Yeah. Hold
Okay.
Beer. Hours, portfolio manager, and, investors. Welcome to our, Altrip Technologies. 3rd quarter 20, institutional investor conference meeting. I this this meeting will conduct in English.
And, in the meantime, we will we will come Chinese, when we do the QMA session. And this meeting, we'll divide it into two parts. First of all, we will still do, short introduction, of Alship Technologies and, the 2nd quarter results. No, the 3rd quarter results and our outlook and, operation update. For, fourth quarter this year and, next year.
And, after that, we will do a session regarding to, our recent, not issued. Our recent things about, decided by our board meeting, this board meeting, the t g the TBR offering, and our investments. After that, we will we will do the filtering session. And, if you have questions, please push the right hand button and, I will unmute you and then you can, freely, asking, you can freely ask questions. To me and to our CEO, Johnny, or you can, write down your questions and the message me through the zoom, message function.
And, we will answer your questions, right after we receive it. Okay. So now we would like to, have I wanna see your John Nissan to start the meeting.
Okay. Thanks, everybody, for coming. Yeah. This is Johnny Shen, the CEO and president and co founder of the LG Technologies. Yeah.
Daniel, please go to page 3. Yeah. In case, you are new to our portfolio, Yeah. Let me make a very quick, company identification and also update again. Page 3.
Okay.
Okay. So our companies are founded in 2003, IPO in 2014. Our current headcount is, over 480 people. Yeah. We think 480 people more than 3 quarter engineer.
So by the end of this year, we will be over 500. Your company is still aggressively, increase our headcount and also design resource now. Since we found the company, we've been successfully tapered more than 420 designs, all in leading edge technology. Our last year revenue is 140,140,000,000 US dollar. Yeah.
Obviously, we're doing much better this year. Even the first three quarter, our revenue number is over 170,000,000. Yeah. We are one of the t a TSNC VCA member, so called Vary Chen Aggregator. Will be officially, help TSNC to distribute their technology.
Yeah, even for the most leading technology, like, 16, 7, or even 5 nanometer. Next page, please. Elcher is doing the ASIC business since we found the company. Yeah. Honestly, a few years ago, not too many people understand or buying the AC market story.
Now AC become very popular. Actually, the the market size is way beyond what we did before. AC market is growing. Yeah. Demand is much more than supplier.
And only few limited player has a track record and experience to do the leading edge technology AC design. Within the AC market, we are focused HPC and AI area. Yeah. We consider it's a two area has a higher entry barrier. And since the design are huge and complicated, always require the most leading energy technology.
Yeah. Yeah, more than 70% of our total revenue, and we truly believe HBC and Air come application will continuously grow and sustain with a reasonable time. Okay. The following, a later few slides, I would like Daniel to share, more detail with, everybody.
Okay. This is the result of our 3rd quarter 20 quarterly income statement. It is pretty straightforward. Our revenue is almost record high at the 67,700,000 for the for the 2nd quarter, which is 23, 23 percent quarter on quarter growth and the 100, 132 percent year on year growth. For the operating income because the 3rd quarter we have, the major growth driver is the mass production revenue.
So the gross margin rate, the gross the gross margin is relatively lower to the second quarter. So the operating income It's 9,400,000 for the quarter. It's a it's a 8.6. Hold on. Go to gross.
And the 174 percent year on year growth. For the net income is 7.7.9000000 for the quarter. The quota quota growth is 22.7, and the year on year growth is 111. Translating into EPS, our single quarter EPS for the 3rd quarter 20 is 3.78. $90.
So the 3rd quarter revenue can actually higher length. We previously expected. The main reason is, the CTO shipment to our China customers is stronger than we expected, especially for the biggest customer both the server and the noble use, the CPU shipment, is quite strong in the third quarter. And then for the n I, which means the design service part, all the milestone came as expected. So, we have multiple tape outs in 3rd quarter.
So for 3rd quarter, for 3rd quarter's total revenue as a whole. I would say, everything is, is is pretty good. From the company's stand standpoint of view, for the operating income. Let's go to operating income. It's 9,400,000 and, the gross margin is 31.31.5 percent, which is a which is a decline on quarter on quarter basis, as I mentioned, because we have higher mix of production revenue in third quarter.
The percentage for production revenue in the quarter is about 60%. And of course, SPC related application remains our major contributors, to our 3rd quarter, both top and bottom line. And our operating operating expense, if you look at the numbers which is gross mostly because we are continuously, develop our, extend our, our people, our design resource and our business. And for the revenue breakdown, as usual, I'll start from the application. For the quarterly application, you can see the HPC now account for 73% of our total revenue in the quarter.
And, the networking account for 10% and the consumer now only accounts for 4%. And the other 12% is contributed by niche market. For the sorry. I guess I'm sharing the wrong I'm sharing the wrong file. I I would I'll I'll I'll upload the file.
Okay? Sorry. Gosh.
That's fine. That's cool.
