indie Semiconductor, Inc.

Welcome to Semiconductor Manufacturing International Corporation's 4th Quarter 2022 Webcast Conference Call. Today's call will be simultaneously streamed through the internet and telephone. Please be advised that if you join the meeting by phone, your dials are in the listen-only mode. However, after the conclusions of the management's presentation, we will have a question-and-answer session. At this time, you will receive further instructions on how to participate. Without further ado, I would like to introduce Ms. Guo Guangli, Senior Vice President and Board Secretary, to host the webcast.

Greetings. Welcome to SMIC's fourth quarter 2022 webcast conference call.

Attending today's call are Dr. Gao Yonggang, Chairman, Dr. Zhao Haijun, Co-Chef Executive Officer, Dr. Wu Junfeng, Senior Vice President, and person in charge of finance.

Let me remind you that today's presentation may contain forward-looking statements that do not guarantee future performance, but represent the company's expectations

and are subject to inherent risks and uncertainties. Please refer to the following statements in our earnings announcement. Please note that today's earnings statement is presented in accordance with International Financial Reporting Standards, IFRS, and all currency figures are in U.S. dollars, unless otherwise stated. 首先,我們有請高永剛博士講話。

First of all, we invite Dr. Gao Yonggang to speak.

Greetings to all shareholders, investors, and friends from the line. First of all, on behalf of the company,

I would like to express my heartfelt thanks to friends who have always been caring about and supporting the development of SMIC. As a semiconductor manufacturing company registered in Cayman Islands, positioning in China and serving globally, SMIC has been always adhering to the principle of independence and internationalization, operating in compliance with the laws and regulations. and striving to provide global customers with high-quality products and service as our goal.

Over the past 22 years, our company has accumulated more than 60 million units of 8-inch chips. The number of chips is nearly 1,000. Our products have been imported to all over the world. They are widely used in mobile phones, consumer electronics, smart homes, industrial and automotive industries, and other fields.

in the past 22 years, the company has manufactured more than 16 million 8-inch equivalent wafers, close to 100 billion of chips accumulatively. Our products have spread out into thousands of families and all over the world, which are widely used in different areas such as mobile phones, consumer electronics, smart home, industrial, automotive, and make contribution to technology advance and a better life for people.

近年來,半導體產業的國際環境正在經歷新一輪的變化。 全球化的專業分工體系受到衝擊。 面對新的外部形式和挑戰, 中芯國際需要更科學的構建可持續高質量發展的能力。 In recent years,

The international environment of the semiconductor industry is undergoing a new round of changes, and the global professional system of this industrial supply chain division has been hit. Facing the new external situation and challenges, SMIC needs to build sustainable and high-quality development capability in a more scientific way.

As one of the important forces of the global chip industry, Zhongxin International will continue to play its own advantage, increase the development and optimization of differential engineering technology, and create a more rich and competitive engineering brand. As a trustworthy partner for global customers, the company will firmly use the market as a guide and the customer as the center of the idea, and establish a more efficient business operation and management system to provide customers with better products and services.

As one of the important forces in the global foundry areas, SMIC will continue to give full play to its own advantages, increase efforts in the development and optimization of differentiated process technologies, as to build richer and more competitive process platforms. As a trusted and reliable partner for global customers, the company will firmly adhere to market-oriented, customer-focused concepts, establish a more efficient business, operation, and management system, and provide customers with better products and services.

Although facing various difficulties and challenges,

We firmly believe that the long-term logic of demand growth for wafer manufacturing remains unchanged, and we are confident in the company's medium to long-term development. 中国大陆是全球规模最大增速最快的集成电路市场之一,是半导体全球化分工合作体系中重要的地区之一,而半导体行业是最能体现全球科技协作与进步的领域之一。

China is one of the largest and fastest-growing IC markets in the world and is one of the important regions in the division and cooperation system of global IC industry.

While the semiconductor industry is one of the fields that can best demonstrate global technological collaboration at advance, SMIC always adheres to the attitude of compliant operation, open and innovation, co-exist and co-win. The company is willing to jointly establish and maintain a healthy and efficient semiconductor ecosystem. together with domestic and foreign industrial chain partners.

