Q2 2026 GlobalWafers Co Ltd Earnings Call

August 4, 2026

Speaker #1: Good afternoon, everyone. Thank you for joining us, and welcome to GlobalWafers' Q2 2026 earnings call. I'm Leah Peng, spokesperson for the company, and I'm pleased to be joined today by our Chairperson, Dr. Hsu.

Leah Peng: Good afternoon, everyone. Thank you for joining us. Welcome to GlobalWafers Q2 2026 Earnings Call. I'm Leah Peng, spokesperson of the company, and I'm pleased to be joined today by our Chairperson, Doris Hsu. Here's how today's event will unfold. Doris will begin with executive comments, providing insights into overall performance and strategic direction. We will then address investor questions received in advance, followed by an open Q&A session. The call will last for 60 minutes and conclude at 5:00 PM. Before we begin, a quick reminder to ensure everyone has the opportunity to participate. We kindly ask that each participant limit your questions to two. Please keep your audio on mute. To ensure smooth and interactive sessions, we have established two methods for you to post questions during the event. Using the Slido feature for written questions and utilizing the Webex hand-raising function for live spoken inquiries.

Speaker #1: Here's how today's event will unfold: Stories will begin with executive comments, providing insights into overall performance and strategic direction. We will then address investor questions regarding receipts in advance, followed by an open Q&A session.

Speaker #1: The call will last for 60 minutes, and will conclude at 5:00 p.m. Before we begin, a quick reminder to ensure everyone has the opportunity to participate: we kindly ask that each participant limit your questions to two.

Speaker #1: Please keep your audio on mute to ensure a smooth and interactive session. We have established two methods for you to post questions during the event: using the Slido feature for written questions, and utilizing the Webex hand-raising function for live spoken inquiries.

Speaker #1: First is Slido, which is the text-based questions platform. Throughout the meeting, you can input your questions using the Slido feature in Webex. Simply access Slido and type in your question.

Leah Peng: First is the Slido, which is the text-based questions. Throughout the meeting, you can input your questions using the Slido feature in Webex. Simply access Slido and type in your question. Our presenters 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 the 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 questions to the panel. Before we begin, I would like to remind you that today's discussion may contain forward-looking statements.

Speaker #1: Our presenters 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.

Speaker #1: The second method is live voice questions. Toward 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, we will acknowledge you.

Speaker #1: Kindly be ready to accept the host's invitation to unmute your microphone when prompted. This will allow you to verbally ask your questions to the panel.

Speaker #1: 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.

Leah Peng: 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 on GlobalWafers. Doris, please.

Speaker #1: 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 on GlobalWafers.

Speaker #1: Doris, please.

Speaker #2: Thank you, Leah. Good afternoon, everyone. Thank you very much for joining GlobalWafers' Q2 2026 earnings call. Leah, our spokesperson, will walk you through the presentation and address some of the frequently asked questions we have received recently.

Doris Hsu: Thank you, Leah. Good afternoon, everyone. Thank you very much for joining GlobalWafers Q2 2026 Earnings Call. Leah, our Spokesperson, will walk you through the presentation and address some of the frequently asked questions we have received recently. I will also take questions during today's session. First, allow me to share our latest observation on the semiconductor market and provide further details on our operating performance this quarter and several important recent developments. Since our last earnings call in May, we have become more positive on the midterm to long-term semiconductor outlook. AI and high-performance computing demand continues to grow, while customer inventories are returning to healthier levels. Demand is also improving across industrial, power management, memory, and other mature node applications. We see AI as more than a short-term infrastructure cycle. It is rapidly entering work, daily life, and physical applications, reshaping how business and industries operate.

Speaker #2: I will also take questions during today's session. First, allow me to share our latest observations on the semiconductor market and provide further details on our operating performance this quarter, as well as several important recent developments.

Speaker #2: Since our last earnings call in May, we have become more positive on the midterm to long-term semiconductor outlook. AI and high-performance computing demand continue to grow, while customer inventories are returning to healthier levels.

Speaker #2: Demand is also improving across industrial power management, memory, and other mature node applications. We see AI as more than a short-term infrastructure cycle; it is rapidly entering work, daily life, and physical applications, reshaping how businesses and industries operate.

Doris Hsu: As AI expands from centralized cloud infrastructure to edge computing, smart devices, agentic AI, and physical AI, computing demand and semiconductor applications will continue to broaden, creating stronger long-term growth. At the same time, advances in advanced packaging, HBM, silicon photonics, and process nodes are increasing wafer usage and technical requirements. This is driving demand for high purity, high flatness, low defect, and specialty wafers, supporting long-term growth in silicon wafers, SOI wafers, and other high-value products. Recent market improvements is already reflected in our operation. Excluding new capacities, our 12-inch lines, 8-inch lines, 6-inch lines, GaN-on-silicon lines are almost fully loaded, and our silicon carbide utilization rate is improving very rapidly as well. This shows that the recovery is expanding from AI and advanced applications to more wafer sizes and end markets. Our Japan operations also delivered very good result.

Speaker #2: As AI expands from centralized cloud infrastructure to edge computing, smart devices, and generative AI and physical AI, computing demand and semiconductor applications will continue to broaden, creating stronger long-term growth.

Speaker #2: At the same time, advances in advanced packaging, HBM, silicon photonics, and process nodes are increasing wafer usage, as well as packaging and technical requirements. This is driving demand for high-purity, high-flatness, low-defect, and specialty wafers, supporting long-term growth in silicon wafers, SOI wafers, and other high-value products.

Speaker #2: Recent market improvements are already reflected in our operations, excluding new capacities. Our 12-inch lines, 8-inch lines, and 6-inch lines—gain-on-silicon lines—are almost fully loaded.

Speaker #2: And our silicon carbide utilization rate is improving very rapidly as well. This shows that the recovery is expanding from AI and advanced applications to more wafer sizes and end markets.

Speaker #2: Our Japan operations also delivered very good results. The Niigata plant achieved a record quarterly revenue in the second quarter of 2026, while its June and first-half revenue were the second highest on record.

Doris Hsu: The Niigata plant achieved a record fourth quarterly revenue in Q2 2026. While its June and the H1 revenue were the second highest on record. Meanwhile, the recently expanded GWJ Utsunomiya site set new shipment records for June, Q2, and H1. These results demonstrating that improving demand and new capacity and our long-term global expansion are translating into actual shipments and operating contributions. GlobalWafers is now entering a new stage of growth as new capacity moves into customer qualification and production ramp-up. Our focus now is shifting from construction to qualification, ramp-up, and investment returns. Our global manufacturing footprint is strengthening supply capability and enabling closer customer support and sustainable long-term growth. While sharing this market and operating updates, I would also like to provide further update on the recent fire incident at our Novara fab in Italy.

Speaker #2: Meanwhile, the recently expanded Utsunomiya MJO Utsunomiya site set new shipment records for June, the second quarter, and the first half. These results demonstrate that improving demand, new capacity, and our long-term global expansion are translating into actual shipments and operating contributions.

Speaker #2: GlobalWafers is now entering a new stage of growth. As new capacity moves into customer qualification and production ramp-up, our focus now is shifting from construction to qualification, ramp-up, and investment returns.

Speaker #2: Our global manufacturing footprint is strengthening supply capability and enabling closer customer support and sustainable long-term growth. While sharing these market and operating updates, I would also like to provide a further update on the recent fire incident at our Novara fab in Italy.

Speaker #2: On July 20th, local time, a fire occurred in part of the 8-inch wafer production line production area of our Novara, Italy operation.

Doris Hsu: On 20 July, local time, a fire occurred in a part of the 8-inch wafer production line, production area of our Novara, Italy operation. We immediately activated emergency response, evacuation, and site safety procedures. Most importantly, all employees were safely evacuated with no injuries or environmental impact. Based on our current assessment, the damage was mainly limited to part of the back-end process area of our 8-inch production line. It did not affect the entire facility or the four 8-inch production line. Majority of the process areas and equipment were not directly damaged by fire or heat. This providing a very important base for our recovery. The newly expanded 12-inch line in Novara was completely not affected and already resumed operations soon after safety checks were completed. Equipment installation, customer qualification, and capacity expansion remains on schedule. Core system of our 300 millimeter silicon operation line also remains fully operational.

Doris Hsu: On 20 July, local time, a fire occurred in a part of the 8-inch wafer production line, production area of our Novara, Italy operation. We immediately activated emergency response, evacuation, and site safety procedures. Most importantly, all employees were safely evacuated with no injuries or environmental impact. Based on our current assessment, the damage was mainly limited to part of the back-end process area of our 8-inch production line. It did not affect the entire facility or the four 8-inch production line. Majority of the process areas and equipment were not directly damaged by fire or heat. This providing a very important base for our recovery. The newly expanded 12-inch line in Novara was completely not affected and already resumed operations soon after safety checks were completed. Equipment installation, customer qualification, and capacity expansion remains on schedule. Core system of our 300 mm silicon operation line also remains fully operational.

Speaker #2: We immediately activated emergency response, evacuation, and site safety procedures. Most importantly, all employees were safely evacuated with no injuries or environmental impact.

Speaker #2: Based on our current assessment, the damage was mainly limited to part of the backend process area of our 8-inch production line. It did not affect the entire facility or the full 8-inch production line.

Speaker #2: The majority of the process areas and equipment were not directly damaged by fire or heat, providing a very important base for our recovery.

Speaker #2: The newly expanded 12-inch line in Novara was completely not affected, and already resumed operation soon after safety checks were completed. Equipment installation, customer qualification, and capacity expansion remain on schedule.

Speaker #2: The core system of our 300 millimeter silicon operation line also remains fully operational. We have begun a global effort to restore our operations safely and efficiently.

Doris Hsu: We have begun a global site to restore our operations safely and efficiency. Our goal is not only to recover existing operations, but also to further strengthen safety, resilience, and long-term operational capability across all sites. Damage assessments, recovery activities, and insurance claims are also underway. The Novara site is insured for property tax and business interruption, so our Novara sites have both property damage insurance and business interruption insurance, which is expected to partially mitigate the financial impact to us, subject to policy terms and the insurer's final assessment. The restart schedule will depend on regulatory approvals, safety inspections, and further progress. To support customer supply, we have already activated our global manufacturing network, cross-site qualification system, and backup plan. Products already qualified at other sites will be immediately supported through alternative facilities where possible.

Speaker #2: Our goal is not only to recover existing operations, but also to further strengthen safety, resilience, and long-term operational capability across all sites. Damage assessments, recovery activities, and insurance claims are also underway.

Speaker #2: The Novara site is insured for property tax and business interruption so both of these are our Novara site have both property damage insurance and business interruption insurance.

Speaker #2: This is expected to partly mitigate the financial impact to us, subject to policy terms and the insurer's final assessment. The restart schedule will depend on regulatory approvals, safety inspections, and further progress.

Speaker #2: To support our customers and customer supply, we have already activated our global manufacturing network, cross-site qualification system, and backup plans. Products already qualified at other sites will be immediately supported through alternative facilities where possible.

Speaker #2: For products not yet cross cross cross-site qualified we will work closely with our customers to accelerate value validation and capacity transfer. Before the incident improving improving demand and production trends supported our expectation of QOQ quarter on quarter revenue growth in the third quarter.

Doris Hsu: For a product not yet cross-site qualified, we will work closely with our customers to accelerate validation and capacity transfer. Before the incident, improving demand and production trends supported our expectation of QOQ, quarter-on-quarter revenue growth in Q3. The fire may cut down this growth. The actual impact will depend on the damage assessment, recovery progress, cross-site support, and customer qualification status. Our top priority remains employee safety, orderly recovery, and supply continuity. Over the longer term, this event again highlights the strategic value of our diversified global manufacturing footprint. Supply chain resilience is built through long-term investment, cross-site qualification, technical expertise, and close customer collaboration. We are confident in managing this event and continuing to serve our customers with a safer, stronger, and more resilient operation platform.

