Welcome to Nanya Technology's 2026 First Quarter Earnings Conference Call. All lines are in a listen-only mode. The conference will be held only in English for investors around the world. Today's conference will be approximately 60 minutes. Nanya Technology's President, Dr. Pei-Ing Lee, will summarize our operations in the first quarter of 2026, followed by our guidance for the next quarter and key messages. Nanya Technology's Executive Vice President, Dr. Lin-Chin Su, Vice President, Mr. Joseph Wu, and Financial Executive, Mr. Philip Chao, will join us as we open our Q&A session. Today's presentation materials are available for download at Nanya Technology's website at www.nanya.com. As usual, we would like to remind everyone that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause the actual results to differ materially from those contained in the forward-looking statement.
Please refer to the safe harbor notice that appears in our presentation material. Thank you. Now I would like to turn the call over to Nanya Technology's President, Dr. Pei-Ing Lee, for the summary of operations and current quarter guidance. Dr. Lee, please begin.
Ladies and gentlemen, welcome to Nanya Technology Q1 Investor Conference. I'm Pei-Ing Lee. Today's presentation include Q1 2026 revenue and result, CapEx and shipment, market outlook, and business review and outlook. I may have a little more material to share with you in today's presentation later on. First, start with financial results summary. Our Q1 2026 net sale comes to TWD 49.087 billion versus Q4 last year, TWD 30.094 billion. Q-to-Q, up by 63.1%. Gross profit and gross margin comes to TWD 33.316 billion at 67.9% in Q1 versus Q4 last year, TWD 14.759 billion at margin of 49%. Operating income, TWD 30.111 billion at operating margin of 61.3% versus Q4 last year, TWD 11.781 billion at 39.1%. The non-operating income, TWD 1.607 billion, and income tax expense at TWD 5.66 billion.
Net income for Q1 comes to TWD 26.058 billion at net margin of 53.1%, versus Q4 last year, TWD 11.092 billion at margin of 36.9%. For the quarter, TWD 8.41 per share, versus Q4 last year, TWD 3.58. Book value comes to TWD 62.25 per share, versus Q4 last year, TWD 54.99 per share. Quarterly revenue and results summary. Revenue are Q-to-Q up by 63%, year-to-year up by 582.9%. For ASP, increased by over 70% Q-to-Q, and year-to-year increased by over 200%. For shipment, Q-to-Q down by mid-single-digit, and year-to-year up by more than 100%. For exchange rate, we see favorable, low-single-digit are favorable, and year-to-year unfavorable mid-single-digit.
For the Q1 2026 result comparison, net sales, TWD 49.087 versus TWD 30.094, up by 63%. The result is due to ASP increased by over 70%, the shipment decreased by mid-single-digit, and exchange rate favorable by low-single-digit. Gross profit, TWD 33.316 billion versus TWD 14.759 billion. Margin is 67.9% versus 49%. The gross profit increased by TWD 18.6 billion, mainly due to higher ASP. For operating expense, TWD 3.205 billion, versus Q4 last year, TWD 2.979 billion is marginally increasing. For operating income, TWD 30.111 billion at operating margin of 61.3% versus Q4 last year, TWD 11.781 billion at margin of 39.1%. Now, operating income increased by 18.3%, mostly due to higher ASP. Net income TWD 26.058 billion at a net margin of 53.1%, compared to Q4 last year, TWD 11.092 billion at margin of 36.9%.
The net margin increased TWD 15 billion, and the difference between the OP margin and net margin mostly due to income tax expense are TWD 3.4 billion unfavorable. Operating expense for SG&A expense for Q1 this year are TWD 1.096 billion. We are seeing operating SG&A increasing in Q4 last year and also in Q1 this year, mostly due to employee bonus planning. For right-hand side, the R&D expense are also increasing from Q1, Q2, Q3 last year to Q4, TWD 2.127 billion. At Q1 this year, TWD 2.109 billion and mostly also due to employee bonus planning. For cash flow, beginning balance for Q1, TWD 58.074 billion. With the cash from operating activities, TWD 31.287 billion and capital expenditure TWD 2.809 billion and financial activity also minus of TWD 533 million. The net end balance at TWD 86.019 billion with free cash flow of TWD 28.478.
