Nanya Technology Corporation ($2408)

[Foreign Language] Welcome to Nanya Technology's 2026 First Quarter Earnings Conference Call. [Operator Instructions] The conference will be held only in English for investors around the world. Today's conference will be approximately 60 minutes. Nanya Technology's President, Dr. Pei-Ing Lee, will summarize our operations in the first quarter of 2026, followed by our guidance for the next quarter and key messages. And then Nanya Technology's Executive Vice President, Dr. Lin-Chin Su; Vice President, Mr. Joseph Wu; and Financial Executive, Mr. Philip Jao, will join us as we open our Q&A session. Today's presentation materials are available for download at Nanya Technology's website at www.nanya.com. As usual, we would like to remind everyone that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause the actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor notice that appears in our presentation materials. Thank you. And now I would like to turn the call over to Nanya Technology's President, Dr. Pei-Ing Lee, for the summary of operations and current quarter guidance. Dr. Lee, please begin.

Ladies and gentlemen, welcome to Nanya Technology Q1 Investor Conference. I'm Pei-Ing Lee. Our today's presentation includes Q1 '26 revenue and results, CapEx and bit shipment, market outlook and business review and outlook. I may have a little more material to share with you in today's presentation later on. First, start with the financial results summary. Our Q1 '26 net sales comes to TWD 49.087 billion versus Q4 last year, TWD 30.094 billion, Q-to-Q up by 63.1%. Gross profit and gross margin comes to TWD 33.316 billion at 67.9% in Q1 versus Q4 last year, TWD 14.759 billion at margin of 49%. And operating income, TWD 30.111 billion at operating margin of 61.3% versus Q4 last year, TWD 11.781 billion at 39.1%. The nonoperating income, TWD 1.607 billion and income tax expense at TWD 5.66 billion. And the net income for Q1 comes to TWD 26.058 billion and a net margin of 53.1% versus Q4 last year, TWD 11.092 billion, a margin of 36.9%. For the earnings for the quarter, TWD 8.41 per share versus Q4 last year, TWD 3.58 and the book value comes to TWD 62.25 per share versus Q4 last year, TWD 54.99 per share. Quarterly revenue and results summary, revenue Q-to-Q up by 63% year-to-year up by 582.9%. For ASP increased by over 70% Q-to-Q and year-to-year increased by over 200%. For shipment, Q-to-Q down by mid-single digit and year-to-year up by more than 100%. For exchange rate, we're seeing favorable low single-digit favorable and year-to-year unfavorable mid-single digit. For the Q1 '26 result comparison, net sales TWD 49.087 versus TWD 30.094 billion, up by 63% and the result is due to ASP increased by over 70%, with shipment decreased by mid-single digit and exchange rate favorable by low single digit. And gross profit TWD 33.316 billion versus TWD 14.759 billion. Margin is 67.9% versus 49% and gross profit increased by TWD 18.6 billion, mainly due to higher ASP. For operating expense, TWD 3.205 billion versus Q4 last year, TWD 2.979 billion is marginally increasing. For operating income, TWD 30.111 billion at operating margin of 61.3% versus Q4 last year, TWD 11.781 billion at margin of 39.1%. The OP income increased by 18.3% (sic) [ TWD 18.3 billion ], mostly due to higher ASP. And net income TWD 26.058 billion and a net margin of 53.1% compared to Q4 last year, TWD 11.092 billion at margin of 36.9%. And the net margin increased TWD 15 billion and the difference between the OP margin and net margin mostly due to income tax expense, TWD 3.4 billion unfavorable. Operating expense for SG&A expense. For Q1 this year, TWD 1.096 billion. And we are seeing SG&A increasing in Q4 last year and also in Q1 this year, mostly due to employee bonus spending. And then for right-hand side, R&D expense also increasing from Q1, Q2, Q3 last year to Q4, TWD 2.127 billion and at Q1 this year, TWD 2.109 billion and mostly also due to employee bonus. For cash flow, beginning balance for Q1, TWD 58.074 billion and with the cash from operating activities, TWD 31.287 billion and capital expenditure, TWD 2.809 billion and financial activity also minus TWD 533 million. The net end balance at TWD 86.019 billion with cash flow of -- free cash flow of TWD 28.478. And this come down to the note underneath of this page. Our net cash comes to TWD 68.2 billion. The net cash means that our cash equivalent, TWD 86.0 billion, minus debt of TWD 17.8 billion. And the net cash, TWD 68.2 billion is exclude the private placement that happened in April, which comes to TWD 78.7 billion. This chart