ChipMOS Technologies, Inc. Q2 FY2023 earnings call

• Q2 2023 revenue increased 18.2% QoQ. Gross Margin was 17.3% (up 490bps QoQ), net earnings NT$0.86 (up NT$0.58 QoQ), accumulated H1 2023 EPS NT$1.14. • Overall utilization rate rose to 60% QoQ (52% Q1), with assembly 40%, testing 59%, DDIC 72%, bumping 60%. • CapEx in Q2: 3.7% for bumping, 57.6% for LCD Driver, 21.2% for assembly, 17.5% for testing. Depreciation expenses were NT$1,210 million. Cash and cash equivalents were NT$12,293 million, up NT$2,397M YTD.

In Q2 2023, assembly represented 20.3% of revenue with 40% utilization. Mixed-signal and memory testing were around 20.2% with a 59% testing average. Wafer bumping was ~21.7% with a 60% bumping utilization rate. DDIC was ~38% of revenue with 72% utilization. Gold bumping was about 20.8%. DRAM and SRAM made up ~14.7% of revenue, and mixed-signal was ~7.8%. Memory products accounted for ~33.3% of Q2 revenue, up 8.2% QoQ but down 34.2% YoY. DRAM was ~14.1%, Flash ~18.6% (slightly up QoQ), NOR up ~7% QoQ, NAND ~29.4% of flash revenue. Driver IC and gold bump was ~58.9% of Q2 revenue, up 31.6% QoQ but down 4% YoY. Gold bump up >30% QoQ, DDIC up 28.7% QoQ. DDIC >20% from automotive panels, TDDI ~23.5%, OLED ~14% of DDIC revenue. Automotive and Industrial was ~20.7% (up 5% QoQ), Consumer ~21.4%, Smartphones ~33.7%, TVs ~19.2%, Computing ~5%, all up >30% QoQ.

• Expect operating momentum to gradually rebound, with H2 2023 better than H1. • Memory product momentum to be better than DDIC in H2; DRAM demand to improve mid-Q3, NAND Flash demand rebounding. • DDIC revenue in H2 to benefit from new capacity from deferred high-end testers. • Gross margin expected to improve with higher utilization and better product mix. • CapEx strategy: invest in green energy, AI, automation; add capacity based on utilization and customer demand.

• Limited 28 nanometers DDIC wafer supply in China as a hurdle. • Foreign exchange impact on financial results. • Fluctuations in memory and DDIC market demand.

Q: Please give more color about the QoQ revenue and gross margin for each of memory and DDIC, comment about local DDIC competitor's recent price cut, growing competition from DDIC backend player in China, and mid to long-term business momentum after inventory correction.

A: According to the current industry situation, Q1 will be the bottom for the year, with operating momentum continuing to gradually rebound in Q3 and Q4. Memory product momentum will be better than DDIC in the second half of 2023. DDIC revenue in H2 will benefit from new capacity from deferred high-end testers. Gross margin could improve by higher utilization and better product mix. For price, high-end testers' price level maintained due to higher UT rate for OLED product. See hurdle from limited 28 nanometers DDIC wafer supply in China. Mid to long-term, memory optimistic about DDR5 and high-density NAND Flash. DDIC to grow with OLED, automotive, etc., and logic mixed-signal products expanding to automotive.

Q: From the presentation, memory the segment grew 8% QoQ, while assembly UT rate was still weak. Does it imply revenue growth is mainly from memory testing?

A: In memory wafer test and final test, benefited from rush orders for consumer niche DRAM in Q2. However, assembly business still suffered from slow demand of commodity DRAM.

Q: Please give us more color about DRAM, NAND and NOR business momentum in the second half. DDIC and gold bump UT rate significantly increased in Q2. Would it maintain the sequential QoQ growth in the second half?

A: By ranking, NAND Flash can grow more than DRAM, followed by flatter NOR Flash. Yes, we still see sequential QoQ growth in DDIC as we have pulled in the deferred DDIC high end tester capacity to meet customers' demand.