ChipMOS Technologies, Inc. Q4 FY2023 earnings call

• Q4 2023 revenue increased 22.2% Y-o-Y and 2.6% Q-o-Q, while full year 2023 revenue declined 9.2% Y-o-Y.
• Q4 gross margin was 20.1%, up 560 basis points Y-o-Y and 420 basis points Q-o-Q; full year gross margin was 16.6%, down 430 basis points Y-o-Y.
• Net Earnings in Q4 2023 tripled to NT$ 0.66 from NT$ 0.22 in Q4 2022 but decreased Q-o-Q; full year 2023 net earnings were NT$ 2.60.
• Utilization rates in Q4 2023: overall 62%, Assembly 57%, Testing 61%, DDIC 71%, Bumping 53%.
• Memory products saw 9.5% Q-o-Q growth and 9.9% Y-o-Y growth. DRAM had strong growth from domestic customers restocking. NAND Flash benefited from customers restocking.
• Driver IC and gold bump revenue was 56% of Q4 2023 revenue, up 40.5% Y-o-Y but down 2.6% Q-o-Q. Automotive revenue was strong, with Auto panels up 11.8% Q-o-Q and accounting for over 25% of DDIC revenue in Q4.

In Q4 2023, assembly represented 23.2% of revenue. Mixed-signal and memory Testing was around 19.9%, and wafer bumping was around 20.4%. DDIC product was about 37.1%, gold bumping about 18.9%, DRAM and SRAM around 17.2%, and Mixed-signal products about 7.8%. Memory products made up 36.2% of Q4 revenue, with DRAM revenue up 28.4% compared to Q3 and representing 16.9% of Q4 revenue. Flash revenue was 19% of Q4 revenue, and NAND Flash increased about 22.4% compared to Q3, representing 37.8% of Q4 Flash revenue.

• Q1 2024 is expected to be the trough quarter, with operating momentum improving in the second half of 2024.
• Memory is expected to outgrow DDIC product momentum in Q1 2024.
• CapEx will be conservative in 2024, similar to 2023, focusing on Green Energy, Automation, Robotics, and AI.
• Board approved a dividend of TWD1.8 per common share pending shareholder approval at the May AGM.

• Industry headwinds and inventory corrections impacted full year 2023 results.
• Potential cost increases from green energy requirements and electricity charges could affect performance.
• Competition from China OSATs is a factor to consider.

Q: Why did gross margin go up so much in Q4?

A: Margin was impacted by factors like lower electricity charges (TWD86 million decrease vs 3Q23), lower gold material charges (TWD45 million decrease vs 3Q23), and decreased depreciation (TWD53 million decrease vs Q323).

Q: Could you provide a more detailed outlook about 1Q24, for revenue and gross margin?

A: Q1 2024 is expected to be the normal trough quarter for 2024, with operating momentum improving as the year progresses and the second half being better than the first half.

Q: What is your CapEX, depreciation and effective income tax rate for 2024?

A: CapEx expected to be similar to 2023 or around 15% of annual revenue. Depreciation rate to increase ~1%-3% quarterly. Effective tax rate around 17%-19%.

Q: The Company benefited from automotive market demand in 2023, however, the end demand seems to be slowing down. What can you comment on this segment in 2024?

A: Expect it to be flattish YoY in 2024.

Q: We see more of your customers placing orders at foundries in China. What is the competition from China OSATs?

A: Remain committed to R&D and core technologies, improve quality and operational competitiveness, expand penetration of high-end products like OLED, automotive panels, etc., to maintain competitive advantage.