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

Good day, and thank you for standing by. Welcome to the Sino-American Silicon Products, Inc. First Half '21 Earnings Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, [indiscernible] semiconductors analyst from Crédit Suisse. Please go ahead.

Welcome to the Sino-American Earnings Conference Call. This is [indiscernible] Credit Suisse. Joining us today from Sino-American is the Chairperson Doris Hsu, and spokesperson C.W. Doris will provide a business overview followed by C.W. for more detail. After the prepared remarks, Doris will provide some update on the frequently questions, and then we will start the Q&A session. I will now hand over the call to C.W. C.W., please go ahead. Thank you.

Thanks. Hello, everyone. Welcome to join SAS' 2021 First Half Earnings Conference Call. I'm C.W. Lee SA's Vice President as well as the company's Spokesman. We also have Doris Hsu, Chairperson and CEO of SA in this call. Doris will give us the executive comments later. And then I will present industry overview and 2021 first half financial performance. The final Q&A session will be hosted by Doris as well. For today's presentation file, we have uploaded onto our website. If you do not have a file on hand, please access our website for the most of this file. Please note that some information during our conversation -- discussion today will consist of forward-looking statements, which are applied throughout the call and this presentation. These are subject to significant risks and uncertainties. Actual results or trends could differ materially from our forecast. Please refer to safe harbor notice in our presentation Page 1 disclaimer. Now I would like to turn the call over to Doris for Page 2 to Page 9 executive comments and the reinvestment status update, and I will report you our 2021 first half operational performance later. Doris, please. Thank you, C.W.

