Good afternoon, ladies and gentlemen. Thank you for joining us on Q2 2024 earnings call. I am Leah Peng, the Spokesperson of GlobalWafers, and our Chairperson, Doris Hsu, is with us today. Here's how today's call will unfold. Doris will start with the executive comments, followed by my brief introduction, covering our perspective on the semiconductor industry, our Q2 and the first half 2024 performance, and address questions we have received from investors recently. The session will conclude with an open Q&A, during which Doris will provide the answers. A quick reminder, please keep your audio on mute. To ensure a smooth and interactive session, we have established two methods for you to pose questions during the event, using the Slido feature for written questions and utilizing the Webex hand-raising function for live spoken inquiries. First, Slido.
Throughout the meeting, you can input your questions using the Slido feature in Webex. Simply access Slido and type in your question. Our presenter will monitor Slido regularly to address your written questions. To ensure the efficient use of time, we encourage you to type in your questions as the meeting starts. The second method is live voice questions. Towards the end of the meeting, we will open the floor for live voice questions. If you wish to speak directly, please use the Webex Raise Hand function to indicate your intention. Once you raise your hand, kindly be ready to accept the host's invitation to unmute your microphone when prompted. This will allow you to verbally pose your question to the panel. Please be reminded to limit the questions to two at a time. This will allow us to accommodate as many inquiries as possible within the allocated time frame.
Before we begin, I would like to remind you that today's discussion may contain forward-looking statements. Please be aware that these statements are subject to various risks and uncertainties, which could cause actual results to differ materially from our expectations. Please refer to the Safe Harbor notice in our presentation. Now, without further delay, I would like to pass the floor to our chairperson for the executive comments. Doris, please.
Thank you, Leah. Good afternoon, ladies and gentlemen. Thank you very much for joining GlobalWafers earnings call of Q2 2024. Leah Peng, our spokesperson, will guide us through the presentation, and, she will also answer the questions we received recently. After that, I will address the questions raised in the meeting today. In Q2, GlobalWafers has encountered two significant challenges. The first one is earthquake, and the second one is cyberattack. I'm very pleased to say that we have navigated them, these two challenges, with resilience and determination. The first challenge in Q2 was a big earthquake on April 3rd. On April 3rd, a magnitude 7.2 earthquake struck Taiwan, followed by over 1,000 aftershocks, this causing substantial disruptions. GlobalWafers temporarily halted our operations for four products and facility inspection.
However, with an ample supply of ingot inventory prepared in advance to address unforeseen events, such as earthquakes and power outages, our production line smoothly transitioned. This earthquake resulted in losses amounting to TWD 124 million, of which insurance could cover around TWD 90 million. This will be recognized as non-operating income in Q3, resulting in a net loss of TWD 35 million. That's the earthquake net loss. Here, I would like to stress our very unique strength, and our global presence and agility. Not only did we swiftly replace the impaired equipment parts in Taiwan with those from our Korea sister site, which share the same process, but our knowledge sharing, our knowledge sharing and best practices among all sites also greatly help us to mitigate the risks. Our global footprint includes five sites in Japan.
You know very well that in Japan, we're also prone to earthquakes. Leveraging insights from our Japan sites, we have implemented an earthquake damping system. This damping system is, concept-wise, very similar to Taipei 101's damping system. We implement this earthquake damping system in some pullers at our Taiwan site. This system can move against shockwaves and immediately lift the ingot from the melt, silicon melt, to prevent ingot dropping and damaging the pullers. During the recent earthquake, the pullers equipped with this technology performed effectively, preventing more severe impact. We plan to roll out this damping system to additional pullers to further enhance our resilience. This system is 100% designed by our own team, work together, by our Japan team and Taiwan team. This is the first challenge. The second challenge is the cyberattack.
You know, GlobalWafers, in the past 20 years, through acquisitions, many excellent companies joined GlobalWafers Group, and their various network systems operate regionally and independently. On June twelfth, we faced a cyberattack in some of our sites, which led to temporary suspensions at certain locations. Through our rapid response, we promptly mobilized all resources and restored and ensuring stable operation within days, and restored our normal shipments within couple weeks. We apologize for any concerns this may have caused our investor and stakeholders. And right now, the entire company is now more vigilant than before ever. GlobalWafers Group is committed to continually investing in strengthening our cybersecurity system to create a more stable and robust cyber environment for the company and all stakeholders.
