Bruce Lu: So, can we foresee a narrower range for the pick and truck margin moving forward? Because margin — volatility is still very, very big. It’s still a lot of investors don’t feel comfortable, right?
Jason Wang: Right. So, like we said, the technology innovation, differentiation, given the diversified capacity located in a different region and given the specialty offering, we seen that will help us to defend that to a certain extent. The other approach is, we are committed to continue developing the FinFET technology that will actually enlarge the differentiation offering as well. And we continue with that development and in terms the — and we see some of the progress on our FinFET development as well. We have successfully entered into the mass production of our 22 nanometer business. And we have witnessed some steady rise of the revenue from 22 and then, which we can build upon our 22 low-power logic expanding into the specialty now. At the same time, we based on that customer base, continue migrating to the FinFET, we think that will also help us in terms of differentiation.
Operator: Next question Charlie Chan, Morgan Stanley. Go ahead, please.
Charlie Chan: And first of all, congratulations for great results, the gross margin sustains a very, very good label. So, my first question is really follow on your 12 nanometer. So, I do agree that it’s the key approach for UMC to differentiate yourself, especially compared to China competitors. So, since you mentioned that there are some kind of demand from certain customers, can you elaborate a little bit first of all when are you going to spend CapEx for data FinFET capacity? And secondly, you mentioned about low power logic. Can you give us some hints what kind of application products for those 12 nanometer FinFET? Thank you.
Jason Wang: Sure. Well, first of all, FinFET does give you a power leakage benefit. So, there is continued with the low power benefit on the FinFET. Well, our plan is to fully explore it, the DUV capability, which we can continue migrating to FinFET for that reason. So, we actively progressing with the development of specialty FinFET based on the 14 FinFET that date that we have, and also the 12 FinFET based upon the current FinFET technology. We are currently engaging with customer on product back performance criteria, as you know, to fulfill their needs. And as for the capacity expansion, the future, think that expansion consideration, all business will still subject to our ROI justification to ensure the proper return on investment.
For the capacity preparation, the method that we approach — the approach that we have is we will employ a cost-effective approach using the existing 22 nanometer and 28 nanometer capacity pool to transition into the FinFET based on a high two conversion rate. So that will help us to achieve our ROI driven criteria. And meanwhile, we will give you more update on our FinFET technology development when it’s more appropriate.
Charlie Chan: Got it. Thanks, Jason. So just roughly, roughly, since you have a great idea about the end demand, even some smart and efficient way to convert capacity for 22 nanometer for that demand. So, can we get a sense when you are going to see a first agreement contribution from 12-nanometer?
Jason Wang: For the 12 nanometers, the process will be freeze in early 2025. So, I think there will be time after that. So, when the time comes will probably be better that we will give you more precise projection, because it is based by the probably Q1, 2025.
Charlie Chan: Okay. Thanks for that. And then coming back to more, kind of, short-term questions, right? So, you mentioned about some rush orders. But you also said that, customers want to keep the inventory offer very, very lean. So, my question is, first of all, do you expect, those lost orders to come in incoming quarter? And compared to the traditional seasonality, do you think, your first quarter revenue or fab utilization will be better than historical sustainability? Thank you.
Jason Wang: I mean, we certainly hope that, the rush to come in. As far as for the Q1 outlook, we will provide that in the upcoming January call. The foundry inventory, I mean, the fundamental is, we believe giving the rush order coming out from the PC and the smartphone space, and we believe there is a sign that indicates, the early sign of an asset in agreement for correction for this segment. And however, there are other market segments that are still having inventory build out that could linger into 2024. So, we just have to — we are optimistic, but we have to be cautious about that. So, we will continue monitoring the rush order situation as well as the DOI situation on those segments. Hopefully, we can validate that the [indiscernible] is for sure. We are out of the inventory correction cycle, but we do know, the auto will probably be lingering into 2024.
Charlie Chan: Got it. Thank you very much. And my next two questions for, Chi-Tung, if that’s okay. So, it seems like, you have a ballpark depreciation increase for next year. And Jason show some confidence about the pricing trend, especially for 12-inch. So, I am wondering, whether full year 2024, you can maintain gross margin at both 30%, because based on the third quarter trend and the forth quarter guidance, I feel like there is the kind of achievable target, but I just really want to get some comments or confirmation from management.
Chi-Tung Liu: Yes. We cannot commit on the numbers, but we do foresee a headwind from micro uncertainty such as, utility, green power, and associated carbon cost. Increasing depreciation in 2024. So, but we will strive our best to maintain our profitability structure. So, we will continue with cost reduction effort, hopefully, can offset the impact from those headwinds I just mentioned. But then in terms of numbers, it still will be on a quarterly basis. And we’ll provide that next quarter.
Jason Wang: And Charlie I may add. Our perspective now is that amid inventory correction cycle, we have dramatically improved our structural probability compared to the pre-pandemic period, and have strengthened by the stable ASP, cost reduction conducting many cost reduction activities and continuous product mix optimization, and the increasing contribution from specialty technology. And all the activity will work off to offset headwinds, such as rising carbon and depreciation. We do expect when the demand return, our probability will also return to a healthier level. We can’t really guide your number right now, but we also understand, and humble enough to understand that will be a — we will foresee some of the cost increase headwinds, and we’ll continue to manage that cautiously as we have done in this few years.
Charlie Chan: Got it. And Jason, so sorry, I come up with a follow-up question to your previous 12 nanometer comment. I’m a little bit surprised that you plan to converse some 28 nanometer and the 22 nanometer for the FinFET, it says, because you have some conservatism for your long term sorry, 20 nanometer demand or why don’t you try to buy new equipment to the FinTech capacity extension.
Jason Wang : I mean, clearly, I mean, we have for this past few years — we have driven the — we do have ROI driven principle that we have [Indiscernible]. So, the converting of 22 nanometer, 28 nanometer capacity is a wonderful possibility. That’s the only possibility. So, we will look at overall, all right, and also the company’s financials and to determine what would be best approach.
Charlie Chan : Okay. So, I don’t need to interpret it that as kind of some concern about the 20 nanometer over capacity in the long term.
Jason Wang : Right. Like I said earlier, once this is more clear and we’ll report that at appropriate time.