Thank you C.W. Hello, everyone. Good afternoon. Thank you so much for joining SAS' earnings call for the first half 2021. This is Doris. In 2021, global consensus of net zero emission and greener future is becoming more Significant and clear. Many places in the world have been devastated by extreme weather, such as the flood in EU, the drought in Taiwan and many others. All of these events demonstrate that the importance of green power due to the mature technology and affordable prices, solar energy now is one of the top choices of energy transition. And this also makes the second quarter as a record-breaking quarter for SAS. If you have our material, please turn to Page 2. And I would like to -- first of all, I would like to start with some -- our financial highlights. SAS second quarter revenue was TWD 17 billion, and our EPS hit TWD 3.61. We have achieved the second best ever in Q2 gross margin, operational profit and EPS. Also, we have our all-time high in net profit and EBITDA. Our accumulated first half revenue were TWD 33 billion and our EPS reached TWD 6.11 per common share. So these are the second best ever half year EPS since establishment. Next, I would like to talk about a very important commitment for sustainability, we are going to make today. This is one of the most important topics, I would like to present to the public today. As the total solution provider of renewable energy, SAS actively expand green power generation, energy storage and green energy resale business and dedicated to supporting the net zero transition of the world and Taiwan as well with credible actions. Pledging all subsidiaries of SAS Group, including Global Wafers oversee all the Global Wafer sites to use 100% renewable energy by 2050. We will increase the weight of green energy by implementing our profound experiences in building solar power generation plants, along with assigning renewable energy power purchase agreements and purchasing renewable energy certificates. These are the actions we're going to take. Our progressive goals are: we want to reach 20% by 2030, want to reach 35% by 2035 and 50% by 2040. Usage ratio of our renewable energy, gradually, we want to achieve the long-term goal of 100% renewable energy users by 2050. Now let me move to our reinvestment results. SAS has successfully explored a unique path, a distinctive business model in the volatile and competitive industry. We strategically deploy innumerous key steps in semiconductor supply chain through reinvestments in high-potential territories. And the leverage, synergies and the profit recognitions are all very favorable for SAS sustainable growth, each of the reinvestment has its very unique value. Let me quickly summarize that they're -- quickly introduce these reinvestment companies. The first one is Actron. Actron is the top one automotive diode supply in the world. It has a solid partnership with the big 6 automakers, and these products are applied in not only traditional cars, but also more and more electronic vehicles. And the next company I would like to introduce is AWSC, Advanced Wireless Semiconductor Company. AWSC specialized in PA or power amplifier. They're the key foundation of electronics. AWSC  is one of the very few Tier 1 compound semiconductor foundry in the industry. They are also definitely one of the major semiconductor compound foundry in Taiwan as well. The third one is TSCC, Taiwan Specialty Chemicals company -- corp. TSCC is one of the major specialty gas suppliers in the semiconductor industry, not only in Taiwan, but also worldwide. Its main product includes Disilane, Trisilane and several other specialty chemicals. I will briefly update the performance of these companies in the first half of '21 later on. Now let me quickly update the solar industry outlook. Regarding the profit for solar energy industry. With COVID-19 vaccination rollout, green energy projects postponed by numerous countries are back on track now. It is estimated that the number of solar installation will grow further this year. We see various policies are legislated to support the development of clean technologies, especially for solar. For example, European capacity is accelerated because of significant measures. I would like to highlight Germany, particularly. German parliament have approved a Renewable Energy Act 2021, to raise the share of electricity from renewable sources to 65% by 2030. This is -- this means that the solar, which will bring up solar capacity almost 3x higher than 2020. SAS German subsidiary, Aleo Solar is the professional solar panel manufacturer. They will expand its comprehensive product offerings in Europe and serving -- and serve local customers with its proximity location and superior quality. We are glad to see that Taiwan government also is plotting a path to achieve net zero emission by 2015, with more than 55% of the greenhouse gas emissions coming from electricity. Transition from the traditional fossil fuel to renewable energy is crucial, it's very important. So solar energy particularly ideal for Taiwan, not only because of its affordability and technological maturity, but also because of Taiwan, it's a tropical island, it's blessed with an abundant sunlight. We expect that the solar power capacity to grow sharply in Taiwan in the next several years. Next, let me spend a couple of minutes to quickly update one of the very important component of SAS, which is Global Wafer, a semiconductor company. Global Wafer managed to achieve a pretty good first half financial results despite of numerous headwinds. In -- Global Wafer's June revenue reached TWD 5.4 billion, and Q2 revenue totaled TWD 15.2 billion. Both of these hit the third highest in the history. The revenue in the first half hit TWD 30 billion, which is 10.3% growth Y-o-Y. In terms of profitability, Global Wafer's Q2 EBITDA, net income and EPS all hit the record high. Q2 EPS amounted to TWD 9 billion, the best ever results. And our Global Wafer's cash flow from operations in the first half of cumulated cash flow from operation in the first half achieved TWD 10.3 billion or USD's 370 million. And the cash on hand as of end of Q2 is as high as TWD 52 billion. And the prepayment as of end of second quarter were TWD 19 billion. So these numbers support very strong growth of Global Wafers. And for the semiconductor industry overall outlook, I think regarding the semiconductor wafer industry outlook, we have seen many downstream manufacturers announcing the intention to expand huge capacity to meet the boosting 5G penetration and growing momentum for connectivity-related applications and medical care. The need for wafer are expected to sort as well. Semiconductor wafers will have more growth in terms of both shipments and revenue in the next several years. So these are our quick update of Global Wafer and SAS' solar business. Next, let me quickly update our -- the financial performance of our reinvestment companies. The first one, Actron. Actron has a very good breakthrough in the first half this year. Its Q2 revenue increased 74% Y-o-Y and almost reached TWD 1 billion. Quarterly EPS reached TWD 1.22 per share. Its first half '21 revenue grew nearly 40% and hit TWD 2 billion total revenue in the first half. And net profit and EPS grew nearly 5x to TWD [ 0.3 ] billion, or TWD 2.92 per common share. So automotive business last year was really very bad. But this year, good recovery, so Actron's first half performance was very good. And the second company with very good performance in the first half is AWSC. AWSC performed quite well in the first half this year, same as the past several quarters, they've been doing very good for several quarters already. And the first half of this year is doing -- they are doing very good as well. Its revenue -- AWSC revenue and net profit in the first half increased sharply with double-digit growth. And first half this year, revenue totaled TWD 2.2 billion. Net profit totaled TWD 0.4 billion, and EPS reached 1.1%. This is a very good performance for all this. AWSC holds positive outlook with mid term Q-o-Q growth for both Q3 and Q4 this year, and we'll conduct aggressive capacity expansion with maximum 30,000 wafers a month by 2023 to support 5G fast rollout and undersaturated market for cheap smartphones in developing countries. So these are the performance of SAS, GWC and 3 main reinvestments in SAS portfolio. So from all of these performance summaries, it's very easy to figure out that SAS stock price, SAS' value is undervalued. SAS market value is undervalued. Current market value of SAS trades at around 60 -- 46% discount compared to the sum of steps of reinvestments in GWC, Crystalwise, Actron, AWSC, and TSC, which makes SAS a worthy option, and one of the very best options for participate in the future growth of the promising business. The above are my very quick comment for a -- quick summary and comment for our overall business in the first half. C.W. will share more details with all of you including the industry trend and also our ESG detail and the business performance. Thank you very much. C.W, please.

