indie Semiconductor, Inc.

Welcome to the 3rd Semester of the International Center for International Development. Today's meeting will be live-streamed online and by phone. Please note that if you join the meeting by phone, you will only be in the listening mode. After the meeting is over, we will conduct the Q&A session. You will receive instructions on how to participate in the Q&A session. Welcome to Semiconductor Manufacturing International Corporation's third quarter 2023 webcast conference call. Today's call is simultaneously streamed through the internet and telephone. Please be advised that if you join a meeting by phone, your dial-ins are in listen-only mode. However, after the conclusion of the matchments presentation, we will have a question and answer session. At this time, you receive instructions on how to participate. Now I would like to invite the Deputy President of the Council, Ms. Guo Guangli. Without further ado, I would like to introduce Ms. Guo Guangli, Senior Vice President and Board Secretary, to host the webcast.

Hello, everyone. Welcome to the third quarter of the Sino-Hungarian International Yearbook. Today, the Sino-Hungarian International Yearbook will be attended by Dr. Zhao Haijun, the Chief Executive Officer of the United Nations. Greetings.

Welcome to SMIC's third quarter 2023 webcast conference call. Attending today's call are Dr. Zhao Haijun, co-chef executive officer, Dr. Wu Junfeng, senior vice president and person in charge of finance. 在此提醒各位,我们今天的表述

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 forward-looking statement 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.

接下来,有请吴俊峰博士介绍公司的财务情况。 I will now hand the call to Dr. Wu Junfeng to introduce the company's financial status.

然後給出第四季度指引。 First, I will report our unaudited operating results for the third quarter, followed by our guidance for the fourth quarter.

0.5% decline. Profit profit of 8,700 million dollars, increase of 9.5%. Profit profit of 9,010,000 dollars before tax relief and sale. Profit profit of 55.6% before tax relief and sale. Profit profit of 9,400 million dollars. Profit profit of 6,200 million dollars before tax relief and sale.

The third quarter operating results are as follows. Revenue was $1,621 million, up 3.9% sequentially. Growth margin was 19.8%, down 0.5 percentage points sequentially. Profit from operations was $87 million, up 9.5% sequentially. EBITDA was $901 million. EBITDA margin was 55.6%. Profit attributable to the company and non-controlling interest were 94 million and 62 million respectively.

Moving to the balance sheet, at the end of the third quarter, the company had total assets of 46.8 billion, of which total cash on hand were 17.4 billion.

Total liabilities were $16.2 billion, of which total debt was $9.6 billion. Total equity was $30.6 billion. Debt to equity was 31.5%, and net debt to equity was negative 25.2%.

In terms of cash flow, in the third quarter, we generated $801 million cash from operating activities. Net cash used in investing activities was $1,711 million.

Net cash from financing activities was 358 million.

关于2023年四季度,我们的指引如下。 四季度销售收入预计环比增长1%到3%, 毛利率预计在16%到18%之间。 For the fourth quarter 2023, our guidance is as follows.

Revenue is expected to grow 1% to 3% sequentially, and growth margin is expected to be in the range of 16% to 18%. 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.

大家好,欢迎大家参加今天的业绩说明会。 Greetings, welcome to today's earnings call. 市场方面,今年下半年没有出现大家年初时期期待的 V 型或者是 U 型的反弹,整体仍停留在底部,呈现出一个 W 的走势。 In the Chinese market, the high water storage problem of products that appeared in the third quarter of last year has been relieved and has come down to a relatively healthy level. The management of the supply chain of mid-end and high-end manufacturers has been planned for localization. The needs of Chinese customers for new products are relatively good. Part of the general product does not meet the demand, but at the same time it also causes a decline in the number of old products.

From the market side, in the second half of the year, we haven't seen V or U-shaped rebound that we expected at the beginning of this year. The overall market still remains at the bottom, showing a double U trend. In the China market, the high product inventory problem that started since the third quarter of last year has been mitigated, and the inventory has decreased to a relatively healthy level. End-user companies and system companies have managed their supply chain and plan for localization. Chinese customers have relatively good demand for new products, with some commodity products in short supply. which has also brought big impact to old products. The inventory digestion of the old products has been slowing down, and a homogeneous price competition has been intensifying.

