Sino-American Silicon Products Inc. (5483) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to SAS first half 2020 earnings conference. In the first half of 2020, COVID-19 was the main headwinds for us, especially for our solar business. The impact to solar business was much tougher than our semiconductor silicon wafer business. Supply chain disruptions and quarantine policies imposed by many countries in the world caused delays in the solar installations in many countries. The damage magnitude for long-term so far is still unclear. Contrary, our semiconductor business, GWC, overall performance both revenue-wise and profitability-wise in the first half 2020 was much more stable than solar. Its Q1 performance this year was better than Q4 last year and Q2 this year was better than Q1. C.W. later on will provide more details of GWC first half 2020 performance in his presentation slides as well shortly. In the first half 2020, SAS consolidated performance actually is good. In 2019, SAS had a big write-off, which was for a solar polysilicon long-term supply agreement. And this year, normal write-off and overall operation performance was very good. So SAS first half 2020 revenue reached TWD 30.3 billion with a very good EPS, which was as high as TWD 4.96 per share, which is much higher than the EPS of the entire 2019. We are very happy for this EPS performance in such a difficult time. Regarding to our dividend policy, GWC will pay its 2019 dividend today, TWD 25 per share. This payout ratio is over 79% for GWC. Total dividend amount will be over TWD 10.88 billion. SAS dividend will be paid out next Friday or August 14. It will be TWD 5 per share totaled TWD 2.9 billion. The payout ratio for SAS 2019 is as high as 130%. This is very high, 130% payout. That means that we pay the dividend to our shareholders much higher than the dividend -- the EPS we made last year. So starting from this year, both SAS and GWC will pay dividend once every half year to smooth out income stream for our shareholders. Next topic I would like to cover is our outlook for the second half this year. In Taiwan, with the incentives from government policies and favorable solar irradiance, the proportion of renewable energy in power generation is increasing year by year. According to Bureau of Energy in Taiwan, Taiwan will reach its accumulated installed affordable type power capacity to 6.5 gigawatts by end of 2020 this year. In addition to Taiwan, some countries have policies and stimulate packages to revive the solar industry as well. The market is expected to be solely recovering post COVID-19. Moreover, thanks to international RE100 program or renewable energy 100% program. More and more leading corporations are in large in this sustainable energy portion and same emphasis are applied throughout their supply chains. So in summary, there are still quite some -- of course, there are still quite some uncertainties in the second half of this year, but for long term, the demand for renewable energy will keep growing the scale, will keep increasing. More and more technologies will be brought to the industry -- solar industry to increase renewable energy's efficiency and also affordability. Next, I would like to talk a little bit about the strategic move SAS just announced yesterday, acquiring 22.53% stocks of AWSC by participating their private placements and becoming their, by far, largest shareholder. AWSC or Advanced Wireless Semiconductor Co. is 6-inch gallium arsenide foundry establishing 1998 in Taiwan. Their key technologies across our HBT, power amplifier we sell in a lot of microwave IC -- microwave devices. We believe 5G RF and many wireless applications will be one of the fastest-growing categories in the next couple of decades in semiconductor industry. These applications use compound wafers, such as gallium arsenide, gallium nitride, silicon carbide, et cetera. Compound wafer is one of the most highlighted focus for GWC now. AWSC's very timely technical feedback to GWC will shorten GWC's overall compound wafer quality and technology improvement learning curve. On the other hand, SAS investment to AWSC will enable AWSC to expedite their expansion schedule and also to enlarge their scale in the next 5 years. This strategic move is win-win for both parties. Last but not the least, let me very briefly highlight some points about GlobalWafers. 90% of SAS consolidated revenue in the first half 2020 was from GlobalWafer semiconductor revenue and robust demand for work from home and medical electronics make GWC's second quarter performance much better than the first quarter. Nevertheless, the logistic challenges, including long lead time and super high freight resulted from COVID-19 outbreak and the subsequent restriction measures offset partially profits. Fortunately, the situation is normalized now. Starting from June, the overall logistics situation has been normalized gradually. In general, for GlobalWafers, both 12-inch and 8-inch utilization is quite stable and very healthy. GWC overall cash flow is as healthy as before. As of end of June 2020, GWC closes over TWD 1 billion cash. That's all I would like to share with all the analysts today. C.W. later on will elaborate more detail shortly. Thank you again for your time. C.W., please.