Thanks, Doris. Let me continue the presentation. Please turn to Page 11. I -- This is the commitment of sustainability. SAS committed to achieve 100% renewable energy usage overall group's global operation base by 2050. The progress [indiscernible] climate blueprint 20% by 2030, 35% by 2035, 50% by 2040 and finally, 100% by 2050. Assets were approached with 4 main stores. First, to adopt the renewable energy. Second, to improve energy efficiency. Third, carbon removal. Fourth, to purchase carbon offset product. On Page 13. -- its group -- company group structure, this is SAS group company structure. [indiscernible] is a diversified business group consisting of solar semiconductor supplier as well as strategic business like specialty gas, semiconductor business [indiscernible]. On the left-hand side, it's solar business group. We have a Aleo, SAS Sunrise, and SPW, which owns 100% share, also Silfab with 15% ownership, covering solar module sale product and solar power plant investment. On the right-hand side, the semiconductor business grew including Global Wafers of 51.7% or semiconductor wafers. Taiwan Specialty Chemical of 30.93% for speciality gas, Disilane, Trisilane et cetera. Crystalwise 41.94% was sufficed. Also new products, LT/LN under development. AWSC 22.53%. [indiscernible] Actron own 22.75%, it's an automotive diode, IC manufacturer. The strength from this partnership a cost-effective and reliable mainstream manufacturing process technology, broad technologies and extensive experience in traditional semiconductor, IC, wireless and also electronics, automotive applications, et cetera. And the synergy will be collaboration in developing silicon compound materials to quickly supply 5G, electric vehicle and other high-frequency and high-power products comes from a competitive compound semiconductor industry chain in Taiwan. And also to expand operations scale and improve operation performance, and of course, end customer feedback received from partners also favorable for AWSC to fine-tune [indiscernible] development. On Page 14, it shows the revenue trend. As you can see, our revenue from Global Wafer semiconductor business contribute around 90% to SAS revenue in first half 2021. Semiconductor business growth is faster and stable than solar business. Semiconductor share increased a lot from 57% in 2014 to 90% in 2021, and definitely will grow again. Next, industry overview, please refer to Page 16 to Page 22. On Page 16, this slide shows green energy development is back on track after pandemic. On left-hand chart it's the net renewable capacity addition number, which reached 280 gigawatt in 2022. On the right-hand side shows the net renewable capacity additions by solar. It grows every year. 145 gigawatts in 2041 and 161 gigawatts next year, 2022. On Page 17, follow previous page. This page shows exception of high solar energy capacity additions to become new normal given it is the lowest cost option [indiscernible] government globally accumulate global solar PV capacity will reach 859 gigawatts in 2021 and 1,021 gigawatt in 2022. On Page 18, this page shows that Europe is halfway to exit coal fire plants by 2030. Totaled 35.4 gigawatts of core power capacity will be phased out by 2030. Please see summary chart. 3 nations announced coal free, 11 nations phase out by 2030, one nation phase out after 2030, and 5 nations are under discussion. On Page 19, the German government approved the share of electricity from renewable sources to 65% by 2030. On the right-hand side, you can find renewable energy scale rates 3 times from 2020 to 51 gigawatts to 2030 to 150 gigawatts. On the left-hand side, as you know, SAS has a subsidiary in Germany. Aleo Solar, which produce and distribute solar margin systems. This company will deepen the promotion in local markets, follow government's new policy. On Page 20, this page shows the trend that net zero 2050 commitment boost renewable energy capacity. On the left-hand side, more than 40 nations agrees to share global CO2 emissions covered. On the right-hand side, you can see solar and wind CapEx grow from 4x from 2020 to 200 gigawatts to 2030 to 1,000 gigawatts. On Page 21, ensures clean energy investment would also let global economic growth. According to Idea research, the required investment in clean energy infrastructure will be [indiscernible] by 2030. Also global GDP expected to be 4% higher is 2030 than it would be on the current trend. On Page 22, it shows Taiwan government announced the plan to achieve net zero emissions by 2050. [indiscernible] shows renewable energy versus total electricity consumption [ 146 ] gigawatt hour in 2020 and increased to [ 613 ] gigawatt hour in 2025. The ratio is 20%. Now let's move to 2021, first half financial results. Please turn to Page 24, financial highlights. 