Good day everyone, and welcome to GlobalWafers Q3 2022 earnings call hosted by Sunny Lin. My name is Sultan, and I'm your event manager. During your presentation, your lines will remain on listen only. If you require assistance at any time, please press star zero on your telephone and the coordinator will be happy to assist you. I would like to advise all parties that this conference is being recorded. Now I'd like to hand over to your host, Sunny Lin. Please proceed.
Thank you so much. Good afternoon and good morning, everyone. I'm Sunny Lin, Semiconductor Analyst at UBS. It's our great honor to host GlobalWafers management today for their third quarter 2022 earnings release. Now let me hand over the call to Mr. William Chen, the spokesperson of GlobalWafers for opening remarks. Thank you, William.
Thanks, Sunny. Hello, everyone. Welcome to join GlobalWafers Q3 2022 earnings call. I'm William Chen, GlobalWafers Vice President and the company spokesman. We also have Doris Hsu, Chairperson and CEO of GlobalWafers, and Leah Peng, Deputy Spokesperson join this call. Doris will give us the executive comments and the economic moat first, and then Leah Peng will present industry overview and Q3 2022 financial statement. Before the Q&A session, Doris will answer investor most concerning FAQ, and I will handle the final Q&A session. For today's presentation file, because of a technical issue at the company website this afternoon, we have uploaded onto Taiwan Market Observation Post System around two hours ago. Please visit mops.twse.com.tw to get the file. Please note that some information during our discussion today will consist of forward-looking statements, which apply throughout the call and this presentation. These are subject to significant risk and uncertainties.
Actual results or trends could differ materially from forecast. Please refer to the safe harbor notice in our presentation, page one, disclaimer. Now I'd like to hand over the call to Doris for page two, executive comments. Doris, please.
Thank you very much, William. Good afternoon, everyone. Thanks a lot for joining us today. First of all, let me share some comments of our financial results and update operation status. If you have the material, please turn to page two. Both the third quarter and the cumulative first three quarters of this year delivered the best ever performance of GlobalWafers. Revenue-wise, both Q3 and the first three quarters broke our history record with double-digit year-over-year growth. Q3 revenue totaled TWD 18 billion with 17.5% year-over-year, and the accumulated three quarter revenue reached TWD 51.9 billion NT at 14.4% year-over-year increase. Our revenue growth momentum has been lasting for over two and a half years, starting from Q1 2020.
Regarding gross profit, our Q3 2022 gross profit margin hit 43.7%, and accumulated three-quarter gross margin hit 43.3%. Both of these two are our all-time high as well. Page three, please. Our operating income was over 35% in Q3, which is a very good record for GlobalWafers. EPS-wise, our EPS has been deeply correlated to the mark-to-market valuation on Siltronic shares, which has eroded our profits in previous three quarters this year, owing to Siltronic's low share price. Even though GlobalWafers managed to contribute the best ever quarterly EPS at 11.74 TWD per share, and the cumulated EPS as of September 2022 climbed to 22 TWD per share.
If excluding the valuation loss and other non-operational factors, our first three Q 2022 EPS would have amounted to record-breaking over 40 TWD per share. Prepayment-wise, as of end of September 2022, our prepayment reached TWD 32.2 billion, which is the highest ever, and is 2 billion higher than end of Q2 2022. It's a very good prepayment record and a very good protection for us. Page four, please. The world economy has entered a period of intense uncertainty as a capricious pandemic and the fallout from Russia-Ukraine war combined to fuel rapid inflation and weigh on an already fragile global recovery.
For semiconductor industry, I think in short term, continually deteriorating global macroeconomic outlook with consumer confidence weighed down by inflation and energy costs, in addition to ongoing COVID disruption to the supply chain are dragging down semiconductor revenue growth forecast. The semiconductor market will likely QOQ decline through first quarter 2023, and leads to a flat or low growth rate in 2023. However, the long-term market outlook remains very strong as semiconductor continue to become a very a larger and more important part of our digital economy. We are very confident that the long-term prospect of semiconductor are still very bright. Page five. I would like to talk a little bit about compound semiconductor. I think, backed by stimulus package and net zero carbon emissions, compound semiconductor will scale up. Worldwide compound semiconductor will scale up very rapidly.
