can receive in CHIPS Act direct funding. So there is no firm number yet, 5% to 15% is just a generally expected range. Additionally, the range may be higher if the project is not eligible for the investment tax credit, which as the material suppliers, GWC is not expected to be eligible for investment tax credit. That means that a company like GlobalWafers, which is not eligible for investment tax credit, will have higher direct funding rate. This is our understanding. So there are a lot of details. We're still trying to figure out that -- to clarify that some details of the document now. So that's the only information I can share with everyone that the 5% to 15% is just a generally expected number. It's not a fixed number or a firm range. We're still working on further details with U.S. government now. Okay. So that's what I can share now for CHIPS Act. I think there is still very -- is still not very clear for us. I mean, there are a lot of details, and we are still trying to figure out some special regulations. But we are in the second group. So we will start our process from late April or early May. So we monitor very close that how -- I think there will be more and more clarification released in the next several -- couple of months because the fab companies like the Intel, TSMC, all of the fab companies are working with U.S. government now. So I think that all the regulations will be more clear in the next couple of months. So when we start our procedure, we will have much better understanding of the procedure. Okay. So the next question is about, it's a very straightforward question. Do you think -- I received a question from a shareholder. They ask that, do you think that it is a wrong decision to select U.S.A. a greenfield location? Will you change the investment location if the subsidy does not measure expectation? I think while the details of CHIPS Act are still under U.S. government discussion, we are waiting for more details. And our American team is following up with the timeline and also monitoring the U.S. government announcement very closely now. So it's too early for GlobalWafers to say that this is selecting with a wrong decision worldwide. It's too early to talk about this. We believe that we will figure things out, and we will have a good operation in the U.S. And next question is that, is about the geopolitical tension that Taiwan is caught between the power play between U.S. and China. What is GlobalWafers' strategy for contingencies? So what's our strategy to avoid from any disruption from the power play. Here is our answer. While GlobalWafers is already a very globalized company with 18 operations, of course, including our U.S. GWA, the Sherman new greenfield. With 18 operations across 9 countries, the threat of future instability is having an impact on decision making. Therefore we diversify the production basis in 3 continents, asked customer to dual-qualify our size preferably in different continents to mitigate the risk, so to strengthen our business continuity. So in the meantime, we also build multiple suppliers and developed customers in different countries and applications. So our customers are distributed evenly in numerous regions and applications. So this is how we build our resilience in the terminus world. I think that is one of a very important value for GWA as well because up to now we don't have any 300 millimeter full production line in the U.S. So when we have GWA, we will be -- this operation will be, not only very helpful for GWC, the whole group's resilience improvement, it will be very important for U.S. semiconductor supply chain's resilience improvement as well. Okay. So next question is about Tesla's Master Plan. They talk about silicon carbide. So the question is that Tesla recently announced that they plan to slash use of silicon carbide transistor by 75% without compromising the performance and efficiency. This announcement has brought a huge blow to all silicon carbide makers. Compound semiconductor has been one of GlobalWafers' target business. Please comment on this point. Well, first of all, I would like to -- I will try to remind -- highlight again that GlobalWafers is not a silicon carbide company. We are a total solution provider. So that means that we have not only silicon carbide, but also we have a lot of good material good for power applications. So basically, it's our company policy that we don't comment on individual brand, individual company's policy. But please allow me, try to share our thoughts of silicon carbide end applications with all of you. First of all, less silicon carbide does not mean semiconductor wafers are not needed anymore. The reduced silicon carbide die count means higher count as silicon die. So that means that if you make a module, a power module, power system, if you use less silicon carbide die, that means that you have to use some other silicon or different material, different die. So you will have more die count for other materials when you have lower silicon carbide die count to compensate the original function, which means that it's very likely that more flows on business for IGBT for the same EV applications. So as a total solution provider, if silicon carbide demand drop a little bit, but it will switch part of the application to some other silicon material, that's material replacement. And also, I think, for Tesla, module design will be the key -- module design improvement will be the key for this plan. Besides silicon carbide without compensating the performance will require significant improvement in module design. Being the first to adopt silicon carbide inverters into its powertrain, Tesla's original design might not optimize for efficiency and might be a little bit redundant. Therefore, this is a major evolution for a very good company like Tesla. So the improvement in module design may require additional powertrain, pushing the volume and demand. Again, GlobalWafers' products are the indispensable substrate for all applications. We are a total solution provider. We have not only compound, but also we have float-zone, we have gallium nitride, we have silicon carbide and other materials as well. So we think that we could supply either way, no matter silicon carbide or more float-zone or a different design. So therefore, we reckon this as an opportunity rather than a risk as it will lead to silicon cannibalization as well. This is to answer that 75% silicon carbide use cut. But from total market viewpoint, matter of fact silicon carbide market will not drop. Maybe for EV, per every single car vehicle, the silicon carbide chip count will be lower than what they are doing today. But the whole EV car total amount will increase and also the semiconductor, semiconductor content for every electronic vehicle will keep increasing in the next several years. So I believe that's our view that even Tesla or the EV industry really improves this module design to very good efficient, no redundant and much lower silicon carbide die count. Even this does happen, I think the whole silicon carbide industry demand is still very high. Yes. That's our view. So, and we received another question that after Tesla assets announcement, we received that I would ask, will -- Doris, will this Tesla announcement effect GlobalWafers' compound semiconductor investment plan or future strategy? Our answer is a very clear no. We will keep the same investment pace and scale up. We will keep doing this because we believe in the total addressable market for compound semiconductors is enormous. It possess -- silicon carbide have superior characteristics that could not be replaced, 100% replaced by silicon or other materials, which are the needed features for technology innovation. So in addition, GlobalWafers' compound business is rather small today comparing to our comprehensive product portfolio. So we need to augment rapidly to meet the strong demand for our customers. That means that we will keep increasing our capacity, silicon carbide capacity as we explained -- announced to the market before. We'll keep doubling our capacity, and we will keep improving our silicon carbide quality. And at the same time, we will increase our -- we will try to accelerate our silicon carbide 8-inch production as well. So that's our answer to silicon carbide question -- related questions. And the -- okay, I think that's all of the questions I prepared. I want to reserve some time for open questions. Thank you very much. Sunny, it's okay to receive open question now. Thank you.