Despite these setbacks, we managed to achieve QOQ growth due to our swift response and robust risk management strategies. Our ability to quickly mobilize resources, implement effective solutions, and maintain operational continuity, has been instrumental in sustaining our growth trajectory, even in the face of unexpected challenges. Now, let's move on to our financial results, and I will provide an update on the operational status. Please move to page three, our financial highlights. Let me start from revenue. Despite the earthquakes and cyberattack in Q2 2024, [Foreign language] Group was able to begin a revenue ascent after four quarters of revenue drop from Q2 2023 to Q1 2024. So our revenue start picking up from Q2 2024. In Q2 2024, our revenue totaled TWD 15.3 billion, showing a +1.6% growth QOQ.
Our revenue in the first half of 2024 amounted to TWD 30.4 billion, reflecting -16.7% YOY. Both Q2 2024 and first half 2024 are the third highest over the same period. Later, Leah will present the simulation, excluding the cyberattack, which should reflect our true situation. Leah will cover this part in her presentation. Next, let's move to gross profit and operating income. Our gross profit, gross profit margin for Q2 2024 and first half 2024, maintained at around 32%-33% level, and operating profit margin was 22% in Q2, and 24% in first half. The erosion is mainly due to cyberattack, which accounts for around 1% of the gross margin erosion and depreciation.
Higher depreciation from our new capacity and power costs increase in Taiwan and several other countries, and other minor factors. These are the main reasons of the gross profit and operating income erosion. Let's move to page four, financial highlights. Let me update a little bit about our net profit. For Q2 2024 and first half 2024, our net profit margin stood at around 18.8% for Q2 2024, and 21.1% for H1 2024. EPS-wise, our EPS for Q2 totaled TWD 6.02 per share. In first half, EPS amounted to 14.04 per share. Prepayment, as of end of Q2, our prepayment hit TWD 34.9 billion, which is approximately around $1.1 billion. Page five, please.
Let me update a little bit about our, all of, micro, macroeconomics and semiconductor industry. Global economy. Global consumer confidence and business activity remains below pre-pandemic levels, but showing positive trends, bolstering predictions for a rebound in the semiconductor industry in the second half 2024. A soft landing from pandemic fallout continues to look more likely as growth remains resilient against inflation. Despite subtle optimism, downside risks still predominate, including geopolitical tensions, trade fragmentation, and also climate change-related natural disasters. For the industry, semiconductor industry, the performance of chips has steadily improved, thanks to advancements in 2.5D and 3D packaging technologies, which require increased wafer usage. We believe the rise of AI-driven devices, and also very important, is that the start of an AI-powered replacement cycle are likely to boost demand for peripherals, ICs, and sensors.
Moderate 2024 semiconductor shipment increase expected to improve inventory situation in the second half of 2024, which are then expected to improve raw wafer shipments. With the above-mentioned momentum and downstream customers start to ramp up in 2025, we anticipate that semiconductor industry is set to recover in the latter half of 2024, and maintain a positive outlook for 2025. That's our view for now. I will stop here, and I will have Leah to take to make further details. Okay, thank you, Leah. Please.
Okay, and here I would like to share some very exciting news with you in page six about our global expansion. Our two U.S. fabs and our Italian fab will receive critical government subsidies. In the U.S., GlobalWafers America and the MEMC LLC will receive up to $400 million to support the construction of the first advanced silicon wafer plant in the U.S. in over 20 years, as well as the only 12 in advanced SOI wafer production site in the country. In Italy, our 12 in wafer expansion will receive up to EUR 103 million to build the most advanced 12 in semiconductor wafer plant in Europe. These grants underscore the vital role of wafers in the industry, and GlobalWafers expansions address a major gap in the European and U.S. supply chains, which have been largely dependent on imported wafers for advanced technologies.
For GlobalWafers, these expansions, funded by cash grants and the potential 25% AMIC tax credit in U.S. projects, enable us to offer comprehensive wafer solutions across major semiconductor markets in Asia, Europe, and the U.S. This will enhance our flexibility to respond to economic and geopolitical challenges, reduce environmental impact from transportation, and leverage local supply advantages for international customers. In page seven, GlobalWafers' commitment to robust corporate governance is evident in our board composition and the consistent high rankings. Our board comprises more than half independent directors and over one-third female directors, reflecting our dedication to diversify and inclusion. For six consecutive years, we have been in the top 5% for corporate governance among all Taiwan-listed companies. This strong governance framework supports our sound financial performance, as highlighted by our ranking tenth in the net profit in CommonWealth Magazine's 2023 survey.
