Ladies and gentlemen, thank you for standing by, and welcome to Hua Hong Semiconductor first quarter 2021 earnings conference call. Today's 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 lines 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 will receive instructions on how to participate.
The earnings press release and first quarter 2021 summary slide are available to download at our company website, www.huahonggrace.com. Without further ado, I would 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 first quarter 2021 earnings conference. Today, we will first have Mr. Junjun Tang, our Executive Director and President, make his remarks on our first 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. I will now turn the call over to our Executive Director and President, Mr. Tang.
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Good afternoon, everyone. Thank you for joining our earnings call.
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Our performance for the first quarter of 2021 was extraordinary, driven by strong demand for virtually all platforms, in particular, NOR flash, MCU, IGBT and CIS. Revenue reached $304.8 million, an increase of 50.3% compared to the same period last year, and 8.8% above the previous quarter, well above our revenue guidance and street consensus. Gross margin was 23.7%, 2.6 percentage points above Q1 2020, largely attributable to improved capacity utilization, better product mix, and increased overall selling price, and 2.1 percentage points below Q4 2020, primarily due to payout of a company-wide bonus prior to Chinese New Year.
Net profit was $20.9 million. Let me give you an update on the status of our 12-inch fab in Wuxi that has shown amazing progress. Revenue contribution from the new fab was $54.6 million in Q1 2021, representing 17.9% of total revenue, an increase of 53.1% quarter-over-quarter. Currently, monthly capacity in this new facility is 40,000+ wafers, and the fab has been fully loaded. Because of strong demand, we expect this fab will continue to perform in this fashion into the future.
For this reason, last year we accelerated our capacity expansion plans. We will reach 65,000 wafers per month by the end of this year, and fully expect to reach 80,000+ wafers per month by mid-2022. Management is confident about our continued growth, mainly based by the following facts. First, our capacity is rapidly expanding. Second, our research and development team continues to deliver competitive specialty technology platforms. Third, global semiconductor demand, particularly in China, will continue to expand.
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Hua Hong Semiconductor continues to be very excited about our mission to be a leading special technology provider for the global semiconductor industry. We are in a very exciting time. I believe 2021 will be a special year for the company. This will be a year of strong growth. Our team is committed to achieving another major milestone.
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I would like to hand the call over to our CFO, Mr. Daniel Wang, for his comments.
Thank you, Mr. Tang, for the very inspiring comments. Let me begin with a summary of our financial performance for the first quarter, followed by our outlook on revenue and margin for the second quarter. We will move on to the question- and- answer session. First, let me summarize financial performance as of the first quarter. Revenue reached an all-time high of $304.8 million, 50.3% over the prior year, primarily driven by increased demand for CIS, MCU, and discrete products.
8.8% above the prior quarter, mainly driven by increased demand for NOR flash and discrete products. Cost of sales was $232.7 million, 45.3% above Q1 2020. 12% over Q4 2020, mainly due to increased wafer shipments, depreciation, and labor costs. Gross margin was 23.7%, 2.6 percentage points above Q1 2020, primarily driven by improved capacity utilization, better product mix, and increased average selling price. 2.1 percentage points lower than Q4 2020, mainly due to increased depreciation and labor costs, partially offset by improved capacity utilization and increased average selling price.
Operating expenses were $59.5 million, 16.7% below Q1 2020, mainly due to decreased research and development costs. 2.7% below Q4 2020. Other income net was $7.1 million, 64.5% lower than Q1 2020, mainly due to decreased government subsidies and fair value gains on financial assets. 70.9% lower than Q4 2020, primarily due to foreign exchange loss versus foreign exchange gain and the decreased share of the profit of associates.
Income tax credit was $1.1 million compared to $11.4 million in Q1 2020 due to decreased reversal of dividend withholding tax accrued for the prior year and increased taxable profit. Profit for the period was $20.9 million versus $2.7 million in Q1 2020 and $28.2 million in Q4 2020. Net profit attributable to shareholders of the parent company was $33.1 million, compared to $20.3 million in Q1 2020 and $43.6 million in Q4 2020. Basic earnings per share was $0.025 versus $0.016 in Q1 2020 and $0.034 in Q4 2020.
