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

Good afternoon, ladies and gentlemen. Thank you for joining us on the Q3 2023 Analyst Call. I'm Leah Peng, the spokesperson for GlobalWafers and our Chairperson, Doris Hsu, is with us today. Here's how today's call will unfold. Doris will start with executive comments, followed by my brief introduction covering our perspective on the semiconductor industry, our Q3 2023 performance, and addressing the questions we have received from investors recently. The session will conclude with an open Q&A, during which Doris will provide answers. A quick reminder, please keep your audio on mute throughout the meeting. If you have any questions, please use the chat panel located in the upper right or lower right corner of your screen, depending on your device and layout, and we will address them during the Q&A. We appreciate your cooperation in limiting the question numbers into 2. Before we begin, I would like to remind you that today's discussion may contain forward-looking statements. Please be aware that these statements are subject to various risks and uncertainties which could cause the actual results to differ materially from our expectations. Please refer to the Safe harbor notice in our presentation. Now, without further delay, I would like to pass the floor to our Chairperson, Doris, for the executive comment. Doris, please.

Thank you, Leah. Good afternoon, everyone. Thank you very much for joining GlobalWafers earnings call of Q3 2023. Leah Peng, our spokesperson, will guide us through the presentation and FAQ received recently and I will address the questions raised in the meeting today. First of all, let me share some comments of our overall financial results and update our operational status with everyone. Page 3, please. If you have already downloaded our material, please turn to page 3. That's our financial highlights. Despite a modest Q-o-Q decline in the third quarter, GlobalWafers resilience in navigating macroeconomic challenges and semiconductor industry imbalances remain commendable. Our Q3 revenue totaled TWD 17.4 billion, which is a 2.9% decline compared to Q2. Please note that this is the second highest over the same period. The accumulated 3 quarters revenue achieved nearly TWD 54 billion, a 3.8% increase Y-o-Y and hit the record high. Yes, we hit a record high for the first 3 months of this year's revenue, totaled TWD 54 billion. Regarding gross margin, our Q3 gross profit margin was 36.6%. The accumulated 3 quarter gross margin hit 38.3%, which was the third highest ever gross margin. This quarter's Q3 2023 gross margin erosion was mainly resulted by depreciation, power cost increase, which will be further elaborated later. And let me move to operating profit. In Q3 2023, our operating profit margin was at 27.8% and the cumulative total for the first 3 quarters of this year reached 29.9%, making it the third highest figure for the same period. And page 4, please. Our net profit this year hit record highs with this quarter, we hit a record high of our net profit, which is 31.9% in Q3 and an impressive 28.4% in the first 3 quarters net profit, both are the highest effort, demonstrating our strong performance. EPS-wise, in Q3 this year, our earnings per share reached TWD 12.73, marking the highest ever over the same period. For the first 3 quarters, our EPS amounted to TWD 35.22 per share, this representing a historical high for the company. And another very important index is prepayment. As of end of September 2023, our prepayment totaled TWD 37.9 billion or USD 1.2 billion. Please note that the prepayment will be refunded to customers once contractual obligations are fulfilled. The value is dynamic. Our prepayment slightly decreased around TWD 0.4 billion to TWD 37.9 billion in Q3. At the end of Q2, it was TWD 38.3 billion. In fact, we continue to sign new contracts with multiple customers. Next is the outlook on macroeconomics. Please turn to page 5 if you have our material. So I'll make a quick outlook of the macroeconomics and semiconductor industry. IMF October 2023's overall economic outlook forecast declined in global growth from 3.5% in 2022 to 3.0% in 2023, subsequently revised down to 2.9% in 2024. Despite the efforts to mitigate inflation through Global Monetary Policy, the semiconductor industry remains under pressure due to the persistent decline in business and consumer activity. Furthermore, the recent outbreak of conflict in Israel has introduced new challenges, contributing to increased concerns for energy costs and inflation. The semiconductor industry is showing signs of recovery, driven by stable demand, balanced inventories and growth in automotive and industrial sectors. However, ongoing challenges such as war, energy crisis, inflation, high bank interest rates continue to impact the macro environment, with customers re-absorbing inventory and the emergence of new applications like AI and automation. We assume 2024 is poised for an upturn, assuming uncertainties like geopolitical tensions are appropriately managed. Notably, memory suppliers' production cuts in response to the previous market downturn are expected to lead to memory supply tightness and rising ASPs in 2024 and 2025 and a shift in product mix for high-end servers and AI applications will help re-balance the global memory market as well. Yes, page 6, please. Let me talk a little bit about the industry outlook. I think I would like to focus a little bit on compound semiconductor. Compound semiconductor is hitting the headwinds now, of course, mainly because of two reasons. One is that EV car industry, EV market seems a little bit softening now. Another reason is the availability of semiconductor compound wafer supply. So due to these 2 reasons, market is a little bit tough now, which has just happened in the past couple of months, but overall, the positive cycle of R&D investment and expanded applications is still expected to drive further market penetration for compound semiconductors. This ongoing process creates a self-reinforcement loop with each technological advancements, leading to more diverse and sophisticated applications, which in turn attracts additional research and investments. As a result, compound semiconductors are poised for rapid, robust, and solid market penetration, delivering innovative solutions and further enriching the semiconductor landscape. Even right now, the market seems a little bit soft, but for long-term, the compound semiconductor is still very strong. That still very promising for the whole semiconductor industry. The above are my comments. Leah, please share more details on the industry outlook and financial performance. Thank you.

