Win Semiconductors Corp

Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to WinSemi's Resolve webcast conference for the second quarter of 2035. My name is Joseon, spokesman and associate vice president of finance in WinSemi. Joining me on today's call is Steve Chen, the general manager of corporate administration. Today's call is organized into three sections. First of all, Steve will comment on the company's results and provide brief guidance for the third quarter 2025. Secondly, I will go through the financials in detail. 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 Faith Harper notice on page 1 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 these forward-looking statements going forward. Now, let me hand over the call to Mr. Steve Chen, the General Manager of WinSemi, and he will provide an overview of WinSemi's business highlights and operational analysis over the past two years, and followed by the comment on our second quarter result and the third quarter's outlook. Steve, please.

Thank you, Joe. And welcome, everyone. Uh, please turn to the slide page 5. On this slide, we can consolidate, I think, for the past two years. Yeah, we faced a lot of market structure change. For example, like the smartphone has a little time decreasing, and because of the trade war in the survey, look like right now what we see is most impact is our cellular application. For this application we can see because regulation to ship to China actually that's raising up China government for the localization kind of supply chain event And because of that, and also because of the smartphone has some decline in the past two years, we can see actually for the past two years, our revenue from the cell phone PA actually was decreasing, and that's mainly because of Corp Corp Corp Corp Corp Corp Corp Enjoy and IOA will keep those net shares for the supply chain. So I think right now that will be structured but the revenue will become more back to the normal season ending quarter by quarter because we still hold major shares in China for the high end and also Other Android and iOS platform And second we can see for the Wi-Fi I think Wi-Fi is still doing well for the past two years It's mainly because of the Wi-Fi 7 But the adoption was increasing And because of the new high frequency band Adopted in Wi-Fi 7 It really contributed with the Wi-Fi Wi-Fi PA application sales revenue growth. So I think compared to a few years ago, the Wi-Fi segment actually is doing well for the past two years. And the next one I think is the most of the segment that not impact because of the train wall or the geopolitical thing. That's our infrastructure demand. Here, I think infrastructure demands, including like radio, and even base station or some very spatial point-to-point station or radar, this kind of application. I think for the past two years, it's keeping steady growth year by year. And right now, for example, like in K2, we already see our revenue represent from infrastructure is really close to our revenue starting the PGA. Yeah. And then the others that were mainly because I contribute by our 3D sensing and other optical demands. Yeah. And for this statement, I think first is It's definitely facing some structure change because of the 3D sensing and customer bring the new player into this market in the past two years so the revenue contributed for the 3D sensing was decreasing by the past two years but fortunately we already see we have some progress for those non-3D sensing optical things such as like AI related applications optical sensing for like LiDAR or data centers and that's a great increase in this period. So right now the percentage for 3D sensing was dropped to around like a 40 to 60% or to our total optical revenue compared two years ago, it may be taking around 80 to 90%. So I think for the past two years, we have making another effort and making more diversified for each application. I think right now spring to us is the future product mix in the future. and then we go to the page six. I think in this side we can see because of the demand was changing for the past two years, so we start to control and the well management of operating experience. So right now we can see no matter the volume is going up or down, Right now, our OPEX was keeping a range around like $800 million in anti-discard range, but although we have control our operating expense, but we still keeping our R&D percentage is around like 40 to 50% in the expense. So that will keep us still have a very good activity for the new technology developing and that also will bring us the better customer demand in the future. And also because of control by the cabinet, we can see the opportunity cash flow is keeping positive for the past few quarters. Yeah, so... I think right now it's the world control about the caverns and also the domains to making the cash flow become more active. And then the next page we can see that our creation ratio and also the situation change. Because of the domain was changed, so we start to control our cavities also. will bring a better depreciation trend for us because of I think right now start from 2024 the depreciation gradually start to decreasing quarter by quarter and even this quarter we see that more significant decrease quarter by quarter and we suppose that will continue for several quarters. And also because of that, so right now the iteration rate is become a little less impact for the growth margin. For example, like this quarter, the iteration rate is still just around like 45%. but we already keeping our margin in the visual margin is better than 20% for the Q1 and Q2. That also show WinSemi has better recovering from the earning pressure for the acceleration and depreciation. And then I think that's all some previous summary for the past two years, what we can be doing to minimize the impact of the market price demand. And then let's come back to the second quarter's results coming. For the second quarter of 2025, Moon Semi reports consolidated revenue of $20,3780 million up to 5.7% quarter-on-quarter and down 23.8% year-on-year. The variance between reported revenue and the earlier guidance was primarily attributable to the significant appreciation to the NC dollar against the USD dollar. In USD terms, the second quarter revenue increased by approximately 16% quarter-on-quarter, in line with previous guidance. The gross margin for the quarter was adversely impacted by currency fluctuations and a slightly less credible bottoming. In addition, share price volatility of a big China customer held by our consolidated subsidiary also negatively impacted consolidated gross margin by approximately 0.4%. Nevertheless, with increased wafer output, capacity evaluation improved to 45% during the quarter, lifting the company in the visual growth margin from 21.9% in the first quarter to 22.9% in the second quarter. Consolidated growth margin also improved from 15.7% in the previous quarter to 19.5%, with the consolidated operating margin reached minus 3.1% after 13 foreign exchange growth of NT$243 billion. 6 million and other non-operating items net net attributes to the parent company was NT$ 421 million which is the DPS of NT$ net minus 0.99 for the quarter. According to Corp segment in second quarter. Demand for cellular and Wi-Fi PAs proved noticeably compared to the previous quarter. Driven by the inventory deals ahead for the new US smartphone launch in the third quarter, in particular the increasing adoption of Wi-Fi 7 strong pull-in from the Wi-Fi router Cosmos, also making Wi-Fi the first growing product segment in the quarter. In optic segments, Samsung's third chip also shows an other-wave optic, similarly supposed by the inventory build-up ahead to the new smartphone launch in the third quarter. Human of the non-3D sensing optical chips remain solid as well. While the infrastructure segment has originally decided to remain flat quarter on quarter, both optical and infrastructure experience a slightly sequential decline due to unfavorable currency exchange movements. As we enter the second half of the year, Concern over potentially reciprocal tariffs from the United States. However, our business activity with customers remains firmly on track. This year, we are seeing a growing number of new customers and new projects across the key areas such as low Earth orbit satellites, AI driven data transmission and also aerospace applications. These customers consistently choose WinSaming as their first choice, thanks to our advanced technology and the long standing record of manufacturing excellence. At the same time, more customers are envisioning engineering cap out for next generation and even future generation Prada, including a number of new Prada introduction projects in the field of optics. These developments continue to progress steadily, come affected by the short-term market fluctuation or external uncertainty, and the integration device manufacturing even has more discussion with us on outsourcing opportunities in order to indicate the risk. Looking ahead to the third quarter of 2025, momentum across all product segments is better than the past year. Right now, the constructed revenue is expected to increased approximately mid-term meetings quarter-on-quarter, with the consolidated gross margin expected to reach around the low-team level. I will turn the call back to Joe. Thank you.

