Q3 2021 Tower Semiconductor Ltd Earnings Call
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Okay.
[music].
Ladies and gentlemen, thank you for standing by welcome to the tower semiconductor third quarter 2021 results conference call all participants.
Are currently in a listen only mode. Following management's prepared statements instructions will be given for the question answer session for operator assistance. During the conference. Please press Star Zero as a reminder, this conference is being recorded November eight 2021, joining us today are Mr. Russell Ellwanger tower, CEO and Mr. Oren Shirazi, CFO I would now.
I would like to turn the conference over to Mr. Levy Senior Vice President of Investor Relations and corporate.
Occasions is levy. Please go ahead.
Thank you and welcome to tower semiconductor financial results conference call for the third quarter of 2021 before we begin I would like to remind you that some statements made during this call may be forward looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected.
The uncertainties and risk factors are fully disclosed in our forms 20-F F form F. Three and 6K filed with the Securities and Exchange Commission as well as filings with the Israeli Securities Authority, They're also available on our website.
<unk> assumes no obligation to update any such forward looking statements.
Please note that the third quarter of 2021 financial results have been prepared in accordance with U S. GAAP, the financial tables and data in today's earning release and in this earnings call. Also include certain adjusted financial information that may be considered non-GAAP financial measures under regulation G and related reporting requirements as established with the securities.
And Exchange Commission the financial tables include a full explanation of these measures and a reconciliation of these non-GAAP measures to the GAAP financial measures.
Now I'd like to turn the call to our CEO Mr. Ross at Island, Gary Russell. Please go ahead.
Thank you.
Welcome everyone.
Thank you for joining our call.
Our revenues for the third quarter of the year was $387 million.
Sequential revenue record for tower.
Which represented 25% quarterly year over year total.
40% year over year organic growth.
And the order of revenue dollars.
Technologies that drove the 40% organic growth was firstly RF Cmos.
At about 75% for.
Predominantly driven by RF Soi.
Second was sensors at about 65%.
Q3 versus Q3, 'twenty with industrial sensors as the major contributor.
The third significant contributor was power IC at about 50%.
Year over year organic increase.
We guide the fourth quarter of the year to continue to grow to a mid range guidance of $410 million.
Representing quarterly year over year, and 19% total growth and 26% organic growth.
Which according to midrange guidance will yield an annual revenue of $1.506 billion for 2021.
Which would be a 19% total and 28% organic full year growth against the one point to 66 billion for 2020.
Looking into our specific businesses.
During the third quarter, our RF mobile business was 26% of our revenues.
And is expected to continue to grow in the fourth quarter and into 2022.
Growth was driven by market share increases.
Accelerated by increased RF content in <unk> handsets.
As five G requires the most advanced technology for which we provide a higher value.
This change in mix drives increases in margins.
Demand is very strong in both 200 millimeter and 300 millimeter.
Providing returns on capacity investments to date.
And giving confidence on the return for our present and planned investments.
The RF infrastructure business, serving telecom and Datacom end markets with our industry, leading silicon germanium and Silicon Photonics technology was about 13% of our corporate revenues.
During Q3, we witnessed the first significant revenue ramp of our Silicon Photonics flows.
This is the highest margin we serve.
It is expected to be a meaningful contribution to our bottom line in 2022.
This quarter, we announced next generation Silicon photonics process flow, which will include lasers and potentially other three five components fully integrated into our high volume silicon process.
This can more than double our revenue potential in this market with the laser being the most valuable single component and in optical communications system.
Last week, we announced a partnership with Elo photonics to product ties are new.
Low loss wave guide technology, both through Enel ozone products, which include precision gyroscopes.
Using silicon photonics to replace optical fiber called <unk>.
As well as in our new foundry offerings for a wide scope of applications and automotive lidar bio sensing and quantum computing.
Our power IC business was 16% of our total revenues with strength in automotive industrial and consumer segments.
We continue our strong position in automotive battery management area.
Additionally, having now signed a long term capacity agreement with a market leader.
Automotive battery management is expected to significantly outpace the overall power IC market due to the world wide push for electrification of the vehicle.
Beyond this market, we are getting gaining overall market share through technology leadership.
And what is the largest portion of the overall analog market.
Our power discrete was 16% of our revenues.