here shows Nanya's performance in net income over the past 13 years plus Q1 '26. As indicated here, over the past 13 years that Nanya has been profitable in 11 years. And with the Q1 this year, TWD 26.1 billion net income compared to the two years of loss, 2023 and 2024. In the Q1, we are very much compensated the loss happened in 2023 and 2024. And on the bottom chart here shows Nanya net cash. Net cash means that our cash minus debt, okay. From the beginning of 2013 at minus TWD 71.3 billion comes to at the end of Q1 at TWD 68.2 billion positive. This is an encouraging trend, and we are expected to self-fund our new fab construction. For CapEx and bit shipment. On the left-hand side of the chart, our CapEx was TWD 13.4 billion in 2025 2026 in Q1, CapEx is TWD 2.8 billion. However, for the year 2026, we expect CapEx up to TWD 52 billion. And within those TWD 52 billion will be around 30% for wafer equipment and 70% mostly for cleanroom construction and facility for our new fab. And on the right-hand side of the chart, bit shipment in 2025, our bit shipment up by 50%, okay? In Q1 this year, our bit shipment was down by mid-single digit, okay? And we've seen our inventory level becoming healthy. And in 2026, the whole year, we target to have around 15% year-to-year growth versus 2025. For market outlook, in general, the market -- the whole market, AI-driven CSP CapEx has supported strong cloud DRAM demand, that's including HBM, RDIMM and low-power DDR5. On the other hand, constrained DDR5, DDR4, low-power DDR4 and DDR3 supply has lead to legacy DRAM end of life. and we are expecting training and inference may trigger more customized edge AI applications. From a supply side, in 2026, we see marginal new capacity introduced by industry, which is more focused on high-end CSP and value-added demand. From demand side, AI has driven overall DRAM demand, HBM, high-density RDIMM and low-power DDR5 leads to overall DRAM demand. We're seeing strong DDR4, low-power DDR4, DDR5 demand for high-end SSD, BMC and NICs. For conventional, high-end PC and mobile demand for DDR5 and low-power DDR5 remain consistent. Others means that the consumer side, we're still seeing strong consumer demand for high-ticket items. For the smaller ticket items, demand is slowing down. However, smaller ticket item in general is already small share of DRAM consumption to start with. So the overall demand remains strong, healthy and sustainable. For business review and outlook. Nanya just completed our private placement. Update for private placement is that four of our major customers participate in Nanya's private placement. We have made the announcement in MOPS on March 25. The total proceeds of TWD 78.72 billion, which means 10.19% ownership of the private placement also announced in MOPS April 8. For the supply agreement, including a stable supply of multiple product mix. Why we're doing private placement? First of all, we strengthened Nanya and our customers' partnership. And second, we built up with customers, our win-win position in AI and CSP supply chain, that's including SSD, networking. And also with the cash injection to Nanya new fab, enhancing Nanya's DRAM supply. And for Nanya specific, we position ourselves in the AI value chain. For the financial update and outlook, and in 2025, we have a profit of TWD 6.61 billion, EPS TWD 2.13 per share for the whole year. And our Board has approved a dividend of distributing TWD 4.65 billion and approximately TWD 1.35 per share. This is based on 3.5 billion shares outstanding after private placement. In Q1 '26, Nanya made a profit of TWD 26.6 billion and EPS of TWD 8.41 per share. In Q1, gross margin at 67.9% and net margin at 53.1%. And for Q2 '26, we are expecting further improve beyond Q1, and we are expecting high gross margin is sustainable in the next few quarters. And for operation update and outlook, Nanya DDR5 contribute to our 10% revenue. However, it's flexible to increase if needed. Based on our supply agreement, likely the percentage will be increasing for the coming quarters. For DDR4, low-power DDR4, we are serving industrial-wide supply gap. And also for customized AI Ultra Wide I/O memory is starting to contribute initial revenue. It's a small percentage, but it's already contributing initial revenue. Our new build construction on schedule and target equipment moving in Q1 next year. And for our third-generation 1C and fourth generation 1D and EUV development are on schedule. And for ESG recognition for the last quarter, we are selected as top 100 innovation by Clarivate on the fourth consecutive years. Now we may move on to question-and-answer session.