These achievements underscore our ongoing commitment to enhancing corporate governance, ensuring operational excellence, and upholding our responsibility in ESG. Okay, and next is our outlook on macroeconomics. Like what Doris just explained, a global economy growth is projected to remain at 3.2% in 2024, and will rise to 3.3% in 2025, according to IMF. Despite being below pre-pandemic levels, improving consumer confidence and the business activity are positive signs for the semiconductor industry's recovery. In page ten, based on SEMI research, global semiconductor fab capacity is expected to grow by 6%-7% annually through 2027, adding 8.7 million wafers per month from 2024 - 2027. With the current supply at 25-30 million wafers per month in 8 in equivalent, there is an indication of potential undersupply.
As downstream customers gradually ramp up their capacity and advance the packaging architectures, further drives the demand for more wafers. GlobalWafers is well positioned to capitalize on the trend by allocating its entire TWD 100 billion in CapEx to advanced and specialty products. In page 11, with inventory levels returning to healthy conditions, analysts widely agree that semiconductor market revenue will grow in 2025. Our internal analysis shows that average forecast among different researchers is a 14% YOY increase in semiconductor revenue for 2025. It is worth noting that growth is expected across all regions, particularly in the U.S., and across all product categories, with a notable focus on memory. GlobalWafers expansions in Asia, the U.S., and Europe, along with its diverse range of applications and specs, are poised to capture the momentum of the market recovery....
On page 12, as Doris just explained, as I just explained, our key expansion in U.S. and Italy have secured funding from the U.S. CHIPS Act and European IPCEI, which means important projects of common European interest. The $400 million direct grant from the U.S. CHIPS Act accounts for about 10% of our total CapEx in U.S. Considering the potential 25% tax credit, which is still pending approval from the U.S. Department of the Treasury, the maximum subsidy percentage for our U.S. project could reach up to 35% or over $1 billion. The EUR 103 million grant for our Italy site, supporting the construction of the first 12 in wafer fab in Europe, represents 25% of its total CapEx.
On page 13, to improve semiconductor production capabilities across the Western Hemisphere, the U.S. has launched the Western Hemisphere Semiconductor Initiative, aiming to enhance semiconductor assembly, testing, packaging capabilities in key partner countries. With three wafer fabs in the U.S., GlobalWafers is set to become a key hub in this initiative. We believe that our proximity to these regions makes us a preferred partner for our customers, as wafer production is fundamental to semiconductor manufacturing. In page 14, compared to the past, where the advancement of semiconductor processes mainly focus on process and miniaturization, the current trend favors 3D packaging and structural changes. As a result, as the number of die layers increases, wafer consumption is expected to grow accordingly. Please refer to our Q2 performance on page 15.
Our revenue totaled TWD 15.3 billion, a 1.6 increase QOQ, despite the April earthquake and the June cyberattack. However, due to the costs associated with the cyberattack disruption, depreciation, power cost, and other minor factors, our gross margin in Q2 dropped to 32.3%. Our Q2 operating expenses rose to 10% from 8% in Q1, mainly because of the costs incurred for expansions and our Q2 2024 EPS stood at 6.02 per share. If there were no cyberattack in June, we would have generated an additional TWD 0.7 billion in revenue, bringing the total to TWD 16 billion . Our gross margin would have reached 37%, with an EPS of 7.31. Concurrently, with our ongoing expansion projects, our Q2 CapEx amounted to TWD 30 billion , while depreciation stood at TWD 2 billion .
Please refer to our first half financial performance on page 16. Our revenue totaled TWD 30.4 billion, with a gross margin of 33.3% and an EPS of 14.04. Without the cyberattack, revenue would have increased to TWD 31 billion, the gross margin to 35.8%, and the EPS to 15.39. Let's move on to balance sheet in page 20. In Q2 2024, our cash totaled TWD 44 billion . The increase was mainly driven by the GDR issuance. If we look into other assets, an additional TWD 25 billion comprises deposits held for more than three months. Another 16 billion represents the restricted cash. Therefore, when considering these cash-related assets, our total cash in Q2 2024 amounts to TWD 86 billion.
