Jason Wang: Yes, like I kind of stated earlier, we cautiously optimistic about it, the 2024. However, the visibility of 2024 is still relative limited due to the macro uncertainties, the consumer spending, higher interest rate and inflationary pressure. So, our customers, is remain very cautious even after the Q1 restocking that we have observed. We will hand in hand with our customer going through this turbulence. And meanwhile, our primary focus on ‘24 is we will continue to enhance the company’s resilience and to weather through this market turbulence, and then embrace the market upturn. So, I am cautiously optimistic about the upturn, but meanwhile, we’ll continue to focus on the company’s resilience.
Charlie Chan: I see. So last question is financial question to Chi-Tung. So now you have the 2024 CapEx guidance. You have the full year revenue forecast. Can you give us some update about your full year depreciation growth, and also your full year gross margin guidance?
Chi-Tung Liu : Well, the depreciation estimates for 2024, it’s about 20% higher than that of 2023. As I mentioned, 2023 was really a trough for a recent depreciation curve. So, the 2024 was 20% increase is probably back to the 2021 level. For margins…
Jason Wang: Well, I mean, for the margin, we understand there’s a software market demand. Like I said, our focus is with a relentless effort and in the past year, as well in 2024 will continue to improve our structural profitability. And so, our margins highly depends on the capacity utilization like we expect will get market share in second half, which will live our utilization rate. Some of the new product will start ramping in the second half. However, we expect the depreciation expense like Chi-Tang said, will increase 20% year-over-year in 2024.
Chi-Tung Liu: So, we don’t really give the full year guidance in terms of margins. Of course, we have a goal for a very longer-term structured trend for gross margin, but not the 2024 margin — gross margin guidance.
Charlie Chan: Okay. So, use the first quarter 30% as a benchmark, do you think full year can keep at a similar level?
Chi-Tung Liu: Again, we don’t come on the full year margin. I think, we have a long-term goal.
Jason Wang : Maybe I can share this with you, we hope to stay around the mid-point of 2022 and 2023 gross margin number, while continue to add resilience to our profit margin. I guess.
Chi-Tung Liu: The structure gross margin target not for 2024?
Charlie Chan: Okay. I’ll need to go back to check my model. But anyway, thanks for the tips. Good luck gentlemen. Thanks for your, your answers.
Operator: Next one, the home China Renaissance.
Unidentified Analyst : I have a question on R&D. In Q4, the number edged up quite a bit. Is it due to the fact that, we are starting to do the 12 nano R&D activities?
Jason Wang: Yes, of course. 12 nanometer is one of the key focus for R&D activities, but there is also some year-end adjustment for R&D efforts. I would say, the overall R&D budget will continue to increase, but we will try to manage as a fixed number in terms of percentage of revenue.
Unidentified Analyst: Can you share with us, what would be the R&D run rate going into, let’s say, ’24 and ’25?
Jason Wang: Sorry, say that again, please.
Unidentified Analyst: R&D run rate into 2024 and 2025, can you share with us, let’s say, as a percentage?
Jason Wang: I think the run rate will be similar to 2023.
Unidentified Analyst: And second question regarding the cash dividend policy. Would that still be based on the payout?
Jason Wang: As Jason mentioned, even though we may see a peak CapEx in 2024, that will not affect our dividend policy. We still intend to balance the payout ratio as well as the absolute dollar trend in terms of cash dividends.
Unidentified Analyst: I see. Fair enough. And then last question regarding the partnership with Intel. Are the fab be targeting those customers order serving the European and also the U.S. markets primarily?
Chi-Tung Liu: I mean, the solution will be serving customer globally. It’s not limited to any market segment.
Jason Wang: It is Western footprint for the first time for UMC’s perspective.
Unidentified Analyst: But would that be biased or focused more on the overseas market than the Asia side of the market?
Jason Wang: No. It will be serving the customer more.
Operator: Next question, Brett Simpson from Arete. Go ahead please.
Brett Simpson: Yes, thanks very much. Most of my questions have been answered, but I had a follow-up on the FinFET partnership with Intel. I mean, I guess the three Intel fabs in question equates to about 60,000 wafers a month capacity. Is that the rough plan we are talking about as part of this partnership? And can you just help us with the math around the CapEx assumption to convert these fabs to your process? Thank you.
Jason Wang: First of all, the capacity planning, it has a subject to the customer engagement. So, while we are referring where the project, the 12 nanometer will be developed in that location, but doesn’t mean that the capacity numbers. They will align with the customer and finalize the capacity size, but the site is actually available for us to plan that accordingly. For the CapEx, like I also mentioned earlier, primarily, we will reuse the existing equipment that will be very limited, the new tools and also from the conversion kits and required CapEx, but the CapEx number is relatively small, yes.
Brett Simpson: And is Intel taking any of the capacity for internal means as part of this agreement. And then is there any CHIP act funding qualification? Do you — can this — does this qualify for any CHIP Act funding going forward? Thank you.
Chi-Tung Liu : We cannot speak for Intel. I think they will make their own decisions, as for us, we won’t do that.
Operator: Next question is from Gokul Hariharan, JP Morgan.