Yes. Thank you, Dr. Lee. Ladies and gentlemen, we are now moving into Q&A session. We will begin taking questions from dial-in participants and followed up by the text questions form webcast. [Operator Instructions] Please limit your questions to two at a time to allow all participants to have an opportunity to ask question. We thank you for your cooperation. [Operator Instructions] The first one to ask question, Charlie Chan from Morgan Stanley.

Dr. Lee, congratulations for a very strong result. Your gross margin is amazing, amazingly high. So I have two questions first. First of all, is about over the past three months, do you see faster ASP price hike? Because I remember three months ago, the guidance was quite conservative, right, like 20% Q-on-Q price hike. But I think that implies ASP increase to be much more than that. And also, you talked about the future trends, right? So I'm not sure if you noticed the recent spot market dynamic. So it seems like your outlook is very bullish, but the spot market is suggesting otherwise. So, first of all, can you comment on the price trend in the first quarter and 2Q?

I think -- your first question about ASP for the past month was quite encouraging for the supplier. And the margin is also in general, very promising for the supplier as well, okay? And most importantly, we're seeing the margin is sustainable. And so your question about the last quarter, I mean, in Q4 last year, I commented like 20% ASP. Yes, it's true. At that time, I only see one month, okay? So maybe that was my [indiscernible] or my misunderstanding of your question. And your second comment is on spot market. I trust the spot market is mostly related to DRAM spot market or general overall spot market, okay? I cannot be expert in the spot market. I think you are, okay? You're pretty much the spot market expert, okay? And regarding to the spot market was impacted by overall, there's a Middle East geopolitical issue, okay? There's energy-related issue, okay, overall the impact on the global economics. But in general, because of AI specifically require DRAM as a critical component. And AI development has been continued to be quite encouraging. So that's a result of the DRAM market continue to be quite healthy, okay? As for the spot market specific for DRAM, I think that you influence probably more than mine.

So I don't mean to influence the market. We just share what we are seeing on supply side, demand side and pricing side. But -- and actually, I was asking about the spot price and -- but it was also very helpful to get some color on the capital market feedback, but we would like to ask both. And so saving one question for me.

Okay. Spot ASP, recently, there are some fluctuation on the spot ASP. I'm sorry, I misunderstood your question. Okay...

Okay, spot market as well. So we really care about.

Yes, I heard spot market, but I didn't know you mean spot market, spot market, okay?

Yes, side by side.

Okay. Spot market is -- first of all, the spot market is a small percentage of overall market, very small okay? And actually, as AI increasing the spot market even getting smaller, okay? That's the first point. Second of all, spot market, there's a lot of fluctuation due to -- there's a lot of leverage in the spot market happening by certain players. It's -- so put it this way, put it as an example, in general speaking, you may be seeing one product in the general market, okay? General market means that in the normal market other than spot, you may be seeing a product selling, say, supposedly TWD 20 or so. But the spot may be already jacked up to TWD 45 or even TWD 50, which is quite outlier compared to the general market, okay? As a result, when the outlier making certain adjustment due to certain reasons, they may have sufficient inventory or whatever reason, we don't know. The price may be drop all of a sudden by 30%, but you figure that TWD 45, TWD 50, down by 30%. What is it, still TWD 30-some compared to regular around TWD 20. I'm just giving you a general example, okay? And that's the reason why spot market is fluctuating overall speaking. But more importantly is that I just mentioned that spot market by itself is a small percentage of overall market. In general speaking, other than spot market, the demand is still quite healthy and also quite sustainable.

Rightly, if I may this spot market dynamic. I think when this so-called up cycle, super cycle began like last year, spot market price was a very good indicator. I'm not saying it kind of demand, right? I'm just saying that you could tell us something, especially recently, we see China smartphone shipments tracking much below expectations for some China brands like their smartphone probably down 35% year-on-year. So I'm not sure if we should associate this spot price correction to weaker demand.

Okay. I think I commented in my presentation also, we're seeing a small ticket item which means that where your phone cost percentage is high, those small ticket items may get influence, okay? And -- but as I say, those area is important, but it's still a relatively small percentage in terms of consumption, okay? That's including small item, low end, whatever it is, okay, they will start to see some pressure in the phone cost, okay? And those adjustments, as you know, is making some adjustment already, okay? But overall speaking, more important is overall demand and supply-demand balance. We don't see that to be overshooting or undershooting in the overall market substantially.