Our short-term loan increased to TWD 46 billion in Q2 due to the bank loan for our U.S. expansion. Additionally, the inventory reached TWD 11 billion in Q2, mainly due to the bullwhip caused by the cyberattack. If we exclude the impact of the cyberattack, the inventory value would drop to TWD 10.6 billion in Q2, lower than our Q1 value. Now, I would like to address both the questions we have received from investors recently and those we anticipate will be raised. First is regarding our outlook. What is your view of the semiconductor wafer outlook? We anticipate a U-shaped recovery in the semiconductor industry, where a demand bottom is established but extended. The mega trends, such as digital transformation and the green transformation, remain unchanged, and the global growth in generative AI is expected.
Despite ongoing inventory corrections causing weakness in automotive, industrial, and power applications, a gradual recovery is expected from second half for our customers. The device manufacturers with PC and the smartphone start to bounce back, and data centers seeing recovery in conventional servers alongside sustained demand for AI servers. Therefore, semiconductor fab utilization rates are expected to rise in the second half 2024. However, silicon wafer shipments in the second half will undoubtedly be less than overall wafer fab starts, as our customer will prioritize digesting their on-hand wafers. There is still a lot of uncertainty on the exact, exact timing, but we anticipate the semiconductor industry is likely to recover in the second half of 2024, and then maintain a positive outlook for 2025. Next one is about our gross margin forecast.
With the announcement of government subsidy from the U.S. and the Italian government, please share with us your expectation for future gross margins and how the subsidy will help in improving your gross margin. Okay, our answer is that CHIPS Act grants will be used for equipment spending and will be recognized as a deduction from the equipment's carrying amount. By reducing the cost of assets, we can lower depreciation expenses and thereby improve overall profitability. The subsidy will be provided in cash annually upon achieving milestones. We anticipate that the group's gross margin will gradually improve starting from 2025, with incremental increases each year. Okay, the next one is about the tax grant. The 25% Advanced Manufacturing Investment Credit, AMIC, is still awaiting the final rules from the U.S. Department of the Treasury.
Could you please advise when the AMIC will be valid, and when your U.S. investment will be eligible for this credit? U.S. IRS, which is Internal Revenue Service, is still reviewing AMIC comments provided by interested parties during a comment period. Once the rule is finalized, companies with eligible expenses can apply for the credit as part of their annual tax filings for the year in which the expense will incurred. GWA and MEMC will apply for the tax, the credit, when they file their 2024, 2025, and 2026 taxes. For expenses incurred in 2023, our company will submit the amended tax returns to receive the credit. The actual payments will be received once the IRS process the file, the filings according to their normal schedule. The next one is about CHIPS Act procedure. Will the CHIPS Act direct funding be given in cash?
What is your next step? The CHIPS Act direct funding can be provided in various forms, including cash grants. In our case, we expect to receive the financial support in both cash and tax credit, direct payments. The next step is for the CHIPS Program Office to complete the due diligence on both projects, and for the parties to negotiate the final incentive grant agreement. We call it the long form sheet, based on the foundation of the signed memorandum. The CPO has indicated that the incentive grant payments will be made as project milestones are achieved, such as construction milestones and installation of manufacturing tools. So, the next question is about what is the expected timing for finalizing the final agreement with U.S. government? So, our answer is that prior to finalizing the final agreement, the Department of Commerce must complete its due diligence.
Our objective is to complete the DD and the negotiation of the final agreement by the end of 2024. And then I would like to update our U.S. expansion project status, also our Italian project status. Our key that GWA could proceed as the original schedule. First, about our GW construction status. We remain on schedule with the first tools now arriving and the installation in progress. The pilot line will be up and making customer samples in Q4 this year. Construction workforces is currently at peak, with work taking place in shifts to maintain schedule to gradually ramp up in the following year. The key that GWA could proceed smoothly is that it has a GlobalWafers Group facility called GlobiTech, which is just located only 1 km from GW construction site in Sherman, Texas.
GlobiTech has provided the management nucleus for the new factory. Its presence locally, as well as the surrounding communities for over 20 years, have been key in facilitating our GW workforce development and the fulfillment. Next, I would like to update our MEMC status. The construction of the 300 mm SOI expansion at MEMC is complete. The first sample is shipped in May 2024, and the production ramp will begin in Q2 2025, reaching full production levels by mid-year 2026. Regarding our Italy site expansion, the building has been almost entirely complete, and the equipment will start being moved in from Q2 this year. But however, due to some delays in construction and the, and the engineering, the schedule has been delayed by about two quarters, so our sample will be shipped in Q1 2025. Next is about our SiC expansion project.
