Good evening, ladies and gentlemen. Welcome to WIN Semi's result conference for the second quarter of 2026. My name is Avon Hsu, the Spokesman and Director of Finance of WIN Semi. Joining me on today's conference is Steve Chen, General Manager of Corporate Administration. Today's conference is organized into three sections. First of all, our General Manager, Steve, will comment on the company's results and provide brief guidance for the third quarter 2026. Secondly, I will go through the operational analysis over the past two years and the financials in details.
After that, we will open to the floor for Q&A. Before we begin, I would like to draw your attention to the safe harbor notice on page one of the presentation slides. 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, Mr. Steve Chen, deliver an overall review of company's second quarter results and provide brief guidance for the third quarter 2026.
Thank you, Avon, and welcome everyone. Let's talk about our second quarter results. For the second quarter of 2026, WIN Semi reported consolidated revenue of TWD 5.2 billion, up 15% quarter-on-quarter and 39% year-on-year, in line with the company's previous expectation, reflecting the combined effect of a more favorable product mix, higher shipment volume and the margin dilution associated with the initial ramp-up of the new products. Individual gross margin was 32.6%, up 0.2% from the previous quarter. Consolidated gross margin was 29.2%, also improving by 1.9% sequentially. Consolidated operating margin increased from 9.4% in the previous quarter to 14.1% in the second quarter, reflecting improvement of both a quarter-on-quarter and year-on-year basis. Net income attribute to the parent company amount to TWD 977 million, with EPS of TWD 2.3 for the quarter.
Looking at our product mix in the second quarter of 2026, WiFi segment declined slightly due to continued soft demand on WiFi routers, while all other product line grew in line with our expectation. As the industry enter the traditional stronger season for smartphone sales, demand for cellular PA products trends in the second quarter, driving single digits sequential revenue growth. Infrastructure posts stronger quarter-on-quarter growth, support by increasing demand from data center, aerospace, and satellite applications. In optical, our data center optical receiver component completes customer qualification and become moved to mass production, contributing to revenue in the second quarter. As a result, optical record the stronger sequential growth among our four major product categories. Overall, the revenue contribution from the higher margin infrastructure business in the first half of 2026 was roughly equal to the contribution of cellular business.
In addition, we also saw a significant growth in our optical segment in the first half of the year. This reflects our continuous progress in optimize the product mix and the strength, WIN Semi's long-term competition strongest in the III-V compound semiconductor industry. As we move to the second half of the year, continued memory shortage and the price increasing across the supply chain and in the end market is adding uncertainty to smartphone sales during this year's traditional peak season. WIN Semi has long maintained a leading position in the global RF GaAs foundry market for the smartphone, with stronger focus on the mid to high-end Android and iOS segment. We have established a strong competitive position and based on what we're seeing today, we remain constructive on demand for the cellular and WiFi PA product used in the high-end smartphone model.
However, overall smartphone sell-through will be continued to depend on broader macroeconomic condition and will be need to closely monitor it. Behind smartphones, we have successfully extend our GaAs PA and GaN technology into the low-earth orbit satellite, which is LEO related application and the space communication applications. We have established a solid position in the global market for aerospace RF components and have become an important participant in the next generation of space communications. We have also expanded into high-speed, high-bandwidth optical interconnects for AI applications while allocating capital expansion and R&D resources. Our priority is to meet the demanding requirements of the leading global customers. Through this effort, we aim to deepen our customer partnerships while further strengthening our competitive and profitability.
Now, looking ahead to the third quarter of 2026, driven by new high-end U.S. smartphone launches and new optical communication products entering mass production, consolidated revenue is expected to increase by low teens quarter-on-quarter while the consolidated gross margin is expected to be around low 30s. I will turn the call back over to Avon. Thank you.
All right, let's jump straight into the presentation. This slide provides an update on our achievements in ESG. WIN Semiconductors takes great pride in its commitment to ESG and sustainable operations. Our key updates for the first half of this year include, in May, we were included in the Dow Jones Sustainability Index for the sixth consecutive year. Also in the first half around April, we were selected for the S&P Global Sustainability Yearbook for the seventh consecutive year. Out of 9,200 companies evaluated globally, only 79 in Taiwan were included, and WIN Semi is proud to be one of them. Furthermore, in May this year, we were recognized among the top 5% in the corporate governance evaluation for TWSE-listed companies for the 11th consecutive year. Next, let's review WIN Semi's overall operational performance over the past two years. The first chart covers operating expenses.