Okay. So my second question is about the LTA coverage because we can understand that the eSSD networking or AI readiness is going to be very, very strong, right, in the coming maybe 5 years, 10 years. But can we get more detail about how much of your approximately 2027, 2028 business can be covered by these LTA contracts?

In general speaking, we are trying to partner with our customer, okay, to help their business development. At the moment, their business development in the high-end side is, as I indicated just now, okay, in the SSD, in networking, in BMC, NIC, those areas, okay? So that's in general what we intend to help our customers making development. However, LTA coverage will cover overall speaking, what is our customers' demand and the product portfolio that we offer to them, including not just that, of course, I mentioned that it may include DDR5, low-power DDR5, DDR4, low-power DDR4, DDR3, RDIMM, SO-DIMM you name it. SO-DIMM with ECC, all kind of different product portfolio. Nanya currently offers to the market around more than 40 product portfolio concurrently, okay? And those products will continue to serve our customers in long term. Plus we are also developing new technology, process technology or new product technology to be offered. That will combine with the current 40-plus product portfolio in the next few years.

Right. Is there any percentage of your business can be covered by LTA?

We generally try to basically formulate our business, including long-term LTA, middle-term LTA, okay, short-term LTA and also monthly LTA. We like to have a combination of all of those together, okay? And for the reason that some of our business is committed, okay? Some of our business that we also need to take care of the eco cycle in the overall DRAM supply and demand industry, okay, making sure that our customers sufficient DRAM supply. However, not to extra to put in the inventory, while the other customer may not have sufficient supply and have a line down situation. So we try to do our best. We cannot do everything perfectly well, but we try to do our best to make the industry more healthier.

[Operator Instructions] Next one to ask question is Simon Woo from Bank of America. [Operator Instructions]

Yes, congratulations, Dr. Lee. Great results. So the case I should be I think you must be very happy with a very high margin, but your point today, you may raise the price further. But how are you going to manage some customer resistance to the further and further memory's price hike. Meanwhile, your gross margin OP margin already record high. So how about if you just make the memory's price very stable for the customer rather than increasing further and further.

This is a good question. Actually, the margin is already high. And we -- of course, we will be doing our ASP according to fair market price, okay? Of course, we will discuss with our customer on fair market price case by case and day by day also, okay? And this the buyer and suppliers discussion and negotiation has always been happening even it's a down market, not [indiscernible] market or it's up market's always happening day by day, okay? And so at the end, we are looking forward to have a fair market price to our customer. And that's the most important, we're also seeing the concern from our customer as well. And our customers also seeing our concern on the fairness as well.

So you mean we are -- still there are many customers which need our DDR4 and even DDR3 but your customers are competing each other among themselves. So some customers accepting higher price then you can sell the product for those customers. So as long as the shortage continues, maybe you can raise the price.

In general speaking, Simon, I cannot comment specifically on one customer versus the other or one product versus the other. In general, this is the fair market discussion throughout all the time, okay, not only now, but also in the past, okay? So that's a general situation. But your point about the high margin and maybe customer resist, and that's always happened now even at a very, very low margin. Customer also resist to be accepting the price as always, okay?

Yes. So you think the ASP second quarter still will increase quite meaningfully quarter-on-quarter basis. That's the industry trend.

Yes. Yes, that's the expectation. And also the confidence level for that is relatively high.

Yes. But even usually the September quarter peak season and then December quarter still, okay. So, the industry trend, the upside some room to see the price increase September quarter, December quarter.

That's most of the seasonality topic, okay? And seasonality could be related to two important things. First of all, is the consumer consumption seasonality. And also, it also depends on major company like enterprise, their budgeting, their spending by quarters, okay? So that could be different from one company to the other company. That's general seasonality, okay?

Yes. Very quickly, you already mentioned the LTA, but do you give a price [indiscernible] portion of your sales with LTA or still small portion or maybe your customers already get from the committed price and volume, but the price is still mostly negotiating monthly or quarterly basis. So maybe would you recap the definition of LTA in terms of the volume and in terms of the price and then time horizon...

For LTA, we will be supporting our private placement subscriber, our partner on that as well as our existing LTA will continue to support existing LTA okay? And the LTA percentage will not be covering 100% of Nanya's supply, okay? We will try to, as I said very beginning, we will try to have a long-term LTA, middle term LTA and a three-months LTA and even monthly price and deliver, okay? So that's going to be -- continue to be Nanya policy, okay? But to be sure, we are making sure that our supply agreement and LTA is fulfilled as much as we can, okay?

