校正紀錄
本檔為 AI 語音轉寫（英文），落地前已校正下列可證明的轉寫誤植；未列出者為原文。原檔附帶的 AI 摘要區塊（Memo）為二次生成，與逐字稿比對有誤（如把 Siltronic 評價利益、模擬 EPS 寫錯），已不納入本檔，只保留逐字稿全文；站方工具列與警語已移除。 - Sultrani → Siltronic（德國矽晶圓廠世創，環球晶持股，同音誤植；共 2 處）。 - 「electronics share price／electronics shares」→ Siltronic 股價／持股（同音誤植；宏遠 2026-11-04 報告亦載「Siltronic 股價相對平穩使獎酬費用提列減少、營益率回升至 9.8%」）。 - Novara AH facility → Novara 8-inch facility（同段稱 8 吋廠火災；「AH」為誤植）。 - 「our edge capacity」→ 「our eight-inch capacity」（同段下文講 8 吋與 SOI 基板受影響）。 - 「new capacity report cost／rate above cost」→「new capacity ramp-up cost」（新產能爬坡成本，與國泰 call memo 毛利率下滑原因一致）。 - 模擬 EPS 「around 85 dollars in Q1 … over 76 … over 7」→ 約 5 元／逾 6 元／逾 7 元 [數字存疑]：原轉寫量綱不合理（單季模擬 EPS 不可能 85 元），依「前九個月模擬 EPS 18.66 元」與模擬毛利率 31%／34%／34% 推算；各季確切數字待原始簡報核對。9M 模擬毛利率約 32.9%、EPS 18.66 元與國泰 call memo 一致。 - repayments／repayment → prepayments／prepayment（長約相關預收款，含保證金；21.2 billion，較前季 22.2 billion 降 4.5%）。 - 「focused on the pressure recovery at Novara」→ 「focused on the recovery at Novara」。 - 「Doris and Liam」→ Leah（主持人 Leah Peng）。 - 「we have absorbed higher SiC wafer shipments」→ observed。 - AMIT → AMIC（Advanced Manufacturing Investment Credit，與 2Q26 法說用語一致）。 - Italy fact → Italy fab；「ramp up and rebate」→ ramp-up；「economies」→ economics；「wafer imagery in houses」→ wafer inventory in-house；「300 millimeter top」→ 300-millimeter SiC；「low single digit weight amount」→ low single-digit percent。 - MS 分析師提問「more price cut into 28」→ price increases（語意反向：期望 2028 年續漲）。 - 股利基準日：發言先講「July 4, 2027」隨即自行更正為「January 4, 2027」，以更正為準（發放日 2027-01-22）。 - 「Novara and Inchline sites」之 Inchline 無從判斷，保留並標 [待確認]。 - 其餘未改但存疑：「E-main growth」（疑為 demand 之類，語意不明）、「NIC phase one」（GWA 一期？）、「we are about to skip to have our phase three expansion for twelve inches」（二期以後擴產說法，語意不明）、「supply bottlenecks celebrating capacity investment」（疑為 necessitating），均保留原文。 - 財務數字交叉驗算：營收 148.71 億 × 毛利率 20.0% ≈ 毛利 29.7 億；營業利益 14.54 億＝營益率 9.8%（< 毛利率）；淨利率 10.1%；EPS 3.13 元，2Q26 7.90 ＋ 1Q26 3.97 ＋ 3Q26 3.13 ≈ 前九個月 15.00 元；現金股利 6 元 ÷ 1H26 EPS 11.87 ≈ 50.5% 配息率；淨負債 186 億轉淨現金 263 億。各項吻合。
原始紀錄
Presentation Leah Peng - GlobalWafers, Investor Relation
(00:00:00)GlobalWafers Q3 2026 earnings call. I'm Leah Peng, spokesperson for the company, and I'm pleased to be joined today by our chairperson, Doris Hsu. Here's how today's event will unfold： Doris will begin with executive comments providing insights into overall performance and strategic direction. We will then address investor questions received in advance, followed by an open Q&A session.This call will last for sixty minutes and conclude at five p.m. Before we begin, a quick reminder： to ensure everyone has the opportunity to participate, we kindly ask that each participant limit their questions to two.
Leah Peng - GlobalWafers, Investor Relation
(00:00:42)Please keep your audio on mute. To ensure a smooth and interactive session, we have established two methods for you to pose questions during the event： using the Slido feature for written questions and utilizing the WebEx hand-raising function for live spoken inquiries.The first, Slido, is for text-based questions. Throughout the meeting, you can input your questions using the Slido feature in WebEx. Simply access Slido and type in your question. Our presenters will monitor Slido regularly to address your written questions. To ensure efficient use of time, we encourage you to type in your questions as the meeting starts.
Leah Peng - GlobalWafers, Investor Relation
(00:01:22)The second way is to use live voice questions. Towards the end of the meeting, we will open the floor for live voice questions. If you wish to speak directly, please use the WebEx raise hand function to indicate your intention. Once you raise your hand, be ready to accept the host's invitation to unmute your microphone when prompted. This will allow you to verbally pose your question to the panel.
Leah Peng - GlobalWafers, Investor Relation
(00:01:47)Before we begin, I would like to remind you that today's discussion may contain forward-looking statements. Please be aware that these statements are subject to various risks and uncertainties, which could cause actual results to differ materially from our expectations. Please refer to the safe harbor notice in our presentation. Now, without further delay, I would like to pass the floor to our chairperson for the executive comments on GlobalWafers, Doris, please.
Doris Hsu - GlobalWafers, CEO
(00:02:16)Thank you, Leah. Good afternoon, everyone. Thank you very much for joining GlobalWafers' Q3 2026 earnings call.Leah Peng, our spokesperson, will walk you through the presentation and address some of the frequently asked questions we have received recently. I will also take questions during today's session. Let me begin with one message that captures GlobalWafers' position today： we invested ahead of the cycle, and we are ready for the next phase of growth.
