Nanya Technology Corp Q2 2024 Earnings Call Transcript

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

Question: Haas Liu - UBS Equities - Analyst : This is Haas Liu from UBS. Thank you so much, Dr. Lee and Joseph, for taking my questions. My first question would be regarding your margin improvement expectation. Do you expect to return to profitable from the operating margin levels in 3Q? And what is your expectation for the pricing improvement from second half this year? Because when I try to calculate how much of the earthquake-related loss recognition impacts your business, it would be around 6% of the sales impact. So basically, if your operating margin is truly in that part of the loss recognition, it should have been improved to close to mid-teens or high-teens loss from the operating margin level. So just your expectation for second half this year. Do you think you can make your profitability on the operating margin level back to profitable in 3Q? Thank you.

Question: Haas Liu - UBS Equities - Analyst : Yes, that's very clear. So I also see you reported your ASP up in the current quarter in 2Q. Could you share your expectation for second half, including Q3 and so forth? Thank you.

Question: Haas Liu - UBS Equities - Analyst : Okay, yes. That is very helpful. And my second question will be on the business trend. Could you let us know the business trend in 2Q if we exclude the earthquake impact? And also for full year, I think you also guided on shipment growth above 20% in 2024. So could you share with us your view on the seasonality in second half, and what implications will be driving the shipment growth in second half this year? Thank you.

Question: Haas Liu - UBS Equities - Analyst : Okay. So for the shipment down culture in Q2, does that have any impact from the earthquake?

Question: Haas Liu - UBS Equities - Analyst : Okay. Yes. Thank you very much. I will be checking the queue.

Question: Ray Wu - Morgan Stanley - Analyst : Can you please share about what's your view for the third-quarter pricing trend and also on the shipment trend? Thank you.

Question: Ray Wu - Morgan Stanley - Analyst : Thank you. I think that although we are trying very hard to increase the pricing to turn our possibility better, but it seems like in the market there are still ample inventories out there, especially for DDR3 and DDR4. So how will you view about the market position on the inventory level? And when do you think it might be? In which month do you think the overall inventory level should be healthier? 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. JULY 10, 2024 / 7:00AM, 2408.TW - Q2 2024 Nanya Technology Corp Earnings Call

Question: Ray Wu - Morgan Stanley - Analyst : Got it. And maybe my last question is on China competition, because we learned from equipment players that actually, like the DRAM project in China, they are still going to be very aggressive expanding capacities. Seems like next year, the CapEx will be 40% higher than this year. So, what do you view about the potential competition on the oversupply issue? How can we position in this kind of situation? Thank you.

Question: Ray Wu - Morgan Stanley - Analyst : Okay. That's very clear. Thank you. I'll go back to queue.

Question: Simon Woo - BofA Global Research - Analyst : Would you recapture why the second quarter sales volume was so weak? It was in line or below your expectations? Or it was simply a matter of oil sprayed impact? 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. JULY 10, 2024 / 7:00AM, 2408.TW - Q2 2024 Nanya Technology Corp Earnings Call

Question: Simon Woo - BofA Global Research - Analyst : Yeah. bit growth. Yeah. Okay. Because I think the market expects it.

Question: Simon Woo - BofA Global Research - Analyst : Yeah, yeah, very clear. The second quarter, your revenue mix, DDR3 versus DDR4, maybe what, 40% to 60%? What was the mixed ratio?

Question: Simon Woo - BofA Global Research - Analyst : Okay, yeah, very clear. So you mentioned that the AI, yes, it will be important even for the non-server area, consumer electronics. So do you see any meaningful content increase for the consumer electronics and auto because of AI these days, or second half for next year?

Question: Simon Woo - BofA Global Research - Analyst : So to achieve maybe 20% bit growth, more than 20% bit growth this year, what could be the catalyst for just the seasonal recovery of the second half, or what could be the underlying assumption to achieve more than 20% volume growth? 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. JULY 10, 2024 / 7:00AM, 2408.TW - Q2 2024 Nanya Technology Corp Earnings Call

Question: Simon Woo - BofA Global Research - Analyst : Yeah.

Question: Simon Woo - BofA Global Research - Analyst : Yeah. So your business is pretty much consumer-centric, so how to achieve 20% bit growth? I mean the nine-year test, is that?

Question: Simon Woo - BofA Global Research - Analyst : So what could be the normal production volume growth nine-year test? Let's forget the inventory sales. What's the normal level nine-year test production volume growth? And then what could be the normal trend for your cost reduction? For example, your production volume growth may be 5% or 10% or 10% higher, and the cost reduction may be 5% or 10%. What could be the overall trend? Maybe this year, next year.

Question: Simon Woo - BofA Global Research - Analyst : Yeah. Thank you so much. All clear. Sorry, sir. The third quarter, you expect another more than 10% ASP increase, right, for Q3? 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. JULY 10, 2024 / 7:00AM, 2408.TW - Q2 2024 Nanya Technology Corp Earnings Call

Question: Simon Woo - BofA Global Research - Analyst : Yeah. Great. Thank you so much, Dr. Lee, and we appreciate your great leadership and the work. Thank you, sir.

Question: Simon Woo - BofA Global Research - Analyst : Yeah. Great. Thank you very much, sir.

Question: Jay Kwon - JPMorgan - Analyst : Thank you, Dr. Lee. Thanks for your time and taking my questions. I have two. First is to remember from your last call mentioning to still target double-digit percent of your total wafer shipment based on DDR5 during some point of a fourth quarter. So we took it as probably in certain months. Are you still keeping this plan as your base case when you gave us a more than 20% bit shipment plan for the year? Then I'll have one more question.

Question: Jay Kwon - JPMorgan - Analyst : Yeah, that's right. Thank you for your answer. And presumably this is 16 gigabit, the DDR5 payout is after the PC customers. When you speak to your major customers, are you sensing incrementally a stronger demand or no material changes lately? Just heading into that later part of this year. And I would say if you could, I know it's a bit far away, but if you could extend into your early '25, H1 '26, are you still seeing more demand improvement on the wafer taping for your 16-gigabit DDR5? Or how are you seeing the demand changes lately during the second quarter? 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. JULY 10, 2024 / 7:00AM, 2408.TW - Q2 2024 Nanya Technology Corp Earnings Call

Question: Jay Kwon - JPMorgan - Analyst : Thank you very much.