This dollars come down to the note underneath of this page. Our net cash comes to TWD 68.2 billion. The net cash means that our cash equivalent, TWD 86.0 billion, minus a debt of TWD 17.8 billion. The net cash, TWD 68.2 billion, is exclude the private placement that happened in April, which comes to TWD 78.7 billion. This chart here shows Nanya's performance in net income over past 13 years, plus Q1 2026. As indicated here, over the past 13 year, that Nanya has been profitable in 11 years. With the Q1 this year, TWD 26.1 billion net income compared to the two years of loss, okay, 2023 and 2024. In the Q1, we are very much compensated the loss happened in 2023 and 2024. On the bottom chart here shows Nanya net cash. Net cash means that our cash minus debts, okay?
From the beginning of 2023 at minus TWD 71.3 billion, comes to, at the end of Q1, at TWD 68.2 positive. This is an encouraging trend and we are expected to self-fund our new FAB construction. For CapEx and bit shipment. On the left-hand side of the chart, our CapEx was TWD 13.4 billion in 2025. In 2026, in Q1, CapEx is TWD 2.8 billion. However, for the year 2026, we expect CapEx up to TWD 52 billion. Within those TWD 52 billion, will be around 30% for wafer equipment and 70% mostly for clean room construction and facility for our new FAB. On the right-hand side of the chart, bit shipment. In 2025, our bit shipment up by 50%, okay? In Q1 this year, our bit shipment was down by mid-single digit. Okay. We've seen our inventory level becoming healthy.
In 2026, the whole year, we target to have around 15% year-to-year growth versus 2025. For market outlook, in general, the whole market, AI-driven CSP CapEx has supported strong cloud DRAM demand. That's including HBM, RDIMM, and low-power DDR5. On the other hand, constrained DDR5, DDR4, low-power DDR4, and DDR3 supply has led to legacy DRAM end of life. We are expecting training and inference may trigger more customized edge AI applications. From a supply side, in 2026, we see marginal new capacity introduced by industry, which is more focused on high-end CSP and value-added demand. From demand side, AI has driven overall DRAM demand, HBM, high-density RDIMM, and low-power DDR5 leads to overall DRAM demand. We're seeing strong DDR4, low-power DDR4, DDR5 demand for high-end SSD, BMC, and NICs. For conventional high-end PC and mobile demand for DDR5 and low-power DDR5 remain consistent.
Others means that the Consumer side, we're still seeing strong consumer demand for high-ticket items. For the smaller-ticket item, demand is slowing down. However, smaller-ticket item in general is already small share of DRAM consumption to start with. The overall demand remain strong, healthy, and sustainable. For Business Review and Outlook, Nanya just completed our private placement. Update for private placement is that four of our major customer participate in Nanya's private placement. We have made the announcement in MOPS on March 25. The total proceeds of TWD 78.72 billion, which means 10%-19% ownership after private placement, also announced in MOPS April 8. For the supply agreement, including stable supply of multiple product mix, why we're doing private placement? First of all, we strengthen Nanya and our customers' partnership.
Second, we build up with customer, a win-win position in AI and CSP supply chain. That's including SSD networking. With the cash injection to Nanya new FAB, enhancing Nanya's DRAM supply. For Nanya specific, we position ourself in a AI value chain. For the financial update and outlook, in 2025, we have a profit of TWD 6.61 billion, EPS TWD 2.13 per share for the whole year. Our board has approved a dividend of distributing TWD 4.65 billion and approximately TWD 1.35 per share. This is based on 3.5 billion shares outstanding after private placement. In Q1 2026, Nanya make a profit of TWD 26.06 billion and at EPS of TWD 8.41 per share. In Q1 2026, gross margin at 67.9% and net margin at 53.1%. For Q2 2026, we are expecting further improve beyond Q1.