Doris Hsu - GlobalWafers, CEO
(00:02:51)Semiconductor demand is broadening, but qualified capacity cannot be built overnight. It requires substantial capital, long equipment lead times, and lengthy customer qualification processes. With our global capacity already in place and customer engagement increasing, our early investments are becoming a very meaningful competitive advantage.Although the Novara fire created near-term challenges in the third quarter, other facilities across our global network continue to deliver solid operating and shipment performance. Our strategic direction remains unchanged, with our global manufacturing footprint's continued progress in capacity ramp-up and
Doris Hsu - GlobalWafers, CEO
(00:03:45)stronger financial position, we remain well positioned to capture growth opportunities as semiconductor demand recovers. With that, let me walk you through our financial performance for the third quarter and first nine months of 2026. If you have our material presentation materials, please kindly turn to page four. GlobalWafersreported third quarter's revenue of 14.9 billion NT, representing a 2.26 percent decrease from the previous quarter mainly due to the impact of the Novara fire, and gross margins stood at 20 percent.
Doris Hsu - GlobalWafers, CEO
(00:04:34)For the first nine months of 2026, revenue totaled 44.1 billion NT, down 4.4 percent year over year, while gross profit reached NT 9.0 billion with a gross margin of 20.5 percent.The sequential revenue decline was primarily due to the July fire at our Novara 8-inch facility. Without the fire, third-quarter revenue would have achieved double-digit sequential growth. Leah will provide further detailed financial analysis later.
Doris Hsu - GlobalWafers, CEO
(00:05:15)Please turn to page five. In the third quarter of 2026, operating margins stood at 9.8 percent, while net profit margin was 10.1 percent. For the first nine months of 2026, operating margin was 9.9 percent, while net profit margin reached 16.3 percent, including the impact of Siltronic's valuation gains.Page six, please. Third quarter EPS came in at 3.13 NT dollars per share, down from Q2 mainly due to the high comparison base from Siltronic's valuation gains in Q2 and the impact of the Novara fire.
Doris Hsu - GlobalWafers, CEO
(00:06:02)Novara fire and our investment in Siltronic is measured at fair value at each quarter-end, with changes recognized in non-operating income or expenses. Siltronic share prices rose approximately 56 percent from the end of Q1 to the end of Q2, generating a significant valuation gain.In Q3, the share price remains largely stable, resulting in no comparable valuation gain. As a result, Q3 earnings more closely reflected our underlying operating performance. Despite the impact of the Novara fire on production and shipments, our underlying operation remained relatively stable.
Doris Hsu - GlobalWafers, CEO
(00:06:53)With strong performance and notable achievements across multiple manufacturing sites, looking ahead, we remain focused on the recovery at Novara while maintaining stable operation across our global manufacturing network. For the first nine months of 2026, cumulativeEPS reached 15 NT per share, nearly matching the 15.29 NT rate recorded for the full year 2025.Regarding prepayments, including guaranteed deposits, stood at 21.2 billion NT, down 4.5 percent from 22.2 billion NT in the previous quarter. We continue to fulfill existing long-term supply agreements based on customer delivery schedules.
Doris Hsu - GlobalWafers, CEO
(00:07:51)While actively discussing additional agreements with multiple customers right now, particularly in the US where demand for locally manufactured wafers remains super strong. The board also approved a cash dividend of 6 NT per share for the first half of 2026, with a total distribution of approximately 3.17 billion NT.and dividend payout ratio of 50.5 percent. The dividend record date is July 4, 2027, and the payment date is January 22, 2027.The dividend record date is January 4, 2027, and the payment date is January 22, 2027.
Doris Hsu - GlobalWafers, CEO
(00:08:53)This distribution provides a meaningful cash return to our shareholders, reflecting the board's commitment to shareholder returns while maintaining the financial flexibility to support the company's long-term growth.Please turn to page seven. We believe the semiconductor industry is entering a new super cycle, with industry research firms raising their forecast and the market expected to exceed 1.6 trillion US dollars in 2026.AI, HBM, and advanced computing are driving structural growth, while demand is broadening into mature node power connectivity and industrial applications.
Doris Hsu - GlobalWafers, CEO
(00:09:52)Silicon wafer shipments continue to grow year-on-year, with recovery extending across wafer sizes and advanced packaging adding to demand. So that means that the recovery is not only for 300mm advanced product but also for even smaller diameter 200mm, or even 6-inch wafers — all wafer sizes.are recovering right now. Rising construction costs, long equipment lead times, and lengthy qualification cycles limit how quickly new wafer capacity can come online. As the supply and demand balance tightens, qualified
Doris Hsu - GlobalWafers, CEO
(00:10:35)production-ready capacity becomes increasingly valuable. GlobalWafers' early expansion investments give us first-mover advantage. With our existing capacity fully utilized across all wafer sizes and new capacity development underway globally, we are well positioned to support growing customer demand.Please turn to page eight. The benefits of our early investments are already becoming visible. Our US operations continue to improve, with a growing number of customers discussing long-term supply agreements for our US capacity.
Doris Hsu - GlobalWafers, CEO
(00:11:24)Reflecting their need for reliable local supply, and our manufacturing sites in the US and Japan continue to achieve record operating milestones while our 12-inch expansion in Italy steadily ramps up.Building on this operational momentum and growing customer demand, I'm pleased to announce another important milestone in our strategic partnership with Micron. Today, our board approved a proposal to issue up to US dollar 500 million in ten-year privately placedconvertible bonds with Micron as the sole subscriber, subject to shareholder approval.
Doris Hsu - GlobalWafers, CEO
(00:12:19)Our long-standing wafer supply relationship together with planned 10-year supply agreements provides a solid foundation for a stable supply and long-term capacity planning. The proposed convertible bond would further deepen our collaboration, extending beyond wafer supply to strategic capital cooperation and long-term supply chain development.By combining long-term customer commitments with financial support, these arrangements will support further future capacity planning, enhance supply stability, and strengthen our advanced semiconductor material manufacturing capability, particularly in the US.
Doris Hsu - GlobalWafers, CEO
(00:13:07)Through technology transitions and industry cycles, with a 10-year term and 0.5% coupon rate, the proposed convertible bond would provide long-term fundingwith relatively low cash interest costs while preserving flexibility in our capital structure. We believe Micron's willingness to participate in GlobalWafers' long-term development through this convertible bond reflects the trust built over many years and its confidence in future growth potential.