In addition to the silicon product, GlobalWafers also has a comprehensive compound semiconductor offering, which makes GlobalWafers well positioned for the trend. Automotive growth still exceeds market growth and due to the increasing demand for EV and the infotainment, autonomous driving technology and so on. As to for the inventory, I think for the worldwide industry inventory with soft momentum in consumer electronics, inventories are really piling up in the industry, a global semiconductor industry. Yet the inventory level in our customers vary on applications. Demand for automotive and industrial applications remain very strong. Page six, I would like to move to utilization. Our Q3 demand is still very solid. Our current demand is still very solid for 200- millimeter and 300-millimeter.
While a lower traction is detected on the smaller diameter, which means 150 millimeter and below, we sense a strong, very strong traction on Float Zone materials and SOI as well at the same time. Next, I would like to move to a very important topic, which is RE100. Following the self-commitment to 100% renewable energy by 2050 in our global operation, we strengthened our green promise by formally joining RE100 organization. Semiconductor industry does consume power heavily. GlobalWafers has a GlobalWafers parent company, Sino-American is one of the very best solar energy company in Taiwan, with very good experience in building solar power plants.
GlobalWafers will implement Sino- American's profound experience in building solar power plants, and along with purchasing renewable energy and renewable energy certificates. By the way, just a couple weeks ago, GlobalWafers is awarded by Taiwan government the top solar system award. This manifests our green advantage again. We are one of the very few silicon wafer makers that own solar power plant. Combined with our global presence that enable local suppliers reduce our wafer transportation mileage, we are evolving towards a greener manufacturer. Page seven, please. Please allow me to further elaborate our economic moats that forge our competitive advantages. Page eight. Our first strength is the complete product spectrum. GlobalWafers supplies semiconductor wafers literally in full diameters, full specs, and covering almost all applications in modern society.
The diversified, yet very comprehensive product offering insulates GlobalWafers against the downturn of particular products and in the same time we could seize the emerging trends. Next page is the financial mode, which is our very robust financial structure. The first financial strength for GlobalWafers is our ample cash. GlobalWafers has ample cash on hand. As of the end of Q3, we have over TWD 83 billion on hand. Even deducting current liabilities, GlobalWafers still holds as high as TWD 50 billion net cash as of end of Q3. With over TWD 5 billion free cash flow generated every quarter, GlobalWafers' strong earning power shields us amid macroeconomic instability. The second financial strength for GlobalWafers is our low funding cost.
Policy measures to curb inflation, such as spiking interest rates in the world, not only result in sluggish world GDP growth, but also pose a huge burden on corporate funding and investment. Luckily, GlobalWafers 100 billion TWD CapEx is backed by low-interest corporate bonds and ECB, which provides sufficient financial resources to support the expansion projects and seamless future growth. As the economic conditions evolve constantly and unexpectedly, GlobalWafers allocate assets with agility to achieve the best portfolio at the end of Q3. Net interest income. Please note this is net interest income, not net interest expense. GlobalWafers net interest income totaled TWD 400 million. In addition, our committed loan drawdown rate is as low as 15%. The rest, 85% of bank credit line could be implemented anytime whenever needed. Next.
For liability breakdown, in Q3 2022, GlobalWafers debt ratio is 68%, which may seem pretty high compared to our past record. If we break down the composition of this 68% high, so-called, quote, "high debt ratio," you will find that prepayment weighs as high as 24% in this 68%, and ECB is 16%. Both of these, prepayment and ECB are not of any interest expense at all. Only 16% among the debt ratio is accruing interest, which are local CB, which is around TWD 19 billion, and other financial liabilities, which is around TWD 6 billion. Our current ratio is way higher than 300%.
Strong liquidity is crucial in the dynamic world economy, so we can convert assets into cash easily and tackle the challenge nimbly. I think that is the current ratio. That is a very important strength for GlobalWafers as well. Next page, I would like to talk a little bit about our profitability. That is definitely a very strong moat for GlobalWafers. GlobalWafers gross profit has been growing for six consecutive quarters, amounting to 43.7% in Q3, offering an encouraging sign of improved efficiency. If you compare with the rivals, you will see that GlobalWafers average gross margin performance is way better than the average if you compare a longer period of time, for example, from 2017 to 2022. I think GlobalWafers, no matter the macroeconomics is good or bad, GlobalWafers profitability is always very stable and very positive.