Thanks, Doris. Let me continue the presentation. Please turn to Page 5, company group structure. This is SAS Group company structure. SAS now is diversified business group consisting of solar, semiconductor supply as well as the strategic businesses like specialty gas, semiconductor business, et cetera. Besides Actron, we newly added a company into organization chart on the right side. As Doris mentioned earlier, this company called AWSC, a 150-millimeter gallium arsenide foundry house. I will explain it in next slide. On Page 6, is [indiscernible] company's production. Capital is USD 65 million, mainly provide 150 millimeter gallium arsenic foundry service product cover HBP for power amplifier, ED pHEMT for SW low-noise amplifier, VCSEL for 3D sensing, et cetera. The strength from this partnership are the cost-effective and reliable mainstream manufacturing process technology, broad technologies and extensive experience in wireless and optoelectronics applications, profound expertise in pHEMT could be applied in gallium nitride technology as well. And the synergy will be collaboration developing gallium nitride to quickly supply 5G, electric vehicles and other high-frequency and high-power products, construct a competitive compound semiconductor industry chain in Taiwan, and to expand operation scale and improve operation performance. In the meantime, downstream customer feedback received from AWSC also favorable for GWC to fine-tune upstream substrate development. On Page 7 and Page 8, silicon carbide and the gallium nitride market information. These 2 compound materials leverage many important advantages over traditional silicon technology, conveniently exploited to fabricate ultra performance power device. Also will play a crucial role in the future of electronics owing to its potential in boosting power handling capability with better efficiency, especially suitable for high-frequency and high-power application. On Page 9 is the silicon carbide and gallium nitride power semiconductor market forecast will rise to USD 854 million by the end of 2020 and pass USD 1 billion in 2021 and to increase at a double-digit annual rate to USD 5 billion by 2029, energized by demand from hybrid and electric vehicle, power supplies and PV inverters. On next page, Page 10, it shows revenue trend. As you can see, our revenue from GlobalWafers semiconductor business contributed 90% to SAS revenue in first half 2020. Given semiconductor business is relatively stable than solar business, semiconductor share increased a lot from 57% in 2014 to 90% this year. Next is industry overview. Please refer Page 12 to Page 18. On Page 12 and 13, these 2 slides show solar PV market will slowly recover post COVID-19 until 2024 All of these, China and Asia Pacific will continue to dominate global solar demand. Government support in solar industry as part of COVID-19 economic stimulus package can be already seen around the world. Solar global market will increase 34% to 150-gigawatt in 2021 Y-o-Y, anticipating significant governmental recovery support but still 6% short on the previous forecast and expected reach to 200-gigawatt in 2024. The year fully left virus impacts behind. On Page 14, you can see Apple's clean energy program with the supplier commitments, which target it will generate or produce at least 4-gigawatt clean energy supply chain in 2020. As of April 2019, already have commitments by exceeding their goal. On Page 15, based on update TSMC CSR report. TSMC emphasize they are the world's first semiconductor company who joined RE100, committed to 100% renewable energy by 2050. Up to July this year, TSMC signed renewable energy purchase agreement to 1.2 gigawatt capacity and set its goal to 25% target 2030. On Page 16, this page shows government stimulus package to boost solar post COVID-19. Malaysia provide a new tender for 1-gigawatt utility-scale solar capacity to be built in Peninsular. Switzerland, expansion of solar PV system this year with CHF 46 million, which equal to USD 48.5 million. European Commission announced COVID-19 rescue fund of 2021 to 2027 with EUR 1074.3 billion, equal to USD 1211.8 billion. 