谢谢大家。 Thank you all.

谢谢高博士。 接下来,有请吴俊峰博士介绍公司的财务情况。 Thank you, Dr. Gao.

Next, I will hand the call to Dr.吴俊峰 to introduce the company's financial status.

我向大家汇报2022年第四季度及全年未经审计的经营业绩,然后给出2023年第一季度指引。 First, I will report our unaudited financial results for the fourth quarter and the full year of 2022, followed by our guidance for the first quarter of 2023. 四季度的经营业绩如下。 The sales revenue is $162,100,000, which is 15% down. The net profit is 2.6%. The net profit is 32%. The net profit is 6.9%. The net profit is 3.3%. The net profit of the company is $386,000,000. The net profit of the non-control authority is $40,000,000.

The fourth quarter's financial results are as follows. Revenue was $1,621 million, down 15% sequentially and up 2.6% year-over-year. Growth margin was 32%, down 6.9% sequentially and 3% year-over-year. Profit attributable to the company and the non-controlling interest were 386 million and 40 million respectively.

The company's unaudited financial results for full year of 2022 are as follows.

Revenue was $7,273 million, up 33.6% year over year. Gross margin was 38%, up 7.2 percentage points year over year. Profit from operations was $1,836 million, up 31.8% year over year. Profit attributable to the company was $1,818 million, up 6.8% year-over-year. EBITDA was 4,611 million, up 20.7% year-over-year. CapEx for the year was 6.35 billion.

Moving to the balance sheet, at the end of 2022, the company had a total assets of $43.8 billion, of which total cash on hand was $18.7 billion. Total liabilities

were $14.8 billion, of which total debt was $8.7 billion. Total equity was $29 billion. Debt-to-equity was 30%, and net debt-to-equity was negative 34.4%.

In terms of cash flow, in 2022, we generated $5,348 million cash from operating activities. Net cash used in investing activities was $10,392 million.

Net cash from financing activities was 3,614 million.

关于2023年一季度,我们的指引如下。 一季度销售收入预计环比下降10%到12%, 毛利率预计在19%到21%之间。 For the first quarter 2023, our guidance is as follows.

Revenue is expected to be down 10% to 12% sequentially, and growth margin is expected to be in the range of 19% to 21%. 以上是财务方面的情况,谢谢。 This concludes the financial status.

Thank you.

Thank you, Dr. Wu. Next, I will hand the call to Dr. Zhao Haijun to comment on operations.

Happy Chinese New Year and welcome to the earnings call today. In 2022, the market demand for smartphones, computers, and home appliances turned from strong to weak, and customers' willingness

to place orders were significantly weakened. The industrial chain entered into a downward cycle from supply shortage to density stocking. Meanwhile, the changes in the international geopolitical situation have brought profound impact on the globalization landscape of IC industry, making the industry face an unprecedented severe situation.

The company's four-level sales revenue is $16.21 billion, which is 15% lower than before. The net profit is 32%, which is in line with the company's judgment and guidance on the industry. In 2022, overall, according to the financial data that has not been reviewed, the company's revenue will exceed $72 billion, which is about 34% of the total growth. In 2021 and 2022, the annual growth will exceed 30% in two consecutive years.

In fourth quarter, the company's revenue was $1,621 million, down 15% sequentially, and growth margin was 32%, which were both in line with the company's expectations and guidance. According to the unaudited financial results, Revenue for 2022 full year crossed to $7.2 billion, up around 34% year over year, with annual growth rate of more than 30% for two consecutive years in 2021 and 2022. The growth margin in 2022 increased to 38%, hit a record high. 全年收入按区域来看,

By region, annual revenue from China, America, and Eurasia accounted for 74%, 21%, and 5% respectively.

with 42% and 24% increase in the revenue amount respectively year over year from China and America.

