Chi-Tung Liu: Well, I mean, first of all, for the second quarter, the newly at 12A P6 capacity is quite minimal. We actually cannot change the equation for yet. It’s still in a very small volume.
Bruce Lu: I see. Understand. Okay. Then I want to switch gear a little bit for 8-inch. I’m actually pretty surprised to see around like 5% capacity expansion for your 8-inch. And I believe 8-inch capacity is one of the — is at the lower end or even lower than your corporate with capacity expansion. So what kind of like product or what kind of new products we are looking at to do to is of the 8-inch capacity tension throughout the year? Or can we expect some like new product in 8-inch?
Jason Wang: Well, I mean, the capacity result now is actually came from some of the effort we have spent in the past. It’s actually coming 2 portion of that. One is the we have done some of the maintenance on the previous — I mean, in Q1. And so once the — those will probably affect the Q1 output and so in Q2 without the maintenance, the number has actually gone up. Secondly is we continue with our streamlining process and the productivity improvement. So that will also reflect. And those efforts is accumulated from in the past and it just started kicking in Q2. It does not representing the overall demand. For the 8-inch outlook, the — we have, first of all, in overall 2023 outlook, we have not seen any sign of 8-inch recovery in the foreseeable future.
We definitely not immune from the market down cycle for the 8-inch. So we are impacted by that. We have observed the 8-inch business recovery will primarily depend on incentives, given that the competitive landscape in certain market segments, which are highly sensitive on pricing. So in short term, our pricing policy will remain firm, while UMC will continue to differentiat the solution and maintaining our customers’ competitiveness to secure or protect their market share. And longer term, we’ll continue working straight to optimize our product mix and the customer portfolio. So they are some projects near term. But in the longer term, we still focus on the product mix improvement.
Operator: Next question, Sunny Lin, UBS.
Sunny Lin: So my first question is 28-nanometer. I just wanted to quickly confirm, earlier, did you mention that the utilization will be able to improve to 90% or higher by end of this year?
Jason Wang: Yes, yes.
Sunny Lin: Got it. And so I wonder for your P6 expansions, could you remind us your later schedule for capacity expansion by end of this year? What’s the current LTA coverage for this expansion?
Jason Wang: Well, the P6 start ramping, the starting point is the Q3 this year and in a small volume, and we’ll reach 12,000 by end of the year, the December time frame. And all RPs covered by the customers’ commitment and all those commitment and business momentum is on track.
Sunny Lin: I see. And I think before you did tell us that for new expansions given the higher cost. And so the pricing will also be higher. And so should we assume for your broader ASP as P6 start to ramp into late this year? Would that be going up?
Jason Wang: Well, I mean, we will provide our ASP guidance, the outlook 1 quarter at a time, given the current market dynamics. So I will prefer probably provide that information 1 quarter at a time.
Sunny Lin: Sure. No problem. And so second question on — also on China, but it’s about the competition. And I think recently, a couple of equipment makers like ASML, Research mentioned very meaningful pickup for China orders. And so I wonder if you would be concerned at all about the increasing China competition for mature foundry?
Jason Wang: I mean we always face fierce competition. The foundry business it is capital intensive. So some of the capital investment in terms of putting capacity in, it’s not the only better for foundry to success. It is easier to enter the foundry space and putting it to end. However, it requires a lot more to become a successful foundry players. And we believe that UMC is well positioned as a foundry player with our comprehensive and competitive offering.
Sunny Lin: Got it. Sorry, maybe one last question on pricing. As of now, despite the easing supply constraint. I think everyone was surprised that the mature foundry pricing has been holding up . So I wonder what do you think you and your peers are doing differently in the current down cycle versus before? And do you think these changes will be sustainable going forward?
Jason Wang: Well, I mean, I don’t know how to comment on our peers. But in terms of our pricing strategy, I kind of mentioned earlier, is to closely working with our customers to uphold their competitiveness and in their respective markets to protect their market share. So we are working with our customers to strengthen that. However, the — in order to be competitive, it’s not just pricing. You also have to look at your technology, your improvement, your capacity support. And net-net, to how to strengthen our customers competitively is a more of a holistic view. And we will strive to do that with our customer, and we definitely will working with them and to make sure that we gave them the best support that we can. Meanwhile, also showing our view about our pricing consideration in terms of how to provide them with the value proposition.