But the stockpile of American and European customers is still at a historical high. In addition, the stockpile of car products that have been stuck for three years has also begun to rise. This has caused the main customer to be vigilant about market correction and to close the order quickly. After more than a year of market ups and downs, customers have experienced positive expansion from two years ago to this year's hard defense.

The speed of destocking and the pace of converting to new chips are varying across different regions globally. In the field of mobile phone, consumer, and industry, Chinese customers have basically returned to a balanced in and out inventory level. but the American and European customers' inventories still remain at historically high levels. Besides, the inventory of automotive-related products is now in relatively high level after being in short supply for three years, which has caused major customers to be alert to the market correction and to tighten their orders placing rapidly. After more than one year's ups and downs in the market, customers have experienced a shift from aggressive expansion two years ago to tough defense this year. They have become more focused on core business and R&D investments, more stringent on inventory and cost control, and more cautious on the tape out and PO placing.

Geopolitical factors have brought duplication of construction and uncertainty of supply chain to the industry's

median to long-term development, and have brought the gray rhino effect. All segments of the industry supply chain are exploring strategies and paths, and we are also maintaining cautious observation and persistent attempts.

Taiwan Taiwan Taiwan Taiwan Taiwan For the company, our customers' market share has increased due to the industry chain's reshuffle brought by the geopolitics and cost competition, which drives the growth of the company's business.

In the third quarter of this year, revenue was $1.62 billion, up 3.9% sequentially, which was at the midpoint of the guidance. Growth margin was 19.8%, down 0.5 percentage points comparing to the previous quarter. The company's overall shipment continued to increase, up 9.5% sequentially, The uneven demand recovery for different products and a relatively big proportion of commodity standard products led to a decrease in the company's wafer ASP. This situation was consistent with what we reported in our last quarter's earnings call.

销售收入以地区分类来看,海外的去库存节奏,特别是手机和消费类相关IC,启动晚于国内。 In terms of revenue by region, the start time of overseas destocking pace

especially for mobile phone and consumer-related ICs, was later than that of domestic. So now it is still undergoing a difficult time for desocking, which enabled a further increase in China region proportion to 84% of total revenue, while revenue from other regions accounted for 16%. By service type, Revenue from wafer accounted for nine-tenths and others around one-tenths. The proportions remain stable.

Shipping lanya should you go home when we don't know. But I'm just asking for her. But I'm just asking for her. Yes, it's true. Don't quote. So who is it? Can't come straight. Can't show. So what happened to you? She doesn't know. But I'm just saying, you know, flash when we don't know. But I'm just saying, she doesn't know. But I'm just saying, she doesn't know. But I'm just saying, she doesn't know. By application, wafer revenue from smartphone, IoT, consumer electronics, and others accounted for 26%, 12%, 24%, and 38% respectively.

The demand for CIS, ISP, and RF Bluetooth applied in the domestic end products was relatively good, with sequential revenue growth of 24% and 28%, respectively. The inventory of display driver recovered to a healthy level, with sequential revenue growth of 16%. The demand for specialty memory was strong, especially for no flush which grew by 27% sequentially. In the third quarter, wafer revenue contribution from 8-inch accounted for 26%, with a slight increase of 1 percentage point. But the utilization rate for 8-inch was still lower than that of 12-inch. Wafer revenue contribution from 12-inch accounted for 74%.

The capital spending of this year is mainly used to expand and build new factories. The capital spending of the third quarter is $2.1 billion. The total of the first three quarters is about $5.1 billion. Due to the more and more complex influence of geopolitical policy on the delivery cycle of equipment, the company allows the equipment supplier to deliver in advance to ensure that the project is launched. The delivery cycle of global equipment supply chain has been improved.

The capital expenditures this year are mainly used for capacity expansion and new fab infrastructure. The company's capital expenditures in the third quarter were $2.1 billion, and the accumulated capital expenditures for the first three quarters were around $5.1 billion. Considering the increasingly complex geopolitical impact on equipment delivery cycle, in order to ensure the production of initiated projects, the company allows its equipment suppliers to make early deliveries. As the current delivery cycle in the global equipment supply chain has been improved, the number of equipment to be delivered to the fab before end of this year is expected to increase substantially compared to the original forecast. The full-year capital expenditures are expected to be raised to around $7.5 billion. As of the end of the third quarter, the company's monthly 8-inch equivalent capacity increased to 796,000 wafers, with an increase of 82,000 wafers comparing to the beginning of this year. Since the total capacity as the denominator increased, despite that the shipments increased in the third quarter sequentially, the utilization rate decreased by 1.2 percentage points to 77.1%. 截至目前,除了與數據中心相關的高性能運算芯片,

