Ladies and gentlemen, thank you for standing by, and welcome to Hua Hong Semiconductor's third quarter 2024 earnings conference call. The call is hosted by Mr. Junjun Tang, President and Executive Director, and Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Please be advised that your dial-in is in a listen-only mode. However, at the conclusion of the management's presentation, there will be a question-and-answer session, at which time you will receive instructions on how to participate. The earnings press release and third quarter 2024 summary slides are available to download at our company's website, www.huahonggrace.com. Without further ado, I'd like to introduce you to Mr. Daniel Wang, Executive Vice President and Chief Financial Officer. Thank you.
Good afternoon, everyone, and thank you all for joining our third quarter 2024 earnings conference. Today, we will first have Mr. Junjun Tang, our Executive Director and President, make some remarks on our third quarter performance. President Tang will address in Chinese and Kathy Chien, our Deputy Director of Investor Relations, will be the translator. After that, I will discuss our financial results and provide guidance for the next quarter. This will be followed by our question-and-answer session. The call will be conducted in English, so please ask your questions in English. I now turn the call over to Mr. Tang.
[Foreign language] 各位下午好，感谢各位参加我们的业绩发布会。
Good afternoon, everyone. Thank you for joining our earnings call.
[Foreign language] 半导体市场的整体复苏态势比较符合我们的预期，但存在着结构性的分化，消费电子及部分新兴应用领域的需求向好，功率半导体等需求情况的改善仍有待观察。
The overall recovery of the semiconductor market is in line with our expectations, but there is a structural divergence. Demand in areas such as consumer electronics and some emerging applications is improving. However, the improvement in demand conditions for some products, such as power discretes, remains to be seen.
[Foreign language] 2024年第三季度，华虹半导体的销售收入达到5.263亿美元，毛利率为12.2%，均优于直营，并均实现了环比提升。产能利用率也达到了全方位的满产，多元化的产品结构及营运效率的优化展现出公司在面对复杂市场环境时拥有较好的韧性。
In the third quarter of 2024, sales revenue of Hua Hong Semiconductor reached $526.3 million, and the gross margin was 12.2%, which was both better than guidance and achieved sequential growth. Full capacity utilization was also reached. With a diversified product structure and the optimization of operational efficiency, the company has demonstrated it has good resilience in the face of a complex market environment.
[Foreign language] 无锡第二条三英寸生产线的建设持续按计划推进，预计各工艺平台的试生产及工艺验证将在今年年底到明年年初全面铺开。
Construction of the new 12-in production line in Wuxi continues to progress as planned, and it is expected that trial production and process verification of each process platform will be fully rolled out by the end of this year to the beginning of next year.
[Foreign language] 我们将利用新生产线进行工艺平台的持续技术迭代，以满足下游各类新兴需求的不断涌现与增长，带动公司整体营运表现迈上新的台阶。
We will use the new production line for continuous technology iteration of the process platforms to meet the continuous emergence and growth of various emergent downstream needs, driving the company's overall operating performance to a new level.
[Foreign language] 接下来请我们的财务长王鼎先生介绍财务情况。
Now, I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments.
Thank you, Mr. Tang, for the inspiring comments. Now, let me begin with the summary of our financial performance for the third quarter, followed by an outlook on revenue and margin for the fourth quarter 2024. And then we will move on to the question and answer session. First, let me summarize financial performance of the third quarter. Revenue was $526.3 million, 7.4% lower than Q3 2023, primarily due to decreased average selling price, partially offset by increased wafer shipments, and 10% over Q2 2024, mainly driven by increased wafer shipments. Gross margin was 12.2%, 3.9 percentage points lower than Q3 2023, primarily due to decreased average selling price, partially offset by improved capacity utilization, and 1.7 percentage points above in Q2 2024, mainly driven by improved capacity utilization.
Operating expenses were $81.4 million, 4.3% lower than Q3 2023, and 9.9% lower than Q2 2024, primarily due to decreased engineering wafer costs. Other income net was $51.8 million compared to other loss net of $19.4 million in Q3 2023, and other income net of $6.9 million in Q2 2024, primarily due to foreign exchange gains versus foreign exchange losses in Q3 2023 and Q2 2024, and increased government subsidies. Income tax expenses were $11.5 million, 11.8% lower than Q3 2023, and 37% over Q2 2024. Net profit for the period was $22.9 million compared to a loss for the period of $25.9 million in Q3 2023, and a loss for the period of $41.7 million in Q2 2024. Net profit attributable to shareholders of the parent company was $44.8 million, 222.6% over Q3 2023, and 571.6% above Q2 2024.