Like power Ics growth is broad based but led by automotive applications.
As discussed last quarter, we anticipate the power discrete business to level off while we focus our capex expansion another higher margin segments.
Our imaging business represented more than 15% of our revenues.
We continue to see very strong demand in the industrial machine vision markets.
As well as the medical and dental X Ray market.
Our customers in these areas are hardly interested in securing capacity for the coming years seeing long term market demand.
Regarding display we continue in a substantial partnership for the development of back plane micro OLED.
Mainly for the VR display market, a very fast growing market.
The automotive portion of our business represented 12% of our corporate revenues. This past quarter supported by most all of our technology sales.
We've been a dependable supplier to the automotive market for many years with our industry, leading offerings in imaging and sensing wireless and wireline communications mixed signal and power management.
We are not only continuing to invest in new capacity and technology Roadmaps, but are also enabling innovative technologies such as solid state Lidar based on our Silicon Photonics open platform.
We recently partnered with the University of Southern California to announce a breakthrough development and Lidar IC technology designed for advanced driver assistance systems and.
And ultimately self driving cars.
And as stated we recently signed a long term capacity agreement with a market leader in battery management solutions.
Ensuring a growing position serving this megatrend of vehicle electrification.
Moving to utilization.
The following are the third quarter foundry layers, all numbers given an eight inch equivalents.
As well there is a full table of all numbers in our Q3 financial highlights presentation that will be available on our website at the end of this call.
For 150 millimeter 455000 players were processed up 55% as compared to Q3, 2020 and up slightly from the previous quarter.
For 200 millimeter.
$6 million 197000 layers processed up 28% as compared to Q3 2020.
And up 5% as compared to the previous quarter.
For 300 millimeter 1.539 million layers were processed up 57% year over year.
And up 10% as compared to the previous quarter.
We will now give more color on the revenue and margin impacts of our capacity growth, including the impact of investments in certain capability tools to enable a richer shipment volume mix.
As stated the Q4 2021 midrange guidance represents a 26% year over year organic growth.
We've created this growth through three vectors firstly, 50% of this is pure capacity increase.
Secondly, 25% of the revenue increase is from a richer mix, meaning higher value higher ASP shipment mix.
Thirdly, 25%.
Is by ASP increases of existing products, which customers participated in predominantly to secure a longer term committed capacity.
All of the above contributes to strong increases in top line revenues and margins.
Targeting to be above 15% net profit margin in 2022.
In 2021.
Our organic growth.
<unk>.
It will result in a Q4 2021 annualized organic revenue of 1.2 dollars 7 billion.
Slightly more than the 2020 total revenue.
This $1 $7 billion of revenue excludes the circa $400 million of Panasonic, now <unk> and San Antonio Maxim long term contracts that were part of the 2020 revenue.
Including those long term contracts.
We end 2021 with mid range fourth quarter revenue guidance, representing a $1 64 billion annualized revenue.
Longer term.
Our capex initiatives.
Which will experience full wrap in 2023.
And with the addition of the initial 2023 revenue ramp of the <unk> factory.
Should allow greater than 30% organic growth on top of the present, 26% organic growth guided for the fourth quarter of 2021.
From that point revenue and margins should continue to increase.
As the <unk> fab continues to ramp through to 2026.
Such capacity increases are fully spoken for by customers.
With that I'd like to turn the call to our CFO Mr. Shirazi Oren. Please.
Uh huh.
Hi, everyone.
We released our quarterly results today, presenting an additional record revenue, reflecting 25% year over year total revenue increased for.
For the first quarter of 2021 or 40% organic increase.
And resulting in significant increases in our gross operating and net profit margins azuela is in cash flow from the rating activities.
The revenue amongst margins increases are driven by the significant customer demand, we continue to see in mostly all of our assets.
We are executing the $250 million of capacity and capability Capex expansion plan in our existing fabs as announced in previous quarters.
And the ramp up of the 12.
12 inch victory being established in Italy.
I will start my review by analyzing the P&L highlights and then discuss our balance sheet and cash.
Additional financial statement read.
Revenue for the third quarter of 2021 was 387 million $76 million of higher year over year, reflecting a 25% total revenue increased 40% organic increase.
Organic revenues are defined as total revenue, excluding revenue from Novo, Tony and oil, Japan, Fabs and revenue for Maxim.
