Win Semiconductors Corp

Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to Winsamy's Resolve Webcast Conference for the fourth quarter of 2021. My name is Zhou Zhen, the spokesman and Associate Vice President of Finance in Winsamy. Joining me today, on today's call, are our CEO, Kyle Chen, and our General Manager of Corporate Administration, Steve Chen. Today's call is organized into three sections. First of all, our CEO Kyle will comment on the company's results and provide brief guidance for the first quarter of 2022. And secondly, I will go through the financials in detail and Kyle will have the industry outlook to share with you. After that, we will open to the floor for Q&A. Please freely submit your questions in the input box on the webcast window throughout the conference. Before we begin, I would like to draw your attention to the safe harbor notice on page one of the presentation slide. Please note that this presentation contains forward-looking statements. These statements are based on our current expectations. Actual results may differ materially from our expectations, and the company undertakes no obligation to update this forward-looking statement going forward. Now, let me hand over the call to Mr. Kyle Chen, the CEO of WaySami.

In the fourth quarter of 2021, customer demand continues to grow, reflecting a sustained momentum from the third quarter. Our revenue reached $7.2 billion in the quarter. is an increase of 7% to 5% year-on-year. This marked another record high for single quarter during the past two years, surpassed the previous one set in the fourth quarter of 2019. Achieving by full capacity and better product mix, our growth margin in this quarter was 40.5%, which was better than our previous expectation. And earnings per share was 4.19 NT dollars. For the full year of the 2021, our revenue set another historical record high to 26.2 billion NT dollars. with an annual growth rate of 2% and earnings per share reached $12.9 NTD. Looking at the growth in the first quarter, we saw strong demand for the smartphone PAs, which not only driven by the continuous momentum from the just newly released a US-based smartphone in the third quarter, but also the strong demand from China smartphone customers. In addition, our infrastructure revenue, which included a 5G and low-Earth orbit so-called VEO, has delivered growth for two consecutive quarters, This was another important key contributor to revenue growth and the better product mix in the fourth quarter. For the full year of 2021, we see the opportunity to be a key beneficiary amidst this shuffling of the China smartphone market. By leveraging our strength of the advanced technology, excellent product use, and industrial leading production capacity. This was our most outstanding growth drivers. Last year, in addition, when the size shrink of the new generation of 3D sensing chip for US-based smartphones caused the market to be cautious about The overall Assumments for Wafers Our 3G sensing revenue actually increased year by year on year, giving the increased difficulty of the wafer production technology, making another key growth driver for us last year. This demonstrates that our strategy of the focusing on technology leadership and customer diversification has served us well, allowing WIM to continue to outperform despite the volatility and uncertainties in the market. Looking ahead to the upcoming new year, while the COVID-19 pandemic continues to impact the world, we believe the global 5G network infrastructure is still incomplete and the penetration rate of the 5G smartphones is still lower than that of the 4G. However, the long-term development of the IoT, AI, and big data and the evolution from the AR and VR even to XR and the recent very hot topic, Metaverse. All require the characteristics of the broadband, high speed transmission, and the low latency for the 5G networks. Thus, we continue to be optimistic about the growth trend of the 5G in the next few years. As well as the construction of the satellite communication infrastructure. In addition, our technologies in optical communications and optical sensing are becoming more mature as we continue to accumulate more experience, which also helps us to attract more potential customers. As a result, we continue to invest in R&D resources and cooperates with key customers closely, aiming to become a pioneer of the next new application. In terms of the capacity extension, the clearing extension, our Fab C, that's our third Fab, will be completed in the first half of this year. And we will install equipment immediately after that. The new Travesty is expected to come online in the second half of the year to meet the demand for the transceivers. For the new LuZhu Fab in the Southern Taiwan Science Park in Kaohsiung. As it's groundbreaking in the middle of the last year, the construction of the new Fab is a key focus for this year. And the goal is to enter must production before end of the 2024. In addition to achieving operational excellency, we also prioritize corporate sustainability and corporate governance. For the 2021 Corporate Governance Evaluation Survey by TWAC, this is the Taiwan Stock Exchange. we not only have been ranked top five among the Taipei listed companies for several years but also ranked the top 10 among all TWSE and Taipei exchange listed companies in the electronic industry with a market value over 10 billion NT dollars In addition, we were also the winner of the 14th PCSS Sustainability Report, President Award, internationally. We have been selected to join the Dow Jones Stock World Index for the second year this 2020. As ESG continues to grow to importance globally, it is encouraging for us to be included in the Dow Jones Stock Index again. Along with the global leading semiconductor companies and again recognition for our effort in the corporate governance and the sustainability. Looking ahead to the first quarter of the 2022 because due to the annual maintenance of our three fabs and the traditional slower season, our revenue is expected to decline 20 than the previous quarter. And the growth margin will be about mid 30. I will turn back the call back to the Joe. Okay.