2021 Q2 is a record breaking quarter, as Doris explained earlier, second best ever record, including gross profit, operation profit and EPS, all time high vehicle including net profit EBITDA and profit before tax. On Page 25, this page shows a comparison of 2021 Q2 versus Q1. All items growth for example, revenue, 7%; EBITDA, 36%; EBIT 53%, operating profit 9%, net profit 46%, EPS reached to TWD 3.61 in Q2. ROE and ROA also showed positive results. On Page 26 and 27, 2021 Q2 versus 2020 Q2 and 2021 first half versus 2020 first half last year. Also, the performance improved a lot versus last year. On Page 28 to Page 32, are a summary trend of revenue, gross profit, operating profit, net profit and EPS. The results showed a big improvement in past 4 to 5 years. We continue to pursue further improvements. On Page 32 is the EPS trend. You can see 2021 first half a month, TWD 6.11 its highest record since 2013. Page 33 to 34, our brief income statement and balance sheet. Cash and cash equivalents is TWD 49.6 billion, inventory stayed at a low level at TWD 7.9 billion. Shareholder equity is TWD 50 billion. It's a very healthy financial structure. On Page 36 to 43 are ESG highlights. SAS [indiscernible] has been at a forefront of global responsibility in the aspects of environment, health and safety and corporate governance. On Page 36 on the right-hand side, SAS achieved the use of recycle water of 56% in 2020. On the left-hand side, total water restore quantity reduced from 817 cubic kilometers in 2018 to 418 cubic kilometer in 2020 and discharge quantity also reduced from 590 cubic kilometers in 2018 to 302 cubic kilometers in 2020. On Page 37, SAS successfully reduced industry waste upwards from [ 5.8,000 ] metric tons in 2018 to [ 2.7,000 ] metric tons in 2020. Page 38 is a commitment to green energy. Until June 2021, SAS Group installed total solar capacity 20.46 megawatts, which could generate 24.56 million kilowatt of electric per year equivalent to [ 12.5,000 ] tons of CO2 emissions reduction and 1.14 million. On Page 39 is ESCO business practice including legal compliance cost of our ESCO conduct grievance system and risk assessment. Page 40 is a corporate governance SAS is best scheduled to achieving corporate governance and fulfill its social responsibility with lesser determination, SAS has been awarded top 5% among all listed companies for 7 consecutive years, agenda, tenure, and expertise, diversity as well as the independence of the 4 directors are guidance for SAS to nimbly navigate in the competitive industry. And we also have a volunteering, sharing and caring, the next 3 pages. On Page 41 is a foreign volunteering handling matters, SAS hope to contribute a better tomorrow by fostering a [indiscernible] to volunteer and share. Our community service includes quick market for underprivileged and fund raising for the elderly living alone, assisting rural schools renovation, beach cleaning and ecological tools and encourage colleagues as well as their family and friends to practice environmental protection and the role of employees in awareness of protecting the environment. On Page 42, is a sharing method difference. SAS encouraged employees to spread their love by giving back [indiscernible] for this advantaged group. So as to fulfill corporate social responsibility. In Taiwan, our activities include disable elder home sheltering, daycare for children after school, charitable breakfast for children, et cetera. This social welfare activities embody our wish to respond to people in need to pursue a better world. On Page 43 is carrying, employees welfare, happy employees state by fostering generally carrying atmosphere, last focus on employee welfare. SAS not only motivate employees, but also raised the productivity levels. SAS enhance overall employee benefits through development a holistic friendly programs in 4 aspects, work-life, health, life, resources, and welfare. By integration and the reorganization of resources, we believe that we are deeply team funding and improving team experience. Next is Global Wafers performance update. Page 45, is the update of development of takeover [indiscernible]. Global Wafers achieved the final acceptance rate of 17.27%. Settlement of the takeover offer is expected in the second half of 2021. [indiscernible] received on required regular approval. The schedule is same as original plan with no change. Page 46 to 49 are GWC 2021 first half performance update including financial highlights of 2021 Q2 versus 2021 Q1, 2021 first half versus 2020 1st half income statement and the balance sheet for your reference. Above content is my presentation. Thank you. Next, I would like to hand over to Doris for Q&A session. Doris, please.

