C. C. Wei: Well, actually, our mature node capacity strategy is very simple. We develop differentiated specialty technology for our customer. In fact, we are working with customers and to define what they need and then what kind of technology that we need to develop. We don’t add any commonly used the large technology per se, but we develop specialty and differentiated and for the long-term, structural market demand, and that’s our current strategy. And because of that, of course, we put R&D’s effort and resources to cooperate with our customer. And so we can generate profitability with reasonable utilization.
Jeff Su: Okay. Thank you, C. C.
Brad Lin: Got it. Thank you very much C. C. Thank you very much.
Jeff Su: Yes. Okay. Thank you. Operator, well, can we move on to the last participant, please?
Operator: Sure. Our last question is come from Mehdi Hosseini with Susquehanna International Group and please go ahead.
Mehdi Hosseini: Yes. Thanks for letting me ask the questions. I want to go back to gross margin. I am a little bit confused if you could clarify something. Your wafer shipment in Q4 declined and also FX actually strengthened by a little bit, which should be negative on gross margin. So your cost-cutting efforts must have been greatly exceeding these trends and I want to get a better feel for it, and I have a follow-up?
Jeff Su: Mehdi’s first question is on gross margin. He is €“ he notes wafer shipments declined sequentially in the fourth quarter. The €“ but with the foreign exchange movement, he notes it’s a negative for gross margin. So, he wants to €“ and then he wants to understand what is the magnitude or rate of cost improvement. Maybe our CFO can clarify some of these, particularly the FX.
Wendell Huang: Right. Our fourth quarter gross margin is 180 basis points higher than that in the third quarter. Foreign exchange rate actually went towards our favor. The NT depreciated in the fourth quarter from TWD32 in the third quarter to TWD31, TWD39, so that gave us about 140 basis points of gross margin expansion. Now, the remaining one, there are cost improvement but offset by, as we said, lower wafer utilization.
Mehdi Hosseini: Okay. So, the volume helped. Now, if I just take your comment about the first half, declining 5% to 10% on a year-over-year basis, it does imply that there is a chance that revenues in Q2 would decline on a sequential basis. Would that also drive gross margin down on a sequential basis?
Jeff Su: Okay. So Mehdi’s second question is then we have noted, we did not say 5% to 10%, but our first half revenue will decline mid to high-single digit year-on-year. So, he wants to know does this mean that second quarter revenue will be down sequentially? And is there €“ does that mean that the gross margin will go below 53% or decline into?
Wendell Huang: Okay. Right. We give you the guidance, so you can really calculate yourself on the revenue growth on the second quarter. And it’s too early to talk about the gross margin in the second quarter and beyond. However, we can tell you that we work very diligently to make sure our gross €“ long-term gross margins of 53% and higher is achievable even in this year.
Mehdi Hosseini: Understood. Sure. Understood. But could it go below 53% and then rebound, so it would average to 53%?
Wendell Huang: It’s too early to talk about that. But as I have said, we work very diligently to make sure this long-term gross margin target of 53% and above can be achievable, including this year.
Jeff Su: And we will give you the second quarter gross margin outlook in April, Mehdi, in three months, okay?
Mehdi Hosseini: Thank you.