Okay, thank you, Steve. Okay, it's my pleasure to present our financial results for the second quarter of 2025. So we are starting from the page nine. The first page, the page nine talk about, discuss about revenue and the margin train. And the second quarter, 25 consolidated revenue, but 37 and 80 million NT. and CO2 was up 5.7% and wild was down 23.8%. And the difference between this number and the earlier guidance was primarily attributable to the significant appreciation of the Newfoundland dollar against the US dollar. and actually if in U.S. standard terms we actually in line with our guidance which is approximately growth about 16% UOQ and for the growth margin in Q2 was impacted by the significant appreciation of the New Haven dollar and also a slightly less favorable product mix. And in addition, the share price volatility of a listed Chinese customer held by our subsidiary also negatively impact the growth margin approximately around negative 0.4 percentage points. Those are the negative factor, which is negative impact to our growth margin. However, there is some positive impact, which is the utilization was increased in our wafer foundry, our FAPs, and so therefore the utilization rate increased to 45% from 35% last quarter. And therefore the Q2 individual growth margin increased to 22.9%, which is one percentage point increase. And the consolidated growth margin also increased about 1.8 percentage point to become 18.5 percent of the gross margin, the consolidated gross margin. And also, the consolidated operating margin improved around three percentage points to negative 3.1 percent compared to last quarter. Okay, this is about our revenue and the margin. And then please refer to the next page, page 10. And the non-op items, including the FX loss and also the interest expense and other non-op items, because of that, our Q2 2025 net loss attributable to the parent company was 421 million NT and compared to last quarter the net profit attributable to the parent company was 16 million NT and therefore the EPS for Q2 was negative 0.99 NT dollars and the accumulated per half was negative 0.96 NT dollars for each EPS for the first half. And please to the next page, page 11, we discussed about the product mix. As Steve has mentioned earlier in our slides, we are making the product mix to be favorable to our growth margin in the past two years. As you can see, the recent two quarters, including Q1 and Q2, our infrastructure percentage is in line with our federal PA percentage. It's a lot different from in the past. Two years ago, or even longer term, our federal P.A. used to be around 40 something to 50% of our total revenue, and the infrastructure less than 20%, but now the product mix is more healthier to our growth margin. for things 2025. Wi-Fi business contributed most of the growth for the second quarter. The percentage is up to between 15 and 20%, which is higher than last quarter. and so for the actually saluted PA also grows in Q2, Q02. And infrastructure actually for the actual result for in US dollar terms or either the shipment for infrastructure or optical is slightly better than Q1 but because of the New Taiwan Dollar appreciation so it's become slightly lower than last quarter. And the optical also become the 13% from 17% last quarter. So this is the product mix. And please press T. Page 12, talk about our guidance for Q3. And I think Steve has mentioned that I'm going to repeat again. We expect Q3... I'm sorry, I have to correct it. Q3 25. It's not 24. I'm sorry about that. We expect Q3... The Consolidated Revenue to increase mid-term QOQ. And then we also expect Q3 2025 Consolidated Gross Margin to be around the level of low 20. And we're expecting all of the product segment will be buttoned out from the first half. And in Q3, all of the products will be positive growth, no matter the cellular, Wi-Fi, infrastructure, and optical. And then we also expecting The best performance for QoQ growth will be optical because of the U.S. smartphone new product launch. And then, secondly, will be Wi-Fi and also the cellular. It's also doing very well. Okay, then, 360. Q2, then we can quickly go through the financial statements starting from page 14. I will consolidate the income statement for Q2, 25. I still have to remind you guys that all of the numbers, it's on audited basis. The actual results were based on the CPA's report thereafter. The Q2's net revenue was 3780 million NTD and QLQ was up 6% and YOY was down 24% and the growth profit was 698 million NTD and