金元收入按尺寸来分, 8英寸和12英寸收入占比分别为33%和67%, 收入金额同比增长24%和42%。 By size,

Wayfair revenue for 8-inch and 12-inch accounted for 33% and 67%, with 24% and 42% increase in the revenue amount respectively year over year. 晶圆收入按应用来分,智能手机消费电子,智能家居,其他应用占比分别为27%,23%,14%和36%。

The same amount of income has increased by 14%, 32%, 48% and 54%. The increase in the consumption of electronics and smart furniture mainly comes from home appliances and applications with limited and unlimited connections. Applications such as industrial and物联网 have increased significantly under the impetus of automation, industrial power management applications and the need for wearable equipment. At the same time, as the company actively promotes car rules verification, Waiver revenue by application, smartphone, consumer electronics, smart home, and others accounted for 27%, 23%, 14%, and 36%, with 14%, 32%,

48% and 54% increase in revenue amount respectively year over year. The growth of consumer electronics and smart home mainly came from the applications of home appliance and wireless connectivity. Industrial, IoT, and other applications have achieved substantial growth, driven by the demand for automation, industrial power management, and wearable devices. At the same time, with the company's active promotion of automotive-grade qualifications, platforms such as PIMIC, body control, and infotainment have been launched one after another. Revenue from new energy vehicles has grown significantly.

In 2022, the company's capital will be $635 billion. By the end of the year, and 8-inch monthly production capacity reached 714,000 pieces, which increased by 15% in total. The annual production capacity utilization rate is still 92% in the case of gradual release of new production capacity. From the four mature 12-inch new factory projects, at the end of 2022, Zhongxin Shenzhen entered the pre-production stage, Zhongxin Jincheng entered the pre-production stage, Zhongxin Inspiration completed the main structure ceiling, capital expenditures in 2022 was $6.35 billion. By the end of the year, monthly capacity increased to 714,000 alien equivalent wafers, with an increase

of 15% year-over-year. Annual capacity utilization rates still reached 92% with the gradual release of new capacity. Looking at the four new mature 12-inch projects, by the end of 2022, SMIC Shenzhen entered into production. SMIC Shenzhen entered into pilot production. SMIC Lin Gang completed construction of Ming Fab Shell, and SMIC Xixing started the construction. The mass production of SMIC Jincheng is scheduled to postpone by one to two quarters due to the delay of bottleneck equipment.

In 2023, the smart phone and consumer electronics industry will need time to warm up. The industrial sector is relatively stable. The increase in the number of Looking forward into 2023,

it still takes time for the smartphone and consumer electronics market to recover. The industrial sector is relatively stable, while the incremental demand in automotive electronics industry can only partially offset the negative impact of weak mobile phones and consumers. In the first half of the year, the industry cycle is still at the bottom. The impact of external uncertainties is still complex, although the visibility for the second half of the year is still not clear. The company has always seen some recovery of customers' confidence. The reserve of new products take out is relatively sufficient.

The net profit is expected to fall between 19% and 21% due to the reduction in productivity and the rise in debt. Due to the relatively stable external environment, the company expects the sales revenue to drop by 20% in 2023. The net profit is about 20%, and the debt growth is more than 20%. The capital spending is about the same as last year. There are two explanations for this. First, in the process of continuous high investment, the net profit will be under high pressure. This is the industrial rule. The company will always use continuous profit as the goal, and work hard to grasp the pace of the expansion of the industrial construction to ensure a certain level of net profit. Second, the company's capital spending this year will mainly be used to mature industrial expansion. Combining the above factors, the company's first quarter guidance is as follows.

revenue is expected to be down 10% to 12% sequentially, and the growth margin is expected to decline to the range from 19% to 21% due to the impact of lower capacity utilization and higher depreciation. Based on the premise that the external environment is relatively stable, for the year of 2023, Revenue is expected to decline by a low 10% year-over-year, and growth margin is expected to be around 20%. Depreciation is expected to increase by more than 20% year-over-year. The capital expenditure is expected to maintain roughly flat compared to that of previous year. Let me give some comments for the above guidance. First, during the process of continuous high investment, growth margin is under the pressure of high depreciation, which is the rule of the industry. The company will always target sustained profitability, strive to grasp the pace of capacity expansion to ensure a certain level of growth margin. The company's capital expenditures this year will be mainly used for mature capacity expansion and the infrastructures for new fabs. The company will steadily push forward the capacity building of four mature 12-inch fabs. As the plans are being carried out in a few geopolitical regions to build up local wafer manufacturing capabilities, the supply chain of critical tools maintains tight. The incremental monthly capacity by the end of the year is expected to be similar to that of previous years.

