The Investor Conference is about to begin. Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to WIN Semiconductors' Resolve Webcast Conference for the Fourth Quarter of 2024. My name is Joe Tsen, the spokesman and Associate Vice President of Finance in WIN Semiconductors.
Joining me on today's call are Dr. Y.C. Wang, Vice Chairman, and Kyle Chen, our CEO, and Steve Chen, our General Manager of Corporate Administration. Today's call is organized into three sections. First of all, our CEO, Kyle, will comment on the company's resolve for Q4 2024 and provide brief guidance for the first quarter 2025. Secondly, I will go through the financials in detail. Dr. Y.C. Wang will have the industry outlook to share with you. After that, we will open to the floor for Q&A.
Please freely submit your questions 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. The actual result 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. Kyle Chen, the CEO of WIN Semiconductors.
Okay, thank you, Joe, and welcome everyone. I give you our first quarter performance and the guidance of Q1 2025. Okay, in the fourth quarter of the last year, 2024, WIN Semiconductors' consolidated revenue was TWD 3.706 billion, which is down 50% quarter- on- quarter and down 24% year- on- year. The performance is in line with our previous expectation. But analyzing this quarter-on-quarter revenue decline, I think the main reason and the primary factor was Wi-Fi PA segment, which experienced a notable decline as the peak season of the inventory preparation for the new model has passed.
The second factor was Cellular PA segment, which was mainly due to the weak demand in the China market. On the other hand, both infrastructure and optics segments outperformed expectations, achieving double-digit quarter-on-quarter growth. Although our capacity utilization declined from 50% in the third quarter and down to 35% in the last quarter, the fourth quarter of 2024.
Also the share price fluctuation of the listed Chinese customers held by our consolidated subsidiaries negatively affected the gross margin by - 1%. This impact was partially offset by a favorable product mix. As I mentioned, the infrastructure and the optics segment outperformed. So as a result, our gross margin for the fourth quarter was 20.4%, decreasing by only 1.2% versus the utilization down 15% on the quarter. Operating margin declined from 2.9% in the previous quarter to - 1.3%. The net loss attributable to the parent company for the fourth quarter was TWD 350 million with an EPS - 0.83.
But for the full year of 2024, WIN Semiconductors officially moved past the downturn experienced in 2023, with consolidated revenue reaching TWD 17.455 billion, marking a 10% year-on-year growth. The full year EPS was TWD 1.81. Looking back in 2024, the China smartphone market had finally moved past the prolonged inventory adjustment. However, the market is not as we expected due to the weak consumer spending in the Android smartphone market, which was affected by China's economic slowdown and the trade barrier between China and the U.S. So overall, end demand did not rebound as strongly as the market initially expected.
But fortunately, in the iOS smartphone supply chain, both Cellular PA and Wi-Fi PA have benefited from the strict quality and performance requirements set by end customers, which allows WIN Semiconductors' customers to remain the key customers with a very significant market share.
As a result, they have maintained a stable growth in the last year, 2024, supporting WIN's Cellular and Wi-Fi business to outperform the previous year. On the other hand, for the optical business, which is also primarily tied to the iOS supply chain, at the end, customers continued to diversify its suppliers. The business faced a continuous decline in the smartphone 3D sensing contributions in 2024.
As expected, however, the infrastructure business rebounded from the previous year downturn, achieving a double-digit year-on-year growth driven by strong demand for infrastructure and satellite communications. In particular, the Gallium Nitride revenue, we delivered a very outperformed annual growth rate of over 30%, and looking ahead this year, I think everybody is talking about the AI.
The AI applications in optical communications and data centers are emerging as a key focal point in industrial growth, with companies across the supply chain actively positioning themselves to seize the new business opportunities, and WIN is no exception. Whether in traditional optical transceivers or silicon photonics technology, optical communication transmission relies on compound semiconductors as the core material for both photodiodes and laser light sources. At the same time, Time-of-Flight laser technology is expanding beyond smartphones and automatic guided vehicles to humanoid robots and the automotive collision avoidance LiDAR.