So you are agreeing on is more like one year, two year, three years' commitment. Meanwhile, price can be changed on a monthly quarterly basis.

That could be different customer by customer.

Yes. Okay. Okay. So the SSD case, again, you are currently selling the DDR4, right, for the eSSD customers?

Both DDR4, DDR5, they're both, okay?

It is called for proper memory or cache memory for SSD solutions?

Customers' solution, whatever they want, for the cloud.

Yes, yes. Okay. Thank you, sir. Maybe, I'll stop here for now, and then I'll get it.

One point, Simon, you asked a question before about employee bonus. I'd like to take this opportunity to share with you on the employee bonus plan.

And also, if you pay a lot of special bonus, maybe...

I'd like to make a couple of comments on that at this point. First of all, employee bonus has been top priority for my presidency, okay? And for the last 13 years, we have made profit for 11 okay? For all the profitable year, we have distributed not only yearly bonus but also quarterly bonus to our employees, okay? And even with those two years, we are not making profit out of 13. We still try to do performance-based bonus for the employee, okay? So I'd like to emphasize that we are trying to share bonus with our employees.

So you have already provisioned the bonus expenses in Q1 results?

Yes.

Okay. Then we don't have to worry about any margin.

It's already -- it's already considered.

Yes. And then sorry, overall, you so glad to hear your confirmation dividend payment based on the 2025 research. Would you repeat maybe your target payout ratio of 50%, 60%?

You mean a dividend. Okay. The dividend, again, this is subject to Board approval, okay? And in general, we will measure the market situation and our cash requirement and our -- also shareholders' consideration, everything together? And we will discuss in the upcoming Board and shareholder meeting as well, okay? And for instance, for the last year, we are distributing a higher percentage. But likely for this year, we may be distributing less percentage because our need to our new fab construction and also to build up our future development.

Next question, Charlie Chan from Morgan Stanley.

So first question is also on the quarterly price. So can you provide some broadly range for 2Q contract price increase for DDR4?

Charlie, we won't give out on the numbers. I just mentioned that we're seeing some -- from the supplier side, we've seen some remarkable price side and the margin will get higher in Q2, okay?

Yes. So, anyway, based on our calculation, right, I mean, if the January price up 20%, February, March each also up 20%. I think the starting point for April is already very, very high. So I would say the quarterly price hike, 40% to 50% is the current market expectation. Is that too high or conservative?

Charlie, your guess is better than mine.

Okay. My guess is 40%. Do you think that's about right?

I think we are not putting a number in the market, okay? I would try to say a few tens of percent, okay?

Okay. Okay. Sure, sure. And also on the supply side, right, in -- anyway, in our research, we were a little bit worried about for Korean supplier, they extend the EOL, end of life of DDR4. And also China peer, I'm not sure if it is also the case you're seeing that they probably will add some DDR4 capacity. I know demand is very, very strong, but besides your customers signing LTA with you, do you think customers are also trying to push other fabs to produce more DDR4 in the coming years?

My answer to you is, Charlie, our supply is not limited to DDR4 and not limited to [indiscernible] DDR4. It's a wide scope of supply. And I would like to share with you maybe I would like to share with you, I don't know if we see it on my -- on this presentation, okay? Basically, this presentation here -- this chart here is showing, first of all, Nanya net income on the top chart, okay? And the middle chart here shows Nanya's sales in regions, okay? And over past more than 13 years, our sales into China customer has been in 20 percentage plus/minus 5% or so, okay? And our sale to worldwide customer is around 80% plus/minus 5%, okay? And all this sale is supported by LTA and monthly, okay, including worldwide sale and sale to China customer, okay? And the bottom chart here show you that China's domestic supply, including all the supplier in China is basically going up quite substantially over the past 10 years or so, okay? What I mean is that if you look at this chart versus Nanya sale in region versus Nanya profitability, okay, it's really not correlated, okay? It's really not correlated. And on top of that, I want to indicate one year, which is 2023, which is the worst year for Nanya performance. That year, Nanya lost TWD 7.4 billion. But on the same year, the worldwide companies lost between TWD 180 billion to TWD 340 billion, which means that if there's any impact, any correlation, okay, with what you've just been concerned with China domestic supply, it's not limited to Nanya, okay? And if you look at this chart, you found that it's really not direct correlation with Nanya performance. It's not even direct correlation with worldwide company supply. okay? So I'd like to give you this information in what's been happening over the past 13 years, okay?