Thank you, C.W. Before we open the Q&A section to the audience, I would like to do some -- answering some questions which we have already received in the past several days, especially some questions after Global Wafers announcement 2 days ago. So I would like to cover just a few questions here. I hope -- I think that many of the questions will be what you want to ask as well. So allow me to answer those questions first. The first question we received is after deducting Global Wafers' contribution and other long-term investment recognition has SAS solar business turned positive or not? I think we received these questions multiple times from multiple parties. Everyone knows that Global Wafers is very profitable. But what the shareholders really care is that not only Global Wafers being profitable. How about SAS own business, are you making profit at all? So here, I would like to answer to everyone that, yes, SAS has already achieved positive gross margin and cash income and operating income, both -- not only Q2, both Q1, Q2 and actually Q4 last year was positive as well. So we have already turned profitable and that -- so it's not only Global Wafers is banking profits, but also SAS solar business is making profit as well. This is the first question and answer. And the second question we received is that many of our investors and shareholders are -- they are concerned about our strategy in the solar business. So the question is that will you continue to make more investment on the technology migration and also the capacity expansion for our solar business? And our answer is that, of course, yes, SAS will consider making the capacity expansion and the needed investment on next-generation technology. However, profitability is very important as well. So before we make any final decision to make further expansion -- more CapEx for expansion or more investment for new technology -- next generation technology migration. Before we make those moves, we will work very closely with our customer and try to get customers' commitment. So we'll try to make it same as our semiconductor business, and we want to have some long-term agreements from our customers first. want to get their commitment before we really kick off putting in fund -- make a huge fund for the expansion. But in general, our R&D is still very aggressively -- very aggressively developing new technology upgradation. So we are always ready to make further expansion on migration for next technology. This is the second question. And the third question is that we were asked about as many of our shareholders and analysts know that we have a very famous solar module plant in Germany, which is named Aleo. So we were asked that how is the performance of Aleo. Are they doing okay? If the Aleo making profits? So here is our update and answer. Aleo is doing pretty well in Germany, in Europe. Actually, Aleo is one of the very few local, made in EU modules -- solar module maker in Europe. So they are doing pretty well, not only this year, but also last year. Last year, they are doing very well, although last year in Germany and the whole EU -- with the COVID-19 pandemic, the whole situation was pretty bad, a lot of lockdowns, a lot of movement control in Germany and many EU countries. There's solar installation business activities were quite smooth. So we were doing pretty okay last year. And this year, we are still doing very good. The first half this year, Aleo revenue was we achieved 5.35% Y-o-Y growth, so which is quite okay and price-wise, European local made module solar product price is quite reasonable and stable. So this year, we will make further CapEx, further capacity improvement and also technology improvement in our German fab. And in the second half or actually in Q4 of this year, we will launch a new product, which is a high efficiency margin, the efficiency, the total output of 1 module will be as high as 440 watts per module, and this is a 60-cell module to cell type, not a 72 cell types. So a quick summary for Aleo is that they are doing very good, making profit every quarter, every month, and we are expanding our German module capacity as well this year. And their key marketplace is in Europe. So it's a Europe made and key market is in Europe. So this is the third question, the third update. And next update is about SAS overall strategy for investments. So the question is that SAS ownership of GWC is -- it's regarding to SAS ownership of GWC. So the question is that with your SAS share as a closing company being undervalued for a long time, will you consider to monetized the GWC share modestly and return cash to shareholders. But in the meantime, remains the largest shareholder of GWC. Our answer for this one, I said, no, SAS has no plan to sell their GWC shares to improve their cash. No, this is not the plan. We don't have any plans to do so. We will keep our largest shareholder position of GWC with no doubt. This is our point for the ownership over GWC. And next question is that SAS total revenue and profit mainly coming from GWC semiconductor business. How do you see the impact to GWC, Siltronic, who just made an announcement to build a new 300-millimeter fab in Singapore last week. Basically, we don't comment about any of our peers' movement or business strategy. This is our company policy. But given worldwide 300-millimeter market demand keep increasing a lot in the next few years. For example, right now, as of now, in Q2 this year, -- now worldwide shipments for 300-millimeter, monthly shipment has already reached 7.2 million wafers a month, and this will keep increasing. So we believe that the demand -- the