In the end of the year, everyone is more cautious and more willing to put the wind and growth in the future. The company expects that the fourth quarter will maintain a middle-to-middle trend. Sales revenue has slightly increased. As of now, except for high-performance computing chips related to data centers, wafer backside processing

dual wafers and three wafers, copper-copper bonding, and advanced packaging of chiplets. There are no new drivers or momentum in other scale markets. At the end of the year, everyone is relatively cautious and willing to leverage the momentum and growth into the future. The company expects to maintain a moderate trend in the fourth quarter. with a slight increase in revenue. The gross margin will be dragged by the continuous depreciation burden of the new capacity, which is expected to be in the range of 16% to 18%. In recent years, the company has carried out continuous capacity expansion with high capital expenditures. The continuous incremental depreciation will also put more and more pressure on the company's growth margin. 在这样的大环境下,公司将继续做好自己的事,一步一个脚印,把握半导体长期需求增长的大趋势。 Looking forward to the next year, we see that the overall market has been stabilized. The demand for mature foundries will grow due to the declining inventories. However, we haven't seen drivers and momentum for significant growth for the markets. it is still need to wait for the recovery of global macroeconomics. We think this is the fundamental situation for the coming year. Under such an environment, the company will continue to focus on its own business, one step at a time, to capture the general trend of long-term demand growth for semiconductors.

在此,我們再一次對長期關心、幫助和支持我們的各界人士表示感謝。 謝謝大家。 Here, we would like to express our gratitude once again to the community who have cared for, helped, and supported us for a long time. Thank you all.

Thank you, Dr. Zhao. Next is our Q&A session. Questions will be answered by 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.

We will now begin the question and answer session. To ask a question now, please press star one one on your telephone. To withdraw your question, please press star one one again. Our first question comes from the line of Le Ping Huang from Huatai. Please ask your question, Le Ping.

Okay. Thank you, Chairman Zhao. I have two questions. First, I would like to ask about the demand. You mentioned earlier This time, it's not V-Shape, it's not U-Shape, it's W-Shape. Can you explain in detail how to understand W-Shape? And then, in relation to that, we have seen a lot of revenue returns from domestic design companies in the last three seasons, and then the net profit has also increased. I remember Mr. Zhao mentioned in a speech last year that it's called a rapid stop. I don't know if you can see the feasibility and strength of the supply of domestic customers now. This is the first question.

Okay, thank you for the question. Let's look at the demand. Let's talk about W shape. W is like this. One is W. People think that the downfall this time is one year. It will recover at the end of the year. Now it looks like this thing is going to double. W is two years. We think so. The second W is the point that will jump in the middle. It's a small industry. As you just mentioned, in the third quarter, we saw some design companies related to mobile phones, relatively small-scale design companies, have created history, new heights, that is, profit and sales. I think it's like this. We now see a small industry that is mobile-driven. Mobile phones are concentrated in the third quarter to be released. There are many specific people who have not changed their mobile phones for several years. So this round, Everyone is changing their mobile phones. It's not because there are so many bright spots on mobile phones. It's mainly because of this specific group of people. They are now changing their mobile phones. We think this small trend does not lead to a big change in the whole situation. Because next year, it looks like the whole sales volume of mobile phones is basically equal to this year. Mobile phone sales are seasonal. That is, in the month and season of the release, it will be very high. It will pull during the backup period. But overall, if we look at it from two years, basically two years is the same, and there is no particularly big movement. We think so. Another one is that there will be some growth in the coming year, mainly because last year's speed up started in June and July last year, so it started very early. At that time, Europe and the United States were still increasing orders and still announcing requirements. Those products can be sold this year, basically sold, but they can't be sold. It won't be sold very quickly, so it won't have much impact on the big companies. So we think the whole trend is flightage. Now this wave is in the mobile trend, and there is good revenue. Now other mobile companies are also being driven and will be bought, so it may continue. But it's just for these companies, for the entire industry, it should be flightage, it's more smooth.