Sure. Thank you very much Doris and Leah. Now let's begin the Q&A session. Please limit your questions to 2 at a time. Now maybe let me kick off the session with 2 questions from my side, if I may. So number 1, Doris, just now you mentioned that for Q4, clients start to push out some of the shipment schedule while the company retained the full production. So I wonder, if you only look at the actual shipment by the customers, what's the utilization rate for your 8-inch and 12-inch in Q4? And how should we think about your seasonality going to Q1 and Q2? Are you still keeping the full production? And therefore, should we assume, let's say, if demand going to second half is not picking up as expected, would there be any risk that you need to lower your utilization rate a bit more?

Thank you, Sunny. Thanks for the question. Yes, if we produce only for the shipment, for the volume, we need to ship at the same time. Our loading will be 90% plus, will be still over 90% for both 8-inch and 12-inch, over 90%, both of them. But we keep 100% loading. The main reason for this is that we know -- not only we feel our customers, also many of our customers believe that second half demand will be stronger than first half. So they want us to commit that all the capacity we reserve for them in the first half, they can get the wafers in the second half. So they want us to guarantee that they will get their wafers in the second half. And that's why we feel that the best way is that we build -- we keep our inventory a little bit higher because they -- many of our customers have already committed to take the wafer, just push out 1 month or 2 months. So that's very minor for us. That's our status.

And so if we look at 2023, your current expectation is the semi's revenue may be down by low single digit. Then how should we think about the growth for GlobalWafers? And how should we think about the gross margin as Q4 despite being a full production, your margin was declining by 1%? How should we think about 2023?

Basically, we don't -- our company policy is that we don't really give the outlook revenue range or gross margin percent. But I can give you some rough idea that we think that, yes, we are expecting that our overall performance will be still better than 2022. That's our expectation for 2023. That's our view, revenue-wise. And gross margin-wise, it depends on currency because it's really the FX change currency is really unpredictable. So that hurts, that is very complicated for us. So gross margin may be flat or close to what we are doing, maybe close to 2022 or plus/minus a little bit percent short, a very narrow range difference, but pretty much linked with FX. That's a critical point. I think because freight is getting back to normal now. It's much better now. The freight is better. Electricity is still bad. Electricity cost is still bad, still high, but it's basically manageable. The most critical point for us is FX. That's the current status. Thank you.

Marcell, would you please take the questions from the line?

[Operator Instructions] And the first question is coming from the line of Donnie Teng.

Hello, Donnie, I cannot hear you.

I can see Donnie's question has been withdrawn. The next question is coming from the line of [ Bruce Lu ].

So the first question is still regarding to your U.S. plant. I mean, I think you do mention that the equipment moving schedule would depend on your LTA status. Can you give us some update for the LTA situation for the U.S. fab? And would that be the cost for the U.S. must be higher, right? And TSMC has been trying to sell [indiscernible]. Are you going to charge a different pricing for your U.S. fab? And what would be -- what is this like incremental like margin accretive for or dilutive for your U.S. fab?