Doris Hsu - GlobalWafers, CEO
(00:13:50)Our global growth strategy also received very strong support from international investors. In September, we completed a US dollar 1.4 billion GDR offering, with investor demand reaching approximately four times the offering size. This response reflects confidence in our global manufacturing footprint.and long-term growth potential. The offering also significantly strengthened our balance sheet, moving us from NT$18.6 billion in net debt at the end of Q2 to NT$26.3 billion net cash at the end of Q3.
Doris Hsu - GlobalWafers, CEO
(00:14:38)This stronger financial position provides us with greater flexibility and resources to support ongoing operation, navigate macroeconomic uncertainty and industry cycles, and invest in future growth. As semiconductor demand recovers, we are better positioned to capture emerging supply opportunities and advance our local-for-local manufacturing strategy.Within this broader growth strategy, I would like to highlight one area where we are seeing particularly strong customer momentum, which is our 12-inch SOI business. 12-inch SOI is one of the product areas where we see very clear mid- to long-term growth potential.
Doris Hsu - GlobalWafers, CEO
(00:15:34)As the market continues to migrate from 8-inch to 12-inch, silicon photonics is emerging as an important new growth driver. On top of established applications such as RF SOI and Power SOI, in particular, customer demand has strengthened noticeably.And the demand we are seeing already exceeds our existing 12-inch SOI expansion plan. We also have a unique strategic position in the US. Our Missouri facility is currently the only site in the US with a 12-inch SOI manufacturing capability.
Doris Hsu - GlobalWafers, CEO
(00:16:19)Together with GlobalWafers' proprietary SOI layer transfer technology and vertically integrated in-house substrate supply, this provides us with a strong strategic position. Our new 12-inch SOI capacity in Missouri is still ramping up as additional tools complete qualification and utilization improves. Our immediate priority is to accelerate the ramp of our existing capacity.by debottlenecking to further increase our output and maximize the utilization of our existing assets at the same time, given the additional demand
Doris Hsu - GlobalWafers, CEO
(00:17:04)from customers, we are evaluating opportunities to further expand our 12-inch SOI capacity. We are already in discussions with multiple customers, including LTAs and prepayments that are planned to support more than 90 percent of the proposed incremental capacity of our SOI. Since the existing fab and infrastructure are already in place,any further expansion could leverage these existing assets and would primarily require additional equipment, resulting in better capital efficiency than the first phase. That said, we will remain disciplined in our capital allocation.
Doris Hsu - GlobalWafers, CEO
(00:17:54)The scale and timing of any next stage investment will depend on several factors, including long-term customer commitments, the profitability of our current capacity, and also government support and the overall return on investment. Overall, we remain very positive about the mid- to long-term outlook for 12-inch SOI, particularly for silicon photonics.
Doris Hsu - GlobalWafers, CEO
(00:18:21)Looking ahead, we will focus on restoring operations at Novara, Italy, accelerating new capacity ramp-up, and pursuing future expansion with disciplined capital allocation. With our global manufacturing footprint, strong customer partnerships, and enhanced financial flexibility, we are well positioned to capture growth opportunities and strengthen our long-termCompetitiveness next, I...
Leah Peng - GlobalWafers, Investor Relation
(00:19:06)I will hand over to Leah to walk you through demand trends across key applications, followed by our company's overview and some financial performance. Thank you very much, Leah.Thank you, Doris. Let me begin with demand trends across key applications, our company overview, and financial performance. I will also address the frequently asked questions we have received recently. On page ten, AI infrastructure remains the main growth driver, supported by rising data center investment and broader AI adoption. Memory fundamentals are particularly strong, with tight supply, robust HBM demand, and increasing long-term supply commitments, improving demand visibility.
Leah Peng - GlobalWafers, Investor Relation
(00:19:51)Smartphone and PC shipments face pressure, but premium and AI-enabled devices continue to drive higher semiconductor content. Industrial demand is strengthening, while automotive recovery remains gradual.Power infrastructure, ADAS, and physical AI provide additional growth opportunities. Advanced packaging and HBM stacking are increasing manufacturing complexity and wafer requirements, while silicon photonics is driving demand for specialty substrates such as SOI.
Leah Peng - GlobalWafers, Investor Relation
(00:20:35)Overall, increasingly complex manufacturing processes and rising semiconductor content across applications are driving silicon wafer demand. These structural trends reinforce our positive long-term outlook for the industry. Please turn to page thirteen. Leading research firms have raised their global semiconductor market outlooks, with global revenue expected to nearly double worldwide to approximately USD 1.6 trillion and approach USD 2 trillion in 2027. Memory and AI remain the key growth drivers, with strong HBM demand and supply bottlenecks celebrating capacity investment. Global fab equipment spending is expected to reach USD 118 billion in 2027. These trends support sustained growth in silicon wafer demand, driven by post-capacity expansion and increasing wafer consumption.
Leah Peng - GlobalWafers, Investor Relation
(00:21:06)On page fourteen, to capture opportunities from strong semiconductor demand and tightening supply, GlobalWafers successfully completed a USD 1.4 billion GDR offering in September, with approximately four times oversubscription, reflecting strong international investor interest.The process will support foreign currency raw material procurement and future growth opportunities across our global manufacturing network, strengthening our local-for-local supply capabilities. The GDR also transformed our financial position from net debt of 18.6 billion NT at the end of Q2 to net cash of...
Leah Peng - GlobalWafers, Investor Relation
(00:21:46)26.3 billion NT at the end of Q3. Our debt ratio declined from 56 percent to 52 percent, while the current ratio improved from 128 percent to 163 percent, and the quick ratio increased from 108 percent to 150 percent. With a stronger balance sheet and improved liquidity, we are better positioned to fund future expansion.We aim to capture growth opportunities driven by AI and advanced semiconductor demand and navigate industry cycles. The offering also broadens our global institutional investor base, enhancing market visibility and trading liquidity.