We are expecting high gross margin is sustainable in the next few quarters. For operation update and outlook, Nanya DDR5 contribute to our 10% revenue. However, it's flexible to increase if needed. Based on our supply agreement, likely, the percentage will be increasing for the coming quarters. For low power DDR4, we are serving industry-wide supply gap. For customized AI UltraWIO, memory is starting to contribute initial revenue. It's a small percentage, but it's already contributing initial revenue. Our new FAB construction on schedule and target equipment move-in in Q1 next year. For our third generation, 1c, and fourth generation, 1D, and EUV development are on schedules. For ESG recognition for the last quarter, we are selected as Top 100 Innovation by Clarivate on the fourth consecutive years. Now, we may move on to Q&A section.
Thank you, Dr. Lee. Ladies and gentlemen, we are now moving into Q&A sessions. We'll begin taking questions from dial-in participants and followed by the text questions from webcast. For webcast participants, please message your questions with your name and company name to Nanya operator in the chat box. Now, for dial-in participants, please press star key and one on your telephone keypad if you would like to ask questions. To cancel your questions, please press star key and two. As a reminder, it is greatly appreciated that you turn off the speakerphone of your device to prevent possible echo effect. Please limit your questions to two at a time to allow all participants an opportunity to ask questions. We thank you for your cooperation. Now, for dial-in participants, please press star key and one if you would like to ask questions. Thank you.
The first one to ask questions, Charlie Chan from Morgan Stanley. Line is open now.
Thank you. Hi, Dr. Lee. Congratulations for a very strong result. Your gross margin is amazingly high. I have two questions first. First of all is about, over the past three months, do you see faster ASP price hike? Because I remember three months ago, the guidance was quite conservative, right? Like 20% Q-on-Q price hike, but I think that implies the ASP increase should be much more than that. Also, you talked about the future trends, right? I'm not sure if you noticed the recent spot market dynamic. It seems like your outlook is very bullish, but spot market is suggesting otherwise. First of all, can you comment on the price trend in first quarter into Q? Thank you.
I think your first question about ASP for the past month was quite encouraging for the supplier, and the margin is also, in general, very promising for the supplier as well. Okay. Most importantly, we're seeing the margin is sustainable. Your question about the last quarter, in Q4 last year, I commented at 20% ASP. Yeah, it's true. At that time, I only seen one month. Okay. Maybe that was my short sight or my misunderstanding of your question. Your second comment is on stock market.
Right.
I trust the stock market is mostly related to DRAM stock market or general overall stock market. Okay? I cannot be expert in the stock market. I think you are, okay? You're pretty much the stock market expert, okay? Regarding to the stock market was impacted by overall, there's a Middle East geopolitical issue, okay? There's an energy related issue, okay? Overall, the impact on the global economics. In general, because of AI, and specifically require DRAM as a critical component, and the AI development has been continued to be quite encouraging, that's a result of the DRAM market being continued to be quite healthy. Okay? The stock market specific for DRAM, I think that your inference is probably more than mine.
No, I don't mean to influence the market. We just share what we are seeing on supply side, demand side, and pricing side. Definitely, actually, I was asking about the spot price.
Oh, okay. I'm sorry.
It was also very helpful to get some color on the capital market feedback. We like to ask both. Thanks for saving one question for me.
Okay. Spot ASP, recently, there are some fluctuation on the spot ASP. I'm sorry, I misunderstood your question. Okay.
No, we care stock market as well. Don't get me wrong.
Yeah, I heard stock market, but I didn't know you mean spot market. Spot market, okay.
Yeah.
Okay. First of all, the spot market is a small percentage of overall market, quite small, okay? Actually, as AI increasing, the spot market even getting smaller. Okay, that's first point. Second of all, spot market is a lot of fluctuation due to, there's a lot of leverage in the spot market happening by certain players. Put it this way, as an example, in general speaking, you may be seeing one product in the general market, okay? General market means that in the normal market other than spot, you may be seeing a product selling, say, supposedly $20 or so, but the spot may be already jack it up to $45 or even $50, which is quite outlier compared to the general market, okay?