As you can see, operating expenses have remained stable since 2024, and in the first half of this year, quarterly operating expenses have dropped below TWD 800 million per quarter. The chart on the right illustrates operating cash flows and capital expenditures. Regarding operating cash flows, looking back at 2024 through the first half of 2025, we generated approximately TWD 1 billion in operating cash inflows per quarter. In the second half of 2025, driven by improved profitability and the write-back of non-operating impairments, operating activities generated a net cash inflow of over TWD 1 billion. Moving into 2026, due to the upcoming peak season, inventory preparation for new products, and enhanced supply chain flexibility, prepayments and inventory stock in the first half were increased.
Consequently, operating cash inflow was approximately TWD 100 million in Q1 and turned into an outflow of about TWD 800 million in Q2. The light blue bar represents capital expenditures. In the first half of 2025, our quarterly CapEx stayed below TWD 500 million. In the second half of 2025, we resumed project-based capital investments, mainly focusing on optical communications and niche products in the aerospace field, particularly gallium nitride. Total CapEx for the first half was around TWD 1 billion. Therefore, our original full-year forecasted CapEx of TWD 2 billion-TWD 3 billion remains unchanged. This page reports on capacity utilization and depreciation expenses. Looking back at WIN Semi's past few years, since entering the inventory adjustment cycle in 2022, single-quarter net revenue once dropped to around TWD 2 billion in 2023.
Following the 2022 inventory correction, we experienced inventory cyclical adjustments throughout 2023 and 2024. It was not until the second half of 2025, thanks particularly to strong performance in infrastructure and the progressive ramp-up of new optical products, that our single-quarter net revenue recovered and stabilized at around TWD 4 billion. In Q2 this year, net revenue reached above TWD 5 billion. Similarly, regarding capacity utilization, our quarterly utilization rate has maintained at 60% since Q3 2025, while individual company gross margin stayed between 25% and 30%. The chart on the right covers depreciation expenses. WIN Semi's previous CapEx peak occurred around 2021 to 2022, primarily due to factory construction in the Southern Taiwan Science Park, with annual CapEx reaching TWD 7 billion-TWD 8 billion.
Over the past four to five years, depreciation has gradually declined on a quarterly basis, falling to around TWD 700 million-TWD 800 million per quarter in the first half of this year. As we resumed project-based capital investments in second half last year, the quarterly decline in depreciation expense is expected to flatten out. Those are the operational results for the first half of the year. In terms of revenue and gross margin trends, Q2 total consolidated revenue returned to the TWD 5 billion level, with unaudited net revenue coming in at TWD 5.257 billion, which aligns with the guidance provided in the previous investor conference. This represents a year-over-year growth of 39%. Overall for Q2, the product mix improved, driven by significant growth in infrastructure and optical.
Due to the combined effects of an improved product mix, higher shipment volume, and early-stage product ramp-ups, Q2 individual gross margin reached 32.6%, up 0.5 percentage points QoQ. Consolidated gross margin came in at 28.2%, up 1.9 percentage points QoQ. Operating expenses remained stable, resulting in a Q2 consolidated operating margin of 14.1%, an increase of 4.8 percentage points QoQ. As shown in the bottom chart, starting from second half 2025, our quarterly revenue has maintained positive YoY growth. Aside from a slight QoQ dip in Q1 due to traditional seasonality, the overall growth momentum persists. The bottom right chart highlights quarterly gross margin, operating margin, and net margin, all of which showed growth in Q2 2026. Looking at overall first half profitability, Q2 non-operating income increased compared to Q1.
Net profit attributable to the parent company for Q2 was TWD 977 million, up roughly 80% QoQ from TWD 533 million in Q1. EPS for Q2 was TWD 2.3 compared to TWD 1.26 in Q1, also representing an 80% QoQ growth. As clearly shown in the chart, both operating profit and net profit attributable to the parent company grew significantly YoY. For EPS, Q2 stood at TWD 2.3, turning profitable compared to a loss of TWD 1 in the second quarter last year. Page 10 of the presentation covers the product mix. As you can see, infrastructure steadily accounted for about one-third of revenue from Q1 to Q2, holding a 30%-35% share. The cellular segment maintained a 30%-35% share as late Q2 entered the early stage of traditional peak season pull-ins.
