Win Semiconductors Corp

The investor conference is about to begin. Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to Winsami's Resolve Webcast Conference for the fourth quarter of 2025. My name is Joe Teng, spokesman and associate vice president of finance in Winsami. Joining me today's call are Kyle Chen, Our CEO and Steve Chen, the General Manager of Corporate Administration. Today's call is organized into three sections. First of all, our CEO, Kyle, will comment on the company's resolve and provide brief guidance for the first quarter of 2026. Secondly, I will go through the operational process analysis over the past two years and the financials in details. And General Manager Steve Chen 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 slides. 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, our CEO in WinSemi.

Thank you, Joe. Hi, everyone. Welcome to join this call. For the fourth quarter of 2025, WinSemi reported consolidated revenue of the 4.794 billion NT dollars. It's up about 7% of quarter on quarter and up 29% year on year, slightly exceeding the previous expectations. Individual gross margin for the quarter was 35.1%, improving by 6% from the previous quarter. which consolidate gross margin reach 31.8. It's up about 4.9% sequentially. Capacity utilization you keep steady about 60%. It's consistent with our previous quarter. The improvement in this gross margin was primarily driven by A more favorable product mix with an additional contribution of approximately 0.5% from the relevant profit generated by a list of Chinese customers held by our consolidated subsidiary. As a result, consolidated operation margin reached 33.9%. Net income attributable to the parent company for the fourth quarter was $1.029 billion NT dollars, and the EPS was $4.43 NT dollars. For the four years of 2025, accumulative revenue reached $16.2 638 billion NT dollars. It's about down 5% year on year. And the full year's EPS was 4 NT dollars. Okay, now I will review the detail of the fourth quarter. For the fourth quarter, let's divide it by the four major application segments. Firstly, it's infrastructure. is still sustained strong momentum from the previous quarter and remains a strong performing segment with continued revenue growth. Secondly, in terms of the Wi-Fi, as the peak season of the US-based flagship smartphones came to the end and the router market remains soft, So Wi-Fi revenue declined slightly. Third one is a cellular PA supported by better than expected end-market sales rules and recovery in demand from the Android smartphone PA customer. Cellular PA revenue remained flat. Last one is the optical segment. driven by a relatively laser inventory build cycle for smartphone 3D sensing applications as well as engineering revenue from the project development of AI optical communication demand momentum extended to this quarter so in total resulting in continuous growth in optical revenue so overall Although the full-year 2025 revenue was slightly lower than previous year, when Semiconductors have shifted meaningfully, the business focus has gradually moved away from the mature smartphone market to aerospace, infrastructure, and AI data center applications. which offer higher value-added content and greater technological complexity, close aligning with the core strengths that we have been long invested in developing. Looking ahead to the 2026 this year and even further in the future, as AI-driven data growth accelerates and the space-based economic expense. Both the demand for ultra-high bandwidth and low latency in AI optical communications and the need for broad coverage and high-speed transmission in low SOB, so-called LEO satellite network, rely heavily on the superior material properties and performance of the compound semiconductors. Our competitive advantage and strategy in compound semiconductors are built on many years proven mass production experience as well as long standing co-developing partnership with leading global customers. Enable us to offer comprehensive and differentiated portfolio for advanced process technologies. With a stable mass production management, we are also the only compound semiconductor foundry in this industry that provides a truly turnkey solution, deliberately integrated service from the upstream architectural structure design to downstream testing. By leveraging and replicating the successful business model established in the wireless micro-communication, we are extending this capability into high-growth markets, including the AI optical communication, optical sensing, and the rapid developing satellite sector. This integrated approach enables customers to shorten developing cycles and accelerate time to market. In AI optical communication, we are currently engaged in joint developing projects with multiple optical communication customers, supporting our continuous revenue growth in the year ahead. Looking ahead for the first quarter this year, 2026, due to this traditional low season, few working days, and when 3 Feb is for the annual maintenance. So our focus is the consolidated revenue is expected to decline by high single digital quarter on quarter. with a consolidated gross margin expected to be around mid-20s level. So now I turn the call back to Joe.

