Charlie Chan : Okay, thanks. And sorry, the last question to Chi-Tung, is really about — sorry, actually two questions. So first of all, for your third quarter gross margin, how much of that is coming from the currency depreciation health? And second, small question questions about the China government subsidy contribution to your OpEx and would that totally go away in 24? Thanks.
Jason Wang : So, every one percentage point change in currency, it will cost around 0.4 percentage point change in our growth margin. So, that answer your first question. And secondly, for the subsidy for our Xaimen fab that numbers goes along with our depreciation curve for our Xaimen facility, which has come to an end of — majority of that has come to an end by end of this year. So, going forward, we’ll still have some small portion of subsidy coming in, but it will not go back to the previous level.
Charlie Chan: So, may we know a rough difference between this year and the next year in terms of the total amount of the subsidy from China government? Just a rough idea.
Jason Wang : Yeah. On average it will be study slowly decline from the third quarter level, which is a little bit over NT$500 million.
Charlie Chan: So, NT$500 million in third quarter and will gradually phase out to like $100 million by the end of next year — the quarter.
Jason Wang : It will gradually decline, but we will continue to apply for married-based incentives, not only in China, but in many other our production side as well. So, they will still…
Operator: Next one Szeho Ng, China Renaissance. Go ahead, please.
Szeho Ng : My first question regarding silicon interpose for the capacity we put in will it be dedicated for interpose production only or will it be fungible between interpose and silicon application?
Jason Wang : Well, I mean, the silicon interpose is a part of the capacity. For the dedicated two on the silicon interpose cannot be convert back to the other use. But they are common too that can be used. So, I don’t know if that qualify as a responsibility. From a dedicated two standpoint, no, it’s not, but that’s a relatively small portion.
Szeho Ng : And the other question regarding the automotive inventory adjustment, you mentioned that Q4, we start to see some adjustment, but how long would it last in your opinion?
Jason Wang : I mean, the start adjusts after the Q2 this year. And so, we have facing the automotive inventory, I mean, demand adjustment happening starting from Q3 already. And we do believe this will probably lingering into 2024.
Szeho Ng : 2024 the entire year or the first half next year?
Jason Wang : Well, I mean, it is also subject to the end market consumptions, right? We hope the correction will be ended in the first part or first half. But also subject to the end market and macro environment. So, we’ll continue monitoring that. Right now, we for sure there is even the buildup for automotive space and we do believe that, it will linger into 2024. In terms of whether they will be depleted by early for mid or later? We will continue to update that on quarterly basis. And it is our hope that, they can deplete the earliest possible.
Szeho Ng : I see. Based on the initial selling, do you think the adjustment will be mostly in Q1 compared with Q4, I mean, for the automotive vertical?
Jason Wang: I mean, we already see quite a bit of adjustment in Q3 already, and we continue to adjust in Q4. And so, we do believe that will linger into Q1. In terms of magnitude, again, it was subject to the macro situation. So, we just have to, we have to see it. We also kind of updated earlier saying — because given the customer current behavior, this behavior is more of a cautious and conservative. So, the visibility is much shorter. And so, we will probably better that if we give you more precise view on a quarterly basis. Right now, our view is that, inventory will linger into 2024.
Operator: Next question, Bradley of Bank of America. Go ahead, please.
Unidentified Analyst: Thanks for taking my question Hi, Jason, want to congratulate on the strong third quarter results. And I have two questions. So basically, one on the Generative AI end, and other is on the wafer technology of UMC. So firstly, have the firms seeing business opportunities also writing from the end device AI application? And if any, the key specs of those chips and what time do we expect it to take off? Thank you. That’s my question.
Jason Wang: Of course. In the quarter for sure. But before that, your question about AI. AI is a mega trend and it has rapidly emerged as we see, and there will be a strong demand on related chips on various functionality such as sensing MCU connectivity. And so that’s within our addressable market. And so, UMC is proactively preparing those solutions for this market. Then that includes the interposer solution as one. And we hope that having those solution prepared that we can enable our custom to capture those market share in AI applications. So many of the products that we are engaging today, we do see there is high possibility that we will start adding the AI function into it. And so, we just have to align with the product specification and make sure we can enable and support them that.
As far as the near-term, very specifically on the interposer, we already in intervals of production. Currently, UMC intervals of capacity plan will be doubled to reach 6,000 per month by Q1 2024. At this point, any additional capacity for interposer expansion what depends on customer demand outlook as well. So meanwhile, we are continuing developing the active interposer, which support the DTC, the deep trenching capacity and for the active interposer, and so on. So, the road map is also aligning with the customer for the future growth in the interposer space.
Unidentified Analyst: we believe it definitely depends on very much depends on the client demand. So, compared to our last earnings call, do we see the demand is getting stronger or it’s just well flattish in terms of visibility?
Jason Wang: We already increased double to 6-K [ph] and beyond that 6-K, we have — not have any alignment for increase that beyond the 6-K. Right now, the focus is more on the pipeline of continuity for the interpose solution. So, in terms of technology development, that’s already aligned for the next generation. But in terms of capacity, no — there’s no number beyond the 6-K yet. Once there’s any number increase, we can also report that.
Unidentified Analyst: Got it. Thank you very much. So, the second question is on the wafer-to-wafer technology. So, we have learned UMC has been investing in this technology for many years, and what time do we expect the contribution to rise and what are the key applications do we expect it to well adopt this kind of the technology? Thank you.
Jason Wang : The first product, by using the hybrid bank will be in the RF front end modules. So — and that’s already, the development’s already underway. And so, we do believe that will provide many benefits. So, we have some expectation on that. So, but the programs under development and the product application will be for the RF front end.
Unidentified Analyst : Got it. Thank you. And then it, may I know the potential margin profile for this kind of the product?