Annualized ROE was 5.2%, 1.6 percentage points over Q1 2020 and 2 percentage points lower than Q4 2020. Now I will discuss the operating results for both the Hua Hong 8-inch wafer fabs and Hua Hong Wuxi 12-inch wafer fab. First, let's have a look at the Hua Hong 8-inch wafer fabs. Revenue was $250.2 million, 24.7% over Q1 2020, and 2.4% above Q4 2020. Gross margin was 27.3%, 6.2 percentage points over Q1 2020, primarily due to increased average selling price, improved capacity utilization, and better product mix, and 1.3 percentage points lower than Q4 2020, mainly due to increased labor costs, partially offset by increased average selling price.
Operating expenses were $32.5 million, 11.8% over Q1 2020, mainly due to increased depreciation and labor expenses, and 103.5% above Q4 2020, primarily due to the recognition of certain government grants in Q4 2020. Profit before tax was $44.5 million, 64% over Q1 2020, and 33.6% lower than Q4 2020. Now let's have a look at the performance of Hua Hong Wuxi wafer fab. Revenue was $54.6 million versus $2.3 million in Q1 2020 and $35.7 million in Q4 2020.
Operating expenses were $27 million, 36.3% lower than Q1 2020, and 40.3% below Q4 2020, mainly due to decreased development costs, partially offset by decreased government grants for research and development. Most important of all, EBITDA was + $9.7 million for the first time. Now I will provide more details on our revenue from Q1 2021. From geographical perspective, revenue from China was $219.7 million, contributing 72% of the total revenue, an increase of 76.4% over Q1 2020, mainly driven by increased demand for CIS, MCU, IGBT, general MOSFET, NOR flash, super junction, and smart card ICs.
Revenue from Asia was $35.9 million, an increase of 22.5% over Q1 2020, mainly driven by increased demand for MCU, general MOSFET, and logic products. Revenue from the United States was $28.3 million, an increase of 11.6% over Q1 2020, chiefly driven by increased demand for other PMICs, super junction, and logic products. Revenue from Europe was $14.8 million, a decrease of 8.7% compared to Q1 2020, mainly due to decreased demand for smart card ICs.
Revenue from Japan was $6.1 million, a decrease of 18% compared to Q1 2020, mainly due to decreased demand for logic products and super junction. With respect to technology platforms, revenue from embedded non-volatile memory was $94.5 million, an increase of 28.8% over Q1 2020, mainly driven by increased demand for MCU and smart card ICs. Revenue from standalone non-volatile memory was $11.6 million, an increase of 306.2% over Q1 2020, primarily driven by increased demand for NOR flash products.
Revenue from discrete was $109.5 million, an increase of 44.6% over Q1 2020, mainly driven by increased demand for IGBT, general MOSFET, and super junction products. Revenue from logic and RF was $49.8 million, an increase of 153.2% over Q1 2020, largely driven by increased demand for CIS products. Revenue from analog and power management IC was $38.8 million, an increase of 25% over Q1 2020, mainly driven by increased demand for other power management IC products.
Let's now take a look at the cash flow statement. Net cash flow generated from operating activities was $60.8 million, compared to $6.6 million in net cash flow used in operating activities in Q1 2020, largely due to stronger collection of trade and notes receivables and increased receipts of VAT return. Capital expenditures were $167.4 million in Q1 2021, including $143.1 million for the Wuxi fab and $24.3 million for the Hua Hong 8-inch fabs. Other cash flow used in investing activities were $0.2 million in Q1 2021.
Net cash flow generated from financing activities was $146.9 million, including $143.2 million proceeds from bank loans and $6.5 million proceeds from share option exercises, partially offset by $2.7 million of lease payments and $0.1 million of interest expenses for bank borrowings. Let's move to the balance sheet. Cash and cash equivalents was $961.5 million on March 31st, 2021, compared to $922.8 million on December 31st, 2020.
