Nanya Technology Corp Q1 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Haas Liu - UBS Investment Bank - Analyst : Dr. Lee and Joseph, my first question is regarding your current technology mix. Could you remind us how much it was in the first quarter and the trend in the second quarter between DDR3 and also DDR4? And also, if possible, could you share with us your view on the pricing trend for DDR3 and DDR4 with more and more capacity moving to DDR5 and HBM production?

Question: Haas Liu - UBS Investment Bank - Analyst : Okay. Yes. So that's consistent with our current market observation. But I was just wondering if the legacy DDR3 and DDR4 DRAM pricing upward trend will be more visible in the upcoming quarters because it has been lagging the DDR5 and also HBM on price uplift on trend in the past. In the past few months? Thank you.

Question: Haas Liu - UBS Investment Bank - Analyst : Okay. So can we put it this way that you've seen come DDR3 and also DDR4 because of the time difference that you can potentially outgrow that of the old D-Ram market price in second quarter? Is that the right assumption?

Question: Haas Liu - UBS Investment Bank - Analyst : Okay. Yes, it was very helpful that you provide a mix by application for your business. And then if we can have more detailed color on the technology mix as well between DDR3 and DDR4? Thank you.

Question: Haas Liu - UBS Investment Bank - Analyst : That is very helpful. And my second question will be your expectation on the CapEx compared with last quarter, you raised your CapEx. Should we expect the incremental CapEx will lead to higher depreciation on the equipment or the equipment will not be deployed until it starts production also, if possible, could you remind us your goal for operating breakeven? Thank you.

Question: Haas Liu - UBS Investment Bank - Analyst : Okay. Thank you. If I could squeeze 1 more question before I go back in the queue? What is your current utilization and for the first quarter, if you could provide some more detail? Thank you.

Question: Haas Liu - UBS Investment Bank - Analyst : Okay. Thank you. It is very helpful. I will be back in the queue.

Question: Jay Kwon - JPMorgan Chase & Co. - Analyst : Thank you, Dr. Lee, I hope Nanya team and all of the families are well from the last week's earthquake. I'd like to first ask a bit more details about the operational impact from earthquake part. If there's any how are you managing it? And also, can you characterize the price negotiation after the earthquake? I think you mentioned that the pricing trend is moving up a little bit better. So are you actually seeing some changes in the customer sentiment? That's my first question.

Question: Jay Kwon - JPMorgan Chase & Co. - Analyst : Thank you. I think you can, and just a follow-up. If you mentioned that there are a couple of days of the impact. So if it impacts then, do you actually expect your since you mentioned your full year bit shipment is still above the 20%, and you started first quarter with a low single-digit increase. So is there any possibility that the Q2 may not see a big increase and most of the shipment increase will be more back half loaded into the Q3 and Q4?

Question: Jay Kwon - JPMorgan Chase & Co. - Analyst : Okay, thank you. And my second and last question is, last call, I remember you were implying that the DDR5 first wafer taping will begin some point in late Q3 to early Q4. So it could become some part of your production in Q4. So I think that's implying R&D samples submitted in second quarter, qualification in Q3. So am I understanding your plan correctly? Are you still keeping this plan? Or are there any roadblocks to the DDR5 ramp that you're planning by the year-end? And also if you could share any of your DDR5 probably bit or shipment mix by end of the year, that would be really great? Thamk you.

Question: Jay Kwon - JPMorgan Chase & Co. - Analyst : Yes, my question is for Anna and I will be back to the queue.

Question: Jay Kwon - JPMorgan Chase & Co. - Analyst : Thank you.

Question: Anthony Lau - Yuanta Securities Korea Co., Ltd. - Analyst : Hey, Dr. Lee and the management team. I have four questions. So my first question is what is our like current sales share from China and do we see any recovery from like China clients recently?

Question: Anthony Lau - Yuanta Securities Korea Co., Ltd. - Analyst : Okay. So also, can you elaborate on our like non-China customers' condition? And also I want to ask that are like 1A or like 1B products like for the DDR4, DDR5 is only targeted to like non-China customers or maybe also still had some China clients will adopt our DDR5 products?