It's our pleasure to present our financial results for the post quarter of 2021. We also can revert our presentation slides. We're starting from page four. Before that, before I start, please, Revenue and Margin Q4 2021 Revenue 7.2 Billion NT Dollar QOQ 7.0% Wildlife 5% The Q2 2021, the gross margin improved about 1.7 percentage points to about 40.5%. And that was driven by the full capacity in our lab and also the better product mix, which we can discuss it later. that the growth margin was better than our expectation earlier. And therefore, the operating margin improved about 1 percentage point to around 27.8%. The next page, in page 5, is the part of talking about earnings. The Q4 2021, the net profit was 1.7 billion NT dollars. Jewel Q was up 13% and YOY up around 32%. Therefore, the EPS coming at $4.19 NT compared to $3.67 NT in Q3. The whole year of 2021, EPS was We talked about the product mix in K-6 In Q4, the product mix We can compare one by one. The cellular was between 50 and 55%, and the infrastructure was between 20 and 25%, and Wi-Fi was between 5 and 10%, and others, including optical, is around 15%. You can find out that the cellular was up one stage and the infrastructure also up one stage. And the cellular, the continued momentum from the US tier one smartphone supply chain, which is the momentum still continues in the Q4. Other than that, also the China Market is still strong. Infrastructure was another contributor for the revenue growth and also the market growth. Due to the sequential growth in the infrastructure business, from the button in Q2 last year and then the sequential growth in Q3 and Q4. I think our CEO Kyle has mentioned a lot about several factors in the infrastructure momentum and then they can give us more cover later in this presentation. and Q1 guidance in page seven. I think Kyle already mentioned that, so I'll just read it over again. Due to the annual maintenance of the fab and the traditional lower season, we expect the Q1 2022 revenue to decline low 20 QOQ. And we also expect Q1 2022 The income statement and the balance sheet I have to remind everybody that all the figures are based on the audited basis. The actual result will be based on the final TPA's audited report. The Q4 net revenue was $7,217 million and QOQ was up 7% and YOY up 5%. The gross profit around $2,923 million and QOQ up 11% and YOY up 22%. The gross margin, better than our expectations earlier, it was 40.1%, which is improved about 1.7 percentage points. Operating expense about 914 million NT and OPEX ratio is around 13%. Therefore, the operating income was The operating margin became 27.8%, which is improved about 1 percentage point. The number of items was net income around $41 million. for your reference. Income before income tax was $2,049,000,000 and income tax expense was $360,000,000. Therefore, the net income was $1,690,000,000. which is the QOQ was up 30% and YY was up 32%. And the net margin was 23.4%, which is improved about 1.3% each point. So therefore, the EPS for this quarter was $4.19. The equivalent quarter ROE was 21% and the approximate utilization in Q4 was fully loaded at 100%. So the depreciation expense for Q4 was 10% It's $108,000,000 NT and the Compact for this quarter was $2,256,000,000 NT. Okay, that's Q4 for 2021. And for the whole year 2021, the next revenue was $26,182,000,000 NT. The worldwide was up 2% The growth Profit was $9,770 million NT and the growth margin for the whole year was 37.3%. The operating expense was $3,347 million and the OPEC ratio was 13%. The operating income becomes $6,423 million and operating margin was 24.5%. The non-op item, the next expense was negative 23. Again, the detail was in page 11 for your own reference. The income before income tax was $6,400 million. And the income tax expense was $1,189,000,000 NT Therefore the net income was $5,210,000,000 NT The net margin became 19.9% for the whole year The EPI was $12.19 for the whole year So the ROE for 2021 became 16% and the whole year utilization rate was 90%. And the depreciation expense became 4035 million NT. The whole year's half-hack for 2021 was 181 million NT. This is the whole year income statement. And page 11 is the number of items for your own reference. And my last page will be page 12 for balance sheet. The date is 2021, December 31st. The total assets was $74,894,000,000. The total liability was $37,732,000. And the common stock remained the same as last quarter, $4,240 million. So therefore, the total equity was $37,122,000. The book value per share was increased from The current ratio, the key index about current ratio, which is in terms of current asset over current liability, was 367%. The debt ratio, which is in terms of total liability over total assets, was 56%. Okay, this is the financial report, and that's my report. So, yeah, okay, then I will turn the call back to our CEO, Kyle.