As a result, when the outlier making certain adjustment due to certain reason, okay, they may have sufficient inventory or whatever reason, we don't know, okay, the price may be drop all of a sudden by 30%. You figure that $45, $50 down by 30%, what is it? Still 30-something dollars compared to regular around $20. I'm just giving you a general example, okay? That's the reason why stock market is fluctuating, overall speaking. More importantly is that I just mentioned that spot market by itself is small percentage of overall market. In general speaking, other than spot market, the demand is still quite healthy and also quite sustainable.
Right. Dr. Lee, if I may, all of this spot market dynamic, I think when this so-called upcycle, supercycle began, like last year, the spot market price was a very good indicator. I'm not saying it kind of accounts for a big part of demand, right? I'm just saying that it could tell us something. Especially, recently, we see China smartphone shipments tracking much below expectations for some China brands like Transsion. Funny, right? Their smartphone shipment probably down 35% year-on-year. I'm not sure if we should associate this spot price correction to weaker demand.
Okay. I think I commented in my presentation also, we're seeing that small ticket item, which means that where your BOM cost % is high, those small ticket items may get influenced, okay? As I say, those area is important, but is still relatively small % in terms of consumption, okay? That's including small item, low end, whatever it is, okay? They will start to see some pressure in the BOM cost, okay? Those adjustment, as you know, is making some adjustment already, okay? Overall speaking, more important is overall demand and supply-demand balance. We don't see that to be overshooting or undershooting in the overall market, substantially.
Thank you. Tony, my second question is about the LTA coverage, right, because we can understand that the SSD, networking, or AI-related is going to be very, very strong, right, in the coming maybe five years, ten years. Can we get more detail about how much of your, for example, 2027-2028 business can be covered by this LTA contract?
In general speaking, we are trying to partner with our customer, okay? To help their business development. At the moment, their business development in the high-end side is as I indicated just now, okay? In the SSD, in the networking, in the BMC, NIC, those area, okay? So that's in general what we intend to help our customer making development. However, LTA coverage will cover, overall speaking, what is our customer's demand, and the product portfolio that we offer to them, including not just that. Of course, I mentioned that it may include DDR5, low-power DDR5, DDR4, low-power DDR4, DDR3, RDIMM, SO-DIMM, you name it, SO-DIMM with ECC, all kind of different product portfolio, that we are currently offered to the market around more than 40 product portfolio concurrently. Okay? And those product will continue to serve our customer in long-term.
Plus, we are also developing new technology, process technology, and new product technology to be offered.
Mm-hmm.
That will combine with the current 40+ product portfolio in the next few years.
Right. Is there any % of your business can be covered by LTA?
We generally try to basically formulate our business, including long-term LTA, middle-term LTA, okay, short-term LTA, and also monthly deal. We like to have a combination of all those together. Okay?
Okay.
For a reason, that some of our business is committed. Okay? Some of our business that we also need to take care of the eco cycle in the overall DRAM supply and demand industry. Okay? Making sure that our customer had sufficient DRAM supply, however, not to have extra to put in the inventory, while the other customer may not have sufficient supply and have a line down situation. We try to do our best. We cannot do everything perfectly well, but we try to do our best to make the industry more healthier.
Okay. Got you. I will be back to the queue. Thank you, Dr. Lee.
Ladies and gentlemen, we are now in Q&A session. Next one to ask questions, Simon Wu from Bank of America. Please, limit your questions to two, please. Okay, Simon, you're on now.
Yes, thank you very much. Congratulations, Dr. Lee. Great result. I think you must be very happy with a very high margin, but your point today, you may raise the price further. How are you going to manage some customer resistance to the further average price hike? Meanwhile, your gross margin, OP margin already record high. How about if you just make the average price very stable for the customer rather than increasing further and further?
This is a good question. Actually, the margin is already high, and of course, we will be doing our ASP according to fair market price. Of course, we will discuss with our customer on fair market price, case by case, and day by day also. The buyer and suppliers discussion and negotiation has always been happening, even it's a down market, not so-so market, or it's a up market. It's always happening day by day. At the end, we are looking forward to have a fair market price to our customer. That's the most important. We also seeing the concern from our customer as well. Our customer also seeing our concern on the fairness as well.