Operator: Next question, Charlie Chan of Morgan Stanley.
Charlie Chan: Just want to clarify. Did you say that your addressable market forecast is now down high teens. Is that right?
Jason Wang: Well, I mean I think, Charlie, to be honest with you, we’re actually tracking this market outlook. And just like we mentioned earlier, quarter-over-quarter, we actually see that is further declining. So the market is being very dynamic right now. The 2023 will be a challenging year. We continue collecting the market data, and we — and try to tracking as close as we can. We just see the market actually is going to be much slower than we anticipated, that recovery is going to be much slower than we anticipated. And so we more focus on now is to minimize our exposure and hopefully, we’re going to be in line with our addressable market notes. And we do know it’s going to get worse than last quarter, but I can’t really give you a clear guidance on how much is that yet.
Charlie Chan: Okay. But you said that you hope to grow in line with the addressable market, that’s something you want to ensure?
Jason Wang: Let’s probably not going to use the word of growth, but we try to be addressable market.
Charlie Chan: Okay. addressable market, just kidding. Yes. So I guess a is still confident that the first half will be trough of your fab utilization? Or you think that the quarter could be the trough?
Jason Wang: Well, I mean, for the Q1, we have observed that revenue is consolidating at the bottom now. So we do not expect the business environment to get worse for However, we have not seen a sign of a strong recovery in the next few months. I think that’s sort of the visibility that we have today.
Chi-Tung Liu: Yes, the time horizon is just the next few months. So anything beyond that, it’s unclear for now.
Charlie Chan: Got it. Yes, in terms of the end markets, so first of all, any bright side or green shoes. We note said there are some kind of recycling for PC, TV, that you’re seeing any similar trends back that?
Jason Wang: Mean we see some short-term momentum. So for Q2, the computer segment will remain flat the consumer will remain flat, communication will remain flat and as well as automotive remained flat. So compared to the Q1, communication consumer computing is all declining, right? So we see some of the very light and momentum on those segments. But at the same time, we see the automotive since peak in the Q1. So it’s — we haven’t really seen a strong recovery, but we see some bottoming. But again, this is given our current visibility. And our the visibility for second half is still baked, yes.
Charlie Chan: Okay. And I’m not sure if the company has any exposure to AI or generative AI type of products. If you do, can you share some of the trends there?
Jason Wang: We have not. Even there is, it’s not going to be any significance. So I’m probably not in the best position to comment that, yes.
Charlie Chan: Okay. Okay. That’s fair enough. And lastly, the pricing strategy, right? So let me try kind of a different way. So you said that you worked to get to help your customers to protect your market share. But unfortunately, if the lower price is the only way to prevent them to lose market share to their competitors. Would you support them in terms of wafer pricing? I know technology development, capacity support is kind of an ongoing process, right? Pricing support could be more immediate. So what would you say about that situation? Customers really need your pricing support.
Jason Wang: Well, you asked it differently. So the simple way to put it is we always will hear what our customers base. And we will work with them closely and to find a way to protect their market positions. And the — another way to look at this is we actually — it’s more of a balance that and we look at the overall blended mix and we look at overall the portfolio and are also try to maintaining our profitable stability. So the — hopefully, to gear up with the goal of a blended ASP with a flattish direction. So I think there is a lot of dynamics, a lot of discussion that we need to have with our customer, and we will work with them closely.
Charlie Chan: Yes. Yes. And just in general, right, not only specific to your company, which process nodes or type of process that you see commoditization, meaning pricing depreciation could be — pricing would be the only differentiation?
Jason Wang: Which segments …
Charlie Chan: Yes, for , 0.13 micron, , yes.
Jason Wang: I think the most obvious one is the 8-inch business. In the 8-inch business, there are certain segments that are more sensitive to the pricing. And there are certain market segments within the 8-inch are sensitive to the pricing.