Compound semiconductors offer wavelength solutions ranging from short to long to accommodate various distance sensing requirements. As a member of the Taiwan Silicon Photonics Industrial Alliance, WIN Semiconductors is one of the few companies globally with mass production technology and experience in both optical communications and optical sensing wafer foundry service.
We are seeing strong demand from the optical customers to outsource manufacturing. And we are now currently working closely with multiple clients to address this need. Additionally, WIN Semiconductors is optimistic about our technology developing the Wi-Fi 7, in particular with U.S.-based flagship smartphones fully upgrading the phone to Wi-Fi 7 in the second half of 2024. This is expected to drive the broader adoption among Android devices or even upgrade the Wi-Fi routers, presenting a promised outlook for the Wi-Fi PA demand.
Lastly, I think the infrastructure business, as I said, we moved down from the past downturn in the previous year and delivered a very outstanding satisfactory growth in 2024. We believe the optical electronic components for data centers, satellite communications, and military and commercial radar applications will serve as the primary growth driver for WIN Semiconductors' infrastructure business in the post-5G era.
Entering the traditional slow season, the Q1. Also, we have less working days, and the 3/5 is due to the annual maintenance. We expect the revenue of the first quarter of 2025 will be declined mid-single-digit quarter-on-quarter, with a gross margin around high-teens level. So that's my report. Okay, so I will turn the call back over to Joe.
Okay, thank you, Kyle. It's our pleasure to present our financial results for the fourth quarter of 2024. We're starting from page one of the presentation slide. Remember to read it over the Safe Harbor Notice. Next page, just for your reference, which is our ESG achievement.
Next page, we're starting from the revenue and the margin. The Q4 2024 revenue was TWD 3.71 billion, and the QoQ was down 15%, and YoY also down 24%. The Q4 2024 capacity utilization declined to 35% from 50%. At the same time, we also suffered the share price decline of a listed Chinese customer held by our consolidated subsidiary, negatively affected the gross margin by negative one percentage point. Although we have such a negative impact, it's partially offset by the better product mix.
So therefore, the gross margin became 20.4%, which is decreasing about 1.2 percentage points, which is better than our earlier expectations. And operating margin became - 1.3%, which is a decline of about 4.2 percentage points if we compare to the previous quarter. And in addition to that, if we take the loss on non-op items into consideration, in the Q4 2024, the net loss attributable to the parent company was TWD 352 million. And with the EPS for Q4 was TWD -0.83. And the EPS for the full year of 2024 was TWD 1.81. This is for earnings.
And please flip to the next page, talk about product mix. Okay, since I have mentioned that the better product mix has partially offset the negative impact on gross margin, it means we have Q4 product mix, which is favorable to the gross margin. If we take a look at the major four items, first of all, in Q4, QoQ basis for Cellular PA, the percentage was from 35%-40% last quarter to 25%-30% this quarter, Q4, which is it went down.
And then Wi-Fi also from 15%-20% last quarter to 10%-15% this quarter, also it went down. But the infrastructure is going up from 25%-30% of range to become 35%-40% of range, which is going up. And the majority is optical business. The others became 21%, which is also going up from 16% last quarter. And at the same time, I would like to give you more color about the inside the optical business.
We also have the majority is a 3D sensing business, and then partially non-3D sensing business. In the past, most of the time, the percentage compared to 3D sensing to non-3D sensing is about 80%-20%. Then for Q4 and the whole year of 2024, the 3D sensing went down to around 70%, and then non-3D sensing going up to become 30%, which is compared 70%-30%. That's the product mix for the Q4 of 2024.
Please flip to the next page. It's the guidance for Q1 2025. First of all, I would like to repeat again what our CEO already mentioned. We expect Q1 2025 revenue to decline mid-single digit QoQ. That's because Q1 2025 is a traditional low season with less working days. At the same time, I also would like to share with you more color about Q1 2025's different products, the trend. We believe that in Q1 2025, our Cellular business and Wi-Fi business will be slightly going up compared to the previous quarter. And the infrastructure business will be flattish compared to last quarter.