You mean still there are many customers which need the DDR4, even DDR3? Your customers are competing each other among themselves. Some customers acting, accepting higher price, then you can sell the product for those customers. As long as the shortage continues, maybe you can raise the price.
In general speaking, Simon, I cannot comment specifically on one customer versus the other.
Yep.
One product versus the other. In general, this is the fair market discussion throughout all the time, okay? Not only now, but also in the past, okay? That's a general situation, but your point about the high margin and maybe customer resist, and that's always happened. Now, even at a very low margin, customer also resists to be accepting the price as always, okay?
Yeah. You think the ASP second quarter still will increase quite meaningfully quarter-on-quarter basis as the industry trend, right?
Yes. That's a expectation.
Mm-hmm.
Also, the confidence level for that is relatively high.
Yeah. Even usually the September quarter peak season and then December quarter still okay. The industry trend-wise, you see the further upside, some room to see the price increase September quarter, December quarter.
Oh, that's more of a seasonality topic, okay?
Mm-hmm.
Seasonality could be related to two important thing. First of all, is a consumer consumption seasonality. Also, it all depends on major company, like enterprise, their budgeting, okay, their spending by quarters. Okay? That could be different from one company to the other company, and that's general seasonality. Okay?
Yeah. Oh, very quickly, you already mentioned the LTA. Do you see the quite significant portion of your sales with the LTA, or still small portion? Maybe your customers already get confirmed, committed certain volume, but the price is still mostly negotiating monthly or quarterly basis. Maybe would you recap the definition of LTA in terms of the volume and in terms of the price, and then time horizon, just roughly? Yes.
For LTA, we will be supporting our private placement subscriber, our partner on that, as well as our existing LTA. We'll continue to support existing LTA. Okay? The LTA percentage will not be covering 100% of Nanya's supply, okay? As I say very beginning, we'll try to have a long-term LTA, middle term LTA, and a three-month LTA, and even monthly price and deliver, okay? That's going to be continued to be Nanya policy. Okay. To be sure, we are making sure that all supply agreement and LTA is fulfilled, as much as we can. Okay?
Your agreement is more like a one year, two year, three years long commitment. Meanwhile, price can be changed monthly, quarterly basis.
That could be different customer by customer. Okay.
Yeah. Okay. The SSD case, again, you are currently selling the DDR4, right, to the SSD customers?
Both DDR4, DDR5, they're both. Okay?
It is called for buffer memory or cache memory for SSD solutions?
Customer's solution, whatever they want, for the cloud.
Yeah. Okay. Thank you, sir. Maybe, yeah, I'll stop here for now, and then I will get back to you.
One point, Simon, you asked question before about employee bonus. Okay. I'd like to take this opportunity to share with you on the employee bonus plan.
Yeah, also the shareholder return policy, because if you pay lots of special bonus, maybe you are.
Yeah
Target for the dividend could be at risk.
I'd like to make a couple comment on that at this point. First of all, employee bonus has been top priority for my Presidency, okay? For the last 13 years, we have made profit for 11. Okay? For all the profitable year, we have distributed not only yearly bonus, but also quarterly bonus to our employee. Okay? Even with those two years, that we are not making profit out of 13, we still try to do performance-based bonus for the employee. Okay? I'd like to emphasize that we are trying to share bonus with our employee.
You have already provisioned the bonus expenses in Q1 result?
Yes.
Okay. Yeah. We don't have to worry about any margin. Yeah.
It's already considered.
Yeah. Overall, so glad to hear your confirmation dividend payment based on the 2025 results. Would you recap maybe your target payout ratio, 50%-60%?
You mean the dividend? Okay. The dividend, again, this is subject to Board approval, okay? In general, we will measure the market situation and our cash requirement, okay, and all our also shareholders' consideration, everything together, okay? We'll discuss in an upcoming Board and Shareholder Meeting as well. Okay? For instance, for the last year, we are distributing a higher %, but likely for this year, we may be distributing less % because our need to our new Fab construction and also to build up our future development.