Okay, thanks, Joe. I will explain more about the multi-outlook ETA and VR. So please see my flyer. Okay. The first page, second page is 2021, the operation highlights. There are four highlights. First is annual revenue, we hit a new regular high. For the application, we achieved more than 30% revenue growth on the cellular and the satellite, and more than 10% revenue growth on the optics. for production capacity expansion 1000Pi-1 1000Pi-1 Science Park XT-XP construction is on schedule. Training will be complete next year Q2 and hope we can launch the production after qualification starting from the 2024. The other you can see the We have a lot of cooperation with the key universities in Taiwan. As you know, the Thailand people is a very important key sector of the semiconductor. So we have a nurturing compound semiconductor in Thailand. We have a joint technology innovation center together with the National Yang Ming Jiao Tong University. And also together with 15 We established the Academy of the Innovative Semiconductors and Sustainable Manufacturing at the National Tenggong University at Tainan. This week supports our future southern Taiwan production site as a South Taiwan. So, next page. This page shows the learning trend of the semiconductor. The upper left is the growth rate. Worldwide Semiconductor, this forecast is from the strategic analytics and the gossip. Last year forecast is 25% growth. Gary Austin and I forecast is 5%. But we achieved 8% in terms of the U.S. dollar. So we achieved from 845 million in 2020 to 913 million in 2021. It's an 8% growth from U.S. dollars. So we saw the future. We are pretty optimistic for the future growth engine as we know. First is the 5G and Wi-Fi. Second, the satellite. The other is not for us. It's about optical. Complication could be sensing and data communication. So we see the 5G penetration rate is still lower than 4G. But we expect the 5G will become mainstream future for the next year. And we have a new technology to deliver more high-performance PA. The other is Wi-Fi. Wi-Fi since last year migrated from Wi-Fi 5 to Wi-Fi 6. In the future, more high frequency bands increased to C. So the other we also developed in the Wi-Fi 7. And the second is the satellite. So the satellite will become more mature in the future. So The more and more companies will launch more satellites in next year and the following. So we provide a set of technology for the decision and transmission. So it could be the, we have a certain market share. And also the V cell. We are the key manufacturing in the world. So 3D sensing and proximity sensing are right now, more and more applications are expanding. So we, actually we already delivery the vehicle sensor in the automobile surface for you. Later I will explain more detail. The other is for another wavelength for the Indian power supply. Also have a receiving and laser device. we expect the Indian box-by-sensing proximity sensor will contribute revenue this year. So first is communication connectivity. This is from the strategic analytics in the page six. So we see the 5G compound annual growth rate is about 20%. The 4G will become lower and lower. So 5G phone will become over the 4G booths from this year. And the revenue is growth. So we have no doubt about the smartphone PS market. The next page, page seven, is Wi-Fi 6 and Wi-Fi 6E. The Wi-Fi 6E covers the new frequency bay from six to seven giga. and the modulation will become more difficult. So the getting organized, the sub-trade has an outstanding characteristic to fulfill this critical requirement. For the next page, we saw the Wi-Fi 6 is the mainstream and the Wi-Fi 6e will be launched maybe second half of this year. It occupies 20% of the market. by 2024, Wi-Fi 6E will cover about 40%. So we can see this market is also growth. And Wi-Fi 7. Wi-Fi 7, the same frequency of the Wi-Fi 6E, but it's a more complex modulation on the wider bandwidth and the high frequency. the quality from starting from 1K to 4K. So the other is a good thing for the gain outs like the MIMO from 8 to 8, 8 by 8 to 16 by 16. So following the Broadcom and TK announced their SoC chips on the Wi-Fi 7, we already developing the advanced HPT to meet the performance of the SoC. Okay, next page is about satellite communications. I show us the satellite installed in the sky. So you can see a lot of the, in my chart you can see the top line, no matter from the sky to the ground, and either to the aircraft, the boat, and the vehicle, even the telephone. So you can see the market and the markets have a forecast that cellular communication have an annual growth rate about 20% from 2021 to 2026. And also the data rate, that means the data traffic is increasing 14 times from 2020 to 2030. So