Basic earnings per share was $0.026, 188.9% over Q3 2023, and 550% above Q2 2024. Annualized ROE was 2.8%, 1.6 percentage points over Q3 2023, and 2.4 percentage points above Q2 2024. Now, I'll provide more details on our revenue from Q3 2024. From a geographic perspective, revenue from China was $434.5 million, contributing 82.5% of total revenue and a decrease of 1.5% compared to Q3 2023, mainly due to decreased demand and average selling price for IGBT, superjunction, and flash products, partially offset by increased demand for CIS and other power management IC products. Revenue from North America was $46.7 million, a decrease of 4.2% compared to Q3 2023, mainly due to decreased demand for MCU, general MOSFET, logic, and superjunction products, partially offset by increased demand for other power management IC products.
Revenue from Asia was $27.8 million, a decrease of 19.7% compared to Q3 2023, mainly due to decreased demand for logic, superjunction, and general MOSFET products. Revenue from Europe was $16.4 million, a decrease of 58% compared to Q3 2023, mainly due to decreased demand for smart car ICs, IGBT, and general MOSFET products. Revenue from Japan was $0.9 million, a decrease of 82% compared to Q3 2023, primarily due to decreased demand for superjunction, MCU, and logic products. With respect to technology platforms, revenue from embedded non-volatile memory was $132.6 million, a decrease of 7.7% compared to Q3 2023, mainly due to decreased demand for smart car ICs. Revenue from standalone non-volatile memory was $29.3 million, a decrease of 20.3% compared to Q3 2023, mainly due to decreased average selling price and demand for flash products.
Revenue from discrete was $163.3 million, a decrease of 30.8% compared to Q3 2023, mainly due to decreased average selling price and demand for IGBT and super junction products. Revenue from logic and RF was $77 million, an increase of 54.4% over Q3 2023, mainly driven by increased demand for CIS and logic products. Revenue from analog and power management IC was $122.9 million, an increase of 21.8% over Q3 2023, mainly driven by increased demand for other power management IC products. Now, let's look at the cash flow statement. Net cash flows used in operating activities was $26.8 million in Q3 2024, compared to net cash flows generated from operating activities of $152.1 million in Q3 2023 and $96.9 million in Q2 2024, primarily due to increased payments of import value-add tax, partially offset by increased government subsidies.
Capital expenditures were $734 million in Q3 2024, including $617.7 million for Hua Hong Manufacturing, $87.8 million for Hua Hong Wuxi, and $28.6 million for Hua Hong 8-in business. Other cash flow generated from investing activities was $18.1 million in Q3 2024, which were interest income receipts. Net cash flows used in financing activities was $5 million in Q3 2024, including $4.5 million of bank principal repayments, $3.3 million interest payments, and $1 million lease payments, partially offset by $2.3 million proceeds from bank borrowings and $1.5 million proceeds from share option exercise. Now, let's move to the balance sheet. Cash and cash equivalents was $5,766.7 million on September 30th, 2024, compared to $6,423.9 million on June 30th, 2024. Prepayments, other receivables, and other assets increased from $75.8 million on June 30th, 2024, to $269.2 million on September 30th, 2024, mainly due to increased value-added tax credit.
Property, plant and equipment was $5,199 million on September 30th, 2024, compared to $3,750.2 million on June 30th, 2024. Other non-current assets decreased from $428.6 million on June 30th, 2024, to $372.9 million on September 30th, 2024, primarily due to decreased advance prepayments for construction and equipment for Hua Hong Manufacturing. Total assets increased from $12,104.8 million on June 30th, 2024, to $13,082.4 million on September 30th, 2024. Total liabilities increased to $3,687 million on September 30th, 2024, from $3,059.9 million on June 30th, 2024. Debt ratio increased to 28.6% on September 30th, 2024, from 25.3% on June 30th, 2024. Finally, let me give you a high-level outlook for the fourth quarter 2024. We expect revenue to be approximately $530 million-$540 million, and our gross margin to be in the range of 11%-13%. This concludes my financial remarks.
Now, we would like to start the question and answer session. Operator, please assist. Thank you.
Thank you. We will now begin the question and answer session. To ask a question, please press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. We will now take our first question from the line of Ziyuan Wang from CITIC Securities. Please ask your question, Ziyuan.