Leah Peng - GlobalWafers, Investor Relation
(00:22:28)On page fifteen, you can see that GlobalWafers is entering the next growth phase with three key advantages： border demand, operating readiness, and disciplined capital. Demand recovery is expanding beyond advanced nodes into mature node applications and specialty wafers, creating broader growth opportunities across all of our product portfolio.
Leah Peng - GlobalWafers, Investor Relation
(00:22:50)Although recovery varies by market, more importantly, our early investment is translating into measurable operating results. Let me now update you on our expansion progress in the US, Italy, and Japan. In the US, GWA major phase one equipment installation is largely finished, and several tier-one customers have completed qualification. Monthly shipments have reached new heights for four consecutive months.Demand for local supply and long-term customer commitments support further ramp-up positioning GlobalWafers America to increase its revenue contribution as utilization improves.
Leah Peng - GlobalWafers, Investor Relation
(00:23:30)At our Missouri facility, 12-inch SOI output reached a record high in Q3, with more than half of the newly installed equipment qualified for volume production. Several RF SOI and silicon photonics products have entered volume production, while major customers are discussing multi-year supply agreements to secure future capacity. In Italy, our new 12-inch facility was unaffected by the fire, and the expansion remains on schedule.Customer qualifications are progressing, volume shipments have begun, and monthly output continues to reach new highs. In Japan, the Utsunomiya expansion is fully complete. Utilization remains high, and shipment volume reached another record in Q3.
Leah Peng - GlobalWafers, Investor Relation
(00:24:15)Higher utilization and an improved product mix have helped the facility turn profitable, contributing positively to our revenue and earnings. These milestones demonstrate that our global manufacturing network is moving from capacity investment toward increasing production and customer supply.Our established footprint across three continents also provides a competitive advantage that takes significant time and capital to replicate. Combined with our strengthened financial position, GlobalWafers has the demand opportunities, manufacturing capabilities, and financial foundation to turn the next semiconductor growth cycle into tangible business growth.
Leah Peng - GlobalWafers, Investor Relation
(00:24:58)Please turn to page seventeen for this quarter's financial highlights.Third quarter revenue was 14.9 billion NT, down 2.3 percent from Q2. Demand across our major wafer size and production lines remained very strong, and before the Novara fire, we had expected double-digit sequential revenue growth. However, the mid-July fire disrupted production and shipments at our Novara and [Inchline，待確認] sites, resulting in a slight sequential revenue decline.
Leah Peng - GlobalWafers, Investor Relation
(00:25:29)The fire impact extended beyond eight-inch wafer cells, as Novara also supplied substrates for SOI products, affecting related SOI production and revenue. We are reallocating capacity across sites to support supply, while other facilities are already operating at high utilization, and cross-site transfers require careful coordination.Due to differences in product specs, manufacturing capability, and customer qualification requirements, the revenue decline therefore mainly reflected the Novara incident rather than weaker end-market demand. Cross-site support and gradual recovery at Novara remain our priorities for mitigating this impact. Our gross margin declined to 20 percent.
Leah Peng - GlobalWafers, Investor Relation
(00:26:13)This reflects new capacity ramp-up cost, depreciation and product mix resulting from the fire at the Novara facility. Operating margin remained stable at 9.8 percent, mainly due to reduced accruals for remunerations following the decline in the Siltronic share price. EPS was 3.13 per share NT compared with 7.9 NT per share in Q2. These mainly reflect the high comparison base.From Siltronic's substantial valuation gain in Q2. Despite the impact of the Novara fire, the underlying operating performance remained stable.
Leah Peng - GlobalWafers, Investor Relation
(00:26:54)Please turn to page eighteen for our financial performance for the first nine months. Revenue was 44.1 billion NT, down 4.4 percent year-over-year, probably reflecting the impact of the Novara fire.Gross margin was 20.5 percent, reflecting new capacity ramp-up cost and depreciation.Net profit increased to 7.2 billion NT, and EPS reached 15 per share.Close to the 2025 full-year EPS at 15.29 per share. Please turn to page 19 for a closer look at our income statement. The simulated figures on the right exclude the impact of major expansion projects in the US, Italy, and Japan, as well as the market changes on the Siltronic shares. On this basis, gross margin actually improved.
Leah Peng - GlobalWafers, Investor Relation
(00:27:49)From around 31 percent in Q1 to around 34 percent in Q2 and Q3. Simulated EPS also increased sequentially from around 5 dollars in Q1 to over 6 dollars in Q2 and over 7 dollars in Q3 [數字存疑：原轉寫為 85／76／7，依合計 18.66 推算]. For the first nine months of 2026, simulated gross margin is close to 33 percent with simulated EPS of...18.66 per share. These quarter-by-quarter improvements in proposed adjusted gross margin and EPS demonstrate the continued strength of our underlying operations. Please turn to page twenty for the balance sheet. Our GDR issuance in September strengthened our financial foundation.
Leah Peng - GlobalWafers, Investor Relation
(00:28:39)At the end of Q3, cash and cash equivalents totaled 60.8 billion NT, while total cash and cash-related assets reached 135.4 billion NT. Inventory slightly increased. It reflects the gradual arrival of supplies and polysilicon purchase to support our ongoing new expansion.The stronger financial foundation supports the working capital and the investment needed as our facility ramps up. It puts us in a better position to meet customer demand and convert our installed capacity into future revenue and earnings.
Leah Peng - GlobalWafers, Investor Relation
(00:29:15)Now, I would like to address those questions we have received from investors recently and those we anticipate will be raised. So the first thing is the industry outlook. What is our outlook for the silicon wafer industry？ We still remain very positive on the industry outlook.Advanced and mature node markets continue to exhibit a two-speed recovery. While the pace of recovery is uneven, the overall trajectory remains upward, and we expect supply-demand conditions to be tighter in 2027 than in 2026. The outlook for advanced nodes remains very positive.
Leah Peng - GlobalWafers, Investor Relation
(00:29:54)Demand continues to be driven by AI-related applications. SEMI estimates that the number of fabs or production lines beginning operation or shipping first silicon will increase significantly from 13 in 2026 to 23 in 2027, providing clear support for wafer demand in 2027.Therefore, we expect advanced node demand to remain strong, while qualified 12-inch wafer supply should become progressively tighter. The mature node market has gradually recovered on inventory normalization, improving demand from power analog and automotive and industrial applications, with a clear strengthening in fundamentals.