The second strength for our profitability is our EBITDA. If excluding the realized loss from Siltronic shares and other non-operational factors, GlobalWafers EBITDA for the first three quarters of this year exceeded 50%, showing very good health of the core operations and robust profitability. Last but not the least is our LTA protection. One of the GlobalWafers prominent feature is our risk management. Our capacity has been locked by LTA with prepayments, and that is the best protection for us against the downward risk in the volatile market. In conclusion, apart from the strong balance sheet, which indicates our ample cash, healthy assets, and an appropriate amount of debt that help GlobalWafers defend the fluctuation, our solid profitability also creates a strong foundation for its sustainable growth.
Coupled with our extensive global reach and flexible capacity allocation, the unique advantages creates our enduring moat in the keen competition, and further confirm our goal of being the preferred partner of our customers. The above are my comments, and Leah will share more industry outlook and financial performance. Leah, please.
Okay. Thank you, Doris. Let me begin with the global GDP growth forecast in page 13. The far-reaching impact from Russian invasion over Ukraine and China's lockdown measures dragged down world GDP growth to 3.2% this year and 2.7% in 2023. Energy supply problems, high inflation in Europe, and zero COVID policy as well as housing crisis in China will likely bring flat GDP growth in these regions in the coming years. In page 14, also the global economy is looming by uncertainties. Semiconductors continue to become ubiquitous in all applications and drive double-digit growth across all regions in 2022. Our global presence strategically located near the major semiconductor markets. Our proximity could withstand geographic instability and supply greener with less mileage.
On page 15, you can see that power transistor sales are on track to grow 11% this year and expected to reach a sixth straight record high level, totaling $24.5 billion in 2022 and nearly $29 billion in 2026. The secular trend is propelled by increasing ASP and the higher transistor count packed in chips. With manufacturing process improvement in shrinking transistors, its density has been growing significantly. In 2014, there were 2 billion transistors in A8 chip used in iPhone 6.
A14 Bionic has 11.8 billion transistors in iPhone 12 and advanced to 16 billion in A16 Bionic for iPhone 14 Pro Max. As of 2022, the largest transistor count in a commercially available microprocessor is 114 billion transistors in Apple's ARM-based dual die M1 Ultra system, embodying the increasing value and the content of semiconductors used in electronic systems. On page 14, this is the foundry capacity utilization rate. According to TrendForce, the capacity utilization rate of eight-inch may decline due to slowing demand for consumer products like TV and PC. However, these 12-inch products are more diverse and the lead production cycle generally takes at least one quarter, coupled with upgrades to some product specifications, thus are not affected by short-term economic fluctuations. As a result, the utilization rate can still be maintained at a high operational watermark of approximately 95%.
On page 17, government support and shifting consumer preferences add momentum to automotive growth trend, resulting in the automotive market registering the strongest CAGR at 13.4% during 2021-2023. Likewise, EV growth trend is urged by energy crisis and zero carbon emission target. BEV and HEV are expected to account for nearly 90% market share by 2035. Let's move on to page 18. In order to further improve the power performance of electric vehicles, major global automakers have focused on a new generation of SiC power components. This market size will climb to nearly $4 billion by 2026 from the current $1 billion.
With continuing breakthroughs in SiC material technology and the maturity of chip structure and the module packaging process, the penetration rate of SiC power components will gradually expand from current high-end vehicle applications to medium and low-end vehicles. Numerous brands have successively launched a number of high-performance car models equipped with corresponding products. For example, Tesla, Lexus, Toyota, Hyundai, and Kia. Please refer to our financial results in page 20. GlobalWafers has contributed a quite remarkable performance, but profits were eroded due to Siltronic evaluation and accompanying factors. Page 20 shows our Q3 quarterly performance. Our revenue hit TWD 18 billion with 70% year-over-year growth margin hit 43.7%. Both are the best ever. Operating profit margin amounted to 35.1%, the third highest in our history.