Doris Hsu: For a product not yet cross-site qualified, we will work closely with our customers to accelerate validation and capacity transfer. Before the incident, improving demand and production trends supported our expectation of QoQ, quarter-on-quarter revenue growth in Q3. The fire may cut down this growth. The actual impact will depend on the damage assessment, recovery progress, cross-site support, and customer qualification status. Our top priority remains employee safety, orderly recovery, and supply continuity. Over the longer term, this event again highlights the strategic value of our diversified global manufacturing footprint. Supply chain resilience is built through long-term investment, cross-site qualification, technical expertise, and close customer collaboration. We are confident in managing this event and continuing to serve our customers with a safer, stronger, and more resilient operation platform.

Speaker #2: This fire—the fire may cut down this growth. The actual impact will depend on the damage assessment, recovery progress, cross-site support, and customer qualification status.

Speaker #2: Our top priority remains employee safety, orderly recovery, and supply continuity. Over the longer term, this event again highlights the strategic value of our diversified global manufacturing footprint.

Speaker #2: Supply chain resilience is built through long-term investment, cross-site qualification, technical expertise, and close customer collaboration. We are confident in managing this event and continuing to serve our customers with a safer, stronger, and more resilient operation platform.

Speaker #2: Now, let me walk you through our overall financial performance for the second quarter and the first half of 2026. If you have our presentation materials, please turn to page four.

Doris Hsu: Now, let me walk you through our overall financial performance for Q2 and H1 of 2026. If you have our presentation materials, please turn to page four. GlobalWafers reported Q2 revenue of TWD 15.2 billion, representing an 8.8% increase from the previous quarter. For H1 of 2026, revenue totaled to TWD 29.2 billion. While gross profit was TWD 6.1 billion with a gross margin of 20.7%. Please turn to page five. For H1 2026, operating margin stood at 9.9%, while net profit margin was 19.4%, primarily supported by non-operational gains from the valuation of our investment in Siltronic shares. Page six, please. EPS for Q2 came in at TWD 7.9 per share and TWD 11.87 per share for the whole H1, which is over 80% higher year-over-year.

Speaker #2: GlobalWafers reported second quarter revenue of NT$15.2 billion, representing an 8.8% increase from the previous quarter. For the first half of 2026, revenue totaled NT$29.2 billion.

Speaker #2: Gross profit was NT$6.1 billion, with a gross margin of 20.7%. Please turn to page five. For the first half of 2026, operating margins stood at 9.9%, while net profit margin was 19.4%, primarily supported by non-operational gains from the valuation of our investment in Celltronic shares.

Speaker #2: Page six, please. EPS for the second quarter came in at NT$7.90 per share, and NT$11.87 per share for the whole first half.

Speaker #2: Which is over 80% 80 80% higher than higher YOY. Prepayment remained at 20.8 billion NT reflecting our continued fulfillment of long-term supply agreement supply commitments based on customer delivery schedules.

Doris Hsu: Prepayment remained at TWD 20.8 billion, reflecting our continued fulfillment of long-term supply commitments based on customer delivery schedules. We are also discussing long-term supply agreements with multiple customers to deepen partnership and improve future order and business visibility. Page seven, please. Global supply chain shifts are changing customer sourcing priorities. Beyond quality, technology, and cost, customers increasingly value local supply stability, traceability, and low carbon manufacturing. As advanced packaging and process technologies evolve, wafer intensity, product specifications, and qualification requirements are also rising. However, qualified suppliers with advanced products, a global footprint, and low carbon capabilities remain very limited. GlobalWafers manufacturing sites across Asia, American, and European allow us to stay very close to our customers and provide long-term supply solutions, combining local production, cross-regional backup, traceability, and also low carbon manufacturing. Please turn to page eight, if you have our material.

Speaker #2: We are also discussing long-term supply agreements with multiple customers to deepen partnerships and improve future orders and business feasibility. Page seven, please. Global supply chain shifts are changing customer sourcing priorities beyond quality, technology, and cost.

Speaker #2: Customer increasingly value local supply. Supply stability traceability and low carbon manufacturing. At the advanced packaging and process technologies technologies evolve wafer intensity product specifications and qualification requirements are also rising.

Speaker #2: However, qualified suppliers with advanced products, a global footprint, and low-carbon capability remain very limited. GlobalWafers' manufacturing sites across Asia, America, and Europe allow us to stay very close to our customers and provide long-term supply solutions, combining local production, cross-regional backup, traceability, and also low-carbon manufacturing.

Speaker #2: Please turn to page eight if you have our material. With existing lines operating at healthy utilization and new capacity moving into customer qualification and mass production, our focus now is shifting to higher utilization, better efficiency, and realizing the long-term value of new capacity.

Doris Hsu: With existing lines operating at healthy utilization and new capacity moving into customer qualification and mass production, our focus now is shifting to higher utilization, better efficiency, and realizing the long-term value of new capacity. Our manufacturing sites across Asia, American, and Europe allow flexibility capacity allocation based on customer locations, demands, and qualification progress, supporting more local and resilient supply. We are also expanding SOI wafer, gallium nitride, GaN-on-silicon line, and 12-inch silicon carbide, square wafers, and other advanced wafer products. Most new and expanded sites focus on high spec and specialty applications by improving capacity returns. Optimizing global resource and upgrading our product mix, we will continue to strengthen long-term growth and value. Next, I will share our view on demand and across key applications. Semiconductor growth is supported not only by cyclical recovery, but also by long-term structural trends.

Speaker #2: Our manufacturing sites across Asia, America, and Europe allow flexibility in capacity allocation based on customer locations, demands, and qualification progress, supporting more local and resilient supply.

Speaker #2: We're also expanding SOI, SOI wafer, gallium nitride on silicon line, and 12-inch silicon carbide square wafers, and other advanced wafer products. Most new and expanded sites focus on high-spec and specialty applications.

Speaker #2: By improving capacity returns. Optimizing global resource optimizing global global resource and upgrading our product mix we will continue to strengthen long-term growth and value next I will share our view on demand and across key applications semiconductor growth is supported not only by cyclical recovery recovery but also by long-term structural trends.

Speaker #2: AI infrastructure remains the main growth driver, supported by higher capital spending and continued growth in agentic AI, inference, and cloud age integration.

Doris Hsu: AI infrastructure remains the main growth driver, supported by higher capital spending and continued growth in agentic AI, inference, and cloud edge integration. Memory supply remains very tight. While long-term agreements provide better demand visibility. Smartphone and PC demand is broadly stable, but AI devices and replacement cycles should increase semiconductor content per device. Industrial and power management should increase semiconductor content, demand remains very strong, supporting 8-inch wafer demand. Automotive demand is mixed, but continues to trend upward. ADAS, software-defined vehicles, and smart features are increasing semiconductor content and wafer intensity per vehicle. Robotics and physical AI are also driving components demand. Advanced packaging, HBM stacking continue to raise demand for advanced and specialty wafers through more wafer layers, tighter specification, and greater process complexity. Overall, AI remains the key structural growth driver, while market improvement is expanding across more applications.

Speaker #2: Memory supply remains very tight, while long-term agreements provide better demand visibility. Smartphone and PC demand is broadly stable, but AI devices and replacement cycles should increase semiconductor content per device.

Speaker #2: Industrial empower management should increase semiconductor content should demand remains very strong. Industrial empower management demand remains very strong. Supporting wafer demand automotive demand is mixed but continue to trend upward.

Speaker #2: ADAS, software-defined vehicles, and smart features are increasing semiconductor content and wafer intensity per vehicle. Robotics and physical robotics are driving component demand. Advanced packaging and HBM stacking continue to raise demand for advanced and specialty wafers, through more wafer layers, tighter specifications, and greater process complexity.

Speaker #2: Overall, AI remains the key structural growth driver, while market improvement is expanding across more applications. This strength further strengthens our confidence in the mid- to long-term outlook for the silicon wafer industry—or I should put it that way, for the silicon and compound wafer industry.

Doris Hsu: This strengthens our confidence in mid to long-term outlook for the silicon wafer industry, or I should put it that way, that for silicon and compound wafer industry. With that, I will hand over to Leah to take you through our overall company overview and our financial performance. Leah, please

Speaker #2: With that, I will hand over to Leah to take you through our overall company overview and our financial performance. Leah, please.

Speaker #1: Thank you, Doris. I will quickly update GlobalWafers' recent developments and answer questions we have received so far. Page 12: AI continues to support long-term industry growth.

Leah Peng: Thank you, Doris. I will quickly update GlobalWafers' recent development and answer questions we have received so far. Page 12. AI continues to support long-term industry growth. Since the start of this year, major hyperscalers have raised AI spending, driving expansion in advanced logic, HBM, and related capacity. More importantly, AI is expanding beyond cloud data centers into devices and physical applications, broadening semiconductor demand. This investment is translating into steady wafer demand, as shown by recovering global wafer shipment. In page 13, as AI expands from the cloud to edge and physical locations, it will drive further demand for computing, sensing, connectivity, and power chips, increasing wafer intensity. These trends align well with GlobalWafers' portfolio. Advanced computing, HBM packaging, and process technologies will drive demand for high-spec 12-inch silicon wafers.

Speaker #1: Since the start of this year, major hyperscalers have raised AI spending, driving expansion in advanced logic, HBM, and related capacity. More importantly, AI is expanding beyond cloud data centers into devices and physical applications, broadening semiconductor demand.

Speaker #1: This investment is translating into steady wafer demand, as shown by recovering global wafer shipments. On page 13, as AI expands from the cloud to edge and physical applications, it will drive broader demand for computing, sensing, connectivity, and power chips, increasing wafer intensity.

Speaker #1: These trends align well with GlobalWafers' portfolio. Advanced computing, HBM packaging, and process technologies will drive demand for high-spec 12-inch silicon wafers.

Speaker #1: Silicon photonics, high-speed connectivity, sensing, AR, automotive, and power systems will expand demand for SOI again, SiC, advanced AP, and pouched wafers, and square wafers, while supporting 8-inch and 6-inch material node demand.

Leah Peng: Silicon photonics, high-speed connectivity, sensing, AR, automotive, and power systems will expand demand for SOI, GaN, SiC, advanced EPI, and polished wafers and square wafers, while supporting 8-inch and 16-inch material node demand. GlobalWafers' broad coverage across wafer sizes, materials, and technologies allows us to capture AI-driven demand, improve our product mix, and increase product value. Please turn to page 14. Our global expansion projects continue to advance with customer qualifications and production ramp-up. Our Texas site, GWA, has qualified with several tier 1 customers and continues to optimize process. Key customers' long-term agreement and strategic funding will further strengthen advanced wafer supply in US demand for new 12-inch silicon wafers. And we also have a 12-inch SOI capacity in Missouri, and the demand is very strong. Customer sampling continues, and several RF SOI and silicon photonics products have entered small volume production.

Speaker #1: GlobalWafers' broad coverage across wafer sizes, materials, and technologies allows us to capture AI-driven demand, improve our product mix, and increase product value. Please turn to page 14.

Speaker #1: Our global expansion projects continue to advance with customer qualifications and production ramp-up. Our Texas site, GWA, has qualified with several tier-one customers and continues to optimize processes.

Speaker #1: Key customers' long-term agreements and strategic funding will further strengthen advanced wafer supply in the US. Demand for new 12-inch silicon wafers is strong, and we also have 12-inch SOI capacity in Missouri, where demand is very strong.