Leah Peng - GlobalWafers, Investor Relation
(00:30:42)Hey, the next question is our own business outlook for Q4 2026 and the first half of 2027.Demand improved significantly across all wafer diameters and all production lines in 2026. Overall capacity utilization remained very high, and market recovery became increasingly evident. Prior to the fire at Novara, we had been quite optimistic about the second half operations. However, the fire at Novara facility in mid-July affected a key portion of our eight-inch capacity as well as the SOI productions.
Leah Peng - GlobalWafers, Investor Relation
(00:31:20)We continue to mitigate the impact through global capacity allocation and higher utilization, and we are working intensively to increase shipments in the fourth quarter. Looking into the first half of 2027, the growth drivers are clearer, demand continues to increase, and demand already exceeds supply for a number of products, including certain small diameter wafers, creating room for pricing improvement.E-main growth, better pricing, the gradual recovery of Novara capacity, and ramp-up of our new facilities. These will all support our operating performance in 2027. In conclusion, we remain very optimistic and promising about outlook for 2027.
Leah Peng - GlobalWafers, Investor Relation
(00:32:02)Next question is our utilization rate. What are the current utilization rates across a company's wafer diameters？ Demand has improved across all major wafer diameters, so if we exclude the newly expanded production lines which are still ramping up, our existing twelve-inch capacity are all fully loaded. Demand for eight-inch and six-inch wafers is also very strong.
Leah Peng - GlobalWafers, Investor Relation
(00:32:25)Utilization are also close to full capacity. The demand recovery has also broadened from advanced to mature node and smaller diameter products. Utilization of all compound semiconductor business such as gallium nitride and silicon carbide is also very good, so their utilization rate is very high. This demonstrates that a continued increasing customer demand for high-quality compound semiconductor substrates.
Leah Peng - GlobalWafers, Investor Relation
(00:32:54)The next question is regarding our Novara fire recovery status. Our recovery efforts for the eight-inch production line in Novara, Italy continue to advance, with the exception of certain back-end processes that remain under reconstruction. All major manufacturing operations have resumed, and AP products have also started to ship.Processes that have not yet been restored are currently supported by other sites.
Leah Peng - GlobalWafers, Investor Relation
(00:33:26)However, those supporting sites are themselves operating near full capacity； therefore, the relocation must accommodate the existing orders, and certain critical equipment have long lead times. As a result, near-term production and shipments remain affected. In addition, qualified capacity cannot be replaced on a one-for-one basis because product space, process capability, and customer qualification requirements...These are all different, increasing the complexity of her site capacity allocation.
Leah Peng - GlobalWafers, Investor Relation
(00:33:59)Regarding the insurance, our insurance claim process for both property damage and business interruption losses have commenced. We continue to provide supporting documentation to determine the final amount of loss and insurance proceeds. This final amount is not decided yet, so we haven't booked any related insurance income in our financial statements.The next question is regarding the subsidies in our expansion projects in the USA and in Italy. So government subsidies and incentive programs are progressing as planned. In the US, GWA continues to meet the milestone requirements for the CHIPS program on schedule.
Leah Peng - GlobalWafers, Investor Relation
(00:34:43)And expects to receive a significant milestone payment from the U.S.Department of Commerce by the end of this year. So we will also apply the AMIC, the Advanced Manufacturing Investment Credit, in accordance with applicable requirements to pursue tax credit related to its U.S.expansion.In Italy, the second and third subsidy instruments are currently under review and are expected to be received progressively in line with project milestones. Overall, GlobalWafers expects to receive about USD 100 million in government subsidies by the end of 2026.
Leah Peng - GlobalWafers, Investor Relation
(00:35:21)However, the actual amount and timing of recognition will remain subject to review progress, policy requirements, and administrative procedures of the relevant authorities in each jurisdiction.The next question is about the silicon carbide outlook. Based on our recent customer engagement, correspondence, and current order activity, we believe that the silicon carbide market is gradually entering its next growth cycle.
Leah Peng - GlobalWafers, Investor Relation
(00:35:52)Demand is expanding beyond EV into high-growth, high-voltage applications such as AI data centers, grid infrastructure, renewable energy, and the industrial market. Customers are also planning a transition from 1200 volt to 3300 volt and above, raising the requirements for material quality and reliability. Supported by broader demand and tightening supply, we have observed higher SiC wafer shipments and gradual stabilization in ASP. Utilization of our SiC-related capacity remains at a high level. Based on current customer demand, order visibility, and emerging application trends, we remain quite optimistic about the future SiC market.
Leah Peng - GlobalWafers, Investor Relation
(00:36:41)Next is our CAPEX outlook for 2027 and 2028. Our previous global expansion cycle is gradually moving into the ramp-up stage. As major construction projects are completed, CAPEX has already come down from its peak and is expected to decline significantly in 2026 compared with 2025.Looking into 2027 and 2028, market demand continues to strengthen with the number of customers seeking additional supply and longer-term cooperation. To meet this demand, we will accelerate ramp-up of new capacity and maximize existing capacity through debottlenecking. If medium to long-term demand exceeds available capacity, we will carefully evaluate further expansion possibilities.
Leah Peng - GlobalWafers, Investor Relation
(00:37:30)For any new investment, key considerations include substantial customer demand and long-term commitment, as well as government support.Also, due to higher construction and operating costs, pricing and commercial terms must appropriately reflect these costs, while profitability, ROI, and payback will also be important factors. Accordingly, actual CAPEX figures for 2027 and 2028 will depend on customer demand, ramp-up and debottlenecking progress, and the economics and timing of our potential new projects.