The Wi-Fi segment was the only one among the four product lines to decline QoQ in Q2, mainly due to soft router demand. Wi-Fi's share decreased slightly to 10%-15% in Q2, down from 15%-20% in Q1. For the optical segment, Q2 entered the early consumer electronics pull-in phase, combined with initial ramp-ups for new data center products, driving its revenue share up to 10%-15% in Q2, compared to 5%-10% in Q1. Regarding Q3 guidance, we are not pessimistic on high-end models, though Q3 faces headwinds from ongoing memory shortages and end market price adjustments. However, beyond cellular and Wi-Fi, we have diversified product projects underway in infrastructure and optical. Data center applications within optical are expected to continue ramping up in Q3. Therefore, we project Q3 consolidated revenue to grow by a low teens percentage QoQ.
Driven by higher revenue and greater operating leverage, Q3 gross margin is expected to reach the low 30s level. The next section provides a brief summary of our financial condition. This page outlines the Q2 consolidated financial statement. Q2 revenue grew 15% QoQ, with gross margin increasing by approximately 2 percentage points. Operating expenses remained steady, and operating profit came in at TWD 740 million, up 72% quarter-over-quarter from TWD 430 million in Q1. Regarding non-operating income, Q2 non-operating income increased quarter-over-quarter, primarily due to significant earnings growth in reinvestments evaluated under the equity method. Additionally, the one-off net value decrease in Q1 caused by dividend distributions in reinvestments did not recur in Q2. In summary, Q2 net profit was TWD 905 million, representing a QoQ increase of approximately 102% compared to TWD 450 million in Q1.
Capacity utilization in Q2 stood at approximately 65%, with CapEx at around TWD 129 million, and depreciation at roughly TWD 760 million. Summarizing the first half, our first-half revenue increased by 34% YoY. Benefiting from better product mix and improved capacity utilization, first-half unaudited gross margin reached 27.4%, up approximately 10 percentage points compared to 17.6% in the same period last year. Operating expenses remained steady. Non-operating income improved significantly year-over-year, as last year's foreign exchange losses driven by U.S. dollar depreciation did not recur this year. Consolidated net profit for first half reached TWD 1,353 million, turning profitable compared to TWD -554 million last year. To briefly review non-operating income, comparing first half this year to the same period last year, first, foreign exchange performance improved significantly because most of our transactions are USD-denominated.
Last year saw U.S. dollar depreciation due to tariff factors, whereas no such issue occurred this year. Second, regarding financial assets measured at fair value through profit or loss, we have investments in private equity funds. When the Taiwan Stock Market pulled back noticeably in first half last year, it caused valuation losses. No such decline occurred in first half this year, leading to higher gains in fair value adjustments. Furthermore, regarding gains and losses of associates and joint ventures accounted for using equity method, the profitability of our investment targets improved year-over-year. In total, first half consolidated non-operating income reached TWD 447 million, up significantly from TWD -432 million in the previous year. The final page covers the balance sheet. Total assets at the end of Q2 reached TWD 6,349 billion, up from TWD 6,056 billion in Q1, primarily due to increases in inventories and long-term investments.
Inventories increased by roughly TWD 2 billion, mainly in raw materials, driven by supply chain flexibility needs and peak season preparations, as mentioned earlier. Long-term investments increased due to higher book values of equity method investments and OCI-measured investments. Total liabilities changed minimally overall. However, within the consolidated report, certain long-term borrowings matured within one year and were reclassified as short-term borrowings. This caused the Q2 current ratio to decline from 223% in Q1 to 162%, though total liabilities remained largely unchanged. The debt ratio remained at a healthy, conservative level of around 30%. That concludes my presentation. We will now move to the Q&A session. Institutional investors are welcome to raise their hands, and our staff will bring you a microphone to ask your questions. Thank you.