Q3 net profit totals TWD 5.1 billion with 28.3% margin, the record high, mainly attributed to the foreign exchange gains from USD appreciation. Even reflecting all the unfavorable non-operational impacts, our EPS climbed all-time high at 11.74 per share. Our Q3 ROE was 43.1%, ROA at 13%, reflecting GlobalWafers collect-direct business model and the nimble operation. Regarding the accumulated three quarters as of the end of September 2022 in page 21. GlobalWafers surpassed the TWD 50 billion milestone in revenue and hit TWD 52 billion. Gross profit margin was 43.3%. Operating income margin amounted to nearly thirty-six percent. All of these hit the highest record in our history. EPS was 22 per share, but would have climbed to 40.89, our all-time high, if such unfavorable influences were excluded.
On page 22, this chart shows our sequential growth of revenue and gross profit. Revenue trends up since Q1 2020, and gross profit has also increased starting from Q2 2021. The momentum has been lasting for multiple years, despite all the turbulences and the volatility in the global transportation economy, geopolitics, foreign currencies, and the world order. Our revenue has been growing for 11 quarters and gross profit for six quarters in a row, respectively. Page 23 is our EBITDA and EPS. Our first three quarters EBITDA was TWD 15.6 billion, with margin at 30.1%. If excluding all impacts, our EBITDA would have become nearly TWD 26 billion, with 49% margin. The EPS would have been as high as TWD 14.89, our best performance ever. Please refer to other pages of our income statement and balance sheet.
Now, I would like to give the floor to Doris Hsu and William Chen for the Q&A session. Thank you. Doris Hsu, please.
Thank you, Leah. Before we open the Q&A, I would like to answer a couple questions which we have been asked, mostly, most frequently, in the past couple weeks. The first question is, have customers started to cut orders? We receive a lot of questions like this from various, many investors. The answer here is that smaller diameters like six-inch and below, and also some those orders, I think we are seeing some lower demand, and also customers are requesting to reschedule the shipment. But basically, all of the 200 millimeters, 300 millimeter wafers overall production plan are still doing okay. We do see some lower traction on some application targeting consumers and memory, but those are not order cutting.
Those are rescheduled a little bit or some flexibility like a swap to some other different products. That's what we are seeing. I think our customers honor those LTAs just as what we are doing. We will provide customers flexibility. That's our policy, that we will provide flexibility of product mix change and, if needed, and as long as that we can find some solution for our customer, we provide some rescheduling flexibility as well to tackle the short-term headwind. Basically, there is no cancellation, and we don't accept cancellation or any change on our LTAs. So far our customers are still, all of our customers honor LTA. This is the first question.
The second question is that many of our investors, shareholders are asking that, "Hey, how about GlobalWafers' projection for the business and our utilization for different products?" I think even for 2023, so far, as of today, I think the only open capacity that we are seeing in Q4 now and maybe early next year is in smaller diameter, 150 millimeter and below. For 200, 300 millimeter are very full in Q4, and also even Q1 we see that all of our production lines for 200, 300 millimeters are full. For Float Zone and SOI, these two items are extremely full with the demand actually higher than our supply.
We have more demand from our customers than, you know, the wafer we can supply. We are doing the expansion for both Float Zone and SOI right now. That's the status of our utilization. Also, another question is about CHIPS Act grant status. Actually, it's not finalized yet, so we don't have too much detail to share about CHIPS Act. We are still working with the related government department, U.S. government department, try to finish some detailed reviews. We don't have the number yet. That's why we are still working with the U.S. government positively. The next question is about our greenfield expansion in America also named GlobalWafers America, GWA. How about GWA's target timeline?
What's our current timeline? Basically, our expansion for in the U.S., our greenfield expansion basically on schedule. There will be a little bit delay, but it's not because that we wanna delay, it's because that we do see some long lead time parts like PVDF. That's special clean room construction material, PVDF. That's a super long lead time right now. We are still working on some long lead time components arrangement. There maybe will be a little bit delay, but basically, we keep working on our greenfield with the original timetable. We work very closely with our customers, LTA customers as well.
You see that in Q3 at the end of Q3, we have already accumulate our net prepayment amount already totaled as high as TWD 38.2 billion. This is our highest ever record and most of the new LTAs are for our American operation. That's why because we keep signing LTAs with our customers and our customers, maybe they have a little bit concern for 2023, especially the first half 2023, but they are all of our customers are pretty positive for the long-term semiconductor demand. That's why we keep having finalizing LTAs with our customers for GWA capacity. That's why we keep the schedule unchanged. That means that GWA will start our customer sampling from Q4 2024. That's our schedule.
