ChipMOS TECHNOLOGIES Inc. Q2 FY2024 earnings call

• Strong Q2 results despite inventory adjustments, with revenue up 7.2% QoQ and 6.7% YoY. Gross profit up 5.8% QoQ, gross margin flat QoQ but down 330bps YoY. Net earnings TWD0.62 in Q2, up from Q1, accumulated H1 EPS TWD1.22.
• Utilization rates improved: overall 69%, assembly 65%, test 67%, DDIC 75%, bumping 65%.
• Focus on shifting to higher-growth, higher-margin products, investing in CapEx for memory test platforms, DDIC capacity, and a new factory in Southern Taiwan Science Park.
• Paid dividend of TWD1.8 per common share on July 19.

In Q2 2024, total revenue was TWD5,810 million. Assembly accounted for 22.3% of Q2 revenue. Mixed-signal and memory testing each made up 21.9%, and wafer bumping was 21.9% of Q2 revenue. DDIC product represented 34.1% of total revenue, with gold bumping at about 18.5%. DRAM and SRAM contributed 14.5% of Q2 revenue, and mixed-signal products were 10.2%. Memory products were 37.2% of Q2 revenue, with DRAM at 13.9% and Flash at 22.7% (NOR flash up over 30% QoQ, NAND flash 34.8% of flash revenue). Driver IC and gold bump revenue was 52.6% of total revenue, up 11.3% QoQ and flat YoY. DDIC revenue rose 13.3% QoQ due to OLED growth, and COF increased 32.5% from large panel rush orders. Automotive and industrial accounted for 23.3% of Q2 revenue, TV panel was 18.7%, smartphone-related was 35.6%, computing was 3.6%, and consumer-related was 18.8%.

• Cautiously optimistic about Q3, expecting stronger second half with improved operating momentum.
• Memory products (DRAM, flash) seeing restocking and stable momentum. DDIC expected to outgrow memory in Q3 due to automotive panel, OLED demand, and smartphone restocking.
• Plan to invest in memory test platforms, DDIC capacity, and a new factory in Southern Taiwan Science Park.

• Inventory adjustments in end markets remain a headwind. - Fluctuations in raw material costs, e.g., gold prices affecting gold bump material costs. - Intense competition in the industry, including from Chinese companies.

Q: Why did gross margin go down as UT level increased in Q2?

A: Higher costs including electricity charges (over TWD100 million due to summer rate and general increase), gold bump material cost increase from higher gold prices, and salary/overtime pay increase with UT improvement.

Q: Could you comment on the H1 vs H2 ratio maintained the previous call, 47:53, and the gross margin target of H2 based on the ratio?

A: Cautiously optimistic, business momentum expected to improve in second half with end markets and inventory levels improving. Margin target aims to improve cost structure, e.g., controlling electricity usage.

Q: What is the company's long-term depreciation as the CapEx increase in H2? And could you comment on the company's strength and action for the DDIC OSAT competition, including China?

A: Depreciation rate: around 1% quarterly increase from H1 baseline, with CapEx up 3-4% quarterly. Regarding competition, focus on superior OSAT product/service, improving quality/operations, expanding high-end products like OLED, automotive panels, and benefiting from higher quality requirements for European/American brands.