Hello, Steve and Avon. I have two questions here. The first question goes to Steve. I remember when we were here at the beginning of the year, there was an update regarding the revenue contribution of AI-related optical communication. I would like to follow up on the latest status. Roughly what percentage did it account for in Q2, and what is your outlook for Q3, the second half of the year, and into next year?
Okay. Last year, our AI-related contribution was mostly from driver ICs. This year, as more optical communication projects move toward mass production, the share has been increasing gradually. Last year, it was roughly at a low single-digit level. This quarter, if I remember correctly, it has reached a high single-digit level, representing more than 100% YoY growth. It should continue to trend upward in the second half of the year, but we will update it quarter by quarter. In short, from last year to this year, it has almost more than doubled. Thank you.
Understood. If we assume it is high single digit this year and continues to climb in the second half, the full year should be at least high single digit. Is there a chance it could reach double digits next year?
Yes, there is a chance to gradually move toward double digits. Because our expectation, as I just mentioned, is that contribution of cellular and infrastructure are currently almost at equal levels. We hope that with continued resource investment, optical can also gradually reach a similar share. This will make our overall product mix and diversification much healthier.
A quick follow-up. PD has already entered mass production. What about the laser side, such as CW laser?
PD began mass production toward the end of Q2, which is why everyone saw very strong growth in optical in Q2. The volume in Q3 should be even larger. Looking at current visibility, optical should have the strongest growth rate in Q3. Infrastructure should also perform decently as WIN Semi's exposure in aerospace covers virtually all major systems. Cellular and Wi-Fi will likely remain flat to slightly growing. That's the overall picture.
Great. Thank you. My second question is for CFO Avon regarding depreciation. You mentioned earlier that depreciation would start cycling up in second half. Could you give us guidance on depreciation for this year? At what level is the bottom before it starts moving up?
Regarding depreciation, we continuously added capital investments in the second half of last year, scattered across prepayments or delivery payments for equipment. They will only be transferred to fixed assets and start depreciating as they are delivered and accepted. We cannot give you a precise growth number because equipment delivery timelines are quite extended. However, what is certain is that our current level of around TWD 700 million per quarter is essentially the bottom line. As new equipment continues to arrive, it will transfer into fixed assets and gradually increase depreciation.
I think returning to over TWD 1 billion is unlikely. It will probably stay around TWD 800± million . There might have slightly quarter-over-quarter fluctuations. Since last year through this year, we have continuously made capital expenditures for advanced process technologies like optical and gallium nitride. However, as you know, lead times for semiconductor equipment are currently very long, and delivery schedules are uncertain. We certainly try to push schedules ahead, but it depends on individual equipment. For this year, I don't see depreciation rising significantly. We are currently at a relative bottom, hovering around the end TWD 800 million level. Thank you.
Got it. Thank you.
I'd like to ask about the increase in inventory. What end applications is this primarily for? Is it related to our equipment delivery and testing?
As mentioned earlier, inventory consists mainly of raw materials. Looking at the current market, first, geopolitical factors have made the supply of many raw materials relatively tight. Second, the situation in the Middle East has introduced delivery schedule uncertainties for chemical raw materials. Furthermore, the second half of the year is peak season for WIN Semi. Therefore, considering supply chain stability and upcoming peak season demands, we strategically raised our raw material inventory reserves starting in Q2. People often ask us whether indium phosphide or gallium arsenide substrates will run short. This shows that we have been planning ahead, so there is no need to worry. Thank you.
Understood. Another question regarding the expansion of gallium nitride capacity. What end application is this mainly for? Is there an expected scale of expansion or timeline for revenue contribution?
Gallium nitride is primarily utilized in infrastructure-related applications, including base stations and satellite communications. This will also be the main growth driver for infrastructure going forward. Thank you.
Is there an expected timeline for expansion and revenue contribution?
It is already actively expanding. Semiconductor manufacturing requires many machines. Capacity expansion targets bottleneck equipment. It's not like an assembly line where adding one machine simply equals to a fixed increase in capacity. It is expanded step by step to ramp up alongside demand. The bottleneck equipment differ during each expansion phase. We estimate our current gallium arsenide capacity is sufficient, so future CapEx will focus primarily on gallium nitride and indium phosphide. Thank you.
Understood. One last follow-up. Is this expansion for the same end application as the delivery and testing mentioned earlier?