Okay. Thank you, Mr. Zhao. And my second question is about the capital spending issue. The company has raised capital spending to $73 billion. And then, because I look at the customs data, we see that in September, China's imported semiconductor equipment reached $51 billion, almost $51 billion. That amount is close to the scale of your capital spending before you raised it. So I see that many domestic manufacturers are importing semiconductor equipment. Zhaotong, how do you see it? One is the relationship between the domestic market and the mature public interest market. How do you see it when these markets open next year? And how do you see the expansion rhythm of our company next year? If this year's capitalization rate is as high as 7.3 billion, it will be 7.3 billion.

Thank you. Thank you, Le Ping. We have already announced so many projects built by Central International. Make it seem to be the same as it does. I thought I thought I thought I thought I thought I thought I thought I thought I thought In a few years, the factory will be closed. We will build a factory that is ready to operate for more than 20 years. This is how we look at the future. It is best to build a factory every year. Some of them are in the peak of the industry. Some of them are at the bottom of the industry. But no matter what, in the next 20 years, and the company's gradual growth, it's all done in the blink of an eye. So this doesn't have much impact on the overall development. We just talked about the reason. Because of the specific situation of SMIC, many of our devices need to apply for a certificate. This means that you can't predict accurately the time it will take for the device to arrive. The best way is to apply together. You are all floating together. In this way, if the supplier is able to market slow down and deliver goods faster, then we now also allow him to come in according to the time he can deliver goods. This will cause what we said just now, the KPI that we originally predicted. By the end of the year, we found that the equipment that came can be delivered more than what was originally predicted. Then we will grow. Answer what you just said. That is to say, there are other companies that are also building production capacity. Is it the future? China China China China China China China China So we are also calculating and doing such alliances and bindings with customers. The production capacity of our central international construction actually has been communicated with customers in advance. There is a client's intention, that is, how much will be put in the central international to be produced in the future. Based on such a kind of exchange, we think the demand of the Chinese semiconductor needs a lot of local production capacity in the future. Our next question comes from the line of

Sihou Ng from China Renaissance. Please ask your question, Sihou.

Oh, hi. 哈君从早上好。 有两个问题想请教的。 第一个问题是关于在这个 specialty platform 里面, 其实过去公司的发展都是蛮成功的。 所以请问一下, 现在 specialty platform 现在我们公司的收入是多少? 还有就是在未来的话, 在 specialty platform 里面有什么新的布局呢? 好了,最后谢谢你。

