Good morning and good evening, ladies and gentlemen, no matter where you are. Welcome to WIN Semiconductors Corp.'s resolved Webcast Conference for the Second Quarter of 2025. My name is Joe Tsen, Spokesman and Associate Vice President of Finance in WIN Semiconductors Corp. Joining me on today's call is Steve Chen, the 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 third quarter of 2025. Secondly, I will go through the financials in detail. 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. 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, the General Manager of WIN Semiconductors Corp., and he will provide an overview of WIN Semiconductors Corp.'s business highlights and operational analysis over the past two years, followed by the comments on our second quarter results and the third quarter's outlook. Steve, please.
Thank you, Joe, and welcome everyone. Please turn to the slide page five. On this slide, we can consolidate, I think, for the past two years. We faced a lot of market structural change. For example, like the smartphone has a little down decreasing, and because of the trade war in February, looks like right now what we see is most impact is our cellular application. For this application, we can see because of regulation to ship to China, actually, that's raising up China government for the localization kind of supply chain demand. Because of that, and also because of the smartphone has some decline in the past two years, we can see actually for the past two years, our revenue from the cellular phone PA actually was decreasing, and that's mainly because of the structure. We see China has some low-end demand already shipped to the localization supplier.
Fortunately, I think for right now, I think the situation is more stable, and WIN Semi is still taking a major share for the high-end demand in China. We also have other Android and iOS, we'll keep those shares for the supply chain. I think right now that will be restructured, but the revenue will become more back to the normalcy of the quarter by quarter. We still hold a major share in China for the high-end and also other Android and iOS platforms. Second, we can see for the Wi-Fi. I think Wi-Fi is still doing well for the past two years. It's mainly because of the Wi-Fi 7, but the adoption was increasing. Because of the new high-frequency band adopted in Wi-Fi 7, it really contributes to the Wi-Fi PA application sales revenue growth.
I think compared to a few years ago, the Wi-Fi segment actually is doing well for the past two years. The next one, I think, is the most of the segment that's not impacted because of trade war or geopolitical. That's our infrastructure demand. Here, I think the infrastructure demands, including like the LEO, the aerospace, and even base station or some very special point-to-point station or radar, this kind of application, I think for the past two years, it's keeping steady growth year by year. Right now, we also, for example, like in Q2, we already see our revenue represent from infrastructure is really close to our revenue in cellular PA. The others, that's what mainly because it's contributed by our 3D sensing and other optical demands.
For this segment, I think the first is it's definitely facing some structural change because of the 3D sensing and customer bringing the new player into this market in the past two years. The revenue contributed for the 3D sensing was decreasing by the past two years. Fortunately, we already see we have some progress for those non-3D sensing optical pieces, such as AI-related application, optical sensing for LiDAR or data center. That's a gradually increase in this period. Right now, the percentage for 3D sensing was dropped to around 40%- 60% of our total optical revenue. Compared to two years ago, it's maybe taking around 80%- 90%. I think for the past two years, we have been making another effort and making more diversified for each application. I think right now, it's bringing to us a better color mix in the future. We go to page six.
In this slide, we can see because the demand was changing for the past two years, we start to control and well manage our operating expense. Right now, we can see no matter the volume is going up or down, our OpEx was keeping a range around $800 million in NTD kind of range. Although we have controlled our operating expense, we're still keeping our R&D percentage around 40%- 50% in the expense, so that we're keeping us still have a very good activity for the new technology developing. That also will bring us the better customer demand in the future. Also, because of controlled CapEx, we can see the operating cash flow is keeping positive for the past few quarters. I think right now, WIN Semi has a well-controlled CapEx and also the expense to making the cash flow become more positive.
The next page, we can see that's our valuation ratio and also the depreciation trend. Because the demand was the change, we start to control our CapEx. It also will bring a better depreciation trend to us because I think right now, start from 2024, the depreciation gradually starts to decrease quarter by quarter. Even this quarter, we see that's a more significant decrease quarter by quarter. We suppose that will continue for several quarters. Also because of that, right now, the utilization rate has become a little less impact for the gross margin. For example, like this quarter, the utilization rate is still just around like 45%. We already keeping our margin in individual margin is better than 20% for the Q1 and Q2. Yeah. That also shows WIN Semi has a better recovery from the earning pressure for the utilization and depreciation.
I think that's all some previous summary for the past two years, what WIN Semi is doing to minimize the impact of the market supply demand. Yeah. Let's come back to the second quarter's results comment. For the second quarter of 2025, WIN Semi reports consolidated revenue of TWD 23.370 million, up to 5.7% quarter-on-quarter and down 23.8% year-on-year. The variance between reported revenue and the earlier guidance was primarily attributable to the significant appreciation to the NT dollar against the U.S. dollar. In U.S. dollar terms, the second quarter revenue increased by approximately 16% quarter-on-quarter in line with previous guidance. Gross margin for the quarter was adversely impacted by currency fluctuations and a slightly less credible product mix.