So any of it.
Gross and operating profits for the third quarter were $85 million and $44 million respectively.
This growth profile, 60% higher year over year, and 16% higher quarter over quarter.
This operating profit is 131% higher youll overview, and 30% higher growth over the quarter.
Net profit for this quarter was $39 million or <unk> 36.
Basic and diluted earnings Bill Sheila.
And adjusted net profit was $45 million.
The resulting gain adjusted basing and needle to earnings per share or 40 foot 42 and.
<unk> 41, respectively.
Those are reconciled in today's press release tables.
This net proceeds is 157% higher year over year, and 27% higher quarter over quarter.
Comparing to the second quarter of 2021, the $25 million of higher revenue in the past quarter resulted in $12 million due to higher gross profit, reflecting 47% incremental gross profit margin.
$8 million higher net brokerage, reflecting 33% incremental net profit margin.
$14 million, EBITDA, reflecting 58% incremental EBITDA margin.
Moving to our cash flow report and focus.
During this past quarter, we achieved a record cash from operations at a level of $107 million.
We invested $88 million in fixed assets, mainly for manufacturing equipment, and we repaid $29 million of our debt mainly a principal payment towards bonds series G issued in 2016.
As we announced in February 2021, and August 2021 quarterly financial press releases.
This year, we ordered a significant amount of equipment tools to increase our capacity and capabilities in our existing 12 inch and eight inch fab in order to satisfy our customer demand.
This equipment tools were mainly directed to fab two in Israel Fabs three benign in the U S.
Well as <unk> 507 in Japan.
The total amount of such approved and issued purchase orders was $250 million other mouse, which are payable between mid 2021 and the end of 2022.
In addition, we forecast that we will make capex payments for equipment tools for the newly built 12 inch factory.
The amount of $160 million in 2022, and an additional $240 million.
In 2023.
Looking to the balance sheet, we demonstrated again, a strong and stable financial position.
A few points to note shareholders' equity reached a record of $1 $56 billion.
The end of the quarter current assets ratio defined as current assets divided by short term liability strong at a value of $3 eight.
Yeah.
Deferred revenue and customer advanced balances under current liabilities and long term liabilities in the balance sheet have increased by $19 million and $35 million as compared to the end of Q2, 'twenty, one and the end of Q4 'twenty respectively.
And are expected to continue to increase reflecting enhanced receipts from customers that have asked to secure more capacity and fund manufacturing equipment cost to grow their business potential and address the increasing demand.
And now I would like to turn the call back to the operator, so little.
Thank you ladies and gentlemen at this time, we will begin the question and answer session. If you have a question. Please press star one if you wish to cancel your request. Please press star two if you are using speaker equipment timing lift the handset before pressing the numbers questions will be pulled in the order. They are received please stand by while we poll for your questions.
Okay.
The first question is from Rajiv Gill of Needham <unk> Company. Please go ahead.
Yes. Thank you for taking my questions and congrats on the strong momentum this year and the execution.
Russell had a question on your on your comment about <unk>.
Given the capacity that youre, putting in place plus the capacity that will come from <unk> in Italy, you had mentioned a 30% organic increase in revenue on top of the 26% in Q4 of this year.
Wondering if you could elaborate a little bit further on how you're getting to that number any idea in terms of the timeline, but the cadence of that revenue growth and how we should think about it.
Maybe across product lines.
Pretty strong kind of long term.
Potential organic growth rate that youre, indicating.
Thank you.
Thank you for the comment and I think we would agree that it's a very strong.
Okay.
Target to be giving forecast if you will.
Specifically related to the fourth quarter of 2023.
We have a good amount of Capex that has been ordered.
Some that will still be ordered.
That will be coming fully online within 2023.
Even if the 200 millimeter levels.
So to give really a huge amount of color on the ramp I don't wish to do that at this point, we will give our guidance is for 2022 as we get into 2022.
But what I wanted to point out is that the.
Growth avenues of the company remained very very strong im.
Im looking forward and that even from this 2023 for I'm talking about a 30% organic I said above 30% organic actually.
That is only the start.
Of our ramp at a drop date itself.
So.
The prospects are very good where I mentioned.
Previously.
Different areas, where we're growing you could assume that those should remain.
