Okay, good afternoon, ladies and gentlemen. Welcome to GlobalWafers second quarter FY 2022 earnings call. My name is Patrick Chen, Head of CLSA Taiwan Research, and I'll be your moderator today. It is our great honor to have Miss Doris Hsu, Chairperson and CEO, Mr. William Chen, our VP and Spokesperson, and Mr. Leo Peng, Special Assistant and Deputy Spokesperson of GlobalWafers, here with us today to discuss about the company's second quarter financial results and share with some insights on the semiconductor industry outlook. The management team will give some executive comments and prepare a presentation, followed by a Q&A session. Now, without further ado, let me pass this call over to Mr. William Chen. William, please.
Thanks, Patrick. Hello, everyone. Welcome joining GlobalWafers 2022 Q2 earnings call. I'm William Chen, GlobalWafers Vice President and the company Spokesperson. As Patrick mentioned, today we also have Doris Hsu, Chairperson and CEO of GlobalWafers, and Leo Peng, Deputy Spokesperson, join this call. Doris will give us the executive comments and capacity expansion plan first, and then Leo will present industry overview, 2022 Q2 financial statement and the ESG highlights. Before Q&A session, Doris will answer investors' highest concerning FAQ, and I will handle the final Q&A session. For today's presentation file, we had uploaded onto company website around two hours ago. If you do not have the file on hand, please access into our website to get the most updated file. Please note that some information during our discussion today will consist of forward-looking statements which are applied throughout the call and this presentation only.
They are subject to significant risk and uncertainties. Actual results or trends could differ materially from our 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 the page two executive comments. Doris, please.
Thank you very much, William. Good afternoon, everyone. Thank you very much for joining GlobalWafers earnings call of Q2 2022 and first half 2022. Leo Peng, the Deputy Spokesperson, will guide us through the presentation. I will answer the questions received recently. William Chen, our Spokesperson and Administration Vice President, will address the questions raised in the meeting today. First of all, let me share some comments of our financial result and of the operation status. If you have the material, please turn to page two. Thank you. GlobalWafers achieved a quite remarkable first half 2022 considering all the headwinds like China lockdown, volatile exchange rate, drastic climate change, energy price hike, and geopolitical tensions. We hit record high in four fronts, revenue, gross margin, operating income or operating profit, and prepayment amount.
Revenue-wise, June, Q2, and first half revenue all hit our all-time highs with double-digit year-over-year growth. Our first half revenue achieved TWD 33.8 billion, which is a 12.8% increase year-over-year. Our growth momentum has been lasting for more than two years, starting from Q1 2020. Page three, please. Regarding gross margin and operating profit, our Q2 2022 gross profit margin hit 43.6%. Our overall first half 2022 gross margin hit 43.1%. Both of these two gross margin hit our record high. Please note that the gross margin has been increasing sequentially since Q1 2021, so it's already five quarters in a row. So is operating income, amounted to over 36% in Q2 and also first half 2022.
Both of these are the best ever. Our EPS. Although our overall performance was quite strong and broke so many historical highs, but our EPS was not as good as previous quarters, mainly due to the non-cash mark-to-market valuation loss on Photronics shares we hold, which eroded our EPS around TWD 16 per share in the first half. If we exclude these valuation loss from Photronics shares we're holding, our H1 2022 EPS would have amounted to record-breaking 26.28 per share NT. 26.28 NT per share. We will have further discussion on this one later on. Next, I would like to also highlight another all-time high is our prepayment.
As of end of June 2022, our prepayment totaled TWD 36 billion or around $1.2 billion, increasing by 9% or TWD 3 billion in Q2 2022. In Q2, only this quarter, we received and we increased another TWD 3 billion prepayment. Right now, as of end of June, our prepayment has already reached TWD 36 billion. This is of course all-time high. Page four, please. I would like to move to the outlook on macroeconomics and semiconductor industry. Based on IMF forecast last week, downward pressure on global GDP has increased. IMF lowers 2022 world GDP growth from 3.6% to 3.2%, and expect 2023 to stay near a similar level. For semiconductor industry, despite short-term headwinds which depress consumer demand, 2022 is still resilient for semiconductor industry.
Also, we are seeing momentum in automotive, industrial, 5G, and cloud service that will consume much more semiconductors than before, providing structural support for long-term growth for semiconductor industry. Page five, please. I would like to make some comments about 5G and automotive. Although smartphone demand dims due to a weaker global economy and geopolitical uncertainties, data traffic growth and need for connectivity propel 5G's very fast scaling up. We are still very positive for 5G. For automotive, due to some China lockdown and Ukraine war, some shortages are likely to continue in some key components, particularly in MCUs and PMICs, and some voltage regulators. However, the slowdown in mobile and consumer electronics will help to transfer foundry capacity to automotive.
