ChipMOS TECHNOLOGIES Inc. Q2 FY2025 earnings call

• Second quarter results were as expected with strong memory product demand offsetting macro softness in auto/industrial and NTD headwind. - Revenue increased 3.7% QoQ. Q2 gross margin 6.6%, down 280bps QoQ. Net loss TWD 0.75 per share due to higher foreign exchange loss. - Q2 overall utilization rate 65%, with memory products improvement. Assembly UT 64%, test UT 67%, DDIC 66%, bumping 63%. - Prioritizing supporting customers, increasing market share, expanding profitability, building shareholder value. Conservative CapEx spending to keep balance sheet strong.

In Q2 2025, assembly represented 27.9% of revenue, led by memory product recovery. Mixed signal and memory testing accounted for 23.9%, and wafer bumping was 23.2% of Q2 revenue. DDIC product was 23.5% of total revenue, with gold bumping about 21.2% of Q2 revenue. DRAM and SRAM made up 16.3% of Q2 revenue, mixed signal products 10%. Memory products were 45.3% of Q2 revenue, with memory product revenue up 21.2% QoQ and 17.6% YoY. DRAM was 15.7% of Q2 revenue, up 19.8% QoQ; niche DRAM up 29.3% QoQ. Flash revenue was about 29% of Q2 revenue, up 21.7% QoQ and 23.1% YoY. Driver IC and Gold Bump represented about 44.7% of Q2 revenue, down 9.4% QoQ and 17.9% YoY. Auto and industrial were 25.9% of Q2 revenue, smartphone 37.4% (up 7.3% QoQ), TV panel 11.8% (down 13.8% QoQ), etc.

• Expect cautious end consumer demand due to global economic uncertainty, but encouraged by data center, communications, AI, auto, robotics demand. - Memory product momentum expected better than DDIC in Q3 due to DDR4 supply-demand imbalance and MLC NAND EOL; memory OSAT prices increased in Q3 to offset material costs. - DDIC demand weakness to continue in Q3, but OLED products expected to benefit from seasonal restocking; automotive panel momentum stable. - 2025 CapEx conservative, focused on higher growth, higher-margin product areas. - Distributed dividend in July, will execute capital allocation programs based on economic environment.

• Macro softness in auto and industrial sectors. - Foreign exchange fluctuations impacting results (e.g., Q2 net nonoperating loss due to forex). - DDIC product demand weakness. - Electricity charge increases (e.g., higher summer electricity rates impacted Q2 gross margin).

Q: Can you give more color about the outlook by product for the second half of 2025?

A: As we look ahead to Q3, we expect to benefit from solid memory product momentum in the second half of the year. There is a DDR4 supply and demand imbalance led by DDR4 EOL and strong DDR5 demand that both will benefit our business. To reflect material cost and gold price increases, we also increased memory products OSAT prices in Q3 and expect it could help offset material cost increases and improve profitability. Therefore, we expect memory momentum will be better than DDIC in Q3. As for DDIC, OLED products momentum is expected to benefit from seasonal restocking in Q3. Meanwhile, automotive panel momentum is relatively stable compared to other DDIC products. Lastly, our logic and mixed signal product line should remain stable.

Q: Please give us more color to separate the impact on lower Q2 gross margin from DDIC ASP cut and NTD appreciation. Will those conditions continue into Q3?

A: In Q2, gross margin was impacted by lower DDIC test ASP and USD depreciation. Meanwhile, the electricity charge increased TWD 102 million due to the higher summer electricity rate charge since May 16. The other factor was materials with the cost of gold increasing more than 30% compared to 2Q '24. Regarding EPS, Silvia, please answer that question. Silvia Su: More on your question for the impact to gross margin from foreign exchange rate and electricity. Gross margin decreased about 1.5 ppts due to NTD appreciation and decreased about 1.6 ppts due to higher electricity charges, which increased TWD 102 million due to the higher summer electricity rate. As for EPS, the major factor is the lower gross margin, including ASP cut and higher costs like electricity and separately, the higher foreign exchange loss of TWD 690 million.

Q: Will those conditions continue into Q3?

A: We are increasing memory products OSAT prices in Q3 about 5% to 18% and expect it can help offset material cost increases from substrate and gold prices in order to improve profitability. Meanwhile, we expect the foreign exchange rate will be more favorable to our operations. Further, OLED product momentum is expected to be better. July revenue was announced and August revenue is on track. So even though there is still a lot of uncertainty, we are still optimistic entering Q3.

Q: Are you making a change to your dividend policy for 2026? Will you pay a dividend next year?

A: We just distributed our latest dividend to shareholders in July. This has been part of our overall capital allocation strategy along with share repurchases, CapEx investments and other levers. Although the company faced headwinds in the first half of the year, along with the broader industry, our focus and operational strength have put us in a great position with accumulated unappropriated retained earnings, which are sufficient to support a stable dividend payout. We do not expect any change in our policy, but our management and Board review the overall capital allocation strategy on a regular basis and remain cautious in our CapEx spending according to the market situation to set priorities in the best interest of the company and shareholders.