From a long-term perspective, the demand for chips is still growing in the era of digitalization, intelligentization, and greenization. The company will gradually grasp the industrial rules and take the lead in the market segment.

In the long run, in the era of more extensive digitalization, intelligentization, and greenization, the demand for chips still continues to grow. The company will follow the trend and grasp the view of the industry, consolidate leading advantages and segmentation markets, strengthen the median and long-term bundled cooperation with global customers and system companies, and promote the win-win cooperation in the upstream and downstream of the industry chain.

At this point, I would like to thank all employees, customers, suppliers, investors, and all sectors of society for their trust and support to the company as always. I wish you all a happy new year

I would like to thank all employees, customers, suppliers, investors, and community for their continued trust and support to the company. We wish you and your families a happy and prosperous new year. Thank you. 谢谢赵博士。接下来我们进入问答环节。

Thank you, Dr. Zhao. Next is our Q&A session. Questions will be answered by Dr. Gao, Dr. Zhao, and Dr. Wu. Chinese questions will be answered in Chinese.

English questions will be answered in English. Please limit your questions to two per person. I would now like to open up the call for Q&A. Operator, please assist.

Thank you. At this time, if you would like to ask questions, please press star 11. As a reminder, to ask questions, please press star 11.

One moment for the first question.

The first question comes from the line of Le Ping Huang from Haitong Securities. Please go ahead.

Hello, can you hear me? Yes. Can you hear me? Yes, I can. Hello, I'm Huang Le Ping from Huacai. I have two questions. The first question is for Mr. Zhao. Mr. Zhao, you just mentioned the whole-year guidance. I want to ask you about the current level of the industry. Thank you for the first question.

The first question is, let me think about it. What is my estimate of the storage of this industry and the first half of the year? This industry is actually divided. We now divide it into the mobile industry, the consumer electronics industry, the industry of industry and cars and others. The mobile industry is now relatively high in storage. What about consumer? We think it may be finished in half a year. There is no storage in the industrial sector. The car industry, especially the new energy car industry, has no supply. Our central international is the manufacturing industry. So our middle and middle end mobile phones and cars are still separated by a design company or a product company. The vast majority of these product companies are now listed companies. They also published a report on the last year's annual and four-year-long settlement. It also shows how much storage they have. In mobile phones and consumer phones, the highest storage is related to the display drive circuit, whether it is a large-screen TV, a medium-screen monitor, or a small-screen mobile phone. The storage of the drive IC in the panel type is very high. It may be more than three degrees. Of course, there are individual companies that may say that the whole year is enough. The next one with a very high storage volume is also a large-scale product, such as CMOS IMAGE and ISP, which are also relatively high. Below that is also a general product, for example, a storage unit, a dedicated storage unit. This storage volume is also more than half a year. Now, some storage volumes have been found, but the entire impact has not been formed. It is MCO type, because it has a large quantity. In general, it seems that there will be a gradual process of recovery. We need to see if the macroeconomic situation continues to deteriorate. Because what we see now is that the consumption of mobile phones, the consumption of cars, and the consumption of electronics, the consumption of the middle end, need to come back to the entire economy. Le Ping, I will answer your question. The first one is this.

Okay, thank you. The second question I want to ask Mr. Gao. I understand that the semiconductor industry, especially our semiconductor manufacturing industry, is very difficult to train people. And I just read Mr. Zhao's transcript. For example, the major development in the next few years, especially in the southeast and northwest, the four factories in the southeast and northwest need to expand. I don't know how we are now, the reserves of talent, and how to attract talent, how to keep talent, what is the plan? Thank you.