And finally, the optical business, because of all of the inventory pool for any kind of new product, including the spring model of the flagship smartphone, is all over. So we expect that Q1 2025, the optical business will be going down. That's some color about Q1 2025 products. And therefore, we expect Q1 2025 gross margin will be around the level of high teens. Okay, this is our financials and the business. And then we're going to take a quick look about the financial statements. First of all, the income statement for Q4 on page 10.
Before I begin, I still have to emphasize that all of the figures are unaudited basis. The actual results should be based on the CPA's report. For Q4 2024, the net revenue was TWD 3,706 million, and QoQ was down 15%, and YoY was down 24%. The gross profit was TWD 758 million, and the gross margin became 20.4%. Operating expense, TWD 806 million, although it's less than last quarter, but because the net revenue QoQ declined, so our OP Ratio went up to 22% from 19% last quarter. Therefore, the operating income, the operating loss became TWD 48 million, so the operating margin was negative 1.3%.
The non-op item was lost about TWD 630 million. We're going to have some explanations in page 12. The loss before income tax was TWD 678 million, and the income tax benefit is TWD 148 million. Therefore, the net loss became TWD 530 million, and the net margin is - 14.3%.
So the net loss attributable to the parent company was TWD 352 million, so the EPS was - 0.83. The return on equity was - 4%, and the approximate utilization rate went down to 35% from 50% last quarter. The depreciation expense for Q4 2024 is pretty close to the last quarter. In the CapEx, it is much less than last quarter, TWD 152 million. So this is the Q4 income statement.
And please flip to the next page. I will show you the whole year of 2024 income statement. The net revenue was TWD 17,458 million, and the YoY is up 10%. And gross margin for the whole year was 23.2%. It is higher, 1.3 percentage points higher than 23. And the OP ratio is 19%, which is 3 percentage points better than last year. And the operating income was TWD 762 million, and the operating margin became 4.4%.
The non-op item was lost TWD 429 million, and the net income was TWD 340 million. The net margin became 1.9%. The net profit attributable to the parent company was TWD 768 million. Therefore, the whole year of 2024 EPS became TWD 1.81. The return on equity for the whole year of 2024 became 2.1%, and the accumulated utilization for the whole year of 2024 became 50%.
The depreciation expense is TWD 4,595 million, slightly less than last year, 2023. This is the first time it trended down on the depreciation expense. At the same time, I would like to share with you that the guidance for depreciation expense for 2025, we believe, will be 10% less than 2024. But it's month- over- month gradually going down. The CapEx for the 2024 whole year is TWD 1,222 million. Then we also expect the whole year of 2025. We expect the CapEx will be between $1 and $2 billion. Okay, this is the 2024 whole year's income statement.
Then please flip to the next page. We can discuss about the non-op item. I probably will pick around three items, the major three items for some explanations. First of all, the foreign exchange loss, that's the foreign currency debt on hand because it suffered from the foreign currency up and down, and then suffered the foreign currency loss. And the impairment loss is calculated based on our IFRS, based on IFRS to recognize impairment loss on the goodwill for the investment on our subsidiary in the past. Then finally, the financial cost is exactly the interest expense for our debt with the bank. That's the non-op item for this page.
And then please flip to the next page. It's the balance sheet. Okay, first of all, the total assets. The total assets are pretty similar to for the December 30th . It's very close to the September 30th , which is TWD 64,259 million. On the other hand, the total liability, which is TWD 25,121 million. The liability is going down significantly because the debt is also going down. And common stock remained the same, so the total equity actually is going up. It becomes TWD 39,138 million. It's also significantly going up.
So therefore, the book value per share became TWD 89.91. It went up from TWD 87.29, although the Q4 suffered a loss. That's because we have financial assets evaluation gain on the OCI, which is other comprehensive income. And then compared to the end of 2023, it's even higher. The 2023 is December 30th, 2023. The book value per share was TWD 80.09.