The mass production ramp will be starting from end of Q1 or early Q2 2025. That's still the plan. Of course, we will keep working very closely with our LTA customer to fine-tune the timeline of our expansion. So far, everything, the project is on schedule. That's the plan. Okay, the last question I have from the analyst's message is about that foreign exchange volatility. How does that affect our revenue or our profit? I think most of our orders business transactions are in U.S. Dollar. So 1% change in U.S. Dollar will affect GlobalWafers' revenue at around 0.7%, because, you know, that our functional currency is NT dollar.
One percent change in U.S. Dollar will affect our revenue in NT dollar at around 0.7% and gross margin at around 0.5%.
That's our rough sensitivity for foreign exchange rate. These are some frequently asked question I received in the past couple weeks. I would like to open the Q&A, and William and myself will take care of these questions. We'll
Great. Thank you.
Well, thank you very much. Now let's begin the Q&A session. Please limit your questions to two at a time. I will kick off with two questions from my side, if I may. Number one, I guess last week, one of your Japanese peers talked about possibility of working with customers on the LTA pricing if demand continues to weaken into 2023. I guess the sharp Japanese yen depreciation probably offers them some flexibility on the margin side. I just wonder, for GlobalWafers, how should we think about your overall pricing going to 2023 as a LTA protection? That's my first question. Thank you. Doris, William?
Hello, Operator. This is Leah from GlobalWafers. Could you please dial us in? Can you hear us?
Yes, I will. Yes, I'm here. I will dial you back, Leah. Just one second. Thank you.
Thank you. Can I use these numbers for William to speak to take the Q&A questions?
Hey, Operator.
Hey, Operator. Can I use the number directly for Q&A section?
Hey, Operator. Sorry, just to check. Are we back to the meeting room?
No. A few speakers dropped off, unfortunately. I'm dialing back Leah Peng right now as we speak.
Yes. May I use this number, the phone I'm speaking with you now for William to open the Q&A section?
Yes, certainly. The Q&A session was open, but Doris Hsu dropped off, Leah Peng dropped off for some reason, unfortunately.
Oh, yes, but I am Leah, so I am dialing back. Can you connect William right now, so you can put us all back to the conference call?
Certainly.
Hi, Operator. Sorry, are we back to the main room?
You are live, Leah, in the conference now.
Thank you. Sorry about the technical issues just now. Doris, William, sorry about that. Are you able to hear my question just now?
Yes. Sunny, we can hear you clearly. Thank you.
Thank you. I would like to kick off the Q&A session, if I may, and then we will start to take the questions from the line. My first question is on your LTA pricing going to 2023. How should we think about the trend and the LTA production on the volume? I guess recently one of your Japanese peers talked about potentially they would work with customers on the LTA pricing in a weaker demand environment. Any thoughts on that? Thank you.
Okay. Thank you, Sunny. Regarding for the LTA trend, as Doris mentioned, actually, we are continuously working with our customer to discuss for this LTA. Actually, we have been buying more new LTA. That can be seen from our accumulated prepayment. LTA are currently still working well, especially for our greenfield in America, okay? Many American customer, they are quite welcome for this new factory, which is closer to their factory. That's for the LTA. If you are talking about the differences for the LTA trend recently, maybe it just take a little bit longer discussing time with the customer because of the recent market chaos. All things, especially for the 300-millimeter, the mid long-term demand are still quite good because it is the mainstream.
All LTA still ongoing as expected. Thank you.
Thank you, William. Sorry, just a quick follow-up. When we model your blended pricing going to 2023, we still go up or we be more flattish, given the current market environment.
Okay. Thank you. Regarding the price, actually, we do not talk much about LTA, but basically, because of the limited supply in the market, so actually the LTA price actually is keeping pace or slightly up, especially the product mix would be moving more forward with the advanced node, which if you are talking about the brands, the ASP actually is going up slightly year-by-year or even quarter-by-quarter. Thank you.
Thank you, William. My second question is on gross margin. Obviously the costs are also going up. How should we think about your profitability going to 2023? Is there any target for 2023?