30% will be applied to natural resources and the environment. Japan also provide almost USD 1 billion to support corporate PPAs, power purchase agreement, to facilitate. On Page 17, Taiwan government actively promotes PV development. The plan is to install 20-gigawatt by 2025, aiming to produce and generate 20% of its electricity from renewable sources. The chart on the left side shows solar general power weight, total generation power 1.4% in May 2019 and increased to 2.3% in April 2020. The right side indicate actual collective data [indiscernible] in summer noon time, solar power comprises more than 5% of Taiwan's total generation. And it is likely to become normal. Page 18 is the top 20 market solar PV additions from 2020 to 2024 worldwide. Based on the right side data, Taiwan solar PV market is expected to reach 31% CAGR growth from 2020 to 2024. Now let's move to 2020 first half financial results. Please turn to Page 20. As you can see, SAS financial structure is healthy with promising future via reinvestment on strategy, strategic business and onerous write-off on polysilicon LTA last year. On second quarter 2020, net income attributed to parent companies, TWD 1.5 billion, the second best high record. On first half 2020, net income attributed to the parent company is TWD 2.9 billion, which is the best ever record. Gross profit and operating profit and EPS are the second best as well. On Page 21. This page shows first half '20 versus second half '19 last year comparison. Although revenue reduced 3%, but EBITDA, EBIT, net profit, EPS, ROE and ROA show growth. Page 22 is the second quarter 2020 versus first quarter 2020 results. Except the revenue reduced 2%, all other items indicate growth increased from 1.5% to 14%. Page 23 is first half '20 and the first half '19 comparison. Only revenue shows negative growth. All other items show positive growth. First half 2020 EPS reached to TWD 4.96 which is improved TWD 0.34 compared with second half last year. Page 24 is the revenue trend since 2013. In 2017, the revenue growth a lot because of the acquisition of SunEdison Semiconductor on December 2, 2016, and we keep growing on the foundation. Page 25 shows the gross margin trend. First quarter 2020 is 33.1% and that increased to 35.2% in second quarter 2020. 2019 is 29.4% and that increased to 34.1% in the first half this year. Page 26 to 28 are the operating profit, net profit, EPS strength, all results show positive growth Q-on-Q or Y-o-Y. First half 2020 EPS result TWD 4.96, as mentioned, is quite promising performance in the EV industry. On Page 29 IS the dividend distribution versus net income. SAS Board of Directors approved to distribute dividend every 6 months to share a stable growth with shareholders as a appreciation for their constant support. And the list is beneficial for the reinvestment and flexible use of [indiscernible] Page 30 is dividend payout versus EPS since 2013. The payout includes distribution from earnings and distribution from capital surplus. You could now that even in the year, 2016, when EPS was negative, SAS distributed from capital surplus to retain shareholders. In a few years, dividends were even higher than EPS. Then notably high payout ratio is one of SAS features to appreciate shareholders' support. 2019 dividend will be paid on August 14 next week. Page 31 to 32, our brief income statement and balance sheet. Skip this. Page 34 to 38, our ESG highlights. SAS has been at the forefront of global responsibility in the aspects of environment, health and safety and corporate governance. On Page 34, SAS achieved to use recycled water 50% in 2019, total water withdrawal already reduced from 1,312 cubic kilometer in 2017 to 502 cubic kilometer in 2019. On Page 35, on the left side chart, you can see SAS accumulated installation for grid-connected capacity reached to 112 megawatts in 2019, total CO2 emission reduced 50,000 tons in 2020. On right side graph is the electricity needed for generating TWD 100 million. It also shows a reducing trend. Page 36 is waste management. The usage is reducing and the reuse ratio increasing yearly. Page 37 are ethical business practice, including legal compliance with local requirements and the international standard, formulate guidelines, which caused ESCO conduct a separate risk assessment periodically, set up grievance system et cetera all performed well and improving. Page 38, diversity and inclusion. SAS is committed to supporting gender equality globally. Women in our workforce is 24% overall and 10% on our board. Page 39 to 51 our TWC 2020 performance update, in which you will find a solid performance in first half 2020, carrying out a strong set in second quarter '20. GWC's overall performance is pretty good. Net profit, 24.8% hit all-time high. Revenue, EBITDA and EBIT all resulted 1.4% to 30% growth Q-on-Q. Gross margin, operating profit, net profit results, 2.1% to 3.5% growth Q-on-Q. Second quarter 2020 EPS is TWD 7.81, plus TWD 1.19 Q-o-Q. GWC has sufficient cash position with TWD 32.1 billion on hand, as Doris mentioned earlier, equal to USD 1.1 billion. Prepayment amount is TWD 18.46 billion equal to USD 623 million. Above is my presentation for SAS first half 2020 financial results. Thank you. Next, I would like to hand over to Doris for Q&A session. Doris, please.

