Ladies and gentlemen, thank you for standing by, and welcome to Hua Hong Semiconductor fourth quarter 2023 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-ins are in a listen-only mode. However, at the conclusion of the management presentation, there will be a question and answer session, at which time you'll receive instructions on how to participate. The earnings press release and fourth quarter 2023 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. Please go ahead.
Good afternoon, everyone, and thank you all for joining our fourth quarter 2023 earnings conference. Today, we will first have Mr. Junjun Tang, our Executive Director and President, make some remarks on our fourth quarter performance. President Tang will address in Chinese, and Cathy Qin, 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]
Good afternoon, everyone. Thank you for joining our earnings call.
[Foreign language]
Hua Hong Semiconductor reported fourth quarter 2023 revenue of $455.4 million with a gross margin of 4%, in line with our guidance. For the full year, we achieved sales revenue of $2,286 million with a gross margin of 21.3%.
[Foreign language]
2023 was an extremely challenging year for the global semiconductor industry due to depressed market conditions. However, with the continued destocking in the industrial supply chain and rapid growth of new generation communications, IoT, and other technologies, the semiconductor market has recently shown signs of recovery. The company's image sensors, power management ICs, and other related products all performed better in the fourth quarter.
[Foreign language]
To meet medium and long-term market demand, the company has accelerated its pace of capacity expansion and continued research and development of its diversified specialty technologies, improving its product supply capability and market responsiveness. By the end of the fourth quarter of 2023, the company's 8-inch equivalent monthly capacity increased to 391,000 wafers. Meanwhile, construction of the company's second 12-inch production line is progressing on schedule and expected to be completed and commissioned by the end of 2024.
[Foreign language]
Hua Hong Semiconductor has always prioritized the technological innovation, devoting substantial resources to R&D, actively promoting new platforms and optimizing existing platforms. In addition, the company is proactively establishing strategic cooperation with upstream and downstream companies at home and abroad to enhance industry supply chain integration and actively explore new markets.
[Foreign language]
In the new year, we will keep offering better technologies and services to our customers, focusing on emerging markets such as automotive, photovoltaic, and consumer upgrades in order to pursue sustainable development and strengthen our leading position in the field of specialty technology foundries.
[Foreign language]
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 fourth quarter and a recap of the whole year, 2023, followed by an outlook on revenue and margin for the first quarter, 2024. And then we will move on to the question and answer session. First, let me summarize financial performance of the fourth quarter. Revenue was $455.4 million, compared to $630.1 million in Q4 2022, and $568.5 million in Q3 2023, primarily due to decreased average selling price and wafer shipments.
Gross margin was 4% compared to 38.2% in Q4 2022, and 16.1% in Q3 2023, primarily due to decreased average selling price and capacity utilization. Operating expenses were $95.1 million, 59.6% over Q4 2022, primarily due to decreased government grants for research and development and increased engineering wafer costs. They were 11.8% over Q3 2023, mainly due to increased labor expenses of the second 12-inch fab.
Other income net was $87.6 million, 146.3% over Q4 2022, mainly due to increased government subsidies and compared to the other loss net of $19.4 million in Q3 2023, primarily due to increased government subsidies and foreign exchange gains versus foreign exchange losses in Q3 2023. Income tax expense was $7.2 million, 76.7% lower than Q4 2022, and 44.5% lower than Q3 2023, primarily due to decreased taxable income. Profit for the period was $3.5 million, compared to $185.8 million in Q4 2022, and a loss of $25.9 million in Q3 2023.
Net profit attributable to shareholders of the parent company was $35.4 million, compared to $159.1 million in Q4 2022, and $13.9 million in Q3 2023. Basic earnings per share was $2.01, compared to $12.02 in Q4 2022, and $0.09 in Q3 2023. Annualized ROE was 2.4%, compared to 0.2% in Q4 2022, and 1.2% in Q3 2023. Now, I will provide more details on our revenue from Q4 2023.
From geographical perspective, revenue from China was $366.5 million, contributing 80.5% of total revenue, and a decrease of 19.8% compared to Q4 2022, mainly due to decreased demand for MCU, smart car ICs, superjunction, and NOR Flash products, partially offset by increased demand for IGBT and CIS products. Revenue from North America was $36.8 million, a decrease of 57.2% compared to Q4 2022, mainly due to decreased demand for MCU and other power management IC products. Revenue from Asia was $30.2 million, a decrease of 28.2% compared to Q4 2022, mainly due to decreased demand for MCU products.