Leah Peng - GlobalWafers, Investor Relation
(00:38:04)For GWA, we will continue to ramp up and develop NIC phase one while advancing phase two planning. With phase two building and certain infrastructure already in place, project expansion could be more capital efficient and faster than phase one.The next question is about the corporate bond we just announced with Micron. How does this US$500 million private placement of convertible bonds relate to the strategic funding announced previously？ Given that the parties already have a 10-year LTA, why use a CB structure instead of a prepayment？
Leah Peng - GlobalWafers, Investor Relation
(00:38:42)The US$500 million private placement of convertible bonds was approved in principle by the board today. This is exactly the strategic funding referenced when GlobalWafers and Micron announced their long-term collaboration. The parties have already established a stable foundation for cooperation through the 10-year LTA.The CB will further deepen these relationships. We believe that a key customer's willingness to support GlobalWafers' long-term development through CB also reflects its confidence in our prospects and future growth potential. A prepayment is typically linked more directly to future product purchase and delivery arrangements.
Leah Peng - GlobalWafers, Investor Relation
(00:39:23)The purpose of this strategic funding is broader. In addition to supporting the party's supply relationship, it is intended to support GlobalWafers' strategic needs, including the development of our U.S.operations and the enhancement of supply capabilities.So, we tend to use the CB structure to secure funding while preserving capital structure flexibility. Under the current plan, the CB will have a 10-year tenure and a 0.5% coupon rate. This will allow GlobalWafers to obtain long-term funding with a relatively low cash interest burden.
Leah Peng - GlobalWafers, Investor Relation
(00:40:02)As issuance, the CB will remain a debt instrument and, unlike a direct issuance of new shares, this will not immediately increase the number of common shares outstanding. Our goal is to strike an appropriate balance among long-term funding, capital structure flexibility, interests of existing shareholders, and a sustainable relationship with key customers.The next question is regarding memory. Looking further, if memory prices decline in 2028, the memory makers adjust wafer starts, while lower component costs support a recovery in consumer demand. Do you expect the supply-demand gap for 12-inch and 8-inch wafers to widen or narrow？
Leah Peng - GlobalWafers, Investor Relation
(00:40:50)We believe it is important to distinguish memory pricing from wafer stocks. While normalization in memory prices does not necessarily imply lower wafer stocks, it could also reflect additional supply coming online. Underlying demand from AI, HBM, and server memory and data center applications remains strong.At the same time, if lower component costs support a recovery in smartphones, PCs, and other consumer applications, we recommend broadening from today's AI and high-end driven market into more mature node applications. Therefore,
Leah Peng - GlobalWafers, Investor Relation
(00:41:26)we do not currently view 2028 as a simple reversal of the current demand cycle, but rather as a potential broadening of the demand base. We expect 12-inch supply-demand conditions to remain relatively tight, supported by AI applications, while 8-inch should benefit from improving customer power, analog, automotive, and industrial demand, with conditions varying by product.
Q&A Doris Hsu - GlobalWafers, CEO
(00:41:54)So, above is our response to the questions. Now, I would like to turn over to Doris for the Q&A section. Yes, the first question is： does the company have any plans to raise product prices going forward？ That's the first question we received from several differentaudience members today. Okay, here is our answer： market demand visibility continues to improve with supply and demand conditions tightening in certain products. The overall pricing environment has become more favorable, and we are continuing to work with customers on price adjustment right now.
Doris Hsu - GlobalWafers, CEO
(00:42:43)Energy and raw material, labor, and operation costs have increased significantly. Freight has also increased significantly, while the investment cost of new capacity is also much higher than in the past. Therefore, we believe that pricing needs to appropriately reflect current supply-demand conditions, cost structures, and product value.Price adjustments will be negotiated on a case-by-case basis, depending on product specification, supply-demand conditions, contract renewal timing, and individual customers' circumstances, rather than being applied as a certain percent price increase across all products.
Doris Hsu - GlobalWafers, CEO
(00:43:38)So, different views, of course, mean different views during pricing discussions are very natural. But with improving supply-demand conditions, we believe that the current market environment is increasingly supportive of pricing returning to more reasonable and sustainable levels.This is the first question. The second question is： existing 300mm capacity is operating at high utilization.While consolidated gross margin continues to reflect several factors, is this greater pressure currently coming from existing contract pricing or from new capacity ramp-up costs looking into 2027？
Doris Hsu - GlobalWafers, CEO
(00:44:38)What are the key drivers for ASP and gross margin improvements？OK, I think both factors you're talking about have an impact, but the larger pressure currently comes from the ramp-up of our global expansion projects. Existing 300mm capacity remains highly utilized right now, while new capacity in the USItaly and Japan continues to absorb depreciation, energy, labor, and initial operating costs during qualification and ramp-up. As a result, the benefit of high utilization in our existing capacity is not yet fully reflected in consolidated gross margin.
Doris Hsu - GlobalWafers, CEO
(00:45:27)Going forward, gross margin improvements should be driven by higher utilization as new capacity ramps up, better pricing and product mix, and improved absorption of depreciation and fixed cost volume increase.Our simulated profitability excluding the major expansion projects is already substantially higher than reported margin, demonstrating the resilience of our underlying operations. So yeah, that's my answer to the second question. Next is, okay, next will be the test questions we received, so we will choose the ones and we will answer.
Doris Hsu - GlobalWafers, CEO
(00:46:16)OK, yes, this one regarding LTA repricing. So the question is regarding your long-term agreements： roughly 1% small percentage of your LTA volume expires in 2027 and can be renegotiated at current market prices.I think every quarter we always report the balance of our repayment, and whenever you see the reduction of our prepayment, that means the reduction of the prepayment.That means that more and more LTAs are fulfilled, so we return our money back to customers. So the smaller the remainder of the prepayment means the smaller the LTA. The LTAs are, and we always honor our LTAs. So when the
Doris Hsu - GlobalWafers, CEO
(00:47:28)current LTA expired, then we can have the new spot orders or new LTAs. Of course, the price will be definitely adjusted based on the new cost conditions, and for some customers, some LTA customers, if they didn'ttake the volume committed in the LTA in the past several years, then we have more flexibility to discuss the new price with the customers as well. That's how we are managing LTA prices. But a very clear answer to you is that you will see more and more
Doris Hsu - GlobalWafers, CEO
(00:48:12)LTA, new LTAs. We have multiple LTAs under discussion. Many of them are very close to the conclusions. So you will see more new LTAs and more spot business with improved prices. So because of the strong demand, I believe that the total ASP will beimproved starting from 2027. It's not only the LTA, it's not only the new LTA but also the product mix improvement. That is another factor as well. So that's a quick answer for your question. Okay, next.
