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

Good afternoon, everyone. I am Brad Lin, semiconductor analyst at Bank of America Securities. It's our honor today to host SAS management for the second quarter '23 earnings conference. Now let me hand over to Mr. C.W. Lee, Vice President and the spokesman of the firm for opening remarks. Over to you, C.W.

Thanks, Brad. Hello, everyone. Welcome for joining SAS First Half 2023 Earnings Conference Call. I'm C.W. Lee, SAS Vice President as well as company's spokesman. We also have Doris Hsu, Chair President and CEO; and Jennifer Cheng, Vice President and deputy spokesperson in this call. First of all, Doris will give us the executive comments, and then I will make a brief presentation of group structure and industry overview, 2023 1st half financial performance and the ESG highlights. A final Q&A session will be hosted by Doris and us later. For today's presentation file, we have uploaded onto our website. If you do not have the file on hand, please access our website for the most updated file. Please know that some information during our 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 our safe harbor notice in our presentation Page 1 disclaimer. Now I would like to turn the call over to Doris for executive comments. Doris, please.

Thank you, C.W. Good afternoon, ladies and gentlemen. Thank you very much for joining SAS earnings call of Q2 2023. Our spokesman, C.W., will guide us through the presentation later on, and I will answer some frequently asked questions received recently followed by the questions raised in the meeting today. So first of all, let me share some comments of our SAS overall financial results and update operation status. If you have already downloaded our material from our website, please turn to Page 2. Let me start with the financial highlights. SAS Q2 2023, our revenue in Q2 totaled TWD 20.3 billion, which is 0.2% Y-o-Y growth. And our first half 2023 revenue totaled TWD 41.2 billion with 5.6% Y-o-Y growth. Both Q2 and H1 revenue, both of these 2 hit the record high over the same period of SAS history. And gross margin, our gross margin in Q2 was 34.3% and H1 was 35.3%. Gross margin, our second quarter gross margin decreased by 2% compared to the previous quarter. The erosion was mainly from solar cell ASP plummet in first half 2023, and also lower utilization of our solar cell production lines in the first half of '23. Of course, SAS subsidiary, GWC, GlobalWafers overall gross margin erosion is another key factor as well. GlobalWafers gross margin was impacted by expenses associated with the unused capacities and spiking power costs in some countries and also higher depreciation from CapEx. These 3 are the key reasons of GlobalWafers gross margin erosion in first half this year. Operating income-wise. Operating income in Q2 and H1 for SAS were 25% and 26.4% separately. Net income. SAS net income in Q2 '23 was 23.3%, and the whole H1 net income was 22.9%. Our EPS for Q2 were TWD 4.15 per share. The first half coincided -- the first half EPS hit TWD 8.36 per share. Please note that both of our net profit and EPS in the first half have surpassed all previous figures for the same period in SAS history, highlighting SAS' ability to capitalize on opportunities for growth. Next, please turn to Page 6, which is solar industry outlook. Please let me further elaborate the solar energy industry outlook. Worldwide solar industry studies, investment in clean tech -- clean energy tech is experiencing rapid growth right now, outpacing spending on fossil fuels. This trend is mainly driven by the increasing affordability and security concerns associated with clean energy sources. Notably, solar energy has emerged as a prominent player in the global energy transition, thanks to its substantial cost reduction over the years. For example, PV costs dollar per watt down by more than 80% over the last decade. This huge cost down in past decade turned solar power into one of the most competitive sources of electricity and sustainable energy in the EU and many more countries. Solar installation are proliferating worldwide, and its cost leadership positions it to claim a larger ship than any other power generation technology right now. That's what I just explained in the past 2, 3 minutes with worldwide solar status. Now let me move to Taiwan overall solar market outlook. Same as China, U.S., EU and many other countries, solar outlook in Taiwan is basically very optimistic as well, reflecting the broader global trend. However, there are some challenges that need to be addressed. The limited availability of land poses a constraint on the expansion of solar projects in Taiwan. And rapidly and unexpectedly, falling prices along the solar value chain have implications for the industry profitability. Lastly, Taiwan's higher and higher reliance on imported solar modules adds another layer of complexity to the domestic solar landscape. These imported modules manufactured at lower prices are putting pressure on local Taiwanese manufacturers, solar product manufacturers. Solar modules are designed to last 20 to 30 years, but the use of imported modules which are not customized, designed for the harsh weather environment in Taiwan, raise concerns about their durability. In the event of natural disasters such as typhoons or earthquake or any other accidents, damage to