Okay. Thank you for taking my questions. [Foreign language] 王总好，王总好，中信证券王子元. Congratulations on the very good third quarter performance. It is better than the guidance. And my first question is, what is your current outlook for the capacity utilization and prices in the fourth quarter? Is there any possibility of the further exceeding expectations in the first quarters? Thank you.
[Foreign language] 感谢您的提问。确实，第三季度来讲，Hua Hong全体上下，我们跟客户一起很好地面对了市场的波动。整体业绩还是稳定地实现了增长。
Thanks for your question. As for the Q3, our whole company worked together with our customers and faced the challenge from the market and achieved a stable growth for our performance.
[Foreign language] 那就整个第四季度来看，整体市场的形势还是增长势头还是趋缓，某种平台的压力还是非常之大。我想整个第四季度的业务来讲，我们还是继续围绕着Hua Hong所关注的embedded flash、模拟电路和功率器件三大块的任务，我们继续发力。
Okay. As for the Q4 outlook, we think the overall market is still in the condition of a mild growth. We are still facing some pressure on some certain platforms. We will focus on our embedded flash analog and power discrete privileged platforms.
[Foreign language] 特别是Hua Hong Wuxi 12-in的产能还是非常的饱满。这方面我们在整个生产的过程当中还是发挥我们整个生产系统柔性的产能安排的调配，不断地创造一个业绩的新高。
We have very high utilization rate in our 12-in fab at Wuxi. We adjust our capacity allocation very flexibly and achieve a record high of our performance.
[Foreign language] 所以整个四季度我们还是非常精英班子和全体员工还是会围绕着指引的目标去努力来实现我们对所有的股东和市场的承诺。
Our management team and all staff of our company will work together to achieve the Q4 guidance.
[Foreign language] 好，谢谢你。
Thank you.
[Foreign language] 好，谢谢唐总。 Thank you. My second question is, I'm glad to hear that our second factory in Wuxi is going to production in the Q1 next year. I'm just wondering, what's the impact of the depreciation in the Q1 next year? What will be the impact on the gross margin? Maybe can you share that? How much depreciation it might be in Q1 and what impact will have on the gross margin? Thank you.
Thank you. That was a very good question. I think in general, the impact from the additional depreciation expenses from the second 12-in fab will be minimal in the first half, okay? So yes, we're going to the fab, the second 12-in fab will become operational literally in December, and the depreciation expense will start to roll out in the first quarter, okay? But I think the impact will be minimal.
I would say it will be anywhere $10 million-$20 million in the first quarter. When you look at the overall for the year 2025, I would imagine it will be around $150 million at the most. But you have to think about this will give potentially a lot of additional revenue for next year, okay? So the goal is it's going to be a gradual ramp. And I think by end of Q4, I think the loading will be roughly around 20,000 wafers in terms of the wafers that will be put in every month, okay? So it's going to be a gradual process.
Okay. Got it. Thank you, Mr. Wang. That's all from my side.
When I said loading is meaning literally around 20,000 wafers out by end of next year, okay? So it's going to be a gradual process.
Right. Thank you. Our next question comes from the line of Lep ing Huang from Huatai Securities. Please ask your question, Lep ing.
Okay. Thank you for taking my question. The first question is a relatively general question. So what's the impact of the re-election of Trump in this on your future business plans?
Hey, Leping, I know you're going to ask that question. But let me address that. Personally, I don't feel there will be any impact on our business, okay? This President Trump's news, his win in the U.S. election, I don't think there will be any impact, okay, on our business. First of all, Hua Hong has been in full compliance on export control, as all of you know. I mean, so we have been doing that for many years.
Internally, we have a strong, robust, it's an internal control program we call ICP, okay, in place that will make sure every wafer we ship will always follow the rules and regulations of export compliance. And the other thing is the current so we are a specialty technology provider, and our technology node most advanced is at 40 nm, okay? So literally, we're not within the control, okay? So our goal is to continue to be a specialty technology provider within the semiconductor foundry space. Finally, I also would like to point out that our communication with the U.S. government has always been very transparent. They know us well. We follow the rules, not just the U.S. rules, and I think it is the export control rules by all the relevant nations. So personally, I don't think there'll be any impact.
Okay. Thank you for clarifying. The second question is, then you are now spending around, I see, $700 million per quarter under CapEx, so since you start to ramp up or finally start to wafer out on this Wuxi new fab, so do you have any color on your CapEx outlook for 2025, or what's the status of your Wuxi fab? Did you roughly finish this construction, and how we should look at Wuxi fab on CapEx in 2025? Thank you.