Okay, let me go to the operational analysis and also the Q4 review. Thank you, Kyle. welcome everybody then please turn the page to okay from the very beginning please read it over the same proper notice and then pages three the pages three is our ESG achievement we keep updating the ESG award including DJSI and also Taipei Exchange listed the ranking. And now please flip to the page four and page five. We're going to share with you that in the past two years, the operational review, and I think for business and the revenue review, I'm going to leave it to Steve later in his report. And then I will focus on, first of all, the operation expense. on page 5. As you can see that in the past two years, our all packs have been kept at a stable level around 800 million NT plus and minus. Even in the period, we may suffer some kind of downturn, but or even in the second half, we have a better utilization rate, but we intentionally to control the OPAQs. But we also allocated around 50% of the OPAQs to R&D to input more resources into the new technology or new application for the future growth that we have to do. On the right-hand side, I'm gonna show you the operational cash flow and the CapEx. In the past two years, Even during the period of Q4-24 to the Q2-25, we suffered a loss. We were having a downturn at that time, but we're still keeping our operational cash flow positive. And then even in the second half, Entering the second half of 25, we have a better utilization and a better business. We still manage the operational cash flow very well. And then on the same time, we also manage the car packs in the past two years. Also disposing the idle assets and the You can see that starting from the second half of 25, we have a little bit higher of a car tax. That's the project-based car tax. That's for a new demand and a new opportunity to work with our partner and the customer. Okay, please flip to the next page, page six. This page, on the left hand side, you can see the depreciation expense trend. In the past two years, the depreciation expense the we we intentionally to have a control the car park so that we have less pressure of the depreciation expense and even in the second half I can see that we already the depreciation already passed the peak and the depreciation expense is going down significantly entering the 2025 and then also reducing the fixed cost burden on the same time and especially the second half for The single quarter even below 1 billion NT for each quarter. We also improved the product mix and also the cash flow. by lowering the depreciation, amortization, etc. And we're still keeping the operating cash flow positive. And on the right-hand side, we're going to show you The utilization rate, see that in the past two years, quarter by quarter, we may suffer the up and down, but the second half of 25, we're coming back to around 60% of the utilization rate, and with the revenue ran up, the the revenue ran up, the utilization also ran up. You can see we haven't reached the peak of the previous, the peak which is in the second, the Q2 of 24, but our gross margin is already exceed the level at that time. That's because We have a better product mix together with UT utilization, a better utilization, and then pushing the gross margin also become better. I think that we're doing a lot of things to moving the business to the high margin business. Okay, then we come back to the Q4. Please step to the page 8. The Q4-25, our consolidated revenue was $4,794,000,000. QOQ was up 7%, and YOY was up 29%, and mainly driven by the High-margin product for example like infrastructure and optical electronic Business and then even the even though the smartphone the q4 is of the Inventory pool is entering the the in almost the end, but it looks like the new model, flagship model of smartphone seems to be selling better than expected. The decline for cellular and Wi-Fi is limited. At the same time, the Android cellular phone has a better performance. That's making our growth margin improve. As we mentioned, the utilization maintained at 60%, but because of favorable product mix, the individual growth margin was 35.1%. In addition, The relevant profit generated by the listed stock by a founded Chinese customer held by our consolidated subsidiary contribute 0.45 percentage point to our gross margin. So as a result, our consolidated gross margin at Q4 become 31.8% and operating profit margin was 13.9%, which each one was increased by QOQ increased by 4.9 and 5.3 percentage point compared to Q3, which is for those Those are better than our earlier expectations. And please flip to page 9, talk about the earnings. Because of the growth margin improvement, also operating ratio stable, the The net income attributable to the parent