Speaker #1: Customer sampling continues, and several RF SOI and silicon photonics products have entered small-volume production. The new 12-inch line in Novara, Italy, has completed major construction, with initial qualifications progressing well.

Leah Peng: The new 12-inch line in Novara, Italy, has completed major construction, with initial qualifications progressing well. Productions will ramp up with customer demand. New capacity in Utsunomiya, Japan, is fully in place. Shipments reach record highs. While capacity utilization remains high and operating and financial performance continue to improve, we will also apply for government subsidies at each project, which is respective milestones. More importantly, these investments strengthen our competitive edge. Customers now look beyond price to local production, supply stability, and closer technological cooperation. As supply chains become more regional, GlobalWafers' diversified global footprint is a key advantage. In page 15, advanced packaging, HBM, and advanced nodes use more silicon and require higher wafer purity, flatness, defect control, uniformity, and tolerances. As scaling, stacking, and integration increase, even small wafer variations can affect yield and performance, raising the value and entry barriers of high-spec wafers.

Speaker #1: Production will ramp up with customer demand. New capacity in Utonomia, Japan is fully in place. Shipments reached record highs. And while capacity utilization remains high and operating and financial performance continue to improve, we will also apply for government subsidies at each project when it reaches its respective milestones.

Speaker #1: More importantly, this investment strengthens our competitive edge. Customers now look beyond price to local production, supply stability, and a closer technological cooperation as supply chains become more regional.

Speaker #1: GlobalWafers' diversified global footprint is a key advantage. On page 15, advanced packaging, HBM, and advanced nodes use more silicon, and they require higher wafer purity, flatness, defect control, uniformity, and tighter tolerances. As scaling, stacking, and integration increase, even small wafer variations can affect yield and performance, raising the value and entry barriers for high-spec wafers.

Speaker #1: GlobalWafers continues to invest in R&D and align with customer roadmaps. Through capacity expansion, qualification, and ramp-up, we are expanding advanced and specialty wafer supply.

Leah Peng: GlobalWafers continue to invest in R&D and align with customer roadmaps. Through capacity expansion, qualification, and ramp-up, we are expanding advanced and specialty wafer supply. Our products are advancing through expansion, qualification, or commercialization, positioning us to capture high-value growth. Please turn to page 17 for our Q2 financial highlights. Our Q2 revenue increased 8.8% quarter-over-quarter, driven by higher shipment volume. However, the benefit was partially offset by the ramp-up cost and additional depreciation associated with new capacity, including the commencement of GlobalWafers America building depreciation in April. Also, higher Siltronic share price increased our pre-tax profit and related bonus accruals, while higher freight and energy costs also weigh on our profitability. Despite these cost pressures, stronger shipments and improved capacity utilization supported our earnings growth. Together with higher non-operating contributions from Siltronic to mark-to-market valuation, our EPS improved to TWD 7.9 per share in Q2.

Speaker #1: Our products are advancing through expansion, qualification, and commercialization, positioning us to capture high-value growth. Please turn to page 17 for our Q2 financial highlights.

Speaker #1: Our Q2 revenue increased 8.8% quarter over quarter, driven by higher shipment volume. However, the benefit was partially offset by ramp-up costs and additional depreciation associated with new capacity.

Speaker #1: Including the commencement of GWA building depreciation in April. Also, higher CO2 shares price increased our pre-tax profit and related bonus accruals, while higher freight and energy costs also weighed on our profitability.

Speaker #1: Despite this cost crisis, stronger shipment and improved capacity utilization supported our earnings growth. Together with higher non-operating contribution from the CO2 mark-to-market valuation, our EPS improved to $7.9 per share in Q2.

Speaker #1: On page 19, this is our first half performance. Our first half gross margin was 20.7%, down by 5.5 percentage points year-over-year. This mainly reflects pricing agreed during last year's weak market, which has not yet fully captured the recent demand recovery.

Leah Peng: In page 19, this is our H1 performance. Our H1 gross margin was 20.7%, down by 5.5 percentage points year-over-year. This mainly reflects pricing agreed during last year's weak market, which has not yet fully captured the recent demand recovery. As well as the higher qualification and the ramp-up cost at our new sites. Compared with last year, when new sites were mainly under construction and initial equipment installation, more equipment capacity and staff are now in place, therefore, increased validation, operating, fixed, and ramp-up costs. GlobalWafers America also began recording its building depreciation in April this year, increasing the impact on the H1 margin. As customer qualification progress and utilization rises, our cost absorption should gradually improve. Also, the movement in reported earnings were also influenced by non-operating valuation items related to Siltronic share price fluctuations.

Speaker #1: As well as the higher qualification and the ramp-up cost at our new size. Compared with last year when new sites were mainly under construction and the initial equipment installation, more equipment capacity and the set are now in place.

Speaker #1: Therefore, increased validation, operating fixed, and ramp-up costs. GWA also began recording its building depreciation in April this year, increasing the impact on the first half margin.

Speaker #1: As customer qualification progresses and utilization rises, our cost absorption should gradually improve. Also, the movement in reported earnings will also be influenced by non-operating valuation items related to CO2 share price fluctuations.

Speaker #1: GlobalWafers holds CO2 shares, while our German subsidiary also issued overseas bonds with warrants linked to CO2 shares. Under IFRS, both the investment and the warrant-related liabilities are marked to market.

Leah Peng: GlobalWafers holds Siltronic shares, while our German subsidiary also issued overseas bonds with warrants linked to Siltronic shares. Under IFRS, both the investment and the warrant-related liabilities are mark-to-market. In the Q2, Siltronic's share price rose from around EUR 80 at the end of April, to over EUR 100 at the end of May. This is an increase of more than 30%, therefore generating substantial unrealized valuation gains. However, the share price subsequently declined to approximately EUR 82 by the end of June. This is a drop more than 20%. This not only reduced the fair value gains recognized on the Siltronic shareholding, but also resulted in additional mark-to-market impacts from the warrant-linked liabilities associated with the overseas bonds. Therefore, amplified the effect on the Q2 pre-tax profit and the EPS. These valuation changes are non-cash in nature and do not affect our operating cash flow.

Speaker #1: In the second quarter, CO2 share price rose from around €80 at the end of April to over €100 at the end of May.

Speaker #1: This is an increase of more than 30%. Therefore, generating substantial unrealized valuation gains; however, the share price subsequently declined to approximately €82 by the end of June.

Speaker #1: This is a drop of more than 20%. This not only reduced the fair value gains recognized on the CO2 shareholding, but also resulted in additional mark-to-market impacts from the warrant-linked liabilities associated with the overseas bonds.

Speaker #1: Therefore, this amplified the effect on the second quarter pre-tax profit and EPS. These valuation changes are non-cash in nature and do not affect our operating cash flow.

Speaker #1: Excluding these non-operating items, the underlying business continues to improve. Our second quarter revenue grew by 8.8% quarter over quarter, and June revenue increased by double digits.

Leah Peng: Excluding these non-operating items, the underlying business continued to improve. Our Q2 revenue grew by 8.8% QOQ, the June revenue increased by double digits, increased by 16% MoM, reflecting the strengthening customer demand and the higher shipment volumes. Our H1 EPS rose to nearly TWD 12 per share. This is 18% higher than H1 2025 EPS. Here is our income statement. This table also shows a simulated cash, excluding major global expansion projects. Our H1 revenue would decrease from the current TWD 29 billion to about TWD 27.5 billion, while gross margin will rise from 20.7% to 32.4%. The current financial pressure mainly reflects the early-stage cost of new capacity, which supports future growth. These investments are essential to capture rising wafer demand and growth in advanced wafers. As qualifications, production, and utilization increase, this benefit will gradually flow through revenue, economics, and profitability.

Speaker #1: And increased by 16% month-over-month, reflecting the strengthening customer demand and the higher shipment volumes. And our first half EPS rose to nearly $12 per share, up 12%.

Speaker #1: This is 80% higher than the first-half 25 EPS. Here is our income statement. This table also shows a simulated cash figure, excluding major global expansion projects.

Speaker #1: Our first-half revenue would decrease from the current NT$29 billion to about NT$27.5 billion, while gross margin will rise from 20.7% to 32.4%.

Speaker #1: The current financial pressure mainly reflects the early stage cost of new capacity, which supports future growth. These investments are essential to capture rising wafer demand and growth in advanced wafers.

Speaker #1: As qualification, production, and utilization increase, this benefit will gradually flow through to revenue, product mix, and profitability. Page 20 shows our balance sheet. At the end of the second quarter, our cash and cash-related assets totaled about NT$52.9 billion.

Leah Peng: Page 20 shows our balance sheet. At the end of the Q2, our cash and cash-related assets totaled about TWD 52.9 billion, with ample liquidity. Our current and quick ratio also improved respectively, our debt ratio remained stable. As the global expansion shifts from capital investment to qualification ramp-up, our financial structure is becoming more stable. We will maintain prudent cash management and sufficient financial flexibility to support operations and long-term growth. Now, I would like to address both the questions we have received from investors recently and those we anticipate will be raised. Okay, the first question is about price. How does the company view current supply, demand, and pricing trends in the silicon wafer market? Over the past two years, the silicon wafer industry has faced pricing pressure.

Speaker #1: With ample liquidity, our current quick ratio also improved, respectively. And our debt ratio remained stable. As the global expansion shifts from capital investment to qualification ramp-up, our financial structure is becoming more stable.

Speaker #1: We will maintain prudent cash management and sufficient financial flexibility to support operations and long-term growth. Now, I would like to address both the questions we have received from investors recently and those we anticipate will be asked.

Speaker #1: Okay, the first question is about price. How does the company view current supply, demand, and pricing trends in the silicon wafer market? Over the past two years, the silicon wafer industry has faced pricing pressure.

Speaker #1: At the same time, rising energy, logistics, raw material, and labor costs, together with increasingly demanding product specs and technological requirements for advanced applications, have driven up the overall cost structure.

Leah Peng: At the same time, rising energy, logistics, raw material, and labor costs, together with increasingly demanding product specs and technological requirements for advanced applications, have driven up the overall cost structure. More recently, industry supply-demand conditions have gradually improved, the order visibility strengthens. The demand outlook for the Q2 is meaningfully stronger than that of the H1. We expect best recovery and strong growth momentum across all wafer sizes. Industrial, power management, and energy-related applications also continue to recover. Our utilization rate across all silicon, all diameters, it remained at very high level. Again, it's fully loaded, and the SiC continues to improve steadily. On pricing, we are actively engaging with our customers. We are communicating openly about the pressures from the above mentioned, communicating openly and fairly. We aim to gain customers' understanding and support.

Speaker #1: More recently, industry supply and demand conditions have gradually improved, and order visibility has strengthened. The demand outlook for the second quarter is meaningfully stronger than that of the first half, with spot-based recovery and strong growth momentum across all wafer sizes.

Speaker #1: Industrial power management and energy-related applications also continue to recover. Our utilization rate across all silicon, all diameters, remained at a very high level.

Speaker #1: And the gain is fully loaded, and the SIC continues to improve steadily. On pricing, we are actively engaging with our customers. We are communicating openly about the pressures from the above mentioned.

Speaker #1: And the in and communicating openly and fairly. So we aim to gain customers understanding and the support. So as the condition vary by product and spec so we do not comment on individual pricing or negotiation progress.

Leah Peng: As the conditions vary by product and spec, we do not comment on individual pricing or negotiation progress, please understand. Okay. The second question is regarding our LTA. What's our LTA current coverage ratio? Has customers' willingness to make LTA commitment increased beyond memory customers? Are you seeing logic customers entering into new LTA agreements? How do you see the future evolution of LTA in terms of pricing? Due to commercial confidentiality, we are unable to disclose LTA specific coverage ratio. However, as the demand for AI, HBM, and advanced nodes continues to grow, we are seeing an increasing number of customers actively discussing new LTA with us to secure future supply, capacity assurance, and localized sourcing capability. Recently, we have secured a 10-year LTA with a global customer, and we have received strategic financing support.