We see.
A lot of strengths.
As stated in presence ramping of Silicon photonics.
<unk> stated that we see that we would believe that that will be a significant contributor to margins next year.
The present price per layer of FIFO.
Exceeds all else that we make and for very good reasons.
Platform.
That enables a lot that takes a lot of capability to make.
So it adds tremendous value to our customers.
That will continue to grow we're investing specific for silicon photonics growth.
And that will certainly not taper off in 2022, it will expand in 2022 and 2023.
I stated that our RF soi.
Has benefited substantially from.
The <unk>.
Content increases of five G, but also for market share increases.
And that we see that growth continuing.
Into 2022.
Certainly an engine that we.
We continue to put fuel into both as far as growing capacity and as far as being very aggressive in figures of merit.
To ensure that we have.
The best figures of Merit in the World.
I mentioned the <unk>.
Sensor area.
Where are we have very strong demand in industrial steadying customers are very.
Involved in ensuring they have long term demand there.
But in addition mentioned display which is not something that has been.
A substantial revenue stream for the company in the past, but something that we expect will become a very substantial revenue stream in the future.
Beginning.
Most likely end of 'twenty, three and growing very very strong in 'twenty four and 'twenty five.
Silicon germanium.
Has been a big business for us continues to be a big business.
At the present, if you noticed I didn't mentioned silicon germanium is one of the growth drivers for.
Our.
Q3, 40% organic growth and indeed it wasn't.
Silicon germanium had very good growth in 2020.
Year for the benefit of the build a infrastructure for <unk> and that infrastructure build that was done in 2020 is what's enabling all of the growth that we have within the.
High end mobile platforms right now.
The infrastructure demand is down slightly.
Or maybe even slightly more than slightly but the data center demand is up so <unk>. Although it's growing is growing not great. At this moment from Q2 to Q3 and Q4, but it is staying stable as we go forward into.
400 gigabit per second.
800 gig per second and data center, the complexity of the laser drivers and the <unk>.
Goes up substantially.
So we would assume that that will mean.
Larger die and.
More wafers for those applications and tends to growth will still be driven and data center.
Due to the complexity of the parts that will be needed.
But as well that takes into account the silicon photonics, which is one of the big areas that are that the cycle will be used for.
And on the data center.
I think that.
That gives a summary of some of the areas of growth one of the other underpinning areas that I'd mentioned is that power management.
Having signed a long term.
Agreement with <unk>.
Our leader in battery management.
But having multiple platforms that really have market differentiation.
And looking forward to.
Our increases in capacity to enable.
That market to take off for us as well.
So hopefully that's enough color I think it was a fairly detailed answers yes, I appreciate all the great insight.
Just wondering if you take kind of a bigger picture view given the.
Capacity constraints that you're seeing in the in the market are you noticing.
Any kind of fundamental changes in customer behavior.
Would appear to be that the foundries, particularly high performance analog foundries like yourselves would have a lot of.
Leverage bargaining power.
In a capacity constraint environment enhanced pricing power.
I'm just wondering is the position of your company in this capacity constrained environment.
Growing given the importance of semiconductors for all these kind of growth market and you mentioned on the long term supply agreement with leading auto battery management.
Liar.
Are you seeing more long term supply agreements across certain customers is that a trend that you think is going to last given.
This capacity constrained environment.
Sure.
So the answer to the first part of the question.
Very very candidly I believe that we've enjoyed very strong customer relationships.
Multiple years.
Being with.
Based upon the fact that.
Our advanced road maps.
Dominic aligned with customer.
Customer needs and.
Customer prequalification and choosing.
Customers that we partner with for every next generation technology node.
Certainly there is.
I would believe across the board in a capacity constrained environment more willingness of customers to invest.
In order to ensure capacity and that only makes sense. If there is an abundance of capacity utilizations.
Obviously, no one needs to invest not the manufacturer and not the customer to grow capacity when capacity is severely.
Constrained, which is in the market right now.
Then customers are more than willing to participate.
To ensure that they have capacity corridor for the present and the future. So I think that that's eye opening in that way.
That customers are not high opening necessarily but customers are more willing to participate.
But that is just the sign of the times right, it's not that.
I think it's just the fact of the cycles that you're in and when capacity.