Basically, all newly purchased equipment follows standard delivery and acceptance schedules. Yes.
Understood. Thank you.
Hello, General Manager. I'd like to follow up on the optical section mentioned earlier. You noted potential double-digit growth next year. Could you give us a sense of whether PD will remain the main driver or if there are expectations for lasers? Lasers were earlier but didn't detail the qualification status for CW lasers, EML, or other optical components. Could you elaborate more on this? Thank you.
Okay, thank you. The growth of PD is indeed very impressive at present. As for lasers, they will continue to grow, though there are more varieties. At WIN Semi, our technologies span VCSEL, EML to CW lasers, serving different customers and projects. As reported, PIC and VCSEL are already in mass production and volume will continue to expand. CW lasers are not as widely adopted yet, with relatively longer development and qualification cycles. Therefore, VCSEL and PIC-related lasers are already in production, while CW lasers will gradually contribute from epi to wafer processes starting next year. For CW lasers to represent a significant share, it will likely be next year or the year after. Other products like VCSEL and PIC will scale up concurrently starting now. Thank you.
Thank you. Could I ask the CFO if there is any new guidance for this year's CapEx? Thank you.
CapEx for the first half was around TWD 1 billion. The full-year guidance of TWD 2 billion - TWD 3 billion we provided at the beginning of the year remains unchanged. We will update everyone as quarters progress if there are significant adjustments.
Hello, General Manager. Two questions from me. First, regarding optical communications, you mentioned strong demand and ongoing growth for PD. Could you share more details, such as whether this comes from a single customer or multiple customers? How do you view its growth momentum through the end of the year or into 2027? Another detail regarding optical communications, are the wafers used produced in-house or supplied by customers? Could you also share our MOCVD machine count or capacity planning? That is the first question.
Okay. For PD, it is currently driven by a single large customer. As for growth over the next two to three years, we remain optimistic. Ramp-up only started in late Q2, and customer forecasts for this year, next year, and even the year after remain very high. Meeting their year-on-year ramp-up requirements already requires maximum effort on our part to expand capacity. So there is little concern about growth stalling due to a lack of additional customers in the short term. Regarding materials, were you referring to all optical products or specifically PD?
If possible, could you share details on both PD and lasers?
As we have consistently communicated, WIN Semi can support the full scope from epitaxy all the way through wafer processing, similar to our approach in MMIC. In optical communications, some products involve customers working with their existing epi suppliers and send designed epi wafers to us for processing, while others involve joint collaboration from design of epi to wafer process. Both models coexist. We do not limit ourselves to a single pattern. In our current optical portfolio, we have products produced fully in-house by WIN Semi, as well as cases where customers design and partner with epi vendor before handing over to us. These models coexist within our business strategy. Thank you.
Understood. A small follow-up, could you share our current MOCVD machine count?
I do not keep track of that off the top of my head. It is just a segment of our equipment. We have thousands of equipment in our fabs, so I cannot track specific machine counts. Thank you.
Understood. The second question is regarding satellite applications among infrastructure segment. Are our satellite products deployed on the ground, in space, or both? Aside from gallium nitride PA, could you share detailed insights into gallium arsenide pHEMT applications in satellite technology?
We explained this in a presentation slide at the beginning of the year. Satellite communications cover two main areas: PA and LNA on satellite and ground-based gateways. Mobile small dish antennas represent smaller volumes and form part of ground applications. Additionally, there is inter-satellite communication beyond satellite-to-ground connections. Whether satellite-to-ground or satellite-to-satellite, we offer different technologies supporting various customers in mass production. In short, across all satellite-related wireless communication utilizing gallium arsenide or gallium nitride, our technology is involved and supporting customer. Thank you.
Thank you. One quick follow-up. Could you give a rough range for the percentage of satellite applications within infrastructure or total revenue?
Recently, within infrastructure, the share of base stations and satellites has become roughly equal. While there are other small volume niche applications, base stations and satellites currently hold comparable weight within our infrastructure business. Thank you.
One last housekeeping question for the CFO. Could you clarify the primary differences between individual gross margin and consolidated gross margin?