Please share with us the status of your SiC expansion. Will you maintain the same plan or slow down due to the recent headwinds? Okay, this is our formal reply. With the recent downturn in the SiC market caused by weak end demand, we have decided to cautiously monitor the situation and slow down our SiC expansion schedule to better align with the actual market momentum. The slowdown provides us with several benefits. One is that we can maintain a robust cash flow, and the second one is that we could match the market's aggressive migration toward 8 in SiC, which is progressing much more rapidly than our original expectations. By rescheduling this expansion, we can calibrate ourselves to meet the market's real need.
Our new capacities are designed for 8 in SiC and fungible between 6 in and 8 in, which give us flexibility to manufacture SiC bars based on the ratio communicated with our customers. Along with our growing production scale, we will be able to reach cost goals to meet future requirement. Our industry-leading profitability, diversified global production bases, and the pure player focus, position GlobalWafers well to compete against silicon-based IGBT technology for lower voltage EV architectures, as well as other suppliers. GlobalWafers is the largest silicon wafer manufacturer in the SiC space of forwarding capacity. Our goal is to be the best quality and the most cost-competitive SiC bar and epi-pure player outside of China. The final question is that about our announcement yesterday. GlobalWafers yesterday announced that your Malaysia subsidiary received board approval for the acquisition of land and buildings. Could you provide more details?
The acquisition involves over 6,000 sq m of land and buildings. This site is near our current KL fab and is conveniently close to the airport and the harbor. As geopolitical tensions in Asia rise, tech giants are seeking secure supply chains in various locations. This investment supports the expansion plans of some of our regional customers, and will position us to benefit from the growing semiconductor market and our proximity to major future clients. We are preparing the space ready and will evaluate its use once customers' demand rises. Next, I will move on to open Q&A, which will be addressed by Doris. The above is our response to the questions. Now, I would like to turn it over to Doris for the Q&A session. Please type your question in the chat panel and ask questions verbally toward the end of the earnings call.
When posing questions during the Q&A session, kindly limit them to two at a time. This will ensure that we have ample time to address everyone's queries effectively. Thank you for your cooperation.
Okay, this is Doris again. Then we received some questions, so let me start from some question we just received this afternoon. The first question is about what's the utilization rate of our wafers by diameter? So let me share the loading utilization rate for now, for Q2, I mean. 12 in is about +90%, but the 12 in epitaxial is almost fully loaded. And for 8 in, lower is somewhere around 80% loading, and small diameter is below 70% for now. Positive thing here is that we see strong demand for 300 mm, and also we see some recovery for 8 in as well. And even small diameter, I think that it's stabilizing a little bit. It's not getting worse anymore, it's stabilizing.
We are very aggressive to reach out, to approach every customer and try to secure more business for 8 in and small diameter as well. So that's our current current loading status. Please note that we have a lot of new capacities, new expansion capacity, which will be online from 2025, so those capacities are not included in this loading calculation, which I just mentioned. Okay, so that's the first question. The next question I received is how many percent is GWC's leading edge, like HBM, GPU, or below 60 nm products, consists of total 300 mm shipments for 2023? And how about those leading-edge products in 2024 and 2025?
Because of some specific NDA, I cannot disclose full details, but I can share some information that the trend is increasing rapidly. So our HBM, GPU, and below 60 nm, our wafer for these advanced products, the weight of these advanced products in for 300 mm in 2024 is more than double of 2023. It's much higher than before, and we are expecting even more shares of these advanced products in 2025. Of course, 2025, we will have more capacity from Q1 because of our new capacity. So, I think that we will have more legacy product as well, but at the same time, we will see, we are expecting more advanced products, advanced technology products in our production line.
And next, question is that: how much is the spot price erosion in first half 2024 for 300 mm legacy product? Let me put it this way, if it's not non-LTA spot price, I think 2024, first half, 300 mm spot price for legacy products compared with 2023, first half, I think the gap is the drop is huge. I think I would say that it's somewhere around 20%, lower than last year spot price. But please be reminded that I'm talking about spot price, non-LTA and legacy product. That's the gap of this year, first half this year versus last year, first half last year. This is...