Okay, then finally, the financial index, no matter the current ratio, which is 164%, or debt ratio, which is 39%, it's all going to the healthier direction compared to last quarter or even a year ago. Okay, that's pretty much what I have. Then, okay, thank you. I will hand over the call to Dr. Y.C. Wang, our Vice Chairman.
Okay, thanks, Joe. This is Y.C. I'm pleased to share our latest market outlook with you. So please flip to page number 14. On this page, it shows the global data traffic continues to grow at a compound annual growth rate of 18%. All the three segments: Consumer Fixed networks, Consumer Mobile networks, Enterprise, and the Industry networks are growing strongly. I think this is fundamental factors driving the computation demand to grow. Okay, I think in the next few slides, we will first explore the key markets that drive our base business revenue, and then we will examine the critical role that three, five compound semiconductors and WIN can play in the AI era.
So let's start from smartphone power amplifiers on the next page, which is page 15. I think this page shows the 5G smartphone adoption continues to grow. From last year, 2024, 63% penetration will increase to close to 69% in 2025. This indicates the more because one 5G smartphone contains more Gallium Arsenide content per phone, so that indicates the power amplifier market we expect to continue to grow. Due to WIN's advanced HBT technology leadership position that we see, we continue to gain market share in the premium and the flagship smartphone models.
Okay, so let's move on to the Wi-Fi page, which is page 16. Wi-Fi 7 enhanced data transmission through the spectrum expansion and advanced modulation and wider channel bandwidth. The Wi-Fi 7 market will continue to grow in the following years for both Cellular and Router segments. Okay, and as you can see from the TSR's market report, the total Wi-Fi shipment units will have strong growth in the following years. Again, it's mainly driven by the Wi-Fi 7. And also, you can see Wi-Fi 6 adoption also continues to expand, gradually replacing Wi-Fi 5.
Okay, let's move on to the next page, WIN technology for cellular power amplifier and Wi-Fi. In this slide, it shows WIN's cutting-edge seventh-generation technology, which has been widely adopted in the 5G smartphone and Wi-Fi 7 markets by multiple customers. This technology offers superior power gain, power efficiency, excellent linearity, and robustness under very stringent environmental conditions.
Okay, and then let's move on to the satellite slide on the next page. Satellite communications is another market expanding very fast. The higher frequency band which is, E-band and V-bands , are being adopted to expand capacity. We expect more LEO satellites planned for launch in 2025 this year. And WIN provides industry-leading Gallium Arsenide pHEMT and Gallium Nitride HEMT technologies to support satellite-to-ground communication needs. And it's also very interesting. We observe there's emerging opportunities for satellite direct-to-smartphone service is coming up. This might increase our opportunity in the near future.
Okay, and the following slide shows the WIN's advanced technologies for satellite communications. Our advanced pHEMT and Gallium Nitride technologies are widely adopted in satellite communications, delivering high-power, high-bandwidth RF solutions to meet the demands of emerging frequency applications.
So let's look at them from left to right. Already in production, which we have 0.120 nanometer Gallium Nitride pHEMT can be operated at 28 volts, which is very good for K-band power amplifiers with good power roughness. And we also have 0.1 micron Gallium Arsenide pHEMT, which can be operated at 4 volts, used in E-band and W-band. Those two technologies have already been in production, qualified by multiple customers.
This year, we expect to launch a new technology on 0.12 micron Gallium Nitride to improve largely in the linearity to be more suitable for the satellite communication power amplifiers. In parallel, we are actively developing 0.1 micron Gallium Nitride, which will be used in E-band power amplifiers. I want to mention that all the Gallium Nitride technologies are compatible to both QFN and the Flip Chip packaging.
Okay, then let's move on to the next page and see what is the role that III-V semiconductors and WIN as a III-V foundry we can play in the AI age. I think AI is driving growth across multiple industries, including data centers, robotics, AI glasses, and autonomous vehicles. These four markets represent the most promising opportunities for the widespread adoption of III-V compound semiconductors.