Individual gross margin refers specifically to WIN Semi standalone. The consolidated financial statements include other business divisions and subsidiaries. The variance between consolidated and individual gross margins stems mainly from the operational results of consolidated subsidiaries.
Hello. Thank you for clarifying the ratio between base stations and satellites. Last year, satellite revenue was not as high as it is now. Is it possible for satellite revenue to surpass base stations in the future? That is my first question.
Indeed. Contribution of applications within infrastructure segment fluctuates monthly or quarterly. They are more like project-based. For instance, SpaceX deployment moves from version one, version two, to version three. Each version has planned volumes approved by NASA, so build-outs occur in waves. Base stations follow a similar pattern tied to telecom tender releases by country. Looking at full year figures, base station revenue was significantly higher than satellite revenue last year. However, starting late last year, satellite deployments entered the next generation, including direct-to-cell capabilities discussed earlier. Adding more features requires more power amplifier devices. Thus, we expect the proportion of satellites within infrastructure to gradually rise. Whether it exceeds base stations remains to be seen. 5G base station build-outs are in their late stages with penetration near 70%, slowing down momentum.
However, 6G projects with customers are underway, with commercialization expected in certain regions by 2030, which will trigger another build-out momentum. LEO's life cycle is three to five years before requiring replacement launches, making this ratio dynamic. Overall, we are optimistic about infrastructure growth as satellite deployments represent a structural shift compared to five years ago. Thank you.
As a follow-up, is direct-to-cell satellite capability positive for us?
It is definitely positive. First, smartphone PA specifications will be higher and more demanding than for base stations on the ground due to increased communication distance. Delivering superior specifications allows WIN Semi to widen its process technology gap over competitors. Second, on the satellite side, connecting directly to mobile devices requires significantly greater connectivity capability. Gateways involve high data traffic but few devices. Connecting directly to hundreds of millions of mobile phones globally increases the required onboard satellite component volume substantially. Thank you.
Thank you. Also, when you mentioned VCSEL and EML entering mass production, does that mean now in 2026? Or did volume shipments start in 2025?
VCSEL started mass production last year, and volume is scaling year-by-year. This reflects our AI data center contribution, rising from low single digits last year to high single digits now, driven by various optical products. Thank you.
Regarding capacity utilization, you previously mentioned 60%. Given that capacity has expanded, at what point in time does this 60% apply?
This figure reflects overall company fab capacity. Many of our machines can be shared across processes, so we do not idle equipment just to categorize capacity for specific application. We evaluate utilization against the total installed fab capacity. Thank you.
Thank you.
Hello, General Manager. A question regarding inventory. Data shows inventory reached around TWD 7.5 billion, a historical high since 2018. Raw materials historically accounted for roughly 70%. What was the raw material proportion in Q2 inventory, and was the absolute increase driven by substrate price hikes?
This is not particularly related to price increases. Price hikes alone could not drive an increase of this magnitude. It simply reflects our strategy to raise inventory levels for key raw materials. First, for the peak season. Second, because geopolitical factors have lengthened supply chain lead times. As WIN Semi holds over 60% - 70% of the global pure-play foundry market, ensuring supply chain security is paramount. Therefore, we proactively built longer-term inventory buffers for critical long lead time raw materials. Thank you.
One more question regarding individual gross margin. Q1 disclosed stock disposals and reinvestment valuation impacts due to stock price changes. Will there be similar disclosures for this quarter?
We will likely discontinue specific disclosures on this moving forward. Following disposals in second half last year, the ongoing impact is under 1%, so we won't track this figure separately going forward. Thank you.
Following up on the capacity question, if current utilization is 60%, what is our historical or labor-supported maximum capacity utilization?
Historically, our capacity utilization can reach 100% without issue. It is purely a function of labor availability and overtime. Over the past few years, while installed capacity was available, market demand did not warrant maintaining maximum operational momentum. As demand recovers, we are scaling up production readiness. Ramping to 100% is simply a matter of labor preparation. Labor allocation depends directly on market demand. Thank you.
Hello, management. Regarding substrate procurement for the PD customer, does the customer supply the substrate, or do we secure it ourselves? Given future volume growth, do we have the capability to secure sufficient substrates, or are LTAs required? Are we also responsible for laser substrates?