I'm sorry about that. There might be some issue.
Got it. That's okay, Daniel. We can use just to use these. Not a problem.
Okay. Okay. Let me go back to Okay. I guess the the the on the right hand side should be the yearly should be the yearly breakdown. It's a long final.
I'll try to fix it, while we finished the institutional investment meeting. All in all, the high performance computing, accounts for, the highest percentage of our total revenue, no matter for the quarter or for a year. And at the early stage, it's, a revenue revenue breakdown by process notes. And, you wanna see, again, I'll fix the I'll fix the mistakes here. There's no, numbers on the on the 12th and the 7th I know either.
But for the 3rd quarter alone, you may see, the 7 nanometer and the 16 nanometer. These two accounts for about 80% of our total revenue. And, you may see the 66 nanometer, contribution. Grow from 29% from 2nd quarter this year to 41%. 2nd quarter this year, that's mainly due to the CPU shipment to our biggest, China customer.
You can also see for the year, the 2020 this year. The advance, the technology note already accounts for 92% of of our total revenue. And, I think, from the process, no, breakdown, LG is definitely the leader among the back end design industry. And for and therefore, revenue breakdown by region. For the third quarter, again, because the strong shipment for, notebook and, server used CPU.
The China contribution account for about 70% of our total sales. And, the 2nd largest is Japan account for 13% while Taiwan account for 6% and, the other region total combined accounts for 11% of our total revenue. For the yearly, it's pretty straightforward, for this year until the third quarter, China revenue from China accounts for 62% of our total revenue, while the Japan accounts for 16% and the Taiwan account for 5% and the other region, which is mainly the North America and the European and the euro accounts for 17% our total revenue. And, the, this stage is about the industry and the company outlook I would I would like to invite, in the Johnny to do.
Yeah. Yeah, let me continue. So China HPC, I see demand. We can say it's a demand very, very strong. Yeah.
Demand from major China customer kept, keep increasing their orders. Not on the information, but also for that a lot of, all our existing customer has a next generation, but in addition to that, we we we do have a lot of a new customer yeah, from from US, from Europe, and also many startup company, in China. Who are doing the leading who are using the most leading edge technology, like a 7 nanometer. China CPU shipment, yeah, for both 16 nanometer and 7 nanometer, still expected to be a major driver for the next quarter. And also for part of, next year.
So next year, in addition to this CPU, this that we expect, and to see some AI chip shipment, from China and also on US. Like, eating right now is, we can say it's a struggling ever. Yeah. Our desired capacity is more than 100% now. Yeah, in fact, it's a 120% or more.
So two capacity become our, biggest, business dependency. 1 is our design capacity. The other is a TSMC 7 nanometer wafer capacity. AI chip sequentially tape out, Q4 and also first half an year, we have a lot of a design win, recently. So based on current schedule, most of a design will be tape out starting from q 4 this year.
So in the other war, for starting from Q4 and Q1, Q2 next year, will be, in terms of total earned ROE amount, I think we expect, grow quite a bit compared to this year. So in addition to CPU project, our AI and Taibao in North America and Europe. And and some of them, it has a mass production plan. So another significant win, we have another 5 nanometer design WAN in the, in Israel area. I think the contract already signed.
They also have a a very aggressive design and mass production schedule. Yeah. Next page, please.
Okay. I'll I'll, I guess, many of the investors we're we're very interested in our, just announce the GVR offering. And I would like to tell everybody what's, what's the company's thinking about, the the reason why we want to raise money through GDR free. We plan to raise, about 100,000,000 US dollar by 10% plus insurance of the new shares. Yeah, again, the purpose, because this involved in the company's strategy.
I like Johnny to, to to to explain this part to the investors.
Okay. Yeah. That's the board meeting. On Friday, we approved the GDR and 2 other investments. Yeah.
Let me share more detail and purpose of a GDR. Fundraising. Yeah. First of all, we will press the trigger only when we consider the share prices within a reasonable range. Yeah.
Currently, based on how you all think that we are undervalued, but GDR entire procedure takes some time. Share board meeting, just a proof, we're going to have a shareholder meeting. And later on, we are going to get the agreement from Taiwan Authority. So the actual time frame, I think, will be q 1 or even q 2 time frame. So we we hope during that time, we will have a more reasonable, share price in order for us to press the trigger.
Another purpose is, to attract long term and more stable, foreign investors. And the banker we are working with has a good confidence to attract field idea target investor. So this GDR offering will be very quick and specific with a little discount. And we, we have a they have a confidence to attract and feel of them. And another purpose to raise a funding is to prepare strong mass production growth in the near future.
Yeah. As as we can say, this year, our mass production growsing rate is a lot. And to be honest, the next year, the momentum is even stronger. So we need to prepare enough cash, yeah, in order to take a capacity. Yeah.
Now our day, capacity is very limited. Not only from TSMC standpoint of view, but also for the substrate. So you need to show you need to prepay. You need to put a Yeah. You need to prepay in order to get the capacity.