Okay. Then yes, because I think memory or DDR4 is still kind of commodity, which is sensitive to incremental demand and supply dynamic, right? So my question was very direct about whether you are seeing the DDR4 supply is growing. I'm not saying like two years later, I mean about the coming six months.

DDR4 has various of DDR4. DDR4 is not just a small item use DDR4. There are large ticket items use DDR4, there are high-end use DDR4, their communication use DDR4. There are RDIMM use DDR4. They are all kind of different, different DDR4, okay? Their DDR4 can be used for cloud. Their DDR4 cannot be used for cloud, okay? So in general, you cannot take DDR4 saying that everything is one story. There's a lot of story behind DDR4. And even with emphasis on DDR4, I believe that Nanya is capable of and flexible of switching our product to meet our high-end customer requirement, okay? And I also believe that DDR4 will continue on to serve many, many areas for many, many years as well, even with more or less here adding more or less, okay? Important thing is there are different type of DDR4 for different applications.

Okay. Okay. Yes. I think I take that you have a big exposure to specialty market and there was a decoupling of your performance versus the supply based on your analysis, I take that. And switch gear to back to LTA discussion. So can we get more details about -- I'm referring to the LTA more than a year. And especially for those strategic partners investors, are those price negotiable? And are there any sort of prepayment in addition to the private placements for the LTA.

Charlie, I cannot share with you our agreement because under nondisclosure agreement that we have with our customer. But I can share with you that we will treat our customers fairly. And also that will be also fair to Nanya. That means that, in general speaking, we're talking about fair market.

Next one to ask question, Jay Kwon from JPMorgan.

I just have one question. I'd like to ask you the sales application mix. So could you share your sales from server applications for last year, both Q1 and also enterprise SSD grade, the DDR4, DDR5 sales mix for 2025 and also Q1 '26.

In general speaking, our share to cloud server, okay, plus PC is around 20% to 25%, okay? And for the storage, which means SSD is around 10% for now, but that percentage may increase, okay? And then we have networking, it's around between 15% to 20% of networking. Networking means communication as well, okay? And other than that is a race, and the race is general consumer. So one thing to mention that automotive and industrial is about approximately 10%.

Just within the RDIMM and the PC, as you said for the cloud and the computing in general, if you exclude the PC portion, just looking at the RDIMM portion, then is it 10% to 15% range?

That will be changing as we speak, okay? And we are -- I cannot share you the specific percentage on that, okay? And in general speaking, we are doing around 20% to 25% for server DIMM and PC combined because they use the same product, mostly DDR4 -- mostly DDR5 or even DDR4.

Next one to ask questions is Simon Woo from Bank of America.

Very quickly for the new fab. So you are saying new equipment for the new fab, the installment will start in Q1 2027. That means the building mostly done already. I mean it will be done by the end of this year.

The share -- the structure is almost done already. Right now, we are going through facility and cleanroom construction.

All right. Great. Hopefully, you can get it there. IC, ID, not yet EUV, right, the multi [indiscernible]?

1C, 1D and EUV is under development. And 1C already have some beginning results.

So 1C should have a EUV layer?

No, no. EUV layer has been exercised in many different generations. And we don't see that it's a requirement for even 1D, but we will exercise it in 1D or even 1C.

Without EUV?

With or without EUV.

Okay. So then your CapEx for the new fab for the DUV level rather than EUV.

We will have both, okay? We will have DUV facility and also EUV facility.

Yes, yes. And then -- yes, people are still asking the helium and the bromine supply shortage, but let me run the today fab. [indiscernible] are you going to see any gas shortage because of the Middle East?

You're talking about helium, right?

Yes.

In general speaking, the helium can be available other than Middle East, okay? So there are no immediate shortage issue yet. However, the price is increasing for sure.

Yes, yes. And then very quickly -- sorry, a little bit confusion is your revenue mix. Previously, I remember you said maybe more than 50% of your revenue is consumer.

Yes.

So, today, you sound already 20%, 25%.

No, no. Simon, sorry for misguiding you. Our consumer is anything other than PC server and low power, everything we put in consumer. And today, I commented on SSD, commented on auto, industrial, comment on networking. They are all in consumer in general speaking. But today, I just say more specific on those areas. Yes, in general, we lump it up as a consumer.

Okay. Then maybe let's start with application. So server plus PC together computing related, again, about 20% to 25% you are saying?

Yes, plus/minus, yes. 20% plus/minus. That's including PC and server, yes.