Revenue from Europe was $18.5 million, a decrease of 45.2% compared to Q4 2022, mainly due to decreased demand for smart car ICs. Revenue from Japan was $3.4 million, a decrease of 70.6% compared to Q4 2022, primarily due to decreased demand for MCU products. With respect to technology platforms, revenue from embedded non-volatile memory was $112 million, a decrease of 52.6% compared to Q4 2022, mainly due to decreased demand for MCU and smart car ICs. Revenue from standalone non-volatile memory was $14.8 million, a decrease of 59.6% compared to Q4 2022, primarily due to decreased demand for NOR flash products.
Revenue from Discrete was $182.4 million, a decrease of 14.4% compared to Q4 2022, mainly due to decreased demand for general MOSFET and superjunction products, partially offset by increased demand for IGBT products. Revenue from Logic and RF was $56.2 million, an increase of 30.9% over Q4 2022, mainly due to decreased demand for CIS products. Revenue from Analog and power management IC was $89.4 million, a decrease of 11.4% compared to Q4 2022, mainly due to decreased demand for other power management IC and Analog products. Let's now take a look at the cash flow statement.
Net cash flows generated from operating activities was [$196 million] in Q4 2023, 6.6% over Q4 2022, and 29.2% over Q4 2023, primarily due to increased government subsidies and decreased payment for labor. Capital expenditures were $331.4 million in Q4 2023. Other cash flow generated from investing activities was $29.5 million in Q4 2023, including $17.8 million interest income and $11.7 million in receipts from government grants for equipment. Net cash flow generated from financing activities was $642.3 million, including $491.7 million capital contribution from non-controlling interests.
$246.6 million proceeds from bank borrowings, $3 million proceeds from government grants for finance costs, and $1.4 million proceeds from share option exercise, partially offset by $54.9 million bank principal repayments, $45.2 million interest payments, and $300,000 lease payments. Now let's move to the balance sheet. Cash and cash equivalents was $5,585.2 million on December 31st, 2023, compared to $4,989.5 million on September 30th, 2023. Inventory decreased from $492.8 million on September 30th, 2023, to $449.7 million on December 31st, 2023, primarily due to decreased raw materials and finished goods.
Property, plants, and equipment was $3,519.3 million on December 31st, 2023, compared to $3,322.9 million on September 30th, 2023. Equity instruments, instruments designated at fair value through other comprehensive income increased from $153 million on September 30th, 2023, to $270.5 million on December 31st, due to increased fair value of equity instruments. Other non-current assets increased from $325.8 million on September 30th, 2023, to $445 million on December 31st, 2023, primarily due to advanced prepayments for construction and equipment for the second 12-inch fab.
Total assets increased from $9,974.3 million on September 30th, 2023, to $10,943.4 million on December 31st, 2023. Our total bank borrowings increased to $2,099.6 million on December 31st, 2023, from $1,926 million on September 30th, 2023. Total liabilities increased to $2,928.9 million on December 31st, 2023, from $2,642.1 million on September 30th, 2023, primarily due to increased debt borrowings. Debt ratio increased to 26.8% on December 31st, from 26.5% on September 30th, 2023. Now, I would like to give you a recap of our financial performance for the entire year of 2023.
Revenue was $2,286.1 million, 7.7% lower than the prior year, primarily due to decreased average selling price. Gross margin was 21.3%, 12.8 percentage points lower than 2022, mainly due to decreased average selling price and increased depreciation costs, partially offset by decreased labor costs. Operating expenses were $333.1 million, 19.3% over 2022, largely due to decreased government grants for research and development and increased engineering wafer costs. Other income net was $19.5 million versus other loss net of $16.5 million in 2022, primarily due to decreased foreign exchange losses, increased government subsidies, and interest income, partially offset by increased finance costs. Net profit was $126.4 million compared to $406.6 million in 2022.
