Operator: Next question, Niklas Baratte from Macquarie.
Niklas Baratte: Yes, given the higher CapEx in 2022 and 2023, what kind of capacity increase do you think you have in 2023, 2024?
Chi-Tung Liu: Yes. Each year, we are budgeting around 5%, 6% also of capacity increase. But as we mentioned earlier, our CapEx number, we dynamically adjust that and reprioritize certain projects. So according to the market conditions. So I think 5% also is the numbers for the next — this year and next year.
Operator: Next question, Frank Lee of HSBC.
Frank Lee: Just wanted to ask a question a little bit in terms of the overall guidance that you guys have talked about and the overall tone. It seems like from what you’re seeing units and shipments, 2Q should be basically flattish or bottoming. But overall, I guess, tone that we’re seeing is that demand recovery has been very clear and auto has potentially peaked. And also looking at your utilization rate is actually going to go up, but your capacity is increasing, but unit shipments are flat. So just trying to get a sense of maybe the overall turn versus the guidance. Are there any company-specific issues that — then we need guys to continue to grow more share or anything that we’re missing?
Chi-Tung Liu: Just base capacity was lower in Q1 because of the new maintenance. And quarter 2, of course, the base went back to normal. And on top of that, we have some additional capacity increase. And there’s always a wafer ship, wafer out time delayed in a very minimum way. So overall, it’s a flattish outlook for second quarter. And yet, we do see some bright spots like our 28 demand is firming up. And the 8-inch outlook seems getting a little bit deteriorated. So there’s a mix factors out there on top of the rising raw material costs and the unfavorable following . So all kind of mix up and lead to our current flattish quarter 2 guidance. We are confident for what we have done our company specifically, but for the recovery of the market consensus, we just want to point out that we haven’t really seen a very clear signs for a strong recovery as previously, the market was hoping.
Frank Lee: Okay. And can I just ask a follow-up on — you’ve mentioned the auto business has peaked in Q1, but your IDM business has continued to ramp up quite nicely. Is there a mix of auto that’s part of this IDM? And with auto slowing, is there a potential impact on IDMs be slowing down or not growing as fast as we’ve seen in the last couple of quarters?
Jason Wang: I mean the IDM includes the auto and also the non-auto business. So in general, we do see our IDM portion of the business actually increased, not 100% coming from the auto market.
Operator: And next one, Laura Chen of Citi.
Laura Chen: Just a very quick follow-up, also on the IDM business as we see quite solid momentum in Q1. So just wondering what kind of technology node and also application. You just kind of sort of talk about the automotive exposure in the IDM space. But just wondering that what’s your order visibilities of the IDM outsourcing in the second half? Or also like what’s the percentage of the IDM business in like consumer and communication application?
Jason Wang: Well, I mean, in addition to the outdoor segment in the IDM space, which is provide some growth for the quarter. And we also continue seeing the — our momentum in the 22 — I mean, sorry, the 28 and the high-voltage space. as well as the larger in ISP area so the — which is associated with the mobile space, yes.
Laura Chen: Okay. But at the same time, you are also saying that the overall demand recovery seems to be quite remote into the second half. But on the IDM business specifically is the solid order visibility at the moment, am I correct?
Jason Wang: We do see that space is actually fairly stable for us, yes.
Operator: Next one, Rick Hsu of Daiwa.
Rick Hsu: Just one question from me regarding your 28-nanometer. Could you guys give us more color about your percentage of revenue contribution ramp up into the second half? Would that be possible exceeding 30% in the second half?
Chi-Tung Liu: The base is actually predictable either. So — but we are saying the utilization rate is going to see 90% in second half. But it’s difficult to give you a pinpoint percentage of revenue given that we are not 100% sure about our revenue base yet for the second half. But certainly, it will improve gradually.
Rick Hsu: Yes, that’s pretty helpful about this over 90% utilization rate for second half. And just a quick follow-up regarding your pricing. Do you expect any price elasticity to kick in, in the second half? Because the reason why I’m asking is because I recently talked to some of your key customers. And they told me they believe that in the second half, if the demand recover and they are able to give you guys more volumes than you’ll probably be happy to give some price discount to these guys with the volume increase, so — or what you think?
Jason Wang: I mean, we’d be happy to discuss that when that happens. Right now, the elasticity of the demand is still not clear to us. And if we start seeing a strong sign of recovery, and then we definitely were looking into that. Again, the — we have many different consideration for the pricing, right? So I have say multiple times earlier already, and we will — we definitely will work with them closely to make sure that we well communicated and all consideration being explored, and hopefully, we can reach the mutual benefits.
Operator: And ladies and gentlemen, we are running out of time, and we’re going to take the last question. And the last one is Bruce Lu, Goldman Sachs.
Bruce Lu: Thank you to giving the second. I want to ask about like the capacity expansion plan. I think you are one of the — only one who doesn’t really kind of CapEx for this year. I mean, do you consider to renegotiate the LTL with your customers for a further delay for your 28 because the capacity expansion all the oversupply situation, definitely not as good as a couple of years under 2 years ago? And do you have any customers trying to push out the schedule by a quarter or 2 or anything like that?
Jason Wang: Well, I mean when we observe the weakness of the market change from last year, end of last year, many discussions already took place. And we have realigned with the customer, we have reset the demand outlook. And the — some of the conversations have already been discussed, and we have already realigned it. Currently to plan the mutual growth going forward, and we continue tracking those engagement, and we continue to review them on a regular basis. At this point, our P6 ramp still on track. If there is any changes, we will update you, but there’s no change at this point.
Bruce Lu: It needs no change, which means that your CapEx will remain at elevated levels even for 2024?
Jason Wang: Well, I mean, for now, like we said, our CapEx TWD 3 billion has not changed, but we always have a contingency plan in place to adjust the CapEx if needed. Changing our CapEx will depend on the macro conditions, industry will make a trend and customer long-term business alignment. And like I said, alignment started end of last year on a continued basis, if there is any changes, and then we have to kick in the contingency plan. But at this point, I mean, we — at this quarter and our CapEx budgets to remain the same.