Doris Hsu - GlobalWafers, CEO
(00:48:52)The question is about real demand versus precautionary stocking. A Japanese peer mentions that customers have started building up a wafer inventory because of concerns over supply chain disruption and rising prices. Could you please help GlobalWafers distinguish between real demand and precautionary stocking by customers？We heard about this situation because the whole operation cost actually is increasing, including freight increase, raw material increase, inflation, a lot of material cost increase, and CO2 increase. A lot, of course, we are asking customers to raise the price, and many of our customers realize that the
Doris Hsu - GlobalWafers, CEO
(00:49:45)supply is getting tighter and tighter quarter over quarters. So they believe that wafer price will keep growing in 2027 and 2028. Therefore, there are some customers who are really evaluating that how can theypre-stock more wafers to avoid from any too much impact from the wafer cost. But as far as we learned, I think it's more, it's still very, very small because
Doris Hsu - GlobalWafers, CEO
(00:50:24)most of the peers have very, very high utilization of the capacity, and basically we all of the peers, including GlobalWafers, we work very closely with our customers because all of our customers are asking for more supply. So we definitely will check with customers how much inventory you have for this one, for that one, and then we will decide that which customer needs the wafer badly, then we will supply the wafer tothose customers first. So we not only GlobalWafers, I think the peers also, all the industry people, they work very closely with each customer to try to supply to the real urgent demand customers first.
Doris Hsu - GlobalWafers, CEO
(00:51:11)There is a question that why was our Q3 depreciation lower than Q2？ I don't think so. I think our Q3 depreciation is supposed to be higher than Q2, but that means double check. If we find the details, we will email.
Leah Peng - GlobalWafers, Investor Relation
(00:51:28)Yeah, because our Korean subsidiary has expanded a few years earlier than the USA FAPS, and so some of their depreciation are just graduated. Please note that in our US expansions, their depreciation will gradually come online.In our GWA now, because we have reached a substantial completion in our construction, so now the construction depreciation already kicked in, while we expect that the facility depreciation will come online.
Doris Hsu - GlobalWafers, CEO
(00:51:59)Thanks for Leah's answer.Also, our accounting head mentioned that our Korean FAB has several FABs, and we follow our accounting policy. I know that this year, some of our equipment will befully depreciated and pushed into Q3. That is why Q3 is lower, but our new depreciation keeps increasing from the new existing size, new expansion size. This trend will not change in the next several quarters. Yeah, okay, thank you.I think I'll take one more question, then I'll open the audio questions.
Leah Peng - GlobalWafers, Investor Relation
(00:52:55)This is Felix Li from Morningstar.Your question is that you mentioned long-term customer commitment, government support, profitability of current capacity are key consi
Doris Hsu - GlobalWafers, CEO
(00:53:18)derations of new expansions. Which of the three is closest to being negotiated or confirmed？ Is there any details you can share？ I think these are not newfactors. Actually, we started this criteria several years ago when we started the expansion, made the decision in 2022. So right now, we are talking about phase two or even further expansion. Like what I said, that SOIand we are about to skip to have our phase three expansion for twelve inches. So we also use the same criteria to check so
Doris Hsu - GlobalWafers, CEO
(00:53:52)The answer to your question is then which one is closer depends on what production lines and also which country this new expansion has SOI. For example, if we're talking about US, I think we do have a lot of support from US government.But at the same time, there are still some uncertainty for the future policy. We're still working with government to try to figure out the future policy or how much support we can get if we make further expansion. So it was clear but now we need to know a little bit about future expansion.
Doris Hsu - GlobalWafers, CEO
(00:54:30)And profitability right now, that's some operation is performing better than the other.So this is we internally tell them we know very well how far the gap is, the current profitability status versus our goal, how big the gap is. So we know that also they canclose the gap. Our operation can close the gap of profitability. So customer commitment is the easiest part. We have a lot of customer commitment. Actually, for example, the 12-inch SOI, actually the customer commitment, customer demand is way over the capacity we can build for phase two. So yeah, so customer commitment right now is the easiest. It's not only verbal commitment. Actually, all of our customers are willing to
Doris Hsu - GlobalWafers, CEO
(00:55:21)not only give you a commitment, sign a contract, but also pay a prepayment. I think they are very positive for those three items. The easiest one is customer commitment, the second one is profitability, the third one government policy. Each one is there. There are still some things we're still discussing with each country's government right now. Thank you very much.
Leah Peng - GlobalWafers, Investor Relation
(00:55:48)Thank you, so ladies and gentlemen, the floor is now open for live questions. If you have any queries, simply use the Webex raise hand feature. Once acknowledged, please be ready to accept the host invitation to unmute your microphone and share your thoughts with us to make sure everyone has the opportunity to participate. Please limit yourself to two questions at a time. So the first is Sunny from UBS. Hi Sunny.
Sunny Lin - UBS, Analyst
(00:56:18)Hello Sunny. Hello, could you hear me？ Okay, yes, yes, perfect, thank you very much. So my first question is to maybe see if you can provide a bit more color on how we should think about the pace of the recovery for the coming few quarters.Earlier you talk about Q3 without the fire incident should achieve double-digit topline growth. Now if we look ahead, the Italy fab is under gradual resumption of operation, pricing start to improve, you are ramping up more supply, and therefore wonder how should we think about the topline momentum maybe in Q4 and also into early 2027.