these modules could not only significantly disrupt Taiwan's power supply but also lead to massive financial losses for investors and bankers. We need to seek ways to safeguard the interest of local users and solar industry and ensure the reliability and quality of solar installations in Taiwan. Local-made solar module is the best solution to local solar power system from product reliability and overall energy resilience standpoint. Unfortunately, Taiwan has higher and higher reliance on imported solar modules. In the past 6 months, around 40% of the modules installed in Taiwan solar systems are imported modules. This is one of the key reasons why Taiwan solar cells module -- cells and module companies, including SAS, are suffering from low utilization rates in the past several months. Next, please turn to Page 10. I would like to introduce -- update everyone a little bit about SAS -- our new technology. We are very pleased to announce the forthcoming launch of our latest solar product, the M10 N-type Topcon sales posting an impressive 25% conversion efficiency. This advanced solar technology aims to make a positive impact in the renewable energy sector. The M10 N-type Topcon sales and modules offers a valuable synergy that can enhance the competitiveness of solar systems, particularly in densely populated regions like Taiwan. We are looking forward to introducing these high-efficiency N-type Topcon products to the market in early 2024, and we believe they have the potential to contribute significantly to the adoption of clean energy solutions in Taiwan. Last but not least, let me share -- update everyone a little bit about our ESG -- SAS ESG status. SAS is awarded top 5% corporate governance among all Taiwanese companies again. This is already the 9th consecutive years and is included as 1 of the top 30 companies in Taiwan Taipei Exchange ESG 30 Index, demonstrating our commitment to improving corporate governance and also fulfilling for ESG responsibilities. That's very important progress. We are very proud of our overall ESG performance. I think the above are all about SAS. Let me also share a little bit update about the -- one of our reinvestment company which is AWSC. AWSC, or Advanced Wireless Semiconductor Company, AWSC is the top 2 gallium arsenide foundry in the world. Despite facing slower demand, AWSC has successfully resumed its growth trajectory during Q2 and achieved remarkable Q2 sales totaling TWD 527 million, marking a substantial Q-o-Q growth of 55 -- 54%. This surge in sales can be attributed to a rush influx of the power-amplified demand from Chinese smartphone customers and some key partners in other countries for Wi-Fi solutions and other products. Demonstrating consistent progress, AWSC has witnessed continuously monthly revenue growth over the past 5 months since February 2023. Notably, July monthly revenue amount -- amounted to TWD 232 million, this is a very good growth. This is a 13% MOM growth. It's very remarkable in such a weak market. So that's what I would like to share about AWSC. The final sector I would like to quickly update to everyone is GlobalWafers overall performance. Around 88% of SAS overall consolidated revenue, 88% of SAS total consolidated revenue is from GlobalWafers. So let me update a little bit about GlobalWafers overall performance in the first half. In Q2, GlobalWafers revenue totaled TWD 17.9 billion with 2.2% Y-o-Y. First half revenue achieved TWD 36.5 billion, a 7.9% Y-o-Y growth. Both of these 2 numbers hit the record high over the same period for GlobalWafers. Regarding the gross margin and operating profit, GlobalWafers gross profit margin in H1 is 39.2%, and operating profit margin in H1 was 31%. Both of these 2 are overall -- in general, overall performance is pretty good. EPS, GlobalWafers EPS for the second quarter was TWD 11 per share. For first half, EPS amounted to TWD 22.49 per share. This is the second highest record and a very important index. Another important index for us -- for GlobalWafers is prepayment. As of end of June 2023, GlobalWafers prepayment totaled TWD 38.3 billion, which is around USD 1.2 billion, marking the third highest ever record prepayment for GlobalWafers. During the first -- I think what's even more important than the total amount, big amount TWD 38.3 billion, what's more important than this total amount is the new prepayment concluded and new prepayment we received in the first half. During the first half of 2023, GlobalWafers established several new long-term agreements with multiple customers resulting in a new prepayment, which is one point -- which amounted to TWD 1.5 billion. That's new prepayment received in the first half this year. And for GlobalWafers, I think there are 2 products which are growing very rapidly. The first one is [indiscernible] in the second one is silicon carbide or the compound product materials. ESG update. Same as SAS, GlobalWafers has been awarded top 5% corporate governance among all Taiwan-listed companies for 5 consecutive years and is included as 1 of the top 30 company in Taipei Exchange's ESG 30 Index and also FTSE4Good Index Series by FTSE Russell, demonstrating GlobalWafers commitment in being a socially responsible company. The above are my comments covering SAS and very quick update about GlobalWafers. C.W. will share more details with everyone. Thank you very much, and C.W., please.