Our current revenue, as I told you before, the center international standard logic circuit is about 30%, and the remaining 70% are all specialties. At one of these exchanges, I said that these specialties, if we divide them according to our own classification, we can divide them into eight segment markets. For example, IOT, super low power, connectivity, RF, high voltage driver, DDIC, CMOC majors, specialty memory, MCO,等等吧,加在一起我们可以把它分为八类,这八类占70%,但是这个季度,当前这个季度,我们的逻辑电路的占比会更大一些,大概是四六开吧,这个逻辑电路分类,我们以后会把它分得更细,但现在大概40%或者40%多一点,是逻辑电路,然后剩下来的都是specialties, Specialty就是跟客户有一些特殊的绑定,有一些专用。那你说未来我们要怎么样发展?这是一定要发展的,因为你知道逻辑电路大家会挪得很快,摩尔定律嘛,追求更低的成本,更好的性能,更低的耗电,这个你没有更好的尺寸缩小,很难取得对标准逻辑,但是对特殊的工艺就不一样, For example, we are doing 0.18, 0.15, aluminum production process. We are also doing BCD, power, high voltage, these things. Every year, we need to reduce its die size. Its RDMOS size should be smaller. And the leakage should be smaller. The R-ON connective battery, the fuselage battery should be smaller. We basically have a expectation that there will be progress every year. So the BCD analogs that we launched in 2018 and 2015 are different every year. There will be progress. Then you also heard about CMOS Imager. It also has a big change. Even the camera lens, everyone requires it to leak electricity every year. We also need to do a good isolation of the new technology, right? Now everyone requires a lot of pixel size and a lot of density. That's from the original wafer to wafer bonding. It became a double CMOS image wafer, plus ISP, three wafer bonding, etc. This is all the progress of specialty. As I said in the previous description, the progress of specialty memory in the central international market is very fast. This quarter has increased by 27% compared to the previous quarter. In this share market, it is the same. It has different applications. In addition to memory customers starting to stock up at the lowest price of the industry, Because a lot of products can be sold at a high price during the peak season. Besides this reason, it also has a variety of uses because it is diversified. If you want to use 8 megabits, don't use 32 megabits. This is specifically designed for this kind of mass-produced, small size, and various performance. There are also professional trees in it. Gehang Ge Shan is very exquisite in every segment field. There are some particularly large companies It may be that the main product is very good, but there is no time to grind every small product to the top of the world. Now, in the special process of Central International, there are just a lot of small customers. It is a kind of product that is more in line with our current situation, that is, we can do deep and detailed work on mature nodes, and we can do each product with the customer to the first tier level, and it is diversified. That中芯国际建了这么多产能又主要都是在中国本土那未来呢第一是靠自己的技术性能全面覆盖然后能在第一梯队第二呢是跟客户战略绑定服务质量特别的好当然第三个就是在国内和国际市场上我们有成本优势可以参与最强的竞争那按照这样的三个方面去做我们 I think we still have confidence in the new production capacity that we are doing. What else did you say just now? Now we need all kinds of products in electric vehicles. And then telecommunications in the future, multi-layered wind farms will also have light electricity units. And now the central international community is also looking at the parts that they have not been involved in. For example, the high pressure and high power used in the car. Uh, uh, uh, So you're writing a report and you're doing the analysis. In fact, the long-term interest rate of the central international is relatively easy to see. So what we're doing now is this. One is the KPEX we invested in. About 75% of these KPEX are used to buy equipment. The rest of it, some of it is used to buy land, build factories, make facilities, and develop equipment, etc. 75% of the equipment is 5 to 7 years old. KPEX accounts for 75% every year. After about six months, there will be a discount. You can calculate exactly how much the KPEX burden is, right? Now, every quarter, we are announcing the current KPEX. That's how each quarter adds up. The second one comes from our loading utilization. In this quarter, we are 77.1%. Then we also announced how much revenue we will increase in the next quarter. In fact, we can see its utilization. If we are full-time, how can we calculate a net profit rate? If it is expected to be 77% like this, then this can be calculated. It will drop a little bit in about every quarter. Last quarter, it was 11.8% and 20%. In the next quarter, we now predict that it will be 16% to 18%. Thank you. Our next question comes from the line of Xiaofei Zhang from Hightown. Please ask your question, Xiaofei.

Thank you, Zhao.

Thank you, Xiaofei. We don't look at the future as a fortune teller. We have two very strong statistics in our hands. The first is that our clients in China and all the clients in the market, the top 20, top 30, the clients in the semiconductor industry, we look at the clients' inventory. How many days of inventory do they have in their hands? Then we probably know next year whether he wants to make up for the inventory or not. How much is it? How much is the central international currency standing in it? The second one is that the products that are going to be ordered next year are actually already in the hands of the central international. Then we are in charge of this kind of new T-pop, which is NTO. Then this kind of new T-pop is a new product. He didn't say that next year we will have a production order and the product will be produced the next day. The design win period is relatively long, at least nine months. So usually the client gives you the product and then you make it into a mask and then you start to do silicon and then seal it. and then to verify it, and then to send it to mobile phone manufacturers, car manufacturers, industrial manufacturers. After all the verification, he will get to the manufacturer and say, I will give you the share of 2,000 mobile phones. Then he will come back and place the order. This period is usually about a year. That is to say, by next year, October, December, such orders of products should already be in the center of the international factory. Now we are waiting for customers to verify waiting for the middle-end customers to put it into the system to verify. So based on these two parameters, we probably know what our market share is, and which products are possible design wins in the coming year. The second thing is that the central international market now has a mobile phone market of 25% to 30%. For example, the consumer market also has a 25% market. What is the industrial market like? Cars are all lined up. Let's take a look at next year's forecast. Next year's forecast is that mobile phones will be on par with this year, or will rise by 1% to 2%. In this case, the total demand for mobile phones in the coming year, no matter if it is released once in April, once in October, or twice, our total demand can be calculated accurately. Cars can also be calculated accurately. PCs can also be calculated accurately. This shows whether the entire industry Second, in the entire industry, is the market share increasing or decreasing? It can also be relatively accurate. In this way, it looks like, back to what I just said, it is expected that next year will be a fly-chase, and then a W. I understand.

And the second question you are talking about is the expansion of next year.