Right, so the only major capital expenditures for Hua Hong Semiconductor at this point is our second 12-in fab, so it is a, as I probably mentioned several times in the past, many times in the past, in fact, it's a $6.7 billion investment. It is a, we're building a twin fab. We're talking about it's got a structure that will house two fabs eventually, okay?
So this is going to be the structure, the building, plus the power facility for the first fab, and also the equipment for the entire 83,000 wafer capacity at 40-nm technology node, okay? Down to 40-nm. So this is the total investment we expect, $6.7 billion. This is going to be basically will be spent in anywhere from starting from last year, 2023, mid of last year, very little, minimum cash out, 2024, 2025, and 2026. So roughly, you're going to look at slightly over $2 billion a year. So your number is pretty close. Talking about $700 million a quarter, it's going to be on and off each quarter based on the progress of the equipment installation, okay? So the number is anywhere could $500 million-$700 million, depending on the speed of the capacity has been installed.
So it's going to be, but between these years, 2024, 2025, 2026, I think roughly the major spending will be between 2024 and 2025, okay? It will be around $2 billion-$2.5 billion a year.
Okay. It's very clear. Thank you.
Thank you. Our next question comes from the line of Tony Shen from SPDB International. Please go ahead, Tony.
[Foreign language] 嘿，庞总、王总，Kathy，你们好。我是浦云国际的沈岱。 This is Tony from SPDB International. Actually, I've got two questions here. The first question is related to the gross margin guidance for the fourth quarter. It looks like if we look at the average gross margin for the fourth quarter, it's basically flattish quarter-on-quarter. So the 4Q gross margin is similar to 3Q. Could we share some reasons behind it, including the utilization rate or ASP? How do we see these two factors impact the gross margin in the fourth quarter? Thank you.
I mean, if you look at our revenue guidance, it's going to be anywhere from, as I said earlier, the revenue guidance, it is $530 million-$540 million. So there's going to be a slightly up, slightly up compared to Q3. I think we had a good strong quarter in Q3. We expect there's going to be a slight ASP increase. Utilization rate for the three 8-in fabs overall is going to be around, I would say, 90%, 90%, okay? There's still some price pressure for the 8-in business, okay? I mean, this is probably true for all the fabs globally. I think the 8-in business is under price pressure, pricing pressure. And for the 12-in fab, it's actually very strong. It's going to be its full utilization rate, 95,000 wafer capacity. It's going to be running at 95,000 wafers, nearly 100 or even more, okay?
We have a few good things that are going strong in the 12-in fab: the CIS product, the BCD product for going for the AI server, and also the GPU device, and then the logic and RF also is going pretty strong for us, okay? But overall, I think the market still has some weakness overall, especially for mature technology nodes. All right?
Okay. Gotcha. It's very clear, and my second question is related to semiconductor cycle. How do we see the cycle into 2025, especially into the next year? I've already noticed that some products from Hua Hong are very strong, such as CIS, but some products, such as power discrete , are still relatively weak, and how do we see Hua Hong is positioned in the semiconductor cycle into the next year? Okay. This is my second question. Thank you.
I think you got these points right, okay? So you guys are all very close to the market. You know the market well. We are a specialty technology provider. We have five strong technology platforms we have developed. Certainly, at this point, not all the engine, all the cylinders are going strong, okay? I think, as I mentioned, the power management IC and the area for power management IC is going strong, both globally and China.
The CIS business logic and RF are also doing very well for us, okay? The power discrete business overall, especially the high voltage products, are weak and are very competitive on price in the market, okay? And embedded non-volatile memory is still at the, I would say, has not recovered completely, okay? I mean, but I expect that part of business will, I mean, we saw throughout the quarters in 2024, things actually had a pretty reasonable recovery.
And we expect this trend will continue into 2025, into 2025. So I expect MCU business will come back, will be doing better next year. The power discrete business, I think, other than the medium low voltage products, the high-end business, the high voltage products are still weak, okay? Still weak at this point.
Gotcha. Thank you. [Foreign language]
Thank you. As a reminder, to ask a question, please press star one one on your telephone keypad. Our next question comes from the line of Sunny Lin from UBS. Please ask your question, Sunny.
Hi, Junjun Tang, Daniel, Kathy. Thank you for taking my questions. So my first question is to follow up on the pricing, and there are a few parts. And so number one, for your second 12-in fab, when you start to ramp from early 2025, how high should we model the ASP? Will it be similar with the first 12-in fab? And then secondly, for 12-in overall, Daniel, I recall before, you didn't have a target to improve the ASP to maybe 1,500 or even a bit higher.