On the other hand, we are seeing more semiconductors to be consumed to satisfy the demand for automotive HPC, EV, HEV, and ADAS. Page six is some quick update of our dividend payout. GlobalWafers will distribute a cash dividend of around TWD 8 per share on August 5th, this Friday. This dividend is for GWC's performance for the second half of 2021. Page seven, I would like to move on to our greenfield expansion. Please allow me to further elaborate our strategic rationale for this very important decision, which is also a great milestone for GlobalWafers. Page eight, please. First of all, I will start with the demand front. Semiconductor industry is anticipated to grow at 6% CAGR and become a trillion-dollar industry by 2030.
Please note that it took roughly around 50 years for semiconductor industry to reach $500 billion in 2021. It is predicted to take only nine more years for that to double and reach $1 trillion in 2030. That will be the market size, $1 trillion market size for semiconductor IC in 2030. Compared to last decade, which was largely driven by single factor like wireless, the growth in the next decade comes from multiple advanced technologies, including wireless, automotive, computing and data storage, and industrial IoT. The pillars are balanced and versatile, underpinning a sustainable growth for semiconductor industry. We are very optimistic that semiconductor industry will remain very healthy in the next decade. Page nine, please.
I would like to, I think, talk about the demand, very solid demand for a high-end 300 mm silicon wafer. I think we are seeing very constant and fast-growing demand for 300 mm wafers. Based on research, 300 mm shipping will continuously grow throughout the forecast period to 2026. That's our view for 300 mm . Matter of fact, as of today, GWC, all of our facility, the production lines for 200 mm and 300 mm are still fully loaded. For small-diameter, like 4-inch, 5-inch, and 6-inch wafers, the loading is slightly lower than 100%. We have three small-diameter fabs in GWC group, China, Malaysia, and Taiwan. Two out of three are fully loaded.
Only one small diameter fab is around 75% to 80% loading. That's our current status. All the 200 mm , 300 mm production lines are still fully loaded. Page 10. Last, I would like to elaborate our view on the equipment lead time. The average lead time of semiconductor equipment before the pandemic was approximately six months, roughly around six months, which was obliged to lengthen to 12 to 18 months due to the pandemic. Now, induced by the Russian invasion, the lead time now is even further extended. Also the rising inflation has affected the acquisition of various raw materials and manpower. Both of these two factors led to delays and cost increases in fab construction. The prolonged expansion process is very likely to eliminate concerns regarding oversupply in 2023.
I think the supply-demand will be still very healthy in 2023. Page 11, please. The destination, I think, at the end of June last month. Actually, it was June twenty-eighth, we revealed the location of our greenfield project. We selected Texas, U.S.A. to build a state-of-the-art 300 mm wafer fab. That was what we announced at the end of June. Why U.S.? I think that was one of the questions I've been asked most frequently in the past several weeks. Why U.S.? There are several reasons. The first reason is to complement the U.S. supply chain. From page 12, bar chart, I think it's very easy that you can see that in the U.S. silicon wafer, there are very few silicon wafer manufacturers.
Semiconductor industry has become increasingly consolidated within many segments in the value chain. As a result, expertise is often concentrated in certain markets. For instance, the U.S. has the highest presence of the fabless player and equipment manufacturer. The very limited silicon wafer makers from the bar chart on page 12 is very clear to show the status. The new fab secures GlobalWafers' unique position in the U.S. semiconductor supply chain to close a critical gap and to build a local semiconductor ecosystem in the U.S. This is the first reason that why we chose U.S. The second reason, page 13, please. The second reason is because of the major customer growth. 300 mm silicon wafers are the starting material for all advanced semiconductor fabs, including recently announced U.S. expansions by GlobalFoundries.
For example, Intel, Samsung, Texas Instruments, and our TSMC as well. Taiwan is very good, TSMC as well. I think so many very good leading advanced semiconductor companies are expanding their operations in the U.S. All of these require stable wafer supply and will in turn afford a more diverse customer portfolio for GlobalWafers. This is the second reason why we chose U.S. Another reason is for the government support. I think CHIPS Act, U.S . Just passed the CHIPS Act last week, waiting for President Biden's final sign-off. Government support, not only from federal but also from local government, that those support are very helpful, very important for a new operation in the U.S.