Speaker #1: So please understand. Okay, the second question is regarding our LTA. What's our current LTA coverage ratio? Has customers' willingness to make LTA commitments increased? Beyond memory customers, are you seeing logic customers entering into new LTA agreements?

Speaker #1: How do you see the future evolution of LTA in terms of pricing? Due to commercial confidentiality, we are unable to disclose the LTA-specific coverage ratio.

Speaker #1: However, as the demand for AI, HBM, and advanced nodes continues to grow, we are seeing an increasing number of customers actively discussing new LTAs with us to secure future supply.

Speaker #1: Capacity assurance and localized sourcing capability. Recently, we have secured a 10-year LTA with a global customer, and we have received strategic financing support.

Speaker #1: This agreement represents the longest LTA in our history and reflects customers' commitment to secure a local supply. We have also observed that this trend is no longer limited to the memory segment.

Leah Peng: This agreement represents the longest LTA in our history and reflects customers' commitment to secure a local supply. We have also observed that this trend is no longer limited to the memory segment. An increasing number of customers are actively engaging with us on long-term partnership agreements, with discussion now extending beyond memory applications to include logic and specialty wafer products. Looking ahead, LTAs are no longer focused solely on pricing or volume commitments, but are evolving toward longer-term and more flexible partnership models, encompassing pricing adjustment mechanisms for dynamic optimization, flexibility, and adaptability to changing market conditions. The next question is: when will the supply-demand reach balance or even under-supply in silicon wafer phase? We believe the supply-demand tightening in the semiconductor wafer industry is already underway and is already happening.

Speaker #1: An increasing number of customers are actively engaging with us on long-term partnership agreements, with discussions now extending beyond memory applications to include logic and specialty wafer products.

Speaker #1: Looking ahead, LTAs are no longer focused solely on pricing or volume commitments, but are evolving toward longer-term and more flexible partnership models.

Speaker #1: In compensing pricing adjustment mechanism product mix often mentioned. Flexibility and adaptability to changing market conditions. The next question is when will the supply demand reach balance or even undersupply in silicon wafer phase?

Speaker #1: We believe the supply-demand tightening in the semiconductor wafer industry is already underway and is happening now. We continue to see high utilization rates across all our diameter production lines.

Leah Peng: We continue to see high utilization rates across our old diameter production lines, stronger customer order activity, improved order visibility, and a growing willingness among customers to secure capacity years in advance. Our recent long-term agreement with customers, 10-year long-term agreement, this is another clear indication of these trends. These developments suggest that market conditions are continuing to tighten, with supply for certain advanced 12-inch products and applications already becoming noticeably constrained. While it is difficult to define a specific point at which the entire industry enters an under-supply environment, the trend toward tighter supply-demand conditions is already evident and is already happening. The next question is about where do we see the next major growth opportunities in semiconductor materials? From our perspective, the most significant AI-driven opportunities are concentrated in three areas. The first is 12-inch silicon wafers.

Speaker #1: Stronger customer order activity improved order visibility and showed the growing willingness among customers to secure capacity years in advance. Our recent long-term agreement with a customer is a 10-year long-term agreement.

Speaker #1: This is another clear indication of this trend. This development suggests that market conditions are continuing to tighten, with supply for certain advanced 12-inch products and applications already becoming noticeably constrained. While it is difficult to define a specific point at which the entire industry enters an undersupply environment, the signs are becoming clearer.

Speaker #1: The trend toward tighter supply-demand conditions is already evident, and it is already happening. The next question is: what do we see as the next major growth opportunities in semiconductor materials?

Speaker #1: From our perspective, the most significant AI-driven opportunities are concentrated in three areas. The first is 12-inch silicon wafers. This is the largest source of demand growth, supported by the expansion of advanced process technologies and AI infrastructure.

Leah Peng: This is the largest source of demand growth, supported by the expansion of advanced process technologies and AI infrastructure. The second is silicon photonics, which has already emerged as one of the fastest-growing applications. We are particularly optimistic about silicon photonics based on SOI wafers. GlobalWafers has established a strong position in the SOI market, and our Missouri-based MEMC is the only US supplier with proprietary technology and vertical integrated manufacturing capabilities and ID-dependent layer transfer technology. This positions us well to benefit from the rising demand for these high-speed optical interconnects in AI data centers. In addition, we also see that AI requires not only computing power, but also efficient power management and energy conversion. As a result, SiC and gallium nitride, which is widely used in power management, power conversion, and industrial applications, offers substantial long-term growth potential.

Speaker #1: The second is silicon photonics, which has already emerged as one of the fastest-growing applications. We are particularly optimistic about silicon photonics based on SOI wafers.

Speaker #1: GlobalWafers has established a strong position in the SOI market, and our Missouri-based MEMC is the only US supplier with proprietary technology and vertically integrated manufacturing capabilities.

Speaker #1: And IP-dependent layer transfer technology. So this position as well to benefit from the rising demand for these high-speed optical interconnects in AI data centers.

Speaker #1: In addition, we also see that AI requires not only computing power, but also efficient power management and energy conversion as a result. SiC and gallium nitride, which are widely used in power management, power conversion, and industrial applications, offer substantial long-term growth potential.

Speaker #1: Overall, we believe that 12-inch silicon wafers represent the largest demand opportunity. Silicon photonics and SOI offer the fastest growth trajectory, and again, SiC provides attractive long-term value creation potential.

Leah Peng: Overall, we believe that 12-inch silicon wafers represent the largest demand opportunity. Silicon photonics and SOI offer the fastest growth trajectory. Again, SiC provides attractive long-term value creation potential. This will be the key growth driver for GlobalWafers going forward. The next question is about GWA. Following the signing of the LTA with a key memory customer, does this mean that phase 2 of your GWA has been confirmed? Based on the scale of the demand reflected in this 10-year LTA, further capacity expansion is the natural and the necessary next step. As we have previously communicated, phase 1 and phase 2 of our Texas facility are located within the same building. The overall Texas campus has been planned with 6 phases in total.

Speaker #1: This will be the key growth driver for GlobalWafers going forward. Okay, the next question is about GWA, following the signing of the LTA with the key memory customer.

Speaker #1: Does this mean that the phase two of your GWA has been confirmed? Okay, based on the scale of the demand reflected in this 10-year LTA.

Speaker #1: Further capacity expansion is a natural and necessary next step. As we have previously communicated, phase one and phase two of our Texas facility are located within the same building.

Speaker #1: The overall Texas campus has been planned with six phases in total. During the construction of phase one, we also complete the building shell for phase two.

Leah Peng: During the construction of phase I, we also completed the building shell for phase II, along with most of the shared infrastructure and utilities. As a result, future capacity expansion does not necessarily require constructing a new building. Instead, it will mainly involve additional production equipment and enhanced support infrastructure, such as power supply, wastewater treatment, and other utility capacities. Compared with the initial phase of construction, future expansions are expected to be significantly more capital efficient and operationally accessible. In addition, government incentives, including CHIPS Act support and the Investment Tax Credit, MIC, are expected to further reduce expansion costs, enhance overall project returns. In other words, our near-term priority is to continue improving the productivity and output of phase I while gradually utilizing the space and infrastructure that were originally reserved for phase II.

Speaker #1: Along with most of the shared infrastructure and utilities. As a result, future capacity expansion does not necessarily require constructing a new building. Instead, it will mainly involve additional production equipment and enhanced support infrastructure, such as power supply, wastewater treatment, and other utility capacities.

Speaker #1: Compared with the initial phase of construction, future expansions are expected to be significantly more capital efficient and operationally flexible. In addition, government incentives, including CHIPS Act support and investment tax credits, are expected to further reduce expansion costs and enhance overall project returns.

Speaker #1: In other words, our near-term priority is to continue improving the productivity and output of phase one while gradually utilizing the space and infrastructure that were originally reserved for phase two.

Speaker #1: Therefore, we fully expect our capacity to increase over time. But we will execute those expansions in the most efficient and disciplined manner, based on customer demand and market conditions.

Leah Peng: We fully expect our capacity to increase over time, how we will execute those expansions in the most efficient and disciplined manner based on customer demand and market conditions. Okay, the next question is about our Novara fire incident. When do you expect Novara to resume operations? We are actively conducting damage assessment and recovery planning while leveraging our global manufacturing network to mitigate customer impact through tolling arrangements, under which selected process steps are supported by other GlobalWafers' sister sites. Products already qualified for core site manufacturing will be prioritized, while qualification activities for additional products are being accelerated in collaboration with customers. Actually, the incident mainly affected certain downstream process equipment within the 8-inch fab in Italy. It did not impact the entire production line. We are implementing a phased recovery strategy, allowing unaffected operations and recovered production areas to gradually resume manufacturing activities.

Speaker #1: Okay, the next question is about our Novara fire incident. So, when do you expect Novara to resume operations? We are actively conducting damage assessment and recovery planning, while leveraging our global manufacturer network to mitigate customer impact through tooling arrangement.

Speaker #1: Under the selected process steps, support is provided by other global wafer system sizes. Products already qualified for core size manufacturing will be prioritized, while qualification activities for additional products are being accelerated in collaboration with customers.

Speaker #1: Actually, the incident mainly affected certain downstream process equipment within the 8-inch fab in Italy. It did not impact the entire production line. Therefore, we are implementing a phased recovery strategy.

Speaker #1: Allowing unaffected operations and recovered production areas to gradually resume manufacturing activities. The AP production building was not affected by the incident at all, and all AP reactors remain intact and are being progressively restored in accordance with the plan.

Leah Peng: The AP production building was not affected by the incident at all, and all AP reactors remain intact and are being progressively restored in accordance with the plan. Based on our current progress, AP operations, this could be resumed earlier than our original plan, with certain production activities anticipated to restart in mid-August. In parallel, other upstream manufacturing operations are undergoing equipment recovery and the qualification activities. They will gradually resume production according to the plan. As the incident mainly affected downstream operations, now we are arranging for other sister sites to support selected process steps through tolling arrangement. We are working closely with customers to accelerate the product qualification and production transfers where appropriate.

Speaker #1: Based on our current AP operations process, this could be resumed earlier than our original plan, with certain production activities anticipated to restart in mid-August.

Speaker #1: In parallel, other upstream manufacturing operations are undergoing equipment recovery and the qualification activities, and they will gradually resume production according to the plan. As the incident mainly affected downstream operations, we are now arranging for other sister sites to support selected process steps through tooling arrangements.

Speaker #1: And we are working closely with customers to accelerate the product qualification and production transfers where appropriate. In addition, except for a limited section surrounding the fire's point of origin that remains subject to final structural review.

Leah Peng: In addition, except a limited section surrounding the fire's point of origin that remains subject to final structural review, the main building has been confirmed safe for recovery activities. Recovery work continues to progress as planned. As equipment recovery, customer qualification, and core site manufacturing support continue to advance, production capacity and shipment capability are expected to improve progressively over time. We will continue to implement recovery and supply chain support measures to restore customer supply chain as efficiently as possible. The next is about our insurance. How much insurance compensation does the company expect to receive for the Novara fire incident? We have already initiated the insurance claims process. Relevant expert teams have already done their investigation and assessment.

Speaker #1: The main building has been confirmed safe for recovery activities, and recovery work continues to progress as planned, as equipment recovery, customer qualification, and course site manufacturing support continue to advance.

Speaker #1: Production capacity and shipment capability are expected to improve progressively over time, so we will continue to implement recovery and supply chain support measures to restore customer supply chains as efficiently as possible.