market demand for 300-millimeter wafer will keep, remain very strong. And right now, current supply is quite limited. It's quite tight. So we think that Siltronic is making -- it's a good direction to increase some capacity to meet a lot of foundry IDM customers demand. So I don't think that this will affect GWC overall semiconductor wafer business. And we are 2 independent business that we do our own business decision independently. Okay. Next 2 questions is about the -- our company dividend policy. So the first question is about SAS dividend policy. We have been asked a couple of times that what is our comp dividend policy for SAS dividend payout policy. SAS dividend payout is always -- dividend payout ratio is always high. And this year, it's very high as well. I mean 2021, the dividend payout for 2020's overall performance was very, very high as well. And our view is that, of course, all the dividend payout will -- definitely will depend on the cash availability and overall strategic investment plan. But in general, we will keep SAS dividend payout quite stable, meaning that we want to keep it at high ratio unless we have specific investment plan or we have some different cash flow availability issue. Otherwise, I think SAS overall dividend payout ratio will be stable. So also quite a lot of shareholders are asking about GWC dividend policy. Because the question is that GWC lowered the dividend payout rate for 2021 as we would -- as Global Wafer would like to reserve more cash for the acquisition and also the capacity expansion this year, 2021. So the question is can we expect that your payout policy will resume back to the normal payout rate in 2022, which means around 75%, 80% in 2022. The answer is that in 2021, we slow -- we slightly lowered our dividend payout rate this year, 2021 for 2020 performance, because we want to reserve more cash on hand for the acquisition and also the capacity expansion plan. So that's what we did this year. And I don't think that next year, we will resume our dividend payout policy back to 2019, 2020. Now that's -- I think it's more likely that our dividend payout will remain at around current level, like 2021 next year, because of the business combination with Siltronic and also quite a lot of high CapEx demand for GWC brownfield expansion in the coming 2 years. So next year, I think that our dividend policy will not be back to 2019 level. It will be pretty much the same as 2021 current level. So that's the 7th question. And next is that we were asked that how about our greenfield, they want to know our greenfield investment plan. So the question -- I mean, GWC. The question is that your peers have been discussing about the potential investment of the new fabs due to limited room for further debottlenecking; however, they will require the longer duration contract with price premium to consider the new fab. Could you let us know if you have such point in discussion with your customers and what would be your criteria for greenfield investment? Here, I would like to make it very clear that GWC do have map out a plan for a greenfield expansion, but GWC will not launch this plan for now. GWC's priority now is to do brownfield projects in several countries, including the brownfield project in Japan for 300-millimeter EPI wafer and polished wafer and also GWC will do SOI expansion in the U.S. and EPI expansion in Taiwan and some debottlenecking in Korea. So all of these expansions are for 300-millimeter. New capacity from this brownfield expansion will be available from maybe mid-2023. So that's the -- that's the expansion plan for GWC. There is no greenfield investment plan for now, at the moment. We have already have the plan ready, but have no plan to launch greenfield expansion now. And the last question, the last question I would like to answer before opening the Q&A session is that, we were asked in the past 2 days since we released our GWC first half results. We were asked that why GWC -- why is GWC Q2 EBITDA so much higher than Q1? GWC Q2 EBITDA was as high as 45% and Q! was around 34%. Why is that? Why is Q2 so much higher than Q1. Of course, our gross margin is higher in Q1 as well, and our overall operating income is higher, but why EBITDA is so much higher. Here is the explanation -- here is the answer for this. The main reason is because of the share price of Siltronic at the end of Q2, comparing with end of Q1 has increased substantially. And therefore, we have recorded unrealized gain resulted from the mark-to-market valuation of its Global Wafers, 13.67%, Siltronic set bond and categorize these earnings as other income. So also Global Wafers has received cash dividends from Siltronic in the second quarter for 2020 performance, which is also recognized under other income. Therefore, the EBITDA margin has improved in larger magnitude versus gross margin. So this explains that why Q2 overall EBITDA -- GWC EBITDA is so much higher than Q1. In Q1, just the active way, just the opposite in Q1, Siltronic stock price was bad. So in Q1, actually, GWC had to record it -- realized loss resulted from the mark-to-market valuation of Siltronic stocks. So just 2 opposite situation. So that is why Q2 overall EBITDA is so much better than Q1. But in general, if we combine Q1 and Q2 make it a total first half of this year, our overall EBITDA margin is around 39.9%, which is about same level like the past several years. So we're quite stable. So these 9 questions were what we received multiple times from multiple sources in the past 1 week. So thank you very much. I just summarize those Q&A first. And now I would like to have to open Q&A, please.