Net profit attributable to shareholders of the parent company was $280 million, compared to $449.9 million in 2022. Basic earnings per share was $18.09, compared to $34.05 in 2022. ROE was 6.3%, compared to 15.2% in 2022. Finally, let me give you a high-level outlook for the fourth quarter , first quarter 2024. We expect revenue to be approximately $450 million-$500 million, and our gross margin to be in the range of 3%-6%, 3%-6%. 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. If you'd like to ask questions on the phone, please press star one one and wait for your name to be announced. If you'd like to cancel your request, you can press star one one again. Please stand by while questions are being collected. One moment for the first question. First question comes from the line of Randy Abrams from UBS. Please go ahead.
Yes, thank you. My first question, I wanted to ask on the, excuse me, the outlook for first quarter, if you could start with a view. It looks like you're guiding stabilization or a bit of improvement at the midpoint. Could you talk about the mix, shipment versus pricing? And I also wanted to ask on pricing after the sharp decline on second half, how do you see that ability to become more stable, or if you're continuing to see more pricing pressure in the market?
Randy, thank you for your excellent question. I think, you know, if you look at our guidance, pretty much, our revenue and margin, I think it is flat to, it's pretty much flat to, Q4 2023. I think our overall utilization rate has been improving, okay? I think, just overall bookings has been gaining, getting stronger during the past two months, okay? Particularly in the fields of CIS and power management IC, okay. So we see pretty strong demand for these two areas. I think there's still some weakness in the area of power discrete, especially IGBT and superjunction.
But certainly management is not worried about this, because we think, you know, power management for power discrete things will, you know, we expect things will recover after the Chinese New Year. Demand will get back to the normal mode after the new year. And I think the only thing that is still weak at this point is MCU. MCU is still weak, okay? I expect things will, you know, gradually improve. I think just in Q1, it will still be low demand for MCU, but hopefully, it will improve in the second quarter. We expect there will be a, you know, a full recovery in the second half of this year, okay?
So I think, you know, pricing and is getting it basically has been stabilized, okay? I mean, you know, I think Q4 is basically the lowest point, okay? It's a low note. Q1 overall, there's improvement, improvement on utilization rate and also on bookings. I think, you know, this will support our revenue for Q1 as well as for Q2, okay? Right now, the three 8-inch fabs utilization rate is, you know, right between 85% to 90%. And for the 12-inch fab, you know, we have 95,000 wafer capacity. Right now, the loading is above 80%. I mean, as... I'm sorry, above 80,000 wafers, 80,000 wafers. I think this is, it's, you know, it's a, it's a good improvement compared to, I would say, you know, a quarter ago. Okay, Randy?
Okay. No, it's, it's encouraging. I, I think seeing some improvement. I'm, I'm curious on the loading, where you have capacity for 95K. Based on your discussion on application, how do you see, I guess by midyear at this stage, for both the 8 and 12-inch? And if, if you could give a view too, if you get full at this current mix and pricing, where, where the gross margins may fall out as you start to, to fill up. Do you, and do you need a, either a change in pricing or mix, to drive further improvement on the margin?
Y ou know, our goal is to get the loading to 95%-100% for the 12-inch fab. In other words, we expect we're, you know, the capacity loading will get to close to 95K by, you know, that's the goal, to get to middle of this year, by, you know, end of June. That's the goal. And I think, you know, most likely, it's we have a very good chance to achieve that, because right now, the bookings for, you know, for certain segments are strong, strong. We also expect, you know, IGBT and superjunction will also recover, in the second quarter. And we expect MCU will also, you know, gradually recover. So that is the plan. Okay, that is the plan.
At that point, once we get to, you know, 95%-100% utilization rate for the 12-inch fab, and then I think we can start to improve just the, you know, pricing for different technology platforms. We also will do that for the 8-inch business as well. And then we were gonna see-
Okay.
a gradual improvement on gross margin.
Okay. So margin, I guess, just the final. So margin, basically, given you have the depreciation ramp, right, I guess two parts to it. So we should think it stays in the single -digit, just given the depreciation ramp. And the second part, I just want to see if any change to the CapEx plan. I think you were targeting a heavy construction year, so about $2 billion for the 12-inch fab, and I think relatively light, like $50 million-$100 million for 8-inch. Just want to see if that plan has changed as well, or that's still on track.