Gets constrained when utilization is very high customers more willing and there is more of a necessity to secure capacity.
So that was I think the first part of your question what is the second part.
No I was just saying I think you may have answered it already but we are seeing.
Cross the industry. This phenomenon, where chip companies are entering into longer term supply agreements with their end customers and in turn the chip companies are entering into longer term supply agreements with their foundry partners.
And I was just wondering if this is something that you said.
At the time versus something more.
Permanent.
I believe it will become more permanent.
It's been catalyzed may be because of.
The presence, which there is many reasons why it happened.
But I believe that it's a model that really makes sense.
And.
Our customers really wished to partner them too.
They know that our success.
Is the key to their success.
And vice versa.
So.
It takes sometimes.
A few moves that are a little bit drastic which was the market.
Especially it.
Through now or this year as far as capacity constraints from certain suppliers.
That makes everyone <unk>, we have to address this maybe differently to ensure that in the long term we have business continuity.
And I think that Thats good extremes.
Put people more into a moderate median than if.
If there were never an extreme.
I appreciate that and provide just my last question on the Capex.
So the <unk>.
<unk>.
We will start to you'll start to ramp that.
In calendar 'twenty two.
And then continuing going forward.
How do we think about.
The Capex impact because I think when you announced the partnership with SD micro.
Which is a very interesting partnership.
I believe.
The Capex discussion was still to be determined.
You kind of mentioned the potential capacity output.
Would create but wondering how to think about the capex.
Trend line going forward.
Yes.
Like you've mentioned in the answer.
We expect to share the capacity space.
Approximately one third of the space that will be built there which is.
In early stages.
The building is I believe already fully.
Bill.
And already.
Tool install and tools are starting to roll in as we speak.
And we really said like you mentioned, we will give more color on the amount of investments.
For the foreseeable future until the end of the year and this is what I.
In my prepared remarks that we will we expect to invest in that factory. This year it will be nothing because the only tool as well.
<unk> about still no no payments would needed to be made because usually payments are made after tool arrival with some payment terms.
But next year, it should be $160 million.
22, and 23 should be additional $40 million. So a total of $400 million in the coming two years.
Towards.
The capacity that we want to have there.
Thank you.
The next question is from Lisa Thompson of Zacks investment Research. Please go ahead.
Good morning.
Okay.
Hi, so looking at all the moving parts.
And in pricing ability.
Sure.
Do you think 2023.
Youre going to be getting.
Like your highest gross margin can you just kind of order which product lines.
Thanks.
As stated Silicon photonics.
We had our first substantial revenue quarter.
In Q3.
We see growth in that area.
Throughout 2022 continued growth in 'twenty three.
<unk> is the <unk>.
Highest price per layer of what we serve.
So on that.
I would expect will remain.
Our highest gross margin and might even go higher depending on.
Some other activities that we might be doing there.
So I think cycle will be the highest <unk> stays very high.
Our stitch field sensors is very high margin.
So I think that those would remain in those same areas.
And then after that.
We'll go next in line.
We have.
Very good margins in some areas of power management.
In particular.
Specialty flows for.
Battery management.
The electric vehicle so that's.
Very good margins.
Overall.
The imaging margins are very strong.
Even non stitch field imaging margins are very strong.
And.
The.
High end RF Soi is also very good.
Point with RF Soi is that.
You have.
We're really very very good prices per layer.
The strengths of substrates. So if you calculate the gross margin of our salt wafer, it's artificially lowered because the 300 millimeter or 200 millimeter RF soi substrate.
Disproportionately high cost.
But the.
Outside of starting material.
<unk> contributed margin of the layers is very good.
Okay. Good that's helpful.
And since you said you've already got.
Although the Italian SAB, what is actually going to be made there.
Who is it going to be sold.
Yes.
I said the capacity is spoken for.
Right.
We've.
Stated that our first flows that we're bringing up there is RF soi.
And then the second flow that we're bringing up there is display.
Stinchfield display.
And is it going to all to European customers.
Okay.
We've not state or two it's going to but.
I don't know that we've ever broken down as far as geography as to where the customers are but the answer would be no.
Okay, great. Thank you that's all my questions.
Yes.
Our next question is from Richard Shannon of Craig Hallum. Please go ahead.
Hey, Richard.
Russell Hi, how are you. Thank you Steve.