Yeah. All clear. Thank you so much, Dr. Lee. Next one to ask question, Charlie Chan from Morgan Stanley. The line is open now.
Thanks for taking my follow-up question. First question is also on the quarterly price. Can you provide some roughly range for 2Q contract price increase for DDR4?
Charlie, you won't give up on the numbers. I just mentioned that.
Yeah
... really that from the supplier side, we're seeing some remarkable-
Right
Price side, and the margin will get higher in Q2. Okay?
Yeah. Anyway, based on our calculation, right, if January price up 20%, February, March, each also up 20%, I think the starting point for April is already very, very high. I would say, the quarterly price hike, 40%-50% is the current market expectations. Is that too high or conservative?
Charlie, your guess is better than mine.
Okay. My guess is 40%. Do you think that's about right?
I think.
40%
I better not put in a number in the market. Okay?
Okay.
I will try to say few 10s of %. Okay?
Okay.
Okay.
Okay. Sure. On the supply side, right, in research, we were a little bit worried about, for example, Korean supplier, they extend the EOL, end of life, of DDR4. China peer, not sure if it is also the case you're seeing, that they probably will add back some DDR4 capacity. I know demand is very strong, but, besides your customers signing LTA with you, do you think customers are also trying to push other FABs to produce more DDR4 in the coming years?
My answer to you is, Charlie, our supply is not limited to DDR4 and not limited to mobile DDR4. It is a wide scope of supply. I would like to share with you maybe, give a nice round of it. Okay, I would like to share with you, I don't know if you see it on this presentation. Okay? Basically, this presentation here, this chart here showing, first of all, Nanya net income on the top chart. Okay? Middle chart here shows Nanya sales in regions. Okay? Over past more than 13 years, our sale into China customer has been in 20% ±5% or so. Okay? Our sale to worldwide customer is around 80% ±5%. Okay? All this sale is supported by LTA and monthly, okay, including worldwide sale and sale to China customer. Okay?
The bottom chart here show you that China domestic supply, okay, including all the supplier in China, is basically going up quite substantially over past 10 year or so. Okay? What I mean is that if you look at this chart versus Nanya sale in region versus Nanya profitability, okay, it's really not correlated. Okay? It really not correlated. On top of that, I want to indicate one year, which is 2023, which is the worst year now for Nanya performance. That year, Nanya lost TWD 7.4 billion. On the same year, the worldwide companies lost between TWD 180 billion-TWD 340 billion, which means that if there's any impact, any correlation, okay, with what you've just been concerned with China domestic supply, it's not limited to Nanya. Okay?
If you look at this chart, you found that it's really not direct correlation with Nanya performance, it's not even direct correlation with worldwide company supply. Okay? I'd like to give you this information in what's been happening in over past 13 years. Okay?
Yeah, because I think memory or DDR4 is still kind of commodity, which is sensitive to incremental demand and supply dynamic, right? My question was very direct about whether you're seeing the DDR4 supply is growing. I'm not saying two years later, I'm talking about the coming six months.
DDR4 has various of DDR4. DDR4 is not just the small item use DDR4. There are large ticket item use DDR4. There are high-end use DDR4. There are communication use DDR4. There are theme use DDR4. There are all kind of different DDR4, okay?
Mm-hmm.
There are DDR4 can be used for cloud. There are DDR4 cannot be used for cloud, okay? In general, you cannot take one DDR4 saying that everything is one story. There's a lot of story behind DDR4. Even with emphasis on DDR4, I believe that Nanya is capable of and flexible of switching our product to meet our high-end customer requirement. Okay? I also believe that DDR4 will continue on to serve many, many area for many, many years as well. Even with more or less here, adding more or less, okay, important thing is there are different type of DDR4 for different applications.
Okay. Yeah, thanks, Charlie. I think I take that you have a big exposure to specialty markets and there was a decoupling of your performance versus the supply based on your analysis. I take that. Switch gear back to LTA discussion. Can we get more details about, I'm referring to just LTA more than a year, and especially for those strategic partners, investors, are those the price negotiable? Are there any sort of prepayment in addition to the private placements for the LTA? Yes.