Today, the demand for InP laser sources and photodetectors in AI data centers is already exceptionally high, and meanwhile, as AI technology continues to rapidly mature, 3D sensing lasers for robotics, AI glasses, and autonomous vehicles are poised for explosive growth in the coming years. I think WIN's InP semiconductor technology plays a pivotal role in enabling high-performance AI applications and driving innovations in these emerging markets, so let's start from the laser sources for AI data center use.
Let's flip to page number 22. On this page, according to YOR's market report, the optical transceiver market is projected to grow at a compound annual growth rate of 11% from 2023- 2029, with data comm expanding at a faster rate of 14% compared to telecom's 8%. Okay, so obviously, data comm is growing at a faster rate than telecom. So here, we're going to focus on the data center segment.
And on page 23, this slide illustrates the laser technologies used in AI data centers across different network layers. At the server-to-server layer, which has the shortest communication distance, VCSEL is the preferred technology. And meanwhile, at the leaf-to-server network layer and spine-to-leaf network layers, indium phosphide-based DFB laser and EML lasers are the dominant choices.
Okay, and let's further flip to the next page. If we further look inside the optical transceivers, we can see where WIN's InP technology is being utilized within the optical transceivers inside data centers. So this is a typical optical transceiver architecture. The upper side is transmit path, and the lower side is receive path. Let's look at the transmitting path first.
So on the transmitting path, it basically transforms electrical signal data to optical data. So it needs a Driver IC, very fast Driver IC, to drive either the laser diode itself or the modulator. So we have multiple customers using our 0.1 micron pHEMT successfully to get into the 100 Gb per second market already in the second half of last year. And I believe this year, the volume is going to continue to grow. And at the same time, we are actively developing 70 nanometer pHEMT with our customers for 200G. And we are also developing indium phosphide DHBT for 400G in the future with multiple customers.
So let's look at the transmitting side, the lasers at the transmitting side. There's two types. One is we call it a directly modulated laser, EML. Usually, the VCSEL is the technology of choice. At this part, we have our 50G VCSEL has been in production last year, and 100G is close to being qualified by several customers, and 200G plan is certainly the future in our technology roadmap.
And the other type of laser, which needs a modulator, and there are two types of modulator. It's called EAM modulator and MZM Mach-Zehnder modulators. Each type of modulator has its own merits. Okay, on both EML and CW DFB lasers, we have several customers who are the leaders in the market. We have projects working with them. So we believe in the coming one year to 18 months, we're able to get into this market, and also here, I would like to mention that WIN has a strong advantage in getting into this optical device market because we are known to have a strong 35 process technology.
And at the same time, we have architectural growth capability, very strong architectural growth capability. We use external MOCVD, and we also have internal MOCVD capability that helps a lot in getting into the optical laser business. Okay, and at the lower side in the receiving side, it's optical PIN diode detector, photodetectors, which transform the optical signal into the electrical signal. We also have multiple projects with our partner customers on the 100G and 200G photodiode, which we believe are likely to get into the qualification in the next few quarters.
Okay, let's move on to the next page on the trends in laser technology for datacom. This page presents our perspective on the evolving trends of integrating laser sources into high-speed switches, CPU and GPU, through the CPO and silicon photonics.
CPO with continuous wave CW external laser source remains the dominant technology today to support higher transmission speed while reducing power consumption per bit. Higher power CW lasers are required. So on our roadmap, we are working closely with our partnership customers on the CW laser with different voltage from 70 milliwatts, 100 milliwatts to 200 milliwatts in the future, and even higher.
Okay, and at the same time, significant efforts are being made to directly integrate InP laser sources with silicon photonics. However, several challenges still need to be addressed, including light coupling efficiency and precise alignment of the light source and the waveguide to minimize the signal loss. At WIN, we are actively collaborating with multiple customers to address and advance this emerging technology trend.