Just now, in fact, in front of Le Ping, when Huang Le Ping asked the question, I answered this sentence. That is to say, We built the factory, but it didn't have a big impact on the quality of the factory. Because after we built the factory, if you catch the best year, maybe the next year won't be good. But your factory still needs to run for 20 years. So the impact of a certain year on the whole 20-year operation of the factory, this is not too much of an impact. Then we mainly look at the future. The future market, the international market, needs the central international market. Because many international customers He wants China to be a competitive manufacturer. Or he has a large market share in China. He wants to produce locally. He needs the production capacity of China. Then we have a goal of how much percentage. Then how much percentage of domestic and local demand. We came to a conclusion. China should build in the next few years. How much production capacity per month. Then we will follow this. A plan has already announced the construction plan. You know how many pieces you need to build in a month. In the first few months and a year and a half, we have announced these projects. These projects have been announced. So far, we have not changed our mind. We don't think we don't need the future. The current state is just for the future. We can adjust the arrival time more carefully. But the whole plan has not changed. So in the next year, we still need to carry out the original construction plans that have been announced and move forward. Then you say that other people in China are also building factories. Will it lead to industry competition? There will always be industry competition in this matter. As I said just now when I answered the question afterwards, the center international is doing strategic mapping with customers. Thank you, Zhao Bo. The second question is about the entire ASP price.

If next year is a year of recovery, the price of the whole fund should be relatively high in terms of the long-term value of the history. I don't know if the price of the fund for the next few seasons will go down.

The trend should be more cautious. Thank you. That's it. We all saw some reports in the third quarter. Many small and medium-sized design companies have obtained design wins in mobile phones and cars. They have achieved the best performance in history, revenue margin. As a supplier, the price of SMEs must be stable. It won't go down. It will only go up, not go down. But for SMEs, SMEs have such a large production capacity, they have to maintain their own utilization rate. SMEs' products are always available. SMEs' products can be sold on the spot market. You can see what kind of CMOS, CMOS, and what is the current market price. We know that if the current market price is 50 US dollars for a chip, we can't ask customers to place orders at Central International to do it for 55 US dollars. Isn't that right? Therefore, mass-produced products will definitely follow the market. In this way, we predict that mass-produced products will further decline in the coming year. ASB还会进一步的下降。 好的,谢谢赵博,很清楚。 我没有问题了,感谢。 谢谢小飞。 Thank you.

Our next question comes from the line of Ziyuan Wang from CITIC Securities. Please ask your question, Ziyuan. 喂,海军总好,我是中信的王子源。

I want to ask two questions, because you actually made it very clear. The first question is about the production capacity needs of 40 and 55 nanometers. Is this still in a state of tension? If so, what are the relevant parallel machines? This is the first question. Thank you, Mr. Hai. Okay. 40 nanometers are still in a state of tension.