Thank you, C.W.

Why don't I kickoff with 2 questions on my side. So #1, I think if you could elaborate more on the potential synergies with AWSC. So I think I'm wondering the current customer base of GlobalWafers in the compound semi. How GlobalWafers and AWSC would collaborate [indiscernible] and will this strategic investment limit GlobalWafers collaboration with the other customers?

Thank you very much for this question. This is very important, and I'm happy to have the opportunity to clarify. First of all, GWC has been developing compound material silicon carbide and gallium nitride from 7, 8 years ago. So we've been working with a lot of European, American and Japanese customers and has some Chinese customers as well. But up to now, we haven't had any business cooperation with AWSC yet. So we're not their supplier for compound material. This investment is made by SAS. So SAS invests AWSC. That's the way we work together. So GWC -- also SAS is the major shareholder of GWC. So kind of like these 2 companies are in the same group. But there is no direct ownership between GWC and AWSC. So in the future, how these 2 companies are going to work together. I think the most meaningful way is that GWC will ship wafer -- compound wafers to AWSC same as GWC is doing with a lot of other strategic customers. But what can be better than the other customer is that we are expecting that AWSC will give us a very timely and openly a lot of feedback to GWC. And their technical -- timely technical feedback will be very helpful for GWC to accelerate, shorten the learning curve and also to improve the quality in a much shorter time. So that's -- from GWC's viewpoint, that's the benefit we're expecting from AWSC. And the benefit AWSC -- the benefit AWSC can expect from GWC is that they will be viewed by GWC as a strategic customer. So they will get the capacity same as all the other strategic customers. So GWC is positioned to AWSC's 1 of the strategic customers. So there's no special conflict with any of our other strategic customers. On the other hand, AWSC can get the benefit from SAS as well. Because of this private placement, AWSC will receive around TWD 3.5 billion. And that is a big money for AWSC to accelerate their future capacity expansion and also to open up their new project development, for example. So far, the AWSC is focusing on gallium arsenide substrate process. But now with this cooperation, they can accelerate pulling their schedule for gallium nitride and silicon carbide as well. So SAS' investment made AWS enable -- AWSC to accelerate a lot of new projects and also to expedite their expansion and also to increase the scale of their expansion. That's our view of -- of this project, the synergy of this project. So we think that this is a very clear win-win for both parties.

Got it. Thank you very much for the comprehensive response. So a very quick follow-up. So wondering for GlobalWafers, how much of the revenue would compound semi contribute for second half of this year and 2021.