Right. Right. Right, right, right. Let me just talk about depreciation. I think, you know, the depreciation expense for 2023, the 8-inch fab is right around $130 million. And for 12-inch fab was $380 million. Depreciation expenses for the 12-inch fab will continue to be at around $120 million-$130 million this year. It's gonna be, you know, very stable. It's gonna be kept at that rate. And for the 12-inch fab, the depreciation will be around $450 million, $450 million total, okay? So, you know, once we get to 95K, then depreciation will start, you know, the entire asset will start to depreciate, okay?
So that's gonna be the case. So for the CapEx, you know, it's minimum for the 8-inch fabs, right around $50 million-$100 million. It's mostly, you know, operational efficiency and just improvement on the tools, that sort of thing. We're gonna take out some, you know, aging tools, replace with some, you know, either new or refurbished 8-inch tools. That's things we would do. But for the 12-inch fab, you know, the 95,000, for the first 12-inch fab, it's fully, you know, furnished. In other words, you know, we got 95,000 wafers capacity. There's gonna be very little capital expenditures for the first 12-inch fab.
For the second 12-inch fab, you know, we start construction in June last year. The construction will complete, the building will be complete, facility will be complete sometime in Q3 this year. So the construction and facility cost is gonna be right around, you know, $700 million-$800 million. And it's gonna be close to, you know, $6 billion on the equipment, okay? On the equipment cost.
So I think, you know, basically, last year and this year, it'd be mostly construction costs, $600 million-$700 million, and it'll start moving the equipment. So I would say the equipment will be right around, you know, $1 billion-$2 billion, I would say around $2 billion a year, starting 2024, 2025, and 2026. So in the next three years, each year, right, you know, on cash flow basis, okay, $2 billion a year for the next three years, that's gonna be around $6 billion , and then plus the construction cost, right, $700 million-$800 million.
Okay. Yeah, no, thanks for clarifying. And if I could just clarify the margin, do you think as you get near full, well, you mentioned if you achieve that, the gross margin, you start to see improvement back, I don't know, say, toward double digit, or it's still just a challenging just given environment, not to get ahead of ourselves yet?
Yeah, certainly, that's the plan. I mean, you know, once we, I mean, as I mentioned, the first thing, we're gonna get both the 8-inch facility, 12-inch facilities, and the 12-inch facility to get it above 95% utilization rate. And once we're at that rate, once we're, we're at that level, I think, you know, we should be able to start to improve price. So when the fab is fully loaded, so, you know, I think, and with some ASP improvement, I think we can easily get it to, you know, overall, for the 12-inch fab, it should be, you know, at least at 20%. The 8, the 8-inch business should get to, you know, 40%+ to 45%.
But once we get its, you know, I would say, you know, the goal is to get to its, you know, most desirable state, which is, you know, the, for the 8-inch fabs to eventually get to 45%-50% gross margin like we had in 2022. And also for the 12-inch fab, once we're, you know, fully loaded 95K, and I think gross margin should get to close to 30%, you know, when, when the depreciation expense is still at its peak.
Okay, great. Thank you, Daniel, and Happy Chinese New Year.
Happy Chinese New Year.
Thank you. Same to you, Randy.
Thank you for the questions. Our next question comes from the line of Leping Huang from Huatai Securities. Please ask your question.
Okay, thank you to take my questions. So first, just follow Randy's question before. So what's the CapEx number this year, and what's the new capacity you will introduce this year, or you will roughly stay at the current level for the whole year? Yeah, thank you. I just, maybe I'm lost number.
Yeah, Randy, the CapEx, as I said, for the 12, the three 8-inch fabs is right around $50 to, you know, somewhere $50 million-$100 million. For the 12-inch fab, the new fab, the second 12-inch fab, I think on cash flow basis, it's gonna be, you know, we're gonna complete a construction that would be $600 million-$700 million. So the remaining costs will be around, you know, $400 million-$500 million. We already paid some in the prior year, and then we are also gonna spend, you know, I think I would say close to $1.5 billion-$2 billion on the CapEx, the tools, for the second fab. And then I will let Mr. Tang, talk about your second question.
[Foreign language]
Thank you for your question. The second 12-inch fab of our Wuxi plant is accelerating its construction schedule. Now we are targeting to move tools by the end of Q3 or the beginning of Q4, and spend two or three months to...
[Foreign language]
To get the all line progressed. Yeah, what?
[Foreign language]
Maybe we can contribute 10K to 20K wafer capacity by the end of this year.