Thanks, Doris. Let me continue the presentation. And please turn to Page 14. This is SAS Group structure. As you know well, SAS Group business sector, including solar, semiconductor and the reinvestment business. On the left-hand side shows solar cells and layer module products both now and the upgrade to M10 N Topcon product for higher efficiency profit contribution. Also, we continuously build solar power plant to leverage SAS company for green energy trading, reinvestment to our NextDrive and Billion company for energy IoT storage business development. Based on the integration, SAS is now acting as a total solution provider instead of a material provider. On the right-hand side, covering GlobalWafers for semiconductor wafers, PSC for specialty gas used by semiconductor IC companies and the CWT is under transformed product to LT, LN, gallium arsenic were delisted on November 1 and merged into AWSC for further business cooperation. AWSC for gallium arsenic, the foundry performs much better in the first half this year versus last year, as Doris mentioned earlier. Also to provide diodes, silicon carbide MOSFETs for automotive device maker also performed very stable and profitable contribution. Transphorm with gallium nitride power conversion and product and ANJET for gallium nitride, semi and silicon carbide cooperation too. With the cooperation of those reinvestment companies, SAS could cover all generation of semiconductor wafer materials, including silicon, frozen wafer silicon carbide, gallium nitride with vertical and horizontal integration. Page 15 shows SAS Group revenue trend since 2014. As you know, we merged Topsil and [ MMC ] in 2016. Semiconductor share become major portion with GlobalWafers expansion plan, brownfield and greenfield in the next 2, 3 years. We believe semiconductor wafer portion will grow further. Next is the industry overview. On Page 17, a solar capacity forecast trend year 2027 based on media scenario on the graph. This year, we reached to 341 gigawatts, including 159 gigawatt rooftop PV installation and move towards to 617 gigawatt in 2027. On Page 18, this slide shows global energy investment. On left-hand side graph is 2015 to 2023, clean energy versus fossil fuel trend. Clean energy portion increasing and the fossil fuel portion become less. On the right-hand side shows 2023 total investment is USD 2.8 trillion, with shares 61% for clean energy. On Page 19, follow previous page. This page shows annual clean energy investment factors. Please refer to 2023 estimation bar. Renewable power factor grow faster and shared the biggest portion. Next, our EV and the nuclear factor on Page 20. This page indicates solar technology performed better among all power generation during 2020 to 2023. Solar factor act as a leader of power generation expected to reach USD 380 billion in 2023, equal to invest USD 1 billion per day. Wind power also indicated growth trend in past 3 years but not strong like a solar power generation. Page 21 is related to government support policy for the renewable energy. This initiative provides financial incentives, regulatory frameworks, long-term market stability such as U.S. II, Europe REPowerEU Plan, Net-Zero Industry Act proposal, China's 14th Five-Year Plan, Taiwan 2050 Net-Zero transition calls, et cetera, all encouraged solar power installation grow continuously. On Page 22 is Germany's