Speaker #1: Okay, the next is about our insurance. So, how much insurance compensation does the company expect to receive for the Novara fire incident? We have already initiated the insurance claims process, and the relevant expert teams have already begun their investigation and assessment.

Speaker #1: The incident mainly affected certain downstream process areas. The facility is covered by a comprehensive insurance policy, including both property damage and business interruption coverage.

Leah Peng: The incident mainly affected certain downstream process areas, the facility is covered by a comprehensive insurance policy, including both property damage and business interruption coverage. Because the loss assessment and the claims process are still progressing as planned, the key factors, including the cause of incident, the extent of the damage, and the period of business interruption, remain subject to further evaluation and confirmation by the insurers. The actual claim amount and the timing of any insurance-related gain recognition will be determined based on the final assessment results and applicable accounting standards. Okay. The next question is also about the Novara fire incident. What is the expected impact on revenue of the fire? The incident is expected to have some impact on our operations and revenue. However, the actual magnitude remains under assessment.

Speaker #1: Because the loss assessment and the claims process are still progressing as planned, key factors including the cost of the incident, the extent of the damage, and the period of business interruption remain subject to further evaluation and confirmation by the insurers.

Speaker #1: The actual claim amount and the timing of any insurance-related gain recognition will be determined based on the final assessment results and the applicable accounting standards.

Speaker #1: Okay, so the next question is also about the Novara fire incident. What is the expected impact on revenue from the fire? The incident is expected to have some impact on our operations and revenue.

Speaker #1: However, the actual magnitude remains under assessment, given that the utilization rates across our major 8-inch manufacturing sites are currently at very high levels. Immediate relief is limited, and therefore some impact may be unavoidable.

Leah Peng: Given that the utilization rates across our major 8-inch manufacturing sites are currently at very high levels, immediately available spare capacity is limited, and therefore, some impact may be unavoidable. Prior to the incident, we expected the Q3 revenue to be higher than that of the Q2. Now we are continuing to work toward achieving sequential growth through various mitigation measures. To minimize the impact, we have activated our sister sites and the global manufacturing network, we are using the core site capacity allocation, production transfers, and the supply chain coordination to support our customer and to mitigate the loss. Okay. That's the questions I received so far. Now we are open for the text questions.

Speaker #1: Prior to the incident, we expected third-quarter revenue to be higher than that of the second quarter. Now, we are continuing to work toward achieving sequential growth through various mitigation measures.

Speaker #1: To minimize the impact, we have activated our sister sites and the global manufacturing network. So, we are using the core site capacity allocation, production transfers, and supply chain coordination.

Speaker #1: To support our customer and to mitigate the loss. Okay, that's the questions I received so far. So now, we are open for the text questions.

Speaker #1: Okay. Let me start with a question in Chinese. Regarding the last conference call, we expect that the depreciation fee this year will be around NT$12 billion, and for the second quarter, it's only NT$2.4 billion.

Doris Hsu: Okay. Let me start from some question in Chinese. Talking about that last conference call, we expect that the depreciation fee this year will be around TWD 12 billion, and the Q2 is only TWD 2.4 billion, does that mean that the H2 depreciation cost will be significantly higher than H1? I think the answer is no. TWD 2.4 billion, that's for Q2 only. Q1 is another somewhere around TWD 2.3 billion, TWD 2.4 billion, about this range. The first half is close to TWD 5 billion depreciation, H1. H2 will be slightly higher than H1 because H2 will have more depreciation for GWA new equipment, new depreciation, and also we'll have more depreciation from St. Peters SOI as well because our 300 mm SOI start ramping up, we expect that we'll have a little bit more depreciation.

Speaker #1: So does that mean that the second half depreciation cost will be significantly higher than H1? I think the answer is no, because NT$2.4 billion, that's for Q2 only.

Speaker #1: Q1 is also somewhere around 2.3, 2.4, about this range. So the first half is close to, half close to $5 billion, $5 billion NT depreciation in H1.

Speaker #1: The H2 will be slightly higher than H1 because H2 will have more depreciation for GWA new equipment, new depreciation, and also we'll have more depreciation from ST.

Speaker #1: Peter, SOI as well, because our 300-millimeter SOI is starting to ramp up. So we expect that we'll have a little bit more depreciation. The second half depreciation will be higher than H1, but it's not significantly higher than that.

Doris Hsu: The H2 depreciation will be higher than H1, but it's not significantly higher than that. It will be just increasing as the production ramp up. That's the first question. The second question is that what capacity utilization is needed for a Sherman phase one to break even? This depends on quite a lot of details, and please allow me to keep this confidential for a while because we are having some pricing structure discussion with some of our customers right now. There will be some factors which can affect the gross margin break-even time. One is that the new ASP negotiation. Number two is that if we receive AMIC on schedule or earlier than our expectation, actually our depreciation cost will reduce as well.

Speaker #1: It will just keep increasing as production ramps up, so that's the first question. And the second question is: what capacity utilization is needed for Assurance Phase One to break even?

Speaker #1: This depends on quite a lot of details, and please allow me to keep this confidential for a while because we are having some pricing structure discussions with some of our customers right now.

Speaker #1: So there will be some factors which can affect the gross margin break-even time. One is the new ASP negotiation. Number two is that if we receive AMIC on schedule or earlier than our expectation, actually our depreciation cost will reduce as well.

Speaker #1: So, we are working with the related party to try to figure out how much we can improve our ASP, and also we are trying to determine if we can get the AMIC on schedule.

Doris Hsu: We are working with the related party to try to figure out how much we can improve our ASP, and also we try to figure out if we can get the AMIC on schedule. These are the factors. Sorry for not being able to give you more detailed information about this one. Next question is why Q2 2026 OPEX ratio was high, and will it be a new norm or any reason behind? No, this will not be a new norm. The only reason for that is because Q2, we had a big part of the profits from our Siltronic shares valuation, mark-to-market valuation. This valuation will pop up our other income. So our margin looks higher because of the valuation. According to our company policy, we have to recognize, reserve our bonus every quarter.

Speaker #1: So these are the factors. Sorry for not being able to give you more detailed information about this one. The next question is: why was the Q2 2026 OPEX ratio so high, and will this be a new norm or is there any reason behind it?

Speaker #1: No this will not be a new norm. The only reason for that is because Q2 we had the big big profit big a big part of the profits from our Celltronic shares valuation market to market valuation.

Speaker #1: And this valuation will pop up our other income, so our margin looks higher because of the valuation. And according to our company policy, we have to recognize and reserve our bonus every quarter.

Speaker #1: So when the margin—based on the margin, the profit of that specific quarter—so if that quarter's profit is high, then we have to reserve a higher amount of potential bonus.

Doris Hsu: When the margin, based on the profit of that specific quarter. If that quarter's profit is high, then we have to reserve higher amount of potential bonus, and this will be true of every quarter when we finalize our quarterly report. We will check the actual performance, actual profitability, and also the updated, especially other income of those mark-to-market valuation numbers. This will not be the new norm. A matter of fact, our expectation is to reduce our OPEX percentage when the operation is more stable, because our revenue volume is increasing. Of course, we have more and more R&D expenses because a lot of advanced ones. Our goal is to remain flat or slightly lower than where we are today. This will not be a new norm.

Speaker #1: And this will be true up every every quarter when we finalize salaries quarter report we will check the actual actual performance actual profitability and also the updated updated especially other other income of those market to market valuation numbers.

Speaker #1: So this will not be the new norm. As a matter of fact, our expectation is to reduce our OPEX percentage when the operation is more stable because our revenue volume is increasing.

Speaker #1: So, of course, we have more and more R&D expenses because of a lot of advanced ones, but our goal is to remain flat or slightly lower than where we are today.

Speaker #1: So this will not be a new norm. And the next question is: do you believe that the prepayment balance has already bottomed this quarter and could begin to increase from here?

Doris Hsu: Next question says, do you believe that the prepayment balance has already bottomed this quarter and could begin to increase from here? I think we have very high confidence that the answer is yes, because as we announced several weeks ago, that we signed a 10-year LTA with a very important AI memory company, Micron, and the prepayment linked together with that one is $500 million. We haven't received the money yet, so we are still working on some detailed procedures. When we receive the money, then our prepayment, I think now is the bottom. Not only the LTA we sign, we have already concluded with Micron. Matter of fact, we are working with several other new customers right now, talking about new LTAs for new products.

Speaker #1: I think we have very high confidence that the answer is yes because we have we as we announced several weeks ago that we signed a we signed a 10-year long-term agreement with a very important AI memory company Micron and the prepayment link together with that one is over is 500 million US dollar.

Speaker #1: So we haven't received the money yet. So we are still working on some detailed procedures. So when we receive the money then our prepayment I think yeah we will have I think now it's the bottom.

Speaker #1: And not only the LTA we signed, we have already concluded with Micron. As a matter of fact, we are working with several other new customers right now, talking about new LTAs for new products. And our policy is that whenever we have a new supply agreement, we will still follow our rule that we will have prepayment to make sure both parties honor the LTA.

Doris Hsu: Our policy is that whenever we have new supply agreement, we will still follow our rule that we will have prepayment to make sure both parties honor the LTA. Yeah. I think that now is the bottom, and we will conclude new LTA very soon. Next is, we would like to know the gross margin guidance as well as the depreciation pressure. For gross margin guidance, sorry, according to our company policy, we don't comment too much about the specific number of price or margin. In general, I think, part of the reason it's very hard to comment, as I said, that we are working on the discussion with our customer for next year's order status. Maybe new price will be discussed and maybe product mix will be different from this year.

Speaker #1: So yeah so I I I think that now is the bottom and we will have new new LTA. We will conclude new LTA. There is some okay and next is we would would like to know the gross margin guidance as well as the depreciation pressure for gross margin guidance sorry according to our company policy we don't comment too much about the specific number of price or margin but in general I think and you know part of the reason it's very hard to comment as I said that we are working on the the discussion with our customer for a new year new year new year next year's older status.

Speaker #1: So maybe new prices will be discussed, and maybe the product mix will be different from this year. So there are still a lot of factors that are not finalized yet.

Doris Hsu: There are still a lot of factors, which is not finalized yet, it is hard to comment the growth margin. Depreciation will keep increasing. This is very sure, because quarter by quarter, we have more and more tools meet the depreciation criteria. We have to start to depreciate our tools. Depreciation cost will increase in the next several quarters. That is the current trend. Next one, GlobalWafers continues to benefit from demand driven by advanced process technologies, AI, and high-performance computing. Under the same industry trends, how do you view TSC, Taiwan Specialty Chemical, how do you view TSC's current operating performance? I think TSC performance is very good. As a matter of fact, up to June, they have already achieved 17 months of MoM consecutive revenue growth for chemical, specialty chemical itself. I am not talking about the consolidated revenue together with HJT.

Speaker #1: So it's hard to comment on the gross margin. But depreciation will keep increasing. This is very sure because, quarter by quarter, we have more and more tools meeting the depreciation criteria.

Speaker #1: So we have to start depreciating our tools, so depreciation costs will increase in the next several quarters. That's the current trend.

Speaker #1: And next one global global wafers continue benefit from demand driven by advanced process technologies AI and high performance computing. Under the same industry trends how do you think about how do you view TSC Taiwan specialty chemical how how do you view TSC's current operating performance?

Speaker #1: I think TSC performance is very good. As a matter of fact, up to June, they have already achieved 17 months of month-on-month consecutive record revenue growth—chemical, specialty chemical itself only. I'm not talking about the consolidated revenue together with HJT. So for chemical revenue only, up to June, they've already achieved 17 months of consecutive month-on-month growth.