Thank you, Doris. Let me share our observation of the industry in page 8. This page serves as a tracker for our customers' inventory level compared with the global semiconductor market revenue and silicon wafer shipments as of the end of Q2 2023. The light blue line represents our customer states of inventory of finished goods as declared in their financial statements. The dark blue curve illustrates worldwide semiconductor revenue, while the gray line represents the overall semiconductor -- silicon wafer service shipping trend. The DOI shows a slight decline of 2%, affirming the effectiveness of actions taken by our customers to restore stock labels to a healthier state. Regarding worldwide silicon shipping area, following a decline that began in Q4 2022 started to grow in Q2 2023 compared to Q1. We are seeing a positive reversal in global semiconductor revenue, accompanying a gradual reduction of inventory labels and adjustments of inventory on a more robust trajectory. However, please note that there is an intrinsic delay in the propagation along the semiconductor supply chain, and customers are still absorbing the high inventory levels. We tend to expect that a soft demand is likely to persist in the second half 2023 for silicon wafers. In page 9, the SiC wave power device market is poised for significant growth, mainly driven by the automotive along with the energy supply segment. Projection indicates a robust 31% CAGR from 2022 to 2028. What sets GlobalWafers business apart is our integrated approach to SiC wafer manufacturing, offering a comprehensive suite of solutions from SiC parks and customizable substrates to diverse wafering services and agitation growth on both our own and customer-assigned substrates. We can support our customers along the SiC material trends through the various services catering to the growing SiC market. Please turn to page 10 for our GlobalWafers scan solutions. Fueled by a remarkable extension in automotive and data communication, the GaN Power device market is projected at an impressive 49% CAGR from 2022 to 2028. With this slow momentum, GlobalWafers complete lineup of GaN heteroepitaxy products encompasses silicon, SiC, and the sapphire substrates. Our commitment to innovation product diversity positions us as a trusted partner in the growing power GaN device market. Please allow me to brief update our greenfield extension GWA in page 11. Our flagship 300-millimeter factory GWA is on schedule for sample capability by the fourth quarter in 2024 and the mass production ramp during 2025 when the market is generally expected to be in full swing. Now, the excavation has been completed, process equipment orders are placed and are aligned with the sample and production schedules. GWA has submitted its pre-application for incentive grant funding in early September and is now awaiting official feedback. The full application is scheduled to be submitted in Q4. While the application is still ongoing, we are diligently staying updated with the latest developments and maintaining close communication with relevant authorities. Please refer to our Q3 financial performance on page 13. While Doris outlined the financial highlights in her executive comment, please allow me to provide further context to our Q3 performance. During this quarter, our revenue experienced a slight decline of 2.9%, reaching TWD 17.4 billion. Our gross margin also decreased by 1.1%, now at 36.6% compared to the previous quarter. The shift can be attributed to factors such as depreciation 2.5%, power cost 0.6%, but offset by the positive contribution of the reversal of LCM adjustment, which is 1.8%. The combination of this and other minor factors resulted in a total change of 1.1%. Our operating income margin stood at 27.8%, bolstered by the mark-to-market valuation of Siltronic shares in our portfolio, our Q3 net profit margin reached 31.9% and our EPS was 12.73%. Concurrently, with our ongoing expansion projects, our Q3 CapEx amounted to TWD 10 billion, while depreciation stood at TWD 1.7 billion. Page 14 represents the accumulated financial performance for the first 3 quarters. The revenue reached nearly TWD 54 billion. The net profit margin stood at 28.4% and the EPS amounted to TWD 35.22. As of the end of September, our CapEx were TWD 24 billion with depreciation totaling TWD 4.9 billion. Please turn to page 16. Here, I would like to emphasize that our accumulated EPS as of the end of September has reached TWD 35.22. This is very close to our full-year EPS in 2022, which was TWD 35.31. Then, let's move on to the balance sheet in page 18 and I will add more color on the key item, cash. In Q3 '23, our cash was TWD 25 billion. If we dive into other assets, additional TWD 46 billion which was earmarked for deposits held for more than 3 months, and another TWD 3 billion, the restricted cash, which is temporarily set in bank for tax consideration, but could be used when necessary. So, if these cash-related assets are included, our total cash in Q3 is actually TWD 74 billion. Additionally, we have spent TWD 4.8 billion in ECB repurchase in Q3. Here, I would like to further elaborate the reason for the changes in the short term and long-term loans. Our short-term loans stretched to TWD 35 billion in Q3, while the long term loan decreased by TWD 7 billion to TWD 15 billion loan. The primary reason for this change is attributed to the reclassification of TWD 7.1 billion corporate bonds into short-term loans in accordance with IFRS principles.