You need to have, more realistic plan with, with a prepaid. So, this year, we encountered some for customer. We are waiting for customers, some money before place, wafer order to TSNC. And starting from next year, we have a we are working with a TSMC more more closely has a more realistic plan, once we can, we can do the prepaid. And, also, Right now, as I mentioned before, the supplier is, much, much shorter than demand.
Yeah. We need to aggressively expand our design resource and solution. Yeah. Design resource need to, increase aggressively, yeah, in order to keep our winning position. And some customer especially the new startup company and some customer in US, not only need the design resource, but also Nissan solution, like a front end, like IP.
Like I mentioned before, I don't intend to do this in house, but we can do invest working with suitable target, partner, yeah, in order to complete our solutions. The other purpose is to secure and forming the strategic partnership with a with a customer and supplier. Yeah. Nowadays, the relationship shift between customer and supplier is a very dynamic not only for a pure business standpoint of view, but a strategic partnership is a very important. They consider you are the good service provider.
Sometimes they also consider you are there, and you are their investor or partners. So with a little in investment can make our relationship a supplier even tighter. So that's another purpose of, for this GDR offering.
Okay. As Johnny mentioned, to solidify, our relationship with customer and the suppliers and the and to explore, more business opportunity. I would take, our investment cases for an example. First of all, the AC lead, we are intended to, invest AC lead. For this company, this company is a TC TSMC's VCA member in Korea.
Actually, there currently, there are 2 VCA members in Korea doing the back end design service business, one is Escalen, and the one is, Global Unenjet. And, we had done business, with, Korean, customer before but the Korean market is very special. The local, IC makers, or system providers, intended to work, with the local suppliers. But for the leading edge technology note, there is no local suppliers no logos, back end design suppliers who can provide such kind of service. And, through this investment, it makes Altered to tap into the Korea HD market through this strategic alliance with the local sales channel and the engineers.
Of HDClamp. And, we expect this joint force will win, leading edge to kind of technology node projects from very notable customers. Maybe most of you already understand that there are, business opportunities in Korean market from Not many. A few, very note, very sound end, customer, such as the Samsung, such as SK Hynix. So I do, by doing this investment to form the alliance with SQL.
We we we are we are in high hope to, win the business from those customers. The second thing is the KJU Kunchild semiconductor Technology Industry for leasing investment. The main purpose is, there are many notable and the sound names of the semicon and the IC companies are the, general partner of least And of course, for the for the limited partner for the LP, there are also many, strong, ice makers and, mega VCs, the, on the list. Through this investment, the amount of the money is that big, but we can get, closely relationship with those with those people and the lost companies. And, to build up this strategic alliance with least professionals, we may explore more business opportunity, from our customers, especially in China.
And, as Johnny mentioned, for now, the market, the market is quite dynamic. With least strategic alliance, with, by building up the capability of doing the investment, and, other things, we we think, for Altered's future business development in China, is quite, for doing this, it's quite important. So these laws are the examples for our, capital, capital raising purpose. And, Then I guess this is the presentation session for today. And, thank you for, join us And then now we are open to the question.
Please use the raise hand, function and I will mute you. And you are free to ask questions. And, one more thing. We are very welcome. The questions in Chinese.
So don't be afraid to ask, questions in Chinese. We can we we can do we can do both English and the Chinese without the problem. Thank you. Please, yeah, is there any question?
Charlie.
Okay. Charlie is from Morgan Stanley.
Hello. Hey. Hey, Johnny. Hey, Daniel. So, I guess, to two questions from me.
You know, for first of all, it's about your, next 2 to 3 years outlook. It seems like you're capacity is now, very constrained, if not considering the potential capacity increase from your future strategic investments. So with that, how big you can grow your business in the coming 2 to 3 years? Can you or at least can you give us some, you know, revenue guidance or targets for 2021. Thank you.
Okay, Johnny. You want to answer this question?
Let me take first. So you you can add on later. Okay.
Sure.
Okay. So, Charlie, to answer your question, yeah, first, first of all, I have a confidence, to me or be, the major major analysis, forecast, yeah, like you did. Yeah. The reason we need to clear, yeah, we need to increase the capacity because we see in the demand is much more than we can digest. Yeah.
We have a we have a chance to to grow even bigger. So, after consideration and all the, current situation, because, before we are only thinking about existing customers, product and their next generation, but right now, so many opportunity. Yeah. It's a much more than we can digest. And all of them are we can cons all of them are very sexy.
So aggressively increase our capacity. I think it's one of our main goal. So the GDR offering will help and also working with a partner or even more aggressively working with a potential partners.
I
think it's absolutely we should do. Yeah. To answer your question, we are quite in sync, with your terms of revenue, we have a competence and quite in sync. We see your forecast, and we have a competence to me or beat.
Okay. And then, thank you. Thanks, Johnny. And my next question is about the recent, markets concerned about a more competition for the China CPU market. I I know you you have a very strong partnership with with DTM and they come in you know, seems to gain a lot of traction in the China local markets.