Excellent apologize for my Scratchy voice here.
Got a couple of questions kind of weaving into the same general topic here.
Starting with your comments that there is also in the press release about achieving a 15% net margins for this year and you talked about an organic growth number I'm wondering maybe if you can help us kind of lead this down to the total total revenues here in the gross margins and therefore falls through that are built into that assumption and maybe if you can the peripheral you also talked.
About <unk>.
Kind of the pricing dynamic that builds into that well. So you can if you can talk about how much prices are going up or or anything to kind of lead into those numbers that'd be a great start and I'll probably follow up on that.
Specifically, we will not give a guidance on revenue for 2022.
So I think that was one of the things that you're asking for but.
Outside of that.
The price increases you can get out of my statement of the breakdown of the organic growth.
For the fourth quarter.
So.
I said that.
That organic growth that was 26%.
Which would be somewhere.
About.
$65 million a quarter of that.
So of that I said, 50% was pure capacity.
About 25% was a richer mix.
25% was ASP.
So.
Just doing the arithmetic that would mean, 665% increase in ASP.
Okay. That's helpful. Maybe I'll ask the question slightly different way in the manner. We spoke spoke about on last calls here, which is to talk about the incremental gross margin fall through for next year.
And you've talked about $50 to 55% range for from various comments I've heard so far it might suggest that that should be meaningfully higher certainly pricing new flows like silicon photonics et cetera, how should we think about that one.
No no I believe the 50% to 55% is still fairly then.
Obviously you can also look at this what you asked in this way.
I mean, the previous year or previous quarters, our net profit margin was about 7% to 8%. This quarter was 10 point something.
If we are adding 50% incremental gross and operating margin.
So the net margin you may assume depends which geography. It is about between 35% to 42% incremental net profit margin. So obviously.
From a baseline of <unk>, when we will add the incremental 50 thus.
Flow through of incremental 35 40 of the above.
Obviously will be the way to achieve our sales target.
Be above 15%.
Next year.
Jim.
Yes, Hi, Paul of course, <unk> high yield and 50%, 55% incremental gross but there is also other aspects which are lower.
FIFO next deal I mean, 22 is not big numbers.
Indefinite growth compared to previous year, but.
It's still it's not something which is dramatic in volumes as compared to the total which causes the blended everything to be above 55%.
Orange so all in all.
If you add up 50% to 55% of incremental.
Baseline.
Any incremental revenue that you assume youll should reach the.
The ability to close the 15% net profit margin across the state.
Perfect Thats very helpful. Oren to follow on one of your comments here into Silicon Photonics.
Some good detail on the call here are Russell, maybe if you can talk about.
How does the customer profile buildup in the application of those customers who are ramping for next year can you give us some color there that'd be great help thank you.
So.
We have customers for <unk> that are involved in lidar. So this is a.
Our pure <unk>.
Solid state.
<unk>.
Phased array instead of having a movable parts of the laser.
That's one area of the CFO I mentioned.
Specifically with <unk>.
A press release with the Nello. That's this is silicon photonics.
Driven geometer.
Replacing optical fiber coil.
And the bulk of the cycle, though is really.
It's.
Yes.
To go into data center.
To achieve a 400 800 gigabit per second case.
Capability.
And the first and foremost customer.
That we had press release Swiss was inside as.
As far as them being a SIFI customer.
Certainly their presence and abilities.
Within having.
Very.
High data rate capabilities.
It is known that they were acquired by Marvell. So those are right now the three major areas that we're involved in.
Okay. That's helpful detail Russell My last quick question following up on another one regarding the <unk> fab.
In a prior question you answered with a couple of areas.
<unk>.
Our focus here I'm not sure if those are the intended to be the biggest ones.
The first couple of years out of the gate or the earliest ones, but maybe if you can give us some more color on other areas, which are continuing to focus on that capacity.
We really are focusing the initial capacity in those two areas.
The RF Soi.
Several different platforms of RF Soi.
Stitch field display.
The initial focus that we have there.
Okay perfect. That's all from me I'll jump on the line. Thank you. Thank you Chris.
The next question is from Mark <unk> of Jefferies. Please go ahead.
Hi, Thanks for taking my question.
I don't know, maybe maybe four or in the capex that you're putting up and projected to put up is there is there have you can.