Doris Hsu - GlobalWafers, CEO
(00:57:04)Yes Sunny, you definitely have very good memory. You are correct. Without the fire in Italy, actually Q3 we could achieve over 10 percent quarter-on-quarter growth, but actually we didn't make it. The reason was the fire, and we internally run a simulation and it's very firm that without the fire we could have achieved double-digit, actually is twelve percent, over twelve percent.Why, why grows so for Q4, this is the coming quarter, the right now the current quarter Q4, I think the momentum is still very strong, actually is even stronger than what we were expected. Some of the customers in order to get more capacity are even willing to
Doris Hsu - GlobalWafers, CEO
(00:57:53)pull ahead of their price new price adjustment, price adjustment or pulling the price adjustment to Q4. Some was talking about this, but the bottleneck is that we don't have enough capacity to supply, so the demand is stronger than our forecast a couple months ago. So Q4 demand is very strong.But super majority of Q4 prices are remain at the old LTA levels or the price negotiated 2025. So Q4 price were still the old price, not too many price adjustment in Q4.The product mix is improved and also we do see some very, very strong demand from customers. So that's current status that we believe that Q4, I think it will be a better quarter than Q3, and starting from Q1 2027,
Doris Hsu - GlobalWafers, CEO
(00:58:59)I think we will have not only more capacity from new expansion fabs but also we will have better price and better ASP than Q4 2026. That's our view. Thank you, Sunny.
Sunny Lin - UBS, Analyst
(00:59:14)Thank you Doris. May I double check because it's quite important for Q4 now based on your visibility and also the production situation of the Italy fab, could you achieve more than twelve percent year-over-year growth for your topline？
Doris Hsu - GlobalWafers, CEO
(00:59:30)Now can't be because Novara is still we are recovering, but Novara recovery volume is still very small. So we are still suffering from the loss of Novara capacity and revenue.So I'm talking about that the growth will be better, Q4 will be better than Q3, but it's not 12% that high. The 12% was that if there was no fire, our Q3 revenue should have been over 12% higher than Q2. Sorry for not making myself clear.
Sunny Lin - UBS, Analyst
(01:00:06)Sure, no problem. My second question is now as supply demand tightens, especially going to maybe second half of 2027 and 2028, and when you allocate the capacity by a market, let's say if memory clients are more aggressive in negotiating new contract to support their more meaningful capacity expansion for that period, while maybe logic are less aggressive,from a high level, how would you think about the best way to allocate capacity by the end market given very different dynamics for pricing？
Doris Hsu - GlobalWafers, CEO
(01:00:44)Yes, we internally have our strategic internal policy that how much roughly how much percent of our revenue is allocated for memory, how much percent for non-memory. So we internally have an allocation, and then for the memory part we negotiate with customer. I hope that we can get thea better price to cover our cost increase. So we talk with customer, different memory customer, and we decide how to allocate the memory capacity reserved to the customer who can achieve at least get closer to our target price. That's how we work with our customer.
Doris Hsu - GlobalWafers, CEO
(01:01:36)And for the non-memory, that the analog part or not for the non-memory area, there are a lot of applications like silicon photonics and power, power, power is SOI, RF SOI, andall the even for compound materials, so we have a lot of revenue. And for those category, we just based on same as what we did before, that would be based on the customer partnership, how long would be because the demand is very tight, right？ Demand is very strong and supply is very tight, so we care about long-standing partnerships. So
Doris Hsu - GlobalWafers, CEO
(01:02:17)our criteria is that customer partnership and LTA status. If they are the customer who are willing to sign LTA and pay premium, they will get the capacity first. So still this is the priority. And for the customers who are not, whose company's policy is notIt's not possible to commit any LTA, then we just will definitely take care. We will make the decision based on their price condition and business terms. Got it, thank you very much. Thank you. Thank you. And next will be Lucas from Morgan Stanley. Hi Lucas.
Lucas Wang - Morgan Stanley, Analyst
(01:03:02)Hello, can you hear me？ Good afternoon, Doris and Leah, thanks for taking my questions. So my first question is also about pricing connection. So as you said that all diameters of your products are reaching nearly fully loaded. But somehow, you know, we hope that we can assume that the pricing negotiation connection could be extremely smooth, but somehow we justkeep hearing some customer pushback about the price hike to next year, especially from the largest foundry customers. So we were just wondering that how could we reconcile this dif
Doris Hsu - GlobalWafers, CEO
(01:03:51)ference？ Like is it because the inventory from the customers or is there anything that we have missed here？ Yes, OK, so yes, you are right. Some customers are more supportive for the price adjustments, some are not, which is true. I know thatbecause each of them have different reasons for that. But as a wafer supplier, we work very closely and we very clearly express our pressure from cost. And if some customer, they insist that no price improvement or very limited price improvement, then we have no choice but to allocate a little bit lower. But we, I mean, there are still a lot of
Doris Hsu - GlobalWafers, CEO
(01:04:36)In addition to price, I think there are still a lot of value and partnership with each customer. And so it's not only that, but because of course we know that some of our customers, they do have more wafer inventory in-house, so they haveless pressure than others to try to imitate, to get a lot of spot wafers or even paying a little bit higher to get the wafers. Yeah, so some inventory availability, that's one of the reasons why they're more, they're stronger, they're tougher to set our price adjustment requests. So that's one of the key reasons that's very true.
Lucas Wang - Morgan Stanley, Analyst
(01:05:26)Yeah, yeah, thanks, thanks for the clarification and hopefully that we can have more price increases into 28 as well. So my second question is I just also want to know about your 12-inch silicon carbide progress and right now how could we, how should we expect meaningful revenue contribution from that 12-inch silicon carbide into 27 or 28？ Thank you.
Doris Hsu - GlobalWafers, CEO
(01:05:52)12-inch silicon carbide is doing okay, but volume-wise, because it's a new project, so volume is still in the ramp-up mode. Not only we're in the ramp-up mode, our customers also, they're in the ramp-up mode. So we do have very healthy 12-inch silicon carbide right now, but volumeis still not that high, but according to the forecast, I think the 300-millimeter SiC might have very good potential in the future, because quite a lot of customers are asking for the same concept and similar material, maybe for different application.
Doris Hsu - GlobalWafers, CEO
(01:06:38)So we think 300 millimeter silicon carbide by 2027, the revenue will be still in the low single-digit percent of our revenue, but it will be ramping up quite smoothly in the next several years. OK, very good, thank you so much.
Leah Peng - GlobalWafers, Investor Relation
(01:06:59)Thank you Lucas. Thank you, and ladies and gentlemen, we would like to express our sincere appreciation to all of you for your valuable participation today. The earnings call concludes now. Thank you and have a wonderful evening. Thank you, bye-bye.