Thank you. Doris and C.W. for the update. Before we start the Q&A session, I would like to ask one question investors who will want to gain more color. So Doris if Global Wafers can successfully acquire Siltronic, the company may need more funding to support it. Would you dilute your Global Wafer stake? Or would you consider to participate and maintain your share in Global Wafers at about 50% levels. And if you decide to participate Global Wafers funding plan, would SAS require additional [indiscernible]?

I think that, first of all, our principle is to minimize the dilution. So as soon as we can match, we will try to minimize the equity -- to do the funding by equity. So because you see that we have already have ECB, we have a lot of laws in Europe, in TWD dollar and in U.S. dollars. So we prepare a lot of fund for the acquisition. So we -- our strategy is that we will maximize our nonequity fundraising. This is the first step. And then next is that of course we don't want to have very high debt ratio as well. So we will check the market overall situation and consider that what is a little bit more balanced way. So maybe we'll have a little bit of equity. If we really have to run some equity, then SAS, it would depend on what type of equity fundraising we're going to do. If we want to -- if we do it as a GDR, then SAS will not be able to participate a GDR fundraising program. So then SAS will be slightly diluted, so that's the point. But in general, we try to minimize -- GWC will try to minimize the portion of equity related fundraising. That's the plan.

Okay. Thank you so much. Operator, we can start the Q&A section. Thank you.

[Operator Instructions] The first question is from [indiscernible] Capital.

Let me just have a couple of questions in terms of, again, GWC. I understand that obviously, we have the greenfield plans in mind, but we're not going to launch it, but what type are we looking at in terms of doing the greenfield. I mean, what price do we need to secure before from stock price in order to actually do greenfield investments?

Yes, you are right that we have the plan, but we are not going to launch at the moment. We have -- I think that there are some criteria we have to met before we launch the LTA. And first of all, price has to be improved. Based on current market prices, we just cannot afford a new greenfield. So price has to be improved on. And we need repayment, some support from customers and we need at least 80% of the capacity has to be taken, has to be covered by customers LTA, that's our plan. So once we have all of these items match, then we will immediately kick off our expansion. And it's very -- our greenfield expansion. We already have 2 candidate location available right now.

In terms of pricing, I mean, we have heard our peer competitors talking about probably 50% to 60% higher in surprising before they can actually do greenfield. In our point -- standpoint, I mean where do we stand in terms of pricing?