But if you look at, not not just the next year, right, but for 2020 to, I guess, two questions. You know, first of all, whether that the China CPU addressable market can continue to expand. Meaning, today, it's only for, there's a garment PC or s a SOS PC. Do you think 2 or 3 years later, you can penetrate to the consumer, markets in China. And and secondly, there seems to be, more, projects going on for tempo via technology southeast, some IP to, the sound hygiene.
And, also, a Taiwanese company called a client, they can, again, a lot of, China CPU projects. So I wanted to know, your observation about you know, the future market size and also the competition, you'd be very helpful. Thank you.
Okay. Again, Daniel, let me go first. You can add on later. Yeah. So in terms of a China CPU market, yeah, based on our customer and also the market analysis, the only data CPU still the major player Yeah.
Be, before, Huawei, highs, High Citycon, and also our customer, I think occupied about around 70% of the CPO market. Yeah. Recently, a as we as we know, the far way we can see is, out of this market. So that's why our customers demand getting, increased quite a bit. Yeah.
But China also sense if they put down, if they put their future, their CPU demand or on on base, they will bring certain risks. So a lot of so other opportunity, increase and start to to kick off But based on our customers, as mentioned, they can they have a confidence to win most of Huawei, which is their competitors in the market. So next year grows I think, via case, I think that's a it's another opportunity. I think other than on, other CPU opportunity also will increase. Yeah.
So expect it.
Mhmm.
Daniel, do you want to ask?
First of all, Charlie, to answer your question about the outlook for the first quarter and next year. For the fourth quarter, this year, which is the next quarter. We believe we can still post a quarter on quarter growth. But since the bay, the base, the support of revenue is quite high, higher than we previously expected, the 4th quarter, quarter, quarter growth, will likely be, single digit. High single digit or low single digit.
Depends first of all, the milestone, the milestone kicking in, and the the, of course, the capacity support
Mhmm.
And, I I I would say this way, 7, the 4th quarter will still be a good quarter for us. For the last year, I know that the market consensus about our, top line is 300,000,000 to 320,000,000. Based on our current understanding, we are pretty confident that we can beat, this, forecast this expectation for sure. But for the, but for the bottom line, I would say the operating income for next year, we are still doing the budgeting and, yeah. But all in all, of course, you you you understand our business model and our financial structure.
The revenue increase for sound revenue, for example, production revenue, which is a effortless revenue, the profit will go down directly to the operating income. So I I would say our operating income growth rate was even better than the revenue growth rate. Okay. And, for, city market, also this way, for a self control and the self made market. CPU market, it will still be dominant by beta.
Because, for the X86, again, the the the the the issue remains X86, this architecture structure still controlled by a US company. Mhmm. And, for those companies doing the X86, based the CPU, I would say if it can penetrate into some, government market, but for but for the, I would say, I would say this way, the low level, like, the the county government, like, the the electric government, they may not have the ability to acquire enough, the on based, PC.
So
I would say, This could be the market for X Eighty Six based, machines. No more ordinary individual market. I would say for for example, you and me, we won't buy fixing CPU inside machines since we can buy Intel inside or AMD inside. I would say for this market, it was still dominant by the, US players. Mhmm.
But for the future. Yeah. I think the trend is good for the local local suppliers
Mhmm.
For the for the government government news, which means the self control of the market.
Mhmm.
I guess, facing will still be the number one supplier.
Okay. Gotcha. Thank you. Ah, it's very helpful. Thank you.
Alright. Thank you.
And, another question from, please ask question.
Hey, Ethan. It's Theo from China Renaissance. And my question will be regarding for next year. The company will be facing some bottlenecks into areas. 1 is the engineering, resources and the other would be the river capacity support.
So how are we going to deal with, these challenges and this year?
Johnny?
Okay. Yeah. Capacity. 1st of all, it's Yeah. Many way to increase our capacity.
Of course, we continuously, try to improve our design efficiency. Yeah. Try to use less people to support more project. But in the meantime, we're doing a lot of, aggressive hiring, and we are working with, partners sometimes we're doing some in source, inviting the, some customer, in, yeah, inviting some partners engineer working working some project in our facility. Yeah.
We can use, we can, we can use that to, to handle the the search business. So gradually increase, our headcount improve the design efficiency and working with a partner I think that's the way, handle the resource. Yeah. In terms of capacity, we need to aggressively very closely working with the TSMC better understand our customers, outlook and forecast. And some and also the most important thing is when TSMC provide a capacity, we need to take it immediately.
So that's why, GDR also help a a lot. Once they have a capacity, we have for enough funding to grab, yeah, immediately.
Okay. Good. And also regarding the GDR Pros that you get, when are you going to put it into the investment of a ASIC LAN?
Yeah. Daniel, do I do you want to answer?