[Foreign language]
We are using the first 12-inch line to hide around some products and aiming to have some quick introduction, product introduction when the second 12-inch line complete its tools moving.
[Foreign language]
All the related work is undergoing on schedule.
[Foreign language]
Okay. Thank you for the answer. So the second question is regarding this ASP trend. So, in my model, it showed that when you are in 2020, your ASP is roughly $423, which is roughly 10% below the current fourth quarter level. Do you think we have a chance to touch this number in the rest of this 2024, or you think we are already the ASP already at the bottom? Thank you.
Listen. Here's what I would think, okay? You know, we believe we hit the bottom. I mean, we hit the bottom in Q4, okay? Things have stabilized over the past, I would say, two months, okay? We see, I mean, as I said earlier, pretty strong bookings for some segments, okay? For some segments, power management IC and CIS, largely attributable to, you know, to the recovery of the smartphone market and also, you know, a strong demand for the AI market. Okay? So, and I, you know, we think pricing basically become stabilized in Q1. I mean, as you can see, our revenue guidance, okay?
Now, in order to improve, to increase ASP, what we need, we need to get all the fabs fully loaded, or at least at 90% utilization rate or above. So this is what we're, you know, basically working on at this point. I mean, we're getting, you know, very close to that. As I said, the three 8-inch fabs are 85%-90% at this point on loading, and the 12-inch fab is, you know, basically more than 80% in wafer input at this point. And we look at 95,000 wafer capacity. So we're, you know, moving pretty fast. Within the past two months, things have moved pretty fast.
What we need is to get the product mix, to get them better, and also at the same time, get the rate up to 90%-95%. And at that point, and I think, you know, we have a very good chance to increase ASP for, you know, some of these, products, some of these products. I think we have a good chance that, you know, all segments will recover in the second half. This is, you know, what we, planned on, and this is something we believe, things will, you know, happen in this, in the, in 2024. We do have strong booking to support, at least for Q1 and Q2 right now, okay? So let's keep our fingers crossed.
Okay. The last question from me is that we noticed your parent company, Hua Hong Group, announced a plan to invest on this new fab in Chengdu. So what will be the relation between this Chengdu fab with the Hua Hong Semiconductor? If I remember correctly, that when you do the A-Share IPO , you have some non-compete agreement with the Huali. So what will be the non-compete relation with this new company and with Hua Hong Semiconductor? Thank you.
What we can confirm is that, you know, our sister company, Huali, did acquire the facility in Chengdu just a few months ago. So, you know, basically, they're focusing on advanced technology nodes. So their strategy is different from us. We are a special technology provider. We are a semiconductor foundry focusing on specialty technology. Huali is focusing on, you know, advanced technology nodes, like 20 nanometer, okay? So our customers' products are different. But during the IPO, the A-Share IPO, we did, you know, we did make a commitment that we're gonna basically, that we will, you know, take over, consolidate their one of their fabs, it's fab five.
Considering, you know, that has, you know, it's got a similar business or competing business. So that was a commitment we made. Yeah, we would do that, you know, within the, you know, within three years. That's the commitment we had. Yes.
Oh, okay. Thank you.
Thank you for the questions. Our next question comes from the line of Ziyuan Wang from CITIC Securities. Please go ahead.
Good afternoon, Mr. Wang and Mr. Tang. My first question is, as we are constructing the Wuxi second fab, fab nine, how will you allocate the capacity of the platform on the second fab? Thank you.
Uh [Foreign language]
The capacity plan for the fab nine is 83,000 per month.
[Foreign language]
Focusing on 55 nm, 40 nm, and power discrete.
[Foreign language]
Basically, we will allocate about 10K-20K capacity to power discrete, and the rest will be IC.
[Foreign language]
The overall capacity will based on the Hua Hong Grace specialty technology platforms, the logic, power management, and some flash.
[Foreign language]
We will have 40K wafer per month capacity after the phase one investment.
[Foreign language] 1-2,000 pieces of so many production capacity.
We are moving on schedule and expecting to have 10K to 20K capacity by the end of this year.
[Foreign language]
The phase one 40K wafer per month capacity will be completed by the end of Q3 next year. Thank you.
Yes. Thank you. Thank you, Mr. Tang. My second question is, I just want to make sure that the utilization rates will contribute to the gross margin on the Q1 2024, or it will be the price or the product mix? Or what will be the utilization rate like in Q1?