In addition, the share price volatility of this listed Chinese customer held by our consolidated subsidiary also negatively impacts consolidated gross margin by approximately -0.4 percentage point. Nevertheless, with increased wafer output, capacity iteration improved to 45% during the quarter, lifting the company's individual gross margin from 21.9% in the first quarter to 22.9% in the second quarter. Consolidated gross margin also improved from 16.7% in the previous quarter to 19.5%, with the consolidated operating margin reached -3.1% after acting in the following exchange goals of TWD 246 million and other non-operating items. Net less attributed to the parent company was TWD 421 million, with the EPS of -TWD 0.99 for the quarter. According to all product segments in the second quarter, demand for cellular and Wi-Fi PAs improved noticeably compared to the previous quarter. Driven by the inventory we built ahead for the new U.S.
smartphone launch in the third quarter, in particular, the increasing adoption of Wi-Fi 7 drove strong pull-in from the Wi-Fi router customer, also making Wi-Fi the first growing product segment in the quarter. In optics segments, hands-on 3D sensing digital chips also show a development optic, similarly supported by the inventory built up ahead to the new smartphone launch in the third quarter. Shipment of the non-3D sensing optical chips remains solid as well. While the infrastructure segment had originally had expected to remain flat quarter-on-quarter, both optical and infrastructure experienced a slightly sequential decline due to a cellular currency exchange movement. As we enter the second half of the year, concern over potentially technical challenges from the U.S. resisted. However, our business activity with customers remains firmly unchecked.
This year, we are seeing a full member of new customers and the new projects across the key areas, such as low Earth orbit satellites, AI-driven big data transmission, and also aerospace applications. These customers consistently choose WIN Semi as their first choice, thanks to our advanced technology and the long-standing record of manufacturing excellence. At the same time, more customers are initiating engineering tap out for next generation and even future generation products, including a number of new product introduction projects in the field of optics. These developments continue to progress steadily, affected by the short-term market fluctuation or external uncertainty, and the integrated device manufacturing even has more discussion with us on outsourcing opportunity in order to mitigate the risk. Looking ahead to the third quarter of 2025, momentum across all product segments is better than the past two years.
Following, the consolidated revenue is expected to increase approximately mid-teens quarter-on-quarter, with the consolidated gross margin expected to sit around the low-teens level. I will turn the call back to Joe. Thank you.
Okay. Thank you, Steve. Okay. It's my pleasure to present our financial results for the second quarter of 2025. We are starting from page nine. The first page, page nine, talks about what's discussed about revenue and the margin trend. In the second quarter, 2025 consolidated revenue was TWD 3.780 million. The QoQ was up 5.7% and the YoY was down 23.8%. The difference between this number and the earlier guidance was primarily attributable to the significant appreciation of the New Taiwan Dollar against the U.S. dollar. Actually, if in U.S. dollar terms, we actually align with our guidance, which is approximately growth about 16% QoQ.
For the gross margin in Q2, it was impacted by the significant appreciation of the New Taiwan Dollar and also a slightly less favorable product mix. In addition, the share price volatility of a listed Chinese customer held by our subsidiary also negatively impacted the gross margin approximately around a negative 0.4 percentage point. Those are the negative factors, which are negative impacts to our gross margin. However, there is some positive impact, which is the utilization was increased in our wafer foundry, our fabs. Therefore, the utilization rate increased to 45% from 35% last quarter. The Q2 individual gross margin increased to 22.9%, which is a 1 percentage point increase. The consolidated gross margin also increased about 1.8 percentage points to become 18.5% of the gross margin, the consolidated gross margin. Also, the consolidated operating margin improved around 3 percentage points to - 3.1% compared to last quarter.
This is about revenue and the margin. Please flip to the next point, next page, page 10. The non-op items, including the FX loss and also the interest expense and other non-op items, because of that, our Q2 2025 net loss attributable to the parent company was TWD 421 million. Compared to last quarter, the net profit attributable to the parent company was TWD 16 million. Therefore, the EPS for Q2 was - TWD 0.99. The accumulated first half was -TWD 0.96 for EPS for the first half. Please flip to the next page, page 11. We discussed the product mix. As Steve Chen mentioned earlier in our slide, we are making the product mix to be favorable to our gross margin in the past two years. As you can see, the recent two quarters, including Q1 and Q2, our infrastructure percentage is in line with our cellular PA percentage.