For now, actually, our compound -- the revenue from compound is less than 1% for GWC. And I don't expect that this will be over 1% in the second half of this year. Also, even next year, you will be still slightly lower than 1%. It's increasing but will be still lower than 1%. The reason is that the whole compound, especially for power device, the reliability -- and the reliability test and qualification schedule takes time. We think that we will see some meaningful growth next year. But still, the silicon portion is increasing as well. So it's very -- it's not that easy. Our total revenue is somewhere around USD 1.9 billion a year, roughly somewhere around USD 1.8 billion, USD 1.9 billion a year. So 1% is also not a small amount of revenue. So I think it will -- the second half of this year and also next year, I think, is still -- I don't expect that silicon carbide revenue will be over 1% of GWC total revenue. But a very important item, a very important point I would like to highlight is that I think GWC management team very -- are very confident that from CAGR's viewpoint in the next 5, 10 years, compound wafer's CAGR will be way higher than silicon wafers, ordinary silicon wafers' CAGR. So that is definitely a very fast-growing category because of the EV will be aggressively growing in the next several years and also 5G and lot of OBC, onboard charging. Those are new now -- very small now, but the next several years, it will be everywhere in the world. So that's why we don't want to miss the opportunity to grow, to make any strategic involvement for compound industry.

Got it. Maybe another question also on compound semis. So since you do both silicon carbide and gallium arsenide, from your view, which one do you think are progressing much faster in terms of customer engagement or technology development?

Both of them are very promising. But I think that silicon carbide maybe will be faster than gallium nitride.

Got it. Okay. Thank you. Operator, would you please open the system for Q&A?

[Operator Instructions] No questions coming through at the moment. I will just give another reminder. [Operator Instructions]

While I give another few questions and if there are any questions coming through, operator, feel free to cut me off and we can take questions. So I think maybe 1 question on the outlook going into second half. Obviously, GlobalWafers has guided for a stable outlook going into Q3 and Q4.

Yes.

Yes. So if possible, could you also give us some thoughts on your solar business going into back half of the year?

Yes. Thank you, Sunny. I think semiconductor -- overall semiconductor business visibility is a bit better than solar. Q2 this year, solar was badly affected by COVID-19 because of the motion control orders and a lot of control in many countries due to COVID-19. So Q2 was a very bad quarter for solar. We were expecting some good recovery from Q3. Actually, we did see some good -- good orders, good increase in June. And also July, we see some -- we did see some recovery. Unfortunately, 2 weeks ago, there was a big blast in China, the polysilicon explosion, a big explosion of 1 of the biggest polysilicon production line in China. And that accident caused a big price increase on polysilicon. The price increase in the last 2, 3 weeks was as huge as over 30%, 40% for polysilicon. And then for mono wafer also it's almost 20% or the more -- higher than 2, 3 weeks ago. So it's not only price sky-high, price sky rocketing, super high price. It's not only the pricing issue, but also supply issue because of that accident, now polysilicon supply is extremely tight in China. So it's very hard to get enough wafer supply for now. Nobody knows that how long this kind of situation will be lasting, maybe it will be resolved, it will be normalizing in 1 or 2 months, maybe will be a bit longer, nobody knows. So we were expecting to have some business recovery for solar. But these -- that polysilicon accident did -- made a lot of impact for solar. So that's Asian situation. But on the other hand, in Germany, we do see very good business so far. In the past several months and even right now, I think we see stable demand in Germany. And you know that we have a module fab in Europe, in Germany, and that fab is doing pretty well as well. So so far, looks like that Europe is still doing okay. But no matter what, the scale in Europe is much smaller than Asia. So Europe is doing okay. Asia is not. So it's very hard for us to share any outlook for the second half of this year. There are several issues that which we -- several factors, very difficult for us to really judge how good, how bad the second half outlook will be. One factor is currency, foreign exchange currency. And the second is the shortage, the supply chain disruption, especially the polysilicon and mono wafer. So this is the second issue. And the third concern is that we just don't know that if COVID-19 will be over or will return. We don't know that if any reopen or re-lockup or reopen. So actually, a lot of uncertainties out there. So it's hard for us to give any outlook. Visibility is not really good enough. Yes. That's for short term, but for long term, as we presented earlier, we are very confident for the long term direction. I think renewable energy increased the percentage of renewable energy. That is definitely the way the human being will do in the next several decades. And we believe there are more and more leading companies like TSMC, Apple, Intel. More and more leading companies will announce that -- will participate RE100 and to commit to consume 100% renewable energy. So we believe that we -- as a renewable energy solution provider, we believe that this is definitely the right industry to be in. But short term, there are still a lot of unexpected factors for the long run. This is definitely the right thing -- the right industry. Thank you.