Okay. This portion includes the DRAM for SSD product or not?

No, not including SSD product.

But the SSD market is not so big and the dedicated in consumer use significantly high amount of the DRAM. So the DRAM for SSD, I'm still very, very at your...

Actually, in general speaking, because of DRAM is helping NAND flash to perform well, especially in the cloud computation. So that area becoming more and more important as the AI development in the cloud today, but it may even go beyond that.

Yes. So but still, less than 10% of your revenue. So DRAM for SSD...

Today, for now. For now. For now.

Pretty small. Less than 10% of your revenue.

10% is very important for us. My -- yes, there are some questions online. May I just giving the online question a little bit of chance to ask? Sorry, Simon.

Thank you for your questions. We are going to move on to the webcast question. Dr. Lee, please begin.

Okay. The first five questions from Yuanta, Michael. The first question is DDR4 16 gigabit current qualification status expect revenue contributing timing. Yes. Currently, the customers are basically try running our 16 gigabit DDR4, and we are expecting second half this year to have revenue. Okay. What is the wafer-to-wafer validation progress, revenue time line and outlook for new customer this year? We are doing the engineering run today for wafer-to-wafer validation, okay? And revenue-wise, we are expecting to be sometime next year. Third question, any upcoming debt or equity financing? What is the target leverage ratio and allocation split between CapEx and R&D? I think I commented that in my presentation material on the CapEx and as well as R&D from our budgeting point of view. Okay. And -- sorry, Q3, let me through Q3. Upcoming debt and equity financing, we're just finishing this round of private placement. For now, we don't need to raise the debt. And for the future equity financing, for now, we don't have a plan yet, but always there's some future possibility that we will take into consideration and -- but not for now, okay. Fourth question, what is DDR5 projected shipment in mix and target market for 2027. This will be very much depends on our customer demand, and we are discussing this topic ongoing. What is your LTA negotiation process? Will there be quarterly price reset or down payment requirement? In general speaking, all the LTA is case by case different, okay? And it could be -- in general speaking, for quarterly, we will have one quarter fixed pricing. And next question is from Capital Security by [ Leanna Chan ]. Two questions. First question is, is there a plan to presecure LTA for upcoming fab 5 capacity. Our LTA not only covering current 3A and 3A-N also covering future fab, and we will consider the whole capacity as a whole. His question 2, for existing LTA, are they primarily fixed price or floating? Do this contract price include price negotiation clause and to capture the upside during the current DRAM pricing? In general speaking, when the price is fixed in our agreement, in general, we will recognize that and our customer will recognize that. And we will try not to make adjustment until the next cycle of negotiation. The next question coming from E.SUN Securities by [ Kony Su ]. His first question is, is there any strategic cooperation in AI storage with Sandisk, Kioxia, and Solidigm? And I commented on that already. In general speaking, we are trying to use DRAM to help our customers able to engage in AI CSP application also within general AI application as well. And second question, what is your view on CXMT capacity expansion and its impact to DDR4 pricing? I already commented that on previous Charlie's question and also added with one of my presentation for you. The next question, beyond weak demand, are you seeing OEM spec down or reduce DRAM content per device due to rising cost? Generally speaking, small ticket item and some ticket item already starting to have that happen, okay? And that's included in my comment to all of you just now. And the next question coming from KGI Securities, [ Michael Shan ]. The question is, Nanya has raised over TWD 70 billion through private placement. And after covering this year's CapEx, along with strong earnings growth, it looks like you should have a fairly solid cash position by next year. And I know it might still be a bit early, but could you share some view on how you are thinking about deploying this cash? For example, would you consider further increasing CapEx and investment in R&D? Yes, we are considering that. Should we view a large cash dividend payout is unlikely given this strong opportunity to narrow down technology gap with competitors. Yes, we will consider to also pay out to shareholders. As of what percentage is reasonable, we will discuss with our shareholders, and we will make that proposal in the next year's dividend distribution. And yes, Nanya also will reserve some cash for future growth as well. With that, it's end of the question online.

Yes. Thank you, Dr. Lee. And ladies and gentlemen, that concludes our conference call today. Please be advised that the replay of the conference will be accessible within three hours from now, which will be available through Nanya Technology's website at www.nanya.com. We hope you will join us again next quarter. Thank you for your participation, and have a wonderful day. You may disconnect your line now. Thank you, and goodbye.

Thank you, and goodbye.