Okay. Thank you. Regarding for the growth margin, yes, you are right. Because of the recent market inflation in all kinds of material, actually it's starting from early this year, the material cost has been increasing up. Regarding for our most important Polysilicon cost, actually, we had signed a longer time LTA with our poly suppliers, which is still with the very stable poly cost for years. We think we can manage this poly cost quite well, stable. Regarding for the other material costs, yes, they are slightly increasing. Of course, through internal efforts such as purchasing negotiation or internal efficiency and all of this, we still try to manage this cost with our minimal range.
Of course, contributed by our increasing ASP with the higher LTA prices, that is, with the higher increasing revenue, which can cover and offset such material costs. You can see from these recent quarters, we have the continuous quarterly increasing revenue, but we do still maintain even increase our gross margin percentage by quarterly basis. We hope we can manage such a trend. I mean, the increasing revenue contributed by the increasing branded ASP and favorable product mix higher price to, you know, reduce such material cost increase. We hope we can, you know, manage this gross margin favorably.
Let me add a little bit. I 100% agree with what William just presented, explained, but let me add a little bit more details on this. First of all, next year is a little bit difficult, more complicated than before because there are several uncertain points next year. For example, foreign exchange rate. We are doing our annual plan. It's very hard to predict how strong, how weak the foreign exchange rate will be. So foreign exchange is a very difficult, complicated point for us. The second one is energy cost. So far, as far as we know, the European energy cost extremely high, still extremely high. We are expecting some reduction.
Still up to now, based on our visibility, I think energy cost will be still a significant increase in Europe and also in Japan. Our energy cost in Japan will increase drastically as well, actually starting from this year. Next year, if Japanese yen keeps dropping, depreciating, I think energy cost will be even tougher than this year. Another very tough factor for us is depreciation, because you know that we have some CapEx expansion. Those expansions, some already finished, will start releasing more capacity starting from next year. We will see more depreciation cost from Q1 next year. That is another concern as well.
Like what William said, because we will add revenue as well, and also we are expecting better ASP for the product mix, the total mix ASP. We are expecting that those potential impacts, like high energy costs, and higher depreciation and maybe uncertain foreign exchange rate, I think maybe most of the impact from these factors will be offset by our higher revenue, higher capacity, and a little bit higher ASP. That's what we are expecting. Some positive factor is like freight. I think freight dropped a lot. This year freight was crazy, but I think that we are foreseeing that next year freight will be better. That's the and the crazy material cost, I think it should be improving.
It's getting a little bit more reasonable starting from next year if the market inflation is going down a little bit. That's our expectation. Thank you. Got it. Thank you so much. Operator, would you mind opening the system to take questions?
Certainly. Everyone, your question-and-answer session will now begin. If you wish to ask a question, please unmute your device, then press star one on your telephone. Thank you. We already have our first question. The first question is coming from Donnie Teng from Nomura. Please go ahead. Your line is open.
Oh, thank you, Chairlady and William, for taking my question. My first question is regarding to SUMCO's announcement on its acquisition on polysilicon player in Japan. Just wondering, what's your view there? Does that mean the polysilicon price will continue trending up, so to acquire polysilicon supplier would be a better play into the coming years? Or is there any view from your perspective? You know, in the past few years, I think, the industry trend is more like to divest, you know, polysilicon players divest the semi wafer entity. Now looks like the consolidation, vertical integration is coming back. Wondering, if there is any meaning behind that action? Thank you so much.
Okay. Yeah, for polysilicon, right? Donnie, is that your question? Polysilicon, right?
Yes.
Polysilicon. I think polysilicon price is very high now. Main reason. There are two reasons for this. One is because of the super strong demand for solar. You know, so the polysilicon for solar-grade polysilicon is much lower than semiconductor grade. That means the production cost is lower, but their market price is extremely high, driven by the strong demand for renewable energy. This is the first reason. The second reason for the skyrocketing, sky-high polysilicon price is because of the high energy cost. Because for Siemens polysilicon production methods, if you use Siemens, and actually right now, almost 100% of the polysilicon factory in the world using Siemens way. So if you use Siemens method to grow polysilicon, then the bottom cost, number one item is electricity cost.