Doris Hsu: Chemical revenue only, up to June, already 17 months MoM growth consecutively. Also, TSC is going to make a further capacity expansion for dye sensitizer, their main product, by end of the year. Their current capacity is about 26 tons per year. They will increase to up to 30 tons per year by end of the year. That is dye sensitizer, their number one most important product. Next year, the plan is that by end of next year, they will be able to further increase their total capacity to 40 tons. They are very aggressive. The reason for this aggressive expansion is that their utilization rates are super high right now. For chemical, their utilization rates are almost at 90%. For specialty chemical, 90% utilization rate is really very high.

Speaker #1: And also, TSC is going to make a further capacity expansion for die size and their main product by the end of the year. Their current capacity is about 26,000 tons per year.

Speaker #1: And they will reach—they will increase to up to 30 tons per year by the end of the year. That's die size, and their number one most important product.

Speaker #1: And next year, the plan is that by the end of next year, they will be able to further increase the total capacity to 40 tons.

Speaker #1: So, they are very aggressive. The reason for this aggressive expansion is that their utilization rate is super high right now for chemical. Their utilization rate is almost 90%.

Speaker #1: And for a specialty chemical, a 90% utilization rate is really very high. So that's why they keep expanding capacity and they keep receiving more and more commitments from customers as well.

Doris Hsu: That is why they keep expanding capacity, and they keep receiving more and more commitment from customer as well. That is number one. I think TSC is doing very good revenue wise. Also from capacity expansion wise, you can see that they are very aggressive. Not only dye sensitizer and also some other product like AHF. AHF is a new product, one of the most important new product this year. The capacity is good, but it is just starting to ramp up right now. Although they just started ramping up, they have already made a decision to initiate, to kick off the expansion for AHF, and for precursor. Precursor is under qualification now, very soon the precursor will start ramping up as well. They have a lot of good things about TSC. Overall performance is very good. Okay.

Speaker #1: So that's number one. I think TSC is doing very well revenue-wise. And also, from a capacity expansion perspective, you can see that they are being very aggressive.

Speaker #1: And not only die size, but also some other products like AHF. AHF is a new product, one of the most important new products this year.

Speaker #1: The capacity—the capacity is good, but it's just starting to ramp up right now. Although they just started ramping up, they have already made a decision to initiate, to kick off, the expansion for AHF.

Speaker #1: And for precursor, precursor is under quotation now. So very soon the precursor will start ramping up as well. So they have a lot of good things about TSC. Overall, performance is very good.

Speaker #1: Okay, next question: Has the Novara 5 affected the 10-year LTA with Micron? No, totally no impact. It's Leah, and I explained that the incident—the fire incident in Novara—is mainly for 200 and only the back end part of the 200. And the other, even 200, the other parts basically not much impact.

Doris Hsu: Next question is, has the Novara fire affected the 10-year LTA with Micron? No. Totally no impact. As Leah and I explained, the incident, the fire incident in Novara, is mainly for 200 millimeter and only the back end part of the 200 millimeter, and even 200 millimeter, the other part, basically not much impact. For 300 millimeter, that is totally a separate building. It is not the same building, totally no impact. Also the Micron LTAs, most of the wafer for that LTA will be from our US operations, no impact. There will be no impact from Novara incident.

Speaker #1: And for 300, that's totally a separate building, so it's not the same building—so totally no impact. And also, the Micron LTAs, most of the wafers for that LTA will be from our US operation.

Speaker #1: So, no impact. No impact—there will be no impact from the Novara incident. And so...

Speaker #2: How do the economics of newer sizes in the US and Europe look, and how do they compare to existing sizes? How does the company maintain its competitiveness?

Leah Peng: What does the economics of newer sites in the US and Europe look like, and how does it compare to existing sites? How does the company maintain its competitiveness? Okay. We believe the competitiveness of new manufacturing facilities should be evaluated based on overall operating ecosystem rather than any single cost factor. Beyond serving local market demand, our US and European expansion projects were supported by high levels of long-term customer commitments prior to construction, and also benefit from government incentives, including the US CHIPS Act, AMI or IPCEI in Europe. There are so many other subsidy programs which will enhance the overall investment returns. In addition, sustainability has become an increasingly important purchasing consideration for our customers.

Speaker #2: Okay. We believe the competitiveness of new manufacturing facilities should be evaluated based on the overall operating ecosystem rather than any single cost factor. Beyond serving local market demand, our US and European expansion projects were supported by high levels of long-term customer commitments.

Speaker #2: Prior to construction, and also benefit from government incentives, including the U.S. CHIPS Act, AMIC, or IPCEI in Europe. And there are so many other subsidy programs which will enhance the overall investment returns. In addition, sustainability has become an increasingly important purchasing consideration for our customers.

Speaker #2: So, renewable energy is more readily available and competitively priced in the US. Both our US and Italy facilities are expected to progressively operate on 100% renewable energy once fully ramped.

Leah Peng: Renewable energy is more readily available and competitively priced in the US, and both our US and Italy facilities are expected to progressively operate on 100% renewable energy once fully ramped. As customer place greater emphasis on localized supply chain resilience, product traceability, and the low carbon manufacturing, I think that our diversified manufacturing footprint will provide significant competitive advantage. As the utilization rate improve and scale benefits emerge, we think that economic performance of these new fabs will continue to strengthen, and this will enhance our competitiveness. Okay. Next question.

Speaker #2: As customers place greater emphasis on localized supply, supply chain resilience, product ability, and low-carbon manufacturing, I think that our diversified manufacturing footprint will provide a significant competitive advantage.

Speaker #2: So as the utilization rates improve and scale benefits emerge, we think that the economic performance of these new fabs will continue to strengthen, and this will enhance our competitiveness.

Speaker #1: Okay. Next question.

Speaker #3: Yes. The recent Kumamoto earthquake in Japan—has there been any impact on GWC's operations? No, no impact. First of all, in Kumamoto, we have one site, Tokuyama, which is very close in the Kyushu area, but it's still far away from Kumamoto.

Doris Hsu: Has the recent Kumamoto earthquake in Japan had any impact on GWC's operations? No impact. First of all, Kumamoto, we have one site. Tokuyama is very close to Kyushu area, but is still far away from Kumamoto. The operation for city Kumamoto wise, we're okay. Number two, we check our suppliers in Kumamoto. We have quite some suppliers and customers in Kumamoto area. From suppliers standpoint, we have enough inventory and our suppliers basically are doing okay. The supply impact is very minimum and manageable. Basically, we have no impact for supply. For customers, we do have some customers in Kumamoto area who got some impact. We work very closely with those customer to provide them a lot of support, urgent support. We ship them some wafer for them to test their equipment. We're working very closely with them.

Speaker #3: So, operation facility equipment-wise, we're okay. And number two, we checked our suppliers in Kumamoto. We have quite a few suppliers and customers in the Kumamoto area.

Speaker #3: So from a suppliers' standpoint, we have enough inventory, and our suppliers basically are doing okay. So the supply impact is very minimal and manageable.

Speaker #3: So basically, we have no impact on supply. But for customers, we do have some customers in the Kumamoto area who got some impact. So we work very closely with those customers to provide them a lot of urgent support, to ship them some wafers for them to test their equipment.

Speaker #3: So we're working very closely with them, so basically, no impact on GWC's overall operation in Japan. Okay, next one: can we know the current utilization rate of each product line, roughly?

Doris Hsu: Basically, no impact with GWC overall operation in Japan. Okay. Next one is, can we know the current utilization rate of each product line, roughly? I think I just mentioned this a little bit earlier, that 12-inch, 8-inch, and 6-inch, GaN-on-silicon. All of these lines are fully loaded. Silicon carbide utilization rate is high, but it's not full, but it's increasing. I believe that silicon carbide will be fully loaded from H2 this year as well. I'm talking about the existing fabrics. For the newly established brownfield, greenfield, many of them are under construction or start ramping up. It's not fully loaded yet.

Speaker #3: I think I just I just mentioned this a little bit earlier that 12 inch 8 inch 6 inch get in line get get on seek and that's why all these lines are fully loaded.

Speaker #3: Silicon carbide utilization rate is high, but it's not full yet; it's increasing. So I believe that silicon carbide will be fully loaded from the second half of this year as well.

Speaker #3: And I'm talking about the existing fab, but for the new, newly established brownfield or greenfield, many of them are under quotation or just starting to ramp up and are not fully loaded yet.

Speaker #1: Yeah. And the next question is about the cost of raw materials. What is the price trend? Does it continue to increase, and what is its weight as a percentage of your company's revenue?

Leah Peng: Yeah. Next question is that the cost of raw material, what's the price trend? Does it continue to increase, and what is its weight to your company's revenue percentage?

Speaker #3: Yeah. Raw material raw material is increasing. You know when we calculate our cost it's MLO material labor cost and overhead we always we we control we manage our MLO percentage very close monitor this very closely and right now material cost is increasing based on current ASP material cost the weight of material cost keeps increasing for example as I as I shared that some raw material like gallium and many other materials are the price are increasing and our overall head like freight is increasing as well.

Doris Hsu: Yeah. Raw material is increasing. When we calculate our cost, it's MLO, material, labor cost, and overhead. We control, we manage our MLO percentage. We monitor this very closely. Right now, material cost is increasing. Based on current ASP, the weight of material cost keeps increasing. For example, as I shared, there's some raw material, like gallium and many other materials, the price are increasing. Our overall freight is increasing as well. Energy cost is increasing. The reason energy cost is increasing is because we use more renewable energy year by year. Renewable energy is expensive, especially in Taiwan. Our overall energy cost is increasing. Cost is increasing. Percentage-wise, it's a little bit heavier. As I said, this is based on this year's current ASP. When we move to next year, parameters will be different and also maybe different currency.

Speaker #3: So, energy cost is increasing. The reason energy cost is increasing is because we use more renewable energy year by year. Renewable energy is expensive, especially in Taiwan.

Speaker #3: So our overall energy cost is increasing. So cost increase is increasing percentage wise is it's a little bit heavier as I said this is based on this year current ASP but when we move to next year product mix will be different and also maybe different currency different different a lot of conditions will be improved.

Speaker #3: So I believe that next year, maybe the situation will be better than this year. That's our view. Depreciation-wise, depreciation cost will still be high next year.

Doris Hsu: A lot of conditions will be improved, so I believe that next year maybe the situation will be better than this year. That's our view. Depreciation-wise, depreciation cost will be still high next year.

Speaker #1: Thank you. And ladies and gentlemen, the floor is now open for last questions. If you have any inquiries, simply use the web express 'penny' feature. Once acknowledged, please be ready to accept the host's invitation to unmute your microphone and share your thoughts with us. To make sure that everyone has the opportunity to participate, please limit yourself to two questions at a time. Okay, the first one is Sunny from UPS. Hi Sunny, please accept our invitation to unmute yourself.

Leah Peng: Thank you. Ladies and gentlemen, the floor is now open for last questions. If you have any inquiries, simply using the Webex Raise Hand feature. Once acknowledged, please be ready to accept the host invitation to unmute your microphone and share yourself with us. To make sure that everyone has the opportunity to participate, please limit yourself to two questions at a time. Okay. The first one is Sunny from UBS. Hi, Sunny. Please accept our invitation to unmute yourself.

Speaker #4: Hello, good afternoon. Can you hear me okay?

Speaker #1: Hi Sunny.

[Analyst] (UBS): Hello, good afternoon. Could you hear me okay?

Speaker #4: Hello, thank you very much for taking my questions. So, my first question is, if we look at...

Leah Peng: Hi, Sunny.

[Analyst] (UBS): Hello. Thank you very much for taking my question. My first question is if we look at-

Speaker #3: Can I hear you?

Speaker #4: Sorry, could you hear me now?

Leah Peng: Hello, Sunny. We cannot hear you.

Speaker #3: Hello Sunny, we cannot hear you.

