Laura Chen: Okay, thank you. And also, my second question is also just wondering that you see the ATM business was slightly down, but at the same time, the gross margin seems to be resilient at their current level. So just wondering like in terms of the technology mix, or applications, what — have you held relatively well, for the profitability into Q4, even though we see some still some softness?
Joseph Tung: Well, a lot of it comes with the product mix that we were building and we are — in quarter three and also in quarter four, we are seeing that the higher margin products being representing a higher percentage of our overall revenue. And also I think the pricing continue to be resilient. And given our scale in our technology offering and the efficiency or the level of automation that we have, we have continued to be able to maintain a reasonable pricing level and also to have pretty good control over our costs and making the margin at a [Indiscernible]. We’re not totally happy about the cost as every level at this point. Even when we’re anticipating a mild decline in revenue going into quarter four, given the efforts that we put in, we believe that we can maintain whatever margin we achieved in quarter three if not higher, a little bit higher.
Operator: Next question is from Mr. Bruce Lu of Goldman Sachs.
Bruce Lu: Hello, can you hear me?
Operator: Yes.
Bruce Lu: Okay.
Joseph Tung: Hi, Bruce.
Bruce Lu: Hi. I think the management sounds a lot more bullish or positive in terms of AI revenue potentials. Given that the technology for AI in terms of packaging is so complicated for me, can you tell us what is the service you provided for AI is more legged to Fan-Out or sub tray or anything, what kind of profitability, what kind of return on equity, what kind of capital intensity for this business?
Joseph Tung: Well, we are getting pretty good traction with our customers in terms of both our Fan-Out as well as in proposal based kind of packaging products. And we will be aggressive engaging these customers and try to fit their needs. But at the same time, we are also increasing our collaboration with the upstream foundries in providing the sufficient capacity into this area. So, we are optimistic about the revenue from these different package type products coming from both directions, one is our own solutions and the other is really the collaboration with foundries.
Bruce Lu: But which one is stronger for there? For the past three months, which one turns out to be more positive to give the management like stronger confidence? Is it collaboration was foundry or yourself?
Joseph Tung: The collaboration is more stable there and it’s more obvious. In terms of our own solution, I think the design or the process of it is still subject to a lot of the customer discussion and also co-working with our customers. We are making a lot of progress on that and we were actually in mass production, but in terms of real volume, I think we should be seeing that coming from next year.
Bruce Lu: Okay, got it. What was the profitability for that? Capital intensity and profitability? The profitability for the AI-related business and the capital intensity for that?
Joseph Tung: Well, you’re seeing our margin being gradually improving so because at least the margin should be good.
Unidentified Participant: Hello, thanks for taking my question. So, first of all, congrats for the [Indiscernible], especially for first quarter gross margin improvement. So first question is about your view about the cycle and I know right now customers are placing rush orders with riverbank depleted. But do you think right now is the hard bottom in cycle, meaning for the first quarter, you then expect a further decline of the fab utilization? Can you give us some color about the cycle recovery? Thanks.
Joseph Tung: Well, I certainly don’t have the crystal ball for it. I think the market is still very volatile. I think one good sign of it is really, same as everybody else, we believe that we’re at least at the — maybe at nearing the end of the inventory digestion. But still I think that’s really not — at this point, I personally don’t believe that this is really the real issue here. I think the real issue is still whether the overall consumption will recover more in the stronger pace than what we were witnessing now. That really involves a lot of different — various exogenous factors. The recent war that’s going on in the Middle Eastern, it doesn’t help the situation. And we thought that the inflation is in check now but with the war going on, that may have another — put in another variable into it.
So it’s very hard to predict how soon or how fast the industry will recover. We’re just going to play by years. I think there are good signs, there are bad signs, but you know, overall, I think we’re just focusing on what we do best and serve our customers. And we are cautiously optimistic about next year. We believe that going into Q1, over the — throughout the whole year of next year, we will continue to see year-over-year growth.
Unidentified Participant: Okay. Thanks, Joseph. So, just a look back, right, when did you start to see your field that so called a rush orders? Can you give us a kind of timing when did you start to see that?
Joseph Tung: We have been seeing rush orders throughout the years, particularly at the — last month of any particular quarter, we see some rush orders coming in across the board. I think the reason for that is the customers are, like Ken mentioned, at this point more cautious about restocking. And since there are no ample capacity as well as wafers and also materials, I think the customers will tend to wait till the last minute until they see they have a clearer view of their upcoming demand they will put the orders in. So that what we have been seeing for the past few quarters and we are seeing that still going on at this point.
Operator: Next question is from Mr. Rick Hsu of Daiwa Securities.
Rick Hsu: Hi. Good afternoon. Can you guys hear me?
Operator: Yes.
Rick Hsu: Okay, great. First question is regarding your capacity utilization across the board at ATM. I think, if I don’t remember it wrong, Ken said something about mid 60s for Q3 right. So, I assume, given your steady decline in Q4 ATM revenue, so your loading should be below mid 60s in Q4. Is that right?
Joseph Tung: It will be slightly lower than 65 years.
Rick Hsu: Okay, great. Second question, your founder partners at the TSMC, UMC see some good early signs of demands stability from PC and smartphone and consumer electronic products. Do you guys agree? And if so, do you see any counter-seasonal possibility for your Q1 building, assuming there is the early sign recovery — demand recovery from this consumer space?
Joseph Tung: Well, there are spotty signs of optimism and demand remains to be seen. There could be some volatility in 2033. We believe that things are starting to look up and that’s why we — like I said earlier, we are cautiously optimistic about next year.
Rick Hsu: All right, thank you so much.
Joseph Tung: Thank you.
Operator: Next question is from Brad Lin of BoA.
Brad Lin: Hello. Hi. Thanks for taking my question. I have two questions, one on generative AI and second on the silicon photonics. So basically, firstly, we are encouraged to learn the management’s positive comments on the new generation of the consumer demand. I’m quite curious about what kind of the new applications should be expected for the consumer market and what are the applications that are inside for the AIC? And also what time do we expect it to, well, take off? Thank you.