Next question is that we have learned the continuous silicon wafer inventory digestion. It's foundry memory, memory makers, IDMs. Does the inventory level normalize yet? How high are they respectively, and what is the healthy level in terms of days? I think this varies from application to application and also from company to company. For example, for advanced products, I think the inventory level, the so-called healthy level, healthy inventory level, will be a little bit higher for advanced one, because the production lead time is much longer. But for legacy products, the so-called healthy level should be a little bit lower, and I would say that it will be somewhere around two to three months. That will be considered as healthy by our customer.
In general, the inventory level is decreasing. Very surely it's decreasing, but it's slowly, it's much slower than anticipated. So that's where the problem is. And that's why up to now, I think that the raw wafer revenue pickup is not so obvious yet. And another very good question is about any upside in U.S. expansion after preliminary grant of CHIPS Act $400 million. Yes, that's a very good question. We appreciate the grant, and that definitely was very helpful for our overall operation in the U.S., that's for sure. But, is that... Are we going to upsize our U.S. expansion because of the CHIPS Act $400 million? I think that is good, but that's not good enough.
I mean, for us to make a decision to make it, bigger than what we are doing today, we need several, we need several factors. One is government support, which we appreciate U.S. government support, and the second is customers' commitment, and the third is that our profitability of phase one. So we focus on phase one expansion, and we will complete our phase two construction, as well. But the schedule, to pull in or install our phase two tools, that depends on these three factors: government incentive, customers' commitment, and also our profitability of phase one. So that's our current status. And I think we received some questions. Okay.
Yes, another question is that, we received another question this morning, asking about that, how's our Q2 2024's 6 in, 8 in, and 12 in revenue, the weight of the revenue of these three diameters, three category products. I apologize that this is kind of sensitive and confidential for the company, but I can give you some brief range. 6 in, the revenue of 6 in or below, accounts for only single digit of our total revenue, and 12 in accounts for way higher than 50%, and the rest is 8 in. That's, that's the information we can share. Another question is that, any thoughts on the supply and demand situation for 12 in wafer next year?
Our view is that by end of this year, we should—we will see a much healthier inventory level, silicon wafer inventory levels, by end of this year. So we expect that next year we will see two positive signals for the market. One is that demand is supposed to be stronger than 2025 and 2024. I mean, 2025's demand should be stronger than 2024. And the second is that inventory should be lower than 2024. So because of these two factors, we are expecting very good, very, very good raw wafer, silicon wafer shipment starting from next year. And the supply, demand, of course, demand-wise, demand is getting stronger—inventory is getting lower.
But at the same time, because of many existing expansion projects will be online next year, will be online next year. So, it's very likely that next year we'll have a little bit some new capacity, like our U.S. GWA will have new capacity, and also our European site will have new capacity as well. So it's very likely that supply will increase, demand will increase, inventory will be lower next year, so that will be the situation. And in general, I think next year it's very likely that supply/demand is very close. It's not oversupply, it's not undersupply, it's not wafer or chip crunch like several years ago, next year.
So next year, 2025 will be a very healthy and positive years with very good growth, not only the chip memory or a foundry company, but also the silicon wafer company as well. So in short, next year will be a good year, also for silicon wafer company as well. That's our view. Okay, and I see some-
Ladies and gentlemen, the floor is now open for live questions. If you have any queries, please simply use the Webex Raise Hand feature. Once acknowledged, please be ready to accept the host's invitation to unmute your microphone and share your thoughts with us. Okay, the first question comes from Tony from Nomura. Tony, please, please accept our unmute inquiry. Hi, Tony, we cannot hear you, or you can type your question in the chat panel.
Oh, can you hear me now?
Yes.
Works now. Yes, Tony.
Oh. Oh, thank you, Chair Lady and Leah. So, to summarize what you just mentioned about the, you know, price, environment, or supply-demand, just may, may I ask about what's your latest view on the, full year outlook this year? Because in the past few quarters, you mentioned some of the targets.
Mm-hmm.
But I guess, you know, customers' inventory-
Yes.
... attrition remains slow. So wondering if you can give us some update on the target?
Sure.
And also, like, CapEx, roadmaps, et cetera. Yeah, that—this is the first question.