Inventories increased from $226.5 million on December 31st, 2020, to $389.9 million on March 31st, 2021, primarily due to the acquisition of a piece of land used for real estate development and increased wafer demand from customers. Other current assets decreased from $135.7 million on December 31st, 2020, to $36.5 million on March 31st, 2021, primarily due to decreased prepayments. Property, plant, and equipment was $2,498.5 million on March 31st, 2021, compared to $2,510.4 million on December 31st, 2020.
Total assets increased from $4,568.6 million on December 31st, 2020 to $4,682.4 million on March 31st, 2021. Our total bank borrowings increased to $709.2 million on March 31st, 2021, from $566.2 million on December 31st, 2020. Total liabilities increased to $1,326,900,000 on March 31st, 2021 from $1,214,500,000 on December 31st, 2020, primarily due to increased bank borrowings. Debt ratio increased to 28.3% on March 31st, 2021, from 26.6% on December 31st, 2020. Finally, let me give you a top-level outlook for the second quarter 2021.
We expect revenue to be approximately $335 million, and our gross margin to be between 23% and 25%. This concludes my financial remarks. We would like to start the question- and- answer session. Operator, please assist. Thank you.
As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, please press the pound or hash key. Your first questions come from Randy Abrams from Credit Suisse. Please ask your question.
Okay. Yes. No, thanks, and good job on the ramp of the Wuxi fab. I wanted to ask actually the follow-up on the guidance for second quarter. I think with the 12-inch fab, you're running, or mentioned you're running pretty close to full utilization. Based on the shipment in first quarter, it seems like you could do even more revenue growth in second quarter if you ship that out. I'm curious if you expect to get to pretty full run rate, like 40,000 wafer per month shipment, or due to the timing, some of that would be more later in the year.
Randy, excellent question. I always expect that you guys, whether the investors or the analysts, always want more. I can understand that. It's a very good question. This is a great guidance. I mean, quarter- to- quarter, it's virtually 10% growth. Compared to a year ago, this is going to be close to virtually 50%. I think this is a good number. Let's see. I mean, we are extremely strong. Let's see how it goes. We had a great Q1. The best Q1 and the best quarter ever. We like to give out this number. I think it's a very good number, and I think, let's see how we can improve based on that. Thank you, Randy.
Okay. Yeah. Great. Could you clarify the utilization, like the 12-inch. It's showing as a full utilization, but how we should update the capacity ramp that's effective that you could ship to over the next few quarters, and then how you see the shipments ramping up against that capacity the next few quarters?
Yeah. Very good. Let me just give you some idea. Currently, we have 40,000 wafer capacity. We're going towards 48,000. That is virtually mark the first phase of the build-out for this fab. Our goal is to get to 65,000 capacity by end of this year. I think the demand, as I said, has been extremely strong. I think we had 40,000 wafer capacity. We still have that right now, and we were running 40,000. We basically load 40,000. Wafer in was 40,000, more than 40,000 in March, and more than 40,000 in April. Okay?
The capacity continued to grow. I think, as I said, get to about 48,000 by mid of this year, and then get to about 65,000. We are expanding very quickly. We expect the 65,000 wafer capacity will be reached by end of this year. We'll continue to ramp up very quickly towards that number. I'm not sure we can get to 65,000 in terms of loading, but I can certainly expect that this ramp up will be very fast and quick.
Okay. Could you give an update on the ASP side, how you see the eight-inch and also the 12-inch progressing as you go through that ramp? Also, shift on the application mix.
Well, we start to adjust the ASP for the eight-inch in Q4 last year, beginning of the Q4, I think. Because of strong demand, I think we do it very cautiously. We have to remember, we still have a 12-inch fab that is ramping up very fast. We need all the help we can from our existing or new customers. Let me tell you this, the ASP is rising nicely. Where there are some other fab shops, whether globally, they just raised their ASP in a pretty fast fashion. Stock went up and afterwards just dropped drastically. We certainly don't want to be that kind of company.