And so how should we think about that going to next two, three years? And then number three, for your price increase, I think in the last maybe two, three quarters in selective areas, you were able to revise your pricing to some extent. Into 2025, are there any products that you could still revise your pricing, or do you think overall the pricing dynamics are moderating or under a bit more pressure at this point?
Sunny, thank you for the question. Sharp questions, very sharp questions.
In terms of pricing for the 12-in fab, okay, I would say to just to model, I think the discrete products, I would say overall average is going to be around, I would say, $800-$850, okay? And the ASPs for the IC business should be around, I would say, $1,200 or even more, $1,200-$1,400, okay? Because which I certainly expect the embedded non-volatile business will recover. I would say you're going to see an increase in volume quarter through quarter for embedded and power discrete, and also is going to be pretty stable around over $1,000 . And not the power management IC. I'm sorry, I misspoke. And then the logic and RF, I think they should be doing pretty well as well. It's going to be around $1,000-$1,200, okay? So that is for the 12-in business.
Overall, I believe the business will get stronger and stronger. We certainly, I mean, if you look at our numbers throughout the year, it's been a tough year, tough year. Price compared to 2022, 2023, price was down. Initially, it was down close to 25%. Now we slowly, gradually have brought it up. Now the difference is about 20% compared to high. I think we're going to start to gradually minimize, basically gradually close that range, okay? Hopefully throughout next year, okay? We are hopeful. We are extremely hopeful about our business, our outlook for 2025. It is certain segments continue to be very competitive, okay? There are some new players. They're coming into the market with extremely low price. I very much disagree with their practice, but if that's how they want to play. But you have to remember, we are a specialty technology provider.
We have standards. We have standard price for each of our segments, okay? So we're not going to basically do whatever these guys are doing, okay? We have our price standard. We're not going to easily change that. So I would say things will start to get better and better, hopefully, next year. Just like what we had this year, 2024 has been tough, but we have been making progress every year, even though it is not easy.
Got it. Thank you very much, Daniel. That's very helpful, and so my second question is on power discrete. Do you think the weakness is because of the end market? Most of the companies reporting recent few weeks talk about the weakness ongoing in automotive and industrial. So do you think that's the main reason for the weak power discrete, or do you think it's actually an oversupply issue? For power discrete, what's your expectation for us to see maybe better recovery?
[Foreign language] 整个功率半导体的这个华宏宏力的半导体的功率半导体的四大平台的业务呢，还是在稳步的增长。8+12的产能呢，还是给整个市场做了很大的芯片的供应保障。
Overall, power discrete business is stably growing, and the capacity from both 8-in and 12-in gives a solid supply for the overall market。
[Foreign language] 那我们也看到整个市场上相关的产能释放以及价格不断走低的这么一种趋势。
Yeah, we also recognize there's more capacity release and the pricing is going down。
[Foreign language] 那华宏的业务呢，我们还是朝着国家这个新能源产业的发展方向，以及风光储工控这方面的需求来不断的提升我们在功率旗舰方面的工艺的性能、产品的质量。
And our business, we will focus on the quality. We focus according in line with the country's new energy trend. We focus on the wind energy storage and automotive industry control。
[Foreign language] 所以我们还想，我们希望通过自身的努力继续能够保持一定的差异化的优势，来进一步巩固华宏宏力在功率旗舰方面它的业务能够进一步做强做大。
We will focus on our specialty privileges and enhance our strength in the power discrete。
[Foreign language] 好，谢谢。
Thank you.
Thank you very much. Sorry if I could squeeze in one last question, maybe a bigger picture question. So if you think about the supply demand in mature foundry overall in China market, on the supply side, do you think we could start to see maybe more consolidations into 2025? I mean, on our side, we start to hear that the Chinese central government is now implementing more control on approving the new project. And so maybe some of the smaller projects from here could see some issues on getting the cash flow. And so I just wonder what you think on that side. And also, if at any point, would you consider buying some of the fabs locally? Thank you very much.
[Foreign language] 整个成熟工艺所面临的市场呢，还是十分的巨大的。
So the mature technology still has a very huge market.
[Foreign language] 无论是人工智能的应用领域，一些高端的应用领域，那么对成熟工艺的需求还是稳步的增长。
And no matter AI applications and some other high-end applications still have the growing demand on the mature technologies.
