Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hua Hong Semiconductor Ltd (HHUSF, Financial) achieved sales revenue of USD 526.3 million in Q3 2024, surpassing guidance and showing sequential growth.
- The company reached full capacity utilization with a diversified product structure and optimized operational efficiency.
- Construction of the new 12-inch production line in Wuxi is progressing as planned, with trial production expected to begin by the end of the year.
- Net profit for Q3 2024 was USD 22.9 million, a significant improvement from losses in the previous quarters.
- Revenue from Analog and Power Management IC increased by 21.8% over Q3 2023, driven by increased demand for power management IC products.
Negative Points
- Revenue was 7.4% lower than Q3 2023, primarily due to decreased average selling prices.
- Gross margin decreased by 3.9 percentage points compared to Q3 2023, affected by lower average selling prices.
- Revenue from Europe and Japan saw significant declines of 58% and 82% respectively, compared to Q3 2023.
- Net cash flows used in operating activities were USD 26.8 million in Q3 2024, a decline from positive cash flows in previous quarters.
- The company faces ongoing price pressure in the 8-inch business, affecting overall profitability.
Q & A Highlights
Q: What is your current outlook for capacity utilization and prices in the fourth quarter? Is there any possibility of exceeding expectations in the first quarter?
A: (Junjun Tang, President, Executive Director) For Q4, the market is expected to experience mild growth with some pressure on certain platforms. We will focus on embedded flash, analog, and privileged platforms. Our 12-inch Wuxi fab has a high utilization rate, and we will adjust capacity allocation flexibly to achieve Q4 guidance.
Q: What will be the impact of the depreciation of the second factory in Wuxi on the gross margin in Q1 next year?
A: (Daniel Wang, Executive Vice President & Chief Financial Officer) The impact from additional depreciation expenses will be minimal in the first half of the year. The depreciation expense will start in Q1, estimated at $10 million to $20 million, with a total of around $150 million for 2025. This will support additional revenue growth.
Q: What is the impact of the re-election of Trump on your future business plans?
A: (Daniel Wang, Executive Vice President & Chief Financial Officer) We do not anticipate any impact on our business. Hua Hong complies with export control regulations and maintains a robust internal control program. Our technology node is not within the control scope, and we maintain transparent communication with the US government.
Q: Can you provide more details on the CapEx outlook for 2025 and the status of the Wuxi fab?
A: (Daniel Wang, Executive Vice President & Chief Financial Officer) The major capital expenditure is for the second 12-inch fab, a $6.7 billion investment. The spending will be spread over 2024, 2025, and 2026, averaging slightly over $2 billion per year. The focus is on equipment installation progress.
Q: How do you see the semiconductor cycle into 2025, especially for Hua Hong's positioning?
A: (Daniel Wang, Executive Vice President & Chief Financial Officer) We are a specialty technology provider with strong platforms. Power management IC and CIS are strong, while power discrete and embedded memory are weaker. We expect a reasonable recovery trend to continue into 2025, with MCU business improving.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