When the electricity cost is high, like in Japan or Europe, actually, it's definitely that will drive the polysilicon cost very high. That means that there are two drivers to drive the polysilicon price high. One is strong demand from solar. Solar market capacity is much bigger than semiconductor polysilicon. The second driving power is electricity cost, super high electricity cost. We are seeing super strong polysilicon price increase right now. Even for some new LTA new purchase order with polysilicon vendors, you know, when they make the offer, make the quotation, they always put an assumption or a condition that when electricity cost increase to a certain level, then this price will be adjusted again.
For 2023, polysilicon pricing, for example, is one of the key burdens for the semiconductor industry. For GlobalWafers, luckily we have some LTAs on hand, so that offset a little bit of our pressure from polysilicon. We don't have enough LTAs to cover 100% of our demand. We do have quite a lot of polysilicon from new orders, new annual orders or new LTAs. That's those new orders price are much higher than the LTA, which we have already booked years ago. That's the current status of polysilicon, worldwide polysilicon status.
Understood. SUMCO's acquisition of Mitsubishi Materials, do you think there's any impact to the current supply situation of the polysilicon? I'm not sure whether it will, you know, further tighten the polysilicon supply in the future.
I guess it will, but so far we have no evidence to show this. Any acquisition that definitely will make some impact. So far we haven't seen it yet.
Understood. I guess Mitsubishi Materials probably account for smaller market share globally, right? I'm not pretty sure because big players maybe like Tokuyama or Wacker, etc..
That's right. It's much, fortunately it's not a major one. Yeah, it's smaller than the others. Market share wise, that's okay. So far we haven't seen any impact from this to GlobalWafers yet.
Okay. Thank you, Chairlady. My second question is regarding to SOI wafer because I think in early days is the demand from RF-SOI was pretty strong because of the 5G adoption. In the history, you know, SOI wafers normally correlated along with the overall semi wafer market. You mentioned about the demand looks like to be still very strong along with the Float Zone wafers. I can understand Float Zone demand is very strong, maybe driven by high power applications. But for SOI wafers, wondering if you could elaborate more if there is any more progress on, for example, like FD-SOI. Is there any more applications can use FD-SOI these days to drive a very strong demand? Thank you.
Yes. Yeah, I think it's mainly for 5G applications, RF related. But in addition to that, we see some sensor related and some other applications like photonics for Silicon photonics, that kind of application as well. But I think maybe another reason is that because our SOI capacity is not big enough. We are just not the number one in the world, so we are still.
Okay.
Applications as well.
Got it. Thank you, Chairlady. I'll go back to queue.
Thank you, Donnie.
Thank you. The next question is coming from Jimmy Huang from JPM. Please go ahead. Your line is open.
Hi. Thanks, Doris, William, and yeah. Thanks for taking my questions. Thanks for sharing your progress in compound semi materials. May we ask how much annual revenue we can recognize from compound semi, mainly from silicon carbide at this moment? And what's your targets for the next 3-5 years? Thanks.
Okay. Thanks, Jimmy. Regarding the compound materials, even combined the gallium nitride, currently, if comparing to our company total revenue, it's still very low, very low single digit. That is because, as you know, the silicon-based revenue is quite so big. Our compound material, both the silicon carbide and the gallium nitride, they are just starting up for the mass production, generating the revenue. Considering percentage-wise, quite low. If we're comparing, if considering the growth rate, that's pretty high, the double digit, even higher. Currently, we are in good shape by shipping out such products to our customers and even more customers on the qualification at the final stage.
We are making the pretty good projection quarter-by-quarter, year-by-year, so we will have the pretty high growth rate in from next year. Thank you.
Oh, okay, thank you, William.
Let me add a little bit more details. I 100% agree with what William just explained. Let me add a little detail. Our goal is to double our silicon carbide output volume every year, double every year in the next four years. That's our goal. Every year in the next four years, double four times. That's our goal. I'm talking about the volume, but not necessarily to the revenue, because product mix change as well. We will gradually migrate part of our demand to six-inch as well. Average price maybe will be but volume-wise, wafer-wise, our goal is to double output every year in the next four years. Thank you.
Thanks. Thanks, Doris and William. My second question is about Siltronic just disclosed for the first time that it has secured 80% LTA for its greenfield expansion in Singapore. We are also wondering about our U.S. greenfield LTA collection progress and challenges. Do we need to wait until next semiconductor upcycle to get more progress, or we also have got 80% at this moment? Thanks.