It's a lot different from in the past. Two years ago, or even longer term, our cellular PA used to be around 40-something to 50% of our total revenue, and the infrastructure less than 20%. Now, the product mix is healthier to our gross margin for the things of 2025. The Wi-Fi business contributed most of the growth for the second quarter. The percentage is up to between 15% and 20%, which is higher than last quarter. Actually, cellular PA also grows in Q2 QoQ. Infrastructure, actually, for the actual result in U.S. dollar term or either the shipment for infrastructure or optical, it's slightly better than Q1, but because of the New Taiwan Dollar appreciation, it's become slightly lower than last quarter. The optical also becomes 13% from 17% last quarter. This is a product mix. Please flip the page to page 12. Talk about our guidance for Q3.
Steve mentioned that, I'm going to repeat again. We expect Q3, I'm sorry, I have to correct it. Q3 2025, it's not 2024. I'm sorry about that. We expect Q3 2025, the consolidated revenue to increase, yeah, to increase mid-teens QoQ. We also expect Q3 2025 consolidated gross margin to be around the level of low 20%. We expect all of the product segments will be buttoned out from the first half. In Q3, all of the products will be positive growth, no matter the cellular, Wi-Fi, or infrastructure and the optical. We also expect the best performance for QoQ growth will be optical because of the U.S. smartphone new product launch. Secondarily will be Wi-Fi and also the cellular. It's also doing very well. Please flip to, then we can quickly go through the financial statements, starting from page 14. Our consolidated income statement for Q2 2025.
I still have to remind you guys that all of the numbers, it's all on an audited basis. The actual results are based on the CPA's report thereafter. The Q2 net revenue was TWD 3.780 million. QoQ was up 6% and YoY was down 24%. The gross profit was TWD 698 million. The gross margin was 18.5%, improved about 1.8 percentage point. The operating expense of TWD 817 million is very, very similar to last quarter. The operating expense ratio is around 22%. Therefore, the operating loss for Q2 was TWD 119 million. The operating margin was - 3.1%, which is improved about 3 percentage points. The non-op item, there is a loss of TWD 432 million. The detail will be in page 16. The loss before the income tax was TWD 551 million. The net loss was TWD 490 million. Therefore, the net margin was - 13%.
The loss attributable to the parent company was TWD 421 million, and the EPS was - TWD 0.99. The return on equity was - 5%. Approximately utilization rate improved about 10 percentage points from 35%- 45% this quarter. The same period of last year was 65%. Depreciation expense was TWD 1.038 million, which is lower than last quarter or even a year ago. The CapEx is TWD 205 million. It's also lower than the same period of last year. We finish the Q2 result. Now the first half income statement. The first half of 2025, the net revenue was TWD 7.356 million, and YoY was down around 22%. The gross margin for the first half is 17.6%. Operating loss was TWD 336 million. Therefore, the operating margin was -4.6%. Excuse me. The net loss was TWD 554 million, so the net margin was -7.5%.
The loss attributable to the parent company for the first half was TWD 405 million. The accumulative first half EPS was -TWD 0.96. The return on equity, excuse me, for the first half was -2%. The approximate utilization for the first half was 40%. In the same period of last year, it was 60%. Depreciation expense was TWD 2.144 million, which is lower than the same period of last year. CapEx was TWD 2.296 million, which is even lower than the same period of last year. This is the first half of the income statement. Flip to the next page, page 16. This is to show you the non-op item. Q2 2025 non-op item was a loss of around TWD 432 million, mainly coming from the foreign exchange loss and the financial cost, which is interest expense.
The rest of it is about something for the financial assets, fair value to the profit and loss, something like that. In the first half, the non-op item was negative, a loss of TWD 276 million in total. The final page, page 17, which is the balance sheet, June 30th. The cash and cash equivalent was TWD 5.460 million. The total assets were TWD 61.132 billion. The total liability was TWD 23.800 billion. The common stock remained the same. Therefore, the total equity was TWD 37.332 billion. The book value per share increased from $85.68 last quarter end to June 30th, $86.17. The key index, including the current ratio, is 227%. The debt ratio was 39%. It's all in a healthy level. This is my part. Now we begin the Q&A. Please submit your question in the input box on the webcast window now. Thank you.
There is a question asking about the strong demand in AI. How should we take a look at the incremental revenue potential in WIN Semi's infrastructure segment compared to other infrastructure products? Actually, we've been sharing with the investor our optical business. We have non-3D sensing business, which has a penetration and adoption related to AI. We spent a lot of time in the first earnings call earlier this year. We shared with the investor that because of AI, WIN Semi has many opportunities in the optical transceiver. For example, no matter the laser diode, the modulator on the TX, and all the photo detector, which is all PIN diode, APD on the RX. I think those are our opportunities. There is also a lot of project engagement right now with our customers. For those, most of the contribution will be reflected in the optical segment.