company reached around 1029 million NT for the Q4. In the whole year of 2025, it was 1694 million NT. The Q4 EPS was $2.43. and the whole year of 2025 was a $4 NT. Okay, that's for the bottom line. And please flip to the page 10, talk about our product mix in Q4. Our product mix, okay, the Q4, Q4, you can see that our CEO mentioned that we are moving our product mix gradually to the more favorable to our gross margin and profit for a period of time. So you can see that Q4 is very clear that the infrastructure increased the most at the expense of cellular PA and the Wi-Fi also going down at Q4, another growth happened at optical electronic business. For optical business, because of 3D sensing ran up later than other segments for the flagship smartphone, so there's still a good performance in Q4. and compared to last quarter. Okay, then finally we go to the guidance. I think Kyle has mentioned that we're going to repeat again. For the Q1 26, because of the traditional low season and also less working day, in addition we have annual maintenance. So We expect that consolidated revenues are going to decline high single-digit QOQ. And also Q1's gross margin, we expect it will be around the level of the mid-20s for the gross margin. And if we separate different segments of the product, we probably will see that except cellular PA will be growing in Q1. The rest of infrastructure, Wi-Fi, and optical electronic will be entering the low season and will not be higher than Q4. Okay, then we can go through our financial statement. Okay, the page 13 for the those are the, I have to remind everybody this on an audited basis, the actual results should be based on the CPA's report. Okay, the revenue for Q4 of almost 4.8 billion NT, QOQ up 7%, YY up 29%, and the gross margin was 31.8% compared to 26.9% in Q3. And operating ratio keeping the same at 18% last quarter, So the operating margin become almost 14% compared to 8.6% last quarter, which is better. And the non-op item was gained around 437 million NT. We have detail in page 15 for your reference. The income before income tax was almost $1.1 billion NT. The income tax expense was $142 million NT. Therefore, the net income became $960 million NT. QOQ was up 40%. Net margin was 20%. compared to Q3. Q3 was 15.2%. And then the net profit attributable to the parent company was 1.1 billion and 29 million NT. So therefore, the EPS was $2.43. and return on equity is 10% and utilization, same as last quarter, 60%. Depreciation expense keep going down, become 827 million, a capex of 372 million, also lower than last quarter. That's Q4. And please flip to the page 14. Page 14 talks about the whole year of 2025. The total revenue for 2025 was $16,639,000,000. The YOY was down slightly, around 5%. And the gross margin for the whole year was 24.2%, one percentage point higher than last year. and OPEX ratio equivalent to 20%. So operating margin become 4.3%. And non-op item 672 million NT. The income before income tax was 1387 million NT. So therefore the net income become 1090 million NT therefore net margin was 6.5% compared to 1.9% last year. The net profit attributable to the parent company was 1,694,000,000 therefore the EPS become $4 NT even. The return on equity for the 2025 whole year was 4.3%. The whole year's utilization equivalent to 50%. The depreciation expense was $3,907 million, which is lower than last year. and CarPax a little bit higher than last year was $1,691 million. And normally, we will provide some kind of depreciation expense and the CarPax guidance for 26. Depreciation expense, we expect It will be going down around 10% to 20% at 2026. And the car parks for the whole year 2026, we also expect probably will be 2 billion NT plus and minus. OK, then please flip to the page 15. talk about the non-op item. I think it's quite straightforward. The total non-op item was a gain on 437 million NT dollars, including the foreign exchange gain and the financial cost, which is the interest expense. That's pretty straightforward. Okay, then finally, last page will be the balance sheet. I think the cash equivalent was $7,067,000,000. And total assets was $60,729,000,000. And total liability was $18,738,000,000 NT, and common stock remained the same, so total equity become almost $42 billion, compared to almost $40 billion at September 30th. Okay, then, therefore, the full value per share at December 30th was $98 NT compared to the $93.12 at September 30th. The key index including current ratio was 248%, not much different than the September 30th. debt ratio was the same, exactly the same as last quarter, which is 31%. Okay, this is pretty much what I have. Okay, thank you, and then I will hand over the call to Steve Chen, the General Manager of Corporate Administration.