There are two major requirements. One requirement is that the current CMOS imager, you know, everyone needs to do the back of the new product. It's all about thinning the back, doing process, with 10 to 20 steps of light. Then put the logic circuit with it, do copper to copper bonding, stick it on, or more closely, ask to do two pieces of CMOS imager thinning. Then CMOS imager and CMOS imager do bonding, then do ISV bonding, and it's three pieces. That way, there is a very high demand for the process on the back. Your production capacity is not enough. This is probably the tightest in the world at the moment. Because hybrid bonding memory, called HBM, or chip lab, or CMOS imager bonding, all require a back-up process. And it's not one or two steps. It's a back-up process that needs to be done from the light layer to the 15th to the 20th layer. The entire production capacity is very tight. This supply and delivery is slow. This is one place. The second place is that now everyone needs a lot of application requirements in 40 nanometers. For example, MCU, high voltage, DDIC, etc. Everyone needs a very strong, very specialized implant. CMOS imager is afraid of stain, so a certain type of implant can be used, and another type cannot be used. Then MCO is a certain layer of stress that can be used, that is, the other one can not be used. So now it is mainly some special machines. For example, the special machine for DDIC, the special machine for CMOS Imager, the special machine for MCO. There is no problem with doing standard logic and IoT. So now you should see that 40 nanometers, you should see that to do CMOS imager, and then to do MCU. The production capacity is very tight. What about 55 nanometers? Originally, the 55 nanometers were used to do CMOS imager, the sensor part, and then the other part is DDIC, which is a relatively competitive, low-price DDIC. In the mobile phone and in the display, that is, in the monitor, it is all done with about 55 nanometers. If you put 55 nanometers in the strength point, it is equivalent to 50 nanometers. This is very competitive. In this area, the current production capacity should be relatively insufficient. Then 55nm, there is another approach, which is to do no flash. As I just said, the No Flash Center International has increased by 27%. Because the industry has reached a low point, the price is also very low. Everyone has started to stock up. The original goods have been sold out almost. The characteristics of memory, everyone will see that the whole memory will have a lot of growth next year. In addition to HBIM and new PCs, memory is the standard product. It is always like this. When it is lower than the production cost, there are many mobile users, car users, and PC users who start to share the goods and have to buy a lot. Because it is impossible for a product to always be under the production cost. The factory works hard to lose money to produce it for you. It will slowly stop production and reduce production volume. So these two needs are very big. Another 55nm is related to BCD, Power Supply. Power Supply used to be high-pressure, 14V, 5V. Its die size is relatively large. Now the GPU requires a lot of space. You can't put it in. So everyone wants to make it 1V, 1.4V, and 1x1, such a small die size. Then you have to make BCD's analog power at 55 and 65 nodes. That is also a big demand. This is the part that is stuck to the AI part of the manufacturing system. That is, the GPU cards that we have built in the data center. In addition to the need for GPU, HBM, and power supply, these power supply chips are very unique. They need a very small size. This is also in 65. This place is now not available. That's all for the resource.

Okay, thank you, Mr. Haijun. The second question is about our 8-inch hardware sales this quarter, which is actually slightly improved. I'd like to ask if this means that the pattern of 8-inch simulation and power management chips has improved. How do we judge the demand for 8-inch chips in the future? Thank you. Okay, Ziyuan.

As I mentioned earlier, the mobile phone market in China China is a bit more obvious. There is a small village where everyone wants to switch to a new mobile phone and launch it at the same time. And then a lot of specific people want to switch together. This leads to people thinking that there is a possibility that the demand for mobile phones will increase. So other people who are related to this mobile phone also start to prepare goods. You all know that this is the case with these companies related to mobile phones. Their demand, for example, fast charging, Power management, Bluetooth, Wi-Fi, this kind of 6-in-1, this is all 8-inch. Its demand is relatively large. Basically, it has recovered to the level of the top of the last year. Then these companies in the three-level public account, there are more than 10 companies in the public account, all announced that they have created a new high in history. You know, those Chinese small and medium-sized design companies I mentioned, they have all been listed on the A-share. These companies have the same demand for 8 inches. But our overall estimate is that this is a small village. If the overall average next year is similar to this year's overall average, the total amount is similar. So I'm not particularly optimistic about this 8-inch piece. I think maybe the current loading ratio will last for quite a long time. Because 8 inches around the world It's all around 50% to 70% loading. The ones that do better are more than 70%. The ones that do worse are only 50%. It's just that if your demand increases a little, you may be taken away by low prices. This way, there won't be a big change overall. Like what I just said, like the back-to-back processing of晶圓, or copper-to-copper bonding, hybrid bonding, it's still different from these. Those are segmented markets. Thank you. We'll be taking our final question from the line of Jingxiang Zhou from Guosun Securities.

Please go ahead, Jingxiang.

Hello, Mr. Hai. I'm Zhou Jingxiang, a researcher at National Securities. I'd like to ask you a question. The new production capacity that we've released in the third quarter is relatively large in this year. Could you please help us analyze the structure of this new production capacity? For example, its size, and its applications.

Thank you. The production capacity that we released in the third quarter, in the beginning of the year, in February, There is a special talk about how much 8 inches and 12 inches will be increased this year. The 8 inches that we released in the third quarter are mainly in Tianjin factory. Then, what we need to do is what I just said, 0.15 to 0.18 BCD annual power. The 12-inch competition part is mainly in 40 nanometers. It's mainly from our Beijing and Shenzhen and 55 nanometers. It's released from our Shenzhen and Beijing new factories. About 55 nanometers. There is a ratio here.

You talk about it. Hello, this has a ratio. That is to say, the ratio of 8 inches and 12 inches, right?

Thank you.

Now I'd like to turn 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 third quarter webcast conference call. We thank you for joining us today. Have a good day.