It does not mean that there will not be any kind of revenue contribution to the infrastructure segment because we do classify optical driver revenue in infrastructure since we use our MMIC, which is pHEMT technology, for the 100 gigabyte or 200 gigabyte. We have a very good U.S. customer who is also in this territory and doing very well. Technology-wise, we classify them into infrastructure. For the rest of the AI-related, we will classify that into the optical business. Most of those optical revenue is NRE or NPI-related revenue at this stage. For the small volume of mass production, we have several engagement projects with a couple of Tier 1 customers right now. This is pretty much like that. Thank you.
It is a question that I want to discuss about the all application segment picture in 2025. I think we already disclosed for Q1 and Q2.
We already see that the cellular, Wi-Fi, all has the result. For Q3, I think right now, we can give the better picture about Q3. It looks like the cellular and the Wi-Fi will all increase because of the smartphone new model launch. Optical is available for that also. I think for Q3, we can see the whole four segments were increasing. The optical will become the biggest growing segment because the shipment is always more concentrated in the second half. The cellular and Wi-Fi also have pretty good growth because of the new model launch. The infrastructure, I think, also has some growth, but maybe not much because that is a more spiky segment compared to the other three. Thank you.
This is a question further asking about the depreciation expense trend in 2025 and in 2026, even 2026.
I think we already shared with you that in the past two years, things reached the peak of the depreciation expense two years ago, and then keep going down gradually, and then even more significant for the recent quarter. We expect that will be further going down for the next couple of quarters. Unless in the next couple of years, there is any kind of momentum to make a decision to do a significant CapEx. Otherwise, I think for the existing utilization and the capacity, we don't need any further CapEx, and the depreciation expense will go down further. I think that's pretty much like that. Thank you. I'm sorry about that. There is a question from the investor asking about the revenue trend for the next couple of quarters or even the rest of the year.
I think we already see the trend of things Q2 and then the Q3. For example, the Q2, the momentum or the growth rate should be even better, but because of the foreign exchange issue, it looks more moderate. I think Q3, we also see probably the same trend. We see a stronger trend for the second half than the first half. I think we believe that especially the second half, starting from Q3, it's a new smartphone new model launch. We have a very good customer in the supply chain, and most of them benefit from that. Also reflecting in our revenue right now and probably also the rest of the year. Thank you. There is a question asking about the outlook for LEO satellite, which is low Earth orbit satellite.
Actually, I can say that this is the most popular topic in our Chinese earnings call, I mean, one hour ago. About LEO satellite, I think we are in this supply chain since many years ago. In the very beginning, we are in the satellite between satellite and satellite. We provide excellent technology for the connectivity between the satellite, which is PA or LNA. Therefore, later on, we also in the supply chain, we have a customer penetrate into the application between satellite and the gateway. I think this year, we see even more penetration. The customer needs the solution for the other than the original KU band and KA band, which is around 17- 19 GHz or 20-something to 30 GHz frequency band.
Even more, they need the E band, which is 70 to 80-something GHz, or V band is brand new between the 70-something or 40 to 40-something GHz. We developed our provide our advanced technology, which is the GaN iTRI 12, the 0.12 µm GaN iTRI solution for the KA band, and the 100.1 µm pHEMT technology for the E band or W band. For the V band, we also provide a 28 V 0.12 µm GaN iTRI technology to support the customer, even combining the bumping technology. This kind of application has been in mass production starting from this year. The new application is a direct-to-handset or direct-to-cell, which connects satellite to cellular phone. It will be equipped on the satellite instead of the cellular phone. For this kind of application, I think we already have some contribution.
We provide the solution to the customer, and we have the contribution starting from this year. This is a very interesting application. I think we are starting from between satellite and satellite to gateway, or vice versa. Now we also provide a solution between satellite and cellular phone. That's a very good opportunity and a good contribution to our infrastructure business. Thank you.
There's a question. It's more related to our future, maybe the IDM opportunity discussion. I think, because like I said at the beginning of the last slide, due to the smartphone global market having a structural change, and also China right now, because of some regulation, they want to have their localization supply chain. It not only impacts WIN Semi's low-end China smartphone cellular share, but also impacts those IDM companies for the China market. I think right now, evidently, there's more uncertainty for running the fab.
We all know WIN Semi has more complete technology to cover all IF devices, and we're still keeping putting a lot of resources to develop the new next-generation technology. I think, and also we have maybe the biggest wafer output capacity in the world. I think those all attract those IDM companies to discuss with WIN Semi, trying to leverage our capacity and technology to help them to lower the uncertainty in the future. Once those IDM companies try to outsource the demand to make their uncertainty become lower, I think WIN Semi is always becoming the first one to talk with. Thank you.
Now it's time. It's 5:30 P.M., and 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. Thank you again. You may now disconnect.
Goodbye.