Okay, thanks, Joe, and good afternoon to everyone. Yeah, I think we'll start Some stuff on the overview for 2025. Yeah, that's page 18. Yeah, we can see if we break down to our application from 2025, we can see the was the biggest change from 2024. The revenue will drop around like, 5%. But at the same time, our EVA charger level increasing about 5%. And then I think Wi-Fi and optical keep very much the same level. So that's the whole picture about our revenue in 2025. And although we dropped maybe around 5% of our total revenue, but because of the product mix was better in 2025, so actually the margin for 2025 is a little better in 2024. And next page, we can break down by our four applications. We can see the cellular actually is dropped around like 20% year on year. I think that many of you are already focusing on the high-end and premium model of the smartphone market. And the second one is Wi-Fi. I think thanks for the Wi-Fi 7 and Wi-Fi 6, the penetration rate of these two new specs is keeping up. higher and higher year by year. So it help us our Wi-Fi application have a several digit growth in this year. And then the next one which is growing is our profitable infrastructure related application. I think thanks to all the very active new satellite launch and the contribution about the AI data send the high-speed requests to driven things like optical drive IC become more major position in this portion. So even though the base station I think is a little saturated at this moment, but we still can keep our infrastructure application grow around 5% year by year. And the next application we will review is the optical distance. I think at this segment the 3D sensing is still taking around 60% of the revenue and due to the new player was joining for the 3D sensing of our end customers so definitely we see double digits going down for this second, but fortunately we diversify this segment by those non-3D sensing business is become, get some results. So right now the optical business, the non-3D sensing taking around like 30 to 40% of our optical revenues, which we're keeping the uh... problem is become better and then we will look around the uh... market outlook for these four segments uh... first let's uh... check with the cellular portion I think uh... the good news for this portion is I think the 5G penetration rate is still keeping uh... a little progress year by year But I think this year we also see that the risk is about the memory shortage. It maybe will impact the global trend about the handset, which we see from most of the market institutions. They also foresee this year maybe the global trend will drop around like 5%. Because WinSemi is more focusing on premium model, high-end model, and even some mid-end model. So we can see the premium model should still keep in growth in this year, which means I think the impact from the memory shortage should be less to WinSemi. And then the next one is a review about the Wi-Fi. And we can see in this page, I think the Wi-Fi 6 and Wi-Fi 7, like I say, still keeping penetrating the market. So CAGR for these two specs, I think still will have more than double-digit growth year by year for next few years. So that's also help with them to have a better demand year by year. Yeah, so I think this year we still keep other meetings for Wi-Fi application demand. And then we will go to the infrastructure related demand. First, I think base station, because I think 5G base station, infrastructure is already more mature. So what we see for a market institution that will be facing around like a 2% drop by year. But thanks for our diversification in this segment. Actually, we will have such like optical case driver for the data center, which because many driven because of the very high speed 1.6T this kind of spec and we see in this year maybe because 1.6T that will be become the main spec in this year for the end application so we foresee this demand maybe will become double even triple in this year and The next one that will be our optical visual sensing market. I think right now this market is not only for face ID. It still will have more application will be used visual sensing such as LiDAR, using car or in the cabin, or even for some mobility device such as like long mover. or even the other kind of different movers. And that also will all bring some increasing for the demand in this year. And next, I think we are more focusing the two key growth engines for the compound semiconductor conductor in the future. I think first is the satellite. We can see from the chart, start from 2021 to 2025, it's already become the first way of the LEO satellite launch and bring a very good volume for this market. And then I think from, start from 2025 to the next five year, we already see Demand still will jump more than times again, and even we already see some markets that most of the end satellite operators, they will submit more aggressive satellite launch plane to the NASA. I think that all will bring a very good momentum in a few years. and the police and actually we are not for those of the federal accommodation all technology can be applied in different kind of way first is the federal I to say for life that this kind of communication and then from the federal right to the gateway or from the UT and even right now we already see that's a more new project demand for the satellite to cellular form, which we call is the direct-to-sale. And because of those more and more valid needed for the transportation, we can see the band from the satellite communication will expand from the original KA, KU band to E band and even V band. And even we see The newest demand comes from the WBAN, which is higher than 100 gigahertz. But fortunately, WinSAN is used always to invest a lot for the technology developing. So for those of high-end frequency, we already have the technology well-prepared and show to our customer and also have some NIE project with our customer, such as Gany-Nitrite. We use 0.1 micron technology for both material and can provide a very superior performance to the customer for the satellite communication. And the next one we will Discussing about AI quotient. I think everybody know after the AI data center become more popular from the market, the CHER definitely will become very high, moving 30% and even more than 40% for the client communication speed. And with Amy, Um, definitely is, uh, will leverage our, uh, getting us live wireless, uh, mass production experience and the capacity and technology to this new market. Because of, uh, the advantages for we certainly to step into the optical, uh, market, definitely we have a very wide global customer partnership with the tier one customer and, um, Actually, most of our Tier 1 customers, they somehow will have also covered optical communication business. So it's more easy for WinSemi to build a coverage with those Tier 1 customers. And then we will leverage the same kind of technology investment for the RF So we will provide a very bold and advanced technology innovator for the VIXO, CW laser, EML laser, even the IMPPIC. Yeah, those kind of different applications to cover different kind of distance, which we can see on the page 35. Yeah, I think right now our VIXO and IMPPC is already mass production and then right now our CWLacer and EMLO that's still is in the ongoing qualification procedure and the next page was showing I think for WinSemi CWLacer's roadmap right now our 17 million is a milliwatt and 100 milliwatt is all collaborate with our customer for the quantification process. And we also have NRE for our customer for the 200 and 400 milliwatt in the future. And as everybody know, we say provide a turnkey solution in the RF business. Yeah, we not only produce, provide a waiver process to customers, and also we have our internal AP progress process to support the advanced AP structure technology to our customers. And we also will leverage this kind of business model to optical business. Yeah, and We see that maybe that will become an advantage to Winsame because for the optical process, the regrowth will become a very necessary process for the laser technology. So by leveraging Winsame's internal AP capacity, definitely we can provide a more complete 10-key solution to customers. And also, Everybody know we have testing, AOI, that's for IVE, and I think we also will leverage to the optical devices application. And the next page is definitely our biggest advantage. It's the six-inch progress capacity from the DNA slide to IMP. Because of... Winsami have the largest getting us like capacity work and those six inch kind of process for Winsami is already running more than 25 years and also we start to our six inch IMP HPD is also more than three to five years. So Winsami is still already have experience with transfer Corp Corp Corp Corp Corp Corp Corp Corp Corp the 16th Indian phosphate capacity in the future. And that will provide a faster title market and lower capacity and lower entry barriers to our customer to convert from a four inch to a six inch. And the next page, we will show that I think all the AI is associated Not only for the data communication, but also the sensing application. For the past 10 years, WeSemi has already built a lot of sensing technology, no matter for the LiDAR, for the AR, or for the VR, and even the automotive vehicles. I think in the future, because of AI, those kinds of WeSemi technologies can get a more better momentum in the future. So that's about our whole overview about the 2026 and for the medium kind of optical and satellite future demand. Thank you.