So let's move on to the next page on the robots. AI-powered robots are driving the widespread adoption of 3D sensing technologies, including LiDAR and time-of-flight sensors. WIN's advanced VCSEL array chips enable precise navigation, object recognition, and real-time interaction, making them a key component in AI-driven robotics. The recent reports indicate that humanoid robots could require up to 40 3D sensing chips to support AI-defined functions. Meanwhile, addressable VCSEL array has already been adopted in robots for sweepers, deliveries, drones, and lawnmowers, with initial production now underway.
Move on to the next page. I think AI-powered glasses and headsets have recently got significant attention. This year's CES. AI has shown AR and VR by enhancing gaming, healthcare, education, and training experiences to entirely new levels. According to IDC's market report, the global AR/VR headset market is projected to grow at a compound annual growth rate of 36%. WIN's VIXO technology enables precise 3D sensing for eye tracking and gestural recognition, driving AI-powered XR innovations.
Okay, let's move on to the next page on the automotive autonomous vehicle market, so as AI technology rapidly matured, the adoption of LiDAR technology for autonomous vehicle safety is expected to accelerate. According to YOR's market report, global LiDAR shipments are growing at an impressive compound annual growth rate of nearly 60%. Both VIXO and DFB laser technologies are being used, and each one has their own merits. I would like to mention that at WIN, since last year, we already have a VIXO array being used, started production, being used in the EV car already, so this is the last page of my presentation.
So in conclusion, I think global data traffic continues to grow, driving the expansion of our key market segments, including 5G smartphone, power amplifiers, Wi-Fi 7, and satellite communications. Meanwhile, as AI technology matures, the demand for laser sources in optical communications is increasing significantly. Additionally, AI advancements are expected to drive innovative applications such as robots, AI glasses, and autonomous vehicles, leading to a promising future for 3D sensing chips. WIN Semiconductors will continue to strengthen our market leadership through technological innovation. I think that's what we have been doing consistently. Thank you. That's my presentation.
Okay, now we still have a couple of minutes. Let's begin the Q&A. Please submit your question in the input box on the webcast window. Thank you.
Okay, I think the first question is about 2025 CapEx and the depreciation outlook. I think this year, the CapEx could be very similar like last year. Mainly, the CapEx will come in from our facility maintenance. So that means I think this year's CapEx should be still around like TWD 1 billion plus and minus, this kind of range. Due to most of our depreciation peak is already done, you can see actually start from last year, we have slightly decreased from 2024, and I think we will keep that trend in 2025.
The next question is about the China foundry peers competition. I think we have discussed that with investors for a long time. Yeah, I think definitely that is some competition in there. So like what you just said, WIN Semi is more focusing on our high-end technology and high-performance technology, trying to make the gap technology with low China peers.
Yeah, and also that means we are more focusing on the high-end market. So I think definitely for the low-end smartphone, they're already taking some shares since several years ago. Yeah, so I think for WIN Semi, our target is very clear. We are more focusing on high-end and high-end smartphone to secure our market and technology gap.
Okay, there's a question asking the driver IC. WIN's driver IC, to our knowledge, because it's our customer's product, their design. So based on our knowledge, it's used to drive the modulator. So I believe it's used for either EML or CW lasers modulator. Okay, and also those have been actually, as I mentioned in the presentation, they are already in production. And we believe this year in 2025 will continue to grow.
Okay. Okay, I think the last question we see is want to know about our capacity. Because, like we mentioned on the slide, for the future, we have more demand. We think that will come in from the data center or the 3D sensing related. Yeah, but I think as we show right now, our utilization rate is only about 30-40. And so in most of the cases, those kind of capacity, we can leverage our original GaN HBT 16-inch process capacity. So I don't think we need to discuss about the expansion for those kind of new demand for next three years. Thank you.
Okay, it's about time. And also there are no further questions. So thank you very much for your participation in WIN Semis conference. There will be a webcast replay within hours. Please visit www.winsemi.com under the investor relations section. You may now disconnect. Goodbye. Thank you very much. Bye-bye.