Okay. I see how money is money. Money money money money doesn't have names. So, of course, we have, currently, we have cash in, and we have, certain money in hand. And, after the GDR, offering, we will have more money.
And, for the investment amount, putting, AC Glenn is not significant. So so a little a little bit. No issue for this investment.
I see. Got you. Yeah. And also, last question from my side. Yeah.
Before jumping to the queue again. Will be the engineering headcount you are going to grow next year, and and update
Okay. Okay. By the end of this year, for sure 5 100 and next year, based on our hiring plan, I think we we try to meet, current target is 700.
Wow. Uh-huh. Okay. And the majority will be, from China. Right?
The majority is still in China region. Yeah. You are right.
Okay. Wow. That's aggressive. Okay. Okay.
Okay. Thank you very much.
Okay. And the next one, is, belongs high. I guess, she's from, UBS.
Oh, hello? Can can can you hear me?
Yes. Yes, please. Uh-huh.
Hi. Thank you for taking my question. I just want to, because I think Johnny just mentioned that high silicon used to have 70% market share in Is it local, China, local CPU market? Is it, like, for public service market, or does that include commercial market? And, are you, say, like, have confidence to, I mean, for fighting to take over high silicones share in this market?
Yeah. Yeah. Let let me correct a bit. Now high city cost is 70% combining fine tuning and the high city can have a 70% of the market.
Okay. And and okay.
Of course, the distribution between finding the high city high city is is a majority.
Okay. And then you're, you're quite confident that, fighting can get this, like, the 70 the market share.
Right. Right. Yeah. Based on finance, justification, the market already there, they are lacking of the supplier. So it's a financial.
It's a very easy for them, to take over take over at least a market. The only dependencies, the software, but right now, I think their software is, can both of them software are Linux based. They can be, yeah, adopt, like, a very easy. So they they have a competency to grab this market.
Okay. Okay. And and these are just just to clarify. So this is the, like, public service, like, government and SOE market. Right?
Government or even commercial, they have a song. They have the on the laptop and notebook business. They also put the very high expectation because the on base laptop can work with a mobile device very closely. As you know, the older cell phone are made by ARM based CPU So the handshaking between ARM based notebook and ARM based CPN, the cell phone, it will be very good, very smooth. Yeah.
That's why you can see even Apple start to make a own base Mac computer. So you can see, a lot of, mobile application can log in in the laptop. Yeah. Even right now, Fenton's notebook. Cell phone application, including including Binance, a lot of application.
I personally, I try. It's a it's a quite amazing. I I bet this market will be, would be very good. For the Intel base, they cannot run. They cannot transfer it.
They cannot translate mobile application, you have our own base and seeing there's no problem for them to do this.
I see. Okay. Thank you. Thank you so much.
You're welcome.
Okay. Next one is Kehoe Wong.
Hey, hello. Yes. Hi, Johnny. Daniel, this is Chiho from, Dimonation. Congratulations on on the good quarters.
Can I ask a question about if you look at the, maybe give us some overall statistical about, this 5 nano or 7 nano tape out, number of tape outs you have done in, 2020 and maybe some of the pipeline, you can see for 2021 in terms of the more advanced and our project? And and then the second question related to that is the, maybe for the tape outs that you have done this year, what, what, what kind of, mass production, volume can we be expecting, in 2021 for this, newly, about projects. Would you have any, color for, like, a contribution in 2021? Because I I I feel that from your opening remark, there should be quite a lot of volume, coming from the newly tape up projects, this year. But I guess it's also skewed to the 5 team.
So maybe I think the 5 team situation is, where I understood maybe talk a little bit about outside of 5 team situation, I you.
Okay. Daniel, why don't you go ahead first?
Okay. Sure. Junal, sorry for that. We, we are not discuss the project by project into detail because our customer has the has some issue with the confidentiality So, we no longer provide the exact, table schedule for our projects. The thing I can say about our, 70 long 7 nanometer and the 5 nanometer project.
I would say this way. And for now, we haven't taken out any 5 nanometer project. The table schedule for the current project, we won't, which are 2 projects, one is for test chip, one is for full mask. The table schedule will be, I would say, the end of next year or the early year 2022. Because the design is quite complicated.
But for the 7 nanometer project, actually, we, tape out many a 7 nanometer project, this year. And, you may see it from our, contribution. Since the 7 nanometer production revenue until now, it's not that high because all of them are just the tape out or just into the protection phase. For the next year, or 1st quarter, we will sequentially tape out, 7 nanometer projects, both in artificial intelligence to AI chip and to the HPC. For HPC, we have several projects from our biggest customer, and the 2nd largest customer.
And for the 2nd largest customer, the 1st 7 nanometer project, enter the production phase now. So you may see the contribution in the starting from 4th quarter and, very good contribution in the first half next year. For the AI trips, I guess, Teva's schedule was still, was still, in the late this quarter or the first half last year. So we expect some of them, the production, revenue will start will start from the second half next year. And then we also have high expectations on some, AI budgets because of the customer is very aggressively to, to to promote, to, try to sell their their AI chips.
