ChipMOS TECHNOLOGIES Inc. Q3 FY2024 earnings call

• Q3 revenue increased 4.4% compared to Q2 2024 and was up 8.7% year-over-year. Gross profit increased 3.4% compared to Q2 2024, but gross margin was flat. Net Earnings of NT$ 0.41 in Q3 2024, and NT$ 1.63 for the first nine months of 2024.
• Overall utilization rate was 67% in Q3 2024, with assembly UT at 58%, test utilization at 67%, DDIC at 75%, and bumping UT at 66%.
• Focus on improving operating leverage, operating expense management, and overall efficiency; carefully adding capacity through disciplined capital allocation.
• Low-cost silver alloy bump solution successfully passed reliability test for small and medium-sized panels, with some customers already designing in the solution.

In Q3 2024, total revenue was NT$ 6,068 million. Assembly represented 22.1% of Q3 revenue. Mixed-signal and memory Testing represented 22.8% and wafer bumping represented 23.2% of Q3 revenue. DDIC product represented 32.6% of total revenue in Q3, with gold bumping representing about 20.5%. Revenue from DRAM and SRAM represented 13.6% of total Q3 revenue. Mixed-signal products represented 10.6% of total Q3 revenue. Memory products represented 36.3% of total Q3 revenue, with memory product revenue slightly increasing 1.1% compared to Q2 2024 and increasing 16.2% year-over-year. DRAM revenue slightly decreased 1.6% compared to Q2 2024 and represented 13.3% of total Q3 revenue. Flash revenue represented about 22.7% of Q3 revenue, up 3.2% compared to Q2 2024. NOR Flash increased 9% compared to Q2 2024, while NAND Flash represented 30.2% of Q3 total Flash revenue and decreased 10.4% compared to Q2 2024. Driver IC and gold bump revenue represented about 53.1% of total Q3 revenue, up 4.3% compared to Q2 2024, with gold bump revenue up 14.5% and DDIC revenue slightly down 1.3% compared to Q2 2024.

• Expect third quarter to be the high point of the year, take conservative view on Q4 due to market headwinds and customer inventory adjustments; second half of 2024 expected better than first half.
• Memory products: slight correction in Q4 due to softer demand and inventory adjustments; DRAM stable, NAND Flash and NOR Flash expected to correct.
• DDIC business: expected correction in Q4 due to soft TV panel demand and smartphone customer de-stocking; auto panel and OLED business momentum slowed.
• 2024 CapEx expected at 20%-25%, 2025 at 15%-20%; depreciation expected to have 3%-4% quarterly increase in 4Q 2024 to 1Q 2025 if CapEx lower in 2025.
• Optimistic about memory product trend of upgrading commodity DRAM to DDR5 and high-density, multi-chip stacked NAND Flash.

• Headwinds from inventory adjustments across most end markets impacting utilization and revenue.
• Soft demand in consumer market impacting NAND Flash and NOR Flash.
• Soft demand of TV panels and customer de-stocking in smartphones impacting DDIC product momentum.

Q: Can you please give us some guidelines for 2024 and 2025 CapEx?

A: We expect 20% to 25% for 2024 due to previous high-end tester capacity expansion and roughly 15% to 20% for 2025.

Q: Can you please give us some guidelines for depreciation?

A: We expect the depreciation of 4Q 2024 to 1Q 2025 would still be around a 3% to 4% quarterly increase. However, if the CapEx in 2025 would be lower as previous mentioned, then the number could be reduced.

Q: Any strategy or action of the Company for competition from China?

A: Cooperating with customers for low-cost silver alloy bump solution on panel level reliability qualification, which has successfully passed reliability test for small and medium-sized panels, and already seeing interest from customers.

Q: Please give us more color on the DDIC and Memory segments in 2025?

A: Still too early to comment, but expect some rush order of large panel DDIC while approaching year end and inventory level improving; optimistic about memory product trend of upgrading commodity DRAM to DDR5 and high-density, multi-chip stacked NAND Flash.

Q: Do you see any business opportunity from companies aggressively focusing on the OLED market?

A: A couple of them have been our long-time customers, and we closely follow their product roadmaps to grow together.

Q: Please give us more color for Memory outlook in 2025?

A: Optimistic about the product trend of upgrading commodity DRAM to DDR5 and high-density, multi-chip stacked NAND Flash.

Q: Company's dividend policy under the current business situation?

A: To consider the further operation cash, capital expense and shareholders' equity our dividend policy would still be between 40% to 60% of earnings