Now, I would like to address both the questions we have received from the investors recently and lots we anticipate will be raised. Okay, so the first question is regarding our debt ratio. GlobalWafers' current ratio and the quick ratio significantly dropped to 150% and 130% respectively in Q3, down from the previous range in 160% to 180% in Q2? Well, the debt ratio slightly improved to 64%. This is a 3% improvement compared to the previous quarter. Do you anticipate any unfavorable impacts on your future operations as a result of these changes? Regarding the quick ratio and current ratio, the main reason is the reclassification of corporate bonds into short-term loans based on IFRS principle that lead to lower current quick ratios. And second, regarding liability percentage, the main reason of the liability improvement comes from the repurchase of partial ECB. Please note that the debt is mainly composed of prepayment, TWD 37.9 billion, ECB TWD 6.6 billion, and corporate bond. This is TWD 19 billion. With very low interest rates, these financial majors and the corporate bond forged a strong leverage insulating GlobalWafers from the rising funding cost and empower us to expand operation and to build long-term compatibility. If we exclude prepayment, the debt ratio would have dropped to 54%. Also, GlobalWafers holds abundant cash on hand TWD 74 billion. If deducting the bank loan, corporate bond and prepayment, and the ECB actually, we hold a TWD 14 billion net cash. And if we will add the prepayment back, GlobalWafers holds net cash of TWD 24 billion. In conclusion, characterized by a healthy mix of assets and liability, our financial structure is well balanced. And the second question is regarding our cash strategy. Even GlobalWafers' debt ratio of 64% decreased the customer pre-payments and a reduction in cash to TWD 25 billion. What is the potential impact on your operations and how should the company address this situation? In fact, we have implemented multiple strategic measures to solidify our cash position. Firstly, our Board approved the issuance of TWD 14 billion corporate bond to-date. This move is expected to bolster our cash reserves and provide us with additional financial flexibility. Secondly, we are generating profits from our day-to-day operations which contribute to enhancing our cash position. Moreover, we currently hold share in Siltronic. This represents a significant component of financial assets, thereby, affording us greater flexibility in capital allocation. Additionally, our Board has endorsed the capital increase initiatives, including the issuance of GDR to be implemented when necessary as resolved during the last shareholder meeting. These measures are designed to inject fresh capital into the company, thus further strengthening our cash position. Through these diverse actions, we own various fundraising tools to enhance the versatility of bond utilization and are actively fortifying our cash reserve, ensuring that we are well-prepared to meet financial challenges and capitalize on strategic opportunities in the future. The third question is regarding our CapEx. Please explain why the CapEx is not paid with cash on hand, but with bank loan? GlobalWafers choose to not to pay the CapEx with this cash on hand, but with bank loans for the following two reasons; first, the company needs to maintain a good relationship with the bank to secure credit lines for future need. Second, GlobalWafers has numerous international locations and may strategically allocate deposits to places with better interest rates to earn interest income. At the end of Q3, our net interest income totaled TWD 2 billion. In addition, our committed loan drawdown rate is nearly 26%. The rates of 74% of bank credit line could be implemented anytime when needed. The next question comes from, regarding our corporate bond. GlobalWafers announced the board resolution to issue the TWD 14 billion unsecured corporate bond to-date. Please advise your rationale. So GlobalWafers foresees cash outflow in 2024 due to the maturity of TWD 7 billion corporate bond and the possible put option of USD 250 million ECB. It is important to note that GlobalWafers maintains a healthy cash reserve to cover these obligations. Today's announcement of this TWD 14 billion corporate bond further augments our assets to medium and long-term bond, providing increased flexibility in fund utilization and optimizing funding sources and costs. These funds will be instrumental in supporting a range of strategic initiatives including the repayment of loans, bolstering of working capital, and the backing of green investment plans. By utilizing these funds strategically, GlobalWafers can continue to drive growth and maintain a strong financial position. Then the next question is regarding our compound