[Foreign language] 为了迎合这方面的需求增长，作为华虹的特色工艺来讲，我们还是从自身的工艺的性能、高可靠、高电压、大电流、高算力等方面，我们会持续的发力。
So to in line with this growing demand, we will focus on our strength on high quality, high reliability, high V, and we will keep focusing on that.
[Foreign language] 同时我们会跟我们的客户一起专注于一些特殊的应用领域，来不断的提高我们的产品的性能，满足市场的需要。
So we will also focus on some special application areas together with our customers and continuous improving our quality to satisfy the market demand.
[Foreign language] 另外我们也会跟终端客户一起来探讨整个成熟工艺发展的成熟工艺技术发展的一种趋势，来加大研发的投入，来更好的满足市场的需求。
So we will also communicate with end customers for the overall trend of the legacy, sorry, the mature technologies. And we will put more efforts on R&D to better satisfy the market demand.
[Foreign language] 我相信经过短暂的一两年的这么一种结构性的调整，或者不断的去优化整个市场，应该是非常非常巨大，而且一定会使我们的业务不断的向好。
So I believe after one or two years' structure adjustment or optimization, the overall market will be very huge, and our business will be improving better and better.
[Foreign language] 好，谢谢。
Thank you.
Thank you very much.
Thank you. Our next question comes from the line of Jian Kuai from Orient Securities. Please ask your question, Jian Kuai.
Thank you for taking my question. The first question is about the AI opportunity. Just now, Mr. Wang and Ms. Tang mentioned about it. So could you please give us more color about the opportunities such as the TAM and our business process or business opportunity or this kind of things? Thank you.
[Foreign language] 人工智能的发展呢，确实是一种潮流，对整个芯片行业带来很大的机遇.
So the AI development is actually a trend and brings us semiconductor industry a huge opportunity.
[Foreign language] 但是它对整个产品的性能的稳定、高可靠方面又提出了更高的要求.
But it requires very high standards on the stable and quality.
[Foreign language] 华虹半导体经历了20多年特色工艺的发展，我们形成了一批非常具有竞争力、非常高可靠稳定的一些工艺，来为人工智能或者一些新能源汽车方向的发展提供服务.
So with 20+ years' development on specialty technology, we have formed several very competitive and very reliable technologies to provide service for the AI and some new energy technologies.
[Foreign language] 我们的模拟电路芯片给整个人工智能的芯片提供供电的保障.
Our analog chips provide the power security for the AI chips.
[Foreign language] 那么相关支撑电源管理芯片的一些功率器件芯片，SGT也好，Superjunction也好，也在不断的进入相关的应用领域.
And some power discrete chips like SGT or Superjunction to support the power management chips enter several relative application areas continuously.
[Foreign language] 我想这部分的市场的应用会不断的支撑公司的业务稳定的向好发展。
I think those markets, those applications will continue to support our business to keep growing.
[Foreign language] 谢谢。
Thank you.
[Foreign language] 谢谢唐总。 My second question is about the Hua Hong Manufacturing, about the capacity allocation. Just now, Mr. Wang mentioned about the 20,000 capacity by year-end. So what is our outlook for the capacity allocation? Maybe by products or by.
Well, you know, it's primarily it will be in the areas of embedded non-volatile memory, power management IC, and some logic and RF, okay, in that order. And there will also be some capacity allocated for power discrete products, the high-voltage power discrete products.
Okay, thank you.
Thank you.
And then we're going to scale up the capacity too as we build more capacity.
Thank you. As a reminder to ask a question, please press star one one on your telephone keypad. We have a follow-up question from the line of Ziyuan Wang from CITIC Securities. Please go ahead, Ziyuan.
Okay, thank you. Can I add one more question? I recall that during the IPO last year, it was mentioned that you might acquire Hua Hong Fab 5 in the future. Is there any timetable or when is it expected to be? Thank you.
That is still the plan. That is still the plan. But you know, we have three years to do that. You know, we committed to merge that fab into the listed company, Hua Hong Semiconductor. We don't have a timetable yet, but that is certainly something we have always been thinking about.
Okay, thank you. Thank you, Mr. Wang.
Thank you. Ladies and gentlemen, that's all the time we have for questions. I'll now turn the call back to Mr. Daniel Wang for closing remarks.
Again, I want to thank you all for joining us today and asking all the good questions. We hope you will join us again next quarter. Please continue to stay safe and healthy. We look forward to meeting you again in person in the near future. Thank you.
Ladies and gentlemen, thank you for your attendance. You may disconnect now.