Yes. Thanks for the question. We set a goal to kick up the whole GWA construction, which is 80% LTA. We have to secure 80% LTA for GWA to kick up the whole construction. And as I just reported earlier, presented earlier that we have already started our GWA construction. That means that we have already secured over 80% capacity LTA. That's where we are. It's not 100% yet, but it's already over 80%. And talking about the cost there, from our calculation in our mind, I think the construction cost is extremely high, U.S. construction costs. I don't know well about other states, but in Texas, is so much higher than Asia. That's really very expensive. Equipment cost is the same because we purchase equipment from all sites. So equipment cost is no different. Construction costs so much higher. But the other operation cost actually is quite close because we're talking about labor cost, which is higher than Asia, but electricity cost is much lower than Asia. And the real estate property cost is lower. So from our overall simulation, we think that construction cost is very expensive, but fortunately, construction costs, you can depreciate by over 20, 30 years, I forgot how many years, but it's depreciated for much longer than equipment. So cash flow-wise, total investment is much higher, but the overall profitability from profit viewpoint, our goal is at GWA, we hope that GWA overall gross margin will be close to Asia fab's gross margin, at least starting from year 6. The reason starting from year 6 is that the first 5 years, everything new. So that means that everything is 100%, you need everything, depreciation cost will be much higher than Asia. But the Asia fab, most of the fab, 90% used equipment, but 10% expansion because those expansions are all brownfield. Now like GWA is 100% greenfield. So of course, depreciation cost will be much higher than other sites. But starting from year 6, I think depreciation costs will be same as all the Asia sites, will be much more competitive, will be much more manageable. So I think, in general, maybe gross margin percentage-wise will be lower, but the company overall gross margin amount will be higher. That's our expectation. And for your question about pricing, I think we said we have a different pricing with our -- every LTA, every product, we have different price. So -- but we didn't set the price, okay, if you buy the wafers from American Fab, it will be higher. That's not how we manage our pricing strategy. So basically, the U.S. price, U.S. products are a little bit different from Asia products. So the price is different. If it's higher, it's not because that it's in U.S. It's because that the product's pay is different. I hope I made myself clear. Thank you very much for your question.

I think the second question is I want to make it clear for the comment you just mentioned about the silicon compound which we -- well, even though the content is lower, but it was replaced by other compound semi. But the question is that the dollar content for silicon carbide and for -- of other compound semi for you, the dollar compound is different, it's not one-to-one, right? So how do we balance and how do we see the -- the 2 [indiscernible] is different? How do we foresee that?

No. Of course, one silicon die and one silicon carbide die, the price, of course, dollar-to-dollar is different. You are very right. But for us, first of all, our total silicon carbide sales volume will keep growing because our share is still very low. So we believe that the whole market -- the addressable market will keep growing because of the content like what I explained. So for me, total silicon carbide volume is increasing as well. And float-zone is increasing, gallium nitride is increasing, so all the compound materials is increasing. Part of that is from the EV or renewable energy degree or heavy power or [indiscernible] chargers, those volumes -- market volume is increasing rapidly. That's one reason. And another reason is because we are getting -- we are obtaining -- gaining some market share. That's our goal. We try to gain some market share as well. So I don't know if this is clear. I mean, you are right that die-to-die 2 different products, of course, price is different. And that's how Tesla is trying to -- that's how Tesla is going to cut down their car price, total car price. Their goal is to cut down by 50%. So in order to reach that, of course, they want to keep the efficiency, but then they have to replace some components. But for GlobalWafers, as a material vendor, no change as long as that we sell many silicon carbide dies, we still can get the revenue. So we don't sell by die, we sell by wafer.

But the dollar content for silicon and silicon carbide was so big that if there is meaningful changes in the silicon carbide usage, the total addressable market for you should be smaller, right? So why is that there's no change for your investment of…

No, no. Total addressable market will still grow because EV is just one of the applications for silicon carbide. It's not -- EV is just one of the applications. There are so many applications and more and more applications are still under development. So I believe that total addressable market is still there. And as I said that addressable market will keep growing. And another one is that our market share, we try to obtain higher market share. That will grow as well. So that is how we -- and our silicon carbide capacity is still too small. So no matter what, we still have to increase our capacity. We'll keep doing the same thing.

In the interest of time, we may have to wrap up here. Thank you all for joining. And thanks again, Doris and Leah, for your time today. This marks the end of the call. Thank you.

Thank you very much, everyone. Thank you.

Bye-bye.

Bye. Have a good day. Bye-bye.

That concludes your conference call for today. You may now disconnect. Thank you for joining, and enjoy the rest of your day.