status. Germany installed solar PV aggressively, will reach 70 gigawatts of solar operation in 2023 and target to reach 22 gigawatt yearly solar PV installation by 2026. Targeted install totaled 225 gigawatts by 2030. Page 23 is Taiwan renewable energy development, blessed with the environment of abundant sunshine, solar power major factor of renewable energy, also because of its affordability and sustainability. See below graph, in April 2023, solar, the red color shared biggest proportion out of all factors. On Page 24 is the SAS business direction versus Taiwan 2050 Net-Zero pathway. On the right hand, you can find 3 major strategy of Taiwan 2050 Net-Zero Pathway are exactly same as SAS business direction on the left-hand side. SAS high-efficiency products and the power plant are matched to build zero carbon energy system, energy storage and micro grid approach matched to improve energy system resilience. Smart Energy business model with the SAS operation to create, SAS become an energy solution provider, also match the government policy to create green power growth in Taiwan. Now let's move to 2023 1st half financial results. Please turn to Page 26 to 27. Financial highlights. These 2 slides are 2023 Q2 and the first half result. As Doris mentioned earlier, our revenue Q2 TWD $20 billion and the first half TWD 41 billion performed record-high result over the same period. EPS first half result TWD 8.36 per share also performed record high over the same period. EBITDA percentage is 39.9% and 39.3%; ROE, 26% and 27%; ROA is 9.7% and 9.8%, respectively. Pages 28 to Page 32 are a summary trend of revenue, gross profit, operating profit, net profit and EPS, Our result show big improvement in past 4 to 5 years. We, SAS Group, continue to pursue further improvement going forward. Pages 33 to 34 are really income statement and balance sheet. Cash and cash equivalents reduced to TWD 51.7 billion, was because some deposits in bank held for 3 months or more need to move to other access items, which accounts TWD 25 billion around. Inventory showed a stable amount versus previous quarter. Shareholder equity remain at TWD 71 billion high level. Pages 36 to 44 our ESG highlights. SAS has been at the forefront of global responsibility, the aspects of environment, health and safety and corporate governance. On Page 36 is power consumption summary. On right-hand graph, SAS revenue shows 3 years consecutive increase. On the other hand, power consumption reduced yearly. On Page 37 is CO2 emission energy savings summary. On left-hand side, 2022, CO2 emission was 48,000 tons, less than 2021, equal to 7.43% CO2 emission reduction versus 2021. On right-hand side, 2022's total electricity conservation was 8,088 megawatt hour equal to reduced 4,117 tons of CO2 emission. This record shows a remarkable result of environment effort by SAS Group. On Page 38 is solar power systems. As of end 2022, SAS has installed 146-megawatt solar power system at home and abroad for grid connected operation systems, which equals to reduced 87,000 metric tons of CO2 emission. Pages 39 to Page 44 are social care, corporate governance. I'll skip these. Please refer to the materials. Pages 46 to 47 are GWC 2023 first half performance update for your reference. Above content is my presentation. Thank you. Next, I would like to hand over to Doris for Q&A section. Doris, please.