Charlie, I cannot share with you our agreement because under nondisclosure agreement that we have with our customer, but I can share with you that we will treat our customer fairly, and also that will be also fair to Nanya. That means that in general speaking, we're talking about fair market.
Okay. Yeah. I think those are all my questions. Thanks for your answers, Dr. Lee.
Thank you for your question, Charlie.
Thank you.
Next one to ask questions, Gokul Hariharan from J.P. Morgan. The line is open now.
Thank you, Dr. Lee, for taking my question. I just have one question. I'd like to ask you the sales application mix. Could you share your sales from AI server applications for last year, also Q1, and also enterprise SSD, RAID, the DDR4, DDR5 sales mix for 2025, and also Q1 in 2026? Thank you.
In general speaking, our share to cloud server, okay, that's in our DIMM plus the PC, is around 20%-25%. Okay? For the storage, which means SSD, is around 10% for now, but that percentage may increase, okay? We have networking, it's around between 15%-20% of networking. Networking means communication as well, okay. Other than that, it's the rest, okay? The rest is general consumer. One thing to mention that automotive and industrial is about approximately 10%.
Just within the RDIMM and the PC, as you said, for the cloud and the computing general, if you exclude the PC portion, just looking at the RDIMM portion, then is it safe to say 15%, 10%-15% range?
That will be changing as we speak, okay? I cannot show you the specific percentage on that, okay? In general speaking, we are doing around 20%-25% for server team and PC combined because they use the same product, mostly DDR4, mostly DDR5, or even DDR4.
Understood. Thank you.
Thank you.
Next [inaudible] of Bank of America line is open now.
Yeah, thanks again. Yeah, actually, very quickly for your new FAB, you are saying new equipment for the new FAB, the installment will start in Q1 2027? That means the shell FAB building mostly done already? I mean, it will be done by the end of this year, construction?
The structure is almost done already. Right now, we are going through facility and clean room construction.
All right, great. Hopefully, we can visit there.
You're quite welcome.
In terms of 1c, yeah, 1c, 1D, not yet EUV, right? Multi-patterning based, right?
The 1c, 1D, and EUV is under development, and 1c already have some beginning result.
1D should have EUV layer in it?
No. EUV layer, it's been exercised in many different generation. We don't see that is a requirement for even 1D. We will exercise it. Yeah, we will exercise it in 1D, or even 1c.
Without EUV?
With or without EUV.
Oh, okay. Your CapEx model for the new FAB still aiming for the up to DUV level rather than EUV?
They will have both, okay? We will have DUV facility and also EUV facility.
Yeah. People are still asking the helium and the bromine supply shortage, but when you run the today FAB in the 3A, you don't see any gas shortage because of the Middle East issue?
You're talking about HBM, right?
Yeah.
In general speaking, the helium can be available other than Middle East, okay? There are no immediately shortage issue yet. However, the price is increasing, for sure.
Yeah. Very quickly, sorry, a little bit confusion is your revenue mix. Previously, I remember you said maybe more than 50% your revenue is consumer.
Yeah
related. Today you're down already 20%-25%.
No. Simon, sorry for misguiding you. Our consumer is anything other than PC, server, and low power. Everything we put in consumer. Today, I commented on SSD, commented on auto, industrial, commented on networking. They are all in consumer, in general speaking. Today, I just say I'm more specific on those areas. Yeah, in general.
Yeah.
We lump it in as a consumer.
Okay. How about this way, sir? Maybe let's start with easy application. Server plus PC together computing related, again, about 20%-25% your sales.
Yeah, plus or minus, yes.
Oh.
20% ±. That's including PC and server, yes.
Okay. This portion includes the DRAM for SSD product or not?
No, not including SSD product. Yeah.
The SSD market not so big, and the SSD does not use significantly high amount of the DRAM. The DRAM for SSD, I'm feeling very low to your revenue, no?
Actually, in general speaking, because of DRAM is helping NAND flash to perform well, especially in the cloud computation, that area becoming more and more important as the AI development in the cloud today, but may even go beyond that.