Okay, thank you, Tony. Let me answer your first question first. Our early this year, at the beginning of 2024, our outlook was that 2024 should be flat, close to 2023, and we tried to make it a little bit better than 2023. That was our goal. Then, at the end of Q1, we made the announcement that we correct our view that maybe it will be a little bit weaker. It's much weaker than our expectation. So for now, what's our view for the whole year, 2024? I think same as what we shared with our shareholders in last earnings call.
We believe that Q1 was the bottom for silicon wafer, and starting from Q2, we'll see the revenue growth quarter by quarter. Now, we see Q2, which is really higher than Q1, and I believe that Q3, Q4 will be higher than previous quarter as well. But the whole year, the whole year revenue, because first half and second half revenue will be pretty flat. I don't expect that second half we'll see any V-shaped growth in second half this year. No, it will be pretty flat. It will be higher, but still pretty flat. So I think that 2024, our revenue of 2024 will be lower than 2023.
2023 was our all-time high, and 2024 will be, will be lower than 2023, and it will be, maybe a high single digit, decrease versus previous year. And, CapEx-wise, because all of our expansion, all of our expansions are for advanced materials, most of them are for, most of them are for 300 mm advanced, polished wafer and, and polished wafer, epitaxial wafer, and also 300 mm SOI. And compound material, that's another big expansion for us. So, we do- we know that we will need the capacity, so actually, we are not slowing down our expansion. We just make all of our expansion on schedule. The reason, like what Leah said earlier, that, our Italy operation sample, sample delivery schedule will be a little bit delayed. It will be Q1 2025.
That was not because of our intention to push out, delay the expansion. No, that's not the reason. The reason is because we have some construction issue, so some construction company delay our construction schedule a little bit, so that was the reason. So in general, in short, our CapEx is very close to our original plan. That's our overall status. Thank you, Tony. So, that's my answer to your first question.
Well, understood. And, second question is regarding to the HBMs. So,
... Wondering if you could give us some more colors on the, you know, the competition landscape of the raw wafers regarding the, the HBM business in the market. For example, how do we compete with, Shin-Etsu, SUMCO, or SK Siltron, et cetera? Because SK Hynix looks like to be the strongest player in the market, but I guess they probably use more SK Siltron. So yeah, if any comment on the competition landscape and what we can do more from here would be appreciated. Thank you.
Yes. HBM, for HBM, there are some challenges. Of course, the lead time, the spec technology, that is very critical, how to manage your edge profile and also the flatness and particle control. There are a lot of very critical specs for HBM, and it's not the ordinary wafer. It's really perfect, perfect wafer. It's perfect thick and perfect wafer, so a lot of specs. And many... These companies, each one has some special, unique position. For example, just like what you said, Korean vendors, they have Korean, it's the same group, so SK Siltron will have much better opportunity to get more share from SK, SK Hynix.
And Japanese companies, they are, of course, very strong as well, and especially because of Japanese yen, weak currency, that help a lot for the price competition. So that's very true. And the best uniqueness of GlobalWafers is that, is our global presence, because of, from overall risk management's viewpoint, a customer always want to have several more vendors instead of, instead of, local vendor, only. So, I think that's our strength. But in general, I think, what we're working is that our Korean fabs supply to Korean, HBM customers, as a local supplier. And also, of course, we have to compete with the other foreign customer. That's very true.
It's very hard to say what's our strength, but all of these vendors... Because there are not that many customers, not that many vendors, and all of them are very good. So, we just try our best to work very closely with customers, and try to improve our quality. Price-wise, it's very hard to compete with Japanese vendors because of the currency issue. So far, we're doing okay.
Understood. Thank you, chair lady. I'll go back to the queue.
Thank you, Tony.
Thank you, Tony, and next will be Bruce Lu. Hi, Bruce. Please accept our inquiry to unmute. Thank you. Hi, Bruce, we cannot hear you now.
Hello? Hello.
Yes.
Can you hear me now?
Yes.
Okay.
Yes, please go ahead.
Thank you. Thank you. I want to ask about the profitability outlook. I mean, can we comfortably say that by 37%, you know, remove the one-off impact, 37% will be a comfort zone as a bottom for our profitability? As Doris just mentioned, that the supply and demand outlook seems pretty stable next year, and we received the grants from U.S. government. So we pretty much have like, you know, most of the having addressed already.
Mm-hmm.
Can we comfortably say that, you know, the profitability for U.S. subsidiary will not be the margin dilutive, and can we say that 37% is a clear bottom, and what is the new LTA pricing environment looks like at this moment?