[Analyst] (UBS): Sorry, could you hear me now?

Doris Hsu: Hello, Sunny. We cannot hear you.

Speaker #1: Just one moment, Sunny. Sorry, I think there might be some technical issue, so could you please try to type your question in Slido first? That way, we can address your question more efficiently.

Leah Peng: Just one moment. Sunny, sorry, I think there might be some technical issues.

[Analyst] (UBS): Hello.

Leah Peng: Could you please try to type your question in the Slido first, so we can address your question more efficiently?

Speaker #4: Sure.

Speaker #1: Oh we can hear you.

Speaker #4: Oh, you're back. All right. Thank you very much for your patience. So, if we look at yourselves in 2026, then I think it may still be like 10–15% below the prior peak in 2022 and 2023, despite the capacity expansion in the last few years, and now you are also running at close to higher utilization rate already.

[Analyst] (UBS): Sure.

Leah Peng: Oh, we can hear you.

Doris Hsu: We can hear her.

Leah Peng: Oh, you are back.

[Analyst] (UBS): All right. Thank you very much for your patience. If we look at your sales in 2026, then I think it may still be 10% to 15% below the prior peak in 2022 and 2023, despite the capacity expansion in last few years. Now you are also running at close to a high utilization rate already. Just want to understand where the pricing, and now that the utilization rate are back to higher level and you are negotiating with clients regarding pricing, when should we start to see more meaningful growth for your sales, also hopefully gross margin expansion?

Speaker #4: So I just want to understand, where is the pricing now that utilization rates are back to higher levels? And you are negotiating with clients regarding pricing—when should we start to see more meaningful growth for your sales, and also, hopefully, gross margin expansion?

Speaker #3: Oh yes. Thank you for the question. Actually, Q2 revenue already increased quarter-over-quarter, 8.8%. And Q3, if there was no RFI, actually would have had a higher growth rate than Q2.

Doris Hsu: Yes. Thank you for the question. Right. Actually, Q2 revenue already increased 8.8%. In Q3, if there was no Novara fire, actually we would have more higher growth rate than Q2. Our revenue is increasing from this year better than our annual planned budget. The growth is very firm. Of course now, because of the Italy incident, although the impact for the tool equipment is minimal, but the recovery takes a little bit longer time. There will be some impact, but I think in general, our revenue should be flat or slightly higher than last year. That's the current status. That's because of the fire. Otherwise, we are supposed to have much higher revenue than last year. For the meaningful growth, revenue growth definitely will be from 2027. If there was no impact from the Novara fire, actually, we are seeing the improvements.

Speaker #3: So our revenue is increasing from this year on the same better than ours annual annual plan budget so the growth very of course now because of the incident the Italy incident although the impact for the tour equipment is minimum but the recovery takes a little bit longer time so so there will be some impact but I think in general our revenue should be flat or slightly higher than last year.

Speaker #3: That's the current status; that's because of the fire. Otherwise, we were supposed to have much, much higher revenue than last year. For meaningful revenue growth, that will definitely be from 2027.

Speaker #3: If there was no impact from the Nomara fire, actually we’re seeing the improvement. Even with the fire, we are still working on a lot of workarounds. Maybe we can minimize and mitigate the impact as well. But even being a little bit more conservative for the recovery for our Italy revenue, I still believe that starting from '27, we will see meaningful improvement, for two reasons.

Doris Hsu: Even with the fire, we are still working on a lot of work around. Maybe we can minimize, mitigate the impact as well. Even a little bit more conservative for the recovery for our Italy revenue. I still believe that starting from 2027, we will see meaningful improvement for two reasons. One is that I believe that next year our greenfield and brownfield, especially in Silicon Photonics, SOI wafers and advanced GWA 300 millimeter wafer and Novara 300 millimeter wafers. These new expansions will start contributing more and more revenue quarter by quarter, month by month. Number two is that we will see Novara 200 millimeter back to the contribution. Number three is that I hope that because of this hump increase, I hope that we will be able to improve by product mix or by price increase.

Speaker #3: One is that I believe that next year, our greenfield and brownfield—especially second photonics SOI wafers and three advanced GWA 300 millimeter wafer and Nomara 300 millimeter wafers—these new expansions will start contributing more and more revenue quarter by quarter, month by month.

Speaker #3: So that's number one number one growth the source of the growth. And number two is that we will see Nomara 200 meters back to the contribution and number three is that I hope that because of the cost increase and I hope that we will be able to improve by product mix or by price increase I hope that we will improve we'll be able to improve our ASP.

Speaker #3: So that's why we believe that starting from next year, we'll be able to see some meaningful revenue growth.

Doris Hsu: I hope that we will be able to improve our ASP. That's why we believe that starting from next year, we will be able to see some meaningful revenue growth.

Speaker #4: Thank you. Thank you, Doris. Very clear. My second question is around LTA. Now that you are already having good discussions with multiple clients, when should we think about the timing of most of your contracts expiring, and therefore when a client would need to negotiate anyway? And secondly, in terms of prepayment, when should we expect the timing for the inspection point—meaning also for the significant increase—whether it will be maybe the first of next year, or should we wait until maybe the second half of next year? How should we think about the timing for the LTA engagement?

[Analyst] (UBS): Thank you, Doris. Very clear. My second question is around LTA. Now that you are already having good discussions with multiple clients, when should we think about, one, the timing of most of your contract expiring? Therefore, a client would need to negotiate anyways. Secondly, in terms of prepayment, when should we expect the timing for inflection point? Meaning also for the significant increase, whether it will be in maybe H1 of next year, or should we wait until maybe H2 of next year? How should we think about the timing for LTA engagement?

Speaker #3: Yeah I think prepayment prepayment meaningful prepayment increase should be starting from first half next year. That's our view. Because we have some LTAs under discussion and also as I said earlier that we have we will we will have we have already signed 10 year agreement 10 year LT agreement attached with some financial support so we will have that one as well.

Doris Hsu: Yeah. I think meaningful prepayment increase should be starting from H1 next year. That's our view. We have some LTAs under discussion, and also, as I said earlier, that we have already signed a 10-year LTA agreement attached with some financial support, so we will have that one as well. I think it will be next year, prepayment-wise.

Speaker #3: So, yeah, I think it will be next year, prepayment-wise. Thank you very much, Sunny.

Speaker #4: Thank you very much.

[Analyst] (UBS): All right. Thank you.

Doris Hsu: Thank you very much, Sunny.

Speaker #1: Okay. I also see Lucas from Morgan Stanley. Hi, Lucas, please accept our invitation to unmute yourself.

[Analyst] (UBS): Thank you very much.

Leah Peng: Okay, I also see Lucas from Morgan Stanley. Hi, Lucas. Please accept our invitation to unmute yourself.

Speaker #2: Hello can you hear me?

Speaker #1: Yes.

Speaker #3: Hello Lucas.

Speaker #2: Yeah good afternoon Doris and Liam and thanks so much for taking my questions. So I think for the first the first question is that I just want to know that how do you see the difference between previous upcycle in terms of the silicon wafer probably back into like 21 and 22 no matter from customer inventory center point or from the industry wide capacity expansion center point how do you see the different this time compared to the last time and when we trying to adjust the wafer pricing to next year do you see this time could be more easier to reflect the price compared to 21 or 22 or do you think it's more difficult and this is my first questions.

[Analyst] (Morgan Stanley): Hello, can you hear me?

Leah Peng: Yes.

Doris Hsu: Hello, Lucas.

[Analyst] (Morgan Stanley): Yeah. Good afternoon, Doris and Liam, thanks so much for taking my questions. I think for the first question is that, I just want to know that how do you see the difference between previous upcycle in terms of the silicon wafer, probably back into like 2021 and 2022. No matter from customer inventory standpoint or from the industry-wide capacity expansion standpoint, how do you see the difference this time compared to the last time? When we trying to adjust the wafer pricing to next year, do you see this time could be more easier to reflect the price compared to 2021 or 2022? Do you think it's more difficult? This is my first questions. Yeah, probably I will start with the first one.

[Analyst] (Morgan Stanley): Yeah. Good afternoon, Doris and Leah, thanks so much for taking my questions. I think for the first question is that, I just want to know that how do you see the difference between previous upcycle in terms of the silicon wafer, probably back into like 2021 and 2022. No matter from customer inventory standpoint or from the industry-wide capacity expansion standpoint, how do you see the difference this time compared to the last time? When we trying to adjust the wafer pricing to next year, do you see this time could be more easier to reflect the price compared to 2021 or 2022? Do you think it's more difficult? This is my first questions. Yeah, probably I will start with the first one.

Speaker #2: And yeah, probably I will start with the first one.

Speaker #3: Okay. First of all, both Leah and myself were reminded by our legal department not to comment too much about pricing issues. So I think no matter when, no matter how strong the market or how strong the demand is, I think pricing negotiation is always very challenging.

Doris Hsu: Okay. First of all, both Leah and Doris were reminded by our legal department that don't comment too much about pricing issues. I think it's no matter when, no matter how strong the demand is, I think price negotiation is always very challenging. It's not easy. It never has been easy. We believe that if the demand is stronger and if you can differentiate yourself, then you will have better opportunity to get a little bit more support from customers. That's our view. Sorry for not being able to comment about the price negotiation. For the difference of this time's LTA versus last cycle, which is 2021, 2022, I think, of course, we just started negotiating the LTAs with several customer right now. Our view is that this time the demand is covering basically very different from previous cycle.

Speaker #3: It's not easy. It's never been easy. But we believe that if this demand is stronger and if you can differentiate yourself, then you will have a better opportunity to get a little bit more support from customers.

Speaker #3: That's our that's our view. So sorry for not being able to comment about that the pricing negotiation. But for the difference what's the difference of this time's LTA versus last cycle which is 2021 22 I think of course we're we just start this negotiating the LTAs with several customer right now.

Speaker #3: So our view is that our view is that this time the demand is the demand is is covering basically very very different from previous cycle.

Speaker #3: For example, this time we see much stronger second photonics. This is different from last cycle, and we are seeing much stronger demand for getting on silicon as well.

Doris Hsu: For example, this time we see much stronger silicon photonics. This is different from last cycle, and we are seeing much stronger demand for gallium nitride, GaN-on-silicon as well. This is different from last cycle. Also 300 millimeter advanced wafers, and very tight specs. Those are very different from last cycle as well. Product space, product categories, these are very different from last cycle. A very important difference what we are seeing today is that it seems that our feeling is that it seems that our customers care, starting from this run. In the past several cycles, and we've been doing LTA type of business for almost 20 years, but in the past so many, 15, 16 years, not like this time. Our customers make it very clear that where I want to get my wafers from.

Speaker #3: This is different from last cycle. So, product-wise, it is different. And also, 300-millimeter advanced wafers and very tight specs—those are very different from last cycle as well.

Speaker #3: So product specs product product categories the these are very different from last cycle. And a very important difference what we are seeing today is that it seems that our feeling is that it seems that our customers care starting from this this cycle this run.

Speaker #3: You know, in the past several cycles—and we've been doing LTA type of business for almost 20 years—but in the past, say, 15 or 16 years, it was not like this time. Our customers now make it very clear where they want to get their wafers from.

Speaker #3: In the past, customers would tell you, "For this spec of wafers, I need this many wafers of this diameter, and this is when I need them."

Doris Hsu: In the past, customer will tell you that this spec of wafers, I need how many wafers, this spec, this diameter, and when I need this. They make the spec, everything. What will be the price? How many you have to deliver to me by when? That's the conditions of the LTA last several cycle over the past 15 years. This time, for the very first time, customer request not only the product, not only the spare volume price and the delivery condition, but also they make it very clear how much percent of your wafers have to be from which country. This is very unique, and also it seems that starting from this time, this cycle, this LTA, the length of the period will be longer than the last cycle. Last cycle, most of the LTAs are around three years.