Government support, that's one, another reason. Next reason is utility costs and land availability in the U.S. That's a strength for U.S. as well. In green solution, the U.S. silicon wafer will be able to provide a very good solution with much lower carbon footprint. That will be a very attractive solution, green solution for the U.S. fabs. That's another good reason, especially right now. The global ESG trend and so many uncertainties caused by geopolitical tensions, I think a local supply in the U.S. will be definitely a good solution for those U.S. new semiconductor factories, fabs. Last but not least, I think a very experienced team in the U.S., that is one of a very important reason why we chose U.S.
We have a very talented team in our U.S. operations. Their profound management experience could quickly facilitate the new fab construction and operation very effectively. The brand-new expansion in the U.S. strengthen GlobalWafers' competitiveness. We have more solid and sound global presence in three continents: Asia, Europe, and America. Each equipped with a complete production process of 300 mm all the way from ingot to EPI. I believe that we are one of the most resilient silicon wafer manufacturer in the world, both globally and locally. The above are my comments. Thank you very much for your time. Leah, please share more on the industry outlook and financial performance with the team. Thank you very much.
Thank you, Doris. Let me begin with the global GDP growth forecast in page 15. Like Doris' previous comment, global GDP is dragged down to 3.2% in 2022. The tightening monetary policy and the economic downturn resulted from stagflation will hammer future GDP growth. In page 16, the global economy is also dim. We still see growth across all geographies and all applications. In 2023, the highest growth is logic at 7.3% and the APAC at 5.5%. Let's move on to page 17. The major demand in the automotive industry is no greater than 90 nanometer. The shortage will probably persist because the semiconductor industry is unlikely to address the structural reasons for this shortage, owing to its low profit margins.
Insufficient capacity, over-ordering, and increasing stock levels contribute to the shortage in selected technology node, which is anticipated to last at least three to five years. Page 18 is the revenue forecast for silicon carbide and the gallium nitride. The push for increased sustainability and the electrification is spurring the adoption of SiC and the GaN power devices. Even under the best-case scenario, the growth trajectory is very steep. Annual market growth is expected to be 23% for SiC and 14% for gallium nitride power devices. Let's move on to our financial performance in Page 20. GlobalWafers has contributed to a quite remarkable performance, but profits were eroded due to Siltronic devaluation and the accompanying factors. Page 21 is our first half performance. Revenue hit TWD 33.8 billion with 30% YOY. Gross margin hits 43%. Operating profit margin amounts to 36.3%.
All our best ever. However, like what Doris just said, first half EPS would have climbed to 26.28, our all-time high, if such unfavorable influences were excluded. In page 22, the chart shows our sequential growth of revenue and the gross margin. Revenue trends up since Q1 2020, and the gross margin has also increased starting from Q2 2021. The gross momentum has been lasting for more than two years. Page 23 is our EBITDA and EPS. First half EBITDA is TWD 7.3 billion with margin at 21.5%. If excluding all the impact, our EBITDA would have become TWD 16 billion with 47% margin, and the EPS would have been as high as 26.28. These are our all-time best. Please allow me to present our key ESG achievements in the past year, starting from page 27.
To battle climate change, GlobalWafers holds responsible growth as principle, uses resources in a way that is socially equitable, environmentally sustainable, and economically beneficial. First is water. Taiwan encountered the worst drought over half a century last year. By implementing sound water stewardship, we reduced 16% in water unit consumption in our global sites. Water recycle rate in Taiwan climbed by 5% to 56%. Despite all the challenges, we managed to secure a stable supply to customers without any disruption. In page 28, by means of process improvement and energy-saving measures, GlobalWafers saved 7.1% in unit electricity consumption. Please allow me to stress that we were fully loaded in global sites, and some expansion projects were carried out in 2021. These savings translated to more than 3,000 tons of CO₂ emission reduction. Page 29 is green energy.
GlobalWafers is one of the very few manufacturers that possess its own power plant. Recent world events reveal the criticality of energy independence. By building our own power plants, GlobalWafers is more resilient to the climate change and the power volatility. As of June 2022, cumulative solar capacity reached nearly 27 megawatts, equivalent to 16,000 tons of CO₂ emission reduction. Please refer other pages for our corporate governance and the social society devotion. Now, I would like to give the floor to Doris and William for the Q&A section. Thank you, Doris. Please.
Okay, thanks. Thank you, Leah. I think that the management team have received quite several questions in the past several days. Let me start the Q&A section from these questions we already received in the past several days. First question is that how about GWC customers' inventory status? That's the question we received, one of the most frequently asked question. Our answer is that first of all, our GlobalWafers ourselves, we keep our inventory in a very healthy level at around TWD 7 billion to TWD 7.5 billion, this range. It's, as always, is still the same range. The second answer to this one is that also we would like to update our customers' inventory. Customers' inventory level vary on size and applications.