Got it. Thank you, Doris. Operator, do we have any questions?

No questions have come through.

No problem. So well, another question from me. Well, I think if we look at the demand, definitely, the outlook for solar is quite positive. But another way that I think people consider is also on the competition side. So I wonder Doris, if you could give us any thought on how the competitor landscape is developing for the next few years. Is it improving? Or is this being more competitive?

I think you mean semiconductor silicon wafer section, right?

Well, so my question is more on the solar, like if you could also help -- talk about on the wafer side, I believe people will be quite interested as well.

Okay. So let me cover both. For a solar, China still plays a very important role for the overall solar solution supply, more than 80% of the sales modules and polysilicons are from China. So so far, we don't really see too much -- we don't see too much different -- too much newcomers because basic solar is not easy in the last several -- for now. So from the whole supply chain's viewpoint, we don't see too many new competitors, new comers for the -- for the components or the module system. But from power system, solar or voltaic power systems viewpoint, we do see more and more finance company or equity company are participating on the investment of renewable solar farms or windmill renewable energy. So you can see that more and more investors are working on this. They either invest solar farms or they loan a lot of money to solar farms or they work out green funds to support solar farms. So let me put it this way that from the whole manufacturing components, productions viewpoint, not so many newcomers. China is still leading the whole supply chain. But from overall financing funding viewpoint, I think, is a worldwide thing. Many countries are very aggressive for the renewable energy funding. One more point I would like to highlight, not only the competition, but also, I think what's very interesting now is that we see more and more new technologies and new -- are implemented in solar systems, solar solutions. By doing so, I think people will see higher and higher efficiency in the total dollar per watt will be -- will keep going lower and lower year by year. So that will make the whole solar system or solar -- renewable solutions much more affordable than before than 20 years ago. So I think this is a big change for solar industry. That's our view. And I think in the next several years, we will see more technology like smart grid and some special high-efficiency storage way, all of these will be -- maybe potentially will be some new technology, which make the whole solar industry much, much stronger than today. That's our view. And also, let me cover a little bit about semiconductor competition. I think so far, still for semiconductor, especially for advanced 12-inch products, still only top 5 companies in the world are able to supply high-quality high-end wafers to foundries or IDMs. When I say high-end, I mean, some -- below 20-nanometer process. And we're talking about 10-nanometer, that's definitely much tougher. But we understand that for now still top 5 wafer makers are dominating the technology or working very hard for the technology and also to supply advanced wafers, but at the same time, a lot of newcomers in China are participating the whole 300-millimeter wafer supply. I know that's because of a lot of market and geopolitical issue, a lot of this kind of pressure from different countries, some special restriction from China -- from U.S. to China. All of those political reasons, geopolitical issues cause a lot of new comers in China from policies viewpoint, China carbon policies viewpoint also for the industry, supply chain securities viewpoint, a lot of newcomers out there. I don't think that we think 1 or 2 years, we will really see any newcomers strong enough to supply advanced product, advanced 12-inch wafers to the industry yet. But sooner or later, I think it takes maybe several more years, but I think gradually, they will enter 40-nano, 28-nano, 22-nano. I think gradually, there will be more newcomers for the semiconductor as well, that this is the same as all industry in the world. That's our view of semiconductor competition, potential competition in the next several years. Thank you very much, Sunny, for your questions.

We do have a question from the audience. The first question is coming from the line of Jennifer Liang from KGI.

Can you give us some business and financial updates on the Taiwan Specialty Chemical Corporation?