this high data rate, and the more satellite, we can expect this market is keep growing for the next few years. For the page 11, this is what we got from the Taiwan IEK. They have surveyed this satellite launch plan. So I think the USA Space Link, Starlink, you know very well. And UK have OneFab. also Amazon have a Kuiper is about to start the plan and Canada the Telesat so you can see this satellite number is huge so not only the satellite can bring the business to win for the receiving and the transmission but also as I mentioned the user terminal the aircraft the boat the vehicle the phone as well as the The cost is beneficial to the customer. I believe the market will coming. So, let's take is optical devices. 3D sensing application at WIM is a major driving force for the revenue growth. So, the truck that I think is a US-based smartphone adopt this 3D sensing since 2017 or 2018. still is the key supplier for this application. And also, since iPhone 12, we see the LiDAR was adopted on the real side of the smartphone. And more and more applications on the AR, VR, Metaverse, and we believe another main project ongoing, no matter what kind of phone, the proximity sensor, so they install on the seamless camera to help the focus. So this view says that some notebook already might start to use the 3D sensing. That's another growth momentum for the 3D sensing business. So next page, in 14, you see the yield has forecasted The growth rate about 13.6% from the 2021 to 2026. You see the majority is growth from the mobile, consumable, and telecom infrastructure. So this market is growing. And LiDAR, okay. So we also have a, actually we already delivered our wavers chips to automotive applications. This is an in-vehicle sensing device, so-called DMS, driver monitoring system, and OMS, occupant monitoring system. So this is inside the car. For outside of the car, we also operate with customers. It's about 150 and 200 meter low range LIDAR from low bar taxi and passenger car is ongoing. Right now it's under the pilot stage. The other application is for the AGV. As you know, the factory will reduce the manpower. AGV is key. So this is also another application together with customer in the pilot stage. So we believe the LiDAR, no matter in ViviCore or outside of ViviCore and other applications, this is the first way of coming. So this is a market about the LiDAR. The upper chart shows the, right now the majority in ViviCore is by the infrared LED. But the VESAO has a more good capacity and the performance. So by year 2025, I think this VESAO, the InvisiCo will take over the majority of the application. So the lower chart shows the market, light down market, no matter the, for the auto, Autonomous Vehicle Industries and Delivery, or even Smart City, this market is growing. So to achieve the normative for the ice and also the optical, so we have provided advanced technology for the future market. So in the page 18, this is a little bit complicated I have to show you the periodic table in the upper right side. So one is focused on the Galileo slide, as you know very well, and also the other is for Gemini slide, and also the Indian plus slide. So in the left side chart, you see the, there's a frequency versus power. The Getty Osmo I have a superior performance better than the system. Even frequencies over maybe five gigahertz and the power is over like 100 watts. Getty Osmo I definitely will be the major technology tool to fix this application. And as the frequency increase, We also have an Indian Firefly HAM-HPT is ongoing for developing. And the frequency up to one kilohertz. So you can see the LIDAR, show wavelength, infrared, and the data communication. These are using Galileo's line and the Indian Firefly and the WIM. have all these technologies ready for this market. The other technology is GAN. WINS GAN is for IF menu, not for the hard device. So we have more than 20 years experience and skills and technology on the GAN OS 9. then we can leverage this kind of the experience to help with the GaN nitride for RF. We have a 0.15, 0.25, 0.35, 0.45 technology. This can be covered the GaN nitride major solution under the DC 40 gigahertz. So we believe this GaN nitride market, we can gain some share for this under 40 gigabit. Okay. So the other is another technology, Indian fast way for update. As I mentioned, the sensing and the data communication will become more and more application in the world. Like a proximity sensor, short wavelength infrared, And the lines are no matter on the sensing or the communication. So we are ready to enter this market and become the pioneer production site for this application. So that's why I elaborate more in detail to you, okay. Now I turn back to the next topic, okay.