We maintain long-term agreements for critical materials to mitigate supply chain risks. For PD materials, we co-work with the customer. Since the customer is a major market player and WIN Semi is a leading foundry, both sides collaborate closely to secure material supply. Thank you.
General Manager, how do you view non-operating items for Q3? Thank you.
Which specific item are you referring to?
Non-operating revenue.
Q3 non-operating items depend on event developments as they happen, such as exchange rates. We cannot provide granular foreign exchange forecasts but will update it on a quarterly basis. However, FX impacts remain manageable for us because WIN Semi's revenues and material purchases are predominantly USD-denominated, providing a natural hedge against most risk. Thank you.
Two questions, General Manager. First, regarding individual versus consolidated figures, is the Q3 gross margin guidance based on consolidated results, or does it account for subsidiary impacts? Since the variance is substantial, is this reflected in the guidance?
The guidance provided is for consolidated gross margin. Correct.
How should we evaluate the difference observed in Q2 for Q3?
If you look at past quarters, it generally stays within a similar range.
It will continue to dilute part of the gross margin?
That is correct.
Second, regarding monthly capacity converted to 6 in HBT wafer equivalents, what is the current figure?
Monthly capacity remains unchanged. After all, we have not engaged in large-scale expansions recently.
Understood. As a follow-up, does the company have short-term fundraising, expansion, or financing plans for capacity or major CapEx investments?
Currently, CapEx needs are met by own funds since efforts focus on de-bottlenecking existing fabs. Major capital investments, similar to when we issued ECBs for the Luzhu plant expansion in Kaohsiung, would only be triggered if we build new fabs. We expect to maintain this pattern. Thank you.
Currently, there are no major investment plans under consideration?
At present, that is correct. Future decisions depend on customer demands. If customers' demand requires significant capacity expansions, that would be a different scenario. Thank you.
Thank you.
Hello, General Manager. Two questions. First, regarding gross margin trends across different segments, could you share key drivers or potential fluctuations?
WIN Semi's margin profile across segments has remained consistent for years. Cellular yields the lowest margin below corporate average. Wi-Fi is also below corporate average due to large smartphone shipment volumes driving higher pricing discounts and end customer price sensitivity. Optical and infrastructure command higher margins. Infrastructure performs noticeably above corporate average, while optical aligns closely with corporate average.
Understood. Looking ahead, how will memory headwinds affect segment margins?
We do not manufacture wafers for memory, so memory prices do not impact our direct manufacturing costs or gross margins. The impact of memory lies in whether elevated memory costs suppress end market smartphone demand. As mentioned early this year, global smartphone shipments may face pressure from memory costs. However, WIN Semi has spent two to three years adjusting its segment positioning, focusing cellular PA and Wi-Fi PA on high-end premium models, so our overall outlook remains stable. Thank you.
One final question regarding LEO satellites. Is the trend moving toward more satellites or additional frequency bands? What is the expected timeline?
This should be viewed long term, as it depends on individual satellite operators' rollout schedules. SpaceX has clear progress, while Europe's OneWeb and other global initiatives have their own LEO plans. We remain positive on long-term growth and will update on year-on-year progress annually. I think there is one last question over here.
Hello, management. I have a question regarding infrastructure. Aside from satellites, we previously discussed defense and aerospace. Could you provide a rough breakdown among LEO, aerospace, defense, and base stations?
As mentioned, base stations and LEO represent the two largest shares. Defense is smaller in volume compared to these primary categories. Because the portions of these applications are volatile, it's hard to categorize them by fixed percentages. Annual figures do not show a steady pattern due to project and tender-based procurement across defense, infrastructure, and satellites. Demand must be evaluated from a long-term industry perspective rather than monthly or quarterly trends.
A follow-up. Satellite applications previously used gallium arsenide more heavily. We now see growing gallium nitride demand. Is this driven by customer bandwidth changes or new model designs?
As noted in our Q1 conference, adding more onboard features requires support across more frequency bands. Higher performance and power requirements, such as for direct-to-cell capabilities, accentuate gallium nitride's efficiency advantages over gallium arsenide. Thank you.
Thank you.
This concludes the Q2 2026 investor conference. Thank you all for participating. Thank you.
Thank you, everyone. Goodbye.