Question: Anthony Lau - Yuanta Securities Korea Co., Ltd. - Analyst : Got it. I see. So talking about the 1A, 1B process node is like currently that proportion in our bit shipment have attained about like 5% or 10%. And when we maybe arrive to maybe end of this year, like do you think 1A and 1B process node, maybe like even will attain over 10% still in the end of this year? Do you think this number will attain? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 10, 2024 / 7:00AM, 2408.TW - Q1 2024 Nanya Technology Corp Earnings Call

Question: Anthony Lau - Yuanta Securities Korea Co., Ltd. - Analyst : Okay. So back to maybe second quarter outlook, do we like I remember that like previous analysts talking about maybe the consumer market or like the PC mobile market is stable or just mildly recovered. So do you think the Q-o-Q like a sequential increase of the price hike or shipments in, I mean, in the second quarter, will be higher or lower than like first quarter of this year level?

Question: Anthony Lau - Yuanta Securities Korea Co., Ltd. - Analyst : This is very clear. And maybe let me ask my final question is, so we just elaborate about our mix by different products like 15% from low-power like DDR and 80% to 85% of DDR3 and DDR4. Do we see any like new low-power DDR clients like maybe from DDR like LP DDR4 or maybe DDR3, do we see any new clients from maybe mobile vendors like maybe in China or other places?

Question: Anthony Lau - Yuanta Securities Korea Co., Ltd. - Analyst : Thank you. Dr. Lee and I will back to the queue. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 10, 2024 / 7:00AM, 2408.TW - Q1 2024 Nanya Technology Corp Earnings Call

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes, thank you, Dr. Lee. to hear or safe for now? Thank you. Number one question is would you recap the -- maybe -- you said the normal utilization ratio that was assuming the normal is 90% out of a total capacity otherwise is 55,000 or 70,000. So would you update the cut-on the wafer capacity

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Sorry, but it's not -- isn't that even 60,000? You're saying high 50,000.

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : I'm asking for the growth capacity, I think you should be

Question: Dong-je Woo - BofA Securities, Inc. - Analyst :

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : And then the last year when the industry was very top between the Q2, Q3, at the time, I remember your utilization ratio was around 80%.

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : And so to, I think, maybe low 20% bit growth this year. How you're going to achieve this, maybe you're going to fully utilize your capacity and then you want to sell the older inventories? And then what could be the normal production cost, get 10% or 5%. So I want to calculate how you derive 20% target bit growth. Thank you.

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Okay. All right. So then after the maybe 2024 then, what could be the normal your production growth rate, you are adding the 1B node of capacity, et cetera. What could be the normal, for me DRAM makers can do only maybe 10% to 15% production because even your competitors use EUV 2, et cetera. How do you offset the Nanya's overall, the long-term trend, the DRAM production volume growth, 10%, 15% or single digit?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes, yes. So you said 1A nano node stopped and then the new technology means 1B. And then obviously, 1C node will come, right, sometime next year. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. APRIL 10, 2024 / 7:00AM, 2408.TW - Q1 2024 Nanya Technology Corp Earnings Call

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes. Sorry, maybe very quickly, would you update your after the groundbreaking for the $10 billion, what's the target CapEx spend for the new fab construction? Is it still under the construction or particularly.

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : So wafer input will start to late 2026 for the new fab?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Okay. So lastly, sorry, you already mentioned that maybe 15% total DRAM revenue, right, is the low power, meanwhile, 85% DDR3, and DDR4, but your low-power DRAM was either DDR3 or DDR4, but right, so overall, your weapon is still maybe 50% DDR3, another 50% DDR4, right, overall?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : So low power means a smartphone and then possibly mobile.

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes. But auto, no need low power, right, these days, automotive?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes. So overall, your business is still consumer, right? Let's exclude industrial auto. So consumer electronics are around 66% or 50%, what's the --

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : 65% for consumer includes the auto right? Auto and industry?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : So I think these are earlier not showing any great meaningful recovery. Only we do see some high-end DDR5, HBM demand growing. So I wonder, I hear your point, competitors focusing on HBM or DDR5, then the supply of the DDR, DDR4 will be tight. That's why you think maybe second quarter price momentum better than Q1 level. But the demand, I don't see any meaningful recovery in this consumer area. How do you see the you said they are stable, but I'm feeling weak. But do you think it's?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes, very clear point. So then next coming quarter, your price increase could be higher than high single digits that proved in Q1, right? Higher?

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Yes. Very clear. So double-digit price increase possible in Q2 versus a single digit Q1. That's maybe second quarter pricing management.

Question: Dong-je Woo - BofA Securities, Inc. - Analyst : Okay. Very, very clear hopefully. And then thank you very much. And I hope you all are safe. Thank you.