For example, smartphone customers have relatively high inventory, while the customers targeting high-performance computing or large diameter wafer products have relatively low inventory. We see a very big difference from customer to customer or from application to application. That's the answer to the first question. The second question is that, are you seeing any order cutting? Our answer is that up to now, no order cutting has been recorded so far. The demand for upside volumes above LTA for 200 mm and 300 mm is getting a little bit lower. We see lower traction for the smaller diameter. The demand is weaker than 200 mm and 300 mm. That's our answer for the second question.
The third question is that, what's the weight of electricity cost of GWC's total COGS. Because recently we've seen the price hike, which is the energy price hike, including Taiwan. We just had a 15% electricity price increase effective from July 1st. The question is asking about the weight of our electricity costs for our COGS. The answer is that the electricity cost accounts for 6.1% of our total cost, roughly consolidated. This is the first half this year data. This percentage definitely will increase in the second half because not only Taiwan, but also several countries, including Japan, you know, have very high electricity cost increase.
Although we are seeing some electricity cost increase, but the impact is relatively small, it's still manageable. That's our view for the electricity costing. That's the third question. The fourth question is about Silicon Carbide. The question for item, the fourth question is that, how about, how soon will you GWC start supplying Silicon Carbide Epi Wafers to the market? Our answer is that GWC will start supplying mass production Silicon Carbide Epi Wafers to the market from Q3 2022. Actually, starting from this quarter, it's very likely that a couple weeks from now, we will start. We will make the first Silicon Carbide Epi mass production shipment to our customers. Quality levels are similarly on target. Question number five, how about your customers' expansion crossing?
Are they suspended, canceled, or on track? Our answer for this is that, of course, we work very closely with our customers. We have very close communication with our customers, try to figure out their expansion projects, the status of their expansion projects. So far, up to now, we are not seeing our customers suspend expansion projects. No suspension. But we are seeing several projects scaled down on equipment purchase or lead time extended. That's our feedback for this question. Next question is that, as your announcement, as GlobalWafers announcement on June 27th, you are expecting financial aid from CHIPS Act for from the U.S. government for your big investment in the U.S., or named GWA. Will GWA delay your groundbreaking if CHIPS Act can pass this fall?
I think we received this question a couple weeks ago, but of course, on Wednesday, last Wednesday, July 28th, both houses of the U.S. Congress have passed the CHIPS Act legislation. President Biden is scheduled to sign it into law this week. That's the rough schedule. That's our answer for this one. Next question is that it is said that the CHIPS Act has special guardrails that would ban recipients for CHIPS funding from making investments to expand capacity in countries of concern, namely China. Please advise how it will affect GlobalWafers' future strategy.
I think this is we receive so many investors asking about same question about this China special term, CHIPS Act special regulation, special guardrail, guardrails for China for some future investment in the next 10 years in China. I would like to take this opportunity to make it clear that silicon is not considered part of this stipulation. GlobalWafers up to now it does not have 300 mm wafer production in China. Right now the CHIPS Act special stipulation is for up to higher than 28 nm of process cannot be invested in China. That's the regulation. That doesn't apply to silicon wafer our business. That's our answer for this one.
Next question is, GWA is our new operation in the U.S. Will GWA be as efficient and profitable as other GWC operations in Asia, like Taiwan, Japan, and Korea? Our answer for this is that based on CHIPS Act, federal and local government support from U.S. government, and based on our full utilization and also the energy cost and land cost, all of these, based on all of these factors, we are very confident that GWA will be quite efficient and profitable. We will be able to be equivalent, as effective, as efficient, and as profitable as all of our operations in Asia. That's our view. The last question is about our ECB.
I think we already expressed several times that in June last year, we had a $1 billion ECB. That ECB will be due in three years and five years. That's the terms of that ECB. Also, if you see our announcement to the market, actually we buy back a small portion of our ECB. We received a question from investors and analysts asking about that, "Why did you, GlobalWafers, buy back a portion of ECB issued at par in just over a year ago?" I think there are several reasons for doing so. The first reason is that that's an opportunity to repurchase ECB issued at par in just over a year ago, given overall market dynamics.
The second reason is that the reduction in debt on balance sheet, we will have lower debt ratio and also we can improve our gearing ratios. The third reason is that the ability to book P&L gain as the CB was repurchased below carrying value on our balance sheet. We can reduce future potential dilution for existing shareholders. The last reason is that we can save on future non-cash interest expense. These are the reasons why we buy back a small portion of our ECB. The ECBs, the size of our ECB is $1 billion, and we buy back $58 million, so it's still just a small portion of our ECB.