Okay, Le Ping, thank you. Now, there are more than 20,000 employees in SMIC. Among them, we have more than 10,000 engineers, and more than 2,000 professional developers. We should say that we have a sufficient number of talents in the past few years. From last year's situation, SMIC's talent loss rate is lower than the industry level, which is also the lowest talent loss rate in recent years. I believe that SMIC is the largest infrastructure network management enterprise in mainland China. We have a very good career platform. At the same time, we can provide good living conditions and welfare conditions to employees and excellent engineers. I believe that we have many advantages in attracting talent. I believe that excellent engineers in mainland China will prioritize choosing SMIC to develop the future of the industry and provide good welfare. Now, in Beijing, Tianjin, Shanghai, and Shenzhen, we have new projects in all four of them. We also have some special recruitment and recruitment measures. From the recruitment situation last year and this year, the registration is active, and the talent quality The questions?

One moment for the next question.

Next question comes from Randy Abrams from Credit Suisse. Please proceed.

Okay. Yes. Thank you. Good morning. First question wanted to ask about your outlook on gross margin. Just for first quarter, if you could discuss a bit more magnitude of the decline. I think in prepared remarks, you mentioned the utilization and depreciation. It still looks like a fairly sharp decline relative to the revenue decline. So could you talk a bit more on the pricing environment or any mixed factors? And then the follow up would be as we go through the year, you're guiding a similar gross margin level. but I think implying sequential improvement in sales. So maybe just go through some of the profitability drags, or if you're leaving some conservatism.

Hi, Randy. Thank you for the questions. Talking about the gross margin job in the first quarter, you would like to know the breakdowns, how much comes from The V4 out reduction, how much comes from the price erosion? That gross margin mainly comes from two factors. The first one is majority part comes from the reduction of the V4 out because the total older job from the last quarter. And the second is the increase of new depreciation. And we have the expansion, we have the KPACs. When they move in the five, doesn't matter you have the older or not, according to the financial rules, we all started the depreciation. These two are the major factor. With the combination of the product mix and the ESP erosion in the first quarter is still at a minimum level.

Okay, good. And through the year, is it more just the same factor? I think you're expecting, even with the outlook, some sequential improvement through the year, but is it more just more offset by the depreciation factor that's holding back improvement from the first quarter, at least implied in the annual gross margin guidance?

Yeah, you are right. When we expect the recovery of the market with the overall economic situation. We know that a lot of new odors possibly come from the commodity type of products like non-flash, non-flash, MCU, CMOS imager, ISP, RCD driver, these type of trunk odors. But these kind of products will be at a lower price. Basically, when the market recovers to the same level of two years back, and we will find out the total supply of the capacity has been increased a lot. So the price may not recover to the previous level. And taking into account of this factor, we will say that even though we get the revenue, we will get utilization up possibly in the second half year, but the gross margin may not recover that much.

Okay, that's helpful. So it sounds like it's a little more mixed, initially, the commodity products. Actually, my second question is on that, because you're staying aggressive on continuing to expand through the downturn. So for refilling or getting back to peak, like full utilization, so would the mix be most of those areas you mentioned, like the flash memory microcontroller CIS, or could you go through some of the tape out and qualification activity in terms of mix that may, as you get into the next wave, like some of the tape out activities, if there's some applications you're optimistic on to get back toward full utilization in the recovery?

Yes, Randy. If you look at the numbers we gave just now, the mobile phone sector only accounted for the total revenue of 27%. And the consumer accounted for about 23. That's add up to 50% of the total. But previously, the sector for mobile phone accounted for about 35% to 45%. That means that sector drops very, very seriously. And the consumer also dropped a lot. When we see the recoveries, because the foundry business, it's a very big sector coming from the mobile phone and the consumer. we can expect that the mobile phone will recover to 35% something, and the consumer recover to something like 28% to 30%. At that moment, definitely our utilization will be up to 90% something.

Okay, great. Thank you. So it's recovery of the market.

It depends heavily on these two sectors of the market.

Okay, great. Thank you, Dr. Zhao.