Yes. I think, first of all, basically according to our company policy, we don't really comment pricing. So a project, I cannot give you a specific percentage, but there are 2 ways to calculate the price difference. One is that are you going to charge super high price for those capacity from greenfield capacity -- for those wafer from greenfield capacity only? Or are you going to make it a blended price? I mean, if you expand your capacity by 20% for example, so if you charge a super high price for this 20%, this is one way. And other ways it's like charge a small increase for the whole 120% of all of your wafer and that's another way to charge the wafer. So our point is that if we are going to do a greenfield then we will raise the price of all of our wafers. So that means that we will have all wafer to share the pain of the high depreciation from that greenfield. So if we apply this blended price strategy, then we don't have to make the price increase as high as 50%, 60%, that's the another way. But if we want to make it the greenfield wafer price, the total depreciation will be absorbed by the wafers from greenfield, then I think we really need a huge price increase. Sorry, I cannot give you specific percentage. Sorry about that.

Yes, understood. Maybe my last question for me is actually on SAS right. I mean, from the shareholders of SAS' point of view, what we understand it's actually trading at a huge discount to some of the past. From our point of view, how do we think that we can narrow the discount so that we can actually narrow the discount to the summer of the past, which we really pointed out is actually at a huge discount?

You mean the SAS price discount?

Yes, correct. It's about 46%, what you mentioned is -- so somewhat half of quarter investment? Yes. Yes. I mean how do we actually plan to narrow the discounts? Yes.

Yes, we have several approaches. I mean I do have -- C.W. and I, whenever we do any presentation to any shareholders whether in Taiwan or overseas, we try -- every time we try to highlight value of all of our reinvestment and the value of the potential of the growth of the company. This is one way we try to improve the visibility, the transparency to share our real value to the shareholders or potential shareholders. This is one way. We will keep working on this one. And it's improving from $30, $40, $60, $70 per share and now it's 200 today, maybe somewhere around TWD 200 per share. But it's not enough. It's still big discount. So what we are going to do is that the second step is that we will try to -- basically, we will keep growing our revenue, I mean SAS revenue will keep growing, but we try to limit our capital. So that means that maybe we will freeze our capital, but we try to make our revenue and profit even higher. For example, right now, our capital -- our GWC capital is TWD 5.9 billion, but our revenue is over TWD 60 billion. So it's 10x, it's more than 10x. We will try to make it even larger than 10x. So that's the second way we want to keep improving not only the transparency and visibility of the company, but also increase our EPS and increase our revenue versus capital, now it's around 10x and now it's roughly 11x, want to make it more even higher than 11x, I mean the revenue wise. And the third one is that, of course, dividend payout is a very important factor. So we will work very hard to keep it high dividend. If you check our financial statements, you will notice that maybe you will notice that we have very high capital surplus. Our capital surplus is over TWD 24 billion, I guess, right? Yes, it's over TWD 20 billion. I remember it's somewhere around TWD 24 billion, TWD 23 billion [indiscernible], around TWD 23 billion. And capital surplus means that when you try to -- when you -- okay, our capital surplus is TWD 20 billion right now as of end of June. So this capital surplus means that dollars that we have cash available. Actually, we can pay our dividend higher than our EPS. So for example, in our EPS, it's TWD 12. But we have a lot of cash. We don't have to -- we don't -- it's not necessary for us to limit our dividend payout under 12. We can make it even higher because we have capital surplus. And that capital surplus, the dividend from capital surplus will be tax-free. So that's another way. We try to explain the value -- the potential value of this to the shareholders and also -- as long as cash is available, I think it's very likely that we will have a very beautiful dividend payout for SAS. It's actually SAS really -- I think it's -- one of the very best choice in Taiwan submarket, you check a lot of same price -- same stock price company, but actually no, I think we are the best one, I mean, EPS-wise and dividend-wise. So we will keep improve. I know that this is management team's responsibility to narrow down the discount. We will keep working on this.

Okay. Due to time constraints, we will conclude the call. Thanks Doris and C.W. for the update, and thanks for everyone's participation. If you have any questions, please reach out to the company in [indiscernible]. Thank you.

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

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.