Onto their system or onto the general purpose, AI market. So that's what we can say about, the tape out schedule and the tape out situation right now.
Okay. Thank you. Thank you, Daniel.
Okay. And, next one is Jeffrey. Jeffrey Oh, wait. Yeah. Jeffrey, can you, ask questions?
Excuse me, Jeffrey? Jeffrey, we cannot hear you.
Session for us.
Okay. Charlie, please.
Okay. Yeah, maybe maybe I try try try to feel feel the void And, sorry for the belated congratulations, to to your company, very good execution. So my my follow-up question is about your GDR. You know, one is more, kind of, concern because you also mentioned that there could be, some strategic, investment or partnership with customers. But I thought, no matter for a foundry or the sensor release, business model, you want to be as independent as you can.
Right? So so how do you deal with this kind of, kind of, a deeper, relationship with customer but they could trigger some, you know, conflicts of interest with other customers. I guess there's a out of question. And second question is easier, your timing, for for the, TDR. Thank you.
Okay. I think Charlie, that's a very good question. We've been discussed that internally many times. Yeah. Yeah, obviously, we we will avoid any conflict of interest.
Yeah. To be, to be straight, our investment amount will be very insignificant compared to one customer and also suppliers, situation. Yeah. Right now, China, as you know, so many people has a the customer fundraising is not the issue. They can and use our company can do the fundraising.
I think, immediately, as long as they are, they are, they are willing to issue their share. The reason, we're working with a customer and supplier. The reason, we need to have a, we need to involve for this kind of investment because, people are building some alliance. Yeah. And, once they see you have a solution, you'll have, you'll have a power to make a investment.
I think our winning chance will increase quite a bit. Yeah. Just for your information, and one typical example, when we, compete one of the cases. And once they know, they sense that we have a GDR opportunity. They immediately give us the opportunity.
So this kind of a situation, I think, is quite common in in China. I think to be specific. I think I I can share more, specific example. Yeah. Of course, for sure, we will avoid all companies go still remain independent.
Our independent position is the most important and the highest asset for the company. We won't compete with our customer. Customer can do the chip with the l chip to compete each other, but l chip will not be their competitor. Yeah. Okay.
Daniel, do you want to add some?
Okay. Charlie, for sure. First of all, I would say as you only mentioned, the investment along will be will be will will be will be will be not will be not significant compared to our customers, market status. And secondly, the major principle is business as usual. And, I would say, least way.
Our investment could be a signal to come forth our customer because as you know, currently the back end the big the back end resource, is kind of a is is kind of a treasure in the market.
Mhmm.
Our come our customer also worry about they cannot secure the design resource. From us.
Mhmm.
So, I would say it's a mutual understanding. It doesn't involve any like, we choose the customer. We stay on some certain customer side. And, last that's our, main purpose.
Okay. Got it. To answer your second question, based on our estimation, the fastest way to execute the the QDR without any problem. I think you need a approximately set a 60 day minimum. Yeah.
So, I think like I mentioned before, I'll wait for the the right timing when we are when our share value returned to certain reasonable range to press the trigger. So right now, the fact is fastest timeframe is 60 day later after the shareholder meeting, assuming everything is a go smoothly. So I will say, q 1 or maybe q 2 temporary.
Okay. Okay. Fair enough. Yeah. So because, I think over weekends, I think, some investors are also asking why not just use the credit line because now the interest raise a very low.
And then maybe if you want to introduce some, strategic math, or you can just use the private placement. So Yeah. I mean, I mean, maybe you you don't need to to force it, right, if the market is not not not right, maybe you can just use other vehicles. Yeah, because I I kind of, agree with your, kind of, most part of the strategy investments, but, GDR sounds a little bit, complex here. But anyway, so just a a small question.
I I will get back to the queue. Now now company's revenue profile is still very good to China CPU customers. So another big, growth potential segment should be AI. Right? So I think other and also ask about this topic.
But can you quantify, this year how how big is the revenue contribution from ai, the percentage and how big is that will be, for 2021.
Okay. Yeah. Then you want to go first. Okay. Sure.
For the AI, contribution, I would say, lastly, because it's, for some part, you you are quite difficult to identify if it is an AI or it is an HPC because HPC, some HPC chips can also do the AI thing. So lastly, I would say the current contribution from AI, relationships, accounts for about 15% of our total revenue.
Mhmm.
And, for next year and, of course, Oh, say this way. Both our customer and the l chip belief for the 7 nanometer AI chip. The shipment volume will grow significantly compared to the 60 nanometer ones. Because we all understand that for the AI topic, the this topic has been hovering around, very hard for quite a while, like, past 1 to 2 years, everybody is talking about AI. But except a media, there is no major AI chip suppliers on the market, or the shipment model is not significant.