Can you quantify for us.
The impact the depreciation.
Lying in the.
And the cash flow statement and how.
If you can't quantify or perhaps could you.
Could you give us a framework to think about the.
The normal depreciation schedule for this capex and.
When it when.
When you might start depreciating it thank you.
Hi, yes.
We.
Depreciate, our capex equipment towards over 16 years, four and five.
The depreciation the Capex for the Augusta facility, which I mentioned will be 160 next year and additional 240 and 23.
We will not be starting to be depreciating.
To be depreciated before the beginning of 2023. So next year, you should see zero from that in depreciation because.
Until that orders will arrive and then there should be installation and qualification and it's part of a big chunk of tools that arrive at the same timing so under the rules.
Only once we will qualify everything.
We will start to depreciate, usually it's two to three quarters <unk> been full up to four quarters. After the arrival of the tools.
So.
It will not be next year.
But you can start with model it from <unk>.
2020, starting in small amounts.
From the Middle of 2023 for Q3 of 2023, it will be higher amount.
As we start to ramp they also Russell indicated that we will see some revenues for me I've got.
He is forecast for growth for Q4 'twenty three so obviously windows revenue there will be also a cost and depreciation so that's about that got it.
These cloud.
The second part is the regular capex, so I updated about I mean.
Have you announced it in the past I just gave.
You have an update of the $250 million that we already announced that we all did this year.
We will be paid and you can call it cleanup.
Now flows almost leaning out from the middle of 'twenty, one to the end of 'twenty, two so, let's say $40 million on a quarter.
And that's when it's paid usually depreciation style to one quarter after that.
So additional $40 million.
I mean, if we clean out to 50 over a six quarter additional $40 million of Capex.
Into depreciation, but obviously, we've seen yield right. So it is like 6 million on our call.
Six six.
The committee.
Each such quarter.
Additional $6 million of layer.
I don't think it will impact much because.
On the other hand, we also purchased Capex in the past, maybe a lower amount than that but still well so whenever a new layer of depreciation starts to be amortized.
Layer the finished depreciation of $4 15 years ago.
It was purchased 15 years ago.
Dominates.
So the delta shouldn't be I believe a material amount but of course, you can model it very easily just add 40.
<unk> 40 million level for new Capex every quarter.
Got you. Thank you very helpful.
Thank you.
There are no further questions at this time, Mr. Alan <unk> would you like to make your concluding statement.
Certainly thank you very much.
Firstly.
Really.
I'm excited about where we are what's in front of us.
The relationships, we've developed with our customers the markets that we're in.
The figures of merits, we've been able to achieve that benefit our customers and having differentiated products that as they design to our flows.
And an exciting time in an exciting period for the company.
The 15% net profit margin target that you've given for 2022 I think is a good step for the company.
And look forward to achieving it in two.
Updating as we move forward on the top line value growth that obviously is very accretive to the bottom line margins.
We've.
Recently issued our first corporate sustainability or ESG report.
Reviewing the variety of our global activities, providing in depth information about our sustainability policies programs and goals as a company. We've always had an overriding focus to have a positive impact on society.
And to minimize any negative impact impact on our planet.
To do what we can to have a positive impact on the planet. We're very proud of our activities. We invite you to read our report it is available on our website.
Okay.
We have a package that I referred to before the call or I'm, sorry, I was I was talking about utilization that will publish now that the call is ending that summarizes.
All of the numbers highlights activities Utilizations in the company.
Please put your interests look at that I think it's a complete package.
And lastly, we will be participating at the 24th annual Needham growth Conference on January 10th.
And we look forward to meeting as many of you as possible during that event, albeit virtually but still look forward to a very much.
With that I. Thank you.
Look forward to updating you as interesting happen things happened in the company and definitely upon the end of the quarter. So thank you very very much.
Thank you. This concludes tower semiconductor third quarter 2021 results conference call. Thank you for your participation you May go ahead and disconnect.
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Thank you and welcome to the tower semiconductor financial results conference call for the third quarter of 2021 before we begin I would like to remind you that some statements made during this call may be forward looking and are subject to uncertainties and risk factors that could cause actual results to be different from those currently expected.
These uncertainties and risk factors are fully disclosed in our forms 20-F F O F three and 6K.