Okay. Thanks, Jimmy. Okay, regarding our Greenfield, as Doris mentioned earlier, actually, our Greenfield stage in U.S. will still be on plan, even just a little bit delayed because of the lead time. So far, we are on the track to be starting the mass production in end of Q1, beginning of Q2 in 2025. As a company's long-term strategy, for our Greenfield to take off, we have been until we collecting very high percentage of committed order LTA with prepayment, then we will kick it off. It means that for our Greenfield in U.S., we have reached a certain high percentage of committed order with prepayment. That's why we are currently keeping such Greenfield project on schedule. Thank you.
Okay. Thank you. Thank you, William. Thank you.
By the way, just adding again, our U.S. factory is the most biggest 12-inch wafer supplier in the States. It's close to the biggest U.S. factory customers there. We will become the most preferred supplier in the U.S. by the local supplier. Thank you.
Thank you so much, William. Yeah. I'll be back to the queue.
Thank you. The next question is coming from Bruce Lu from GS. Please go ahead. Your line is open.
Thank you. Doris Hsu, my first question is I think the customers, investors are very concerned for the geopolitical risk at this moment. We understand that your capacity in China is very small, but can you tell us what's your revenue contribution coming from China, and how much of your LTA is coming from the Chinese customers?
Okay.
Yes, we do have a factory in China, but that is mainly producing the small diameter of six-inch wafer and below. Just very few eight-inch wafer manufacturing. Considering our total revenue from the small diameter is the high single digits revenue. It would be becoming even smaller when our brownfield and greenfield expansion completed in eight-inch and the 12-inch. That's for small diameter percentage in terms of our sales, in terms of our revenue. But our small diameter not only producing from China factory, but also from Taiwan and KL, Malaysia. In sum up of total revenue percentage from our China factory, it's still around just the middle single digits percentage. That is the China manufacturing.
Regarding the customers, regarding the revenue distribution by geography, I mean, that is the end product consuming location, including the Chinese customer and also the foreign-based customers, like the Taiwanese company or Korea companies. They are all grouped into our China revenue. Okay. About the China revenue, it's just a low double-digit %. About our revenue distribution, actually, GlobalWafers revenue are quite diversified in each major region, like Taiwan, Japan, Korea, North America, Europe, and China. All of these major areas are quite, you know, not any single market dominates very high percentage. Concluding your question, for customers revenue from China, that is just low double-digit %. That is both that are from both Chinese customer and the foreign-based customer in China operations. Thank you, Bruce.
Thank you. My next question is again for the acquisition, because GlobalWafers is known for the M&A during the down cycle. You know, Siltronic's share price is already like half of what you were willing to pay for it when you tried to propose the deal, right? You know, I'm not asking that whether you want to do it again or not, but what I'm trying to ask is that what's your plan right now moving forward? Is there any showstopper for you to kick off the acquisition again for Siltronic, if there's any?
Yeah. Yeah, let me answer this very typical question. I think for now, we have no plan to move forward for that project. That project is finished. It's finished. We didn't make it, and that's the current status. Of course, we still believe that, but right now, it's the worldwide sentiment for semiconductor industry is like what we're seeing today. I think it's very difficult to do this kind of global transaction for now. That's our view. We are not going to make a move for now. If anything change, like the environment change, global back to the globalization, then maybe we will revisit this topic again then. No plan for now. Thank you.
I'm sorry, just double-check that because you don't want to kick it off again because you don't think the globalization is the trend?
I think.
Is that the right understanding?
No, sorry for not making myself clear. I mean, we're not going to kick off this project again now. I think there are two reasons. One is that we are already doing our greenfield expansion right now, so no matter what, we are building our capacity. The second is that it seems that it's getting more and more difficult for the world to have this kind of cross-border transaction. That's our view. Maybe we're wrong, but we are busy for our greenfield expansion and also we still have some concerns for the cross-border acquisition like this, so we think that we're better to focus on our greenfield expansion right now. That's our point. That's my answer. Thank you.
Okay. Understand. Thank you.
Thank you so much. In the interest of time, we will have to wrap up the call here. Thank you all for joining. Thanks again to Doris, William, and Leah. This marks the end of the call. Thank you.
Thank you very much.
Thank you.
Thank you very much.
Thank you everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining. Enjoy the rest of the day.