Okay. Taiwan Specialty Chemical Corporation, TSC, this year, so far, their overall performance is doing -- not bad. Revenue-wise, much better than -- I think by now, by July, I think their revenue already over the revenue of entire 2019's revenue. So TSC overall revenue, we are expecting to see some good growth of TSC's revenue this year. And because of the volume increase, of course, their overall profitability will be better than last year as well. As you know well, that TSC actually last year was making -- was loss-making, was in red, not in black. So -- but this year, it's very likely that we will see some improvement on both top line and bottom line. That's our view, Jennifer. And also, I think 1 thing I would like to highlight for TSC is that this year, not only new -- not only better revenue and better bottom line, but also that -- I'm very happy that TSC has some more new customers as well. They got qualified by some new so that is very healthy for TSC as well.

Yes. I would like to follow on that -- follow-up on that. So do we have -- can you share like what's the current market share of TSC you have right now? And based on its capacity right now, what could be the potential market share?

You mean the market share of the disilane or that specific product?

Yes, the disilanes and trisilanes.

Yes trisilane -- because trisilane is still very small now, so we don't really count trisilane, but disilane market cap right now is -- I think, is -- worldwide market cap -- market share maybe somewhere around 20%, I think. It's not capacity constraint is because of qualification, because we're a newcomer. And many Tier 1 companies been in the industry for much longer time, so their overall market share is much higher than TSC. We're -- I think we're lower than 20%, maybe somewhere around 15%, but we didn't really calculate this one. So I think we are slightly higher than -- we are around 15%. Let me correct this number. And I think that our capacity, because our utilization is still very low. So we have very good opportunity to increase our worldwide market share, but it's still -- first, we treat this as our confidential company info. So sorry that I cannot share too much details on this part for now.

Okay. No problem. And also, under what condition will you consider to increase stakes in TSCC?

To increase what?

Your investments.

TSC?

Yes.

We -- our ownership is 30.93% right now. We are okay with this ownership. So far, we don't have any plan to increase the stack -- the ownership there.

Okay. The -- yes, the next question, I don't know whether it's too sensitive, but if you can answer. Is there any -- is there an IPO planning for this company?

Yes. There was -- yes, there was one. There was an IPO plan, but I think that I -- intentionally, I push out the schedule a little bit because SAS was always, I want to see a very solid fundamental. They have to see -- I hope that we can see really positive growth in term lag and also you have solid plan to get a lot of customers' qualification and you're really getting healthier and healthier. Before you reach our internal KPIs, you are not allowed to go IPO. So that's our company policies. Before SAS jointed TSC, they did have an IPO plan, but I asked them to revise that one. So for now, the IPO plan is -- the whole plan is put on hold. So we -- the whole management team follow all the IPO-related regulations, but we don't really submit the document or anything for now. For us -- for TSC, for now, the most important thing is to make okay profit and increase our market share and get more customers qualification. That's more important than IPO. So we don't have a real planning yet. But of course, from the management team, internally, I have some special schedule. It will not be 2021. It will be after 2021.

Okay. It's good to know. And can you tell us how many clients do TSC have in a geographic breakdown?

Okay. They have right now, slightly lower than 10 customers. So they have definitely more than 1 customer. They have somewhere around -- I mean I'm talking about mass production, we are delivering every month. We have, I think, 7, 8 customers right now, continuous taking our shipments. Those are mass production customers. And all of these customers are in Asia. And we have some European customers and some American customers are under bulk quotation, but not mass production yet. So for now, mass production customers are 100% Asian customers.

Can you break down that within Asia?

Taiwan, China. These 2 are the top 2. And we have a little bit Singapore in some other countries, but those are much smaller.

And Korea, not yet?

Yes. Korean not yet. We're working on this now, but not yet. Not mass production yet.

I have 1 last question. Given we are going to pay out dividends for the first half EPS in the first quarter of next year.

That's right.

Can you give the full part number like what percentage we're looking at?

