Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Q2 revenue increased by 7.2% compared to Q1 2024 and 6.7% year-over-year.
- Net earnings increased to TWD0.62 in Q2 2024, up from TWD0.60 in Q1 2024.
- Overall utilization rate improved to 69% in Q2 2024 from 63% in Q1 2024.
- Memory product revenue increased 2.4% compared to Q1 2024 and 17.6% year-over-year.
- Free cash flow was TWD1,433 million for the first half of 2024.
Negative Points
- Gross margin decreased by 330 basis points compared to Q2 2023.
- Operating profit margin decreased by 3.2 percentage points compared to Q2 2023.
- Net non-operating income decreased by TWD95 million compared to Q2 2023.
- Profit attributable to the company decreased by 28.3% compared to Q2 2023.
- Higher costs in Q2 2024 due to increased electricity charges, gold prices, and salary expenses.
Q & A Highlights
Q: Why did gross margin go down as UT level increased in Q2?
A: In 2Q '24, gross margin was impacted by higher costs compared to Q1 2024. Electricity charges increased more than TWD100 million with the higher normal summer rate, a general charge rate increase since April, and UT increase compared to Q1 2024. Meanwhile, the higher price of gold led to an increase in gold bump material costs. Salary and overtime pay also increased with the UT level improvement in Q2. (Silvia Su, Director of Finance & Accounting Management)
Q: Could you comment on the H1 vs H2 ratio maintained in the previous call, 47:53, and the gross margin target of H2 based on the ratio?
A: We are cautiously optimistic and continue to expect our business momentum will improve through 2024, leading to a stronger second half with operating momentum, end markets, and end customer inventory levels currently improving. The ratio would be very close as noted on the previous call, which is still depending on end consumer demand. As for the margin target, we continuously work to improve our cost structure for a better margin compared to H1, such as controlling electricity usage to manage electricity charges. (SJ Cheng, Chairman, Director/President)
Q: What is the company's long-term depreciation as the CapEx increases in H2? And could you comment on the company's strength and action for the DDIC OSAT competition, including China?
A: By using 1Q '24 depreciation as a baseline, the depreciation rate of H1 should be around a 1%, 3% quarterly increase. However, it would be up to a 3% to 4% quarterly CapEx increase. Regarding the competition, including China, we have always assumed there would be competition in the industry. We always run our business with competition in mind. We are in a strong position to support customers and are positive about our business going forward. Our focus is on providing a superior OSAT product and service. (Silvia Su, Director of Finance & Accounting Management and SJ Cheng, Chairman, Director/President)
Q: How is the company planning to handle the increased demand for DDIC test capacity?
A: We plan to invest in our memory test platform in the second half of the year to meet demand supporting memory upgrades to DDR4 and DDR5 from DDR3. Based on current customer forecasts and the increasing UT level, we acquired DDIC capacity to expand our DDIC high-end test capacity in short capacity expansion schedule for coming DDIC test capacity demand. Additionally, we plan to purchase an idle factory located in the Southern Taiwan Science Park to handle test capacity expansion of automotive panel and OLED in Tainan to strengthen our further business growth momentum. (SJ Cheng, Chairman, Director/President)
Q: What are the company's strategies for maintaining competitive advantage in the OSAT market?
A: We continue to improve our quality, operations, and competitiveness. This includes expanding the penetration rate of high-end products such as OLED, automotive panels, and high-end TVs to maintain the company's competitive advantage. We also expect to benefit from a higher quality level requirement for European and American brands. (SJ Cheng, Chairman, Director/President)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