You know, I think I talked about utilization rate, the current utilization rate earlier. I think right now it is, you know, 80%, you know, right now, around, we are already at 85%-90%, okay, for the 8-inch. The 12-inch, you know, we're just getting 90%-95% already, okay? So that is, you know, we certainly have had a pretty major improvement on utilization rate, largely because of strong bookings in the last two months.
Okay, thanks. Thank you, Mr. Wang. And, could you give us some, a guidance or view on the 2024 whole year revenue and gross margin? Could you share with us what do you see on the 2024 based on current demand and order? Thank you.
Well, as you know, you know, I think it's gonna be a good year. We're gonna start low, start low Q1. But things have stabilized already. I think we're gonna have a low Q1, and then we're gonna have an improved Q2, and then we surely look forward to a second half that is gonna be fully recovered. So we will have a 2024 that's gonna be stronger than last year. We will have a better 2024 than 2023.
Okay, thank you. That's all my questions. I wish you a happy Chinese New Year in advance. Thank you.
Thank you. Thank you very much. Happy Chinese New Year!
Thank you for the questions. Our next question comes from Szeho Ng from China Renaissance. Please ask your question.
Oh, hi, and good afternoon, gentlemen. I have a question regarding the Q4 gross margin. Could you quantify the impact coming from the inventory write-off? I, I remember last time you mentioned there will be a 3% impact to the gross margin for Q4, but I'm not sure. I just want to verify with you.
Yeah. It is, it was around the, around the 3.9 percentage points. If you look at quarter versus, quarter -to -quarter, quarter over Q3 from Q4. From Q3 to Q4, 10 percentage points is due to ASP drop, and 3.9 percentage points came from the inventory provision. It's not a-
I see.
You know, it's not written off. I didn't, nothing got written off, okay? It's, Szeho, it's nothing got written off. It's,
Okay.
It is basically a provision we took.
I see. Got you.
Yes.
And then the Q1 guidance is on a clean basis, that means no more one-off items, right?
No, no. At this point, no.
Okay. So that means from, margins-
Nothing, nothing.
Q... Oh, sorry. Go ahead.
What I said, you know, to answer your prior question, nothing is significant enough to consider to be a, you know, major one time.
I see. Yeah.
One-off.
So basically on... Right, right, right. So on clean basis, the margins should keep the bottom, this quarter, right? So, and then the margins start to recover, from Q2 onward. Is that a correct statement?
Right. You know, we are at the, ASP is still at the same level as Q4. It's, you know, it's gonna be pretty much at the same level. I don't think. Hopefully, things will improve slightly. I mean, President Tang and the team are driving very hard. You know, bookings are getting better, so hopefully we'll have more room to, to, to negotiate on pricing. Okay?
Mm-hmm.
That is the key. So yeah, I mean, hopefully from this point on, you know, the pricing will get better and better.
Got you.
But Q1-
Okay.
You know, things are become very calm now, unlike second half last year.
I see. Got you. Yeah. Second question, regarding government subsidies. We book a pretty lumpy subsidy in Q4. So how should we expect it going forward into 2024?
Are you talking about subsidies?
Yes, the government subsidies. You booked $51 million in Q4 last year. How should we expect?
Yeah.
The subsidy, going forward? Yeah.
You know, I think, you know, it's gonna based on the commitment that we got from the government. You know, we, for the first fab, there's still a couple more years to go. I think two more, this year, next year. We're still gonna have some that we're entitled to, based on the contract we had with the local government.
Okay, all right. But any figures or ballpark number that you can share with us on the line?
Any what?
Any ballpark number that you can share? Yeah, the residual subsidy that we can claim.
Oh, you know, no. It's... I would not share. I never share that number with anyone. I would prefer keep that, you know, in my chest. No. Good try, though.
All right. Okay, okay. All right. Okay, I try. Yeah.
Okay.
All right. Thank you very much, Daniel.
Thank you for the questions. One moment for the next questions. The next question comes from the line of Qingyuan Lin from Bernstein. Please go ahead.
Hi, Mr. Tang and Mr. Wang. Thank you so much for the presentation. I have three questions. First one is around our Q4 revenue. We saw that the revenue from China continued to grow in share. Last year in fourth quarter, it was 72.6%. Previous quarter, it was 77.5%, and this quarter, we grow it up to 80.5%. Want to understand what's the driver behind, or and your view, is it temporary or will be the long-term trend?