Thanks, Randy.

Thank you for the questions. One moment for the next question. Next question comes from CEO Ng from China Renaissance. Please proceed.

Good morning, Director. I have two questions I would like to ask you. The first one is, from what we can see from the customer's rolling forecast, is there a stable trend? And the second one is, for the second half of the year, How is the rebound rate from the American market? Let me answer. Zico, hello.

When Le Ping asked, it was similar to this question. The market is there. Overall, the economic situation is not that good. How much it goes down will probably affect the middle end, such as mobile phones, consumer goods, and cars. So the first one, we look at the macroeconomic economy. The second macroeconomic economy, if it recovers to the same level as in 2020, why should I use 2020? In 2021 and 2022, there are a lot of needs for intermediate products. In fact, there are some panic emotions in the middle. Maybe it needs 100, it orders 150 or something. Then wait until the second year, it feels that there is no panic, it only orders 50. So in two years, it's still 200. But in the first year, it's 150. In the second year, it's 50. As you can see, the gap between two years is very big. Even if you normalize it, it will go back to 100. So I think in 2020 or 2019, it's the real demand in the industry. Then use this demand to measure the storage amount that everyone has announced in their hands. These intermediate product companies, CMOS Imager, LCD Driver, Not Flash, Non-Flash, MCO companies, they all have announcements on how much their storage is. Based on their amount, we can see that the second half of this year should be the time for normal replenishment. It should be back to the total amount of orders in 2020 and 2019. In addition to the new energy vehicles, there are some new needs in the industrial world. It should be like this. So this amount, we estimate that in the second half of the year, it will be communicated with our central international customers. there should be such a recovery. When we look at our company before, in the first half of 2019 and in the second half of 2020, the amount of exports per month is probably the amount that everyone can come back. But I just said a sentence in this, and I will say another sentence in this. Now the capacity of the entire market has increased a lot more than at that time. So this demand should come back, but its entire price may not be as high as it used to be. This is the product and technology that we all need to do. It needs to be more competitive. It needs to be more competitive with middle-end customers. Don't enter a low-end price competition.

I understand. Another quick question. Last year, we had a growth rate in every area in the U.S. How should we look at it this year?

We just announced that the revenue of the U.S. central center is 21% of the international market. It should almost maintain such a proportion. Because many of our customers, in fact, their final use of the product is also very much related to the Chinese market. For example, mobile phones, consumer vehicles are also very large. So when our Chinese market comes back, these orders from American customers will also come back. The ratio should be almost such a proportion. Thank you for the question. One moment for the next question. The next question comes from Jun Chong Xiao from Haitong Securities. Please proceed.

Thank you, Manager Chen. Good morning, Manager Chen. I have two small questions I would like to ask. The first one is a question about exchange rate change. I don't know if you can help to share the impact on income and interest rates. Thank you. Okay, thank you, Juncheng.

Let me answer this question. Because our income settlement includes RMB and US dollars. The same cost and cost settlement includes RMB and US dollars. The fluctuation of interest rates has the opposite effect on income and cost. So, is the influence of interest rate fluctuations on our interest rates positive, negative, or positive? This depends on the ratio structure of the U.S. dollar settlement in terms of our income and cost. So, this structure changes and is relative. So there is a certain uncertainty about the impact. As for the individual income, from the perspective of the private sector, due to the decline in RMB, the impact on the income is negative. Thank you. Thank you, Mr. Wu.

My second question is about the part of the added potential that we will see in the next two or three years. On this part, on the average unit price, I don't know, because Mr. Hai mentioned it just now, it may not fall into the low-price competition. If we consider the opening of the future new production, as well as the local production of domestic design companies, and the gradually increasing quantity of customers and products, I don't know if there is a pace of increasing quantity in this aspect, and the average unit price of some of the new products, I don't know if I can ask the leader to help share. Thank you. Okay, Jun Cong. We don't talk about the international price.

