Good evening, ladies and gentlemen, no matter where you are. Welcome to WIN Semi's result webcast conference for the first quarter of the year 2021. My name is Joe Tsen, the spokesman and Associate Vice President of Finance in WIN Semi. Joining me on today's call is Steve Chen, General Manager of Corporate Administration. Today's call is organized into three sections. First of all, Steve will comment on the company's results and provide brief guidance for the second quarter to 2021. Secondly, I will go through the financials in detail. After that, we will open to the floor for Q&A. Please freely submit your question in the input box on the webcast window throughout the conference. Before we begin, I would like to draw your attention to the safe harbor notice on page one of the presentation slide. Please note that this presentation contains forward-looking statements.
These statements are based on our current expectations. Actual results may differ materially from our expectations, and the company undertakes no obligation to update these forward-looking statements going forward. Now, let me hand over the call to Mr. Steve Chen, General Manager of WIN Semi.
Thank you, Joe, and welcome everyone. Given the first quarter in a traditionally low season, our revenue for all product segments in the first quarter of 2021 decreased sequentially compared with the previous quarter. 5G PA shipments accounted for slightly less than 20% of the overall cellular revenue in the quarter. Revenue of NT$ 9 billion decreased 12% quarter-on-quarter, in line with our expectation. This translates into a mild decline of 1% YOY. Due to the impact of the product mix and the capacity utilization, gross margin declined sequentially to 33.5%. With a decline in revenue and an increase in operating expense, the operating margin in the first quarter was 19.9%, declining by 4.4% sequentially. EPS was NT$ 2.72. Looking at the product mix in the first quarter, the magnitude of the sequential decline in cellular and Wi-Fi revenue was relatively mild.
We attribute this mainly to the fact that working from home and learning from home have become the new normal since the outbreak of the COVID-19 pandemic, driven by the demand for long time intervals and the large amount of audio and video data transmission from wireless connected devices. Devices including handheld, Wi-Fi base stations, and IoT applications, all require better and more stable connection quality. We have provided high quality and high performance power amplifiers for a long period of time, and our product has become the first choice for the market. Since last year, despite rapid changes in the market share of the smartphone brand and tension of the geopolitical conflict, many of our Asia-based customers have actually benefited from this change with a continuous increase in demand.
Given our diversified customer base and the competitive advantage in technology and capacity, we have always played an important role in the market. We are actively planning the development of the new fab in Southern Taiwan Science Park in Kaohsiung this year, and it is expected to officially start construction in the middle of this year. This is to serve customers' long-term demand for production capacity and to lay the foundation of our continuous growth in the future. Looking ahead to the second quarter of 2021, we expect revenue to grow low single digits quarter-on-quarter, and gross margin to be around the level of low 30s. I will turn the call back to Joe.
Okay. Thank you, Steve. This is our pleasure to present our financial results for the first quarter of 2021. Please the page in your presentation slide starting from page four. Page four, we discussed about the revenue and the margin. Q1 2021 revenue was NT$ 609 million, QOQ was down 12%, and the YOY is down 1%. Because of the product mix and the capacity utilization, our Q1 gross margin declined by 1.5 percentage point to 35.5%. The operating margin was down 4.4 percentage point QOQ to 19.9%. Talk about the product mix, because as Steve mentioned on his management comment, the 5G PA actually below 20% of the overall cellular business. At the same time, cellular and the Wi-Fi, it looks better than infra and optical, but in this kind of mix, it's unfavorable to our gross margin.
Another one is the OpEx, also higher in Q1 compared to last quarter. That is because our bottom line and EPS in the whole year 2020, better than expected. The company decided to add more employee bonus normally in the Chinese New Year, and it is making the Q1 OpEx ratio higher than before. The next page, we talk about earnings in page five. In Q1 year 2021, the net profit was NT$ 1,095 million, the QOQ was down 14% and YOY down 30%. Therefore, EPS was NT$ 2.72, compared to NT$ 3.07 last quarter. Please flip to the next page six. Talk about free cash flow and which is the balance sheet figure. In Q1, because the CapEx was lower than last quarter, we have an increase in net free cash flow inflow.
You probably see the interest-bearing debt and the gearing ratio both increased significantly. That's because we successfully did issue an ECB, which is a euro convertible bond, for $500 million in Q1. Both the interest-bearing debt and the gearing ratio went up significantly. Next page, we talk about the product mix in page seven. In page seven, compare Q1 to Q4 last year. You probably already noticed that the percentage of the cellular was between 45% and 50%, which is higher than last quarter. Another one will be the optical, including 3D sensing and others. It went down from 22% to 19%. With the total revenue went down 12% QOQ, the Wi-Fi and infra probably remain in the same level. Because of the cellular and the 3D sensing percentage change, this kind of product mix is unfavorable to our gross margin.