This is the first time we have the 6 months dividend. For us this is the first time. So we haven't had any discussion with the board yet. So so far, no consensus with the board yet. We need some time to communicate. And you know that SAS just had a new board this June. This -- in June this year, we had -- we elected new board, new audit committee, some new board members this June. So we need a lot of communication with the board. So sorry that we don't have any plan for this now. We will have a -- we will finalize this number. Maybe, I think, in our next board meeting, which is November or early December, we will have more discussion and then at that time, we will announce the number. But not now. No number yet and no range yet.

We do have another question. That's from the line of [indiscernible] from Putnam Investments.

I guess you just answered partially my question to -- general question there, overall shareholder return. Just more broadly speaking, I'm thinking SAS has been paying out more than 90% of EPS in the last 5 years, sometimes more than 100%.

Yes.

And going forward, under your chair leadership, under -- of the company, how should we think about the investment versus payout? Like -- yes, I think that extent partly you -- we'll will seeing of the past. But like GlobalWafers also paying out 80% more of EPS earnings. Well SAS payout to be in that range, long-term speaking, probably it's more like [indiscernible] investment first more than 50% in investments and less in payout. I know it's probably late, I'm trying to squeeze in another question. Clarify for us if again, development -- the substrate development -- is GWC still doing R&D or is GWC actually has [indiscernible] substrate that can be qualified by customers.

Yes. Okay. Thank you very much for your 2 questions. Let me start from the question 2. Yes, TWC has -- already had revenue from gallium nitride and silicon carbide. So it's not in R&D stage only. We have -- right now, the status is that we have some small volume mass production. And meanwhile, we have more samples under qualification and also our R&D are working about optimization and next-generation development right now. So we have 3 stage -- 3 key mainstreams in our production line, 1 is mass production and other one is under qualification, and the third 1 is stabilization, optimization of the production. So that's our -- that's to answer your question #2. And your question #1 is very important. Basically, our -- I think our policy is to stabilize our dividend. This is company policy. And in the past so many years, our policy is always try to keep the dividend payout high. That's our policy. But some years, we paid even higher than 100% for some good reasons. For example, last year, we paid out 130%, and 2 years ago, we paid out 170%. The reason that some years our payout rate was that high. 2 reasons. One is that, in that year, we had some specific write-off, that means that those are noncash write-offs. So EPS wise looks low, but our cash flow-wise, actually, we have enough cash flow for dividend payout. So then we make our payout -- dividend payout even higher than 100%. For example, last year -- in June last year, we had a write-off policy. LTA write-off -- the write-off amount was as high as TWD 4.3 billion. But actually, that TWD 4.3 billion, that did eat up a lot of EPS, but that didn't eat up any cash. So cash-wise, we are okay, we are capable to pay more dividends. So that was why last year we paid out even more higher than 100%. So there are 3 factors to decide -- I mean, principle, our principle is to keep high payout and keep the payout -- keep our dividend very stable. So this is our principle. But the -- every year when we calculate that what is the right number to payout this year, we have 3 vectors to check. One is just like what I explained, that do we have any one-off -- that kind of write-off that specific year. This is checkpoint #1. And the second checkpoint is that what's our overall cash availability. If we have a huge, a very meaningful investment that's specific year, maybe we will adjust the payout rate a little bit. So the second point is our cash availability. And the third -- in the, the third checkpoint is our stock price. So basically, we want to keep our -- if our stock price is high, then we will pay out higher as well. Someone said, our cash is very reasonable. If the stock price is extremely low, then we will factor in that specific point as well. So we have been doing like this from more than 10 years ago. So we follow -- basically, there will be no game rule changes. So everything will be same as before. And all of those factors will be checked every year, so that we will follow what we've been doing in the past. I hope this is clear. Thank you.

Well, thank you. Well, I think given the interest of time. Let's wrap up here. So thank you all for joining the call, and thanks again to Doris and C.W. today. This marks the end of the call. Thank you.

Thank you very much, everyone. Thank you. Have a good day.

Thank you. Happy weekend.

Happy weekend.