the growth The operating expense of $817 million is very similar to last quarter expense ratio is on 23% and therefore the operating loss for Q2 was 119 million NT and the operating margin was negative 3.1% which is improved about 3 percentage points. The non-op items there is a loss of $432 million and the detail will be in page 16. The loss before the income tax, $561 million, and then the net loss was $490 million, so therefore the net margin was negative 13%. and loss attributable to the parent company was 421 million and the EPS was negative 0.99 NT dollars and return on equity was negative 5% and approximately utilization rate improved about 10 percentage points from 35 to 45% this quarter, and the same period of last year was 65%. The depreciation expense is $1038 million, which is lower than last quarter or even a year ago. And then the car parts, $205 million, also lower than the same period of last year. Okay, then we finish the Q2 result and then now the first half income statement. The first half of 25, the net revenue was $7,356 million. and YOY was down around 22% and the growth margin for the first half is 17.6% and then operating loss was 336 million NT and then therefore the operating margin was negative 4.6%. Excuse me. The net loss was 554 million NT. So the net margin was negative 7.5%. The loss attributable to the parent company for the first half was 405 million NT. In the accumulated, the first half, ETS was negative 0.96 NT dollars. The return on equity for the first half was negative 2%. Approximately, utilization for the first half was 40%. The same period of last year was 60%. Depreciation expense, $2,144 million, which is lower than the same period last year, so does the chart card, $296 million, which is even lower than the same period last year. Okay, this is the first half of income statement, and then flip to next page, page 16. This is to show you the non-op items. For Q2, 25 non-op items lost around $432 million. Majorly coming from the foreign exchange loss and the financial cost, which is interest expense. And then the rest of it is around... is something for the financial assets, trial value to the profit and loss, something like that. In the first half, the number of items was negative, was loss of 276 in total. Okay, then the final page in page 17, which is The cash and the cash equivalent was $6,460,000,000. And the total assets was $61,132,000,000. And the total liability was $23,800,000,000. and a common stock rebranded then and therefore the total equity was $37,332,000,000. The book value per share was increased from $85.68 last quarter end to assume 30 years $86.17. The key index including the current ratio is 227% and that ratio was 39% all in healthy label. So okay, this is my part. And now we begin the Q&A. Please submit your question in the input box on the webcast window now. Thank you. Okay, there's a question asking about the strong demand in AI how should we take a look about the incremental revenue potential in wind damage infrastructure segments and then compare to other infrastructure products. And actually, we've been talking, we've been sharing with the investor our optical business We have now 3D sensing business which has penetration and adoption related to AI. We spent a lot of time in the first earnings call earlier this year and then we shared with the investor about because of AI, we say we have many of the opportunities in the optical transceiver, for example, no matter the laser dial, the modulator, the TX, and all the photodetractor, which is all pin dial, APD, on the RX. I think those are our opportunities and then also a lot of project engagement right now with our customers. But for those, most of the contribution will be reflected in the optical segment. But it doesn't mean that there won't be any kind of revenue contribution to the infrastructure segment because we do have we do practice by optical driver revenue in infrastructure because use our MMIC which is key hand technology for no matter the 100 gigabyte or 200 gigabyte and we have a very good US customer who are also in this territory and doing very well and because the technology wise we classify them into infrastructure for the rest of AI related we will into the optical business. And then most of those optical revenue is NRE or NPI-related revenue at this stage. And so for the small volume of mass production, that's We have several engagement projects with a couple of tier one customers right now. Okay, this is pretty much like that. Thank you.