semiconductors. Here, I would like to update our compound semiconductor inputs. GlobalWafers' SiC Roadmap is aligned with 1 of our key customers. Our 200-millimeter SiC Power and wafering capabilities has already been demonstrated and established. The capacity ramp will be consistent with the consolidated demand in the long-term agreements with our customers. Seizing the rising demand for power e-semiconductors in the automotive industry, GlobalWafers anticipates our qualification in the first half of 2024, with limited shipments planned for the fourth quarter in 2024. By 2025, our production capacity is set to ramp-up quickly and by 2026 or 2027, the total output of our 8-inch SiC wafers is expected to surpass that of 6-inch Sic wafers. The next question is regarding the geopolitics. How does the current Israel and Hamas conflict impact the semiconductor industry? Okay. First, industry-wise, the Israeli-Hamas conflict and the potential issues in the Strait of Hormuz increased geopolitical risk, potentially disrupting the semiconductor industry. These challenges include the supply chain disruptions, operational issues for Israeli semiconductor companies due to reserve service, transportation disruptions, and energy supply concerns. What is most worrying is the closure of the Strait of Hormuz. The supply route for around 30% of the world's maritime oil and a phase of a global liquid natural gas supplies threatening energy supply, impacting semiconductor manufacturing cost. Regarding foreign exchange, at the moment, the economic impact of the war between Israel and Hamas in Israel, Gaza, Egypt, and Jordan. Based on historical experience, Israeli-Arab war and Israeli-Palestinian conflicts have typically had limited financial impact except on the oil prices. However, the duration or severity of the conflict can still affect the markets, so we will closely monitor the situation. The next question is regarding our greenfield expansion GWA. How many government fund does GWA foresee to receive? Given that GWA is America's only currency for wafer investment for advanced chips, and is essential in addressing a critical gap in the United States in order to build a truly resilient domestic semiconductor supply chain? As such, GWA investment is truly unique and is vital to national economic and security interest. While the application is still ongoing, we are diligently staying updated with the latest development and maintaining close communication with the relevant authorities. Above is my response to the FAQ. Now, please allow me to pass the floor to Doris for the Q&A session. Please type your questions in the chat panel. Doris will provide the answers.

Okay. Thank you, Leah. Thanks a lot for the questions. First of all, the first two questions are from Donnie, Nomura. The first question is that CapEx plan and depreciation costs year-to-date GlobalWafers only have around TWD 24 billion CapEx, looks like to be running behind our earlier estimates of TWD 40 billion. If assuming 40% of our TWD 100 billion CapEx plan in 2022 to 2024 will be spent in 2023. Depreciation cost looks like still quite manageable at around TWD 1.6 billion to TWD 1.7 billion a quarter. So wondering if you could give us an update on CapEx and capacity expansion plans as well as your estimates of depreciation cost for 2023 and 2024 forecast. This is definitely a very important question for GlobalWafers because we are doing expansion in 6 countries with a total CapEx waived over TWD 100 billion. So this is definitely very important. And you are very right, Donnie, our CapEx is behind our original plan. Our original plan is 40% spent in this year, but for 2 reasons that our actual CapEx is lower than our original plan. The first reason is because I think last year and early this year, I have already reported to shareholders and in the earnings call several times that due to some material long lead time of the construction material delay, so our construction basically have a little bit delay. That's one of the reasons. And the second reason is that starting from 2023, we are seeing some softness of the market. So we talk with our customer, check a little bit about their demand for '23 and '24 and we realized that our customers demand and our customers' ramp-up schedule will be a little bit delayed. So we intentionally push out the tool installations a little bit to be aligned with our customers' demand, slightly push-out our equipment installation schedule. And also, we discuss with our tour vendors as well, try to get some support from tour partners and let them know that we need a little bit flexibility on the delivery schedule, tour delivery schedule and payment terms. And that's why we came up with a little bit lower CapEx. We intentionally make it this way. So the peak of our CapEx spending will be '24. I think that will be our peak. And it will come down in 2025 and slightly push-out to 2026 CapEx wise. And depreciation, I think, 2024 depreciation will be higher than this year. This year already, right now Q3 depreciation already, you can see a significant increase this quarter from the presentation material. Our presentation material, you