I think that's because for the AI users, when they use the AI chip to build up their system, they have to be, they have to they have to make sure that the system is stable. The system is work. The system is efficient. So they have done a lot of testing. For the 7 nanometer, which I think for, okay, for the 16 nanometer, I think is, mainly for the testing purpose.
For the 7 nanometer, we expect the volume will be, will be quite, good compared to 16 nanometer. Otherwise, maybe AI is not is not will will not be a hard topic anymore. Yeah.
Okay. So in terms of revenue percentage next year, could it be more than 15% or
Of course. Definitely. Definitely.
Okay. Okay. Great. Thanks. Yeah.
The growth rate is quite promising, but I don't know. Maybe the CPU also grow very fast. Yeah. But But in you, other so other than China, we we expect, AI shipment in in US, well, will increase significantly. Yeah.
1 of our 2 major customer, I think they they put a strong forecast.
Okay.
Yeah. As you know, one of them just acquired by another giant company. Mhmm. And they are the 7 nanometer is in the in the mass production right now. So we expect, good shipment on that specific chip.
Okay. Jeffrey, can you hear me? Yeah. I can hear
you change changed my microphone. Hope this helped. Is this better?
Oh, it must have been.
I can hear you clearly.
Okay. Great. Thanks. So my my question is you talk about potentially prepayments to foundry and maybe substrate. I guess, you know, can can your customers actually do the prepayments, or why does that fall upon you guys to have to do those prepayments for for capacity?
Of course, they can prepay, but there's a there's a gap. For example, TSMC recently just have a for example, 501,000 piece of wafer, they asked us, do you want to take? If you want to take, we need to press the other immediately. But in the meantime, of course, the customer is waiting to pay prepay, but there will be some gap. Before place the order to supplier and receiving money from customer.
So because of that, we are losing some capacity and Looking forward for the next year, we see a lot of opportunity, especially in 7 nanometer capacity fine, between old customer, I think we are continuously sustained. So we need to prepare ourself, to receive the older fund.
Okay. Great. One one more question.
Please. Mhmm.
Yeah. Just on on 5 nanometer mask, I guess, you know, 7 there. But what's what's your approximate cost of a 5 nanometer set of mask and and when do the customers pay versus when do you have to pay for those masks?
Based on our business model, customer will pay for the mask. Yeah. Yeah. Regarding the price, I think we're not We are on the NDA. We cannot share the ending specific pricing information, but based on our business model, customer will, do the we'll pay the mask.
Okay. Great. Thank you very much.
Thank you.
Thank you. Next one is let us know the name on the system is Zoom user. Can you could you state, your name and, the company you are working with, please, please ask ask a question.
Oh, hi, management. Could you could you hear me? Yes. Hey. Hi.
This is, Hans Lee Tong from, Publium Usures. So, I, thanks for measurement to, take in my questions. So, firstly, regarding to the GDR, health our trip identified any, targeted, investors. And if the answer is yes, Could you share, like, which country these investors are coming from?
Okay. Like I said, we do identify some potential investment target, but, for now, we are not allowed to review it. And, the example is, other than other than China, of course, we do have some, potential investment target. For example, the HD Glenn, which is a which is one of the investment target. But for the other targets, since all the investment case need to, need to be, need to get permit
by the by the board.
So so far, we have candidate, but we don't have. We we cannot reveal the the names.
Alright. Thanks. That then my second question is that, I think in the beginning of the presentations, you have mentioned that probably might be a good opportunity, to attack, from the courier market. Has the company have targeted any, but, revenue percentage of contribution from the country in the next maybe 2 to 3 years.
I was at least way and the Johnny can add, some colors on it. Also, the the thing is, we do the strategic alliance through investment and the technology cooperation. So for the design, for the design portion, our partner, which is excellent, will will take the design. And then we share the profit through the investment. But for our, but for some project like the 7 nanometer with huge shipment volume, our partner may not have the capability to handle it.
So for this portion, Lowe's, production business will go directly to Elgin.
Alright. And the foundry sorry. Go ahead.
Go ahead. Go ahead.
Alright. And I'll of course, for the foundry hard, we will we will still we will still be in the TSMC.
Mhmm. Alright.
Okay. So in terms of revenue expectation, I think, Korea is very specific. Unlike other region, they have customer are very big. Once you win, we expect a very significant revenue growth. So, yeah, I think after consideration career is definitely a praise.
We shouldn't give up. I think the But if we want to win the career business without the the Korean people, I think it's very difficult. So I think that working with the AC Glenn, the size is a quite match. They have a design dependency on us. We have, for some reason, it's a channeling, dependency on them.
I think cooperation between this whole company. I think I think it's quite quite helpful.
Alright. Thank you very much.
Thank you.
Okay. Prior to the next one, Sehoe, I would like to answer a question from, message, on investor field. It's asking about the schedule of phase and or phase and project. As I mentioned, I cannot review the details of the single project, but what I can say is for currently, we are shipping a 16 nanometer product to beta, for server and for a PC. And then for the next generation, for the server, we are in design phase for the for the notebook CPU, the design, isn't, hasn't kicked off yet, but the potential about the scheduled, kickoff date should be around the first half next year.