The following question for a similar ECB question is that, will GlobalWafers buy back more ECB? If so, how much more do you plan to spend? I think it will be subject to the market conditions and our overall capital arrangement for an optimal capital structure. For now, we don't have any further plan for further repurchase of the ECB. No plan, but that doesn't mean that we're not going to do so. I think we will, it depends on the overall market condition and also our overall capital arrangement. If the overall situation is good for a company, then we will consider to make next repurchase. But so far we don't have firm plan for this. Thank you very much.
That's all the frequently asked question in the past two, three weeks we received from the investors. I make a quick, FAQ update, answer all those questions to everyone. Thank you very much. I think, I finished my, Q&A portion, and we have around, 20 minutes time that we can, have our Q&A. We can open our Q&A section now. Thank you very much.
Thank you, Doris. A very comprehensive illustration. Now, if you'd like to ask a question, please use the Raise Hand function, and I'll enable you to unmute yourself. Or you can simply type your question in the Q&A input box. We already have some raised hands, so let me start with Nomura Donnie. Donnie, please go ahead.
Oh, thank you, Patrick. Can you hear me?
Yes, we can hear you fine.
Okay. Thank you, Chairperson, William, for taking my question. My first question is regarding to the capacity expansion plan across the semiconductor wafer company. You mentioned in your presentation that you are seeing foundry companies are expanding with a slower pace. I'm curious, what about the semiconductor wafer company's capacity expansion plan? Is there any delay or you are seeing that most of the peers, including GlobalWafers, are expanding on track without much overhead on, like, equipment or infrastructure related materials? This is the first question. Thank you.
Okay. Thank you, Donnie. This is William. Regarding the capacity expansion, as our material, our greenfield project in Texas would be completed by 2025. Regarding the peers, I do not think we can comment on the other peers' situation. For our company, as Doris just explained it, currently, because of macro uncertainty, overall equipment suppliers do have a little bit of delay because of the poor supply chain. Basically, I think, considering our capex project expansion lead time, I think our peers could have the similar overall lead time like ours. Even, some equipment we are, you know, tailor-made by ourselves, but some are commercial models. In general, the overall expansion lead time should be quite similar. Thank you.
Got it. I will say maybe in the short summary slide should be mostly on track despite maybe a little bit delay, but still largely on track. Is that correct?
Yeah. Basically, yes, you are correct. Still on track for our planning. Thank you.
Okay. Thank you. My second question is regarding to gross margin trend. We are seeing quite foreign trends volatility a lot in the past one to two months. Wondering if you could comment on the impact to our gross margin and also considering the rising material cost across the semi supply chain and also the rising depreciation cost potentially along with the brownfield or greenfield expansion. Just wondering if Chairlady or William can comment on the gross margin trend. When should we see gross margin to peak out in the future?
Maybe let me.
Oh, sorry.
William, maybe let me make some quick feedback on this one. I think it's very hard to predict for several reasons. The most critical one is energy cost. Actually, we are seeing continuous increase in Japan for electricity cost. You know that we have five fabs in Japan, and that's one of our major power consumption country. Japan keep increasing their electricity cost. The latest information we received is that, starting from September, electricity costs will increase again, another big jump. I think there are several uncertainties. One is electricity cost, and the second one is currency. You know that, of course, U.S. dollar is our main currency for most of our business.
We do have around 30% of our revenue in Korean Won, U.S. dollar, and euro. No, I mean, around 70% U.S. dollar, but another 30% is Korean Won, Japanese yen and euro. You know that all of those currencies are so much weaker than NT dollar. I don't know, because our functional currency is the NT dollar, so it's a little bit hard to predict them, which factors will be what will be the trend for the currency. Another factor is that we will have month by month more and more new capacities online. That means that we will start adding new depreciation from the second half.
I would say that we have a lot of positive things, including that our LTA price for the second half will be better than first half, and we will have more Epi wafers and high and some very good products in the second half because of new capacity available brought up online. We have some positive stuff and we have some uncertainties including energy costs and currency, some Asian currency, euro currency as well. It's very hard for us to predict how good our gross margin will be. I think our best estimation is that second half's gross margin should be close to the first half.
I don't expect that too much big improvement or big impact going down. It should be flat or slightly better than first half. That's our view.
Thank you so much, Chair Lady. Just one last housekeeping question. First quarter, OpEx, sorry, second quarter OpEx ratio was only like 7.1%, so still below the previous normal level, like 8%.