I think we are going to see a very nice rise on ASP throughout this year. Every quarter. Think about it, if you can do 3%-5% every quarter, it's going to be very nice. We have certainly raised the ASP of some of our customers, started last year. We also start to raise some ASP for the 12-inch guys this year. You're going to see that every quarter, very nicely. We had a nice ASP rise, especially for the 8-inch in Q1. With the 12-inch, I think we can definitely do a lot more in the future. Just wait and see. It's going to be a fantastic year for us.
Okay. That's good. If I could have one final one, I'll just put it in at two. Inventory, if you could split out the land piece versus how much was WIP. Would that land, that property, stay in inventory or is that a short-term? If you could give a little more color on what that's tied to.
The land was virtually to build a sort of residential place for our employees there. It's mostly. 60% of the property will be used for our employees there. That's the point. 40% will be used for offices and that sort of things. The cost of land is about $104 million, out of that number. Out of that inventory number, $104 million is for the land.
Okay, great. The second part was just to follow up on the ASP. With that type of increase, you do have the depreciation. Does it net out that the gross margin you kind of manage to pretty similar type of range or you could start to see a bit of improvement in the gross margin even with the depreciation ramping?
You talking about the 8-inch or the 12-inch?
I guess we can talk about both. You can.
The 8-inch business, the gross margin was 27.3%. You know what? It was largely because a Chinese New Year bonus payoff. Part of that was accrued last year. Part of this was coming out from Q1. It was about $10 million within the overall cost of goods sold. That itself, we take that out, you're virtually getting very close to 30%. Our goal for the three 8-inch fabs is going to get to 30%. That is the goal for the year. I think we're going to be seeing 30% even more hopefully by end of this year, overall for the year.
I think the 12-inch will also do well because we're ramping very fast. You have to remember, the depreciation expenses are huge. As we continue to ramp, there's going to be more and more depreciation expenses. It is gross profit positive this quarter, you know what? Don't take that too seriously because do not look at gross margin this year. I can tell you, as I said in the last quarter, our EBITDA is positive. It's a major achievement. I think the EBITDA will never become negative again. That's my prediction.
Okay. No, great. Thanks, Daniel. Thanks, Junjun.
Your next questions come from Andrew Lu from Sinolink Securities. Please ask your question.
Junjun Tang , Daniel, First one regarding your CapEx. What's the update for this year CapEx?
Andrew, let me answer that question. It's more a financial question. The CapEx for this year, including the expansion to 65,000. From 48 ,000- 65,000. For the Hua Hong Wuxi, I think overall it's going to be close to $1.2 billion. It is $800 million for the new phase expansion, this is on cash-out basis, plus some of the money which you have to pay for the first phase, to get 48,000. Then for the Hua Hong 8-inch wafer fabs, it's going to be around $126 million, $130 million. How's that? That would be the rough number.
About $1.3 billion, slightly over.
Yes. Earlier you mentioned the 12-inch with a fab capacity will reach 65,000 per month. How about 8-inch? Will you add 8-inch capacity as well?
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From Q4 2020, we start some capacity optimization for the whole company. As for the 8-inch, we adjust the product mix and improve some capacity ability. Overall for the whole fab, we improve about 10%. We ramping up very fast on the 12-inch fab. At the beginning of this year, our capacity is around 20,000 In April, we first start above 40,000 wafers per month, and our utilization is above 100%.
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Thanks to the shareholder support, we have already started the capacity expansion plan to 55,000. We will release the capacity gradually, and hopefully by the end of this year, we can achieve 65,000 wafer per month capacity. Along with the capacity expansion, we also accelerated the R&D process on the specialty technology platforms. Up to now, the R&D process for all the platforms are going very smoothly.
We have many products ramping up, going to the mass production. We anticipate our utilization rate will remain at a very high level till the end of the year, and almost close to 100%.
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Thank you.
Andrew, let me talk about this. Andrew, you there? Yes. We have been upgrade and acquire necessary tools to replace some of the old tools for the three 8-inch fabs for many years. Through that effort, we're continue to improve the product mix within discrete, within MCU, within some other things. Okay? At the same time, because strong demand, we're going to be raising price. Okay? That's going to happen very seamlessly, naturally. Okay? I expect we get some great performance out of these three old fabs this year.