Speaker #3: So they make the spec, everything, and what will be the price, when, how many you have to deliver to me, by when. So that's the conditions of the LTA, last cycle, last several cycles over the past 15 years.

Speaker #3: But this time, for the very first time, the customer request, I know not only the product, not only the spec, volume, price, and the delivery condition, but also they make it very clear how much percent of your wafers have to be from which country.

Speaker #3: This is this is very unique. And also it seems that starting from this time this this this cycle this LTA the tuner the the the length of the period will be longer than last year the last cycle.

Speaker #3: Last cycle, most of the LTAs were around three years. The longest would be five to eight years, but this time it seems that more are a bit longer than last time. But as I said, we just started signing LTAs with customers.

Doris Hsu: The longest will be five to eight years. This time seems that more is a bit longer than last time. As I said, we just started signing LTAs with customer. I don't know, maybe six months later, if you ask me the same question, maybe I'll give you a little bit more precise answer at that time.

Speaker #3: I don't—I don't know. Maybe six months later, if you ask me the same question, maybe I'll give you a little bit more precise answer at that time.

Speaker #2: Yeah, thank you. Maybe just a small follow-up on this, since you mentioned the size. Customers care more about the size this time.

[Analyst] (Morgan Stanley): Yeah. Thank you. Yeah. Maybe just a small follow-up on this, since you mentioned about the size. Customer care more about the size this time. I'm also wondering in terms of the new LTA, will we have different pricing strategies in terms of the new capacity in GWA versus other existing capacity?

Speaker #2: So, I'm also wondering, in terms of the new LTA, would we have a different pricing strategy in terms of the new capacity in Q2 versus other existing capacity? And this is asking about whether we will...

Speaker #1: Do you have any different pricing strategy for our new fabs, like in Qwa or in Novara?

Doris Hsu: I think the question you are asking about will we have any different pricing strategy for our new fabs, like in GWA or in Novara.

Speaker #2: Yeah yeah yeah.

Speaker #1: The higher cost?

Speaker #2: Yeah yeah exactly.

Speaker #3: Yes, we communicate that this is very case by case, because for new fabs, of course the production cost is higher due to depreciation and also several overall economic issues.

[Analyst] (Morgan Stanley): Yeah

Doris Hsu: the higher cost?

[Analyst] (Morgan Stanley): Yeah, exactly.

Doris Hsu: Yes. We communicate with this vary case by case, because new fabs, of course, the production cost is higher because of depreciation and also several overall economic issues. The cost is higher. At the same time, if customers want to get the wafer from that specific site, then the cost will be higher. At the same time, the transportation cost is lower. That's some good and bad. Again, we don't have a rule for every customer. We make it, we discuss this. It's very pretty much case by case. We talk with customer, explain that who are you going to take care of this cost, and are you going to agree this one? Give us some flexibility. There are quite some detailed discussions needed. It's pretty much different. It's case by case. There is no fixed rule for the pricing.

Speaker #3: So the cost is higher, but at the same time, if customers want to get the wafer from that specific site, then the cost will be higher.

Speaker #3: But at the same time, the transportation cost is lower. And that, you know, is some good and some bad. So, again, we don't have a rule for every customer.

Speaker #3: We make it we discuss the this it's very pretty much case by case. We talk with customer explain that who are you going to take care of this this cost and our are you are you going to agree this one this one.

Speaker #3: So give us some flexibility. So there are some quite some detail discussions needed. So it's pretty much different case by case by case there is no fixed rule for the pricing.

Speaker #1: Okay, thank you, Lucas. Then we will take our next questions. This is our last question. So, Jimmy from JP Morgan. Hi, Jimmy. Please unmute yourself.

Leah Peng: Okay. Thank you, Lucas. We will take our next questions. This is our last question. Jimmy from JP Morgan. Hi, Jimmy. Please unmute yourself.

Speaker #3: Good afternoon Jimmy.

Speaker #1: Hi Jimmy. We cannot hear you. Could you please accept? Yeah, we can hear you now.

Doris Hsu: Good afternoon, Jimmy.

Leah Peng: Hi, Jimmy. We cannot hear you.

Speaker #2: Hello, Chat. Yeah, thank you so much, Chat Lady and Leah, for taking my questions. I think my first question is, how do we expect repricing increase percentage versus previous LTA for your new LTAs?

[Analyst] (JP Morgan): Yeah, sure.

[Analyst] (JPMorgan): Yeah, sure.

Leah Peng: Yeah, we can hear.

[Analyst] (JP Morgan): Hello. Yeah, thank you so much, Trinity and Leah, for taking my questions. I think first question is, how do we expect repricing increase percentage versus previous LTA for your new LTAs? Do you think that memory and logic customers will have different pricing uptakes? Means that maybe some customers can accept higher pricing, but some customers maybe not. Just curious about the new LTA pricing change. Yeah. Thank you.

[Analyst] (JPMorgan): Hello. Yeah, thank you so much, Trinity and Leah, for taking my questions. I think first question is, how do we expect repricing increase percentage versus previous LTA for your new LTAs? Do you think that memory and logic customers will have different pricing uptakes? Means that maybe some customers can accept higher pricing, but some customers maybe not. Just curious about the new LTA pricing change. Yeah. Thank you.

Speaker #2: And do you think that memory and logic customers will have different pricing appetites? Meaning that maybe some customers can accept higher pricing, but some customers maybe not.

Speaker #2: So, just curious about the new LTA pricing change. Yeah, thank you.

Speaker #3: Thank you, Lucas. That's a very simple question for us. It's very hard for us to comment on the pricing, but just a general, general, general answer to your question.

Doris Hsu: Thank you, Lucas. That's a very difficult question for us. It's very hard for us to comment the pricing. Just a general answer to your question. Every LTA is individual, so the condition is different. Basically, we'll check that the cost based on your request, this location and this product spec. We will work out a cost to our customer. Costs are different because the product mix may be also different. We'll come up with a package deal with every customer and to talk about the price. That's how we work together. You know that the material costs keep increasing, and labor costs also increasing as well. We have no choice that we have to explain the difficulties with our customer and try to get some support.

Doris Hsu: Thank you, Jimmy. That's a very difficult question for us. It's very hard for us to comment the pricing. Just a general answer to your question. Every LTA is individual, so the condition is different. Basically, we'll check that the cost based on your request, this location and this product spec. We will work out a cost to our customer. Costs are different because the product mix may be also different. We'll come up with a package deal with every customer and to talk about the price. That's how we work together. You know that the material costs keep increasing, and labor costs also increasing as well. We have no choice that we have to explain the difficulties with our customer and try to get some support.

Speaker #3: Every LTA is is is individual. So the condition is different. So basically we'll check that the the cost based on your request this location and this product spec.

Speaker #3: So, we will work out a cost to our customer, and costs are different because the product mix may also be different. So, we'll come up with the package deal with every customer and talk about the price.

Speaker #3: That's that's how we work together. And you know that the material cost keep increasing and labor cost also increasing as well. So we have no choice that we have to we have to explain the the the our difficulties with our customer and try to get some support.

Speaker #3: But there is no specific rule that how much how much percent boundary or memory which companies are more flexible to accept higher price. No, we are we don't have the we don't have this this kind of rule.

Doris Hsu: There is no specific rule that how much % foundry or memory, which companies are more flexible to accept higher price. No, we don't have this kind of rule. Every customers have different situations, so we have to discuss with each customer. Sorry about that for not being able to give you a firm answer.

Speaker #3: And every customer has a different situation, so we have to discuss with each customer. Sorry about not being able to give you a firm answer.

Speaker #2: Yeah, thank you. Thank you so much, Chat Lady. May I have a quick follow-up? I think, based on your current—yeah, thank you.

[Analyst] (JP Morgan): Yeah. Thank you so much, Trinity. May I have a quick follow-up?

[Analyst] (JPMorgan): Yeah. Thank you so much, Doris. May I have a quick follow-up?

Speaker #2: Based on your current prepayment balance, could we say current LTAs will still cover most of your 12 instruments until the second half of next year? And for the current LTAs, are you able to change the pricing or do you need to comply with the pricing for the current LTAs in the current period?

Doris Hsu: Yes, please.

[Analyst] (JP Morgan): Yeah, thank you. Based on your current prepayment balance, could we say current LTAs will still cover most of your top-line shipments until H2 next year? For the current LTAs, are you able to change the pricing, or you need to comply with the pricing for the current LTAs in the current period? Yeah.

[Analyst] (JPMorgan): Yeah, thank you. Based on your current prepayment balance, could we say current LTAs will still cover most of your top-line shipments until H2 next year? For the current LTAs, are you able to change the pricing, or you need to comply with the pricing for the current LTAs in the current period? Yeah.

Speaker #2: I mean, in the current period, yeah.

Speaker #3: Yeah. Our instruments, in the second half of this year and maybe the first half of next year, the revenue will basically be coming from LTA, and also we will have a certain percent of our revenues from spot business.

Doris Hsu: Yeah. Our instruments have, in the H2 this year and maybe the H1 next year. The revenue will be basically coming from LTA, and also quite a certain percent of our revenue is from spot business. That means that the ordinary RFQ business, they negotiate the price every 6 months and place a PO. We call RFQ business. For that kind of business, we talk about price every 6 months, or some even a little bit shorter, every quarter. For that kind of non-LTA wafers, I think it's very likely. I think the price is definitely higher than H1 this year. As I said, our utilization is very high. That means that cost is increasing and utilization is high, so of course, we will try to get our customer support to raise the price to cover our higher costs.

Speaker #3: That means that with the ordinary RFQ business, they ask, they negotiate the price every six months, and place the PO. We call this RFQ business.

Speaker #3: For that kind of business, we talk about price every six months, or sometimes even a little bit shorter—every quarter. So for those kinds of non-LTA waivers, I think it's very likely, and I think the price is definitely, definitely, definitely higher than H1 this year. As I said, our utilization is very high.

Speaker #3: So that means that cost is increasing and utilization is high. So, of course, we will try to get our customer support to raise the price to cover our higher costs.

Speaker #3: So, for a non-LTA price, I believe that in the second half of this year and even Q1 next year, we will see the spot price increase. But for LTA price, usually we honor the price, unless we have some special terms in our LTA. Then we will have some flexibility to have further discussion with our customer.

Doris Hsu: For a non-LTA price, I believe that H2 this year and even Q1 next year, we will see a spot price increase. For LTA price, usually we honor the price, unless that we have some special terms in our LTA. We will have some flexibility to have further discussion with our customer. Otherwise, we'll follow LTA.

Speaker #3: Otherwise we'll follow LTA.

Speaker #2: Yeah, thank you so much for your time and reply. Yeah, thank you.

Speaker #3: Thank you Lucas.

Speaker #1: Thank you Jimmy.

[Analyst] (JP Morgan): Yeah. Thank you so much for your time and reply. Yeah. Thank you.

[Analyst] (JPMorgan): Yeah. Thank you so much for your time and reply. Yeah. Thank you.

Speaker #3: Jimmy, sorry—sorry, Jimmy. Thank you.

Doris Hsu: Thank you, Lucas.

Doris Hsu: Thank you, Jimmy.

Leah Peng: Thank you, Jimmy.

Speaker #1: Okay, so 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.

Doris Hsu: Jimmy. Sorry. Sorry, Jimmy. Thank you.

Leah Peng: 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. Thank you all. Bye-bye.

Speaker #1: So, thank you and have a wonderful evening. Thank you all. Bye-bye.

Doris Hsu: Thank you. Bye.

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Q2 2026 GlobalWafers Co Ltd Earnings Call

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