What should we expect the OpEx ratio going forward, and what's the reason behind the second quarter? Thank you so much.
Yes. I think second quarter is a little bit lower, but second quarter is a normal level. Our OpEx is supposed to be somewhere around 7.5%. That's our internal. We always try to make it below 8%. That's our goal. But you know that the revenue keep increasing, so the percentage will start going down a little bit. So it's around 7.5%. That's our goal. 7% to 7.5%.
Got it. Thank you. I'll go back to queue.
Thank you. Yeah, thank you. William, I'll get it back to you. Thank you.
Thank you, Donnie, for your question. Let's move on to Eric Chen. Eric, please go ahead. Eric, could you unmute yourself? Maybe some technical issue here. Eric, why don't you type the question, I'll ask for you. Let's move on to Bruce. Bruce, please unmute yourself.
Okay, can you hear me?
Yes, we can.
Okay. A couple questions. The first one is that, Doris, you mentioned that when you announced $100 billion CapEx, you mentioned that your CapEx will depends on your LTA you sign with your customer. Can you give us some update for that? And what is your CapEx plan for your U.S. fab?
Yes. Our U.S. fab, our plan, the total CapEx for our phase one U.S. fab is about TWD 55 billion. That's our total CapEx plan for phase one of our U.S. operation, U.S. expansion greenfield project. Yes. Is that your question?
Not really, because at that moment, you mentioned that your plan for next year was, I would say, I think it's TWD 40 billion for next year, and you would see how it goes for the year after, right?
Yeah, okay.
Depends on your customer LTA status, right. I just want to know what is the current LTA you sign with your customers.
I think that if you check our prepayment amount that you know that we have, we keep receiving more and more LTAs. Our construction, everything will be on schedule. The LTA is still ongoing. That's our status. You know that when we reach 80%, we will kick off, and then we will start the production. It's not possible that if we have 10%, then we build 10% capacity. No, that's not the point. The point is that we have to reach 80%, then we will start the construction. We're still working on that. We have already concluded quite a lot of LTAs. It's not 80% yet, but we're still working on this. I mean, the sign-
I'm sorry. Without hitting 80%, you will not kick off the equipment moving. Is that right?
That's correct.
Understand that. One thing I want to ask is that, you know, Morris mentioned that the U.S. factory, U.S. fab, their operating cost is 50% higher. You just mentioned that your operating cost is as good as other side. You know, can you tell us what's the secret sauce? I mean, you know, how do you deliver that? Is it coming from like, you know, different manufacturing costs, different utility costs, or you-
We are different.
Yeah.
We are silicon wafer fab. We are not foundry, not like TSMC. That's different. We cannot. It's not apples to apples comparison. Another very important point is that we already have two operations in the U.S. One in Texas is already over 20 years, and another one in Tempe is already over 50 years. The teams are running operations. I think in the past several earnings calls, I also explained that our U.S. fab, Texas fab, is an EPI fab. By far, it's the largest EPI fab in the industry, by far. A single fab, a very huge capacity. We have another three EPI operations in other countries like Japan, Taiwan and Europe. You know, whenever.
William is the head of the overall cost benchmark, cost monitoring, checking each site's operation performance. He knows much better than I do that our U.S. fab overall EPI cost performance is always the champion in our team. That's why, you know, in my presentation, why U.S., I said that the last item is an experienced management team. It's not a new team. We don't send any Taiwan management team to the U.S. No management. We have very good management team in the U.S. We have two very strong U.S. operation management team.
You don't expect the cost structure is different between your U.S. fab and, you know, Japan fab or Korean fab?
Right. The only difference is that all of the capacity tools will be brand new because it's a greenfield. It's totally different from Taiwan or Korea, because many of them already 50% depreciated. In U.S., that will be a brand new fab. Depreciation definitely will be higher than Korea and Taiwan. No matter where you build a greenfield, depreciation is always the heaviest part of the cost. All the others, I think it's equivalent.
I see. Understand that. Last question is, what do you want to do with your Siltronic holding at this moment? The share price went back to pretty much the level, you know, when you tried to acquire them. You know, what do you want to do with those holdings?
Sorry, no comments for this question. I think we have planned, but I have no comment today. Sorry about that. Thank you.
I understand. Thank you. I'll go back to the queue.
Thank you for your question, Bruce. Eric, your turn.
Thank you, Patrick. Can you hear me?
Yes, I can hear you fine, Eric.
Thank you. It's actually Sunny from UBS. Doris, William, thank you for your time today. My first question is on how you think about the supply-demand outlook for next two to three years. Obviously now the visibility is quite different from the start of the year. Demand is slowing down, but as you said, the industry expansion are mostly ongoing. Just want to know if any changes on the outlook for next two to three years. Thank you.