Thank you, Bruce. Thanks for your question, Bruce. Let me answer this question first. I think next year, all the existing fabs gross margin definitely will be better than this year. All of our existing fabs, gross margin will be better. But next year, new fabs depreciation because of high depreciation and also, you know, the grant, we, you know, the calculations that you have to receive the grant first to recognize, the negative impact, to reduce your, depreciation. So I don't think that we will receive the grant on day one next year. So that means that, our depreciation for new fabs and depreciation will be still high until we receive the grant, maybe end of next year, maybe early 2023.
When we receive the grant, then we will, we will recognize from our P&L, so we can lower our depreciation. Before we receive the grants from Italy or from U.S., before we receive the grant, actually, our gross margin will be very challenging because everything is new. Although our building construction, building depreciation is 39 years in the U.S., so it's, even it's, it's a big amount, but because you can depreciate in 39 years, so the impact is not critical. But for tool depreciation, actually, before you receive the money. Now, they say that I grant you $400 million, but until you receive the grant, you cannot until you receive the cash, you cannot recognize our financial results. So let me try to make myself more clear.
For the existing fabs, I'm very sure that next year, overall performance will be much better than this year, unless any unexpected, political, geopolitical issue or any special energy or energy costs, price hike. Otherwise, I don't see any reason that our existing fab, profitability will be, will not be much better than this year. But for the new fab, starting from next year, new fab before receiving the, the fee, new fab gross margin will be still quite challenging because of the high CapEx. I hope I make it clear. Thank you, Bruce.
Thank you. Can I follow up with that? You know, assuming the worst case scenario, that the grant will only be, you know, received by early 2026, which is the worst case scenario for 2025, what is the negative impact for GWC as a whole, from the overseas perspectives?
There are still a lot of moving targets still out there. A lot of uncertainty, including the currency. I don't know how to calculate currency now, so it's very hard to predict. And I don't think that we will receive the money in 2026. We should be able to receive some grant from 2025. So I just don't know when. So, yeah, it's very hard to predict. And there are another uncertainties that we need to know because we will ship the samples for qualification at the end of the year. That's for America. Our GWA end customer, it takes around six months or longer for qualification, six months or even one year for qualification.
So, year one, you, we have to try to, try to load our tools in America by, some maybe easier, easier products, which can get qualified much faster. So I think that the, the gross margin, we don't know. It depends on the loading, how many, how, how soon we can get the samples qualified. So it, there are a little bit more uncertainty. I am—Bruce, I'm very sure that next, earnings call, which will be, October in our next earnings call, November, early November. Our next earnings call, we will make it—we'll have a much better picture for that. It's a little bit, it's not very clear yet. There are still a lot of moving factors right now.
Understand. Thank you. Just try, try to avoid the bumpy, profitability in-
We understand.
Yeah. Okay.
Yeah.
The next thing.
That's very important for us as well. We try to stabilize the profit, but I just want to make it very clear. Yeah. Thank you. Yes, Bruce? Yes.
It's related to the next question, which is like, you know, the U.S. fab will have a meaningful help in terms of your advanced logic market share, which you have disproportionately smaller market share in this space. But you also just mentioned that you would try to start with a, you know, simpler or easier process first. So when can we expect to see the meaningful, like, market share improvement in the advanced logic for your twelve-inch wafer products?
Yes, our market share increase, I think that we should be able to... Because all of our new capacity will be online next year and waiting for qualification. So I believe that by end of 2025, we should be able to see some improvement on our market share. As I share with all the investors in the past two earnings calls, I said that we need these expansions. The reason that we know market is slowing down, but we need the expansions, and we want to keep it on schedule. The reason for this is that we need 12 in capacity. We don't have enough 12 in capacity. So this time, 100% of our new expansions are for advanced 300 mm capacity or compound, or float zone, or SOI, only these four most advanced products.
We have LTA, and we have government support, so I know very well that we will be competitive, and we will improve our market share. But it's not the first half next year, because we need qualification, and also we need the market rebound as well. So, I would say that by end of next year, you will see some meaningful market share improvement.
I see. Thank you.
Thank you very much, Bruce.
Okay, ladies and gentlemen, we would like to express our sincere appreciation to all of you for your valuable participation today. The earnings call concludes now. Thank you and have a wonderful evening.
Very much.