We talk about the price of sales in the market. In the past, when the supply and demand was announced, the price of sales in the market was very high, especially in general products. For example, C-Mall, C-Major, NowFlush, NonFlush. I'm talking about the specialized ones. specialty memories, LCD driver, are all very high. Now we all know that up to now, compared to the price in the third quarter of last year, that is, the price compared at the end of last year, these products that I mentioned just now, its end is what we call unit, the price sold directly in the market. It's not the contract price, it's the random selling spot price. It may have fallen to three-thirds, about one-third. If so, when it comes back, we can probably calculate it back. If the price has such a big drop when it comes to supply and demand, if it goes back to 2019, 2020, it shouldn't have such a big drop. We expect that the price should be that everyone can meet their own demand for interest rates and can survive and grow at the same time. Then you have to ask me what the price will be when it comes back. I really can't predict what the price will be now. Because the current orders, from these large-scale products, the current orders are very few. Next, it will come back. What is the price when it comes back? There is no way to fully predict this now. Okay, thank you, Manager Chen. We have no other questions.

Thank you.

Thank you for the questions. One moment for the next question. The next question comes from Zhiyuan Wang from Statix. Please put it up.

Hello, everyone. I'm Wang Zhiyuan from Statix. I'd like to ask you a question. We expect that the capital spending in 2023 will be roughly 10%. Actually, at the Q3, you mentioned that At that time, when the capital was being spent, there was a shareholder of long-term equipment that accounted for a certain proportion. So I would like to ask whether this shareholder will still be a significant part of our capital spending in 2023. If this is compared to 2022, will the shareholder part be more or less? Or if we actually pay for this part of the equipment, What will be the situation in 2023 and 2022? Thank you. Let me answer. Hello, Ziyuan.

When we announced last time, we considered such an operation for the payment. Maybe our top line will make a capital output of $6.6 billion. But the final result, just now, the person in charge of Taiwan has already said, we only did 63.5%. In fact, we are... less than $2.5 billion, which means that some of the payment operations did not take place last year, so it will be delayed to the first quarter. You know that the price of this equipment is to be negotiated, the deadline, these different deadline times, the price of the equipment is different, so this is to continue until this year, so this year we still have the issue of payment, but it is different from last year, that is, we are almost even with last year, the amount of payment um

I understand. Thank you, Mr. Haijin. The second question I would like to ask is, in terms of the spread of the area in this quarter, it seems that there have been some adjustment changes in the Chinese and European areas. In fact, the rate of income in the U.S. region has increased. Is this because we are still maintaining a very stable economic cooperation with American customers, or is it because there are some new customers? What is the reason for the increase in domestic income? Thank you. Let me answer this question.

You know, let me answer the question about the U.S. first. The U.S. market is affected by the U.S. market. The time between the U.S. market and the Chinese market is later. Four or five months is China's. If you have not been participating in our law meeting, which is the investor analyst's exchange meeting, we say that the market has changed. It was last year's May. At that time, the US and European markets were still recovering or growing. When the US market was basically no longer growing, no longer increasing orders, it was the end of last year. So we see that there is no obvious change in the fourth quarter. Changes that may occur will occur in the first quarter of this year. This is the first one, which is the post-pandemic phenomenon. The second one is the American market. These customers have a relatively small drop, that is, the volatility is relatively small. The overall characteristics of Chinese customers are relatively large. This is one. The second question you asked just now is actually your first question, which is the proportion of the Chinese region. Compared to the original record, it seems to look different, right? Originally, we put this Taiwan area of ​​China and integrated it into the Asia-Pacific area. The Taiwan area and Japan and Korea, because its business is particularly similar, so the salesperson is also the same. We are painting outside, in the Asia-Pacific area. Of course, now we have changed the company's sales approach and painted it in the China area. Thank you for the questions. One moment for the next question. We have a question from Jinxiang Zhou from Guosun Securities.

Jingxiang Zhou, your line is now open.

Looks like there was a response from the line.

I will now close the Q&A. I'd now like to hand the call back to Ms. Guo Guangli for closing remarks.

Thank you for participating in today's conference call. Thank you for your trust and support.

This concludes SMIC's four-quarter webcast conference call. We thank you for joining us today.