Thank you very much. Yes. We recently -- we received several questions. Let me start from these 5 questions. The first question is, please update the status of SAS's operation, overall operation status, including your cell business, module business and the other business. So our -- let me start from cell business. Our cell operation, we have already finished our upgrade from the past 2 years. From G1 right now, it's completely M6 and M10. For M10, it's one of the earliest M10 cell line in Taiwan, and we have very good efficiency overall production performance. M6 is stable. But the problem for both M6 and M10 lines, the most important problem for these 2 lines is that the local demand is not strong enough. That's why our utilization rate is not high enough. That hurt our financial result. You always have some special charges associated with unused capacity. So that's why this is challenging for us. And for our module, in the first several months of this year, our margin operation in Germany was doing pretty well until some special events in Europe, Intersolar, some special events over there. And at that time, China announced some shipment and supply at a very low price in Europe. That hurts the market price very much. So that's why the module business in Europe is slowing down a little bit -- for local-made module is slowing down a little bit. And for SES, which is a sustainable energy solution company, that one is still performing very well. We signed more contracts with semiconductor customers who need renewable energy. So we signed a green power contract, supply contract with those customers. And also we have -- we are working on some potential wind power projects as well. So SES in general, we are doing okay. So that's our overall operation status. In general, we are still positive. Our solar business, same as last year, we are still making okay profit. but the pressure is getting higher and higher because of low utilization right now, especially in Taiwan market. And the second question is that from SAS financial report, it seems that SAS revenue for solar products only in the second half in Q2 2023 is about 20% lower than Q2 2022. Is this correct? Any special reason for this revenue erosion? Yes, you are right. I think the question -- this question has been asked by some analysts and shareholders. And this analysis is correct. Our revenue -- solar-only revenue is lower than last year. And there are 3 main reasons for lower revenue here in this year, especially in Q2, if we take Q2 this year versus Q2 last year, The gap -- revenue gap is about 20-plus percent and 3 main reasons for this revenue down. The first reason is the ASP drop. You know that in 2022, solar ASP -- in general, solar ASP was very good, not only cell module price but also the whole supply chain all the way from polysilicon, wafer and then cell and module. So all the whole supply chain price were very -- were much higher than this year now last year. But suddenly, starting from December last year, price crashed, starting from polysilicon price crash and then followed by wafer price and then, of course, developed to cell and module. So that's the first reason of our overall -- why our revenue is down. The first reason is because of ASP drop. So even we ship in same volume, same megawatt or same wafers, our revenue will be still lower, and main reason is because the supply chain price down starting from December last year. And right now, the material, the supply chain price is still pretty unstable, but basically it's slow. So ASP drop, this is the first reason of the low revenue for a solar business. And the second reason for this is because of the soft demand, soft solar demand in Taiwan or a lot of solar project installation were delayed, pushed out. So the process is -- the approval procedure seems taking a little bit longer time this year. So a soft market in Taiwan, that is another -- the second key reason of our pricing revenue down in Q2 this year versus Q2 last year. That's the second reason. And the third reason is higher import module. We just subtract the number in the past 6 months, I mean, from January to June. According to our analysis, around 40% of the modules installed in our Taiwan solar systems were imported modules. So that is one of the reasons. So we have -- basically, we have triple wind. We have ASP issue because of supply chain, value -- the price down, and we have a soft market in Taiwan, soft solar market in Taiwan. And the third one is much higher import, much higher modules -- percentage of the modules were imported from overseas. So these 3 are the main reasons why SAS Q2 revenue is much lower than Q2 last year. And the third question is please explain your plan for the investment -- for your investment for next-generation cells. Yes, very happy to answer this question. As many of you maybe know very well, that SAS is -- used to be the technology leader of PERC in the worldwide market for more than 10 years. So in the past 10 years, the whole market, all the sales are basically dominated by PERC products, which was designed, developed -- and the first one launched in the market that was by SAS. It's about time to really have another new generation. In the past more than 10 years, whenever we talk about efficiency improvement, it's always still PERC but try to improve in knowledge the cells dimension. So that's how we improve our efficiency in the past several years. Of course, there are several here and there some minor improvement as well. But the main improvement -- cell efficiency improvement in the past 10 years was mainly PERC but with some dimension in large. But starting from next year -- actually starting from now, next-generation technology is mature and has already been launched to the market which is N-type Topcon, In the past, so many -- past decade, when we were talking about -- we're talking about P-type PERC, but now this time, we are talking about N-type. And if you use a large dimension wafers such as M10 or G12, a large dimension with N-type Topcon technology, you can yield somewhere around 25% efficiency. And that's what we want. Today, P-type curve efficiency is around 23. But now when we move to next generation, it will be around 25%. It's a big improvement. And SAS N-type Topcon next-generation cell we launched to the market in the early 2024. That's our plan. And we aim to reach 25% efficiency. That's our update of the new next-generation cells. And next question is that, why is Taiwan solar industry so much more challenging than other countries' solar industry? What are the main reasons of all the supply chain difficulties? Yes, this is very correct. Actually, solar now is so important, same as what C.W. presented in his presentation. Solar market -- solar is so affordable now. So for almost every -- many countries, solar industry is one of a measure not only to improve your renewable energy and the percent of your renewable energy but also to reduce your CO2 emission. Not only this, solar industry, solar operation has been taken -- has been used -- in many countries, it's been used as one of a very important measure to improve your GDP, improve your overall activity, macroeconomy in many countries. But why not in Taiwan? Why Taiwan solar industry is so difficult, so challenging -- so much more challenging than other countries? Several reasons. The #1 reason is that it's so difficult in Taiwan to secure, to obtain large scale of the land here in Taiwan to build solar power systems. In Taiwan, we have beautiful sunshine, we have very good -- enough sunshine to generate more energy, solar energy. But the problems is that we don't have enough space. We don't have enough land. So this is the first reason. And the second reason is that all the power solar industry, solar company in Taiwan, the scale, because the whole market size is too small, it's just about 2 gigawatts, 2.5 gigawatt a year in Taiwan, that's our home market size, total addressable market. So market is small. That's why all the manufacturers' capacity is small as well. And because of our small scale, Taiwan solar companies is not as competitive as those Chinese solar companies, which easily 5 gigawatt, 8 gigawatt, 10 gigawatt. But in Taiwan, 1 gigawatt or 800 megawatts. So it's totally different order. The whole capacity, the scale in Taiwan, solar cells, solar module company scale in Taiwan is much smaller than China or some third countries. So that's another reason. And next is, I think, government strategy and incentive, that is a big -- that is -- it can be very important for the whole industry as well. If we take a lot at U.S. IRA or U.S. ITC, PTC, some special incentive for the solar or green tech, renewable energy, actually in the U.S., they have big land and also they have a very aggressive incentive because they take solar energy as one of the national security levels issue. So this is another reason that why some other countries like U.S., their solar companies' overall performance is better than Taiwan. So let me make a quick summary here, that 3 main reasons for this -- for all the difficulties for Taiwan company -- in Taiwan solar companies in Taiwan in the solar industry. Number one is that our land is -- the availability of land is too difficult. And the second is that basic solar company in Taiwan, our scale is too small. And the third one is overall policy-wise, I think it's more challenging in Taiwan. So that's my answer to the #4 question. And the last question is talking about that, yes, U.S. government, American government just released some very aggressive incentive and financial support for solar applications, such as IRA, Inflation Reduction Act, or ITC investment tax credit, or PTC, production tax credit. So there are a lot of special programs in the U.S. to encourage and financially support solar or green tech companies. How about SAS strategy? Are you going to build your production line in the U.S.? Or do you have any investment plan in the U.S. for solar? That's the last question I'm going to reply today. And the question for -- to make it very short, the question for this is that we are still evaluating. There are quite a lot of issues we have to figure out before we really make the move. One is that, of course, we need to know more details of all the incentives offered by U.S. government, same as our Semiconductor Chip Act, for green technology, for solar, we need to figure out IRA, ITC, PTC, all of those programs as well. So that's number one. And number two, for us, which is very important as well, that in the U.S., if you want to build a solar operation in the U.S., I don't think that scale like a Taiwanese company will work. It has to be much bigger than this. So we should talk about something like 5 gigawatts or 3 gigawatts, that kind of scale instead of what we are talking about. Right now in Taiwan, it's 800 megawatt, 1 gigawatt, 2 gigawatts. It's way too small. So we have to be very cautious. If you want to make an investment in U.S., it has to be a big one, a big boy. So then how to make sure that the investment and labor shortage in the U.S. and all of the potential risks will be well managed to make sure that we can enjoy the big market, but at the same time, we will be financially performing okay. So that's the second point that we have to be very cautious. So right now SAS is still evaluating and considering all the potential pros and cons. And we haven't made a decision yet. We will make a decision very soon but not yet. These are 5 questions we received recently from different parties. So let me make a quick summarize here. Thank you very much for your time. That's all the questions we received. And we are open, any questions are welcome. Thank you.