Okay, next page, we'll talk about Q2's guidance. As Steve mentioned it in his management comments, I just repeat again. We expect Q2 2021 revenue to grow by. We also expect Q2 2021 gross margin to be around the level of low 30s. Okay. We can quickly go through our financial statement, including income statement and balance sheet. Before I begin, I always want to remind everybody, all the figures here excuse me, is on audited basis. The net revenue for the Q1 2021 was NT$ 6,900 million, QoQ down 12%, YoY up 1%. The gross profit was NT$ 2,012 million, gross margin became 33.5%, which is down 1.5 percentage point, the operating expense was NT$ 816 million. Therefore the operating expense ratio was 14%, which is 3 percentage point higher. Operating income become NT$ 1,196 million, the operating margin was 19.9%.
Compared to last quarter, it's 4.4% lower. The non-op item for this quarter is positive NT$ 191 million. The detail will be in page 11. The income before income tax was NT$ 1,386 million. The income tax expense was NT$ 291 million. The tax rate equivalent to 21%. The net income become NT$ 1,095 million, the net margin was 18.2%, which is 0.4 percentage point lower than last quarter. The EPS was $2.72 in this quarter, and the ROE become 14%, which is 2 percentage lower compared to last quarter. Approximately, utilization rate was 80% in this quarter, which went down from 85% from last quarter and compared to the same quarter last year, last year was 90%. The depreciation expense was NT$ 1 billion in this quarter, and the CapEx is NT$ 1,834 million. That's the income statement for Q1.
The next page will be the non-op item in page 11. It primarily comes from the foreign exchange gains. We can talk about balance sheet in page 12. Okay. In the dated March 31, 2021, the major item difference will be the cash and the cash equivalent. It's NT$ 22,334 million. First of all, because we successfully issued an ECB in this quarter by $500 million. I'm sorry. $500 million ECB, so making a couple item different. For example, like cash and cash equivalent. Another one will be the total assets went up to NT$ 70,149 million. For the liability, you can see that there is a bond, a convertible bonds payable, which is exactly coming from the ECB issuance. Another one, the current liability also went up significant.
That's because the board approved a dividend payout on March the 18th for NT$ 10 per share. This dividend payable about NT$ 4.2 billion. The total liability becomes NT$ 36.919 billion. The common stock are pretty much the same as before. The total equity was NT$ 33.230 billion. The book value per share becomes NT$ 74.62. The key index, including current ratio, was almost 280%, and the debt ratio went up to 53% because of the issuance of ECB. Okay. This is what I have. Now we can begin the Q&A. Please submit your question in the input box on the webcast window now. Okay, there's a question asking about the gross margin, operating margin, those kind of questions. Okay.
As I mentioned, the gross margin, the major reason for gross margin this time is because of the change in product mix, the decline in capacity utilization rate. Of course, in the future, it depends on both utilization and the product mix. If both are favorable to the mix, and utilization rate will be better, it will be favorable to our gross margin. As to the operating margin, as we explained it, there is additional employee bonus for Chinese New Year this year at this time, because the bottom line EPS was outperformed in last year. It's one reason and one item for Q1. Normally our operating ratio most of the time below 12%. What we believe that after this Q1, it should be back to normal for the operating ratio. Thank you. Okay.
It looks like not many questions on the list. We will give you more color about what we have in this quarter and the next quarter. As you can see that in the Q1, our customer in cellular, it looks like a little bit stronger. Looking forward, for the Q2, we also still seeing that the cellular customer looks have a stronger demand. At the same time, the 3D sensing, normally the high season for 3D sensing will be in Q3. This time in Q2, probably the 3D sensing business will be under some kind of product transition period. The 3D sensing business may be weaker in Q2. The cellular business looks even stronger. Since the rest of other business pretty much in line with Q1.
That's why although the revenue will look a little bit growing in Q2, but margin may be still not favorable from the product mix point perspective. Yeah, that's what we see that here. Also, I would like to talk about a lot of investor Interesting about the demand from IDM customer. As you guys know that right now in compound semiconductor, the limited IDM for RF, it's only few, and most of the business, WIN Semiconductors have those IDM customer, it was in the Wi-Fi product, especially Wi-Fi router, IoT gateway, which is like Wi-Fi base station, those kind of business. In the past, over one year, because of the COVID-19 pandemic, work from home, learn from home, making the Wi-Fi base station, the demand stronger.
The Wi-Fi 6, normally the Wi-Fi router or Wi-Fi base station, will need a better performance, higher volume, compared to the smartphone, I mean the mid-end and low-end smartphone. We do see Wi-Fi 6 integration happening more and more, and we have a very good relationship and business with those IDM on this kind of business. In the Wi-Fi business, and I know there is a lot of investors also interested about Wi-Fi 6E. I have to say, yes, we do see Wi-Fi 6E is coming, and we already have project with important customer, including those IDM customer, and, I believe that Wi-Fi 6E should contribute our revenue further, in the near future. That's about the product mix in the IDM customer and the Wi-Fi. Thank you.