William, please, could you reply first. Thank you, William.
Okay. Thank you. Thank you, Sunny Lin. I think, let's, in terms of different diameter, I think it will be quite different, the situation. Talk about the macro demand, we knew that the mainstream of the wafer is still the 12-inch. The 12-inch macro demand is still growing, also growing much bigger than the 200 mm and the small diameter. Basically we have no question at all for these, the 12-inch wafer will be keep growing. Considering for the current macro, 12-inch capacity, we knew that they are, they cannot meet for the demand for the 12-inch until the greenfield added from the five years. No problem at all from now till 2024, 2025, the new greenfield join.
Basically, the 12-inch wafer will be serious shortage. Even for the 2024, 2025 greenfield joint, we do not think there will be a big problem for the oversupply issue because of all the newest demand applications, also advanced node wafers are all sourced from the 12-inch wafer. The coming years for the 12-inch wafer demand, we do not think any issue at all. That's for 12-inch. Regarding the 8-inch demand, they are still moderately growing in terms of the macro demand from now till the coming years. The macro demand, we do think some applications and the devices are still using the 8-inch foundry or IDM.
Regarding the macro supply for the 8-inch wafer, we knew that these five major tier players do not have any greenfield capacity to come out in the coming years. Considering this macro demand still growing and the macro supply from the five peers already fixed there, we think there is still a healthy balance situation for the 8-inch. Of course, regarding the small diameter, the macro demand would be kind of flat or even decline, and the macro supply might be still slightly increasing from the tier two, tier three the wafer supplier. This small diameter might have the excess capacity if the macro economy situation is not good as expected.
That's the view for the coming years in terms of 12, 8 and the small diameter. Thank you.
Got it. Thank you, William. A quick follow-up is that I understand probably the order in the coming quarters are still pretty much unchanged. I wonder when key customers they communicate with you guys on the future capacity allocation have you seen customers turning slightly more cautious or overall still pretty bullish on the longer term demand?
Thank you. Okay. Actually, what we got from customers, especially for the bigger diameter, the 12-inch wafer. Actually, as I just mentioned, for the current macro supply, still quite short, supply to meet the total demand from all our customers. Given, just like Doris mentioned right now, the macroeconomic a little bit slower, softer than the year beginning, but the gap is still pretty large. Under such a situation, actually customers still need our 12-inch wafer supply and the commitment battery. That's the reason why, as reported today, our prepayment still accumulate bigger and bigger from quarter to quarter. That's the situation. Our main customers, no matter for the IDM or foundry, their demand for the 12-inch wafer still quite strong. They do need our wafer commitment, not only this year, next year or the year after.
As I mentioned before, actually what the new batch of LTA have been signed from second half last year, then first half this year. Our LTA coverage percentage has been reaching pretty high, very, very high actually. Not only this year, but also next year. Customer's LTA requirement actually is already from last batch, five years expanded to this batch as long to eight years, even longer as to 10 years. That's the situation for our 12-inch customer. You know that there are only five tier one wafer maker can supply this 12-inch wafer, especially for the advanced node wafers. The coming green capacity would not be available until two to three years later.
Also the 12-inch, no matter power or epi wafer, actually is just a very low single digit of BOM cost to our customers. This is, I mean, the wafer, 12-inch wafer is a strategic raw material to our customers. They do need to secure these wafer stable supplying with the highest, best quality. That's the reason why customer need to secure, and the customer is willing to sign a LTA with prepayment for such long years. Customer do know that the 12-inch wafer is the trend for the coming year by year, and even moving to more advanced node wafer. They also need we wafer maker to construct the new advanced node newest capability and the capacity wafer greenfield to supply to them.
That's the overall situation for customer demand. Let's just, as Doris mentioned, customers still signing the LTA and paying the prepayment with us month by month and quarter by quarter. Thank you.
Got it. Thank you, William. So my last question is to follow up on your expansion in the U.S. Could you share with us your latest target of capacity expansion by 2025? I think the total capacity is expected to be 1.2 million units per month. Any timeline for the capacity to achieve that scale?
Okay, thank you, Sunny. Actually, as I mentioned, actually, for this Texas new plant, we do have a huge land just next to our current epi factory in GlobiTech. Actually, just refer to right now, we will have very good synergy to manage this, the new greenfield 12-inch wafer cost. Regarding for the capacity, we are kicking off the phase one by considering the LTA amount inquiry from customer. Okay, whenever we collected, like 80%, we just mentioned of capacity, we are kicking the phase one. After that, we do believe customer will continuously to you know ask more wafer supply.