You know what? I mean, just overall, China has been, you know, we have strong customer base in China. I think overall, in Q4, other regions have come down compared to, you know, Q3 last year, as well as Q4 a year before. Okay? But overall, the China business also came. Overall, you know, our revenue was $455 million, but out of that, you know, China was particularly large. It was 80.5%.
Mm-hmm.
Other regions were a little, basically, slightly less than the prior quarters. So it was just for that reason, they were, you know, up and, you know, above 80%.
I see.
I would not read too much into it. You know, I would not read too much into it because, you know, we would like to have a balanced revenue profile among different regions. We like to keep China at 70%, around 70%. We will continue to have other regions around, right around 30%. That is the goal.
Mm-hmm.
We want to maintain that level. We want to continue to acquire, you know, to, continue to work with these big IDMs, design houses abroad.
Mm-hmm. Mm-hmm.
I think, you know, they are, you know, they're great customers globally. We want to continue to attract them.
Got you.
We want to continue to acquire new customers. So I mean, it's just a snapshot of the-
It's temporary.
So that it-
Gotcha.
Don't read too much into it.
Very clear. Very clear. Thank you. The second question around your comment on the recovery in second half, 2024. In my kind of view, there's two factors for the, you know, low demand. One is the China destocking, you know, introduced by COVID. The second is just the macro cycle. Which one do you think has a stronger play in the second half that, you know, increase the demand? And if you factor in all the competition there, we have the kind of expectation that ASP will continue to get better, but at the same time, probably more capacity will be released in 2024 and 2025. How do you think, you know, all the sectors plays out?
Well, you know, so you're basically talking about competitors. Is that your... Is that your question?
Yeah. I guess from the demand side, yeah, demand side is first around destocking and, you know, semi-cycle, specifically China semi-cycle, which one is stronger in 2024, second half, in terms of picking up?
Well, you know, I mean, we see a second, you know, from all the data, from all the analysis we see at this point, we believe that things will get better, especially in the second half.
Mm-hmm.
We have some-
Mm.
- good, strong booking numbers to support that, even right now. We see-
Got you.
As I said, you know, the loadings are up. You know, loadings, loadings have improved quite a bit compared to, you know, a quarter ago, for us, for us, for both 8-inch and the 12-inch business. Okay? But, you know, you have to remember, Hua Hong Semiconductor is one of a kind. We are a semiconductor foundry focused on specialty technology. Over the past 20+ years, we have developed five different technology platform.
These are very, very strong technology platforms in great demand. We certainly are a leader in every segment, in every segment. So we'll continue to, you know, focus on technology. We continue to be the best in each segment. You know, yes, there are a lot of, you know, capacity has been built in the past several years. But you know what? I would say they're at very, very early stage, nothing at our level. So we're not concerned, we're not worried. We are still absolutely the best in China and globally, as far as, you know, with that regard.
Very clear. I guess the last question is around the new 12-inch fab. We mentioned that we are accelerating in terms of the, kind of, setting up the facility and moving the equipment, and we will have 40K as third quarter 2025. I was just wondering, do we have any customers locked into that capacity? What will be the impact of that new fab, kind of, capacity to the current fab's utilization?
Well, you know, the ramp, you know, we expect that 83,000 wafer capacity will be gradually filled. The ramp up, the ramping process will be, you know, within two to three years. We're gonna start to do that, you know, start the ramp process in the end of this year. It'll take 2025, 2026, 2027 to get to 83,000 wafers. All the existing technology platforms will be migrate to that fab. We continue to work with major customers globally, some of the major IDMs, they're currently our customers as well. We will, you know, basically create an even bigger partnership with, you know, all of them. So we expect, you know, not just the Chinese customers, but globally, yeah, we'll continue to work with the major IDMs, the design houses.
Thank you. Very clear.
Thank you for the questions. That's all the time for questions. I would like to hand the call back to management for closing.
Again, thank you all for joining us today and asking all the great questions. We hope you will join us again next quarter. Please do stay healthy, safe and healthy. We're looking forward to meeting you in person very soon, and much joy to you all in the Year of the Dragon. Thank you.
Ladies and gentlemen, thank you for your attendance. You may now disconnect.