Okay. I think, there's a question, want to know, will the mmWave 5G SoC impact the 5G PA? I think first, we should say that, until right now, what we call a 5G PA we provided is all gallium arsenide-based PA, and that more relate to the sub-6 GHz PA. Until right now, I think, all the mmWave 5G PA installed in the handheld devices, I think, is not made by gallium arsenide. I think it's not such an impact that the SoC for the mmWave PA, will impact the gallium arsenide or not, because, I think until right now, you can see all the sub-6 GHz PA that was made by gallium arsenide for GaAs PA. Yeah. I think until right now, we don't see that some kind of replacement for sub-6 GHz PA to become used SoC. Okay.
I think, it's a very complicated question, want to know about first, the competition, second is, how's the opportunity for WIN Semi in infrastructure and even for LiDAR. I think that maybe can all consolidate to how is the strategy about WIN Semi, about the technology. I think as you know that since WIN Semi established, I think we are more focusing to become a technology leading company in the world. We develop all the technology by ourselves and provide all the total solution to the customer from the 100 GHz to 100 MHz. Any customer, no matter he wants to design any kind of application, from the cellular PA to satellite PA, he can find the total solution technology to them in WIN Semi.
For other competitor, I don't think they can do that, because they may be more focusing on some special technology, not the very fully coverage of all the frequency and applications. I think that's a big difference from WIN Semiconductors and other competitor. Especially because of technology, so definitely WIN Semiconductors has a better opportunity in infrastructure and even in LiDAR, because I think right now WIN Semiconductors should only pure-play foundry who can provide fully infrastructure base station related or even a satellite kind of PA technology in the world. No other competitor can provide with that. At the same time, for the LiDAR, I think, because WIN Semiconductors are so successful in the 3D sensing, so definitely we already have a very good experience to mass production those kind of very complicated and powerful devices than traditional optical company.
I think the technology leading strategy still will provide WIN Semiconductors in a very good position in those new coming new applications. Thank you.
Okay. There's, I think, several investors concerned about the tier one smartphone, maybe there is a 3D sensing design change may impact our business, or any kind of question like that. Okay. First of all, I have to say sorry that anything related to U.S. tier one smartphone, or our customer, it's a sole source to them, a major source, that may be sensitive. As a supplier, in this supply chain, we may not describe too much about that. Something I assure is, our customer still the major shareholder, I mean, having the major share in this supply chain and in this product. Even if there is any change of the design, that only will making the entry barrier higher, which is to make sure our customer still have the major share.
For us, we are the only source, we are the only foundry partner to our customer. There is nothing to worry about that, about the 3D sensor this year. Thank you.
Okay. I think let's continue discussion about the mmWave 5G PA. I think we maybe should say it more clearly is, the millimeter wave PA, that the 5G PA, that using gallium arsenide, many right now is using for the small cell or femtocell, those kind of infrastructure related devices. Yeah. For the silicon-based SoC, I think right now is more using in the smartphone devices. Okay. I think because of the there's still some investment, want to know about our new capacity expansion, no matter in Fab C or the new fab that will build in south of Taiwan, in Kaohsiung, in the future. I think, first, I think in this year, we may not have any new capacity that will added to us.
Right now we just start to build our Fab C first floor clean room in this year, that should be maybe will complete it and move into equipment in next year Q1 and Q2. For this year, I don't think we will add it capacity. Yeah. For the new fab in Kaohsiung, I think we will start to the construction, as like I said before, middle of this year, that maybe will take two to three years to complete the construction, then move the equipment in too. Maybe we will need three years to prepare for the new fab in Kaohsiung before we got the capacity added for that. That's why, although we still have plenty space to expand in Fab C, but we need to start the Kaohsiung site right now.
Otherwise, we will have a very long-term demand and supply gap in the future. Thank you. Okay. There are still some questions related to the LiDAR business. Yeah, I think as we mentioned before, because like I said, WIN Semi was successful in 3D sensing, so definitely we have a lot of projects and the customer come to WIN Semi and try to co-developing the LiDAR application with us. Because until right now, LiDAR is not a standard equipment for the car, so in most of the case right now, we see those LiDAR developing projects still in the project phase and also in the very initial stage. Definitely, we will have some revenue from those projects, but I think compared to our total revenue, it will still be pretty small.
I think for this year, it still should be in that kind of project-based revenue and taking a very few contribution to us. Thank you.
Okay. As there are no further questions, thank you for your participation in WIN Semi's conference. There will be a webcast replay within hours. Please visit www.winfoundry.com under the investor relations section. You may now disconnect.