[Operator Instructions] Now let me start with 2 questions from my side, if I may. So firstly, with the ongoing solar ASP pressure, so do you think we are near the bottom yet? And what time do you expect the ASP inflection point to come and... [Technical Difficulty]

Hello? Brad, we lost you. Brad, can you hear us? We lost you. .

Justine, Brad, are you online?

Yes, we are. Sorry, we're just disconnected, but we are back now.

I heard your first question. So maybe let me answer the first question, and then please repeat your second question. Would that be okay? .

Sure, sure. Actually, I think I was disconnected from the second question. So yes, thank you for letting me say that again. So the second question is from a longer-term perspective is, what is the company's strategy in the long run to consolidate the resources that we have among all the subsidiaries, especially in the fast-growing areas like green energy, silicon carbide and gallium nitride?

Thank you very much. Very good question. Thank you very much, Brad, for your question. The first question, ASP, I think for solar supply chain right now, it seems that the ASP already hit the bottom and it's recovering. We are seeing [ crash ] -- we are seeing the ASP improvement from now. I think it will be back to normal. Because the past 6 months, the price was crazy low and is recovering now. So it's a short quick answer for your question one. . And question two, that's a very important question. We keep asking us -- the management team reviewing this topic very often. SAS has 2 very important key business strategy. One is green cap or renewable energy -- or we should put it this way that we focus on all the renewable energy and sustainable energy solution. So that's our part one. And part two is all semiconductor-related supply chain. So for part two, right now for part -- for the second part, the semiconductor part we have, of course, global wafers from raw materials, including silicon and compound materials, silicon carbide and nitrite. And we have like design house like Transphorm and ANJET and many other different very good design house company. And also, we have a module company like [ Extron ] and we have foundry like AWSC. Those are our foundry -- compound foundry company. Also, we have a chemical company like TSC. So those are our semiconductor side. And for a solar part, most of our solar operations in-house, like our cell, our module and we have our solar power plant teams, we build a lot of solar power projects in the whole world, in many countries, not only in Taiwan but also overseas. We are now working on storage, power storage. And we also -- we are trying to figure out that if we can involve any smart grid or any other renewable energy, even green hydrogen or any other new material for solar. So these are what we are doing. So for the long run, we will focus our resource for both of these 2. So these 2, SAS will not -- basically, all of our resources will focus on this [ street ], but we will fine-tune and make the focus -- try to reallocate our resource in a very smart way to make sure that the rapid-growing one with higher potential business unit will resource from the groups. And also, we will try to identify more related companies with better synergy to join either our renewable energy group or our semiconductor group. That's what we keep working on. There are a lot of strategy works and also have a lot of execution work as well. We believe that we will have more and more synergies materialize in the next several years. Thank you.

Thank you very much, Doris. We definitely look forward to more of the synergies to come. So our first question is coming from Donnie Teng from Nomura.

I have 2 short questions. The first one is the solar business outlook because last time we -- you mentioned about the semi wafer business outlook. And just wondering, considering the solar price has been at the bottom level of the cycle, what kind of expectation you are looking at into the second half? And I wonder if you could kindly give us some solar business outlook for 2023? That's the first thing. And secondly, for the semi wafer business, I think you previously mentioned about that in coming 2 years, the utilization rate of 12-inch wafer should be still staying at above 90% level. But considering there are still quite some greenfield capacity expansion activities in the industry, what's your latest view on the peers' expansion schedule and whether you think the slow semi demand will make this greenfield expansion to slow down into the coming quarters.