Okay? They're doing very well. Just look at our Q1 number. Okay? $250 million from the 8-inch fabs. I expect it will get better and better this year. Okay. I always talk about $1 billion revenue from the three 8-inch fabs, but I think, you know what? This is the year. We can make it happen.
Yes. My last question is regarding your gross margin. You already mentioned the 8-inch wafer fab, you are targeting 30% gross margin this year. The 12-inch, it seems you are not that comfortable with the current 7% margin. If we mix together, can we say for the rest of the year, your second quarter guidance already out. Can we say the second half of this year margin will be quite similar or below or above the first half, 24% gross margin, combined both 8-inch and 12-inch?
You're talking about second half? You mean like second half.
Yes.
The gross margin?
Second half this year.
Between first half and the second half, right?
Yeah.
I think we continue to ramp very quickly. I think even the product mix for the 12-inch fab will get better. You have to remember, it is brand new fab. We're managing the depreciation expenses very carefully. Okay. It is a lot of depreciation expenses. You know what, Andrew? Don't worry about. You're always dwelling on gross margin for the 12-inch fab. Forget it. Just think about, look at the revenue. Look at the revenue growth, and then look at the cash generate, EBITDA, how quickly we turn that number.
Okay. It was negative. It's positive now. Okay. The depreciation expense is good. Okay. You have to have that. That's part of the process. It will affect gross margin, but the important thing is focus on revenue. Okay. The three 8-inch fabs will have great gross margin. They're going to be quickly get to 30% or even above. The 12-inch fab, it's going to take a while. It's $2.5 billion initially, the first phase. This time is another $800 million. You know what? Our ASP is getting better and better. Okay.
I can't predict how the gross margin is going to go with the 12-inch because the in and out flux is going to be really. It's hard to just to predict, I think overall, it's going to get better and better. Andrew.
Thank you.
Your next questions come from [inaudible] . Please ask your question.
Okay. Thank you to take my question. I have two questions. One is about your Wuxi fab. Since you will reach 65,000 wafers per month by end of this year, I think you must also consider the further expansion ahead. What's the new application you plan to introduce to this Wuxi fab, or you are basically expanding the existing platform? Currently, my feeling of the Wuxi fab is that the ASP is much relatively lower versus your peer. It's below $500 if you use that. The EBITDA margin seems to be not so ideal.
When you introduce the new application, do you expect any change on this, your profitability of the Wuxi fab? Thank you.
Hey,
Yes.
I don't know where you get the number $500 for the 12-inch fab. That is completely wrong. Okay?
8-inch equivalent.
Oh, that's a different story ?
8-inch equivalent.
You have to be very clear.
Yeah. 8-inch equivalent.
If it's a 550 x 2.25, it should be getting to $1,200-$1,300 . That's a very respectable price for the 12-inch business initially. Okay. Let me tell you. Just overall, we're not there yet. I think there are two parts. One is the discrete, the other one, the IC, like the NOR, the NAND, the larger RF, BCD. The discrete part, it just goes anywhere from, at this point $400-$500, to up to $800-$900. The idea is continue to improve. Okay? Out of 40,000 wafers, the 18,000 wafer capacity is dedicated for the discrete. The idea is get them into the high-end stuff like IGBT.
Okay? Their ASP could be higher. The IGBT in 8-inch is about $400-$450, hopefully get close to $1,000. The idea is to get all of the capacity for IGBT and the high-end stuff, the high voltage discrete products. That is the plan. For the IC part, hey, we're getting things from $1,200- $1,500. Okay? You have to realize, this will get better and better. CIS is initially run around $1,000. At 90 nm, it's already improving even within that technology node. At that technology node, but I think going forward it would be at 65 nm, it will be $1,200, $1,300 or even more.
Some of the new applications we're doing, it is all at around $1,500. It's going to be where this fab is doing what it's doing in its most efficient way. I mean, nobody else can deliver a 12-inch fab at the rate that Hua Hong is doing. Okay? I mean, lucky I hope that will answer some of your question, but maybe I'll let Junjun Tang answer the initial part that you had.