Okay, thank you, Kyle. And we now begin the Q&A. So please submit your question in the chat box on the webcast window now.

Okay, I think there's a question wants to know about I think first, as you know, we're saving right now for the ice purpose. We're still more focusing on resources to gain silicon carbide. And I think right now I want to know if we have some study on the gain on silicon. Yes, I think, definitely, as we mentioned before, recently as a foundry, so, and focusing on the AIVS purpose. So, all the material, if that can have the technology used for the AIVS application, I think we will put some resources for that. But I think, as I mentioned before, I think gain on silicon carbide is still the mainstream. So for the gain on silicon, for IFC purpose, yeah, we have put some resources, but I think it's just in the IFC stage. And for the Indian phosphide, I think, right now, most of our Indian phosphide capacity is for the optical devices. which is the laser-related technology. For the interface and R&D purpose, I think it's a little larger than CityHeart. We just put some resources for R&D purpose. Yeah, thank you.

Okay. There are several questions asking about this year, the year 2022, capacity expansion, cost depreciation, such questions. We plan to expand the capacity around 3 to 5K increase for this year. And the total capacity will be around 12 billion NT plus and minus. I think the majority and the major focus will be for the Southern Taiwan Science Park, the Kaohsiung Luzhou Fab. And it's still under construction for the first building of the fab. And this will be the focus for this year. and the depreciation expense because of that the depreciation I think the new fab in Kaohsiung due on construction and also that the The building, I think, the last amortization for the depreciation, but we still, we are open up the new capacity in our fat series in Greystone for the, for 3 to 5K this year. and they also have the equipment procurement which is coming later after year and so they still have the depreciation. The expense we expect will be compared to last year will be around 10% to 20% more in this kind of range. That's for the Compact. Thank you.

Okay. I think I read this too. I think there's some question. I want to know about some picture about a Q1 statement paper. I think for us two just mentioned before I think Q1 our guidance is the revenue will down low 20s and for those four segments I think our device revenue that is the most is the segment that the drop percentage is efficient I think mainly because For our optical segment, actually, it's mainly focusing on the 3D sensing and as we know, that device is only for one end-applied case and devices. So, there is a very clearly, most of the demand will more concentrate on the second half and the first half that will be the low season as usual. So that's the reason why they dropped the most percentage in Q1 compared to the fourth segment. And the best segment that performance in Q1, that would be infrastructure. Yeah, although it's still declined, but I think the percentage for our infrastructure segment is denied compared to the other three segments. They declined percentage is pretty low compared to the others. And the other two cellular and Wi-Fi which take maybe most of the revenue of the Wi-Fi, their decline percentage is very close to our guidance. So that's the situation and status picture about the fourth segment in Q1. Thank you. Okay and I think the other information right now we want to share with you is that as you know before we will mention the 5G cellular PA percentage in our conference but I think right now we already see most of the cellular unit is more the 5G smartphones become the mainstream. And also at the same time, the fan of the 5G is increasing. It's not only 10, 77, 79, and also a lot of new 5G fans was installed in the smartphone. And those frequencies is also Corp Corp Corp Corp Corp Corp Corp start to calculate and figure out those percentages because right now it's become a little hard for us to do and so in effect to misleading the percentage to the investor so I think we will no longer to provide a spot GPA percentage about our in our revenue thank you

Well, we're still waiting for more questions coming, but so far, we were waiting for two more minutes. Thank you.

Okay, I think there's one question right now. He wants to know about our Special Capacity Expansion I think this year we still have 1.4 KN expended so for this year in our capacity we were increasing around like 3 to 5 K capacity at the end of this year yeah and so that's the plan right now and about the load I think it's not so quick the quick effect here they can have some contribution I think maybe still wait until 2024 yeah I think that's about our future expansion plan for Oh, is that me? Yeah, thank you.

Thank you. There are two questions about the Indian FastBuy sensor. One question is will Indian FastBuy replace the V-cell? It's definitely not. It's a different application.

Indian Far Cry have a different wasteland so they have a different application Okay, we are going to answer the final question asking about the OPAC and depreciation The OPEX, most of the time, our OPEX ratio is around 12% up and down. For the year 2021, it was up to 13%. will be in the range of between 11% and 13%. That will depend on the different situation, including the high season, low season, any kind of the scenario. And about the depreciation, it's still hard to predict the schedule, because this year we have, as Brian mentioned, our major focus is on the construction for our new fab, and it's step by step, and at the same time, our old fab, Fab C, still also the premium, construction still ongoing and then later on the equipment will be installed. So yeah, probably the later, the higher the depreciation expense that may be happen. But let's see what happens on quarter on quarter later. Okay, thank you. Okay, now, right now is exactly the time, 4.30. So, thank you for your participation in WinSemi's conference. There will be a webcast replay within hours. So please visit www.semiconductors.com under the investor relations section. You may now disconnect. Thank you and good night.