Thank you very much, Donnie, for your 2 questions. Very good questions. The first question about our solar business outlook. The first half was tough for overall our solar business. The second half, I think it will be flat or slightly better than first half. The reason for this is that our M10, big product, is completely not only ready but also many of our customers have already got the certificate. So we will have more new business. We are expecting more M10 Topcon -- M10 product capacity online. And also, as I answered Brad's question earlier that we see the price ASP of solar product has been improving gradually from -- actually from July, August, from these 2 months. So we see some improvement, and we guess that this improvement will continue. Maybe it will not be back to last year's level. By end of the year, we'll be still lower than last year, but it will be definitely better than first half this year. So we think that the outlook, if we are talking about second half only, I think overall performance will be slightly better than first half this year. It's not only -- it's ASP. Another reason is -- as I said, that ASP is one of the reasons. Another reason is the demand, soft demand. In the past several months, we are -- we found that the solar project approval, the efficiency of the approval -- I mean, government approval for some project is delayed quite a lot. So that was one of the reasons that -- why the business was bad. And this part is a little bit unpredictable. So we think that the second half this year, I think, overall -- because the first half, a lot of delays. So I guess that the second half of this year, overall approval procedure will be much faster than before. So we think we're expecting the second half, our overall solar business should be improving. That's the first question. And the second question is about semiconductor wafer. I think semiconductor wafer, most of the expansions are from 2 categories: one is 12-inch and the second one is compound. So that's all where most of the expansion for. And so far, I think for compound semiconductor, like silicon carbide, I still believe that the utilization rate -- worldwide utilization rate will remain very high because demand is still very strong. So compound utilization rate will not be an issue. What is more concerning is 300-millimeter. A lot of expansions are for 300-millimeter polished wafer and 300-millimeter heavy wafer. So it seems that more and more greenfield or brownfield capacity will be chicken very soon. Maybe from second half '24 or '25, more greenfield capacity will be available then. So it looks like that expansion capacity, there will be a lot of new capacity online very soon. But we -- from our investigation, our understanding from the market, I think that many projects -- many of the wafer projects schedule has already been delayed for a while. I'm not talking about 1 year, 2 year to date, that kind of stuff. But quite many projects were delayed like 2 quarters or slowed down the installation. For example, if I want to install 2 lines, many projects, we install 1 line first and waiting for the market demand recovery for the second line. This is because the past couple of quarters and also the coming maybe Q3, market demand is really very, very weak. The inventory correction has been lasting much longer than the industry original expectation. So that's why many companies, not only the fab foundries, they are more cautious. Many of the fabs, foundries, IDMs, their expansions are slowing down or pushed out. So not only these sectors, but also our peers, silicon wafer companies, as far as we know, that many of that were delayed a little bit. Not -- no cancellation so far, but quite some projects are delaying a little bit. And at the very beginning, some delay was mainly from construction. I know the labor shortage issue, that is not only in the U.S., but also many countries are facing exactly same issue. And also inflation, super expensive cost and difficult, not easy to get enough experienced labor. All of these factors are delaying the construction schedule. And then the second reason for the slowing is because it seems that the inventory correction is taking more a longer time than expectations. So then all the companies, our peers also, they intentionally slowed down the installation a little bit. That's what we are seeing right now. So I think, in general, to answer your question that what will be the utilization rate for 300 millimeters, I think we're pretty confident that the next several years for semiconductor wafer 300-millimeter utilization should be still over 90%, the whole industry. And if we are a little bit more optimistic, it can be even higher than 90%. And as long as that the whole industry utilization rate is over than 90%, then I think pretty good because that means that the stronger company, maybe their utilization rate will be 95% and a little bit. Not that efficient company, maybe the utilization rate will down to 88& or 85%. So that's still pretty okay. So in general, 300-millimeter overall utilization rate will be still pretty healthy in the next several years. That's our view. Thank you very much for your question, Donnie.

Thank you very much. In the interest of time, we will wrap up here. Thank you all for joining the call. And thanks again Doris, C.W. and Jennifer for your time today. This marks the end of the call. Thank you very much. Happy weekend.

Thank you, everyone. Have a good weekend. Thank you.