Yeah.
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We are progressing the overall Wuxi according to the original target from last year. We have five major specialty technology platforms. We achieved all the targets we set two years ago, we have engaged many new customers and existing customers so we can achieve 40,000+ wafer starts in April.
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Thank you for your question just now. For the next step, the expansion plan from the history of Hua Hong, we are developing based on the specialty IC and advanced discrete.
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From the IC perspective, we have MCU, embedded non-volatile memories and PMIC, and et cetera, the technology platforms. We will research on the more advanced technology nodes, and we can introduce more applications according to customers' demand to satisfy our requirements for capacity expansion.
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We have already achieved a decent performance in the 12-inch power discrete aspect. We have many customers, strong demand in all four platforms.
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On one hand, we will continue to enhance our existing technology platforms to satisfy our customers' demand. On the other hand, we will focus on the new energy vehicles.
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We are very confident, along with our capacity expansion to 65,000, we will ensure our capacity utilization rate around 100%.
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Thank you.
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From our business structure, we have around 1/3 business in the communication field.
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According to our communication with our customers, the market demand for the second half is still very strong, not only in the communications, also the new energy vehicles and BCD, MCU, industrial, etc.
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In particular for the power discrete.
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Your next question comes from Sze Ho from China Renaissance. Please ask your question.
Hi, good afternoon. My first question is regarding the Wuxi fab. Given the very rapid ramp of the factory, is it fair to assume that the company is getting a pretty high level of customer commitment? Or is there any take-up place arrangement in place for the customers?
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We have such high utilization rate at Hua Hong Wuxi, thanks to our specialty technologies, the acceptance of the customers and the market.
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Our embedded technology supports some demand from domestic design companies.
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BCD and power management platforms are well accepted by some North America and Europe customers.
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For more capacity at our Wuxi 12-inch fab, our customers are also accelerating their R&D process.
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We are facing strong pressure in tape out.
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We are very confident our R&D team will deliver the technologies satisfying customers' demand and for the market requirement.
Okay. Second question, maybe for Daniel, can you share with us the capital injection timing or amount from your JV partner? Because you are now embarking on the second phase of expansion.
Okay. Very good question. The first phase was a $2.5 billion investment. It includes the land, the shell for the first fab, and also clean room, facility and all of that. The 48,000 wafer capacity. For the second phase, that was $2.5 billion. Out of that, $1.8 billion was equity from the three major shareholders. We own 51%, the IC fund own 29%, and then Wuxi government owns 20%. Okay? Now for the second phase, when you look at the debt to equity ratio for the first phase, we actually had $1.8 billion equity, only borrowed $700 million. We had enough.
Basically the debt ratio was very low. We discussed for the second phase, it's about $800 million for the expansion to 65,000. Okay. That, we basically didn't bother the shareholders at this point. I think we basically were going to be doing a raise of the debt. Put together the syndicate loan group.
It's going to be basically a $100 million loan. We're going to be doing that. That's what it was then.
Okay. All right. Very clear. Yeah. Lastly, for that fab, what's the maximum capacity that you can achieve? I think, especially beyond the 80,000 wafers.
Probably 80 ,000- 90,000.
That's the max, right?
Yep.
Okay. All right.
After this, we're going to go from 65,000- 80,000- 90,000. It's going to be a little bit more. It's going to be also, we're thinking about 40 nm, small mini line maybe. It's going to be a little bit more, but we're good to get there.
Okay. Basically, the 90,000 is the maximum, right?
Yep.
Okay, good. Okay. All right. Thanks, Daniel. Great results.
Thank you.
Your next questions come from Luo Yiyang from Tianfeng Securities. Please ask your question.
Hi, management. Thank you very much. First is a follow-up question about the Wuxi fab. Looking into the product mix when the capacity reach 80,000 wafers for the amount in the middle of 2022.
The product mix?
Yeah.