Okay. And then, we go back to Sehoe, please.
Yes. And my follow-up question would be, on the company's business model going forward. Would the company consider or or be more open for those at least I like business or even a a production only business?
Yeah. Of course. We are open, for production only in business. For design life or we have a 4 different business model. Yeah.
We can take design completely and so we can do partial design and we we can even do the production only in business.
Going forward with the rating, for production only business to go up.
Honestly, yes. I think the other than China, yeah, in other regions, for example, in US, we did see a lot of a production only or partially that opportunity.
Okay. So, basically, you're in difference. You're open for a a type of business opportunity.
Yes. Yeah.
Oh, okay. Great. Okay. Thank you.
Thank you.
And, the next one is Oliver Lee from Hawaii, a BlackRock. Oliver. Oliver, you you have to unmute. Yes.
Can you hear me?
Oh, yes.
Oh, thank you very much. Yeah. I I just wondering if I look at your, balance sheet, you have about, roughly 140,000,000 US dollars. In the second quarters. And, and then that is kind of support, roughly 250,000,000 Avenue this year.
So does that mean, if, if you have additional, like, 100,000,000 US dollars. So that would be somewhere like a a 240. Can I use that ratio to project the you know, the the the size of your potential older?
Yeah. Oliver. I I think, our money is not 100% for production, right? The ratio is very, but but you need to discount a bit. Right?
We need to reserve the cash for operating for operation. Yeah. And for the investment, for the employee salary, and benefit. Yes. You can you can cooperate.
Yes. We, we expect mass production volume increase a lot. So we need additional funding, but is precise the ratio, please try not to do that.
Okay. Understood. Okay. Thank you. That's only my questions.
Thanks.
Okay.
Okay.
Asking, through message that, he's asking about, markets lowering that phase and, has, military background. How how how does LG view, Lucy?
Okay. That's a tough one, but expect it. Then you want to go first. Uh-huh.
Okay. Sure. First of all, Yeah. It is true that Satan is originated from the National Defense University. It is a fact But many, many years ago, Faitan already separate from National Defense University and the move the company to changing originally.
This company is located in Changsa. Where is where is, where is where the national defense university located. So since then, phase on this focusing non military, purpose ICs. And, for the military purpose ICs, it will, it will be it is. It will be done by the National Defense University itself.
So the separation is very clear. So, we cannot stop the rumor or we cannot we, we, I think for those rumors, everybody has their own opinion. We are not in a position to to to to to to change their mind. But to us, we will say this way that now is 100% normal company. They are doing CPUs for server and the PC.
And, even though in the fully trained scenario, even fatal even facing, is considered to possibly on the essential entity list, I would say, for for for for the sequence, it will be on the ADA tool and the IP I did bend this the first. If Fader is on the list, we don't see too much impact to the business, for fatal or for the business we are doing with data because for EDA tools and the IP, there are solutions. And, especially for EDA tools, we think the dependency from fatal to algebra work becoming even bigger, which we consider it is a good thing. But Honestly, we we do we do think, based on our extension list, it's a low possibility thing. Otherwise, if facing is really doing the military background, ICs, they they will be on the session list already.
Kenny, you want to add some color. Okay?
Okay. Sure. Yeah. Then before, freight and spend a lot of time to separate their business, the company is Tianjin is, doing a pure commercial and specific usage. They will not touch any, military, related application and I think this one already between us, TSNC and Faitan, we have a consensus agreement.
Whatever they do is a pure commercial, and we know they are customer, we know they are usage. They shouldn't, they will not doing the military related, using that for CRT using Clayton for sure. Yeah. Just, also add on to the Daniel's, potentially, people are thinking about things that they are doing the CPU high profile design due to any kind of reason, maybe US will put them on the sanction list. Of course, not because of military, because of any strategic reason.
Yes. Once a veteran in the sanction list, we consider the opportunity and also dependency to LQ will be even higher. Yeah. Because, essentially, they cannot acquire EDA tool. They can acquire IP that's our fundamental business.
We can help them to do the design. We can help help them to prepare the IP and tape out. So If we're thinking about eventually, Faitan will be like a high city count. I I think that will be a long way to go. Yeah.
I I don't think other than the high silicon, none of them are star production from TSMC. So I think, even on the sanction list, I think that's a good news for l chip. And because they have a much, much tighter dependency for us, yeah, we all make sure whatever we're doing under NDA there will be no military related application involved for sure.
Okay. And for now, there's no raise hands. And we leave the one more question, for the Q And A session. If you have that question, please ask.
Okay.
Okay. I guess there is not. And, then, thank you. We are closing our, third quarter 20. If institutional investment meeting right now.
Mhmm.
And thank you all for your participation. Thank you.
Okay. Thank you very much. Thank you for your supporting. Thank you.