Yeah. But still less than 10% of your revenue, so DRAM for SSD.
Today, for now.
Yeah.
For now.
Yeah, still small, less than 10% of your revenue.
10% is very important for us. Yes. There are some questions online.
Okay.
Yeah. May I just giving the online question a little bit chance to ask?
Yes, please.
Sorry, Simon.
Yes. Thank you for your questions. We are going to move on to the webcast questions. Dr. Lee, please begin.
Okay. The first five questions from Yuanta, Michael. The first question is DDR4 16 gigabit current qualification status. Expect revenue contributing timing. Yeah, currently the customer are basically try running our 16 gigabit DDR4, and we are expecting second half this year to have revenue. Next. Okay. What is the wafer-to-wafer variation progress? Revenue timeline and outlook for new customer this year. We are doing the engineering run today for wafer-to-wafer validation. Okay? Revenue-wise, we are expecting to be sometime next year. Third question, any upcoming debts or equity financing? What is the target leverage ratio and allocation split between CapEx and R&D? I think I commented that in my presentation material on the CapEx, and as well as R&D, from our budgeting point of view. Okay. Sorry. Q3. Let me read through Q3. Upcoming debts and equity financing. We're just finishing this round of private placement.
For now, we don't need to raise the debt. For the future equity financing, for now, we don't have a plan yet, but always there's some future possibility that we will take into consideration, but not for now. Okay. Fourth question, what is DDR5 projected shipment in mix and target market for 2027? This will be very much depends on our customer demand, and we are discussing this topic ongoing. What is your LTA negotiation process? Will there be quarterly price reset or down payment requirement? In general speaking, all the LTA is case-by-case different, okay? It could be, in general speaking, for quarterly, we will have a one-quarter fixed pricing. The next question is from Capital Securities, by Le Ann Chen. Okay, two question. First question is there a plan to pre-secure LTA for upcoming Fab 5 capacity?
Our LTA not only covering current 3A and 3AN, also covering future Fab, and we'll consider the whole capacity as a whole. Question 2, for existing LTA, are they primarily fixed price or floating? Do this contract price include price new negotiation clause and to capture the upside during the current DRAM pricing? In general speaking, when the price is fixed in agreement, in general, we will recognize that, and our customer will recognize that, and we will try not to make adjustment until the next cycle of negotiation. The next question coming from E.SUN Securities by Connie Su. Okay, his first question is there any strategic cooperation in AI storage with SanDisk, Kioxia, and Solidigm? I commented on that already. In general speaking, we are trying to use DRAM to help our customer able to engage in AI CSP application, also within general AI application as well.
Second question, what is your view on CXMT capacity expansion and its impact to DDR4 pricing? I already commented that on previous Charlie's question, and also added with one of my presentation for you. The next question, beyond weak demand, are you seeing OEM spec down or reduced DRAM content per device due to rising costs? In general speaking, small ticket item, and some ticket item already starting to have that happen, okay? That's including in my comment to all of you just now. The next question coming from KGI Securities, Michael Shen. The question is, Nanya has raised over TWD 70 billion through the private placement, and after covering this year CapEx, along with strong earning growth, it looks like you should have a fairly solid cash position by next year.
I know it might still be a bit early, but could you share some view on how you rethinking about deploying this cash? For example, would you consider further increasing CapEx and investment in R&D? Yes, we are considering that. Should we view a large cash dividend payout as unlikely given this strong opportunity to narrow down technology gap with competitor? Yes, we'll consider to also pay out to shareholder. What percentage is reasonable, we will discuss with our shareholder, and we will make that proposal in the next year's dividend distribution. Yes, Nanya also will reserve some cash for future growth as well. With that, is end of the question online.
Thank you, Dr. Lee and ladies and gentlemen. That concludes our conference call today. Please be advised that the replay of the conference will be accessible within three hours from now, which will be available through Nanya Technology's website at www.nanya.com. We hope you will join us again next quarter. Thank you for your participation, and have a wonderful day. You may disconnect your line now. Thank you and goodbye.
Thank you and goodbye.