Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hua Hong Semiconductor Ltd (HHUSF, Financial) reported sales revenue of USD 478.5 million for Q2 2024, in line with guidance and showing sequential growth.
- Gross margin improved to 10.5% in Q2 2024, up from 6.4% in Q1 2024, driven by increased capacity utilization.
- The company is progressing rapidly with the construction of its second 12-inch production line, expected to end trial production by the end of the year, which will expand capacity.
- Revenue from logic and RF increased by 11% over Q2 2023, driven by increased demand for CIS and logic products.
- Hua Hong Semiconductor Ltd (HHUSF) expects revenue for Q3 2024 to be approximately $500 million to $520 million, with a gross margin range of 10% to 12%.
Negative Points
- Revenue decreased from $631.4 million in Q2 2023 to $478.5 million in Q2 2024, primarily due to decreased average selling prices.
- Gross margin dropped significantly from 27.7% in Q2 2023 to 10.5% in Q2 2024, largely due to decreased average selling prices.
- Operating expenses increased by 7.8% over Q2 2023, primarily due to increased expenses for new fab Hua Hong Manufacturing and engineering wafer costs.
- The company reported a loss of $41.7 million for Q2 2024, compared to a profit of $7.8 million in Q2 2023.
- Revenue from several regions, including Europe and Japan, saw significant declines compared to Q2 2023, with Europe down 57% and Japan down 89.7%.
Q & A Highlights
Q: What is the outlook on the average selling price (ASP) for the second half of 2024?
A: Daniel Wang, Executive Vice President & Chief Financial Officer, stated that Q2 marked the bottom for pricing. Utilization rates have returned to 100%, and the company has started to adjust prices upward over the past two months. ASP is expected to improve in Q3 and continue into Q4.
Q: How is the demand outlook for the second half of 2024 and beyond, particularly in automotive and industrial sectors?
A: Daniel Wang noted that demand is recovering, driven by consumer electronics, RF, CIS, and power management ICs. The embedded non-volatile memory segment is also picking up. Automotive and industrial demand is expected to improve, although IGBT remains weak.
Q: Can you provide an update on the progress of the Wuxi new fab and its expected contribution to revenue?
A: Junjun Tang, President and Executive Director, explained that the first 12-inch production line is fully completed and operational. The second 12-inch line is 80% complete, with trial production expected by the end of the year and capacity release in Q1 2025.
Q: What is the expected revenue mix between Chinese and non-Chinese customers moving forward?
A: Daniel Wang aims to maintain a 70% China and 30% global revenue mix. The current higher China ratio is due to local demand and competitive pricing. With the second 12-inch fab, the company plans to expand partnerships with global customers to restore the original mix.
Q: What are the expectations for gross margin improvement in the third quarter?
A: Daniel Wang indicated that while ASP is expected to increase, the market is not fully recovered, which limits significant margin improvements. The company remains conservative with a gross margin guidance of 10% to 12% for Q3, reflecting gradual market recovery.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