Just like I mentioned, they do need a stable commitment from we wafer makers, especially, you know, that they are more and more new fabs constructing in U.S. Our greenfield in U.S. would be kind of local supply to them. We are foreseeing to collecting more and more inquiry and commitment, even the LTA prepayment from this new U.S. customers. After the phase one, definitely we will be collecting the phase two prepayment. Whenever reach the same similar high percentage like phase one, we will kicking off the phase two and so on. Thank you.
Thank you, William. How meaningful is the capacity for phase one?
Sunny, this is kind of business confidential information, so we do not think any wafer makers would be sharing the precise number. Basically just the phase one of this new greenfield to be available by 2025, just basing on the actual demand we collected from the customer, as I just mentioned.
Got it.
Thank you.
Got it. Thank you. Thank you, William.
Thank you for your question, Sunny. Hart, please unmute yourself.
Hi, Doris, William, and Leo. Thanks for taking my questions. My first question is about your brownfield investment. With extending equipment lead time, is your brownfield investment still going to ramp from second half 2023? If that is the case, could you provide update on how much capacity would you be able to expand in the existing facilities? Thank you.
Okay. Thank you, Hart. Our brownfield actually have been ongoing and you know couple brownfield projects in Taiwan, Korea, Japan, U.S., even Italy, mainly for the 12-inch wafer and special wafer like SOI in U.S. And FZ in Denmark. That's for the 8-inch. Of course, SOI also 12-inch in U.S. at the same time. All of these brownfield are ongoing smoothly as our expecting schedule. Just even a little bit macro uncertainty, supply chain delay, but not an issue at all. Basically for this brownfield, the schedule would be completed from end of this year and mainly for the 2023 and later.
All of the schedule still as expected. As mentioned, the 12-inch wafer for the brownfield could be up to 10%-15% of our current capacity. Of course, that will be depending on the product mixing mainly and advanced node, the wafer of course we are focusing. That's the answer. Thank you.
Thank you. That is very clear. My second question would be on the pricing outlook. You mentioned the raw wafer demand upside beyond long-term agreement is lower for 8-inch and 12-inch. Does it mean the wafers you are shipping in the spot market could have more pricing pressure if demand further slows down? If the spot price drops below contract price, would you worry your customers cancel the LTAs? Thank you.
Thank you, Hart. Actually, as mentioned, we are fully loaded currently for the 12-inch, 8-inch, not only this half, first half and the second half, even next year. Actually, for the current capacity, the price order already fully loaded and booked. Also the trend of ASP, no matter for the spot or the LTA, actually it is increasing. That's the reason why given our total capacity, we're not increasing significantly, but look at our revenue, look at our gross margin percentage, we are still increasing quarter by quarter, even reaching the record high. I think that's couple reasons for why we can have the record high in terms of revenue and the gross margin percentage quarter by quarter.
One, of course, is the one of the most major factor is because of the ASP improving, not only for the all LTA pricing, but also the spot pricing. Actually, we are fully loaded in first half and the second half. The ASP improving is the very important and helpful factor to help the quarter, every quarter's revenue and profit. Thank you.
Okay, that is very helpful. If I could ask one more. You discussed about your own NAND end market inventory levels, but could you discuss about the overall inventory levels at foundries, IDMs and your memory maker customers? Thank you.
Hart, I think Doris right now has answered this question. It's the inventory. I mean, the customer inventory level is different by customers' applications. The mobile phone consumer devices, they are with a relatively higher level. Comparing the high computing devices, actually they are still with the very strong demand. The wafer inventory levels still quite low. If talking for our products, actually we are making to order, we are not making to stock. That's the reason why all our making products can well be shipped to customer when it is finished. That's the reason why you can see our quarterly inventory levels almost keep a similar level. That's the, you know, inventory situation of today. Thank you.
Thank you, Hart, for your
Okay.
Yeah. Thank you, Hart, for your question. In the interest of time, we will have to conclude the call now. Before we go, Doris or any of the management team, do you have any closing remarks?
Yeah. This is Doris again. I would like to thank again for everyone's participating in the meeting. I think the most important message I would like to deliver to everyone is that so far for silicon wafer, this sector, I think the supply demand is still very healthy. Even for next year, I think especially for 12-inch, demand is still very strong, and 8 inches, demand is quite comfortable. That's our comment. Thank you very much for everyone's time. Thank you.
Thank you, Doris and management team. Thank you all for your participation. Please have a lovely evening and take care.
Thank you. Have a good day. Thank you. Bye-bye.