Okay, it's a question. is going to discuss about the old application segment picture in 2025. I think that we already code for the Q1 and Q2. We already see that the cellular and Wi-Fi all has the result and for Q3 I think right now we can give the better picture about Q3 looks like the cellular and Wi-Fi that were all increasing because of the smartphone new model launch and also optical is available for that also and so I think for the Q3 you can see the whole fourth segment was increasing and optical will become the biggest growing segment because of the their shimmy is always more concrete shape they can have. And fairway and Hawaii sites also have pretty good growth because of the new model launch. And the infrastructure I think also has some growth but maybe not much because that's a more slightly segment of those compared to the other three. Yeah, thank you.

Okay, there's a question further asking about the depreciation expense trend in 2025 and 2026. I think we already share with you guys that in the past few years, since we reached the the peak of the depreciation spending two years ago and then keep going down gradually and then even more significant for the recent quarter and then we expect that will be further going down for the next couple of quarter unless in the next In the next couple of years, there is any kind of momentum to make a decision to do a significant contract. Otherwise, I think for the existing utilization and the capacity, we don't need any further compact and then the depreciation expense will going down further. I think that's pretty much it. Thank you. I'm sorry. I'm sorry about that. There is a question from the investor asking about the revenue trend for the next couple of quarters or even the rest of the year. I think we already see the trend up since Q2 and Q3. for example the Q2 the momentum or the growth rate should be even better but because of the foreign exchange issue and then it looks more moderate and then I think Q3 we also see probably the same trend and we see a stronger trend for the second half than the first half. So I think that we believe that especially the second half starting from Q3 is a new model launch and then we have a very Good customer in the supply chain and most of them benefit from that and also reflecting in our revenue right now and then probably also the rest of the year. Okay, thank you. Okay, there is a question asking about the outlook for LEO satellite, which is low Earth orbit satellite. And then actually, I can say that this is the most popular topic in our Chinese call, I mean, one hour ago. And about Leo Satellite, I think we are in this approach since many years ago. And in the very beginning, we are in the satellite, between satellite and down line, and we provide excellent technology with for the connectivity between the satellite and which is PA or LMA and then therefore later on we also in the suppression we have a customer penetrate into the application between satellite and the gateway and I think this year we see even more penetration the customer needs the solution for the other than the regional KU band and KA band which is around 17 to 19 gigahertz or 20 something to 30 gigahertz frequency bands. even more they need the E-fan which is 70 to 80 something gigahertz or V-fan is brand new to the between the 70 something or 40 to 40 something gigahertz and so we develop our provide our advanced technology which is the Gideon 9512, the 0.12 micron Gideon 95 solution for the KA band and then the 0.1 micron PEM technology for the E band or W band. And then for the V band, We also provided 28 volts, 0.12 micron, getting nitride technology, and then to support the customer, even combine the bumping technology. So this kind of application has been mass production are starting from this year. And then the new application is a direct to handset or direct to cell, which is connect satellite to cellular form. And then it will be equipped on the satellite instead of cellular form for this kind of application. I think we already have some contribution We provide the solution to the customer and then we have the contribution starting from this year and this is a very interesting application and then I think we starting from between satellite and then satellite to gateway and then or vice versa and then now we also provide a solution between satellite and cell phone. That's a very good opportunity and good contribution to our infrastructure business. Thank you.

Okay. There's a question. It's more related to Our future, maybe the IDM opportunity discussion. I think, yeah, because like I say at the beginning of the slide, due to the smartphone, global market has changed, and also China right now, because of some regulation, they are more want to have their low-finance supply chain. It's not only impact Winsane, means low-end China smartphone, but also impact those IBM company for the China market. So I think right now, evidently, has more uncertainty for running the web. So, and I think we all know Wi-Fi has more complete technology to cover all our devices and also we still keeping put a lot of resources to developing a new next generation technology. I think though, and also we have maybe the biggest wafer output capacity in the world. I think those all attract those idea and company to discuss with Winsome and try to leverage our capacity and technology to help them to lower the uncertainty in the future. Yeah, so I think Once those IBM companies try to outsourcing the demand to making their uncertainty become lower I think Winston is always become the first one to talk with. Thank you.

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