can see the table that we show that our depreciation is increasing, but next year, the whole 2024 Y-o-Y wise, I think our depreciation will be still higher than 2023. So that's the status. Basically, the expansion plans, everything on schedule. Just like what this point that our Italy expansion will delay around 6 months and our US expansion basically on schedule but the qualification maybe takes a little bit longer time, but basically everything on schedule. So this is my answer to the first question. And the second question from Donnie is regarding to our sales and gross profit margin outlook. We said that in the past, basically, our forecast is quite accurate about the sales trend in Q3 '23 since mid this year. So when I indicated that Q3 could be down slightly Q-o-Q despite the overall semiconductor industry is still at the downturn. Are you still holding the same view that Q4 sales to stabilize or slightly recover from Q3? I noticed that recently, some auto IDM companies have toned down the demand outlook in second half of 2023. So wondering if it will become a drag to our sales and gross profit margin outlook in Q4 onwards? Any guidance would be appreciated. So, okay. This is very important. Our revenue is like this, Q1 2023 was our all-time high. Q1 this year was our all-time high revenue-wise. Then we have a slight decline in Q2, which is 3.7% Q-o-Q. And now Q3 is 2.9% Q-o-Q minus 2.9% Q-o-Q. So down a little bit. I think Q4 will be weak as well. Our current view is that it's very likely that our Q4 revenue will be again slightly lower than Q3. That's our view. If you're talking about Q1 next year, I think Q1 will be still weak. Matter of fact, our customers demand, our customers are doing better and better, but they are, I mean, higher revenue. Our customers' revenue is getting higher, but that doesn't mean that they will need more wafers because they have already have some wafer inventory. So our view now is that Q4 will be slightly lower than Q3 and Q1 next year will be still a little bit weak. But I think that it's very likely starting from Q1 next year or Q2 next year, we will see Q-o-Q starting from Q1 next year or Q2 next year, then our revenue should be picking up quarter-by-quarter. That's our view. And you are very right that some IDM companies just very recently, just about a couple of months ago, we started seeing some IDM companies slowing down their demand and especially for automotive components, automotive applications. That's very true. I think that will be a short-term thing because they have high inventory, so they are trying to reabsorb the inventory. That's one of the reason. And also the market gradually picking up. So I think that's definitely -- that's one of the main reasons why our Q4 this year and Q1 next year will be maybe a little bit slow. Main reason is because IDM is a little bit weakening a little bit right now. That's what we are seeing. But the impact will be manageable, I think, will be not too significant. That's the status. So far, it's hard for us to give numerical guidance for Q3 or for Q4 2024 revenue for now. But I think revenue trend-wise, Q4 will be slightly lower than Q3 and Q1 next year will be flattish or slightly lower than Q4 this year. Then we will start seeing pickup. That's our view. Thank you very much for the question. And next question is from Bruce. The first question is that, LTA is trending down for 3 consecutive quarters. Do we see the trend continuing? Any changes in our 3, 5 years CapEx plan? I think you're talking about LTA. Are you talking about prepayment or yes, prepayment wise, our prepayment balance is trending down a little bit but very slowly from TWD 38.3 billion to TWD 37.9 billion from end of June to end of September. So LTA, prepayment wise, is trending down very slowly. LTA shipment, actually revenue-wise, Q1 was our peak and Q2, Q3 was weak and Q4 will be a little bit weak as well. I don't think that this trend will be continuing. Just like what I've said, Q1 next year, maybe the LTA shipment will be still flattish or a little bit low, but the overall shipment will be recovering from Q2 next year. The reason we think that the revenue will be picking up is that, if you check our, I mean right now, the slowing down is that IDM companies are a little bit slow. But if you check the revenues, actually more and more customers are announcing a very positive revenue increase, including many Tier 1 companies, their revenue are getting better and better quarter-by-quarter. And the reason that they don't really push us to ship more is because they still have quite some inventory to digest. That's why they have high revenue, but still it takes a bit time for them to reabsorb the wafer inventory. So I think that this kind of situation is not going to be continuing starting from the second quarter next year, it should be improving. And our next 3 years to 5 years CapEx plan, like what I answered earlier, this year, 2023, our CapEx will be lower than our expectation because of our push out, intentionally push out including negotiated a little bit late tool installation schedule and late payment. But it will be catching up in '24 next year. Peak will be 2024, the overall CapEx, and I think will push out a little bit. '24, '25 will be high and will push out a little bit to '26. That's our point. That's our view. And the second question from Bruce is that what's the financial impact for GWA with and without CHIPS Act support? That's a huge impact. We definitely need CHIPS Act, and that's a part of our equation. So when we evaluate that, are we going to make the investment in the US? I think that's one of a very important factor. Of course, customer demand is one important factor. Customer LTS is another important factor. And what's very important is that government support. So with or without CHIPS Act support, definitely it's a very important financial impact to us. So far, I think Leah already answered and updated a little bit about the CHIPS Act status. I think so far, we're doing okay. We have already filed the pre-application and also we're working on our final full application. So far, everything is doing okay. And the third question is from Charles from Bloomberg Intelligence. The first question, the inventory status and normalization forecast. Could you provide an update on the current wafer inventory levels at your clients' facilities, specifically, what is the anticipated normal inventory duration in the current market contest? Will it be around 100 days additionally? When comparing memory and memory segments, which do you foresee normalizing quicker in the upcoming quarters? Well, very good question. I think actually for us, it's not really very easy to really figure out that what's the wafer inventory level at our customer site. They announce their total inventory numbers, but not necessary to tell us how much of the inventory is wafer. Some of them is their finished goods, some of them is raw material, including our wafer. So it's not very clear for us, but we believe that it's somewhere around maybe 30 days, 40 days. I think it should be this level. We don't have the number, that's just our guess. And at GWC, our company's level, our finished good inventory level is quite low. So it's very healthy. I think that the normal, so-called normal wafer inventory level should be 1 to 2 months. That's a normal level. Wafer only. I'm not talking about the whole thing. That's our view. Wafer finished good level at our customer side. But again, let me repeat this again, that actually we don't really know that the wafer inventory level at our customer. We know that very well at our site, but we don't know that at our customer. And the memory or non-memory segments normalizing. Which one will be normalizing quicker? This one, inventory-wise, memory inventory is higher than non-memory segments right now. But there are quite a lot of exciting killer applications such as AI. For AI applications, you need a lot of memory as well. That will be another driving power for the recovery for memory. So, current inventory level-wise, I think memory is higher than non-memory inventory level. But the recovery right now, it seems that non-memory's recovery is faster than memory. Depends at, if in the next couple of quarters, it's very likely that high resolution, high efficiency, advanced server, and AI applications will consume a lot of high speed density or advanced memory like DDR5, that kind of advanced product. So we think that both of these 2 will be okay, but relatively, maybe non-memory segments, inventory consumption, or rebalancing will be faster than memory. That's our view. And next question is capacity utilization trends. Regarding your Q3 capacity utilization, can you share the latest figure for 6-inch, 8-inch, and 12-inch wafers? What are the exceptions going forward in terms of utilization rate? Right now, our utilization rate, the worst one is small diameter. Small diameter utilization rate is about 60% to 65% right now, close to 70%, slightly below 70%, small diameter and 8-inch used to be okay in the first half this year, but starting from Q3, 8-inch is much tougher. It's around 80% to 90% our 8-inch utilization. And for 12-inch epi is 100% fully loaded, 12-inch Polish wafer is lower than -- epi wafer is somewhere around 90%. That's our utilization. 2 exceptional products, which is fully loaded. One is flow zone wafer, especially flow zone 200 millimeter is fully loaded and the second one is silicon carbide. Both of these two items are exceptionally full for now. But as I explained earlier, that some IDM companies and the softeners, it seems that we see some softening of automotive applications starting from Q4. So maybe signal car by demand will be slowing down a little bit, but basically, our 2023 compound revenue will be still over 10 times higher than last year. And next year we are still expecting a good Y-o-Y growth for compound and flow zone as well. Flow zone right now is fully loaded and we keep expanding our flow zone operation. I think starting from 2024, we will have another additional strength for our flow zone wafer. In addition to, on top of the high demand and other advantage for GlobalWafers flow zone is that starting from Q4 2024, our flow zone operation in Denmark will be 100% renewable energy. I