Charlie Chan: Got you. Yes, so we wish you a success. So may I switch gears to some near term or financial questions?
Jason Wang: Sure, absolutely.
Charlie Chan: Thank you. So on a gross margin side, I’m wondering how you model the kind of electricity cost impact to your gross margin and also is it depreciation still growing like 20% here for 2024?
Jason Wang: Yes, depreciation should grow around 20% or a little bit less maybe given the current new schedule for Singapore P3. And the utility impact is actually after the older cost together, blended together, it’s actually rather minimum. And our goal is always try to offset that through our operating efficiency and also the benefit from the larger economy of scale. So current forecast is a small impact to our operating to our gross margin.
Charlie Chan: Okay, so it sounds like you don’t intend to pass through this kind of minimal additional cost to your customers. Do I interpret this comment right?
Jason Wang: I mean, the cost and the pricing to us is actually two different thing. From ASP standpoint, I mean, our pricing strategy like I said is consistent based on our value proposition. And then we have to align with that, that includes the competitive resilience, right? But from the cost, we always want to try the aggressive cost reduction effort, to compensate or offset some of the headwinds to maintain our probability. So we — it’s not a cost plus business model for us.
Charlie Chan: I see. So in the Q&A with Bruce, I think to hear you, you kind of admit that second half margin can be also at a similar level. Did I hear you right?
Jason Wang: I mean we typically giving guidance quarter-over-quarter. But at this point we more look at a market outlook. The ASV projection will stay firm. But we do found the headwinds. Like you said, the 2D cost increase, inflationary cost increase, depreciation cost increase. There are some headwinds that we have to deal with. So we will continue aggressively spend an effort to improve our cost structure. But then so the goal will be at least, continue to improve our structure profitability from that standpoint. I mean, I have to say currently, we have been navigating the industry dynamics even with the utilization rate below 70%. Right? I mean so I think we have demonstrated that for the past periods. And now we’re dealing with the headwinds depreciation or all those inflationary cost pressures. And I think we will continue to do so. And so despite those challenges, we will have a relentless effort to overcome those challenges.
Charlie Chan: I see. The last one from me. So on an end market trend, one observation. So I fully respect and you have been right. I found a cycle recovery in market forecast. But recently we’ve seen through here that smartphone supply chain can be [Indiscernible]. One of your major customers will report this Friday, I guess. So we are seeing inventory de-stocking. Some tough situation for kind of smartphone still. You seem to say the inventory is healthy. So can I know how you’re going to reconcile those data points?
Jason Wang: I mean, I kind of touched that. So first, we are cautiously optimistic about the rest of the year. If I put it this way, at this moment we will see the Q1 2024 could be the bottom. And the biggest uncertainty is the overall macro outlook that could impact end market dynamics. So because the visibility, insufficient visibility at this point, giving the customer is, practice, rush-order practice approach. So we feel optimistic about it, but we need to be cautious about it. If the end market does not recover as we expected, and we could have a challenging second half, but however, at this point we have not seen that. So we really hope that if the market continues by adjusting the inventory, gradually improving the end market demand, gradually improving, we actually foresee the Q1 2024 will be a bottom for the year.
Charlie Chan: I see. Thank you, gentlemen. Awesome discussion on the pricing, [Indiscernible] and also the 12 nanometer strategy. Thank you.
Jason Wang: Given that you have complemented me twice, I have to say. Thank you.
Operator: Next one, Jason Jones [ph] CLSA. Go ahead, please.
Unidentified Analyst: Thank you for taking my questions. One, if you can give us more details in terms of demand in second half. I mean, can you give us outlook or more details for 28 nanometers or 40 to 90 nanometers or 8 inch?
Jason Wang: Well, I mean, let’s talk about the Q2 since we’re in the current quarter. And the Q2 outlook, if we look at the application, we expect the wafer demand in consumer and computer development will grow while the automotive industrial segment will remain soft, they are still digesting the inventory. So they’re still in the mixed bag for Q2, but overall shipment I think will grow for all the quarters sequentially. If you break it down to a technology notes, the 28 and 22 will gradually improve. And for the mature notes there are 12 inch, 40 and 65 will stay flattish. And while the eight inch will stay flattish as well. And so that will be the current projection for us.
Unidentified Analyst: Okay, thank you. So can we expect that there will be normal seasonality demand in Q3? And how can we expect whether your utilization rate can reach maybe around 70% in this traditional house season? Can we expect that kind of seasonality or demand in Q3?
Jason Wang: Well, I mean, at this time, the market still lack of a sufficient visibility, like I said, for the second half. I try to give you an example there. We have observed rush order from customers as they continue to managing their business prudently. And for auto and industrial, they have a slower inventory digestion. So we think by end of the year, I think auto and the industrial will be at a much healthier position. So giving the mix of that, it’s hard to tell you if the Q3 will recover to a 70% utilization rate. We certainly see some of the market segment has a healthy inventory, so they have the demand will more directly link to the end market needs. And this is the auto and the industrial still have to digest their existing inventory on hand.