Well, right now we're looking at 40 nm. The CIS is around 10,000-15,000. We're looking at 48,000. The power discrete would be 18,000. 15,000 will be CIS. Logic and RF is 5K. Embedded is 5,000-10,000. I think 5,000 for now. The rest would be logic and some NOR flash. NOR flash is easily 5,000-10,000.
Okay.
That's for 40 nm. You can think about, basically, this is going to continue to expand based on the need of our customers.
Okay. The second question about your 8-inch fab, about the ASP increase. Can you break down by product? Which product contributes to ASP increase most in first quarter? How the 8-inch product mix changed in the first quarter?
Virtually across all platforms, we're seeing strong demand. We really look at that. We have ASP increase our MCUs, all the power discrete products, from low voltage to high voltage, has all gone up. I think you're going to see more in the second quarter. Okay? Because we started in Q4 last year. Only part of that thing would reflect in Q1, but I think Q2, you're going to see a lot more. I think it will have more impact on the ASP.
Okay. Thank you, Daniel.
Your next questions come from Saiji from Jefferies. Please ask your question.
Hi, Daniel. When I look at the 12-inch depreciation, I think it decreased in first quarter versus fourth quarter last year. I'm just wondering, as you extend capacity in first quarter, why the depreciation of 12-inch Wuxi fab would decrease? How do you see the depreciation for 12-inch and 8-inch this year?
I didn't understand your first part. Okay. The depreciation expense for the 12-inch fab decreased compared to what?
Yeah. We did some math on your 12-inch P&L, and we found that the depreciation in 12-inch actually decreased in first quarter.
Compared to Q4?
Yeah.
That is not true. Last year, overall depreciation expense for the 12-inch fab for Q4 is $25.6 million. This time was around $33 million. Let me just give you the overall depreciation forecast.
Okay
For depreciation expenses. I think for the Wuxi fab for the whole year, it's going to be around slightly under $180 million, probably $170 million-$180 million. Okay? Then for the 8-inch business, it's going to be around $144 million for the whole year. Overall, we're talking about $320 million.
I see. Thank you. My next question is regarding your product mix when you expand your capacity from 65,000. What's the drivers and those 25,000? Also can you share what will be the main drivers when you expand from 65,000- 80,000?
We're looking at many things. CIS moving from 90 nm- 55 nm. Standard NOR flash, it's ramping up very quickly. There are also strong demand for BCD. BCD, that's the new thing. We have a few other things that are still under our new work. I can't really share with you at this point because confidentiality that we made the commit to our customers very high ASP, high margin products, so in some of the very interesting areas. Yeah, it's going to be very, I would say, high demand, high margin products.
Got it. Thank you. Just a follow-up. Can you share a little bit outlook on what's the current stage of your 55 nm and 90 nm allocation, and how do you expect it to migrate let's say in the following quarters?
I'm sorry, I didn't get you.
Can you share what's your breakdown or allocation between 55 nm and 90 nm [inaudible] and how fast do you expect it to migrate?
At this point, it's more 90 nm, less 55 nm is moving very quickly, especially for CIS, for NOR, and some other stuff, and even BCD. Eventually the goal is to move all of that to 55 nm, because they're better ASP and high margin.
Thank you very much.
Your next questions come from Po Kuk from PLK Fund. Please ask your questions.
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The current breakdown will be 18,000 for power, around 10,000 for eFlash and BCD, 10,000 for CIS and some other products. From 40,000 - 65,000, we will add some 55 nm ICs like CIS, MCU and the eFlash.
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From current point of view, I don't see any change for the market demand. We are very confident our utilization rate will keep at a very high level. We will do better and better.
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Yeah, that's correct.
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Ladies and gentlemen, that's all the time we have for questions. I will now hand back to Mr. Daniel Wang for closing remarks.
Well, again, thank you all for joining us today and the valuable questions and input. We look forward to seeing you again in the next call. I wish you all continue to stay safe and healthy. Believe me, I sincerely hope we'll be able to meet in person very soon. Thank you.
Ladies and gentlemen, thank you for your attendance. You may now disconnect.