Okay, thank you. Thank you, Steve. And now we begin the Q&A. Please submit your question in the input box on the webcast window now. Thank you. Okay, there is a question asking around Q4, the recent QOQ decrease for Wi-Fi and QOQ increase for infrastructure. I think we have mentioned that by our CEO earlier, I think because the US flagship smartphone inventory pool has come to an end and also at the same time the router market demand a Q4 kind of soft that's making Wi-Fi PA revenue decries slightly, not too much, and that's the reason why. But another, regarding the infrastructure, I think infrastructure turned into stronger things, Q3, due to satellite business and also the Optical Driver in AI Data Center Demand and also Aerospace, also strong. That's the reason why. Thank you.

Okay. I think for our slides mentioned, there is a lot of future demand driven that will come from Satellite and AI related I think like Joe and Kyle just said I think right now the satellite which is the aerospace those kind of demand is already taking around 30% to 40% of our Infrastructure Applications Revenue and AI-related technology last year is taking should be low single digits about our revenue and this year we think that should be up to mid-single this kind of range Yeah, thank you.

Okay, there's a question asking about the depreciation and amortization and asking is that the same path decline at 2025, especially second half. I think we have mentioned it earlier We expect the whole year of 2026, the depreciation expense going to reduce around 10 to 20% compared to the whole year of 2025. Probably going down quarter by quarter. That's pretty much like that. Thank you.

Okay, there's a lot of questions. All want to know a little better about optical technology status. Yeah, that's to explain again. I think right now, like the slide we show, our VIXO for data communication product is already mass production. and also at the same time for those kind of very long distance PIC laser, we also is already mass production, which is more than 10 kilometers. And for loads of demand between 100 meter to 10 kilometer, which is like the CW Laser or the EML Laser. So these two kind of laser we both already have a lot of customer have NIE with us and some of that maybe right now is still in NIE but some of them will already step into the qualification schedule. And then that's for the Transceiver side, and for the receiver side, I think our PD receiver technology is also already stepping into the manufacturing schedule. I hope we have good news to announce in the future.

Thank you. Okay. The time is 5.32. I'm going to answer the last question. Asking about Q1's about Q1. First of all, Q1's utilization rate we expect will be pretty much like Q4. The reason why is although the revenue is going to going down around high single digit, but I think probably most of the growth will be happen cellular PA. The rest of the segment like infrastructure, optical, and the Wi-Fi will be going down. And because the cellular PA is It's a shorter product cycle, so we expect the volume of the production probably will be pretty much the same as last quarter. That's the reason why we also expect the utilization will be probably pretty much the same as last quarter. Because of that, the product mix will be unfavorable to the growth margin for Q1. That's also the reason why we guide mid-20s of the growth margin for Q1. Thank you. Okay, now it's 5.34 the time right now, and thank you for your Participation in Winsamy's conference. There will be a webcast replay within hours. Please visit www.windfoundry.com under the investor relations section. You may now disconnect. Thank you and goodbye.