think that is another factor. Many of our customers are very interested for that. And next is from Ms. Lina from Sunny. Okay, so the question from Sunny is that, directionally overall semi's demand recovery has been slower than expected. However, most of the silicon wafer greenfield expansions are still on track in terms of timeline and scale. How should we assess the supply-demand into 2024, 2025? Yes. So far, silicon wafer companies' greenfield expansion basically are on track in terms of timeline and scale. That's true, but it's true for construction, basically for tool installation, because from 2022 or early 2022 or mid-2022, those new expansions have already been designed. So, for example, if the design, the construction is for 300,000 wafers a month or 400,000 wafers a month, you have already designed. So, so far, since the silicon wafer company's expansion are -- basically follows the same timeline or just slightly a couple of months or 3, 4 months delay. So no big delay, skill same, but the adjustment is delivery tool, delivery schedule. I learned that including GlobalWafers, I think we will do our best to accommodate with our customers, maybe adjust the tool installation a little bit to meet the pickup, but, so for '24, I think especially for the first half '24, I think from wafer capacity to viewpoint capacity is higher than wafer demand in 2024 worldwide, industry-wise. Capacity is over demand. But starting from '24, actually, as I said earlier, most of our customers have already started picking up their revenue from this year, not next year. So you see that many Tier-1 customers, their revenue are improving. Many of them, you see a lot of the revenue improve from '23. No impact for silicon wafer companies now because they are reabsorbing the inventories now, but maybe 1 or 2 quarters later, inventory will be reabsorbed and much more at reasonable, normalizing level. So at that time, definitely our customers' business is increasing and inventory is very stable, very healthy. Then they definitely have to restart wafer -- increase the wafer start every month. So that's our view that's starting from second half. The situation will be getting healthier and healthier. Now, that's our view. Okay. And the second question from Sunny is that one of your peers on his recent earnings call mentioned that for LTAs, some key customers are trying to renegotiate on the price term for 2024. How's your discussion with the large customers under the demand uncertainties, yet increasing industry supply? Yes, that's a very important question. Of course, there are a lot of -- I know that our customers are facing a lot of challenges in the past several quarters. And also 2024 customers are, of course, they have some inventory adjustment pressure. We know that, up to now, of our customers and also GlobalWafers, I think we honor LTA. We honor our commitment because of our very long-term, long-standing relationship so far. Yes, we do have a lot of discussion, but so far, customers are all following the commitments they made on the LTA. So that's current status. Okay. Yes. That's from KGI Jennifer. Based on LTA enhance and spot price trend for smaller diameters, does the firm forecast ASP to trend up Y-o-Y in 2024? I think ASP, LTA price -- we don't know other company's LTA, but our LTA price for 2024, definitely ASP vary -- LTAs in 2024 definitely is higher than 2023, because starting from 2024, we will have higher and higher depreciation due to expansion, new capacity, new tool. So depreciation is much higher. Our pressure is there. So before we kick-off the whole expansion, we have already talked and agreed -- talked with our customer and agreed by our customer that they understand that that's the cost of our expansion, that's the cost of our capability upgrade and also capacity expansion. So our 2024 ASP is higher than 2023. And spot price-wise, I believe that next year should be -- this year is a little bit panic here and there and a lot of uncertainty, but I think next year, ASP should be more -- or spot price should be more reasonable and stabilized. So GlobalWafers' view is that 2024 ASP will be higher than 2023. And next question is that, is it possible to slow down GWA if CHIPS Act is not smooth? As you might know, there's no one from Taiwan got it yet. I think it's too early. Our focus now is to do whatever needed to supply a full application. I think we address, we meet all the criteria, audit criteria requests from CHIPS Act, and we really improve the overall resilience in the supply chain in the US. So we believe that we will get the support. And yes, your question is very important, but that's not our focus. Now, our focus is to do our best to explain ourselves and to get the support. It's our original plan. So that's the question. Okay, thank you very much. I think I have already answered -- yes, I have already answered all the questions I received today and appreciate. Thank you very much.

Ladies and gentlemen, we would like to express our sincere appreciation to all of you for your valuable participation today. The earnings call concludes now. Thank you and have a wonderful evening.

Thank you.